Fuel Duty

John Redwood Excerpts

Monday 12th November 2012 Commons Chamber

[Cathy Jamieson]

I hope the Government recognise that this is a big worry for constituents. We are all familiar with the e-mail campaigns and the correspondence that we have had through the FairFuelUK campaigns and from our constituents. FairFuelUK has produced a comprehensive report, which I know it has presented to the Chief Secretary to the Treasury. It sets out the impact of retaining the January rise, and gives a stark warning that about 35,000 jobs could be at risk.

[Mr John Redwood (Wokingham) (Con)]

Will the hon. Lady give way?

[Cathy Jamieson]

No, I want to make a little progress.

The Federation of Small Businesses says that 85% of its members said that their car or van is crucial or very important to their business, and just over half its members said that rising fuel costs were one of the main concerns for their businesses in the third quarter of 2012.

[Mr Redwood]

rose—

[Cathy Jamieson]

No. I have given way already and I want to make some progress. It is important that people hear why we are proposing the motion tonight.

Almost 20% of FSB members identified fuel costs as a barrier to growth. Not only those organisations but—[Interruption.] Hon. Members on the Government Benches—those who tend to think they are the champions of industry—might want to listen to the voice of industry. The Petrol Retailers Association has reminded us of the impact of VAT and the impact on the price of fuel if the 3p per litre increase goes ahead in January.

Those are the voices of industry, but it is not just industry that will be affected:

“We must remember that motorists are not a lobby group. They are mums driving to school, children on buses and pensioners hit by inflation. When the cost of road haulage rises, the price of everything else rises too.”—[Official Report, 23 May 2012; Vol. 545, c. 140WH.]

Credit where it is due—those are not my words; they are the words of the hon. Member for Harlow (Robert Halfon) in a Westminster Hall debate in May 2012.

[Cathy Jamieson]

I am genuinely sorry that the hon. Gentleman adopts that tone because I know that he has worked determinedly to raise the issue. I am sure that his constituents will want to know exactly what the Chancellor is going to do. Our shadow Chancellor has said what he thinks, whereas the Chancellor seems to be debating by a nod and a wink, and nothing is determined.

[Mr Redwood]

rose—

[Cathy Jamieson]

Those on the Government Benches may want to listen to the consumer organisation Which?. It has told us that 85% of people polled recently were worried about the cost of fuel. That is up nine points since the previous poll in July. One in 10 people polled admitted that they had had to dip into savings to meet the costs of motoring. Many of these people rely on their cars to get to work, to get their kids to school, to take up education and training opportunities, or perhaps to care for elderly relatives.

As I said earlier, these are tough economic times and hard-pressed families out there know that only too well. They are the ones who are suffering most from this out-of-touch Government’s failed austerity plan, which has delivered the longest double-dip recession since the second world war—a plan that is failing on the deficit, with borrowing higher so far this year than last.

--- Later in debate ---

[Cathy Jamieson]

The hon. Lady must also recognise that it was in her Government’s Budget. What we are asking the Chancellor to do is listen. We have heard a great deal about how he is in listening mode, but I do not know how long he must listen before making the decision. According to the House of Commons Library, the cost of delaying the fuel duty rise again until April 2013 would be around £350 million, and we think that could be paid for through a clampdown on tax avoidance. I am conscious that the right hon. Member for Wokingham (Mr Redwood) wishes to intervene.

[Mr Redwood]

I am very grateful. Will the hon. Lady explain which specific tax loopholes Labour would close that the Government are not already closing, and why does Labour not provide any money after April when they would be putting the tax up again?

[Cathy Jamieson]

I absolutely will explain that. We think that there are loopholes that can be closed, and I am sure that the Government will also want to close every possible loophole. For example, there is a growing problem with some employment agencies forcing workers to become employees of umbrella companies. They then falsely inflate the workers’ travel and other expense claims, reducing tax and national insurance and pocketing the avoided tax as profits. Her Majesty’s Revenue and Customs forecast in 2008 that the cost to the Exchequer of that avoidance would be around £650 million by 2012-13. More recent reports have suggested that the current tax loss could be as high as £1 billion. Even if only a proportion of that money was recouped, it could pay for the fuel duty rise to be postponed.

As I said earlier, I know that many Government Members feel strongly about this issue. We have heard over the weekend and today all the talk about the Chancellor being in listening mode, but at the same time the Treasury’s official line is that no decision has been taken. Nods and winks are no good to families struggling in the run-up to Christmas. The approach that says “It will be all right on the night” is no use to the small business trying to balance the books and plan for the first quarter of next year. If the Chancellor has made up his mind to delay the duty rise, his Ministers should say so, and they should say so today. If we do not hear that announcement loud and clear, every hon. Member who wants to see the increase dropped should not only talk the talk tonight, but walk the walk; they should walk into the Lobby with us and vote for the 3p increase to be delayed.

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[Mr John Redwood (Wokingham) (Con)]

The Opposition are right to highlight the issue of the cost of living, and it is timely that we are having a debate about the pressures on it. It is particularly timely that we are having a debate about the pressures that the outgoing Labour Government imposed on the cost of living, which still remain. I am thinking of the hidden increases in petrol duty, and all the other measures that they left in place or that were needed if we were to try to combat the deficit.

There is no doubt that the squeeze on people’s real living standards has been very severe in the last four years. It was most severe under Labour during its slump, but it has continued under the coalition Government. One of the reasons for the intensity of that squeeze on real incomes is the fact that price inflation has remained obstinately high, partly as a result of indirect taxation and partly, as the Minister said, as a result of world pressures on commodity markets.

I find myself unable to support the motion, which may come as no surprise to any Member on either side of the House. I consider it to be defective in two important ways. First, I do not think that a temporary three-month freeze will solve the problem. A double whammy in April, which is what Labour proposes, could be even worse, because people will not have become used to the rising fuel price that was inherent in the Labour plans.

[Fiona O’Donnell]

The right hon. Gentleman suggests that three months do not constitute a long period, but they will be three months of cold weather, during which people will be having to cope with an increase of up to 11% in their energy bills. The three-month freeze would make a difference.

[Mr Redwood]

I am all in favour of lowering energy bills, although that is probably a topic for another day and another debate. I have made many suggestions to the Government, all of which I think Labour would find unpalatable. I have, for instance, suggested possible methods of making gas much cheaper, thus reducing prices for all our constituents and affecting real incomes in a way that would please me, but is not often favoured by my party.

I think that the first part of the motion is flawed because what it proposes would not solve the underlying problem, namely, the tax increases left by the outgoing Government, but I am not very happy with the second part either. The Minister said that he did not think the Opposition had done their sums properly before proposing the measure to deal with tax avoidance, which they say would pay for the temporary lower duty rate. It was interesting to hear from him that the Labour Government had considered a scheme relating to travel costs, but had decided that it would be unwise to pursue it. We do not know whether they made that decision because of the impact that it would have on people or because it would not bring in enough revenue, but it appears from what the Minister said that there was an issue involving the amount of revenue that it would raise. For those two reasons—it would not solve the duty problem, and the numbers do not add up—I think that it would be unwise for the House to support the motion.

As for the coalition Government’s amendment, I find myself particularly in agreement with the final words, in which we are asked to welcome

“the Government’s commitment to do more to help with the cost of living in future”.

I was interested to hear the Minister not only say that he understood the points that many of my right hon. and hon. Friends had been making about the level of fuel duties, but imply that action might be forthcoming in the autumn statement and the subsequent Budget statement to tackle that or related problems. I shall be happy if the Government tackle the over-burden of taxation in a variety of ways. I do not think that we need be too prescriptive tonight. We know that an autumn statement is coming up, and we know that there will be a Budget statement after that. However, I want to address my few remarks in this short debate to the issue of what the commitment to do more to help people in the future might amount to in those two important statements of Government policy.

The first point that I hope the Government will grasp is that this country’s problem is not that it is undertaxed. If we look at the budgets and the state of the national finances, we see that there is every sign that successive Governments have tried to increase the tax burden substantially to keep pace with accelerating current public spending. I think that we have now reached the point of no return—the point of saturation. The high rate of income tax introduced by Labour has led to a big fall in income tax receipts at the top level, which is not very surprising—and which, of course, is of no interest to Labour Members. They had their little jibe about millionaires, but they should be asking themselves what tax rate will cause rich people to make the maximum contribution to filling the massive financial hole in which we find ourselves.

We are well above that rate now, as the figures clearly indicate. I think that the Government will find that their higher rate of capital gains tax also collects rather less revenue than before, or than they would like, and that fuel duties, while probably still contributing some increment to taxation, are not creating as big an increment as they would like either, as people simply cannot afford all the fuel that they used to buy because the duties are so high.

We know that more than 60% of the pump price—and the price of petrol and diesel in this country is currently very high—goes, in one form or another, to the UK Government. Of course, part of the rest of the price goes in taxes to other Governments so that they can produce the fuel in the first place. A massive amount of tax is being taken by the British Government directly, along with the 60%-plus that is taken by them indirectly through the tax on oil companies, and by foreign Governments in their taxation on the oil. The motorist is seen as an easy target for huge amounts of tax in an attempt to meet the bills. I hope that, when considering ways of easing the cost of living, the Government will bear in mind that motorists and business drivers—people who are trying to power the economic recovery—are incurring very large bills through this particular tax.

I think that all Members agree with two propositions about the economy. First, we would like it to grow faster, and secondly we would like to make big cuts in public spending by getting people back to work, so that they can earn more in jobs than they can receive in out-of-work benefits. Those are the aims that the Government must pursue. They have told us that they wish to make work more worth while. It is now clear that the economy has had a good job generation capability in the private sector over the last couple of years or so, and that is very welcome. However, we now need to ensure that we can reduce public spending by getting many more people into jobs, so that they require less benefit support, and we need to do that partly by cutting tax rates, so that we can collect more revenue in a friendlier way.

There is no doubt that we have tax saturation, and the Government need to take that on board for the purposes of the autumn statement and the Budget. We should reject the rather foolish motion, which was never going to ensnare many Conservatives—Labour will have to get better at ensnaring Conservatives, if that is its game—and support, and ensure that the Government deliver on, their proposal to do more about the cost of living, because that is a very real issue which worries many of our constituents.

[Mr William Bain (Glasgow North East) (Lab)]

I was intrigued by the Economic Secretary’s arguments when he moved the amendment. He is no longer in his place, but wherever he is at the moment, I hope he can afford enough fuel to return to planet Earth, as that was not a place he was able to inhabit much during his contribution. He spoke of the fanfare of international approval for the Chancellor’s policies, yet the OECD says that this year demand in our country will be one tenth of that in the United States and in the lowest fifth among EU countries. He said this Government dealt in costed spending commitments, from the very Dispatch Box where a few weeks ago the Prime Minister caused chaos in the energy industry by saying every consumer would be on the lowest possible tariff. The Economic Secretary also boasted about taking action on high commodity prices on behalf of a Government who are blocking the enactment of a global Dodd-Frank Bill in line with the successful approach in the United States.

Last week’s election in the United States showed that for voters both across the Atlantic and in the United Kingdom the key issue is living standards. During the longest journey out of an economic slump in Britain for 140 years, living standards have declined at a more prolific rate than during the recessions presided over by the Conservative party in the 1980s and 1990s. As last month’s Office for National Statistics study of well-being showed, on the net national incomes measure, incomes in the second quarter of 2012 were 13.2% lower than before the start of the great recession in 2008. We should be under no illusion: a real economic recovery for millions of lower and middle-income people in this country will not happen until these trends show signs of being reversed.

[Mr Redwood]

Does the hon. Gentleman agree that the biggest fall in living standards occurred on Labour’s watch, when boom went to bust?

[Mr Bain]

Tax credits helped to sustain family incomes in that period, but that is precisely the part of the tax and benefit system that is under such great assault from the Government the right hon. Gentleman supports.

We need a long-term strategy to tackle declining living standards, but there are short-term measures we can take now that will help ordinary families. We can have a cut in VAT and not proceed with the 3p rise in fuel duty next January. Both those measures would help to restore growth to an economy that has been starved of it for a year, and which is smaller now than at the time of the Chancellor’s comprehensive spending review of October 2010.

Despite a decrease in the headline consumer prices index inflation rate from 5.2% to 2.2% since last October, costs of basic goods such as electricity and food are going up. Average electricity bills are up by £200 since the coalition took office, taking the average bill to £1,310 a year. Costs for childminders for the over-2s in Scotland have risen at nearly twice the CPI inflation rate this year. Living costs are, therefore, soaring for millions of people.

Multiannual Financial Framework

John Redwood Excerpts

Wednesday 31st October 2012 Commons Chamber

[Mr John Redwood (Wokingham) (Con)]

I welcome strongly the Government’s wish to have a new relationship with the EU, which is so appropriate now that it is going to integrate for the euro, so why is this not the time to negotiate different arrangements on how much we contribute and how many spending programmes we are part of, as the framework covers such a long period of time?

[Greg Clark]

That is exactly what we are doing in this multiannual financial framework, and the opportunity we have to veto a settlement that we are not in favour of gives us leverage in that.

Infrastructure (Financial Assistance) Bill

John Redwood Excerpts

Monday 15th October 2012 Commons Chamber

[Chris Leslie]

My right hon. Friend makes an important point that emphasises the argument that we are making. This is not simply a question of the levels of capital investment; it is also a question of competence. It is also about the relentless need to focus on delivery, and on the detail behind the delivery. I just do not see the Treasury, as currently comprised, being capable of getting to grips with the granularity of some of the obstacles that face capital schemes. It is no wonder that we are falling further and further behind. The Treasury seems to see an obstacle and be deterred by it, rather than trying to tackle it and move past it.

[Mr John Redwood (Wokingham) (Con)]

We are being invited to agree to a potential £50 billion commitment. Do the Opposition have any thoughts on the pace of that kind of expenditure? What levels would they recommend for this year, next year and the following year?

[Chris Leslie]

It is difficult to say, when looking at a guarantee scheme or underwriting scheme, because certain things are not wholly in the control of Ministers. They are putting the guarantee out there and waiting for organisations in the private sector or elsewhere to come forward and bid for the resource. It is a bit like pushing against a piece of string; it is impossible to know what the demand will be. We do not rule out the possibility of the proposal being of benefit—of course it could be—but it is impossible to know at this stage. We are holding up a finger to test the direction of the wind. There are no time scales in the Bill, and the explanatory notes do not add any information in that regard. We want to know the judgment of the studied intellects in the Treasury.

--- Later in debate ---

[Chris Leslie]

I would like to hope so, but I do not advise my hon. Friend to hold his breath. We are not even talking about a fund; we are talking about promises to under-run funds in order to guarantee other schemes as they come forward. Where is the confidence? Where is the demand in the economy? Where are the private sector schemes whose organisers want to come forward? Far greater efforts must be made, and the Government must take the economic climate more seriously. We should be bringing forward schemes, prioritising UK infrastructure, and kick-starting construction here at home. We have suggested that revenue from the 4G spectrum auction should be used to fund the building of 100,000 new homes, and we are more than happy for the Chancellor to steal our thunder in the autumn—or should I say Christmas—statement on 5 December. Our amendment would ensure that the Bill focused on the British economy, and that should surely be the starting point.

[Mr Redwood]

I think we should be a bit careful. I thought that the Bill to which we are being invited to consent would provide solely, or primarily, for guarantees and loans, but in fact it allows expenditure and

“any… kind of financial assistance”,

which could include direct purchase. It certainly includes court or prison facilities and roads, which, in many cases, will involve no revenue, so presumably that means direct spending.

[Chris Leslie]

I think that the right hon. Gentleman is technically correct. The wording of the Bill is very loosely framed. We know that accounting officers in the Treasury had put a big question mark over exactly what Ministers were proposing. They wanted one line to cover them in circumstances in which things might go wrong, and they would be challenged and hauled before the Public Accounts Committee. That dates back to the 1932 concordat on public accounts, and it is being radically changed by the Bill. We do not necessarily think that that is the wrong thing to do, but it is noticeable that legislation has been presented to the House of Commons by Ministers who cannot say what it will be used for. We need information on the specifics of the schemes and the dates on which they will be supported. That is the level of detail that we require.

Amendment 9 relates to the definition of “infrastructure” in clause 1. I am sorry that the amendment tabled by my hon. Friend the Member for York Central (Hugh Bayley) was not selected; he noticed that flood defence schemes were not included in the list of items covered by infrastructure expenditure.

Our amendment seeks to insert the word “childcare”. Education is included in the set of infrastructure projects that might benefit from the scheme, but child care is quite different. We consider that to be an obvious anomaly which the Government should correct. We know that the costs of child care are afflicting many families throughout the country, a number of whom are not necessarily choosing to enter employment because the child care options are too limited or too expensive. One of the reasons why child care is so expensive is that the facilities are expensive. We do not have enough of them, and we need more investment in them.

--- Later in debate ---

[Chris Leslie]

My hon. Friend’s point is borne out by the statistics. Only 67% of mothers in the UK are in employment, which compares with figures of 84% in Denmark, 79% in the Netherlands and 74% in France. That reflects on the characteristics of our national output and our economy. More could be done to help those parents to gain access to employment. Families in the UK with pre-school-age children spend more on child care than is spent by this group in any other OECD country, except Switzerland. More nursery places and more not-for-profit providers of child care would help to drive down that cost. According to the OECD, the cost of child care in the UK is more than 26% of the average family income in those circumstances, whereas the OECD average is just under 12%, so this is a very significant drag on family budgets and it is holding back our economy.

The Daycare Trust has called for Government assistance to enable children’s centres, smaller private providers and not-for-profit early years providers to expand. It has pointed out that some 28,000 extra nursery places for two-year-olds need to be found in London alone, so we can clearly see that child care issues need to be considered in the definition of “infrastructure” that could obtain support under this legislation. Those are the amendments that I wish to discuss for the time being, but other hon. Members will doubtless have noticed omissions in the legislation.

[Mr Redwood]

My concern about this Bill is with the definitions and the amount of money involved. I am obviously very much in favour of more productive infrastructure projects going ahead as quickly as possible. There may well be utility in facilitating the Government to make guarantees, support or indemnities available at a time when the banking system is still not functioning well and it is difficult getting these things financed privately in the way we normally like. However, I start from the proposition that what we really need to be doing is generating a lot more freestanding private sector investment projects. It would be better if we took stronger and faster action to remedy the banking problems that lie underneath the problems we face in getting these things financed.

I am concerned that the wide-ranging powers in clause 1 may lead to a big increase in public spending, which would damage the Government’s fiscal targets. A lot of time and energy has been expended by Governments on reducing capital programmes to try to get public spending down to levels thought to be more compatible with reality and markets. We want to avoid this Bill becoming a way of undoing all the hard work that has been done to try to get the deficit down, at a time when this Government strongly believe that deficit reduction is crucial. The outgoing Government actually enacted legislation committing themselves to halving the deficit over the lifetime of this Parliament.

The definition of “infrastructure” in clause 1(2) is wide ranging. I thought that the type of infrastructure we had in mind for this Bill was that in subsection 2(a), which states that infrastructure is about “water, electricity, gas, telecommunications”. Those services are all provided by the private sector with charges to customers, so there is a flow of revenue that can remunerate the capital. If those projects are held up because of banking difficulties, I have every wish to encourage the Minister, newly in his job—I give him my congratulations—to expedite them. One hopes that the Government would be properly rewarded for the indemnities and the guarantees, or that they would not be necessary in the fullness of time, and so the taxpayer would not lose by this process. I am happy with that provision, which I thought was the thrust of the Bill.

However, subsection (2) also provides for mixed projects and entirely public sector projects. It includes mixed projects in the form of railway facilities. Railways are extremely heavily subsidised, and any new project is likely to require many years of future subsidy, because such projects do not normally reward the railway operator or the taxpayer sufficiently from the fare revenue. We therefore need to consider, for any one of these projects, the medium-term and long-term implications of cash outflows from the public sector, as well as the private sector revenues. Those things cause difficulty in the evaluation, as we have found recently through one of the franchise problems.

Subsection (2) also makes provision in respect of areas where spending must entirely be an expense for the public sector—I assume that we are not envisaging court or prison facilities having paying guests who would contribute towards the costs, so this money will be entirely expended by the public sector.

[Mr Crispin Blunt (Reigate) (Con)]

I return to an argument about prisons that I made on Second Reading. New prisons cost substantially less to run per place than old prisons and can better develop wider policy objectives—for example, on rehabilitation and work in prisons. When debating the Bill, reference should be made to the spending on prisons that would come from the Ministry of Justice’s delegated expenditure limit. This approach would enable the capital expenditure to happen now, in order to take the savings later.

[Mr Redwood]

That is a helpful contribution, but it shows the dangers of this clause, because it demonstrates that if these projects are not properly evaluated they could be more expensive overall. My hon. Friend has recent experience as Minister with responsibility for prisons and he is saying that in the short term they will definitely be dearer, because the state will have a big cash outflow in order to buy the new prison. It will take time to close down the old one and find some alternative use for it, and that process might not produce anything like the amount of money that the new prison costs. He is arguing, with his former brief in mind, that this may still represent a good bargain for the taxpayer, but when we come to account for it, we will have to account for the fact that a lot more has been spent in the first couple of years; there may be benefits for Governments to come if, as he hopes, the thing is cheaper and better in the longer term.

In debating this clause, we need to unpack the three types of project we are talking about. The first is a genuine private sector project, where we hope that there will be no ultimate call on the taxpayer and it may just involve a facilitation guarantee that will be properly rewarded. The second is a mixed project, where a lot of accounting has to be done—as the Department for Transport is discovering, such projects are difficult to evaluate. The third is the pure public sector project, where we need to go into the departmental budget. So I hope that the Minister will give me some reassurances about this.

[Hugh Bayley]

I follow the argument that the right hon. Gentleman is making, although I do not necessarily share his conclusion. Health facilities are defined as one of the fields of infrastructure that this fund could be used to support. The recent health Bill showed that the Government favour more NHS services being provided by private contractors and private hospitals. Is he telling the Committee that he would be happy for this fund to be used to finance a private clinic or a private hospital, but not happy for it to be used to fund an NHS hospital trust?

[Mr Redwood]

I am not trying to say anything that contentious. I am trying to unpack what is going on in this clause, because we are in Committee. I was not going to presume to give my views on total public spending, because that is a matter for another day and another debate. I am trying to get the Committee to understand that we are dealing with three different types of project, and the health one is closer to the pure public sector project. Even if it is carried out in a private sector facility with some so-called “private sector risk”, all the patients will be paid for by the NHS if it is for the NHS and so it is a flow of public revenue. We have to account for it in the proper way and be realistic about that.

[Kate Green]

The right hon. Gentleman is making an interesting argument. Does he not also accept that one of the difficulties with long-term infrastructure projects is that they have different phases, some of which may be susceptible to public intervention and some of which, later on, will require private investment. Let me give the example of a large site in my constituency that is currently in private ownership and has large redevelopment potential. The initial investment will have to be public investment to decontaminate the land and prepare the planning requirements, but down the line one would hope to see private investment. Does that not create a further accounting conundrum?

[Mr Redwood]

Yes, indeed. My point, which is not hostile to the Minister and is merely an attempt to inform the debate, is that we are discussing a set of very different projects and we are not sure what we are talking about because the Bill is very generic and general. We can probably all come to the conclusion that for this to work we will need precise control over what is being proposed—of how much of it is public, how much is private, how much involves a direct charge on the taxpayer and how much involves a guarantee or indemnity.

If a guarantee or indemnity is involved, I am sure that the Minister, with his forensic financial backgrounds and skills, will be able to keep control of it and to reassure the Committee that it is unlikely to be called on unless it was absolutely essential and a very important project would not go ahead without it, which would mean that it was a reasonable risk to run. I am happy at that end of the spectrum, as we will have to trust the Minister’s judgment and this is a good Minister with the skills and ability to do such things. We need to probe when such projects are proposed, however, as we are the custodians of public money and do not want to end up with white elephant projects with huge guarantees and indemnities that will in due course have to be met by some Government.

I am also concerned about the projects in which there is more of a mixture or a muddle, because they must be fitted in to the public expenditure plans. That does not prejudge whether the expenditure should be higher or lower, and there will be different views on that in the Committee, but they will need to be fitted into the plans. A large sum is involved—£50 billion—and we do not know the time scale. The Government might want to come back and ask for more money, and a provision allows them to do so by order, so I want a little more information from the Minister about how such projects will fit into the public expenditure plans and how Ministers collectively will evaluate the mixed projects that receive a big flow of public subsidy and, more particularly, those that really are public sector projects. They might be dressed up as private sector projects, but as far as I am concerned if all the money for the provision on behalf of customers or users of the service comes from the state, that is a public sector project and the private sector is merely a franchisee or agent of the state. If all the money comes from the state, I expect the state to have a grip of the project and to satisfy us that it represents value for money that is being organised in the best way.

I am not ideologically driven as regards the provision of state services. I think that should be done in the cheapest possible way, provided that they offer good quality, and that always causes problems, but I hope that the Minister will give us some guidance about how he will differentiate and seek reassurances about the granting of those indemnities and guarantees and about what proportion of the projects will involve pure public spending, as the Bill entitles him to spend as well as offer guarantees.

[Mark Field (Cities of London and Westminster) (Con)]

Although I accept much of the thrust of what my right hon. Friend has to say, does he not accept that if too much time and Treasury orthodoxy are spent on evaluating schemes at this stage, many of the infrastructure projects will simply not be built? We need to move ahead with getting them under way at the earliest opportunity if there is to be economic growth and some of the evaluation process to which he refers might be better placed at a later date.

[Mr Redwood]

I normally agree with my hon. Friend, but I am afraid that I do not on this occasion. There is not now an excuse to go in for projects that do not make any economic sense just because we all want some more growth and jobs. Indeed, that would be a very good way of setting us all back further as it would damage the public finances without giving us the benefit of a good project that people wanted to use and that produced plenty of user revenue. When one is in a financial hole, as our country is, one needs to be very careful. We look to the Treasury, in particular, to evaluate such matters carefully and I want a little more guidance because £50 billion is a huge sum. I am not surprised that so few MPs want to discuss it—if we were debating £500 million, the place would probably be packed, but because we are discussing £50 billion everyone has gone off for a tea or a coffee—but to me it is a serious sum of money and I want some reassurance that we will get something worth having for it.

[John McDonnell (Hayes and Harlington) (Lab)]

The right hon. Member for Wokingham (Mr Redwood) roamed over many of the issues covered on Second Reading and over the scepticism on both sides of the Committee. I say to the hon. Member for Cities of London and Westminster (Mark Field) that I think evaluation is critical, as we have seen with the west coast main line, and undertaking projects on a wing and prayer at this stage is dangerous, to say the least.

The Bill, as we said on Second Reading, seems to be the reverse of the private finance initiative. PFI was meant to shift the risk on to the private sector, yet the Bill seems to shifting it back on to the public sector. I share the concerns. Clause 1(4) defines financial assistance in the broadest terms possible, so it could involve revenue assistance, and clause 1(3) refers to the operation of a project. In addition to a capital project, we could be subsidising in revenue terms the operation undertaken by a capital project. That leaves open the issue of hospitals being built by the private sector and then revenue supported under the Bill.

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[Mr Raynsford]

I think it very likely that any definition of “national significance” would include flood defence schemes, which are defined as infrastructure in the national infrastructure plan. My hon. Friend should not be troubled about their absence from the list, although he wishes to move an amendment to clarify the matter. There is no question but that flood defences are infrastructure, and if they protect from flooding areas of the country at risk of flooding, which is clearly catastrophic, the likely interpretation would be that they were of national significance.

However, I do not propose to add a precise definition; I simply want to give an overall, overarching legislative obligation for the Bill to be used for the provision of financial assistance to schemes of genuinely national significance.

[Mr Redwood]

I remind the right hon. Gentleman that the Government could not merely offer a loan for the new school door; they could pay for it—they can pay for operating expenditure. So the issue is very wide-ranging.

Oral Answers to Questions

John Redwood Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Osborne]

I am keen to see further investment in our ports. I am happy to engage in a specific conversation with the hon. Gentleman about his proposal and, if necessary, speak to the Welsh Government about it.

[Mr John Redwood (Wokingham) (Con)]

Does the Chancellor agree that the projects that have the most beneficial impact on the economy are those that are fully self-financing in the private sector because they are popular?

[Mr Osborne]

I agree that we want to see private sector investment, and tens of billions of pounds of private sector investment is coming into the United Kingdom. Indeed, today the Chinese company Huawei has announced a $2 billion investment in the UK. I absolutely agree with my right hon. Friend. We want to create the low-tax, competitive conditions for the UK economy in which the private sector can grow, but I think he would recognise that there is a role for public money in providing large-scale transport infrastructure, for example, which these companies need to succeed.

Draft European Union Budget

John Redwood Excerpts

Thursday 12th July 2012 Commons Chamber

[Mr Hoban]

Unlike the Opposition, who were prepared to sacrifice our rebate for some sort of illusory review of spending, we stand firm. It is one of our red lines. In the same way, we stand firm on the financial transaction tax. That is why we vetoed it. We have cut €500 million off the CAP budget this year, which is much more concrete than some review that cost us £10 billion.

[Mr John Redwood (Wokingham) (Con)]

rose—

[Mr Hoban]

I give way to my right hon. Friend, but then I must make some progress and allow others to speak in this short debate.

[Mr Redwood]

What would the member states that want a high budget say if the UK Government pointed out that public sector wages and benefits in Greece and Spain are having to be cut in cash terms because the EU will not cut its own budget? When there is so much waste and programmes that are not very important, one would think it was much easier and preferable to cut those.

[Mr Hoban]

My right hon. Friend needs to reflect on the fact that there are, crudely, two groups of member states: those that are net contributors to the EU budget, such as the UK, Germany, the Netherlands and France; and those that have no incentive to curb the size of the budget because they are net recipients. That is one of the reasons there was a tension in the Council debate on this year’s budget and, effectively, two blocking minorities: one if the budget settlement were too low and the other if it were too high. We are making the case across Europe that we need to curb spending and that the money is spent much better at home than through Brussels. We have a group of like-minded allies on that, although not all member states see it in the same way. I think that we need continually to send the message that there are better ways to boost growth in Europe than simply by spending more taxpayers’ money, whether it comes from Belgian, Greek or British taxpayers.

[Mr Redwood]

But they need to be educated, because in order to get money out we also have to put money in, so higher EU spending affects all member states adversely, not just those that make a net contribution.

Oral Answers to Questions

John Redwood Excerpts

Tuesday 26th June 2012 Commons Chamber

[The Economic Secretary to the Treasury (Miss Chloe Smith)]

We on the Treasury Bench have argued many times in the House that it is fair to ask couples to work under similar requirements as lone parents, and I urge the hon. Lady to consider that in this case.

[Mr John Redwood (Wokingham) (Con)]

When will the House be given the details of the three very large schemes for monetary easing announced at the Mansion House, and when will we be given a chance to debate them?

[Mr Osborne]

It is standard practice for the Bank to announce its own monetary and liquidity schemes. That is what it did with the liquidity proposals, and the Governor of the Bank was answering questions about them this morning before the Treasury Committee in this House. When we have further details about the funding for lending scheme, we will of course come to the House and make that announcement, but I hope that my right hon. Friend will allow me to continue to make Mansion House speeches as Chancellors have before.

Business and the Economy

John Redwood Excerpts

Monday 14th May 2012 Commons Chamber

[Vince Cable]

I do not think that the Foreign Secretary actually said that. He works extremely hard with me and my colleagues promoting British business around the world. A large part of his job is commercial diplomacy and he is doing it extremely well.

One key proposal in the enterprise and regulatory reform Bill is legislation for the UK green investment bank, which will drive the transition to a green economy. The Bill will set the bank’s purpose, ensure its independence and make funding provision. The bank will be formed as a public company under the Companies Act, with initial funding of £3 billion to March 2015. It will operate independently from Government, but will agree its strategic priorities with the Government. Until formally established, the Government are making investments, on commercial terms, in green infrastructure through a specialist team in my Department. I reported to a Standing Committee of the House two weeks ago on its progress.

[Mr John Redwood (Wokingham) (Con)]

I think that the Secretary of State agrees with me that the Vickers proposals for more competition among our domestic banks are very good. What further measures can the Government take urgently to get some competition in banking capacity in the high street?

[Vince Cable]

My right hon. Friend is right that, in addition to the structural reforms, competition is essential. He will know that the Government are endeavouring to carry through as ambitiously as possible the divestment of branches from Lloyds, and a potential solution to that is in sight. There are also some excellent new banks coming up—Handelsbanken and Metro bank are good examples—and we must ensure that the regulatory process is as efficient as possible in order to get those up and running. I thank him for his continued pressure on that important point.

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[Mr Umunna]

In case the hon. Gentleman has not noticed, we are in a double-dip recession. That says something about his party’s policies, given that, as I have just said, it inherited an economy that was growing, unemployment that was falling and a recovery that was setting in.

Before the Queen’s Speech, there was, of course, the Budget. Let us remember what people said about it. The general secretary of the TUC said:

“We needed a Budget that looked to the future and made jobs - particularly for young people - the national priority… Instead we have got a Budget by the rich for the rich.”

The chief executive of the Forum of Private Business said:

“what small businesses and the economy need are confident strides forward now. Largely, that has not happened in this Budget.”

People were looking in the Queen’s Speech for signs that Ministers understood what people were telling them—to change course and to put in place policies that will deliver an economy that works for working people and businesses, and the building blocks upon which a new economy can be built.

Did the Queen’s Speech deliver the change that people and businesses signalled they wanted to see? There are things that we welcome, subject to the small print being worked through. I have given the Business Secretary credit for ensuring that the Government established the Independent Commission on Banking. We are playing our part, in a cross-party spirit as far as possible, to implement its recommendations, and will look at the detail when it is published. The Government, by their own admission, said that they were bequeathed one of the best competition regimes in the world by this party. The Business Secretary will need to demonstrate that the creation of the single competition and markets authority—which he has just spoken about—will improve on that legacy, not squander it.

Our 2010 manifesto included plans to create a supermarkets ombudsman to protect farmers and food suppliers from unfair and uncompetitive practices by major retailers. The Government are taking that forward through the grocery adjudicator, which the Secretary of State has mentioned. We will work to ensure that the grocery adjudicator is given powers to ensure fair access across the supply chain. In office we set up the primary authority scheme—which he also mentioned—to help reduce the local regulatory burden on firms. The enterprise Bill will extend that to include more businesses, which is welcome. The Secretary of State also referred to the changes to parental leave. Again, we will look at the details, but on the whole, that does not sound like a bad measure.

We were told that the enterprise Bill would contain measures on executive remuneration—something the Secretary of State has just repeated. In order to build a more productive and responsible capitalism, it is important to ensure that we bring an end to rewards for failure and the excessive pay we have seen, which is bad for our economy and our businesses. On both sides of the House we agree that change and reform must be led by shareholders and investors with Government support. In office, we were the ones who introduced the advisory shareholder votes on remuneration reports, which have been causing a lot of news recently.

[Mr Redwood]

What approach would the shadow Minister recommend to the remuneration of senior executives and directors in banks with state shareholdings?

[Mr Umunna]

I would say that their pay should be linked to performance against criteria and specified objectives. Our argument in relation to RBS is that the Government are the biggest shareholder. They have lectured others about the need for greater shareholder activism, but it would be good to see it from those on the Government Front Bench.

However, despite all the things I have welcomed, in sum, it is business as usual for this Government. This Queen’s Speech signals little change in approach. For the person looking for work, this Queen’s Speech offered no hope; for individuals, families and firms faced with increasing energy and water bills, and rising transport costs, it offered no hope; and for sound and successful small businesses struggling to get by in this recession of the Government’s making, it offered no hope. However, listening to the Business Secretary, one would think that the Queen’s Speech had been positively received. I do not know who he has been listening to, but this is what our business leaders have said about his Government’s Queen’s Speech. On Friday, Justin King, the CEO of Sainsbury’s and a member of the Prime Minister’s business advisory group, which is meeting as I speak, said:

“Consistency is what gives confidence. Unfortunately, what we have seen over the past couple of years is something that could not be described as a consistent pursuit of a clear policy”.

In other words, uncertainty—created by the Business Secretary’s Department and all across Whitehall—is reducing businesses’ confidence to invest for the long term. On Saturday, the director general of the British Chambers of Commerce said:

“there is a big black hole when it comes to aiding businesses to create enterprise, generate wealth and grow”.

Business people are clear: what they want is a Government who will step up and work in partnership with them to create the conditions for private sector growth. What they have got is a Government who step aside and leave business to struggle on alone.

What was the Government’s response to those comments by business people? Step forward the Foreign Secretary. Yesterday—in what the Business Secretary described as “commercial diplomacy”—he said:

“I think they should be getting on with the task of creating more of those jobs and more of those exports, rather than complaining about it. There’s only one growth strategy: work hard”.

What on earth does the Foreign Secretary think this country’s business owners do all day? His message is clear. He is saying that the fact the economy is not growing has nothing to do with the Government’s failed economic policies. He is saying that it is not growing because the people in all our businesses out there are not working hard enough. How out of touch can the Foreign Secretary be?

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[Mr John Redwood (Wokingham) (Con)]

I remind the House that I offer business advice to a global engineering business and a small investor management business.

We meet today with the winds of danger blowing once again from the euro area. We meet to discuss measures in the Queen’s Speech to make Britain more competitive, to equip Britain better, and to produce more jobs and deliver more goods and services around the world. No one in this House would disagree with the aim. All the main parties agree that we need more economic growth. I think they all agree it is easier to get a deficit down when we are creating more jobs, getting people who are out of work into those jobs, and generating more income and activity, than when we are not. There is no disagreement across the Floor of the House about the aim.

However, when debating how we are going to get that growth and give the best possible support to the companies and individuals who create the jobs and make things happen, we must also recognise that there is a very threatening and menacing problem on our doorsteps. As we meet here today, we know that the Greek political parties may not be able to form a Government at all, or they may not be able to form a Government that can put through the necessary measures to meet the requirements of the EU and IMF loans in Greece. They may decide on new elections in some weeks’ time, creating a dangerous hiatus; and those elections may produce a Government who fully reflect the view of the Greek people, as expressed in the last election to a considerable extent, that they do not wish to co-operate any longer with the lethal mixture of policies that the euroland senior politicians have put forward.

That matters to the United Kingdom, not only because some of our exports and services are sold within euroland, but because, as members of the European Union, we will participate in some of the meetings about what kind of growth strategy Europe as a whole can develop, and we will be a party to some of the decisions that will determine the future of the euro. If the Greek tragedy unfolds such that the Greek state cannot meet the requirements, the European Union has to decide either to give in yet again and come up with another compromise, or that there has to be an early exit of Greece from the euro. It would be better for the British economy and for the future of euroland if an early exit of Greece from the euro were organised quickly, and in confidence up to the point when the necessary announcements must be made. I would not expect the British Government to confirm that that is their aim, but I hope that Ministers are working closely together, representing the greatest financial centre in western Europe and perhaps the world, with that in mind. The sooner the Greek problem is solved, the sooner we can get on with sorting out some of the wider problems in the European economy.

If it is decided to cobble together another compromise, massive headwinds against growth and prosperity in our continent will continue to blow forcefully. Will an early Greek exit be easy to handle? No, of course not. Will it be pleasant? No, of course not. But the Greek people have got to the point where they cannot take any more years of austerity, and in some way or another Greece has to be made competitive. If is it is completely impossible, as it seems to be, in a democracy to slash wages by the amount the German side of the argument seems to say the Greeks should slash wages by, other means have to be used: having a devaluation and having a new currency.

The United Kingdom has one big advantage in the crisis: we have our own currency, it is freely floating,and we are much closer to having competitive prices than Greece, Italy or Spain can possibly be within the euro. Any measures that my right hon. Friends can take to improve our competitiveness in order to create more export jobs, the better. How right Ministers are to see that there has to be a huge reorientation of British exports towards the emerging markets—to the faster-growing territories of Asia, Latin America and parts of Africa—because Europe is making such a comprehensive mess of its economy and its prospects. It is destroying hope and jobs on such a massive scale that our only hope as a country is to support and orient our businesses to where the growth is and where the opportunities are to be found.

That means taking urgent action to mend our banks and to establish more competitive banking, with more money to lend to our companies, because they are going to need working capital and investment capital. They are going to need to gear up for the 2.5 billion Indian and Chinese who want to come to the world party, many of whom, I am pleased to say, will come to the world party and will be the market that replaces the European market, which is failing so visibly.

We also need competitive energy. Surely the Secretary of State would agree, at least in private, that if we wish to lead an industrial revival in this country or anywhere else, we need cheap and competitive energy in plentiful supply. We should not be saying, “Let’s make everything in China, so it does not score against our carbon dioxide totals.” Let us make things here. If we have cheap energy, we will have more chance. Modern manufacturing creates lots of jobs in marketing, legal work and promotion. It does not create many jobs on the shop floor because it is automated, which requires access to lots of cheap energy. That is what I want this Queen’s Speech to address: cheap energy, less intensive regulations—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I remind hon. Members that there is a six-minute limit on speeches.

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[Danny Alexander]

I do not have that information to hand. However, the point I made earlier, which he ignores, is that in many cases where the regional growth fund has been awarded, the private investment takes place well in advance of the public funds being needed. The measure he seeks to use of who has received public funds is therefore not necessarily the best measure of the investment that has taken place, quickly stimulated by the award of regional growth funds. If he looks around the country, he will see many examples of private sector businesses that have been awarded moneys from the regional growth fund and have started their investments well in advance of public funding arriving, because that is how their projects have been planned. If he were doing his job properly, he would understand that that is the way in which many businesses operate.

We have also heard a number of comments about the banking Bill. Indeed, strong support for that Bill was expressed on both sides of the House, and there was support, too, for the strong recommendations of the Independent Commission on Banking.

[Mr Redwood]

Has the Chief Secretary noticed the latest forecast, which says total City bonuses are likely to be only £2.3 billion this year, as opposed to £11.5 billion at the peak, under the Labour Government? Will he consider representations in favour of a bankers’ bonus tax in the light of how little revenue it will raise compared with the original forecast?

[Danny Alexander]

I was about to come on to the mess that the Labour party made of our economy, but the right hon. Gentleman’s question causes me to bring those remarks forward. One of the most calamitous failures of the last Labour Government was the complete failure to regulate the financial sector and to control the excesses that built up in the banking system, and the figures he gave are just one example of that. The banking Bill will implement the reforms that are necessary to deal with some of the excesses and, more importantly, to protect the taxpayer and the British economy from the sorts of problems that previously arose. It was very striking that in neither Labour Front-Bench speech did we hear any apology for the previous Government’s failure to regulate the banks properly, just as we heard no apology for the mess they made of our public finances and the many other mistakes they made, too.

Oral Answers to Questions

John Redwood Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr George Osborne]

We cut business tax to make this country more competitive and to create jobs; we delivered an income tax cut for 24 million working people; we took 2 million low-paid people out of tax altogether; and, above all, we continue to clear up the economic mess left to us by the Labour party.

[Mr John Redwood (Wokingham) (Con)]

What will we get for the £64 billion extra spending this year compared with the last year under Labour?

[Mr Osborne]

The plans we set out for public expenditure were measured, but they involved reducing the deficit. That has been very important. The public finance figures, published today, show that we are on track to meet our deficit targets. At the same time, we have found resources for things such as extra nursery education for disadvantaged youngsters, the pupil premium and all sorts of other things that support our objectives of a fairer and more balanced economy. [Interruption.]

Section 5 of the European Communities (Amendment) Act 1993

John Redwood Excerpts

Tuesday 24th April 2012 Commons Chamber

[Mr Hoban]

We have signed up to certain aspects of the stability and growth pact. One precondition is that we present this information, as we have done every year since the Maastricht treaty. I will set out later why the UK is treated differently in this process from other European Union member states, but there is nothing new in the information that we will supply and it has been presented to the House. When the EU sought to revise its economic governance package, we were very clear that, whereas other member states provide information to the Commission in advance of their budget-setting process, the UK will provide it after our process.

[Mr John Redwood (Wokingham) (Con)]

Does the Minister believe the UK is bound by the Maastricht rules that its deficit should be 3% per annum and no more, and that it should have a stock of debt of only 60% of national income?

[Mr Hoban]

We are required to endeavour to achieve the Maastricht criteria. A very different regime is in place for the UK because of the opt-out that John Major negotiated under the Maastricht treaty. We have been clear, as the economic governance package has developed in recent years, on preserving that opt-out and the different treatment for the UK as compared with other European member states. One achievement is that we are not subject, for example, to the sanctions regime to which other member states are subject.

We jealously protect our particular position in the process, as I am sure hon. Members on both sides of the House would want us to do. Clearly, were we to follow the Leader of the Opposition’s policy—he wants us to join the eurozone at some point—we would have to give up those safeguards and protections. That is not a policy that this Government or the Conservative party would support.

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[Mr Hoban]

Different member states have different constitutional requirements and different histories on the use of referendums, so it is not necessarily appropriate for a politician here in Westminster to lecture others on how to ratify treaty changes.

Before I took the intervention from the hon. Member for Blackley and Broughton (Graham Stringer), who has now disappeared, I was talking about how the UK fits into the economic governance measures. We will present the convergence programme to the Commission after the Budget has been presented to Parliament—the process we are going through at the moment. The EU, alongside other international institutions such as the OECD and the International Monetary Fund, can comment on the Budget, but, crucially, we are under no obligation to take action. It is up to the Government, not Brussels, to decide what action to take in the UK.

Of course, as the euro area moves towards closer fiscal integration, we must remain vigilant to protect the UK’s interests. Where matters are rightly for discussion or agreement by all 27 member states—for example, on the single market or financial services—they must be agreed by all 27 member states. In case there is any doubt, I can reassure Members that the UK remains at the heart of the EU’s economic debate. It is because of the Prime Minister’s recent letter with 11 other Heads of State or Government ahead of the March European Council that the Council conclusions were agreed with a commitment to ambitious structural reforms at the EU level. That included concrete Council conclusions on strengthening the single market and its governance; completing the digital single market by 2015; making further progress in reducing administrative burdens; and boosting trade by removing trade barriers and ensuring better market access and investment conditions.

The Government will push for even more ambition, however, because a return to sustainable growth is the only way for EU member states to pay down their debts and exit the current crisis. It is essential that the Commission uses EU-level policy levers fully to support growth, but member states must continue to take tough decisions to prioritise the most growth-enhancing reforms, matching the kind of ambition that the Government have demonstrated since coming to office, including in our most recent Budget. The Budget information we are providing to the Commission in the convergence programme is part of the European semester process, now in its second year, and will be something that the Commission will look at.

[Mr Redwood]

Does the Minister think that, when the Commission reviews the British Government’s homework, it will say that we need to go further and faster with the cuts or endorse the Government’s programme?

[Mr Hoban]

I do not wish to pre-empt the Commission’s conclusion—it would be wrong to do so—but when other international organisations have looked at the Budget and the Government’s path to fiscal reform, they have clearly endorsed keeping to the path and sticking to the course. That is important. It has meant that we have retained the confidence of international markets, and interest rates are low as a consequence, which is to the benefit of households and businesses. That is vital to the programme of continued economic reform in the UK.

It is important that we discuss these matters with international partners and have a debate about economic policy in Europe, but at home we have to stick to the path required to deliver the necessary reforms. The Budget builds on the Government’s ambition to create a stable and prosperous economy, it shows our commitment to fiscal consolidation and economic growth, and, along with the OBR’s forecast, forms the basis of the UK’s convergence programme. We are taking the right path, and I hope that—

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[Mr John Redwood (Wokingham) (Con)]

I have some sympathy with the Minister in this debate, which is about colossal issues, such as the future of economic prosperity throughout the European Union and its impact on our own economy, yet it is also a rather absurd debate. Successive Governments have felt that they have to table documentation and figures to the European Union, but they are embarrassed by that fact because they know that many of us feel that it is this Parliament, which answers to the British people, that should debate and settle these issues, and that what we are doing is none of the EU’s business. If we do a good job, we will stay in office; if we do a bad job, we will be thrown out of office, and the British people will rightly choose another group of people as they decided to do in 2010 as this crisis developed. We think that that is the right approach.

I must tell my hon. Friend the Minister that if the Opposition had tabled a motion suggesting that the House should tell Brussels that we would no longer send it these documents, I would probably vote with the Opposition, because I would consider that a sensible way of trying to send an obvious message to Brussels. However, we are being invited to spend more time debating the crucial topic of what kind of economic policy would best promote growth and stability in our own country, and what contribution wider economic policies can make to stability and growth in the European Union as a whole.

The description of the pact that we are debating as a stability and growth pact is a grotesque bad-taste joke at the expense of the European peoples. It is clear from the way in which it now operates in the euroland countries that it is actually an instability and recession pact. It is a pact for mutually assured deflation. It is intended to do more damage at the very point in an economic cycle when an economy is performing very badly, to withdraw spending power from both the private and the public sector in an economy with too little demand, and to take jobs away in an economy with a problem of mass youth unemployment.

[Mark Hendrick]

I accept that the policies of many euro area member states are deflationary, but it is ridiculous to deride them simply because those countries are members of the eurozone when our own Government’s policies are equally deflationary.

[Mr Redwood]

As I shall make clear shortly, our policies are rather different. For one thing, the coalition Government decided to increase current public spending, which is running at £64 billion a year more this year than in the last year of Labour government. The Red Book shows that real current public spending has risen in each of the two years of the coalition Government, although not by very much. The Government are clearly not trying to deflate the economy by introducing massive current spending cuts, given that overall current spending has been rising.

[Stewart Hosie]

The right hon. Gentleman, who knows the Red Book inside out, will recall that it makes it clear that the Government’s projected discretionary consolidation by 2016-17 amounts to £155 billion a year, of which 81% will be delivered by cuts in services and the remainder by tax increases. The hon. Member for Preston (Mark Hendrick) was right: the Government are embarking on precisely the policies for which the right hon. Gentleman is criticising others.

[Mr Redwood]

I am afraid that the hon. Gentleman has not read the Red Book intelligently. The 80:20 statistic on which Members seem to rely relates to changes compared with much bigger growth in public spending that was in inherited programmes. It is not the reality. The reality of the Government’s strategy is a massive increase in taxes over the planned five years of the present Parliament to pay for rather modest increases in current public spending over the life of the Parliament, and to get the deficit down. The 2010 strategy suggested that tax revenues would be £171 billion a year more in year 5 than they had been in the last Labour year. The Government have now had to reduce that figure a bit because—as other Members have pointed out—the expected growth has not been forthcoming, for a variety of reasons.

We need to promote growth vigorously and actively, which is common ground between the Government, coalition Back Benchers and many Opposition Members. The argument, surely, concerns what measures are most likely to bring that about. It appears that over the last four years both Governments have operated policies involving actively increasing public spending, with the exception of capital spend—certainly overall spending has risen—and actively promoting massive borrowing, while at the same time the economy has bombed very badly. I am not suggesting that that is causal, but it should lead Opposition Members to ask why that fiscal injection—massive borrowing and an increase in current public spending—has not done the job. There seems to be some disconnection between the remedy that they recommend and the reality of what is happening.

When we look at the way in which other countries have pulled out of crises of this kind, and, indeed, the way in which Britain has pulled out of similar but, perhaps, less aggressively damaging crises than the one that we inherited, we see that there is nearly always a period during which public spending must be reduced or controlled quite strongly to make room for a private sector recovery, and that a series of measures to promote that recovery will then be necessary. As I have explained at length in the past, banking reform and competitive banking are crucial. The Government’s theory favours a tight fiscal policy and a loose monetary policy. They want to allow more money to circulate through the private sector through credit and through the banking system, and they want to lower the deficit gradually in the public sector so that the fiscal policy becomes a bit tighter.

[Mark Hendrick]

The right hon. Gentleman makes great play of tax revenues. We all know where they come from—they come from those who can least afford to provide them—but given that only one private sector job is coming along to replace every 10 jobs that are being lost in the economy, where will they come from in future?

[Mr Redwood]

So far the strategy has generated quite a lot of new private sector jobs, which is very welcome, but it is obvious that it needs to generate many, many more over the next three years if it is to secure the savings on welfare benefits that I am sure all Members wish to see.

It is nonsensical for Opposition Members to say that the poor will be paying the taxes. We have just seen a big increase in thresholds which takes many people out of income tax altogether at the lower end of the income scale. Moreover, if the hon. Gentleman looks at the Red Book, he will see that there will be a sharp acceleration in self-assessment income tax—the income tax that is paid mainly by the rich—once we get the rate down. I know that Opposition Members do not like reading the figures in the Red Book, but it provides a much better case than Ministers ever provide for why we need to get back closer to Labour’s rates of income tax.

One of the things that I most admired about the former Prime Minister and last Chancellor of the Exchequer but one was his insistence that 40% was the highest rate of income tax that could be charged to optimise the amount of money obtained from the rich. He stuck to that view throughout his time as Chancellor and most of his time as Prime Minister. We all know that he only put it in as a political trap at the end of his period in office when he could see the writing on the wall, but it is obvious from the Red Book figures that he was right: 40% is about as high as we can go to optimise the revenue.

According to the forecast in the Red Book, the revenue will stream in after the rate falls to 45p. If Opposition Members look at the Red Book, they will see that last year, under the 50p regime, self-assessment income tax fell by an amazing 9%. That was because rich people who have a lot of freedom and ability to decide how much to pay themselves—I know that Opposition Members do not like that, but it happens to be the state of play—decided to pay themselves a great deal less. Both the outgoing and the incoming Governments had said that the tax was temporary, so they decided that they would hold back their income. It was obvious that they would do that.

[Gavin Shuker]

The right hon. Gentleman is talking like a cheerleader about the Laffer curve. Why does he think that the UK economy is not growing?

[Mr Redwood]

I think that the UK economy may be growing. We will know the facts tomorrow, when we see the first quarter figures, but I suspect that the economy will grow this year. I accept the Government’s forecast of a slow and modest rate of growth. Why, though, is the economy not growing more quickly? There are two main reasons.

The first reason is banking. All the cash that the Bank of England is printing is not going into circulation in the private sector. It is very helpful to keep the Government’s rate of interest down, and it is very helpful to make the increase in public spending more affordable because it controls the interest rate cost for the Government; but the money cannot enter the private sector in any real quantity because the banks are under a huge regulatory cosh to hold more cash and capital at what is, in my view, the wrong stage in the cycle, which means that we cannot secure the growth in banking credit that would finance a better recovery.

The second reason is that taxation is now very high overall in the United Kingdom, which—combined with the inflation tax that has resulted from the high inflation rate that we inherited, which has remained persistently high—means that real incomes are being badly squeezed. It is plain to us all that real incomes started the squeeze under Labour, when the recession really hit, and that that squeeze has continued. A progressive squeeze on the scale that we have experienced since 2008 hits demand and makes recovery that much more difficult.

[Graham Stringer]

Is there not a third reason: that we are in the wrong part of the world, next to the eurozone, which has no mechanism for the poorer countries to get rid of their trade imbalances or for Germany to get rid of its trade surplus? Normally that would be done by revaluing or devaluing those currencies, but having one currency makes it impossible.

[Mr Redwood]

I know that you would like me to wind up quickly, Mr Deputy Speaker, because others wish to contribute, but it is such a pity, as this is a crucial issue. I entirely agree with the hon. Gentleman that there is great difficulty in financing the big balance of payments deficits in the eurozone. Now that a mechanism has been found—German surplus deposits in the ECB being routed to weak member states’ banks through the ECB—the Germans are kicking up a fuss, because they suddenly realise that they have €600 billion at risk and they are not very happy. However, as the main surplus country, Germany has to finance the transfers in the union, and until she does so actively and in an encouraging way, there will be all these kinds of problems.

We have problems in Greece, Portugal and Ireland, which we know about. We now have deep problems developing in Spain, and we even have a problem in the Netherlands—which was meant to be one of the good guys—because of a falling out over the rather modest cuts needed to hit the Maastricht criteria. I agree that we need to get to 3% and 60% in due course—I have no problems with the European targets—but I feel strongly that we should do so for our own reasons, in our own time. It is nothing to do with Europe how we run this economy, and the sooner Ministers have the courage to tell Europe that, the better.

--- Later in debate ---

[Mr Nuttall]

I entirely agree with my hon. Friend on both those points: first, this is a complete waste of time, and secondly, we certainly ought to have a referendum. That is not, of course, the matter before us tonight, however. Instead, this is the question under discussion tonight: what is the point of sending this document to Brussels?

The Minister admits that we pay no attention to what Brussels says to us, and that we govern our own affairs, so what is the point of producing this document? We should be honest with the people in Brussels and say, “Look, we’re not going to listen to you anyway. We’re independent in these matters, and we’re going to stop sending you this document every year.” It is a complete waste of time to send it this year—and I would be very interested to know what happened to last year’s document.

[Mr Redwood]

Does my hon. Friend also agree that it is a cruel paradox that the EU lectures member states to get their deficit down and then demands more money from them by way of public spending?

[Mr Nuttall]

My right hon. Friend makes a very good point, and it prompts the following: if the bureaucrats in Brussels are keeping an eye on the eurozone, something has gone pretty badly wrong because right across the eurozone nobody is sticking to the rules and regulations. The growth and stability pact went west years ago. If the bureaucrats had stuck to it a bit more closely, all the bail-outs, mechanisms and IMF funds would not have been necessary. If they had spent a little less time reading convergence documents and a little more time concentrating on the problems in the eurozone, our country might be better off because our European neighbours might be better off too and would therefore want to buy our goods and services.

There is no useful purpose to our constituents in this document being sent to Brussels, and I urge the House to vote against the motion.

--- Later in debate ---

[Mrs Main]

As usual, my hon. Friend is absolutely right. Why do we want to converge? I do not believe that the British public even know that we are converging, given that this is so lost in the mists of time.

[Mr Redwood]

I fear that the convergence programme began so that countries could converge with the Maastricht criteria to join the euro. As it is clear that we do not want to join the euro, we should in no way be talking about convergence.

[Mrs Main]

I shall not be supporting this motion, because I fundamentally disagree with what is on the front of the document—convergence. I do not think that our currency or our country should be converging with anything in Europe. Our sovereign Parliament should not have to hand in its notes to see whether or not they are acceptable to Europe. If there is convergence, I am sure that somebody is marking us out of 10 on how far down the road we have gone. If we have gone down that road, I would happily stop doing so right this minute. I conclude by saying that at some point this Parliament has got to stand up for itself and say, “We are not going to do this any more.” I would like this to be the year when we are not going to do this any more.

IMF

John Redwood Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

I do not think that there is much political opportunism in having to take the difficult decision that Britain should contribute to IMF resources. I have taken that difficult decision, and I am happy to explain it to Parliament and to the public.

[Mr John Redwood (Wokingham) (Con)]

Given that I agree with the Chancellor that IMF money should not be used to bail out a currency, will he urge the IMF to make sure that loans are made available to European countries only when they are in a position to devalue or when they are withdrawing from the single currency? Otherwise, as with the sterling area, surely the responsibility rests with the governing authorities and the central bank of the euro to make the money, the loans, the subsidies available.

[Mr Osborne]

I do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.