Finance (No. 4) Bill
John Redwood Excerpts(12 years, 6 months ago)
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Owen Smith
It is a pleasure to serve under your chairmanship, Mr Hood—the first chance that I have had to say that today.
Clause 209 and our amendment to it, amendment 5, relate to the bank levy. The point of the amendment is to raise the issues that Opposition Members believe ought to be at the forefront of the Government’s thinking and at the heart of their Budget: what we do to stimulate growth and, in particular, to generate jobs in our economy. Crucially, on a day when we have seen yet another report, this time from the Institute for Public Policy Research, on the scarring impact of long-term unemployment on, in particular, young people, and on a day when we still see 1 million young people languishing on the dole, it seems to me a very easy argument and a very simple point to make to the Government that such issues ought to be at the forefront of not just our mind but theirs.
This aspect of the Bill, the bank levy, offers an opportunity for the Government to do something to fill the gaping hole at the heart of their Budget when it comes to creating growth and generating jobs. There is not a single word in the Budget or in the Bill about the problem of youth jobs, and that is a crying shame, so I hope that the Government will later today amend that omission.
In a moment I shall discuss the background to the bank levy, but to begin with I shall draw together some of the common themes that run through my remarks and the Bill—themes from the debate that we have just had on clause 1 and this debate on clause 209 and the bank levy.
First, I want to raise some questions about the Government’s competence. Clause 1, the profound uncertainty about Government decisions, the other more general decisions in the Budget in relation to VAT on caravans and on pasties, which we will debate later, and the various other curious measures that they have brought forward have all already raised enormous and pressing questions about the competence of the Chancellor and the Government when it comes to managing our economy.
Secondly, there are questions about certainty. Earlier we debated the HMRC report on the Exchequer effect of the 50p rate, and Opposition Members such as the hon. Member for East Antrim (Sammy Wilson) and my hon. Friend the Member for Rhondda (Chris Bryant) asked significant questions about the accuracy of the Government’s modelling in that report and the accuracy of the claims that only £100 million will be lost to the Exchequer. There are further questions to be asked about the accuracy with which the Government have measured the impact of the bank levy to date and juxtaposed it with the rates of revenue which were raised by the bank bonus tax that the previous, Labour Government introduced.
Thirdly, there is a crucial set of questions about values and priorities, because both the clauses that we have debated to date and the clause before us raise questions about the priorities and values of this Government versus those of the Opposition. Those questions do not reflect terribly well on this Government, Mr Gale, it is a pleasure to welcome you to the Chair—[Interruption.] Sir Roger, of course. How on earth could I have forgotten? Sir Roger, welcome. It is a pleasure to serve under your chairmanship.
I suggest that the Government could simply do the decent thing today by deciding to retain the bank levy but also introduce a bank bonus. That would be the wise thing to do, and it would set about raising the revenue that could be used to try to create 100,000 jobs for young people.
Mr John Redwood (Wokingham) (Con)
Does the shadow Minister think that the Royal Bank of Scotland and Lloyds HBOS need less profit and less retained cash to get out of the mess they are in, or more?
Owen Smith
I would be terribly happy for all the banks, including RBS and HBOS, to make more profit. That would clearly be a very good thing for the British economy; we are entirely agreed on that. At the moment, however, they are not being asked to bear a particularly heavy burden, and nor are the other banks that are already making significant profits—lower than in previous years, but still significant. It is not easy to square that with the Conservative Government’s previous commitment to honour our intention to make those with the broadest shoulders bear the greatest burden. The Government’s decisions on the 50p rate and the bank levy do not bear out their former agreement with us; rather, they speak of a Government who have decided to make a different set of decisions over the past few years, as borne out most recently by the 50p tax rate. The Government should think again about how much money they are raising from the banks and what is the appropriate amount that they should raise.
Owen Smith
That would have been a good intervention, were it not for the fact that the £3.5 billion that was realised is written in black and white on page 101 of the OBR document. It is clear how much money was raised—£3.5 billion. [Interruption.] If the Minister wants to intervene to correct me on that, he can do so.
Mr Redwood
The shadow Minister is not completing the thought. We are not disputing the gross amount. We are asking how much other revenue was lost because of the behavioural consequences. He has agreed that the purpose of the bank bonus tax was to drive down bonuses. Assuming that there was some success, the Exchequer must have lost a pile of money in other taxes.
Owen Smith
The right hon. Gentleman is right that there would have been behavioural impacts. We do not dispute that, nor do we dispute that there would have been behavioural impacts in respect of the 50p rate. What we dispute is that the behavioural impacts would be as significant as those projected in the document on the 50p rate and those alleged by the Government on the bank levy. Given how fallible those projections have been shown to be in today’s Treasury Committee report and in any number of comments written about the HMRC report on clause 1 and the 50p rate, we are entirely right to question the basis of the assumptions both on the 50p rate and on the bank levy.
Mr Redwood
If the hon. Gentleman reads the Red Book further, he will see that £4 billion-plus more a year will be raised from self-assessment income tax under the 45p rate than under the 50p rate. Indeed, in the year to April 2012 there was a 9% reduction in self-assessment income tax, because the top income tax payers paid themselves 25% less than the year before.
Owen Smith
At the danger of being ruled out of order for repeating today’s earlier debates—[Interruption.] The Financial Secretary says from a sedentary position that I am on the back foot, but I am absolutely not. I have been pointing out to his colleagues for the past couple of hours that the volume of behavioural change anticipated in the Exchequer analysis is fundamentally flawed. The taxable income elasticity point chosen by the Exchequer to derive that volume of behavioural change is completely outwith the normal delta used by economists to assess the elasticity of top incomes. [Interruption.] No, we are talking about the future. We are talking about what behavioural change there will be and what the yield will therefore be in future.
That takes us to the central question of the Government’s competence. There are questions to be asked about the competence of the way in which they set up the bank levy. Why on earth did the Government choose in the first instance a rate of 0.045%, only to have to increase it five times in the past 18 months to hit their annual yield target of £2.5 billion? I would be delighted to hear the Financial Secretary explain that to us. Why did the Government do it that way around? It does not make any sense to me. It would have been more sensible either to have stuck with the payroll tax, as we suggested, or to have arrived at a hard figure and allowed the yield to set the rate, not the rate to set the yield.
Thus we come to the question of how the Government can keeping saying that they are certain that the bank levy will yield £2.5 billion each year. It did not in its first year, when it hit £1.8 billion. The reason the Treasury team is continually having to tweak the rate is that it is not certain how much money it is going to yield.
Sheila Gilmore
I agree absolutely. I saw clearly, in my city, the follow-through of that financial stimulus. It was followed through to the Scottish Government, and I give them credit for bringing forward some of the construction spending at that stage. We had more affordable homes built in 2009 than we had had for some years. I believe that the figure was 900 affordable homes, which is high for Edinburgh, but that has now plunged right down again. This was not sustained and we are back in the same cycle as we were in before. Such an approach can work, as we get the homes and the jobs, and we ensure that unemployment is not rising as fast as it otherwise would.
When Labour Members suggest stimulating the economy, Government Members invariably ask how we would pay for it. They say, “Oh, you are going to borrow yet more. That is absolutely shocking.” When we make any proposal on how we would fund it, we are immediately told, “You cannot possibly do that. You should not do that.” We are making a genuine proposal here. We have talked about it for several months, but it has not yet been taken up by the Government. The economy is still flatlining and we are seeing all the results of that in our local communities. So, yet again, we are justified in tabling this amendment.
We are constantly told about all the people who are going to go abroad if we do such and such a thing—we hear that banks are going to disappear off, to wherever—but there is not a great deal of evidence of that happening. It feels very much as if we are being blackmailed and as if powerful people are trying to say, “We will take our ball away. We are not going to play.” We have to be very clear that a lot of this does not actually happen in practice; indeed, there is evidence to suggest that the bankers did not leave the country during the period of the previous bonus levy. There is no evidence to suggest that they suddenly swanned off somewhere else. If we are serious about building and growing our economy, as we have to be, this measure will be one small part—it is not suddenly the answer to everything—of enabling us to get this economy going again. It will stop us from sitting on our hands and expecting that somehow to happen, because it will not.
Mr Redwood
I remind hon. Members that I am an adviser to an industrial company and to a small investment management business. I am not a tax adviser, so I feel able to participate in this debate.
I was interested in the Opposition amendment and it turns out to be rather disappointing, for a number of reasons. It asks the Government to produce a report
“on how the additional revenue…would be invested to create new jobs and tackle unemployment.”
As phrased, it does not actually ask for a report on how a bank payroll tax would work, although that is perhaps what Labour Members wanted, too. Interestingly, the Opposition have shifted from wanting a bank bonus tax—a tax originally described as a “one-off” and clearly aimed at very high earners in certain kinds of investment bank, which everybody loves to hate at the moment—to wanting in this amendment a general bank payroll tax. I ask them to think about what that means, because most of the people on the payrolls of our leading large banks are, of course, modestly remunerated. This payroll tax would give a further incentive to bank directors and managers to try to get rid of personnel they are employing, because if we tax something, we clearly do not like it. The Opposition say that they do not like payroll, so they are trying to tax payroll.
Owen Smith
I am grateful to the right hon. Gentleman for giving me this opportunity to clarify the wording—[Interruption.] No, there is no “Ah ha” moment, I am afraid. The wording we have used reflects the wording used by the OBR to describe the temporary bank payroll tax. It is no more than that.
Mr Redwood
It is worth teasing these things out, because I think we have had confirmation from the Opposition that they have in mind a general payroll tax, which would hit people other than the very high earners in investment banks. The amendment does not say “a bonus tax for investment bankers”, for example; it says a “payroll tax”. One therefore has to assume it would affect conduct.
Owen Smith
With the greatest respect, either the right hon. Gentleman misunderstood what I said or he is deliberately misrepresenting what I said—mischievously, I suggest. We were not intending to do anything other than replicate that which we have done previously, so a bonus tax is what we were talking about. The language adopted in the amendment is reflective of that used by the Government and the OBR—that is all.
Mr Redwood
Well, I think we are very grateful for that clarification. We await the details that, unfortunately, we did not get from the Opposition about how they would target the measure, whom they have in mind, how much those people would have to earn and how much bonus they would get. The point rests on perhaps a narrower base than the words in the amendment lead one to infer. One has to assume that the tax will lead banks to employ fewer people.
The tax that the Government have adopted also has consequences. They have decided to get extra money out of the banks by taxing the size of their balance sheets. I think the Government might be right that that is a slightly better way of doing things than taxing personnel costs because it is more general, but that too has adverse consequences. All taxation has adverse consequences as well as some positive uses. The Government tax encourages banks to shrink their balance sheets because they do not wish to pay too much tax. What does that mean in normal language? It means they want fewer deposits and less share capital and that they want to lend less money to people because the way to reduce the tax burden is to have less taxable capacity in the United Kingdom. The tax therefore has a cost. I do not disagree with what the Government are doing: I understand the awful financial situation that the country finds itself in and I can see how this tax is more popular than many others, but let us not pretend that these things are costless. At a time when we need more growth and more loans of a suitable kind to people who can afford to pay them back in order to create demand and more loans to smaller and medium-sized enterprises at a time when they need to grow, taxes on banks are not terribly helpful.
I am enough of a politician to know that banks are very unpopular and that it is an easy hit for politicians who want to improve their own popularity to take a position against the banks, so I am being something of a foolish hero by standing up and saying that not all banks are bad and that quite a lot of people who work for banks are perfectly decent people doing a decent job. The banking service that is supplied around the country to small and medium-sized enterprises and to you and me, Sir Roger, is very necessary, and sometimes it is well handled and well conducted.
There is a dreadful run of debate in this country that everything to do with the word “bank” is evil and wrong, that it serves the banks right and that everything has to be directed against them, but we have to work with the banks—the good, the bad and the indifferent—because we need them to be on the side of economic growth and recovery to tackle the very real problem that the Opposition have identified in the second part of their amendment—tackling unemployment. We need to get unemployment down, and one way of doing that is by having a strong banking sector working closely in partnership with the small and medium-sized enterprise sector and with those people who have a reasonable income and might want to borrow more to buy things and create demand.
Kelvin Hopkins
The right hon. Gentleman glosses over the fact that the banking system has two distinct components. There is the banking for ordinary people and small businesses and then there is the casino component, which is about gambling with vast sums of money—often our money—and often losing it by the billion. That is the bit of banking we are complaining about, not the retail banking that looks after our money and ordinary working people’s money.
Mr Redwood
If it were that easy to make the distinction and to close down or punish the one and reward or encourage the other, I am sure the outgoing Government would have done it. The fact that they did not implies that in office they realised the situation was far more complicated. When we consider the complications of a large conglomerate bank—as it happens the taxpayer should have a lot of knowledge about them because we are the forced owners or part-owners of two such banks—it is immediately obvious to any sensible analyst that the activities of the investment bank are deeply integrated with, and related to, those of the normal commercial bank; for example, in their service for small and medium-sized enterprises. A small or medium-sized export business may need forward currency cover or trade finance and credit, or it may have an investable surplus. It may need all kinds of services that go well beyond the basic banking that the hon. Gentleman was trying to describe—just having a current account to make payments and a simple savings account. The world is much more complicated than that. If we are to survive and compete in a global world with international trade, we need to be able to handle its requirements.
Mr George Mudie (Leeds East) (Lab)
I do not share the right hon. Gentleman’s confidence that the banks are so optimistic, and that they are so ambitious to provide loans that will get jobs for the million youngsters who are out of work. The Government signed up to Merlin scheme for loans to small businesses, but were badly let down by the banks who did not live up to their part of the agreement. This year’s Budget wheeze is the loan guarantee scheme, which is supposed to get jobs for youngsters. The Treasury Committee took evidence and accepts in its report that the scheme will not provide additional lending for firms; it is only a method for lowering current rates, so why is the right hon. Gentleman so confident?
Mr Redwood
I do not think I expressed any confidence on the subject at all. The hon. Gentleman, the Government and I are in agreement that past levels of lending have been inadequate. That is why the Government have come forward with yet another scheme to try to encourage more lending, which I should have thought everyone in the House would want them to do. If the hon. Gentleman wants to know why there has been too little lending in the last couple of years, there are two simple reasons. The first is that after the crash the banks were forcefully regulated not to lend more—[Interruption.] The hon. Gentleman says that is nonsense, but their problem is obvious. The banks were told by the regulator that they needed to hold more cash and capital relative to their lending; the only way they can do that, especially the nationalised ones, is to keep lending down. They are not in a position to raise more money because the taxpayer does not want to put more money into RBS at the moment, and I entirely agree with the Government’s view that we should not be doing so. There is thus a regulatory squeeze on the amount of lending.
The banks would say that the projects are not out there. I am not so sure. The hon. Gentleman and I probably know of financeable propositions on which we would like to see the banks rise to the challenge. We hope that will be possible with the new scheme, but under the Opposition amendment we would spend any revenue that might be raised from what they call a payroll tax, although it is apparently a bonus tax on new jobs and tackling unemployment. We do not know exactly how much they have in mind; the amount would probably be quite modest, as it was from their bonus tax. If the banks see another bonus tax coming in this climate, there will be even fewer bonuses to tax, but the Opposition may welcome that.
Mr Dave Watts (St Helens North) (Lab)
Is it not right that the people who caused financial problems and hardship for many families and created mass unemployment pay a fair amount of tax to compensate for the damage they did to the economy? Is that not exactly what the amendment would provide for?
Mr Redwood
Many people would think that the outgoing Government had a lot of responsibility for the crash, along with their professional advisers, the quangos and the Bank of England, who apparently did not see it coming. They had very light regulation in the lead-up to the credit crunch and then very tough regulation. [Interruption.] Labour Members feel there is some justice in my response, as they are getting very heated, but we are straying rather far from amendment 5.
The point of the amendment is that the Labour party wants to raise an unspecified amount by taxing unspecified people who apparently earn more than Labour thinks is good for them. The Opposition would spend that on youth measures, and they want the Government to come back with a report on how that money could be spent.
My hon. Friend the Member for Staffordshire Moorlands (Karen Bradley), who rightly said that she could support a bank levy to try and get the deficit down, was speaking sense, but this, as she will have realised, is not the proposition of the Labour Opposition. They do not want to get the deficit down. They want to find another pot of money to increase spending. I am with them in their aim of reducing youth unemployment. We will make much more progress in reducing youth unemployment if we have stronger banks able to finance a more vigorous recovery. I urge the Government to work more strongly on that. The more money they take off the banks in taxes, however tempting that is, the less the banks will be able to lend to people to get the recovery going, so the proposal could be self-defeating.
Mr Bailey
I have often made the same point myself. I was on the Government Benches at the time of the so-called financial crisis and the run-up to it, and I do not remember any demands whatsoever from the then Opposition for us to introduce heightened regulation of the banking system. It is very easy to be wise in retrospect.
Mr Redwood
I think the hon. Gentleman has experienced some memory loss on that point, because I can remember both the Conservative and Liberal Democrat parties pointing out—as I did, too—that the borrowing was excessive and needed to be reined in.
Cathy Jamieson
Thank you, Sir Roger. That gives me the opportunity to repeat, for those unable to hear because of the conversations, my point about the harsh reality of the Budget, which has done nothing to give Britain the jobs and growth we desperately need, and about how it fails the fairness test. It has done nothing to help support families and pensioners on modest and middle incomes. We will discuss that further tomorrow so I shall not dwell on it now. It would, of course, be outwith the scope of the new clauses. I shall only say that families are already finding out just what the Government’s decisions will mean for their household budgets. As we will hear, businesses are also now finding out that the botched Budget makes no economic sense for them either.
There was a time when people might have given the Chancellor some credit for his strategic brain. Some on middle incomes and small businesses might even have given him the benefit of the doubt on economic policy, notwithstanding our many warnings about cuts that go too far and too fast. They might have given him the benefit of the doubt even if they did not completely agree with everything he was doing. But how times change. The Chancellor has had several weeks of torrid headlines—The Mirror: “Half-baked Tory tax a mistake-and-bake from Osborne and co”; The Sun: “PM David Cameron is urged to show leadership over pasty-gate”; The Guardian: “‘Pasty tax’ is the last thing people need”; the Evening Standard: “Heston says pasty tax will stop artisan bakers earning a crust”; and even “Tax on beloved Cornish pasties sparks furore in Britain” in USA Today and “‘Pasty tax’ row heats up for British PM” on the al-Jazeera website.
Mr Redwood
Is the hon. Lady at all worried that the fine reputation of the pasty will be damaged by so many MPs trying to associate themselves with it and get their ratings up as a consequence?
Cathy Jamieson
I am sure that the pasty industry is looking on as we speak and will want to know exactly which MPs have gone and sampled the local delicacies in whichever part of the UK they happen to live.
Those weeks of torrid headlines have led us to the current situation. There is now a pasty petition, and there has apparently been a pasty summit, while Greggs is planning a pasty protest march on Downing street to plead with the Prime Minister to step in personally and kill off the hated pasty tax.
Finance (No. 4) Bill
John Redwood Excerpts(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr John Redwood (Wokingham) (Con)
When the Government proposed VAT on pasties, did they feel they needed to do that to protect other VAT revenue on takeaways from European challenge? Is that what is in the Chief Secretary’s mind?
Danny Alexander
No, that is not what is in our mind. It is one of a number of anomalies in the VAT system that we addressed in the Budget, although it is not actually a matter contained in the Bill. My right hon. Friend will be aware of the comments of, for example, the National Federation of Fish Friers, which makes the point that small independent fish shops, of which there are thousands around the country located in the constituency of every Member, have for many years been charged VAT on sales whereas other retailers have not. We are seeking to correct that anomaly.
Rachel Reeves (Leeds West) (Lab)
This Finance Bill is so flawed, so unfair and so inadequate a response to the problems now facing the country that I am surprised that the Chief Secretary does not show a little more embarrassment in presenting it to the House this afternoon. This Government are presiding over an economy beset by rising unemployment, a slump in private sector investment and billions of pounds of unplanned extra Government borrowing, yet he comes to this House with a Finance Bill that does nothing for growth, nothing to get more young people back to work and nothing to help small businesses struggling to stay afloat, and which instead asks millions of hard-pressed families and pensioners to pay more so that millionaires can pay less.
It is less than two years since this Government took office, yet they have already sent our economy into reverse. Business and consumer confidence have drained away, and growth has sputtered and stalled with no net increase in our national output over the past 15 months, and with wages and incomes stagnant or falling even as the cost of food, fuel and fares rise and rise. The Office for National Statistics confirms that last year saw the sharpest annual fall in real disposable income for 35 years. The private sector has been unable to fill the gaping hole left by deep and painful public sector cuts, and as a result overall redundancies have been running at a rate of one a minute since this Government took office.
Mr Redwood
What tax cut does the hon. Lady think would do most to promote economic recovery?
Rachel Reeves
I believe that a temporary cut in VAT back down to 17.5% and a national insurance holiday for all small businesses taking on new workers are the way to put the economy back on track to recovery.
Amendment of the Law
John Redwood Excerpts(12 years, 7 months ago)
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Mr John Redwood (Wokingham) (Con)
I fully support the Government’s aim. We need to earn our way out of the fiscal crisis, the massive over-borrowing and the large deficits. I also fully support their aim to get more money from taxing the rich, and we need a tax break for everybody else. We need a stimulus to demand and growth in this country and it is welcome that, given the difficult figures before the Chancellor today and the situation he inherited, he has managed to find a way of cutting tax for most people. That will be welcome relief from the relentless pressures on private budgets that hon. Members and their constituents have been experiencing as we try to climb out of the crisis.
It would be helpful to remind the House of the general shape of the five-year programme to try to get the deficit down. We want to get to a position in which we are adding less to the new borrowing. It is not that we are paying off the debt or dealing with the nation’s mortgage and credit card; we are just not flexing them quite as much as before. The Government have said that, over the five-year period of the planned coalition Government, they wish to increase current public spending by £90 billion and tax revenues by £174 billion a year by the fifth year of the programme, compared with the last Labour year. The House can see that, on most normal ways of looking at the situation, the plan is for the heavy lifting of getting the deficit down to be done by a very large increase in tax revenues.
Those tax revenues best roll in if the economy grows reasonably rapidly. The more quickly the economy grows, the easier and less hurtful it is to get money out of people; the less the economy grows, the more the choices become difficult.
Barry Gardiner (Brent North) (Lab)
The right hon. Gentleman says that the heavy lifting will be done by the rise in tax, but does he accept that there is a ratio of 4:1 in the amount that will come from cuts in public spending and benefits to the amount that will come from tax rises?
Mr Redwood
I have just given the figures—they are taken from past and current Red Books—and the hon. Gentleman must make his judgment. I am giving the House my interpretation. Most people who see spending going up by £90 billion and revenue going up by £174 billion will say that the increase in revenue is doing the job of bringing the deficit down. If he compares that with Labour’s plans for even bigger increases in public spending, he can make a case. He may also have in mind—we have debated this in the House before—whether the cuts are real or not. Some programmes will experience real cuts. We know that because there is a much slower rate of growth in cash spending than anything this country has been used to for a very long time.
If debt interest takes too much of the extra money, and if welfare benefits take too much, other things will obviously be squeezed more, which could lead to very unpleasant consequences. That is even more reason why the Government are right to try to get the deficit down, so that we do not keep on increasing the debt at such a huge rate, and why they are right to keep official interest rates low—that helps with the cost of the deficit. It is also why they are right that we need to earn our way out of the situation by getting many more people back into decent jobs, so that they are paid more in work than they are paid on benefit. Surely the whole House can agree on that and share that aspiration.
Sheila Gilmore (Edinburgh East) (Lab)
We obviously want to get more people into jobs, but will the right hon. Gentleman comment on something the Prime Minister said in Prime Minister’s questions? He said that 600,000 new private sector jobs had been created since the election, but a year ago he said that 500,000 new private sector jobs had been created since the election, and three months before that he said that 500,000 new jobs had been created since the election. Is not the rate of creation of new jobs slowing down massively under this Government?
Mr Redwood
We all know from the output and jobs figures that the economy did not do as well at the end of last year as it had done at other times since the Government were elected, but we also know that the forecasts are that growth will now pick up. I am sure the hon. Lady will welcome that and join me in having a serious debate on what this Parliament can do to make it more likely that my constituents and hers have jobs, and more likely that they are better-paid jobs.
The question whether real public spending is falling or not depends on the rate of inflation in the public sector, so I urge again that we take advantage of the tough times. There is a two-year pay freeze for public sector workers, and the Government say that they are buying things more cheaply throughout the public sector. In addition, there are recessionary conditions in Europe and other parts of the world. If we take advantage of those things, it should mean that we do not have to have big real cuts in spending, because we will have that £90 billion per annum to spend by the fifth year of the strategy.
However, we should focus today on taxation, which is clearly what the Leader of the Opposition wanted to focus on. I do not think he listened to the Budget speech or the numbers he was told, because my right hon. Friend the Chancellor made it very clear that he had come up with a series of targeted measures to tax the very rich more than if he had not made the changes. That is fine by me, and I would hope it is fine by the Labour party, but the Leader of the Opposition seemed to say that it was not fair, because some rich people would still get away with it. However, if we get enough or more out of them overall, is that not worth while? Surely even Labour would accept that if we raise rates too high, the very rich go away—they find ways around paying the tax or do not pay.
Labour in opposition does not take that seriously enough, but the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), took it very seriously when he was in office. As Chancellor, he had the option of putting the 40% rate up to 45% or 50%, or the 83% that Labour had when previously in office, but he never chose to do it. I wish he were here today. If he were, I would ask him, “Why not?” I think his answer to Labour groups around the country is, reportedly, that had he raised it above 40%, he would have raised less money in taxation rather than more. Naturally he wanted to get more out of the rich—on that I agree with him entirely—but the way to do that was to keep the rate at a sensible level.
The Opposition should study the figures for tax receipts. If they look in the new Red Book, they will see that self-assessment income tax is plunging this year. That is exactly the problem that my right hon. Friend the Chancellor has to tackle. Under Labour, self-assessment taxation at 40%—the then rate—brought in £22.5 billion at its best, before it made a mess of the economy. The forecast for 2010-11 out-turn is £22 billion, and the forecast for the 2011-12 out-turn—soon to be seen—is only £20 billion. That means that the Treasury now expects a 10% reduction in self-assessment income tax receipts, which is where many of the high earners congregate with their complicated tax affairs. Those, then, who think that a 50p rate raises a lot more money have a lot of explaining to do given that we are in the middle of this collapse.
Mr Redwood
I am sorry but I will not get any more time, so I am afraid I cannot.
If the Opposition study the Red Book, they will also see that when the 45p rate is firmly up and running, there will be a surge in revenues compared with the current bitter experience with 50p. Self-assessment income tax is scheduled to rise to £28.5 billion by the last year of this Parliament, showing that, according to the Treasury’s own model, growth is expected. However, I think we will see a much disrupted experience of tax collection now, because if we give advance warning of a new lower rate, we might have a problem in the year before, but we will have to see—we will watch with great interest.
Overall, however, the House should note that there are difficulties with getting the massive increase in taxation from the country which everyone wants. According to the current receipts table, there has been slippage every year in the current receipts forecast under national accounts taxes compared with the autumn statement. Some of that, of course, is the result of the policy change on lower tax designed to help people—we welcome that very much—but we have to understand that it is very difficult to get as much tax out of the economy as many MPs would seem to like.
The Government are right to want a Budget for aspiration; they are right to want a Budget that allows us to earn our way out of this situation; and they are right that we need to make it more worthwhile to work. I hope that they will reinforce that message in future Budgets. Since the 1970s, in which time we have had Labour Governments as well as Conservative and coalition Governments, no Government have ever been able to raise more than 38% of the total national income from taxes. I am sure that Labour would like to try it, but actually the record shows that Conservatives have taxed a bit more as a percentage of national income than Labour—normally because they have had to clear up the mess, the debts and the deficits that they have inherited.
There is a natural ceiling on how much we can get out of people in a free economy. When we have a footloose international economy, it is all too easy for the people with talent and money—Labour might not like them—to go somewhere else, spend their money somewhere else and invest in jobs somewhere else. We desperately need every job that we can get, and we desperately need the good will of those with money, talent, entrepreneurial flare and ability. We also need the money of some of those who do not have any of the above—we still want them here and to ensure that they spend their money here.
The Budget therefore has to concentrate on the crucial issues of how we reward aspiration and generate true prosperity. A much greater man than I, I think, said, “You cannot tax a country into prosperity.” This country is not short of taxes. Governments have been incredibly inventive in finding all sorts of ways of taking money off people. They are taxed again and again and again—on income, on spending, on savings, on capital gain. There are endless taxes. We are not short of taxes. We do not need new taxes. We need a growing economy and to persuade people to pay the taxes that we have put in place trying to pay for the public services.
We want great public services but we need to understand the language of priorities. I think those priorities are shared across the House. Both Labour and Conservative Members would choose to make health and education their top priorities for public spending. The last Government certainly did that with large sums of money, and this Government are doing it with what money they can find. However, I also hope we would agree—this is more difficult when Labour are in opposition—that we need reform of those public services so that every pound we spend is a pound well spent. We need to increase productivity and quality, and get more for our money, because everyone has to accept that times are hard and the amount of money available will be limited.
The Front-Bench team need to do all they said in the Budget to promote growth; they need to do more to sort out the banks because until we have properly functioning and competitive banks—super-charged to lend against good projects—we will not go as quickly as we would like; and they need to ensure that every pound they spend in the public service is well spent. That is the way to earn our way out of the crisis and into prosperity. We cannot tax our way into prosperity but we can earn our way there.
Living Standards
John Redwood Excerpts(12 years, 8 months ago)
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Mr John Redwood (Wokingham) (Con)
Having highlighted the anomaly with one and two-earner families regarding child benefit withdrawal, does the Labour party have a suggested solution to sort it out?
Rachel Reeves
I am looking to the Government Front-Bench team for their solution, given the words that we have heard from Ministers over the past couple of days. The Labour party supports child benefit as a universal benefit. At the very least, the Government must iron out the anomaly that means that families earning £84,000 a year can still get child benefit, while a one-earner family on £43,000 cannot.
One month tomorrow, on Good Friday, 212,000 families stand to lose up to £4,000 because of changes to the working tax credit. The Government will say that people need only to increase the number of hours they work from 16 to 24. If they were in touch with working families and businesses, they would know that this is simply not an option for many people because the jobs are not there, and employers are laying people off and cutting hours, not increasing them.
Mr John Redwood (Wokingham) (Con)
I am grateful to the Labour party for choosing this important subject for this evening’s debate, because it is right that we should debate living standards. It is quite brave of the Labour party to choose this topic, because there was a sharp decline in living standards in the last years of the Labour Administration, but it is also true that there has been a further decline in the first 18 months of the coalition Government. It takes time to turn these things around. The main reason why living standards have continued to fall in the past 18 months is that inflation has been too high. If time permits, I wish to suggest some things Ministers could do in the drive against rising prices so that we can relieve some of the pressure on our constituents.
I agree with Labour and colleagues on the Government Benches that we are here above all to ensure the better prosperity of the people we represent. None of us wishes to see their constituents’ livings standards fall, and it is right that today we should consider, on an Opposition motion, how we might strengthen and improve living standards. I also agree with Labour that we need to debate jobs and growth and am delighted that the motion starts off with that. I am sure that Ministers on the Treasury Bench are well aware that, although they have introduced some measures, they have not yet done enough to ensure a rapid, strong and continuing recovery. We all look forward to my right hon. Friend the Chancellor adding to the range of policies and instruments that he can adopt to improve the chances of more rapid and sustained growth.
Again, it is a matter of common agreement across the Chamber that growth is a good thing, that it will mean more jobs, rising living standards and higher incomes and that it will bring with it more tax revenue. More tax revenue is much needed, because the Chancellor and his Front-Bench colleagues have decided to increase public spending in cash terms every year of the five-year period, which will not be easy to finance, given the very large running deficit and accumulated debt they inherited. Contrary to what some people in the media have said, the debt is still rising day by day because we are still running a large deficit.
I was hoping to say something good about the parts of the motion where Labour highlighted one of the problems people have with one of the Chancellor’s proposals. As many Labour Members and others have pointed out, with the wish to make richer people pay a little more by withdrawing child benefit there is the problem that those who are better off might in some cases get a better deal than those who are worse off. None of us likes that, and I think that there is common ground on that across the House. It is not a new discovery that Labour has highlighted today. I was hoping that it might have a contribution or a solution, because we know that the Treasury is thinking about whether the problem can be dealt with, but when I asked, thinking that I might find something I could support, answer came there none.
Ian Austin
What advice would the right hon. Gentleman give to a constituent of his, earning perhaps £42,000 or £42,500, who has three children, is working hard, getting on in life and wants to do better, but who is offered a pay rise that would take them into the 40p tax band? They would then face the difficult choice between taking a promotion that they have worked hard to get and losing thousands of pounds in child benefit. What would he advise them to do?
Mr Redwood
That is a very good example of the problem one can get into, and that is why I wish my right hon. Friends on the Treasury Bench every success in dealing with what we can all see is a problem, but I am not recommending to them that they give up and say that somebody on £200,000 a year should still be able to get full child benefit. That is not the right answer, and I should hope that Labour might sympathise with that proposition and agree, but I am grateful that some Opposition Members are now coming round to my view that high marginal rates of tax and of benefit withdrawal, at all levels of income, are a disincentive.
Just as Government Front Benchers are rightly trying to tackle the very serious problem at the lower end, perhaps with some support from Labour, they should have some sympathy for people in the middle of the income scale, where the situation can be equally unpleasant and difficult for families struggling to meet their bills. Sometimes Opposition Members forget that, although people in my constituency tend to have a higher average income than many of the average incomes in their constituencies, my constituents’ housing costs, their travel costs and other factors in their cost of living mean that they need higher incomes in order to have the same living standard as those whose houses are half the price or less, because housing is a very big component.
The Labour party has rightly said that it would be wonderful if we could tax the banks more, and I again find myself in agreement with that. It is an immediately attractive proposition. We all know that banks are pretty unpopular, and we like to think of them as very rich, so it would be good if we could tax them more. Unfortunately, Labour is wrong to suggest that the Government have just offered another tax break to some banks by cutting the marginal rate of corporation tax. The reason we are getting so little tax out of them is nothing to do with a small drop in the corporation tax rate; it is that two of the biggest banks, Royal Bank of Scotland and Lloyds HBOS, are loss-making, so it does not matter what corporation tax rate we set, because they are not going to pay a penny of it. That is a disgrace, but it is where we have got to because of the disasters and problems in bank management over recent years.
Worse still, we are in the position whereby, if those banks do start to make money—it is true that the losses have been much reduced in the past year and they might start to make money—they will not be about to pay any tax, because they have such huge inherited losses from the period under Labour when they plunged into massive deficit and got into a disastrous position.
Richard Fuller
My right hon. Friend is making very good points about the importance of companies being profitable so that they can pay tax, but when it comes to bankers and high earners paying taxes does he think that it is more important that the tax take is as high as it can be, or that we have a headline-grabbing marginal tax rate? Which is more important: the take or the rate?
Mr Redwood
I am very much of the view that we want a higher tax take, and I favour taking the tax from the people with the money, the rich, and from the companies with the money, rather than from the people who do not have it. That is what I believe, and I would hope that that again was common ground. The way we do so is by charging a rate that people are prepared to stay and pay, because the danger is that if we set the rates too high, people do not stay or they do not pay; they find clever accountants and lawyers, do less, invest less, risk less or go. It is the same with banks: if we get the rate wrong for banks, instead of getting more money out of them, we get less.
In 1979 when Labour had had a strongly socialist Government, they left office with a marginal income tax rate—in which some current Opposition Members would take pride—of 83p in the pound. In those days the top 1% of income tax payers contributed just 11% of the total income tax take, because the rich had either gone or had clever arrangements to avoid paying tax. When the Conservatives brought the rate down to 40%, not only did the amount of money paid by the rich go up, and the real amount that they paid go up significantly, but the proportion of total income tax that they paid more than doubled. Surely that is a desirable outcome, and it is the same with banks: we need to find a way of taxing them.
My first recommendation to the Chancellor for his Budget is to sort out the banks. We need to create some working banks out of the RBS framework, get them out there in the market, sell them off, get them into a profitable state without all the back history of tax losses, and create new entities that can trade properly and lend money for the recovery, and then we can get some tax revenue out of them. I hope that Labour Members might agree with that proposition. We then need to tackle the problem of inflation, which has been rising too rapidly.
I am glad that those on the Front Bench have done something about council tax bills—I hope that Labour councils will join Conservative councils in keeping those bills down, because they are very difficult for many people to afford—and have started to do some work on fuel prices, although they are still extremely high. We could do more to get water and energy bills down. I recommend that we allow more competition in those industries, particularly water. In the energy industries, we need more private sector-led investment, with an emphasis on cheaper power, which is needed to tackle fuel poverty and inflation and to secure an industrial recovery. The Government need to recognise that energy is now usually the biggest cost in many industries and, instead of favouring dear power, follow competition and private investment policies that will promote cheaper energy.
Oral Answers to Questions
John Redwood Excerpts(12 years, 9 months ago)
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Mr Hoban
The hon. Lady makes an important point, but let me be clear: as she will know, youth unemployment in her constituency peaked in December 2009—it is actually lower today than it was then. No one should be complacent about youth unemployment, but she should recognise, as the right hon. Member for South Shields (David Miliband) did, that youth unemployment is not a problem that this Government created, and that it is a long-term challenge and grew even when the economy was booming. We are taking steps—such as the youth contract and boosting the number of apprenticeship places—that will benefit every constituency in the country, including hers.
Mr John Redwood (Wokingham) (Con)
When will we see more of the details of the credit easing scheme and what is the Minister’s forecast of the monthly draw-down for the rest of this year?
Mr Hoban
We are working with banks on the details behind the national loan guarantee scheme. We have set aside £20 billion to enable the rates that are charged to small businesses to fall by up to 1%. The utilisation of the scheme will very much be driven by the demand from businesses for debt finance.
Youth Unemployment and Bank Bonuses
John Redwood Excerpts(12 years, 9 months ago)
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Rachel Reeves
I will make a little progress, because we know that many Members want to speak. I will try to give way again later.
Although many of our constituents are very fearful about the future, not everyone is looking to the future with fear and trepidation—not for all the question of how their money will last until the end of the month, or whether they can afford to heat their homes and eat three meals a day. For the past week, we have been hearing stories of banks preparing to pay bonuses to a few hundred senior employees amounting to hundreds of thousands, even millions of pounds in another multi-billion pound bonus season.
The Opposition believe in rewarding hard work and encouraging enterprise that contributes to the prosperity of the economy, but this is about fairness, responsibility and proportion. It is about the difference between rewards for success and rewards for failure.
When millions of families are struggling to find work, businesses are having their loan applications turned down and banks are continuing to rely on taxpayers’ hard-earned money for their very survival, the vast majority of people in all our constituencies find the idea of such sums being paid to a small number of individuals unacceptable. People rightly feel that we did not bail out the banking system to perpetuate a business-as-usual model or to pay big bonuses when ordinary workers are losing jobs. Surely we bailed out the banks to protect the businesses and families that depend on banks serving and supporting the wider economy.
Mr John Redwood (Wokingham) (Con)
Will the hon. Lady explain why Labour Ministers accepted and approved such grotesque contracts for RBS, so that they now personify payment for failure?
Rachel Reeves
We introduced a bank bonus tax to get some money back from the banks. The Government refused to go ahead with it and, instead, gave the banks a tax cut this year. That is not acceptable, and that is what the motion is about.
While banks seemingly return to the business-as-usual model, aided and abetted by the current Government, last week the Office for National Statistics published another set of dreadful unemployment numbers. Total unemployment is now at its highest since the summer of 1994. Women’s unemployment is the highest it has been since autumn 1987. Youth unemployment is now the highest since comparable records began. The number of young people claiming jobseeker’s allowance for six months or more has doubled in just 12 months.
Those figures on their own are shocking enough and should be sufficient to end all debate and drive the Chief Secretary and the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling), to urgent action. However, most worrying is the fact that, on every measure, and according to every forecast and to the Government’s Office for Budget Responsibility, unemployment is set not to fall, but to get worse.
The Office for Budget Responsibility’s projection, alongside last year’s autumn statement, showed unemployment rising to 2.8 million this year. The OECD expects unemployment to rise to 9% in 2013. If unemployment continues to rise at the rate that it has done in the past six months, it will reach 3 million this summer. The economy may well be headed back to recession—we will hear the grim reality on Wednesday.
However, it is clear that, although the situation is now perilously close to tipping point, and the Government’s failures are mounting, they could still take action. Yet since taking office in 2010, the backfiring of their attempts to cut too far and too fast has added a shocking £158 billion in extra borrowing.
Connecting Europe Facility
John Redwood Excerpts(12 years, 9 months ago)
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Mr Hoban
My hon. Friend’s point is outside the topic of the debate this afternoon. He is aware of the Chancellor of the Exchequer’s comments and assurances on that matter.
As I have said, at home, we have taken tough decisions to tackle our deficit and demonstrated leadership. We expect exactly the same leadership on spending in Europe from the European Commission, but whether on the annual budget or the financial framework, such leadership has been completely lacking. Instead of finding ways to cut spending or to drive better value for money, the Commission, through the connecting Europe facility, proposes to increase spending on transport, energy infrastructure and telecommunications by 400% as part of a multi-annual financial framework that increases payments by more than €100 billion over its duration.
Just as at home, where we have prioritised spending on growth while tackling the deficit, the Government would like a higher proportion of a restrained EU budget spent to promote sustainable growth. The proposal does not achieve that objective. We are arguing that spending should be lower, and that what spending remains should be focused on areas that offer genuine added value across the EU.
Mr John Redwood (Wokingham) (Con)
A number of people who have written to me condemning the High Speed 2 project have alleged that Britain has to build it under the EU network ruling. Will the Minister confirm that Britain remains free to make its own decision on whether to have High Speed 2?
Chris Leslie
It is important that the European Commission, and the eurozone in particular, focus on getting economic growth. My simple point is that it is not happening. An austerity-only approach is being taken, but it is not working, just as it is not working in this country. Of course we have to ensure that we reduce the proposed budget increases—we do not disagree with that—but there are ways to stimulate an economy within that envelope, including through a phased approach towards the European spending review process. That is my point. It is the glaring omission from the Government’s plans so far.
Mr Redwood
Will the shadow Minister bring us up to date with Labour thinking on the IMF having more money to lend to save the euro? Does Labour think that it would be a good idea because it would promote growth, or a bad idea because it would damage the British budget?
Chris Leslie
We are all waiting to see what proposals come forward. The Chancellor has said that he will come to Parliament and let us have a say on many of these things. Indeed, perhaps the Minister can help us out with the timing of those proposals—[Interruption.] If he would care to listen to my questions, perhaps he could also tell us when we will get the Bill to enact the European financial stabilisation mechanism permanent bail-out fund. We are all waiting for that. The eurozone countries are supposed to be rolling together the European financial stability facility and the EFSM into that permanent arrangement, but as I understand it we will have to legislate for that. Will he tell us when that will happen, because it is related to this question about potential IMF funding? We need clarity from the Government—and from the IMF as well.
Banking Commission Report
John Redwood Excerpts(12 years, 10 months ago)
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Mr John Redwood (Wokingham) (Con)
Will the Chancellor take urgent action with RBS to create three new competitor banks from its assets and liabilities so that we can have real competition and more promotion of growth?
Mr Osborne
I have set out our view as the largest shareholder of RBS. We have to be careful of the shadow director rules and the like, but I was very clear in my statement that we expect and hope to see RBS shrink the size of its investment bank and focus on the UK and its UK customers. That is our proposal as an RBS shareholder. Of course, the question of how to dispose of our shares in RBS, which might arise in future, is one that we will address at the time.
Northern Rock
John Redwood Excerpts(12 years, 11 months ago)
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Mr Hoban
Clearly, there are two parts to the Northern Rock business that the previous Government nationalised: the business that we are selling—Northern Rock plc—and Northern Rock Asset Management, which holds a lot of the old mortgage book. The previous Prime Minister assured the House that both would make a profit for the taxpayer.
Mr John Redwood (Wokingham) (Con)
I hope that Sir Richard Branson can turn this business into a profit-making, growing business, generating more jobs and paying some tax. Will the Minister remind us how much this bank has lost in state hands, which accounts for the fact that it is no longer worth what the Labour party paid for it?
Mr Hoban
The previous Government injected £1.4 billion-worth of capital into Northern Rock plc. That has gone down to £1.2 billion because of the losses incurred, and we expect further losses in this financial year and in the next. The challenge for Virgin is to use the platform it will have in Gosforth to grow the business, attract new customers and use its reputation for challenging incumbents.
European Budgets 2014 to 2020
John Redwood Excerpts(12 years, 12 months ago)
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Mr Hoban
No, let me continue.
The best way to restrain EU annual budgets is to set tough multi-annual framework ceilings. That is why, at the European Council in October 2010, member states agreed that the
“forthcoming Multiannual Financial Framework must reflect consolidation efforts being made by Member States to bring deficit and debt onto a more sustainable path”.
Rather than following that path, however, the Commission has meekly bowed to pressure from the European Parliament to increase the budget, thereby returning to the extravagance and irresponsible spending that sowed the seeds of the current global economic crisis. Just as we cannot accept the Commission’s 2012 budget, we also cannot accept the Commission’s proposal, as set out on 29 June, to increase the multi-annual framework budget for 2014 to 2020 by 11%. Such an increase is incompatible with the tough decisions being taken in the United Kingdom and in countries across Europe to cut spending.
Instead of consolidation, the Commission proposes expansion. It has ignored the calls made in December last year by the UK, France and Germany for a real-terms freeze in spending. The Commission claims to have done as we have asked, but let me make it absolutely clear to the House that it has not. On average, the spend in each year of the next framework would be about €14 billion higher than it is today.
Mr John Redwood (Wokingham) (Con)
Given that the Government are now studying the powers and duties that can be brought back to the House for national and local decision, surely we should be taking big lumps out of this budget? If, for example, we repatriated agriculture, industrial aid and regional aid, we could cut the budget by two thirds. I think that the members of the public to whom I answer would be very pleased with that.
Mr Hoban
My right hon. Friend makes an important point. In parallel to the debate about the ceilings for the budgetary framework over the course of the period between 2014 and 2020, debates are also taking place on the individual lines of expenditure within the EU budget, and we are proposing significant reductions in cost to underpin our strategy of curbing overall spending by the EU.
Chris Leslie
I understand my right hon. Friend’s frustrations, but I really do not think that the proposal on the table from the Commission would achieve the outcomes that he or I seek. We have to make concerted efforts to broker a deal where any FTT applies in any of the world’s big financial centres, all of which by the way have much to gain from a new and reliable revenue stream that supports jobs, growth and the developing world.
The Commission’s proposal falls short, especially because of its intended destination for the revenue, but I think that the difference my right hon. Friend seeks is this: we felt that there was a real window of opportunity to steer the agenda on a financial transaction tax and to persuade other countries that it was something seriously worth considering, but our Chancellor is out there at the ECOFIN meeting today, resisting under all circumstances. Indeed, he wrote a private letter to bankers the other day in which he indicated that he was not in favour of it at all—even though that contradicts some of his statements in this place. He is wrong to block wider discussion among the G20 and beyond.
The BBC’s Nick Robinson reported this lunchtime that our Chancellor asked what was the point in even having a conversation about the financial transaction tax and, apparently, whether it was
“the best way to spend our time”.
It is important that we address those issues, because the Government’s weak and defeatist attitude is an abdication of leadership and a total abandonment of the gains made for the cause at the G20 meeting in 2009. It is time that Britain stepped up to the plate and showed the leadership needed to broker a better deal by being open to the idea that it is possible to win the argument for a different approach. That is why we call on the Government to engage internationally—beyond the EU proposals alone.
The second major proposal in this multi-annual financial framework is for the Commission to change the correction mechanisms for countries that are the most significant net contributors to the EU. In other words, it proposes to end the UK’s permanent rebate. The rebate returns about two thirds of the difference between the UK’s contribution to the EU and the money we receive back. Let us be absolutely clear: the Commission’s proposals are totally unacceptable. Of all the 27 countries, only Germany is a higher net contributor to the EU budget than the UK, and we have the lowest per capita receipts from it. The common agricultural policy is a far bigger distortion of the EU budget than any correction mechanism such as the UK rebate.
This is a key test for the Prime Minister. He needs to put up a strong defence of our rebate if the language that he uses here in the House is to be matched by his deeds in those negotiations.
Chris Leslie
Everybody will be watching closely, including the right hon. Gentleman, to whom I am happy to give way.
Mr Redwood
What promises did the previous Prime Minister but one receive when he gave away a chunk of our rebate? I thought we were promised a reduction in agricultural spending, which would be very welcome.
Chris Leslie
I was not a Member at the time to which the right hon. Gentleman refers, but it is true that there have been changes to the UK rebate, although not to the majority of it. My understanding is that, in terms of money returned, the total amount of rebate has actually gone up, with €5.8 billion in the previous MFF round compared with €2.8 billion before, so the rebate is still a very significant gain for the UK.
There were changes to the common agricultural policy, although—I accept—not as many as people would have liked, but until we have further proposals from the Commission on reforming the common agricultural policy I am certainly not going to get into the business of urging the Minister to change the UK rebate. It is very important that the Government put up a defence of the current position and, indeed, try harder to engage with further proposals on the CAP. That is by far the bigger distortion. We need to pursue a stronger reform agenda and to have a CAP reform that is fairer to small farmers but does not lavish as much on wealthier players in the wealthiest countries. We need to tackle that anomaly as it is an outdated relic.
I am grateful to Business for New Europe’s pamphlet entitled “Rethinking the EU Budget,” which suggests some very important changes to EU competitiveness deficiencies, such as boosting research and development. It is also important that the Minister address the deficiencies in the structural funds. Few of those are helping to boost growth, when they ought to be getting investment moving into the economy. Above all, the MFF ought to contain far greater emphasis on a strategy for jobs and growth, where we know the Government have a blind spot.
The Commission and the European Parliament also need reminding that, without growth, we cannot solve the debt crisis, the banking crisis or the jobs crisis. Energy infrastructure projects, high-speed broadband and transport link improvements could all be brought forward within the MFF envelope and prioritised to boost employment and economic activity. [Interruption.] The Minister shouts from a sedentary position that that involves more spending, but we are talking about within the limitations of the budget. We do not wish to see the increases proposed by the Commission. The Minister should be out there arguing for a proper strategy for growth, and his failure to do so betrays Ministers’ and the Treasury’s blind spot on these issues.
The motion before us tonight talks tough on some of these issues and we will not oppose it, but it is important that this time Ministers do not flunk the tests when they get into the negotiations.