Finance (No. 4) Bill

Jonathan Edwards Excerpts

Monday 16th April 2012 Commons Chamber

[Rachel Reeves]

I support cracking down on tax avoidance, but let us stick with the policy of cutting the 50p rate. The Office for Budget Responsibility shows that 300,000 people who are currently paying the 50p tax rate will get, on average, a tax cut next year of £10,000. For 14,000 millionaires, there will be an average tax cut next year of £40,000. That much we know. What we do not know is whether people putting their money in Monaco or a Caribbean bolt hole, as the Business Secretary described, will indeed rush back to the British Isles to pay the 45p rate of tax. If they do, perhaps some money will come in, but if they do not, we will lose out to the tune of £3 billion. The reality is that the stamp duty changes will affect only the people who are moving home, so the vast majority of millionaires who are happy in their mansions will not be affected by the changes. In fact, numbers published by the Treasury this morning show that tax avoidance measures will bring in around £300,000, but the changes to the top rate of tax will cost £3 billion. That is not fair; it is not the right priority to give millionaires a tax cut while asking millions of ordinary hard-pressed working families to pay more.

Once upon a time, some people argued that the Prime Minister needed a clause IV moment to fully detoxify the tainted Tory brand, but the Government have gone one step further; they have got themselves a clause 1 moment. Clause 1 of the Bill confirms once and for all that the Tory party will never be for the many, but always for the few. Nothing could more clearly demonstrate the Government’s perverse priorities than the fact that when ordinary families are going through the toughest times in living memory, part 1, chapter 1, clause 1 of the Finance Bill gives a £3 billion tax cut to the richest 1% of the population, and the rest of the Bill is peppered with dubious means for making other far less fortunate people in our society pay for it.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The House has already divided on the 50p rate and the Labour party abstained. Was that a deliberate abstention?

[Rachel Reeves]

The Labour party voted against the entire Finance Bill, including the cut in the 50p rate. On Wednesday and Thursday, we will have an opportunity to vote on the tax cut for the wealthiest 1%, and I hope that Members on both sides of the House will join us in the Lobby to vote against a tax cut for the very wealthiest in society at a time when ordinary families are being asked to pay more.

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[Katy Clark (North Ayrshire and Arran) (Lab)]

It is a pleasure to follow the hon. Member for Watford (Richard Harrington). He made an interesting speech on an issue that we shall no doubt hear a great deal about in the near future.

The Finance Bill and the Budget are a huge wasted opportunity. So much needs to be done now, with more than 1 million young people out of work and a manufacturing base that is continuing to decline. We are continuing not to see the growth figures that we need if we want even to start talking about paying back the deficit. Many of the contributions from the Government Benches today have shown yet again that the Government’s policies are simply not going to get us out of this mess.

I believe that the Government’s position is ideologically driven. Many of their Members would believe in their policies irrespective of the economic position that we were in—for example, the comments about the need to get rid of employment protections in the workplace and to get rid of red tape would be made irrespective of whether we had 10% growth or negative growth in this country. The debates that we are having here are similar to those taking place across Europe, the United States and the west generally. We face massive challenges, but the answers being provided by Opposition Members, from whatever political party, are very different from those coming from Government Members.

[Jonathan Edwards]

Does the hon. Lady agree that what we are hearing from the Government Benches proves that the political right never lets a good crisis go to waste? Following the downturn in the economy, the Government are looking for further erosions of workers’ rights, which is extremely worrying and typical of right-wing politics.

[Katy Clark]

When we look at history, we see that, during economic crises, those on the right argue for policies that they would not get away with in other circumstances. We have seen that happen time and again. Perhaps the most comparable economic situation is that of the 1930s, and history shows that the policies that worked then were not those of tax cuts, of huge public spending cuts or of rolling back the state; they were the kind of Keynesian policies to which many Opposition Members are now sympathetic.

The policies of austerity that we are seeing not only here but across Europe are simply not working. We require very different policies from those in the Finance Bill and those being implemented across a range of Government measures. My party’s Front Bench has already mentioned the figures from the Institute for Fiscal Studies, which show that the average family is losing between £530 and £551 a year as a result of the measures being brought in now. The changes to tax credits being implemented are a central plank of the policies that will take away money from not only the poorest people, but those on modest incomes as well.

My right hon. Friend the Member for Knowsley (Mr Howarth) has already talked about the impact of the measures on his constituents. My constituents, too, are coming to see me to talk about these issues. For example, last week a nurse came to see me: she works 16 hours a week, her husband is retired, and she has a 13-year-old child, and she is losing £3,700 a year as a result of the changes to tax credits. She works 16 hours a week at Crosshouse hospital, and she has asked to increase her hours to 24 a week, but the hospital has not agreed to that. That is the reality of the situation for the many families who are going to be affected by the tax credit changes, including more than 11,000 families in Scotland alone. Unfortunately, in the present economic circumstances, many employers will not be in a position to offer more hours, even if they wish to do so. That is just one example of the way in which the Government’s changes are affecting people.

As I have said, I believe that the Budget is a missed opportunity. We have heard about the Government’s radical proposals for deficit reduction, and indeed we are seeing the impact of those policies in all our constituencies. We are seeing what were considered to be essential public services being cut. We are seeing services being taken away that individuals and communities fought for, generation after generation, and that did not come easily. The incomes of the richest people in this country have increased by about 20% over the past two years, but the incomes and living standards of most people, including the poorest people, are going down.

The Finance Bill does nothing to address any of those issues. It does nothing to address the inequalities in wealth in this country. The Government’s policies simply exacerbate problems that we already have. The Bill will do nothing to bring about the essential increase in jobs and growth that we need. We will start to pay off the deficit only when the economy starts to grow, but the Government are taking money out of the economy and out of communities such as North Ayrshire, which is disproportionately reliant on the public sector because the manufacturing sector that we relied on in previous decades no longer exists. We are seeing money being taken out through cuts in the welfare sector and the welfare state, and through cuts in benefits and tax credits. The measures that are now being implemented are taking money out of the pockets of some of the people who need it most.

I say to the Government that we need policies that will stimulate growth. They should use every financial lever at their disposal for that purpose, rather than introduce tax cuts for the wealthy in the form of a rate reduction from 50p to 45p, and a cut in corporation tax, which is an ideologically driven measure that will have no impact on jobs and growth. My hon. Friend the Member for Leeds West (Rachel Reeves) mentioned the figures from Ernst and Young which suggest that the Government’s measures could lead to negligible growth of 0.1% and have all sorts of other ramifications.

The Government have talked about being a Government for families and about us all being in this together, but the reality is that the Finance Bill, like many of the other measures that they are introducing in this place, week in, week out, will simply make Britain a less fair country, a less equal country, in which the gap between rich and poor, and between north and south, will become greater as time goes on. Furthermore, this Budget will not help the country to start to reverse its industrial decline. For much of my adult political life, I have been able to talk about us being the fourth richest country in the world; now we are the seventh richest, as we have failed to keep up with other countries that are advancing, failed to value our industrial base and failed to value our manufacturing. The Bill will do nothing to address any of these things. Frankly, this Government should be ashamed of coming forward with these proposals at this time. To a large extent, they are a political fix between two political parties in coalition, and they will do nothing to address the real problems that our constituents are facing.

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[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I intend to make only a short speech, concentrating on fuel prices. Plaid Cymru has been consistent in calling for a fuel duty regulator to prevent unexpected spikes in prices that cost users at the pump and are then pocketed by the Treasury.

Figures for November 2011 from the Office for National Statistics showed that the poorest 20% of households spend twice as much of their disposable income—nearly 4%—on petrol duty as the richest 20%, who pay less than 2%. We already know that rural families spend hundreds of pounds more on petrol than urban families, so constituents in rural Wales, where there are lower incomes, are being hit by a double whammy.

Since 2005, Plaid Cymru and the Scottish National party have called for a fuel duty regulator, through which an advance estimate of UK tax returns would be made. If prices rose faster than expected, a price cap would be introduced, so there would be no windfall tax for the Government. In 2005 and 2008, Labour voted against our amendments, while the Conservatives and Liberal Democrats abstained. In 2011, it was the other way round. At least this place is consistent, no matter who is in government. The Federation of Small Businesses has published proposals for a stability mechanism in the last few weeks; the Treasury should at least look at it.

[Mr Russell Brown]

The hon. Gentleman has mentioned dates when proposals were put forward. There was one year, 2006, I think—it may have been 2007—when no proposal came from anyone for a fuel duty regulator. Why was that?

[Jonathan Edwards]

I have admitted that we proposed amendments in 2005, 2008 and 2011. The hon. Gentleman is right that we did not do it every year, but every time we made the proposal, the voting record of each of the Unionist parties has been consistent.

The 1p off fuel duty announced last year was not a regulator in the way that the Treasury suggested, and the 3p increase in August is most certainly not either. In the continuing poor economic circumstances, I would rather the proposed fuel duty rise in August was cancelled, so that businesses did not have to face that extra cost in these tough times. Families could use that money for their own benefit; that would help them and the wider economy. As my hon. Friend the Member for Dundee East (Stewart Hosie) said, that would be one way of removing a serious drag on economic recovery.

I hardly need explain that my party and I are in favour of maintaining the 50p tax rate for those who earn more than £3,000 a week. Indeed, unlike the overwhelming majority of the official Opposition—there are two honourable exceptions—I put my disagreement with the policy on record in the vote on 26 March. It cannot be right for the Government to offer a tax cut to those who earn the most while announcing a £10 billion cut to the welfare budget. Clearly, we are not all in this together.

[Andrew Selous (South West Bedfordshire) (Con)]

rose—

[Jonathan Edwards]

I will not give way; I am sure that the Front Benchers want to get on with their summing up.

My party and I do not support the freezing or scrapping of age-related thresholds—the so-called granny tax—or the introduction of means-tested child support benefits, whether we have a cliff-edge or a taper. The point of universal child benefit is that everybody with a child receives the benefit, irrespective of their income, because it costs additional money to raise a child.

Schedule 23 of the Bill allows Northern Ireland the right to vary air passenger duty on long-haul flights, but does not provide the same for Wales and Scotland. That appears to be an ad hoc arrangement. As my party has noted consistently, what is good for one part of the British state is good for other parts. For that reason, I have tabled an amendment to the schedule that will give Wales the same powers as Northern Ireland. I look forward to debating the issue on Wednesday—and to having the support of the official Opposition, in view of the position taken by the leader of the Labour party in the Assembly.

The Budget continues the UK’s inequalities and the transfer of wealth from the poor to the rich. We cannot accept a Budget that offers no prospect of growth, and a Finance Bill that reinforces inequality.