Finance Bill

Debate between John Pugh and Nicholas Dakin

Tuesday 2nd July 2013 Commons Chamber

[John Pugh]

I will try to say something positive about new clause 10. It is quite laudable, in a way, because it would link spending to taxation and get us to engage in retrospective analysis, and frankly we do not do enough of that in this place. We talk about policy a great deal, but the long-term effects are often hidden from us. It can be quite counter-intuitive. We had an interesting debate yesterday on the 50% tax rate, the Laffer curve and the effect that such a rate might or might not have. There are plenty of other examples where the effect of taxation needs to be adequately scrutinised. In Committee we debated what tax avoidance measures would do to people’s behaviour, what petrol taxation would do to people’s behaviour and to the revenue we get, what landfill tax would do to councils’ behaviour, and what the video games industry would make of the various changes that will affect it.

My problem with what the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is saying is that I think Parliament should do what she is suggesting. It seems to me that Parliament does not have enough good, accessible data and that we make no real effort to examine the whole business of tax revenue yields in any systematic, thorough, regular or routine way. When it comes to spending, there is a very similar picture. There is no real scrutiny of spending in this place. The scrutiny we do is not even as good as that which might be found in a local council. We have the big events, such as the announcement of the spending review, but there is no detailed examination of expenditure.

If Members do not believe me, they should come along to estimates day tomorrow and see the examination of estimates that is imposed in this place. The last time we had an estimates day, I was actually ruled out of order by the Deputy Speaker—not you, Madam Deputy Speaker—for talking about the estimates, which was thought improper.

We do not examine the non-controversial, everyday departmental expenditure that goes on from year to year and the errors that occur in it. The Public Accounts Committee does a very good job of looking at the controversial stuff, but there is no rigorous, effective or ongoing examination of expenditure. We do not do enough of that and we do not know enough about what tax policy actually does, how Departments spend and what the profile of a Department is on a day-to-day, month-to-month and year-to-year basis.

Arguably, somebody in the basement of the Treasury knows the spending profile of Departments, but they would probably be unable to give the hon. Lady the answer she wants in three months, and probably not in six months. I think she has to recognise that she is making a hard ask and, in my view, probably a futile one, because if we do not do any real scrutiny of taxation in this place—we scrutinise policy, but certainly not outcomes—beyond headline figures and big grandstanding days such as the announcement of the spending review, then what we are essentially doing with the Government finance is firefighting.

What takes place in this place is not effective financial scrutiny. We do not look at the boring, pedestrian, routine and important spending, which is massive. The new clause asks the Treasury to mark its own work, and I am sure that it would be perfectly happy in some contexts to do so, but what we really need is to get Parliament to do the work and to give us an answer that would satisfy us, including the hon. Lady.

[Nic Dakin]

It is a pleasure to follow the hon. Member for Southport (John Pugh), who began by underscoring how important it is to have retrospective analysis, which is exactly what the new clause asks for. It is difficult to see how it can be argued against. It says:

“The Chancellor shall publish, within six months of Royal Assent, a review of the impact on revenue from rates and measures in this Act, resulting from the Spending Round 2013.”

That would assist good governance and assist the people out there whom we come here to represent. Indeed, so far the arguments have been supportive, although there has been useful interrogation of the issues as the debate has progressed, which everybody has welcomed.

--- Later in debate ---

[John Pugh]

Every Budget begins with the Chancellor giving a résumé of the implications of his policies. I cannot remember that ever being greeted with wholesale acclamation from all parties. What the hon. Gentleman is asking for is more of the same, is it not?

[Nic Dakin]

The hon. Gentleman makes a good point. Chancellors sometimes glance back at the effect of their Budgets with rose-tinted glasses instead of seeing the real effects of their economic policies, including the decisions made in 2010, 2011 and 2012.

I congratulate the Government on moving their rhetoric to the right place: suddenly, words such as “growth” and “investment” are as prominent in their lexicon as they always should have been. However, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) has pointed out, their promise on infrastructure spending is to spend tomorrow—most of it in 2014, 2015, 2016 and even 2017—rather than now. It is spending decisions taken now that will have an impact on the lives of people today, rather than waiting and hoping for things that may happen at a future date.

Boosting growth and living standards this year and next year would bring in more tax revenues and reduce the scale of the cuts needed in 2015. Taking action now to boost economic growth—by, for example, bringing infrastructure plans forward so that they happen now rather than tomorrow—would make a real difference. That is why the new clause would be helpful: it would test the impact of the spending round on tax receipts and, as my hon. Friend has said, do so in time to make any necessary adjustments to improve not only the economy, but people’s lives and living standards.

The figures revealed by the Government last week showed another cut of 1.7%—or nearly £1 billion—to capital investment in 2015-16. One would not have thought that to be the case on hearing the announcement, but having looked at the plans I know that that is what they reveal. Capital spending is down by 1.7% in education, by 2.3% in defence and by 17.6% in the Home Office. In the Department for Communities and Local Government, including housing, it is down by a massive, staggering 35.6%, and by 57.6% in the Department for Culture, Media and Sport. Those are large figures and we need to know whether their impact on the economy’s behaviour will be beneficial or, as I fear, not.