Finance Bill

Jonathan Edwards Excerpts

Tuesday 28th June 2011 Commons Chamber

[Mr Speaker]

I see no reason for it to be taken again, but I am strikingly impressed by the fact that, although it is three minutes past 11 o’clock, the sense of humour for which the hon. Member for Wellingborough (Mr Bone) is renowned throughout the House has not deserted him. However, it is only fair to say that the Chair has discretion to allow the vote to continue for slightly longer in particular circumstances. A very large number of Members were seeking to get through one Lobby so I extended the time. I think we will leave it there, and I am grateful to the hon. Gentleman for the manner in which he has raised his point of order.

New Clause 6

Rate of value added tax

‘(1) In section 2(1) of the Value Added Tax Act 1994 (rate of VAT), for “20 per cent” substitute “17.5 per cent”.

(2) In section 21(4) of that Act (restriction on value of imported goods), for “25 per cent” substitute “28.58 per cent”.

(3) The amendment made by subsections (1) and (2) has effect in relation to any supply made on or after 30 August 2011 and any acquisition or importation taking place on or after that date.’.—(Jonathan Edwards.)

Brought up, and read the First time.

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

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 9—Value Added Tax (Change of Rate) Order 2011—

‘(1) The Chancellor of the Exchequer shall make an order under the powers conferred by sections 2(2) and 21(7) of the Value Added Tax Act 1994 that in section 2(1) of the Value Added Tax Act 1994 (rate of VAT), the rate of tax charged by virtue of that section shall be decreased by 12.5 per cent.

(2) In section 21(4) (value of imported goods) of the Value Added Tax Act 1994 for “25” substitute “28.58”.

(3) This Order shall be known as The Value Added Tax (Change of Rate) Order 2011 and shall come into force on 30 August 2011.’.

New clause 10—VAT—

‘The Treasury shall, within three months of the passing of this Act, report to Parliament its assessment of the impact of the rate of VAT on UK economic growth.’.

[Jonathan Edwards]

Diolch yn fawr, Mr Speaker. I had an hour-long speech prepared for this debate, but as it is going well past my bedtime, I will try to keep my remarks as short as possible.

I move this new clause with a sense of déjà vu, as only last July I closed a Finance Bill debate on an amendment tabled by my hon. Friend the Member for Dundee East (Stewart Hosie) that aimed to overturn the decision in the emergency Budget to raise VAT to 20% from January this year. Many of the arguments I made then remain relevant, but I will resist the temptation to air the same speech twice. Interestingly, that debate [Interruption]—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Too many conversations are going on in the Chamber, and I am sure that everybody wants to hear the hon. Gentleman.

[Jonathan Edwards]

Thank you very much, Mr Deputy Speaker.

Interestingly, when the House divided on that amendments the Labour party abstained. Since then, it seems that the official Opposition’s main critique of the UK Government’s economic policy has been based on the Treasury’s VAT policy. I hope that when we divide later the Labour Front-Bench team will set aside its usual partisan approach to votes in this place and will walk through the Lobby with us. As I see the shadow Minister, the right hon. Member for Delyn (Mr Hanson), grinning, I hope that that will be the case.

In the 2010 general election, Plaid Cymru campaigned against a VAT increase—unlike the Liberal Democrats, who had their tax bombshell poster, we meant it. That is why we tabled an amendment to prevent the increase last year and why we have done the same again this year. Last year, I said that there was both a social and economic reason why the increase in VAT was a bad idea, and I hope to concentrate on those reasons during my speech. We are against the ideological cuts and the rush to achieve a zero deficit within one parliamentary term with the net result of hundreds of thousands of lost jobs and unimaginable pain across our communities. We have consistently expressed our concern at the possibility of what the former Monetary Policy Committee member, David Blanchflower, called a “death spiral”, whereby cuts in expenditure become cuts in receipts.

A country’s economy is not like a family budget. Although it is good public relations, making misleading references of this sort is a very dangerous game for the UK Government to continue to play. In the case of the state there is a direct link between expenditure and income. Indeed, an overt reduction in expenditure can lead to a reduction in income and an increase in the deficit. Some would argue that we are in that situation already, even before the real cuts start to bite.

The state cannot cut its expenditure and assume that its income will remain constant. We are talking about intrinsic fine balances, which is why it always makes more sense for a state to change its expenditure levels modestly, rather than go cold turkey, as is favoured by the current Government. Four main elements drive economic growth: public sector expenditure; exports; private investment; and the key element as far as today’s debate on VAT is concerned, which is household spending.

VAT is, in essence, a tax on consumption. Economic growth in the Labour years was largely driven by consumer spending, resulting in a situation whereby personal debt levels in the UK have rocketed to an unsustainable 100% of gross value added, at £1.4 trillion.

[Matthew Hancock (West Suffolk) (Con)]

I am listening to the hon. Gentleman’s argument. Given that cutting VAT appears to be the only economic policy of the Labour party, is he not surprised that the party tabled its amendment so late that it was not selected and that the leader of the Labour party did not sign up to its amendment?

[Jonathan Edwards]

The hon. Gentleman makes an interesting point and I hope that the shadow Minister will be able to address it much better than I could.

Debt charities such as Citizens Advice report that the amount of debt problems dealt with by the service continues to increase, as the human cost of the recession feeds into the system. There is a long-term economic case for addressing this unsustainable situation by reducing the personal debt caused by consumption in the economy. My preference, however, would be to change the banking code and make it more difficult for lenders to seduce consumers into debts that they cannot service, rather than directly to reduce the purchasing powers of individuals via the use of VAT. I note that new clause 11 has been selected for debate and it covers associated matters.

The major issue faced by the economy is a lack of demand. Personal household debt, built up during the last decade, will be a severe economic headwind facing the UK economy for the foreseeable future. The increase in VAT exacerbates the situation, as we can see today from the revised growth figures for the first three months of 2011, which show that consumer spending is falling at its fastest rate since the second quarter of 2009, a decline of 0.6%. Real household disposable income is 2.7% lower than it was last year, the biggest annual fall since 1977.

Growth in consumer spending will be key if the UK Government are to meet the economic growth forecasts they have set in order to achieve their fiscal consolidation targets. The January VAT increase will stymie the consumer-led growth on which the Government depend.

In the past, my party has argued against VAT being used as an economic stimulus, which was the aim of the previous Labour Government when they cut VAT by 2.5% in 2008-09. In our view, there were more effective ways of stimulating the economy, not least investing in capital infrastructure and putting proper money in people’s pockets and in their pay packets rather than just hoping that they would spend the small change from VAT. With the increase in standard VAT from 17.5% to 20% and the stagnating economic recovery from the recession, the circumstances have changed. This is no longer about merely keeping the tills ringing, but about keeping families in their homes.

[Christopher Pincher (Tamworth) (Con)]

I have listened carefully and with interest to the hon. Gentleman’s new clause. Can he tell the House when he informed the shadow Cabinet that he was going to table this clause and whether he has had any advice on it from the shadow Chancellor?

[Jonathan Edwards]

The hon. Gentleman will be aware that I am in a different party from those on the shadow Front Bench and we do not normally negotiate on the clauses we table. I can only assume that my staff are more effective.

Richard Banks, the chief executive of UK Asset Resolution, said that the UK economy faced a tsunami of repossessions once interest rates rise. Increases will come sooner rather than later, partly as a result of the VAT increase. The increase in inflation has come about for a variety of international reasons, including the slow devaluation of the pound and increases in basic food and oil prices, but we have a 2.1% increase in prices across the board and I am sure that many businesses have racked up their prices by greater amounts. The increase in VAT is adding to the inflationary pressures on the economy and it therefore seems strange that the Treasury is using a fiscal measure that is playing its part in increasing inflation and will inevitably at some stage lead to a tightening of monetary policy, creating a further major headwind for the economy. It is the economic equivalent of shooting oneself in the foot.

[John Hemming]

I congratulate the hon. Gentleman on being more efficient than the official Opposition. However, he is proposing to reduce VAT in this financial year, which would mean an increase in the deficit and therefore an increase in the borrowing. Where would we borrow the money from and how much interest would we pay?

[Jonathan Edwards]

As the hon. Gentleman rightly says, I am proposing a temporary cut and I am endeavouring to convey that the priority of the Treasury should be securing sustained economic growth. In my view, the increase in VAT is hindering that. That is my key point.

Older people and pensioners who thought that they had enough to live comfortably for the rest of their lives now find themselves with very little interest but high inflationary costs in their everyday life. The Government’s attempts to save money by changing indexation from the retail prices index to the consumer prices index means that any benefits people receive are lower than the real world cost, rather than keeping up with it.

Families who are stretched by the costs of their daily living are dealing with wage freezes but finding that the cost of living is rising dramatically. Young families find it hard to save to buy a house, and others live in worry about the base rate increasing and being unable to cover their mortgage. The VAT change last year is reported to have taken £450 from each family with children across the UK.

--- Later in debate ---

[Alun Cairns]

I give the hon. Gentleman and his party credit for having had consistent policy on this matter, but has he had any indication about where the official Opposition stand on his amendment? There has been some indecision within the official Opposition, with policies being announced without the shadow Cabinet knowing about them.

[Jonathan Edwards]

We will have to wait and see. I just hope that my words are powerful enough to entice them to come through the Lobby with us, but I am afraid we will have to wait until a little later in the evening.

I was talking about one positive reason for a temporary VAT cut, but that would not be my main, or only, consideration. The purpose behind the cut would be to help the millions of ordinary people who would benefit from not having to pay those extra pennies and pounds every day to the Government, which they could then use to spend or save elsewhere as they saw fit. They could spend them on other goods and stimulate the economy in that way or they could keep them to pay off their debts. At the moment, many costs have been factored into the margins of businesses and many businesses have not yet raised their prices to meet this new inflation from both VAT and other spending increases. If we can keep prices down through the use of a temporary VAT cut and keep high street prices down with it, we will help families. On the other hand, if we can secure the margins for shops and companies, we will help business. I hope that Government Members will agree with that point. Either scenario would be a win-win situation for families and business. Negating a key element of inflationary pressure would also enable monetary policy to be kept loose for longer, which I would imagine is a key objective for the Treasury and the Monetary Policy Committee.

In closing last year’s debate on the effect that the VAT increase would have on the budgets of public sector organisations, the devolved Governments and charities, I asked the Government what analysis they had made of the impact that increasing VAT would have on the operating costs of those bodies, as one study had estimated that increasing VAT would cost charities alone an extra £150 million per annum. I would be grateful if the Minister addressed that specific point in winding up. We will be pushing for a division on new clause 9, as it would introduce a temporary reduction and is more likely to generate support across the House. New clause 6 would be our preferred solution in the long term, but I will not push it to a vote tonight.

[Ian Swales]

I rise to speak against new clause 6 and I note that we have had no costings from its proposer, the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I would be interested to find out what he thinks the policy would cost. I can report that there was no dancing in the streets of Redcar when the VAT was reduced from 17.5% to 15%, and neither have we had riots in the streets about the rises from 15% to 17.5% and then to 20%.

--- Later in debate ---

[Mr Hanson]

In a moment. The new clause does not do what we said we would do, which is implement a temporary reduction. We have tried, through new clause 10, to ensure that we have a review of all the issues I have mentioned—of tourism, business, jobs and families—so that we can come to conclusions about sectoral reductions and a temporary reduction to help employment.

[Jonathan Edwards]

May I clarify my position? I have a note from the House of Commons Library to me:

“NC9 finds an alternative way of doing the same thing as NC6 (i.e. decreasing the rate of VAT), only on an exclusively temporary basis. It does this by means of the Economic Regulator, which is a mechanism that allows for changing the rate of excise duties like VAT on a temporary basis without having to use primary legislation.”

Surely, it cannot be clearer than that.

--- Later in debate ---

[Nia Griffith]

Absolutely. That is now having a devastating impact on the economy, on businesses and on individual families. In our new clause, we are asking for a proper impact assessment of the effect of the VAT rate on growth in the UK. Let us see whether the Government can come up with something more constructive and find a way to drive the economy forward.

[Jonathan Edwards]

I thank my parliamentary neighbour for giving way. Is she saying that the evidence is already there that the VAT rise is hurting the economy, as I believe it is, or that we need a review to see whether it is doing so?

[Nia Griffith]

I am saying that any fiscal measure is interdependent on other fiscal measures and the Government need to decide how their growth strategy will work and how the VAT rate will fit into that, in addition to any other fiscal measures they wish to take. I am not promoting any one particular measure, but there needs to be some form of stimulus because at the moment we are spiralling downwards and seeing increases in the debt and the deficit, in the benefits bill and in the number of people who are out of work. We would like to see increases in the number of jobs and in the number of businesses that are picking up and we would like to see the deficit come down so that we can get Britain back to work and get people back into jobs. The problem at the moment is that the policies with which we are being presented seem to do precisely the opposite, as was ably explained by my hon. Friend the Member for Coventry North West (Mr Robinson) a moment ago.

We need a proper assessment and we need proper decisions to be made on the basis of it to help our economy to grow.

--- Later in debate ---

[Mr Gauke]

The fact is, the economy grew in the first quarter of this year, after the VAT increase, unemployment fell this year at the fastest rate since 2000, and borrowing is falling. The plan is working. I am afraid that Opposition attempts to talk the economy down are not working. In difficult international conditions, the economy is growing.

Raising the rate of VAT was a difficult decision to take, but it was the right decision, and the responsible thing to do. The Opposition proposal is reckless: an unfunded VAT cut to the tune of £12 billion a year, and £51 billion over the Parliament. How do the Opposition propose to fill that gap? Would they revert to their tax on jobs? Do they think that that would stimulate growth?

Deficit reduction, in which the VAT increase plays an important role, is a prerequisite for sustained economic growth. At the June Budget and in the spending review, the Chancellor set out a credible plan to reduce the deficit. According the OBR, the plan is consistent with medium-term growth, achieving the mandate in 2014-15, a year earlier than required. The International Monetary Fund continues to back the Government’s consolidation plans, and to advise against changing course. It considered whether it is time to adjust macro-economic policy, and its conclusion is that the answer is no.

Events in Europe and around the world in the past few weeks have shown how important it is for countries with large deficits, such as the UK, to have a credible plan to deal with their debts. The Government have a credible plan. The British economy is recovering, output is growing and new private sector jobs are being created. We have set out why we have made those changes and explained what is required. We are putting our economy on a path of sustainable growth. I urge hon. Members not to press the new clauses to Divisions, and to support the Government’s plans for this country.

[Jonathan Edwards]

We have had a very interesting debate, although I find myself somewhat confused by the voting intentions of hon. Members. We will see in a few moments.

I shall not press new clause 6 to a Division, because it proposes a permanent reduction in VAT. New clause 9, however, proposes a temporary reduction, no matter what Labour Front Benchers say, and I will press that to a Division. Those who do not join us in the Lobby for the Division on new clause 9 will not be able to say with any credibility that they oppose the January VAT increase.

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9

Value Added Tax (Change of Rate) Order 2011

‘(1) The Chancellor of the Exchequer shall make an order under the powers conferred by sections 2(2) and 21(7) of the Value Added Tax Act 1994 that in section 2(1) of the Value Added Tax Act 1994 (rate of VAT), the rate of tax charged by virtue of that section shall be decreased by 12.5 per cent.

(2) In section 21(4) (value of imported goods) of the Value Added Tax Act 1994 for “25” substitute “28.58”.

(3) This Order shall be known as The Value Added Tax (Change of Rate) Order 2011 and shall come into force on 30 August 2011.’.—(Jonathan Edwards.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

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.