The Economy

Jonathan Edwards Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Pamela Nash]

I would argue that the Government’s policies in the past year have done nothing to increase the confidence of this country’s consumers. The British Retail Consortium and KPMG’s retail sales monitor shows that the total value of retail sales last month represented

“the worst drop in total sales since we first collected these figures in 1995…high inflation and low wage growth have produced the first year-on-year fall in disposable incomes for thirty years.”

Worse still, according to the BRC the main cause of inflation is not just wages or consumer-driven increases but external shocks such as the VAT increase.

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

I agree with many of the points that the hon. Lady is making in her thoughtful speech. However, my recollection of last year’s Finance Bill debate is that the House divided on a Plaid Cymru and Scottish National party motion to overturn the decision to increase VAT, and the Labour party abstained. Can she explain why?

[Pamela Nash]

I cannot explain why, but I hope that our shadow team will answer the hon. Gentleman’s query at the end of the debate.

The VAT increase has already had a considerable effect on stretched budgets in homes throughout the country. It has hit the poorest in our society hardest, as have this Government’s two Budgets as a whole. It has meant that people are living in fear for their personal domestic budgets, as they do not know what the future will hold. The decision to increase VAT, a regressive tax, illustrates the priorities of the Tory-led Government.

The Chancellor’s claim in the Chamber a year ago today that the emergency Budget was “progressive” was frankly laughable. The Institute for Fiscal Studies has confirmed that it was regressive, and that half a million more children in the UK will end up in relative poverty by 2013. That is disgraceful. The Government are feeding the cycle of poverty and repeating the mistake of Thatcher’s Government in the ’80s. The Prime Minister stood at the Dispatch Box today and claimed that his Government were helping people out of poverty, but the experts beg to differ.

Young people are particularly affected, and they have a right to feel victimised by the Government. There have been a series of failures, leading to their generation being hard done by. Thousands of young people will now be saddled with up to £40,000 of debt after completing a degree. I am glad that my constituents still benefit from Government-funded higher education in Scotland, but even they leave university with considerable debt from the living and material costs of what is usually a longer term of four years at university.

When a young person graduates from uni, they then have to find a home. Unfortunately, the average age at which a person in the UK can afford their first home has risen to 37 under this Government. The national drop in house prices has had a smaller effect in Scotland, as the prices were much less inflated originally than in the south of England. Despite that, Scots are still just as affected by the difficulties in obtaining a mortgage without the considerable deposit of about 10% that is often now required.

After leaving university with so much debt, people have to cope with low and frozen salaries, if indeed they are lucky enough to get a job. Many remain without a job, as unemployment is hitting young people and Scotland in particular. We had the lowest unemployment rate in the UK in 2007, but we are now closer to the highest after four years of the SNP’s budget mismanagement.

The scrapping of the future jobs fund was yet another massive blunder by the Government. To label it a waste of money and say that the jobs created were not real is frankly offensive. I have met numerous future jobs fund workers in Airdrie, Newarthill and Shotts who enjoyed their six months in the programme, learned essential skills, improved their self-confidence and, in many cases, ended up creating a role for themselves and being kept on. At the very least, they were helped to find a similar job once they left their placement.

Unfortunately, the new Work programme is more likely to make the poor poorer than it is to get Britain back to work. There are two major problems with it. First, the promise that it will give 2.4 million unemployed people jobs over the next five years depends entirely on economic growth, evidence of which remains to be seen. There are currently 2.43 million people unemployed and 2.4 million out of the labour force, but in the last quarter there were only 469,000 vacancies. Secondly, the Work programme operates on a payment-by-results basis. Although I welcome the fact that good results are required for taxpayers’ money to be spent, in today’s limited job market are not private companies much more likely to pick individuals who are not long-term unemployed?

The majority of unemployed people are looking for a job. Many have the wrong skills, or are in the wrong place, and unfortunately they have little hope of gaining funding for retraining at the moment. The housing market also makes it almost impossible for them to relocate. With limited means, people are supposed to pay for increased food bills and sky-high energy bills. Despite the fact that I now spend almost half my time in Westminster, away from home, I still received a letter last week, like many people in Airdrie and Shotts, telling me that my electricity and gas bill is going up by £20 a month.

Fuel bills are also rocketing, and people are rapidly finding themselves struggling to cope. At a recent meeting with my local citizens advice bureau, we discussed the fact that the people who are now coming to us for advice are not just those on benefits or very low salaries but people in a variety of salary brackets, who are seeing their wallets empty much earlier in the month. If those on half-decent salaries are struggling, how are those on benefits and the minimum wage even beginning to cope?

The Government have spent their first year in power causing successive growth forecast reductions and prolonging the effects of the recession on both families and businesses, and a generation of young people has been put on the scrap heap. When are the Government going to stop blaming everyone else and find a plan B that will get the UK working again?

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 21st June 2011 Commons Chamber

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

Diolch yn fawr, Mr Speaker. The Governments of Northern Ireland and Scotland will soon have greater financial autonomy. What requests has the Chancellor received from the new Welsh Assembly Government for similar job-creating levers?

[Mr Osborne]

The hon. Gentleman knows that we made a clear commitment that if the outcome of the referendum in Wales was a yes, we would set up a Calman-like process that would come to an agreed set of proposals—I hope they will be agreed across many parties, as was the case with Calman in Scotland—on greater financial responsibility for the Welsh Assembly. We are engaging in that process now. One reason why Calman has worked well—I know that we will come on to discuss the Scotland Bill later—is that at least three parties in the House of Commons, Labour, the Liberal Democrats and the Conservatives, were able to agree on a set of proposals. I hope that we can achieve similar agreement in Wales.

Scotland Bill

Jonathan Edwards Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Gauke]

It gives me great pleasure to return to the House to discuss the Scotland Bill after the Committee debate in March.

The first group of amendments on today’s selection list is fairly extensive and addresses several different aspects of the Bill’s finance package. I will set out why we have tabled Government amendments and why we will not accept the non-Government amendments.

In Committee, we debated the definition of a Scottish taxpayer for the Scottish rate of income tax. I said that the Government would table a new clause to apply the same definition to the Scottish variable rate, in response to one of the recommendations of the Scottish Parliament’s Scotland Bill Committee. The reworked definition of a Scottish taxpayer for the new Scottish rate of income tax is a significant simplification. I appreciate that it is unlikely that the Scottish variable rate will ever be invoked. Nevertheless, without the amendment, there would be two separate definitions of a Scottish taxpayer in place at the same time. There is potential for practical difficulties for taxpayers, employers and their professional representatives, who might need to familiarise themselves with one definition for the years up to 2015-16, only to have to switch to a different definition for subsequent years. That is entirely unnecessary.

Applying the definition of a Scottish taxpayer that has been developed for the Scottish rate of income tax for the purposes of the Scottish variable rate will help smooth any transitional issues, and will also make it easier for people to understand whether they are classed as a Scottish taxpayer. The Scottish Parliament’s Scotland Bill Committee rightly recommended the change, with which the UK Government very much agree, and I commend the new clause to hon. Members.

On a previous occasion, my hon. Friend the Member for Milton Keynes South (Iain Stewart) raised a particular query. He has tabled amendment 24, about which he intends to speak later. I will respond to the issues that he raises after he has had an opportunity to set out his thoughts on that.

Government amendment 31 would make a small, technical change, to which I hope the House can agree. Section 989 of the Income Tax Act 2007 contains several definitions, which apply for the purposes of income tax legislation. It includes definitions of the basic, higher and additional rate of income tax. They refer to the rate of income tax set by the UK Parliament in the year in question. Government amendment 31 would extend those definitions to include the rates applicable to a Scottish taxpayer. As I said, it is a minor drafting amendment, and I do not anticipate its proving too controversial.

The purpose of Government amendment 15 is to correct a technical fault with the Bill so that it is consistent with the Government’s policy intentions as set out in the Command Paper, which states that the Scottish Government will be able to borrow to manage the difference between forecast and outturn tax receipts. However, as I explained in our Committee debate on 14 March, the Bill as it currently stands enables the Scottish Government to borrow to manage this difference only for fully devolved taxes, and not the Scottish rate of income tax. That is a technical fault, which the amendment corrects. I hope that it will be accepted.

Let me deal with Government amendments 32 to 35. The purpose of Government amendment 32 is to introduce a power, which will enable the Government to amend in future the way in which Scottish Ministers can borrow, including by way of bond sales, without the need for further primary legislation. The Bill gives Scottish Ministers a new power to borrow, by way of loan, from 2015-16 up to £2.7 billion of total debt, £2.2. billion of which can be used to fund capital expenditure.

The UK Parliament has an interest in ensuring that Scottish Ministers can borrow efficiently and sustainably because, although interest paid on any loans will be funded from the Scottish budget, it will be included in the UK fiscal aggregates. The Bill therefore gives Scottish Ministers the power to borrow in the most efficient and sustainable way—from the national loans fund, as recommended by the Calman commission. In addition, should Scottish Ministers so choose, the Bill gives them the power to borrow by way of commercial loan where that represents value for money.

Reports on the Scotland Bill by the Scottish Affairs Committee and the Scottish Parliament have recommended that Scottish Ministers should be granted additional borrowing powers—specifically, the power to issue bonds. The First Minister made the same points in his discussion with my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for Scotland. The reports and discussions have highlighted the discrepancy between the powers of Scottish Ministers and local authorities, which already have the power to issue bonds.

So far, the main evidence that has been provided to the Government in support of Scottish Ministers issuing bonds is “because other bodies can do it”. However, with the exception of Transport for London, the vast majority of local authorities have not exercised those powers in recent history, not least because local authorities judge that they have access to more efficient and sustainable forms of borrowing.

The Government continue to believe that the case against bond issuance is clear cut, particularly in the medium term, given the uncertain outlook and challenging fiscal mandate. All the evidence suggests that further bond issuance would have a negative impact on the UK’s fiscal position.

In the context of the highest deficit since world war two, the Government would consider allowing Scottish Ministers to issue bonds in future only when that does not undermine the overall fiscal position, or have a negative impact on total UK borrowing. If a case is made that Scottish Ministers’ borrowing powers could be extended without undermining the overall UK fiscal position or increasing UK borrowing, the amendment that I am tabling today would allow changes to the borrowing powers of Scottish Ministers to take effect swiftly, by way of an order.

The Government have committed to conducting a review of the costs and benefits of bond issuance over other forms of borrowing to help inform any decision. The amendment would have the effect of, first and foremost, protecting the UK’s fiscal position by continuing to allow Scottish Ministers to access the most efficient and sustainable source of borrowing.

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

After the Bill has been passed, the Welsh Government will be the only political entity in the British state unable to borrow. Will the Exchequer Secretary address that matter quickly, rather than awaiting some prolonged Calman process, which the Government currently envisage?

[Mr Deputy Speaker]

Order. I am not sure that that is relevant to the debate.

Regulatory and Banking Reform

Jonathan Edwards Excerpts

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

The financial crisis clearly had an impact on London’s standing as a global financial centre, but my hon. Friend will be pleased to note than in the most recent survey of global financial centres London still came top. That is a recognition of London’s continued strength. It is important to ensure that we have a well-regulated and well-functioning financial services sector that can not only meet domestic demand, but serve the interests of an array of international companies. I believe that the package we have announced today, coupled with further regulatory changes being made in the European Union and internationally, will help to ensure London’s continued pre-eminence as a centre for financial services.

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

Before the general election, the Chancellor and the Business Secretary were involved in a verbal fistfight about who was going to be toughest on the banks, so it is not surprising that neither is here today to make this business-as-usual statement. If the previous Government were charged with light-touch regulation, are not this Government guilty of light-touch reform?

[Mr Hoban]

The reforms we have set out are proportionate, and the recognition of the need to strengthen the banking sector through structural reform is a significant move. We, unlike many other economies, were exposed to a financial sector challenge of some scale, and it is right to respond to that. We have ensured a proper debate about those issues, which the Independent Commission on Banking has led, and the reforms announced in its interim report have been widely welcomed. That gets the balance right. It is not about being tough or about being light touch; it is about getting things right.

Motoring Fuel Costs

Jonathan Edwards Excerpts

Tuesday 14th June 2011 Westminster Hall

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

Will the hon. Gentleman give way?

[Robert Halfon]

I must make progress, but I will give way to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) as he has not spoken.

[Jonathan Edwards]

I congratulate the hon. Gentleman on securing the debate. He is making some important points about green taxation. I agree with such taxation, but does he agree that it should be linked to clear environmental criteria, and that if it is not it will lose public confidence, which would be a crisis for the Exchequer and for environmental policy?

[Robert Halfon]

Of course there should be environmental criteria, but people too often have their heads in the clouds and do not realise that low petrol prices would make a huge difference to ordinary people who must use their vans to drive to work, drive their trucks to do their job, drive their minicabs, or drive their kids to school.

What is to be done? I believe in competition and choice. First, when a market is cornered by vested interests and semi-cartels, such as big oil companies, it is right for the Government to establish conditions for a fairer market. We need a fuel rebate so that when the oil price falls, big companies face a choice: either they cut prices, or the Government will impose a windfall tax on profits, and use the money to cut petrol prices anyway. That would be the solution to the great British petrol rip-off. Instead of the oil companies having us over an oil barrel, it would make them honest, and stop them profiteering at the expense of small businesses and families on the breadline.

Secondly, we must commit to no more petrol tax rises in this Parliament. The Government are pro-business and pro-growth, and have already given a commitment to scrap the fuel duty escalator, which was pushing up prices above inflation. The Chancellor has delayed inflationary rises by a year for the next two years, but will the Government go further, and consider abolishing even the inflationary rises?

Thirdly, we must establish a commission to look at radical ideas, and other ways for the Government to raise revenue, and to address the unfairness of UK fuel duty being so out of line with the rest of Europe. We must consider more toll roads in exchange for significant cuts in fuel duty, and how a fuel price stabiliser could work.

In conclusion, we need fair fuel reform with a fair fuel rebate to push prices down, no new taxes during this Parliament, and a commission to look at radical ideas to get petrol taxes down to the European average in the longer term. The 37,000 motorists in Harlow and the 34 million vehicle owners in the UK are being fleeced. For the sake of future growth and jobs in our economy, we urgently need reform.

Oral Answers to Questions

Jonathan Edwards Excerpts

Tuesday 10th May 2011 Commons Chamber

[Danny Alexander]

No, I am afraid I cannot make that commitment. As I said earlier, our priority is to reduce the deficit. We have the Scotland Bill to take forward here, and in relation to Wales we have a process that is following on from the referendum and we have the Holtham commission to look at specific issues. I think that is the right set of priorities for the moment.

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

As the Chief Secretary knows, his Government have announced a Calman-like process for Wales following the successful referendum in March for further powers. Will he confirm that reform of the Barnett formula will be a precondition of any wider financial reforms to the way the Welsh Government are funded?

[Danny Alexander]

I cannot confirm that, no. We have said that we will consider the issues to do with tax powers raised in the second Holtham report as well as other issues that were brought forward at that stage. We made a commitment to the previous Welsh Assembly Government to engage in a conversation about those things. If the new Welsh Assembly Government want to take that forward, we will be open to that, too.

Amendment of the Law

Jonathan Edwards Excerpts

Thursday 24th March 2011 Commons Chamber

[Stephen Hammond]

Indeed; I am grateful to my hon. Friend.

The shadow Chancellor, in contending today that the changes were too fast and too deep, once again relied on the Keynesian multiplier. He is an eminent economist, and he should know better than to rely too heavily on that mechanism. It has traditionally held out the prospect that public sector investment has an impact on the private sector, so there could be an element of crowding out and of limiting of growth potential. If the right hon. Gentleman has read the recent academic research, however, he will also know that the size of the multiplier in the growth phase of an economy is about a third of the size of the multiplier when an economy is going into recession. To rely on that thesis is therefore to rely on a very weak economic mechanism.

But let us leave the world of deficit denial behind, and welcome a Budget that does not bow to pressure. It is hugely important that the Government should stick to their policy of deficit reduction, as that is the only way to achieve long-term growth in the economy. Market rates clearly indicate that there is confidence in what the Government are doing, and to be blown off course would result in a loss of confidence. The cost of borrowing and the yields on 10-year gilts, which are important for the cost of industry borrowing and UK Government borrowing, would change. Domestic inflation would rise in those circumstances, and any indication of making a special case for one would result in having to make a special case for another. The Government are therefore to be congratulated on sticking to their policy.

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

Will the hon. Gentleman give way?

[Stephen Hammond]

I am sorry; I have no more time.

Many colleagues on both sides of the House, including the Chairman of the Select Committee, the hon. Member for West Bromwich West, have made the point that the macro is always based on the micro. The devil is always in the detail. This is the first Budget for many years in which the detail has matched the rhetoric, and in which the detail on the micro side supports the detail on the macro side. Measures include the corporation tax rate, and the 21 new enterprise zones. Far from being a failed policy of the 1980s, this was a great success. Only earlier last year, when I travelled to Merseyside and Manchester to talk to business people there in my role as a shadow Transport Minister, I found that people were asking for this and were keen for it to come through.

The measures to support small and medium-sized enterprises include research and development tax credits and the change in the enterprise investment scheme, which, alongside what is happening with the banks, will bring new capital into the country. These are micro-economic reforms that will come through to build macro-economic success through growth. The simplification of the tax code, the abolition of regulation, the acknowledgement that the 50% tax rate must be only temporary—these are all key levers of growth. They are a sign that in this Budget, the rhetoric is matched by the detail and the commitment.

Finally, growth must come in order to be fair to families, and again with this Budget, the rhetoric matches the detail. The increases in personal allowances, taking the lowest income earners out of paying tax altogether, ensuring that the 40% tax band is not extended, the freeze in council tax—those measures will all impact on real people, and it is real people and the private sector, not just the Government, who build the growth of the economy. The Budget is to be commended; it is the first for some time in which the detail has matched the rhetoric.

Scotland Bill

Jonathan Edwards Excerpts

Monday 14th March 2011 Commons Chamber

[Mr Gauke]

The point is that there would be a reduction in the block grant, because the revenues from the aggregates levy would be going to the Scottish Government. If it was subsequently found that the aggregates levy in its current form was not legal, either we would have to readjust the block grant or the Scottish Government would have to bear the shortfall.

I shall move on to amendment 57 and new clause 16. The Calman commission recommended the devolution of the UK’s air passenger duty, not a general power to tax air travel, which is what the amendment seeks. The UK Government are exploring changes to their aviation tax system, as stated in last year’s June Budget, and will look at devolution of this tax base in that future work. However, it is not appropriate to devolve aviation tax until these changes have been explored, with any major changes subject to consultation, and a decision on the future of UK aviation tax made. To do otherwise would mean that the Scottish Parliament would have to plan the future of their new tax without the context of the UK version. I would also like to answer the point about the process of a new tax. Clause 24(6) provides that any new tax would need to be approved by the Scottish Parliament, under section 80B of the Scotland Act 1998. That would clearly apply in these circumstances.

I turn to amendment 60 and new clause 17. The Calman commission recommended that corporation tax not be devolved. The Scottish Parliament has endorsed this, although it wants to stay engaged in any future discussions on corporation tax devolution. Both the Calman commission and the Scottish Parliament recognised very good reasons why not to devolve the tax. First, the Calman commission concluded that if comparable levels of public services were to be maintained, the scope for substantive reductions in the rate of corporation tax in Scotland was limited, unless the Scottish Government are able to increase revenues from other sources. As the hon. Member for Glasgow North said, under European law there will have to be a reduction in the block grant commensurate with the value of the reduction in the corporation tax rate.

Secondly, the commission also believed that the potential administrative impacts of such a move were significant. The creation of compliance costs to businesses operating on either side of the border, as well as the increased collection costs to the Government, would be undesirable in the present economic climate.

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

The Exchequer Secretary might be aware that the Conservative economics commission in Wales has advocated the setting of corporation tax at a regional level. What does he say to that?

[Mr Gauke]

We will consider that. At the moment, however, we are concerned with Scotland and Wales in particular. There is a slightly different issue with Northern Ireland, where the Government have not yet made a decision on the devolution of corporation tax. Clearly, however, the circumstances in Northern Ireland are different: it does not have a land border with the rest of the UK, but does have one with a country that has a substantially lower rate of corporation tax.

There are a number of detailed questions about how some of these tax matters will be addressed. Various points arose from last week’s Scottish Parliament report, and we will respond to those in due course. However, I am keen that the joint exchequer committee—that is the title suggested by the Scottish Parliament, and it is one we are happy to take onboard—which will consider these matters in some detail, meets as soon as possible after the Scottish elections and the formation of a Scottish Government. We can then discuss some of these matters and provide further details in the future.

Fuel Costs

Jonathan Edwards Excerpts

Monday 7th February 2011 Commons Chamber

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

Diolch, Madam Deputy Speaker. I am delighted to have the opportunity to close the debate on behalf of the Plaid Cymru and SNP group. Our combined parties have campaigned on this issue for a number of years, not least in tabling amendments to Finance Bills in 2005 and 2008. It is somewhat disappointing that, in our first Opposition day debate of the Session, we must once again highlight the need for Government intervention to stabilise fuel prices.

Fuel prices are driven by the global price of oil and by domestic taxation. In the case of global oil prices, the trajectory is likely to go in only one direction, as oil is a finite resource. It is already being traded at over $100 a barrel. As the world economy recovers, the price will rise further as a result of increasing demand, especially from the emerging countries and, in particular, China. Volatility will only be exacerbated as we reach peak oil. Oil prices will also inevitably increase as a result of the long-term deflationary policies of the United States Government. Oil is traded in dollars, and a weakening dollar pushes up oil prices as producer countries try to make up for the shortfall of a currency whose value lessens. I echo the call of the French President, Mr Sarkozy, for a long-term agreement between oil-producing and consumer countries to offer more stability on prices.

Fuel prices are obviously influenced by domestic taxation, and it is with that element that we are concerned today. Duty on fuel in the UK represents about 65% of the price of fuel at the pump, if my sums are correct. Clearly, the higher the price of wholesale oil, the higher the tax receipts raked in by the Treasury. As is shown by an excellent House of Commons Library research paper, petrol duty in the UK is the second highest in the European Union, and the duty on diesel is by far the highest. While most other countries impose different levels of duty on road petrol and diesel, the UK’s rates are exactly the same, which means that the UK’s diesel prices are far higher than those of our European partners.

There are three general reasons for the need for a mechanism to stabilise fuel prices via control of duty. First, the volatility of fuel prices has far-reaching social and economic consequences, and we therefore need a mechanism to dampen the peaks and troughs. Secondly—as we have heard in a number of notable speeches today—surges in prices have a disproportionate effect on some sectors of the economy, some sections of society, and some geographical parts of the state. Thirdly, green taxes must be linked to clear environmental criteria, because otherwise the public will believe they are just another cash cow and there will be a loss of support for environmental taxation. That would be a disaster, in view of the challenges that we face as a nation and, of course, throughout the world.

Let me stress that we are not arguing for the introduction of something new and untested. Many OECD countries have mechanisms to regulate the price of fuel. France has a fuel regulator, and Canada even has a regional fuel stabiliser. If we were to adopt a similar system in the United Kingdom, I should like to advance a special case for south-west Wales.

In adopting our policy following the Finance Act 2008, the Conservative party’s 2010 general election manifesto stated:

“We will consult on the introduction of a ‘Fair Fuel Stabiliser’. This would cut fuel duty when oil prices rise, and vice versa. It would ensure families and businesses and the whole British economy are less exposed to volatile oil markets, and that there is a more stable environment for low carbon investment.”

I could not agree more, and I look forward to the support of hon. Members who stood for election on the basis of that manifesto commitment when the House divides later this evening.

We have had a very interesting debate, featuring many positive and informative contributions. The hon. Member for Dundee East (Stewart Hosie), in his usual ultra-detailed opening remarks, made a comprehensive case for the need for a stabilising mechanism. I urge those who missed the beginning of the debate to read his speech, and I hope one day to be able to rival his knowledge of these matters. He made the specific point that rising fuel costs constituted a significant economic headwind. Given the recent deliberations about the Government’s lack of a growth strategy, I humbly suggest that that is one idea that they should fully embrace.

The Minister defended the Government’s position admirably by blaming the previous Administration, but while we welcomed her comments about the rural derogation pilot and look forward to further progress, her suggestion that the devolved Governments could intervene to reduce the burden on families was somewhat weak. Much as I should like the Welsh Parliament to have the taxation powers that would enable it to intervene, this is a matter for the United Kingdom Government. They need to take the necessary responsibility and introduce proposals of their own, rather than blaming the previous Administration and placing the onus on the devolved Governments without giving them any power. That seems to have developed into a growing theme in recent months.

The hon. Member for Bristol East (Kerry McCarthy) confirmed that the Labour party opposes any stabilising mechanism. I am sure that colleagues who will fight Welsh Assembly elections and Scottish parliamentary elections in a few months’ time will remind electors of Labour’s policy.

The hon. Member for Morecambe and Lunesdale (David Morris) noted the problems that small companies—notably the haulage industry—face in his constituency.

As usual, the right hon. Member for Torfaen (Paul Murphy) spoke with great authority. He concentrated on the importance of small and medium-sized enterprises to the Welsh economy. I echo his views and look forward to his support in the Lobby later.

The hon. Member for Argyll and Bute (Mr Reid) highlighted the specific problems faced by communities in the Scottish islands, and I thank him for his contribution.

My hon. Friend the Member for Banff and Buchan (Dr Whiteford) made a strong case for the food processing industry in her constituency. She discussed the added burden that that industry faces as a result of spikes in the price of oil.

The hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) made a staunch defence of the Government’s position. We would welcome a derogation pilot in England, as he suggested, because if it worked in remote parts of England it would work in Wales and mainland Scotland, too.

[Albert Owen]

The hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips) is not in his seat, but he said that only areas with devolved Administrations have been proposed for the pilot. The Isles of Scilly are, as we all know, in England. Wales has been left out, but surely the Isle of Anglesey would be the ideal place to experiment with such a derogation.

[Jonathan Edwards]

The hon. Gentleman makes a strong point. I am sure that the Assembly Member for his area, who is a member of my party, agrees with his comments.

My hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) discussed how fuel prices in his constituency have reached the £1.50 a litre mark. Having visited his beautiful constituency last week as a member of the Welsh Affairs Committee, I can inform my hon. Friend that his effort on that issue is appreciated.

The hon. Member for Mid Norfolk (George Freeman) highlighted how the rising fuel price hinders economic growth, especially outside south-east England and in those sectors of the economy that the UK Government are depending on, if they are serious about their stated aim of rebalancing the economy.

My hon. Friend the Member for Angus (Mr Weir) highlighted the huge problems caused to small businesses in his constituency. He pointed out the impact on disposable income for working families in his valid contribution.

The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) made an informative speech. He made a powerful argument about changing the VAT rate for fuel, and I hope that Ministers will consider his ideas.

In their joint economic declaration last week, the devolved Administrations specifically called on the UK Government to take action to counteract rising fuel and transport costs. The Governments of Wales, Scotland and Northern Ireland all highlighted how rising fuel costs form a significant economic headwind that undermines efforts to rebuild after the recent downturn. The declaration called for the postponement of the proposed duty increase planned for April this year. I am sure that all the Celtic Governments support the need for a fuel duty stabiliser.

In closing, I want to refer to those bodies that have contacted us to support our motion. We have received overwhelming support from many diverse organisations, such as the Farmers Union of Wales, NFU Cymru, the Freight Transport Association, the Road Haulage Association, the Federation of Small Businesses and the Countryside Association. That diversity reflects our point that ordinary families, businesses and workers across the UK acutely feel the effects of volatile fuel prices, although rising fuel duty will inevitably hit rural communities hardest.

Gareth Vaughan, president of the FUW, has written to say how “grossly unfair” it is that we in the UK pay more than any other country for our fuel, because of the “extortionate level of tax” imposed by the UK Government. He added that

“bearing in mind that there is a difference of as much as five pence per litre between rural and city garages in Wales already, the added fuel duty coupled with rising oil prices will be devastating to rural communities all over the UK.”

Jack Semple, director of policy at the Road Haulage Association, has stated:

“The Road Haulage Association welcomes Plaid’s and the SNP’s support for a fuel duty stabiliser”

since

“the volatility of fuel prices is a major issue for hauliers and, increasingly, for their customers.”

John Walker, the FSB’s national chairman, has also endorsed our approach, reminding us that

“Every extra penny spent at the pumps is a penny not being spent elsewhere in the economy…Small businesses want to grow...and create employment but the cost of fuel puts the brakes on their ability to drive the recovery.”

Finally, the FTA has stated:

“Lives and livelihoods up and down the country are suffering in the face of unsustainable and crippling fuel costs. This cost is unsustainable and...as part of the Fair Fuel UK Campaign, the Freight Transport Association and the Road Haulage Association, along with backing from the RAC, are asking government principally to scrap the fuel duty rise planned in April and introduce a methodology for stabilising fuel prices.”

It is not only organisations and individuals outside this place who have backed our campaign. In introducing his plans for a fuel stabiliser in 2008, the then shadow Chancellor—the current Chancellor—described the stabiliser as

“a common sense plan to help families, bring stability to the public finances and help the environment by making the price of carbon less volatile”.

In the light of those comments, people across the UK will ask why his Government oppose our motion today.

National Insurance Contributions Bill

Jonathan Edwards Excerpts

Thursday 13th January 2011 Commons Chamber

[Mr Hanson]

My hon. Friend makes an important point. He will know that the Opposition are extremely concerned about the impact of the VAT rise on businesses, on consumer confidence and on consumer expenditure. Although the measure is not directly linked to the VAT increase, its aim is to help businesses in difficult times. From the Minister’s perspective, the measure is primarily designed to help businesses take up the slack caused by the massive 500,000 people who will lose their jobs as a result of public spending cuts. We will come back to the impact of that on London, the south-east and the east region, where many public sector related employment opportunities will be lost and there will be no benefit from the scheme.

It is important that the Minister not only takes on board where job losses will be but that he looks outside the three excluded regions at the benefits that the scheme will bring to England, Wales, Scotland and Northern Ireland. The production of an annual report will show with full transparency where the businesses are that benefit from and take up the scheme. If those businesses are in areas where there is already low unemployment and deprivation, or they are in areas in the rest of England or Wales where there is not high public sector employment, the objectives set by the Minister will not have been met. In the interests of transparency, it is important to have such a report.

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

We support the Bill and the right hon. Gentleman’s new clause because we fear that the measure will not go far enough and that an annual report would show the need for further countervailing measures. Does he agree?

[Mr Hanson]

The purpose of the Bill, which the Opposition support, is to consider how we give limited help to start-up businesses through a national insurance holiday, so that we can get employment going across the United Kingdom with the exclusion, which we are trying to tackle, of London, the south-east and the east region.

Micro and macro-economic policy will need to be looked at again in many areas. My hon. Friend the Member for Luton North (Kelvin Hopkins) mentioned VAT. Hon. Members are concerned about the impact of public spending cuts on job losses. The issue of the economy generally is also extremely important, as are matters such as employment in west Wales. The annual report would clearly show where new businesses are commencing because of the scheme proposed by the Minister in the Bill and whether those new business commencements can be married to areas where there are high levels of public sector job losses, deprivation and unemployment and therefore where there is a necessity for new businesses to commence. If new businesses are starting up in areas where there is already prosperity, wealth and low unemployment, the loss of the £940 million of national insurance revenue that the Minister is proposing in the Bill could have been used elsewhere to meet the objectives of tackling deprivation and unemployment in a much more concerted manner.

--- Later in debate ---

[John Healey]

It is an extraordinary state of affairs that a series of serious and significant pledges, set out formally in the coalition agreement in May, should have been broken in the White Paper produced by the Health Secretary in July. My hon. Friend is right: the one thing that the Government promised not to do in the coalition agreement was to go ahead with a top-down internal reorganisation, but that is exactly what is now planned. It could cost up to £3 billion. It is high risk and high cost; it is exactly the wrong thing to do at this stage, when the NHS is facing such tight financial pressures. I also have to say to the Minister that his colleagues are already showing signs of strain.

I am anxious to return to the amendment that the House is discussing. The House will notice that it refers to the National Audit Office, which is an independent, authoritative body. The Minister will appreciate the assessments, analyses and authoritative views of independent bodies. He and his colleagues set up the Office for Budget Responsibility. Its independence has—shall we say?—been put on perhaps a slightly more questionable footing than that of the NAO, but it is nevertheless an important organisation. Indeed, the problems of the hon. Gentleman and his colleagues were compounded when their Office for Budget Responsibility updated the economic forecast and the fiscal numbers in November. One of the significant changes in its independent, authoritative assessment of this country’s economic prospects was to its forecast for inflation, thereby changing the deflator—in other words, the amount by which the Government and everyone else anticipate that costs in general, and Government spending in particular, will rise. Instead of a GDP deflator for 2011-12 of 1.9%, as set out in the OBR’s June report, its updated economic forecasts in November gave a deflator of 2.5%.

In other words, even before we take into account the double-counting of funding for both the NHS and social care, we have, instead of the wafer-thin rise of 0.1% for England that the Chancellor promised, a much heavier cut, of 0.5%. That has been confirmed by the Library, and by independent, authoritative bodies in the health field and the Select Committee on Health, which said in its report into public expenditure on 14 December that

“the Government’s commitment to a real terms increase in health funding throughout the Spending Review period will not be met.”

So the Government are breaking their promises to protect NHS funding in England, Scotland and Wales. Next year, Scotland is now being short-changed in NHS funding by £70 million, while Wales is being short-changed by £40 million. In total next year, there will be a shortfall from the promise made by the Government to the British people in their coalition agreement of more than £1.3 billion—not a rise in NHS funding next year, but a cut. On 20 October, the Chancellor promised to increase health spending over and above inflation. That promise is being broken by £1.3 billion.

Our amendments today, including amendment 8, are intended to be helpful, as I said to the Minister. They are intended to demonstrate how the Government can deal with the problem, if they have the will to keep their promises on funding for the NHS. We endeavour to act as a responsible Opposition, as our leader promised we would. The amendment is therefore designed to show helpful ways in which the Government can use this legislation to keep good both the Chancellor’s word and the Government’s promise to protect NHS funding, and thereby to see a real increase each year in this Parliament, and not, as at present, to deliver a real-terms cut.

The amendment suggests having an independent assessment and a report carried out by the National Audit Office. The independence is important: it is designed to try to give the public more confidence in what the Government are doing; to give this House more confidence in what they are doing; and to give everyone more confidence that what was a central promise from the Government and a personal promise from the Prime Minister is in fact being met.

This subject came up at the last Prime Minister’s Questions before Christmas, and it was interesting to note that the Prime Minister told the House:

“I am confident that we will fulfil our goal of real-terms increases every year in the NHS.”—[Official Report, 15 December 2010; Vol. 502, c. 902.]

That will not happen next year. The Exchequer Secretary is a talented Minister and he has an opportunity to give his big boss, the Prime Minister, the confidence that he clearly wishes to see by accepting the amendment and allowing the NAO to do an independent report, demonstrating the extent of the shortfall and the extent to which the Government are breaking their promise fully to fund the NHS. By doing so, he would do the House and perhaps even himself a favour.

[Jonathan Edwards]

In the light of the situation that he has explained applies in England, does the right hon. Gentleman agree that it is reckless for the Conservatives in Wales to promise in the forthcoming National Assembly elections to increase spending on health above the retail prices index?

[John Healey]

One of the two consequences of devolution is that in this area of health such decisions are taken in Wales for Wales. The second, however, is, I have to concede to the House, that I, as an English shadow Health Secretary do not follow those decisions in detail, so I think the hon. Gentleman is going to have to prosecute that argument in his home area.

Finally, the House will note that the date in the amendment is anticipated to be after the expected Royal Assent to the Bill, so it is tied to the Finance Act. The Exchequer Secretary might want to discuss with the Chancellor the idea of doing this assessment, publishing the report and highlighting the shortfall, showing the extent to which the promises they made to protect NHS funding and give it a real-terms increase in each year of this Parliament are being broken. The Budget, of course, provides the Chancellor’s opportunity to make good his word and make good the promises that his Government have given to the British people on the NHS.

--- Later in debate ---

[Mr Hanson]

My right hon. Friend makes that point in relation to Lewisham and her constituency, but as I shall discuss, it is not just her constituency and Lewisham borough that will be excluded and disadvantaged by the scheme. For example, the constituencies of Oxford East; Luton North; Lewisham East; Canterbury; Southampton, Test; Eltham; West Ham; North Thanet; Hackney North and Stoke Newington; Tooting; Islington North; Dulwich and West Norwood; and Brighton, Kemptown all fall, by the Minister’s own criteria, in the top 60 constituencies for public sector employment, but they will not be eligible for the scheme because the Minister is excluding them from it.

If the Minister looks, as he has, at the House of Commons figures that I raised with him in Committee, he will see that 23 of the top 100 constituencies for public sector employment in England, Wales, Scotland and Northern Ireland fall within the three regions that are excluded from the scheme. So my right hon. Friend makes a clear and telling point on behalf of her constituents, but 23 of the top 100 constituencies fall into the same category.

[Jonathan Edwards]

I accept the point made by the right hon. Gentleman, but does he not recognise the need to rebalance the economy on a geographical basis? If he does not support this measure, what measures would he like to introduce?

[Mr Hanson]

I certainly would not have abolished the regional development agencies or cut public spending with the speed and to the extent that the Government are doing. I certainly would not have cut the Welsh Assembly Government’s budget in our own areas to the extent that the Government will do over the next two to three years. That would have helped to manage the necessary downturn in public spending that we needed to make to readjust the economy in a way that was proportionate, fair and met our constituents’ needs for public services and for employment.

--- Later in debate ---

[Jonathan Edwards]

In general we support the Bill, not because we think it will make much of a difference—as we have heard, the take-up has been far from promising so far—but because it is recognition by the UK Government that the UK’s economy is geographically unbalanced and that action needs to be taken to address the problem.

The gross value added of the communities that I represent is 20% of that of inner London, something that clearly has to be addressed. Under the last Government, 10 jobs were created in the south-east of England for every job created in the north and the midlands, and I fear that Wales fared even worst. One of the great themes of the last Government was the concentration of jobs and money in the south-east and London, with massive growth in the financial sector and the destruction of other sectors of the economy, particularly manufacturing. That led to huge wealth polarisation on both a regional and an individual basis, and it was refreshing to read today in The Independent that the Leader of the Opposition at least recognises that damaging legacy.

We should also consider other areas that need action. The UK Government have been talking about the creation of enterprise zones in Northern Ireland and the use of different levels of corporation tax to stimulate private enterprise in areas of the state that are lagging behind. We will therefore support the Bill.

Question put and agreed to.

Bill accordingly read the Third time and passed.