Income Tax (Charge) Debate
Full Debate: Read Full DebateJamie Stone
Main Page: Jamie Stone (Liberal Democrat - Caithness, Sutherland and Easter Ross)Department Debates - View all Jamie Stone's debates with the Department for Business, Energy and Industrial Strategy
(3 years ago)
Commons ChamberThe hon. Lady is completely right about that. She anticipates my next point brilliantly; it is a useful segue. If we want to understand why growth is so anaemic, she is right that we need look no further than the Chancellor’s failure to seize the opportunities for green growth. This is an important point: the prudent and responsible economic call—I suspect the Business Secretary agrees—for economic growth is to invest at scale in the transition to a zero-carbon economy. Let us be honest, it is now a completely open secret that the problem is that the Chancellor is not a believer, and it showed yesterday. As we prepare to host the most important international summit ever on climate change, as delegates gather from all around the world, and as the eyes are on Britain, what did he unveil as his flagship measure yesterday? To cut air passenger duty for domestic flights. You literally could not make it up. People want good and affordable rail services, but the plan for rail seems to have been postponed again, and instead there will be 400,000 more domestic flights as a result of that decision. Once again, that shows that the Treasury is not signed up to the agenda.
I am such a nerd that I was reading the OBR report last night and there is an interesting and illuminating bit on, I think, page 176—Members can check—which says, in OBR language:
“the…costs involved in getting the rest of the way”—
to net zero—
“remain significant and their apportionment between businesses, households, and government…remains largely unclear. This leaves the costs associated with the transition to net zero as a major source of longer-term fiscal risk.”
Let me underline that point for the House. The July 2021 OBR report, which for the nerds among us is brilliant, and which I strongly recommend to Members as bedtime reading—Madam Deputy Speaker is laughing at me, or perhaps with me—warned of the danger of not acting on the climate and of debt climbing to eye-watering levels as a result. When my hon. Friend the Member for Leeds West said yesterday that debt would rise to 300%, I noticed a Conservative Member at the back look at his hon. Friend and say, “Oh that can’t be right,” but that is what it says. The interesting thing about that report is that it warns not just about the danger of not acting, but about the danger of delay. It says that delaying action on the climate by a decade will double the cost of the transition as we lock in high-carbon choices.
Does the right hon. Gentleman share my disappointment that the Budget had so little for the potentially huge industry for the UK of offshore floating wind energy? He talks about delay. If we delay, we will lose out to other countries in that race, and they will not show any mercy on that front.
The hon. Gentleman makes an important point. We have been successful in offshore wind generation, and it is right to acknowledge that. The ground was laid by the last Labour Government, but I will leave that to one side. We have been successful at generating the wind energy, but not the jobs. He is completely right that we have not delivered for many people when it comes to jobs.
As I was saying, not acting increases the cost, so the prudent responsible choice is to invest. I will mention some key sectors, because again, there has been a deafening silence. I come back to the steel industry, which is such a litmus test. It needs about £6 billion of investment to get to net zero by 2035. The view is shared on both sides of the House that it needs to get to net zero and that it is a foundational industry that we need and that is incredibly important to communities across the country. There are 20 demonstration projects around Europe but none here at the moment. It requires a partnership of the public and private sectors and needs both sides to invest. There is a crucial role for the Government in that.
We have set out a commitment of up to £3 billion over a decade to create that partnership with the steel industry so it can make the transition and we can keep those good jobs with good wages that are vital to many communities. It is a test of us as a House of Commons.
The Government talk about a £250 million clean steel fund, but even that has still not been delivered. I hope that it is still Government policy, but it seems to be in the balance and might have been got rid of. That is not good enough. The Treasury has to understand that unless we invest in steel, automotive and hydrogen, we will fall behind in the global race, as the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) said.
I completely agree. I actually take a crumb of comfort from the Business Secretary, when he defends the sorry saga of the green homes grant, pointing to some of the money given to local authorities and what they did. That is what we need at scale—locally led, house by house, street by street. We are miles behind other countries.
On green investment, a philosophical difference is emerging. I worry that the Government will increasingly leave individuals and industries on their own to face the costs. I do not think that is true of the whole of Government, but the Treasury remains a fundamental block to the green investment that we need. There was a whole saga about its net zero review and the fact that it emphasises short-term costs rather than long-term gains. Frankly, that is a big problem for our country.
I will make some progress and finish.
Labour would deliver a climate investment pledge of £28 billion extra every year for the rest of the decade. That is an investment in bringing down energy bills; delivering affordable public transport and cleaner air; and backing British industries with a real plan for jobs and wages. That is what real action on the climate emergency and industrial strategy looks like.
Given the cost of living crisis, the immediate issues facing business, and the need for longer-term investment, this is not the Budget we require. It does not make choices to help working people; it hits working people. It cuts taxes for the banks but raises taxes for workers. It deserts key British industries and it fails to invest, as we need to, in the green transition. If the big challenge of the future is how we build an economic model that rights the wrongs of the past, this Government cannot be the answer and nor was this Budget.
It is a pleasure to see you in the Chair, Madam Deputy Speaker.
This Budget may have fallen a few days short of Hallowe’en, but for many of my constituents and people across these islands, it represents a real horror show. The past 18 months have been difficult for many people, but yesterday we saw that this Government are prepared to continue to heap misery upon misery by balancing their spending on the backs of the most vulnerable. Not even the most cynical among us could have imagined tax breaks on sparkling wine and short flights just weeks after universal credit payments were cut.
We have all seen the headlines over the last few weeks about monetary tightening, but the self-enforced fiscal tightening in this Budget is much more worrying. The Chancellor tried to fend off criticism and evade proper scrutiny by trailing Budget announcements in the press before presenting them to this House—and his sleight of hand did not stop there. He instructed the independent Office for Budget Responsibility to produce its Budget forecasts using out-of-date figures to increase his chances of being able to cut taxes before the next election. That is a cheap trick, and people should not fall for it.
It was an illusion, too, to try to make out that the Chancellor’s actions yesterday do not come on the back of 11 years of Tory austerity—11 years of the same Government on those Benches, albeit in different guises—of cuts to public spending that this Budget does not come close to reinstating, and of assumptions predicated on some iffy figures peppered through the Budget Red Book. On this Chancellor’s watch, the public are facing a Tory cost of living crisis—an energy crisis, a poverty crisis, an inflation crisis—and the people who can afford it the least are bearing the brunt of it.
The furlough scheme has now ended, and while we do not yet know the full impact of the withdrawal of that support, economists expect that there will be a rise in under-employment and a subsequent squeeze on wages. When the UK Government should be stepping up to tackle the challenge of this cost of living crisis, they are compounding matters with this spending review. It is difficult to remember a bleaker outlook.
IFS director Paul Johnson said on Twitter:
“This is actually awful. Yet more years of real incomes barely growing. High inflation, rising taxes, poor growth keeping living standards virtually stagnant for another half a decade”.
The OBR has said that since it closed its forecast, its analysis is consistent with
“inflation peaking at close to 5% next year,”
even higher than the 4% the Chancellor alluded to yesterday. That is further evidence that high inflation may not be temporary, as the Prime Minister has previously said, and that even those families who are relatively well off will feel the impact of it.
We must not be misled by this UK Tory Government. When the Tories talk of a living wage, it is not a real living wage, determined by the Living Wage Foundation; it is a pretendy living wage, and it is not enough to live on. The Government may claim that the increase to £9.50 matches the real living wage as it stands today, but in reality that is yet a further deceit, because the increase in the minimum wage will not match the real living wage by the time it is implemented. We are three weeks away from Living Wage Week, which will see the most up-to-date real living wage for the UK announced. It will almost certainly increase from £9.50, because the real cost of living pressures we face are taken into account and folded into that figure.
That pretendy living wage has age discrimination baked in, with workers who start the same job on the same day legally entitled to less if they just so happen to be younger. There is a £5,000 gap between an 18-year-old and a 25-year-old. House of Commons Library figures lay bare the difference between the wage paid to the youngest and that paid to older workers, which has grown from 20% at the establishment of the minimum wage to a staggering 97.5% in this Budget. There is absolutely no justification for that. Rent is not cheaper for young people, electricity is not cheaper, childcare is not cheaper, nor is food and nor is travel, so why have this Government decided that their labour should be?
I commend the more than 2,000 real living wage employers in Scotland and I hope that many more will join them. Of course, the minimum wage increase will be gobbled up by the Chancellor’s other monstrous policy choices—the £20 cut to universal credit and the increase in national insurance. People who are out of work or not earning very much will see no overall benefit to these changes, and those on legacy benefits, including people with disabilities and carers, are again forgotten about altogether by this UK Tory Government. Of course, some people are not even entitled to support in the first place, including those with no recourse to public funds—and the many who were excluded from support schemes completely during the course of the pandemic found that they were not entitled to support either.
Those out of work are a big and varied group, including people who have cancer; people who have disabilities; people who care for their children who have disabilities; veterans; people who have been injured at work, and people who are struggling to find a job. All of them are now flung into the Chancellor’s pile of “undeserving” universal credit claimants. That is not good enough, and he should hang his head in shame. The Joseph Rowntree Foundation has estimated that that particular group of people—those the Government think are undeserving—now has the lowest main rate of out-of-work support in real terms since 1990.
Let us look in a little more detail at the situation for those who are working. The Chancellor said that the annual increase resulting from the minimum wage increase is £1,000, but overnight analysis from the Joseph Rowntree Foundation puts that figure at an absolute maximum of £364 when the taper rate and cost of living increases are factored in. Some people on universal credit will be nearly £700 worse off. On top of that, every person on universal credit is, of course, £1,000 worse off from the scrapping of the uplift. My back-of-a-Twix-wrapper calculation says that these measures mean that the Chancellor is cutting incomes for those on universal credit by between £600 and £1,700 a year. And it is clear from page 136 of the Red Book that the Chancellor’s giveaways are being funded from the pockets of pensioners, who have lost their protections under the triple lock.
These are policy choices. They are not an inevitability of the situation in which we find ourselves. This spending review is a chance to show the UK Government’s priorities, and unfortunately, it seems that their priority is to give their friends in the City a tax cut, paid for by ravaging universal credit. It is a political choice to cut the tax surcharge on bank profits from 8% to 3%. It is a political choice for the Chancellor to tie his own hands with fiscal rules while our economy is still reeling from a pandemic that has not yet ended. It is a political choice to take food out of the mouths of children by removing the £20-a-week universal credit lifeline, to keep the appalling two-child limit and the rape clause and to maintain a five-week wait for new claimants. It is a political choice to refuse to increase statutory sick pay in line with international standards. And it has been a political choice to press ahead with Brexit in the middle of a pandemic, in the face of all reason.
The Chancellor barely mentioned Brexit in his speech yesterday, even though it is the single biggest policy change the UK has made for generations. Scotland did not vote for Brexit, yet our businesses are having to adjust and absorb the costs of this Government’s mistakes. The OBR says that the evidence so far shows that the impact of Brexit will be a 4% hit to GDP, with knock-on effects on living standards. That is bigger than the expected long-run effect of the pandemic. The OBR’s own analysis cites migration and trading issues as driving factors of the supply chain issues currently hitting our businesses, on top of debt through covid and soaring energy prices that businesses also face and will pass on to consumers.
While the EU is giving Ireland €1.05 billion to mitigate the damage of Brexit, Scotland has yet to receive a single penny piece from Westminster. We need urgent clarity that the £4.6 billion annual increase to the Scottish Budget will be new money, rather than giving with one hand and taking away with the other, as this Government so often do. The £150 million small business fund for Scotland, like the rest of the funding, should be disbursed by the Scottish Government and their agencies, not by Westminster—or, in this case, the British Business Bank, whose good work should not be politicised through this brazen Tory power grab. It is little wonder that more and more people are coming to believe that Scotland’s future will be best served by its becoming an independent European country.
The OBR also said in its outlook report that labour supply constraints are likely to suppress productivity, and it cited constraints on immigration as an example of that. It is very likely that the Government’s restrictive and arbitrary immigration rules are having a long-term negative fiscal impact. That will be of no surprise to Members across the House who proudly represent, as I do, communities with high levels of immigration. As MPs, we see daily the impact of the hostile environment—the widespread misery and harm that it causes, but also the economic impact—and it is only going to get worse. The Refugee Council, for example, says it will cost the Government £400 million more in prison costs to implement the provisions of the new Nationality and Borders Bill. That is an awful lot of taxpayers’ money to treat people so badly. Removing the right of people to work as they wait, sometimes for years, for the outcome of an asylum claim is as dehumanising as it is senseless. My constituent, Sandra, is studying adult nursing at university and is on track for first class honours. She desperately wants to work and contribute to the NHS in Scotland, but has been waiting over a year for contact from the Home Office. She does not have any faith that it will happen before she graduates. That is a shameful waste of her talent and skills, and there are many, many more like her.
Members of this Government will stand and applaud the NHS, but they fail public sector workers at every opportunity. The Chancellor talked about unfreezing public sector pay, but that is a previously announced change that will not generate Barnett consequentials and so will have no impact on the Scottish budget. It is also worth noting that ending the freeze during this period of high inflation does not go far enough. It is effectively a pay cut. If the Government are serious about levelling up, they should commit to public spending and pay public sector workers a fair wage.
The Chancellor should take a leaf out of Scotland’s book and deliver a national care service, creating jobs and increasing the quality of public services for years to come. This Government should stop talking about care as if it is a burden. The Women’s Budget Group says that a high-quality care service requires investment of £28 billion per year over and above current spending, but that that would produce 2.7 times as many jobs as an equivalent investment in construction.
The Tories promised £500 million for family hubs in England to support parents and children, including breastfeeding and mental health advice. That is welcome, no doubt, but the anti-poverty campaigner Jack Monroe perhaps put it best when she said:
“for every £1 the Tories have taken out of local council funding…in the last decade, Sunak’s budget announcement is putting 0.5p of it back and expecting us to all jump for joy at his largesse and conveniently forget about that 99.5%”.
Now, I try not to get too deeply into matters relating to England and I do not intend to do so, but in my capacity as chair of the all-party parliamentary group on infant feeding and inequalities, I congratulate the Secretary of State on his new arrival. I hope the services his family needs have been there for him. Health visiting and support services in England were lost in the pandemic in many areas, with new parents left unsupported. I urge him to put a figure on breastfeeding support specifically. An expert in this field, Dr Natalie Shenker, suggests a figure of at least £30 million to be truly transformational, covering: additional training, Baby Feeding Initiative community service accreditation, ramped up peer support, integrated specialist lactation support, and comprehensive hospital-only milk bank services. I look forward to engaging with Ministers on that and invite them to present their detailed plans to the all-party group.
In the run up to the spending review, I met business representatives from all sorts of industries, as I am sure the Treasury team did. I was impressed by the well thought out proportionate policy ideas that would have genuinely helped both individual firms and the wider economy in this difficult time, such as: the call from the Federation of Small Businesses to increase to the employment allowance to encourage firms to hire more staff and to take action on increasing energy prices; the Finance and Leasing Association’s call to extend the super deduction to those who lease equipment, which is particularly important as firms face increased costs and increased debt repayments in the coming year; the call from Scope and employers such as 4ICG in my constituency to expand the restrictive eligibility to the Kickstart scheme to support more disabled and young people to apply, because at the moment many lose out to their great loss and frustration; and an online sales tax to encourage people back to the high street.
This UK Government chose none of those things. Instead, they chose: an increase to national insurance, which is a tax on jobs; yet more Brexit red tape; and an industrial strategy that was scrapped before it could be implemented, leaving creative industries in particular without any clarity on the support they are entitled to. There is a lot of talk about science, but there is much that comes from the arts and they have been lost in that conversation. For example, the Glasgow School of Art produces exceptional graduates who should be a part of the strategy, but they do not see their place within it. The Chancellor will say that he has offered cuts to business rates, but, of course, that does not apply to businesses in Scotland, who have already benefited from the Scottish Government’s action. The Scottish Government offer 100% rates relief to retail and hospitality for a full year, the only part of the UK to do so. That was done without consequential funding from the UK Government.
I welcome the review of alcohol duty and hope it will lead to better outcomes on public health. I am concerned, however, that the measures trumpeted yesterday fail to support hospitality and tourism more widely. A few pence off a pint, sooked up by the large breweries, does nothing to support a sector hard hit by the pandemic. Retaining the reduced 12.5% VAT rate for the hospitality industry would make a significant difference as supply chain costs and prices for fuel and labour increase, and it would increase the sector’s attractiveness and global competitiveness. It baffles me that the Chancellor would ignore that call from UKHospitality. I urge those on the Treasury Bench to reconsider and see what more they can do in that regard.
All eyes are on my constituency of Glasgow Central this month for COP26. This Budget and spending review fell woefully short of the ambition required to tackle the global climate challenge: nothing for carbon capture in Scotland and nothing on our need to grow and scale up the renewables industry in Scotland, not just wind farms but tidal and wave.
Further to my intervention on the right hon. Member for Doncaster North (Edward Miliband), it is all about delay. One of the terrifying aspects of delay is that we have the skills in Scotland—welders, fabricators, pipe fitters—but the people with those skills are ageing. Every year that goes by, we are missing the opportunity to educate the next generation, the young people who came to the reception on UK renewables in the Commons yesterday. That is another reason why we cannot countenance delay at any price.
The hon. Gentleman makes an excellent point. This is an industry with a future. Climate change is the most significant challenge we face and investing in those industries now will set us up for the future. Carbon capture and storage in Scotland would have employed 20,000 people, a pipeline of jobs in an area that much needs it and a transition from the old to the new. The Government ought to be investing in that or giving us the powers in Scotland to do it in our own right.
There should have been measures to tackle energy inefficiency, such as cutting VAT on insulation and solar panels for houses. Such measures encourage people to play their own part in that effort. What do we have instead? We are cutting air passenger duty on internal flights. Manchester United were roundly condemned for taking a 10-minute flight to Leicester recently, but the Chancellor wants to encourage this! He wants more climate profligacy and that is utterly irresponsible. He could have put the money from the scrapped £20 billion Boris bridge through the Beaufort’s Dyke munitions dump into green infrastructure, but he has failed to do so.
The Tories have cut Scotland’s budget when we need to be investing more to stimulate the economy and have undercut the devolution settlement, taking powers from the democratically elected Parliaments of Scotland, Wales and Northern Ireland. The Budget is great news for the 1%, but bad news for equality, inclusive growth and the environment. Time and time again, the people of Scotland are seeing a tale of two Governments with divergent priorities: this Westminster Tory Government providing tax cuts for short-haul flights, sparkling wine and their pals at the banks; and a Holyrood SNP Government determined to stand up for people and businesses, and deliver a fairer, greener Scotland.
I look forward to the day when we do not have to live with the choices made by a UK Government that Scotland did not elect, but have a Government chosen by the people of Scotland with our people’s priorities at their heart.
It is a pleasure to follow the hon. Member for North Tyneside (Mary Glindon). I am sure that her late husband would have been pleased to see her banging the drum for her constituency.
I want to speak in this debate because I want to make two points: the first is about levelling up; the second is about the impact of the spending review on the Foreign, Commonwealth and Development Office budget. First, however, it would be appropriate to reference my own constituency, which, outwith the highlands of Scotland, is the largest constituency in the United Kingdom. It is therefore extremely welcome news that fuel duty is to remain frozen, especially just now when family budgets are already under so much pressure. Over the past 12 years, since the freeze on fuel duty was introduced, I have argued for its extension. It currently saves the average driver £10 every time they fill up, compared with how the escalator would have operated. In a rural area, fuel costs are always higher, so the further freeze announced by the Chancellor will be welcomed across my constituency.
The Chancellor’s announcement of a £150 million fund to help thousands of small and medium-sized Scottish firms to recover from the pandemic is also good news. The UK Government’s furlough scheme helped to save hundreds of thousands of jobs during the pandemic, and this fund will now help small businesses in Scotland to grow back even stronger. I hope to see it benefit companies across my constituency when the full details are announced.
It is particularly welcome that, through the Barnett formula, the block grant to help support public services in Scotland is to increase by £4.6 billion. As we have heard from the hon. Member for Glasgow Central (Alison Thewliss), this is not welcome. We know that, however much money there might have been in that Barnett increase, it would never have been enough for the Scottish Government. Some grievance would always have been manufactured, however the funds were deployed. On this occasion, however, I want to express my own grievance, and it is about the way in which the Scottish Government allocate funds within Scotland. The south of Scotland is systematically starved of resources, and my constituents feel that, because we are not a nationalist-supporting area, we do not see resources coming into the south of Scotland.
Does the right hon. Gentleman agree that the problem affects a slightly wider area than just the south of Scotland, and that the very remote areas of the highlands have the same problem as he does?
Indeed. The very northernmost part of Scotland is well represented by his good self, and the hon. Gentleman does not sit on the SNP Benches.
I am the only speaker for my party in this debate, so I hope that the House will forgive me if I adopt a slightly winding-up tone. I want to put on record what a pleasure it has been to take part in the debate after the long time we have spent dealing with covid. We are not out of its shadow yet, but hopefully we are on our way. How nice it is to be back in this Chamber speaking in debates in our normal way.
I do not think that I am known for having a pop for the sake of it in this place, and if the Minister were still here, I would thank him for the excellent work that has been done on the space launch front. That is very enthusiastically supported in my constituency. However, I am bound to make two points, the first of which is a national issue.
As the House will be aware, as my party’s Defence spokesman, I have made the point in recent times that I am particularly perturbed by the reduction in the numbers of our armed forces personnel, particularly in the British Army. Two points arise from that. The first is that if—perish the thought—we had to mount some sort of operation similar to the one in Afghanistan, I worry that the size of the British Army would not be sufficient to do that. Secondly, I believe that when it comes to recruitment, if the British Army gets below a certain critical mass, the brightest and best of our young people who might want to join our armed forces would take a look and say, “It’s too small. It’s beginning to look like a sunset industry. I’ll go and do something else.” That worries me about recruitment, because it is an issue for the British Army.
Returning to the Budget, I am deeply perturbed to see that there will be a cut of 1.4% in Defence spending over the next four years. I want to put on record that that is a dangerous cut, and I am surprised to see it in the context of what is a tax-and-spend Budget. We could debate the rights and wrongs of such a Budget, but I will not do so today. For those who have not seen it, I draw the House’s attention to the editorial in The Times today, which states that the Chancellor runs the risk of stoking inflation. If we take a tax-and-spend Budget and add it to the increase in the price of commodities in the world—the price of fuel has been mentioned, and we have to consider the ramifications of covid and Brexit—we could, perish the thought again, have inflation on our hands.
I am the oldest member of my parliamentary party at the august age of 67, so I lived through the horrors of inflation in the 1970s. I was working in the oil sector on a smallish wage, and during the year my wages started not to meet the costs of the bills I had to pay. Inflation is a bad, bad thing. I hope it does not hit us, but I fear it might.
This morning I telephoned a friend of my daughter—they were in the same class up in the highlands. I spoke to her and another friend, both single mothers living in council accommodation, and I asked, “What concerns you about the Budget?” Members might think that perhaps they did not take a big interest, but they did. One lady said to me, “It is the cost of the bills I have to pay. I am concerned that I may not be able to afford them.” The other young lady said, “I am concerned about education. I am concerned about special needs assistance for my child.” I believe they speak for a lot of people, as other hon. and right hon. Members have touched on.
These worries are out there. When we think about how inflation would add to those worries, it becomes scary. When we think about what inflation would do to our hard-pressed frontline services, it becomes very worrying indeed. I put down those two markers at national level.
I end on a point that might not ingratiate me with SNP Front Benchers. The right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) mentioned the great jug of money called Barnett consequentials that is poured out towards the Scottish Government after passing through a sieve. I think he was referring to the fact that in some parts of Scotland the sieve seems to have a hole, and in other parts of Scotland it seems to have a very fine mesh. What we in the highlands fear, with all due respect to my good friends in the SNP, is that the money rushes through the hole to the central belt and does not come to more rural areas. That is the challenge the right hon. Gentleman posed to the Scottish Government.
I have spoken many times in this place about maternity services in the far north of Scotland and how pregnant people have to make a return journey of 200 miles to give birth. There are so many pressures because of rurality, distance and sparsity of population. With the best of intentions, I sincerely hope that the Scottish Government will address those inequalities with the moneys they are being afforded through the Barnett consequentials. I live in hope, but there is a nagging doubt at the back of my mind.