Finance (No. 2) Bill

Jonathan Edwards Excerpts

Thursday 18th April 2013 Commons Chamber

[Catherine McKinnell]

The hon. Gentleman makes an extremely strong point, and one that I have made repeatedly. This might seem like small change to the Chancellor, but it could make a very big difference to some of the people affected by his failing economic plan.

I am sure, given the concerns recently expressed by apparently senior Liberal Democrats, that Lib Dem Members will join us in calling for a commitment from their Conservative colleagues in the Government. Indeed, only last month a member of the Liberal Democrat tax working group stated:

“While the Treasury’s own figures about the 50p are highly questionable, the politics of cutting tax for the very rich make no sense; there is no reason why a 50p rate shouldn’t be part of a solution for tough times.”

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

I agree with many of the hon. Lady’s points. Plaid Cymru will fight the next Westminster election on a pledge to reintroduce the 50p rate. Will the Labour party do the same?

[Catherine McKinnell]

We have made it perfectly clear from day one that we do not support the cut to the 50p rate now, and we call on the Government to analyse the impact of the introduction and premature removal of the 50p rate. When we come to publish our next manifesto, we will review the state of the economy and whether a 50p rate would be the right response. I hope that Members of other Opposition parties, as well as Liberal Democrats, will support our amendment, because it would help to establish whether the 50p rate would bring in the additional Exchequer revenue that was anticipated—but if the Government refuse to back it today, we will never know.

The President of the Liberal Democrats, the hon. Member for Westmorland and Lonsdale (Tim Farron), said:

“Cutting the top rate was a stupid thing to do. It probably raised up to £3bn a year. We should pledge to restore the 50p rate at the next election. It’s not enough to be fair, you have to be seen to be fair.”

Their current, or former, Treasury spokesman—I can never work out which he is—Lord Oakeshott—

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[Fiona O'Donnell]

I am sure that Members on both sides of the House are seeing that in their constituencies. I hope that Government Members will visit food banks in their communities to understand the causes of food insecurity. As my hon. Friend the Member for Newcastle upon Tyne North said, it is about the choices the Government are making and their priorities. Earlier we heard the most uncomfortable and distorted logic: when the economy was growing, unemployment was falling, we were investing in health and helping young people into employment, the Labour Government should have taken more money from the rich through a 50p tax rate, just for the sake of it; but when the economy is flat-lining, unemployment has just risen again, poverty and the gap between rich and poor are increasing, it is the right time for this Government to give a tax break to people earning over £150,000. I cannot follow that logic.

The Joseph Rowntree Foundation has estimated that almost 2.5 million families on low incomes will pay £130 more in council tax this year, adding further to the squeeze that working families are suffering. This Government have made their choice, and I think that, as they drive towards the next general election, if they glance in the rear-view mirror, two hazards will make them fail the electoral test. The first is their decision to scrap the 50p rate of tax. The second is their choice to introduce a bedroom tax at the same time. There is a family in Wallyford in my constituency, the Anderson family. Mr Anderson is a full-time carer for his wife, who has a severe form of epilepsy. He is saving this country a small fortune by caring for his wife, but he does it because he wants to, not because he has to. There are times when he needs not to sleep in the same room as his wife—I have his permission to discuss his case in this amount of detail—and he needs to be able to make that choice. He also has a son with spina bifida, who is now enjoying a degree of independence and living away from his family, but he can maintain that independence only by returning home for about three days a week when the weather is bad. Recently, he has been at home for longer—so that bedroom is needed for Mark and his equipment.

I feel ashamed that Mr Anderson should have to come to see me to ask why the Government are choosing to give money to people who are not even asking for it, when he is going to be taxed for having that bedroom. And it is a tax; when the Government take money out of people’s pockets, that is a tax. This Government are choosing to make life much more difficult for a man who has given up work to care for his wife and to support his disabled son and enable him to live as independent a life as possible. That says a lot about the Government’s approach, and it does not surprise me that Government Members are not seeking to contribute to the debate today.

[Jonathan Edwards]

The hon. Lady will be aware that the tax cut for people earning more than £3,000 a week was introduced in the last Finance Bill. Members of the parliamentary Labour party abstained in the vote on that Bill. She has made some pretty strong comments today. Is she now saying that that abstention was a catastrophic political mistake?

[Fiona O’Donnell]

No, I am not. I would say that the catastrophic political mistakes are most often made on the nationalist Benches. We are stating clearly that, if we were in government today, we would not be scrapping the 50p rate. There is no ambivalence or doubt about that. That is the position of Labour Members in the Chamber.

I appeal to Liberal Democrat Members to remember their Lib Dem values, and to all Government Members to think about the people who are contacting them. Are they the people who earn more than £150,000 a year, or are they the families and pensioners who are struggling with the cost of daily living? I urge Government Members to vote according to the representations that they are receiving.

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[Alex Cunningham]

Some Members have chosen to talk about billions of pounds. I will speak about the odd pound and the odd penny, because that is what makes the difference to many of the people I represent.

The cost of living is one of the defining issues of this Parliament not only because of what the Government are doing but because of what they are not doing. Following the announcement yesterday of a huge increase in unemployment—12,000 in the north-east of England—in the last hour, we have learnt that another 160 jobs are going at SABIC, a pharmaceuticals company on Teesside. That is not good news.

The Chancellor’s VAT hike has been shown to be a mistake and it is hitting the vulnerable and those on the lower end of the income scale the hardest. Yes, one of the millionaires who uses his £100,000 tax cut under this Government will pay more VAT than the vast majority of other people when he buys himself a luxury car, but that will not make the difference to whether or not he can buy an extra loaf of bread or a pound of mince for his family’s evening meal. A cut in VAT of 2.5% may just buy some extra peanuts when the banker buys his champagne to celebrate his latest million-pound bonus, but it is the people earning peanuts for working hard to support their families who can put the extra pound or two from a cut to good use.

The previous Labour Government showed that that works when they temporarily reduced VAT to 15%. The reduced tax on sales provided an effective stimulus to the economy. Likewise, a VAT hike was always going to suppress consumption, and hit ordinary families in places such as my Stockton North constituency hard.

[Jonathan Edwards]

As the hon. Gentleman is aware, the rise came in the emergency Budget in 2010. There was a vote on the rise and the Labour party abstained. Can he explain the voting record of the Labour party?

[Alex Cunningham]

That is a very difficult question to answer but easy enough to ask. I regret that that happened.

The Chancellor once spoke of the liberal credentials of his public school, so he could change and understand a bit more about the people out there. At the time, The Guardian quoted him talking about St Paul’s. He suggested that everyone was treated the same and said:

“It didn't matter who your parents were. Your mother could be the head of a giant corporation—or a solicitor in Kew”.

I have news for the Chancellor. Contrary to his blinkered view, solicitors and captains of industry do not encompass the full imaginable spectrum of socio-economic status. Not everyone out there can absorb VAT increases and not notice the difference. One has to add teachers, police, social workers, canteen cleaners, domestic staff, joiners, bricklayers, call centre staff, health care assistants and so many more to one’s list of acquaintances if one is really to understand the impact of his policies on people.

The statistics speak for themselves. The impact of the VAT increase will cost the lowest-paid workers four times more than any gain from the £10,000 personal allowance, when it is introduced in 2014. Like other Labour Members, I approve of the allowance being at that level. It is good that hard-working families can get extra money, but when the Government take it away with the other hand and people end up paying more, that is not a good thing.

Food prices are also up. I know it has probably been a long time since the Chancellor has nipped around the supermarket to do his weekly shop, if he ever has done so, but if he did so regularly he would see that food and other grocery shop prices are somewhat higher than he imagined and, for many items, way ahead of what his inflation figures are suggesting. Whether it is the price of caulies or a budget chicken, my constituents tell me they are having to pay more, or sadly just do without. Families at the bottom of the income scale—on average, on £53.81 a week—will suffer a 6.3% drop in their overall income following the VAT rise, personal allowance increase and other minor tax changes.

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[Ian Paisley]

I will come to that in a wee minute. The hon. Gentleman will have to bide his time and be patient, or, as we would say, houl yer whisht. Perhaps he knows what I mean by that.

It is important to put on the record that Northern Ireland has an international connection and an international carrier from Aldergrove airport to Newark airport, which is just outside New York. It flies every day in peak season—one flight a day in, one flight a day out. We have no other international carrier. However, the same carrier operates from Dublin, which is 90 miles down the road, to Newark. In the last number of years, the business in Northern Ireland was put under threat for one reason only: the airport authority and the carrier had to subsidise one another to the tune of £1.5 million. Had they not done so, the business would not exist, and people would be forced to travel 90 miles down the road and pay a lesser tax.

The price difference was staggering—it meant that it was possible to travel 90 miles down the road. Filling a car with petrol or diesel and driving to Dublin costs about £50—there would also be a car park charge—but the APD for that international flight from Northern Ireland was £150. The duty in the Republic of Ireland was €3. The difference would have ruined that business. It was essential on those terms that we got rid of APD for that international flight. My position is that I want the duty removed for the whole UK. That is what the debate is about. The measure is about internal flights in the UK, including, of course, our glorious and noble Scotland.

I am concerned that there is an element, or even a huge big bit, of fudge, which we should avoid. The policy, which should be set out loud and clear, should be the scrapping of APD for all of the UK.

[Jonathan Edwards]

It is with pleasure that I introduce my new clause 4 and new schedule 1; I hope to press the new clause to the vote at the appropriate time.

The UK Government’s Commission on Devolution in Wales, headed by Sir Paul Silk, published the first phase of its report in November 2012. This phase concentrated solely on fiscal powers. Here we are, five months later, still waiting for the UK Government response, which was originally said to be due this spring. In a matter of a few weeks, the cricket season will be upon us and it will be summer, yet we are none the wiser about the intentions of the UK Government.

In short, the Silk commission recommended that powers over stamp duty land tax, the aggregates levy, air passenger duty for long haul, landfill tax and business rates be devolved in their entirety and as soon as possible. It also advocated a sharing arrangement for income tax. In addition, it argued—importantly—that should corporation tax be devolved to Northern Ireland, Wales should not be left behind. I reiterate the point that I made on the closing day of the Budget debate—that we are very interested to see the strong lobby, led by the CBI, coming from Northern Ireland. In total, the fiscal powers advocated by Silk for immediate devolution—the minor taxes—together account for about £1.2 billion of the Welsh Government’s budget.

[Hywel Williams (Arfon) (PC)]

Does my hon. Friend find it strange, as I do, that no one representing the Labour party in Wales is present to back the policy of the Labour Government down in Cardiff?

[Jonathan Edwards]

I am extremely grateful for my hon. Friend’s intervention, as we had a debate in the Welsh Grand Committee on this issue, and Labour speaker after Labour speaker lined up to say that they not only were in favour of the Silk recommendations on minor taxes, but wanted them devolved immediately. They went even further, saying that the Finance Bill was the appropriate vehicle for achieving that.

[Mr MacNeil]

I have a certain understanding of the word “immediately”, and I am sure that my hon. Friend does, too. Does he think that that understanding of the word is shared by Labour in Wales?

[Jonathan Edwards]

That is the exact point. This was said to be the appropriate legislative vehicle for devolving airport duty to Northern Ireland, and if it is good enough for Northern Ireland, it is certainly good enough for Scotland and Wales.

Needless to say, the proposed powers fell far short of what Plaid Cymru was advocating as a party. We wanted a more comprehensive list of job-creating and economy-boosting powers, including VAT, corporation tax, resource taxes and capital gains tax. In the interest of compromise, however, and not second-guessing Silk, we are happy to proceed as the commission recommended—not least because the fiscal powers recommended by Paul Silk and his team in the commission’s report are desperately needed for the sake of the Welsh economy. The minor tax powers, the income tax sharing arrangement and the borrowing powers that would be triggered as a result would enable us in Wales better to deliver job-creating and economy-boosting measures and policies to help turn around the continuing dire state of the economy.

Yesterday’s unemployment figures showed a small drop in unemployment in Wales, but the number of economically inactive people went up by 7,000. The rate is still 0.4% higher than in the UK, and there are still nearly 50,000 more people unemployed in Wales than there were before the recession began, and another 50,000 more people who are under-employed. That is on top of the extra 50,000 public sector jobs we expect to be lost in the coming years on top of the 24,000 that have already been lost.

Last week’s research by Sheffield Hallam university and the Financial Times, to which my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) referred, highlighted that more than £1 billion is due to be taken out of the Welsh economy over the next year by cuts to social security. This will have a devastating human cost, which is becoming all too clear.

The private sector is already on its knees in Wales due to the depression caused by the disastrous economic policies pursued by both Labour and Conservative Westminster Governments, which have destroyed the productive economies within the British state. It will deteriorate further as money is sucked out of local economies through further austerity. We are yet to see any realistic plan of how jobs and growth will come about in these depressed areas or any effort to counterbalance the austerity cuts, despite the high rhetoric of geographical rebalancing.

There are three important reasons why the Welsh Government should be empowered with fiscal powers as advocated by the Silk commission and as proposed in my new clause. First, it would make the Welsh Government more accountable. Secondly, it would incentivise the Welsh Government to concentrate on developing the economy to raise the necessary revenue to invest in public services. Lastly, an independent fiscal stream would enable the Welsh Government to access the borrowing powers they have agreed with the UK Government.

Labour’s proposals for substantial cuts in Welsh capital spending in the last Budget that it presented before losing office were supported in the Conservative-Liberal Democrat comprehensive spending review in October 2010, which cut the Welsh capital budget by 42%. Announcements in subsequent UK Budgets or autumn statements have meant that the final cut is about 39%. Although that is admittedly a smaller reduction than the one planned by Labour, it represents a huge hit for economic activity in Wales. The devolution of minor taxes and the triggering of borrowing powers would go some way towards filling the gap, enabling the Welsh Government to invest in infrastructure projects and generate economic momentum.

[Hywel Williams]

I thank my hon. Friend for giving way again; he is being very generous. Does he agree that the term “minor taxes” is a misnomer, given that those taxes constitute a key that could unlock substantial moneys which the Welsh Government could invest in dealing with our economic difficulties?

[Jonathan Edwards]

That is exactly the point. We have experienced twin processes in Wales. We have had the Silk commission, but there has also been a bilateral negotiation between the United Kingdom and Welsh Governments. The consequence of that negotiation was that the Welsh Government would be given borrowing powers if it had an independent fiscal stream. That is why my new clause is so vital for the Welsh economy.

In January, the Welsh Grand Committee debated the commission’s part II recommendations. Although there was a difference of views over the proposals for income tax-sharing arrangements, it was broadly accepted on all sides that the minor taxes recommendations should be implemented as soon as possible. I must confess that during that debate I became slightly confused. Unionist politicians were in favour of full devolution of some taxes, but opposed to a sharing arrangement between the UK and Welsh Governments in relation to income tax. My natural conclusion following the debate was that as there was a consensus at least in relation to the minor taxes, we ought to get on with devolving them swiftly rather than waiting for what could be years for a new Government of Wales Act.

The most prominent of the minor taxes is covered by the air passenger duty recommendation. It is difficult for us to table amendments relating to the other minor taxes at this stage because consideration in Committee is in the hands of the usual channels, from which my party is excluded, but we are at least able to consider the devolution of air passenger duty. I suggest that that should serve as a spur for the implementation of the other minor tax powers recommended by the commission.

[Mr Mark Williams (Ceredigion) (LD)]

Does the hon. Gentleman acknowledge that the Silk commission said that his package should be viewed as such—as a package? I share the hon. Gentleman’s impatience as we wait for the Government to respond to part I of the Silk recommendations, but we should nevertheless see them in that light.

[Jonathan Edwards]

I think that the question for the hon. Gentleman is this: if he favours the devolution of fiscal powers to Wales, should he not walk through the Lobby with us rather than waiting for another Government of Wales Bill? When will that Bill come before the House? When will the legislative gap arise? If he is promising me that the Bill will be in the Queen’s Speech, we may consider whether or not to press new clause 3 to a vote.

If the Committee supports the new clause, I shall expect the Treasury to include the other minor taxes and business rates as the Bill proceeds, and to implement fully this aspect of the Silk recommendations.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

My hon. Friend is making a powerful case. Is it not strange that no Welsh Labour Members are present to debate air passenger duty, given that the Labour First Minister of Wales has spent many millions of pounds of Welsh money on buying an airport in Cardiff?

[Jonathan Edwards]

My right hon. Friend makes an excellent point, to which I shall return. Fifty million pounds of Welsh taxpayers’ money has been spent on buying an airport, and no Labour Member from Wales is present this evening to vote for a proposal that would enable the Welsh Government to make the most of that asset. It is a disgrace, and I hope that the Welsh media are listening to the debate and will report on it fully.

[Mr MacNeil]

Is the hon. Gentleman actually informing the House that Labour at Westminster does not want to give powers to Labour in Wales because it wants to leave those powers with the Tories in Westminster? Is that the situation with which we are dealing? Does Labour prefer to put power in the hands of the Tories rather than in the hands of Labour? Does Labour trust the Tories more than Labour trusts Labour? This is bizarre.

[Jonathan Edwards]

I believe that that is indeed the case.

Admittedly the revenue gathered from the minor taxes, although not insignificant, is relatively small in comparison with the revenue that would be available through the income tax-sharing arrangement recommended by the Silk commission. That would make the Welsh Government responsible for 10p in every pound of income tax raised in Wales. It would enable the Welsh Government to increase their borrowing capacity substantially, and would strengthen the accountability test. My intention is to return to that at a later stage of the Bill’s progress. It would also undoubtedly incentivise the Welsh Government to grow the economy in Wales and provide responsibility for its expenditure. It is also clear that fair funding and the proper resolution of the blatant inadequacies of the Barnett formula, whereby we estimate that Wales loses out on an average of £500 million a year, are desperately needed, but that resolution must not be used to block the partial devolution of income tax or the minor taxes.

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[Ian Paisley]

I appreciate that the hon. Gentleman is clarifying the matter. The power has been devolved but it has not yet been implemented and, like him, I would urge our Executive to implement it. It will help business and the whole of the United Kingdom could benefit, including Wales, Scotland and England, if they get on with it.

[Jonathan Edwards]

The hon. Gentleman makes a powerful point. That is especially the case in Wales, as the Welsh Government own our national airport.

It is clear that the Bill is the appropriate legislative vehicle to move this issue forward. There is a clear precedent and, as I said, I believe the Treasury should accept the amendment, as it includes all the minor taxes recommended by Silk.

The Labour Welsh Government have recently acquired Cardiff airport, and the ability to attract long-haul flights to Cardiff would significantly improve the airport’s competitiveness. Cardiff airport has 1.5 million people in its catchment area and long-haul flights could attract people from even further afield. The development of Cardiff airport could act as a spur to growth in the south Wales economy, bringing in greater foreign direct investment through better business links, in turn bringing jobs and growth.

Quite frankly, I am amazed that the Labour party has not tabled its own amendment. That goes to show that the First Minister has absolutely no influence over his bosses down here. On Tuesday of this week, he stood in the National Assembly telling the Members and the people of Wales that

“the most important thing is to ensure that Silk part 1 is progressed”.

I would expect Labour MPs to file through the Aye Lobby when we vote, or his authority will be fatally undermined—but as the Labour Whips have sent them home, that will not be the case.

The fact that the Treasury has not used the Finance Bill to implement Silk also shows once again that Wales is an afterthought in the machinations of the British state. Those powers should be devolved, yet there is delay even though it is apparent that there is broad consensus among the main parties who represent Welsh constituencies, as evidenced in the Grand Committee debate and despite the fact that the commission received representations from all parties. Each month that passes by without these powers being devolved, the Welsh economy further deteriorates with job and economic prospects diminished, hopes and dreams shattered and lives ruined.

Over Easter, I attended a major forum meeting organised by Carmarthenshire county council to move the proposed Llandeilo bypass project forward. Despite being high up the Welsh Government’s priority list as a transport infrastructure project, it is being held up as a result of the savage cuts to capital budgets in Wales. If the amendment is successful, it will enable the Welsh Government to access borrowing powers to move the scheme and many others like it forward. In Carmarthenshire there is cross-party support for the project, and I would like to close by kindly informing my political opponents that should they fail to support the amendment their grandstanding in supporting projects such as the Llandeilo bypass will be exposed and there will be a heavy political price to pay in my constituency—a constituency I believe the Labour party view as a target seat come the next Westminster election.

[Pete Wishart]

No chance, not with you there.

[Jonathan Edwards]

Well, I am grateful for that comment.

Plaid Cymru has made jobs and the economy its absolute priority. That is why we have tabled this amendment on air passenger duty. We want to create a modern and prosperous Wales, and unlike our political opponents we have little faith in London Governments of whatever colour achieving that ambition. That is why we want the tools to get on with the job ourselves without delay.

[Mr Reid]

It is important to set out first of all what the debate is not about. It is not about whether air passenger duty is a sensible tax; it is about whether we should be devolving air passenger duty on long-haul flights to Scotland and Wales. I must admit that I was disappointed by the lack of preparedness of the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) for the debate, as he was not able to answer a simple question from the hon. Member for Central Ayrshire (Mr Donohoe). It must be remembered that the SNP has the whole Scottish civil service machine to back it up. I am extremely surprised that the hon. Gentleman did not come armed with an impact assessment produced by the Scottish Government to show the benefits of devolving the tax to Scotland. He had no impact assessment whatever.

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[Cathy Jamieson]

The right hon. Gentleman asks how closely I have been monitoring the situation. I have not only been doing that; I have had discussions with a number of Members, including those from Wales. My hon. Friends from Wales, and from Scotland, appear to be able to distinguish between what has been put on today’s Order Paper as a political fix or stunt in order to grandstand and make some wider arguments, and having a sensible debate about the real issues, which is entirely different.

[Jonathan Edwards]

On a point of order, Mr Evans. Since when has an amendment agreed by the Clerks of this House been a political stunt? This is what the Labour party is saying in the media. It is a disgrace and it brings dishonour on this Chamber. [Interruption.]

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

Order. Everything that is being debated today is in order; otherwise it would not have been selected. It sounds to me like part of the current debate.