Finance (No. 3) Bill

Kate Green Excerpts

Tuesday 5th July 2011 Commons Chamber

[Kate Green (Stretford and Urmston) (Lab)]

I agree with every word that my hon. Friend says. Does she agree that one crucial value of the future jobs fund intervention was that it broke the trend into long-term youth unemployment—a trend about which we should be particularly concerned? The lesson of the 1980s recession was that if young people did not get a start in the labour market at the very beginning of their working lives, they never really got themselves established. That is what the future jobs fund successfully intervened to disrupt.

[Alison McGovern]

I thank my hon. Friend for her intervention. Having grown up on Merseyside in the 1980s, I know it was only when I studied economics later in my life that I found out that there was a word for the thing I always knew happened—that people got punished throughout their lives for being unemployed when they were young. The economic word for that is hysteresis. The labour market has memory: if someone fails to get a job early in life, it stays with them, scarring not only the person’s career prospects, but the economic prospects of the locality. We know all about that and the previous Government worked to stop it happening when the economic crisis hit. I would like to see this Government take that problem seriously, introduce measures that will bring real work to young people and deal with some of the problems we face, which are getting worse.

Finance (No. 3) Bill

Kate Green Excerpts

Monday 4th July 2011 Commons Chamber

[Mr Hanson]

Far be it from me to engage with my hon. Friend on the benefits or otherwise of Trotsky’s theory, because I am sure that he would win that discussion hands down.

The key point is that we all seek transparency in remuneration. My hon. Friend the Member for Hayes and Harlington will be aware that there is already legislation on the statute book that means that banks must have transparency in their remuneration. The Government should enact that legislation and should also push for a wider European agreement on transparency, an act of faith that they have so far failed to push for.

The previous Government, in our Financial Services Act 2010, allowed the Treasury to issue regulations that forced banks to disclose in bands the number of staff earning more than £1 million a year. That legislation has so far not been pursued with any vigour by the Government. The Act, which gained Royal Assent in April 2010—just before the general election—gave the Treasury the power to regulate on this issue. It is an issue that my hon. Friend the Member for Hayes and Harlington has raised and for which the Government must account today. The Opposition will continue to consider it in the future. Indeed, my right hon. Friend the Leader of the Opposition made a clear speech to the Coin street neighbourhood centre on Monday 13 June in which he committed the Opposition to ensuring that we had such transparency and that chief executives were accountable not just to their shareholders but to the wider community.

[Kate Green (Stretford and Urmston) (Lab)]

Does my right hon. Friend agree that an important feature of exposing those very high bonuses to public scrutiny was to make it clear that other lower paid workers in the banking sector receive some bonus payments? It is very important that we distinguish between the excessive bonuses at the top and the bonuses that top up relatively modest wages for the bank clerks, who are feeling quite attacked personally when the banking crisis was none of their making.

[Mr Hanson]

My hon. Friend makes a valuable point. She will know that the legislation passed by my right hon. Friend the Member for Edinburgh South West (Mr Darling) in the last Parliament allowed salaries of more than £1 million to be open to scrutiny, which would address the issue she mentions.

There is some merit in bringing this issue to the attention of the House, and I am grateful to my hon. Friend the Member for Hayes and Harlington for doing so. He will know that there are some issues to do with his amendment delaying corporation tax cuts, but I am grateful that he has addressed the issue and I hope the Minister will respond in due course.

Amendment 17 is about the enterprise investment scheme, which we support. In Committee, we asked the Minister whether he had state aid approval for the EIS and I would welcome an update on whether he has since made progress on that.

I have some sympathy with amendment 51, tabled by the right hon. Member for Gordon (Malcolm Bruce). On Second Reading and in the Committee of the whole House, we tabled amendments that mirrored his amendment in many ways, asking the Chancellor to produce before the end of September an assessment of the impact of taxation on ring-fenced profits, business investment and growth, including an assessment of the long-term sustainability of oil and gas exploration in the North sea. For the reasons mentioned by my hon. Friend the Member for Aberdeen North (Mr Doran), the way that the proposal was brought forward contained elements of surprise for the industry. There was a lack of consultation and there have been consequences. The right hon. Member for Gordon and the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) both mentioned Statoil and the great impact that the decision has had on that company’s potential $10 billion—or £6.1 billion—investment in the North sea.

It is important that the Economic Secretary has had discussions—some potentially very exciting and energetic—with oil companies on these matters as part of her initiation into her role in government. I hope that she will ensure that she reports back. I also hope that the Minister will accept amendment 51, or at least accept an amendment in principle for the future.

Finally, although my hon. Friend the Member for West Bromwich East (Mr Watson) is not present today because of other matters, I very much welcome his amendment 9, which is part of this group. We raised the issue of video games tax relief in debates on the Finance (No. 2) Bill. However, we need to look at the issue again in detail, if only because the hon. Member for Wantage (Mr Vaizey) said when in opposition:

“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”

He said that during the general election, on 13 April 2010. He is now the Under-Secretary of State for Culture, Olympics, Media and Sport, yet he has been sat on by the Chancellor of the Exchequer, who said in his Budget statement last June:

“In the current climate, with the deficit the size…all those reductions in tax must be more than paid for by other changes to business taxation, so we will not go ahead with the poorly targeted tax relief for the video games industry.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]

My hon. Friend’s amendment 9 asks the Government to look again at the issue. I simply put on record the fact that, yet again, those in government said one thing during the election and something else afterwards. We need to encourage the video games industry so that we can compete on a global scale.

In summary, there are some useful amendments in this group. I cannot accept everything that the hon. Member for Amber Valley said, but the other amendments before us have some merit. I look forward to hearing what the Minister has to say.

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[John McDonnell]

May I associate myself with amendment 30, which I also signed? For my constituents, £250 means a lot. It is a lot of money in terms of paying daily bills, but it is also the difference between some children having a summer break this year and not. I hope the Minister responds positively and examines that matter, but I will give him this assurance: if we do not have positive assurances from the Government, we will be back time and again until that money is paid.

I wish to speak to amendment 14, which is in my name. The amendment simply proposes that, as we determine personal income tax rates for the coming year, we look carefully at their impact on inequality. The proposal is from various lobbies in recent months, from religious groups, churches, welfare rights groups, trade unions and other civil society organisations, which have expressed their anxiety about inequality in our society. Like them, I believe that our country is disfigured by inequality and the extremes of wealth and poverty. Consequently, I believe that we should use every legislative weapon possible to address it.

I mentioned some of the extremes of wealth and poverty in the earlier debate on executive pay—some top executives earn a salary that is 145 times the average salary of their workers. The Government’s assessment of wealth distribution last year showed that the total wealth of the top 10% of the population is now 100 times that of the bottom 10%. The simple reason is that the poorest have so little wealth.

In 1986 in the UK, the richest 1% held 25% of marketable wealth. Twenty years later, that had risen to 34% of total national wealth. The poorest 50% had gone from holding 11% of the nation’s wealth to holding just 1% today. That is not solely the result of economic trends or globalisation—it has been Government policy, largely in the 1980s and 1990s, to pursue the systematic redistribution of wealth from the poor to the rich, and the last Government at least held back the tide for a period.

Taxation policy has a key role to play in addressing inequality and I note that the Treasury Committee quoted Wendell Holmes’ popular dictum that tax is the price we pay for a civilised society. I agree, but civilisation has a range of definitions, one of which is that we should not live in a society that is so starkly unequal—

[Kate Green]

I very much support the sentiments my hon. Friend is expressing. Does he agree that it is not only the income and consumption taxes that need to be encompassed in his amendment, but the wealth taxes, especially in light of the examples that he has just given us?

[John McDonnell]

My amendment proposes examination of the whole range of taxes, indirect and direct. It is interesting that the direct taxation system can be progressive in redistribution, but that the indirect system is so regressive in this country. It has a considerable impact on ensuring that we see these vast extremes of poverty and wealth.

It is not only the lobbyists from various organisations who have expressed their concerns about this inequality, because the general public are averse to high levels of inequality too. In recent surveys, 80% to 90% have been in favour of a more equal distribution of wealth in our society. We have had various discussions in this House about the impact of inequality, and none better than the debates around the work by Richard Wilkinson and Kate Pickett, “The Spirit Level”, which was ground-breaking.

Richard Wilkinson was an adviser to my party in the early 1990s, when he did the earliest work on the impact of inequality on health. That was revisited in 2005, when he came to the House and briefed several MPs. “The Spirit Level” confirmed what he had suspected in the 1990s and started the debate. The Prime Minister and the Leader of the Opposition have both accepted that inequality is an issue that must be addressed. In 2009, the Prime Minister quoted from Richard Wilkinson’s book in a major speech, demonstrating that the Conservative party at that time was keen to address some of the issues of inequality. He said that

“among the richest countries it’s the more unequal ones that do worse according to almost every quality of life indicator.”

In his first major speech as leader, the Leader of the Opposition said:

“I do believe that this country is too unequal and the gap between rich and poor doesn’t just harm the poor, it harms us all.”

That is based on the work in “The Spirit Level”.

The argument in “The Spirit Level” is straightforward—that when people in the same social class, at the same level of income and education, are compared across countries, those in more equal societies do better on every measurement, be it health, mortality, obesity, teenage birth rates or mental illness. Their quality of social relations is better too. Inequality is socially divisive, increasing the rate of homicide, hostility and racism. The level of trust in unequal societies is lower than in societies that are more equal, and social capital is less —the engagement in civil society and even in political processes. That is why we need to address the issue of inequality when we consider taxes and our financial strategy.

I realise that this has been a contentious debate, and I have read the arguments made by the TaxPayers Alliance, which has tried to rebut Wilkinson and Pickett’s work, but I have also read the more recent independent research studies that have simply reinforced the inequality argument. Whichever side of the argument Members fall, it is clearly an issue to be considered, and that is why I suggest that we look at taxation as a whole—

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[Kate Green]

Does my hon. Friend agree that it would be an important opportunity to look again at the assertion that the countries with the highest levels of inequality are also those with the least social fluidity and therefore at the role that tax could play in achieving the Government’s social mobility objectives?

[John McDonnell]

That is particularly important given that we are in if not a recession, a period of economic inactivity in which the economy has been scraping along the bottom. We have 2.5 million unemployed, of whom nearly 1 million are young people and 1.7 million people are in enforced short or part-time working. As Richard Wilkinson demonstrated, during the ’80s, the social psychological response was either fight or fright: fright meant depression, alcohol and drugs, and fight often meant violence on our streets and, unfortunately, an increase in violent crime.

We should be addressing those issues now, as we pass through this economic recession, which might last some time. It behoves us, as we discuss taxation and if taxation can play a role in addressing inequality, to examine the matter in detail. The amendment simply tries to emphasise that inequality is an important issue that has to be addressed and that all legislation needs to be reviewed and assessed in the light of its impact and effectiveness in addressing inequality. The amendment therefore calls for a report to be brought back to the House addressing that matter. In that way, we might at least acquire an understanding of the impact of taxation policies on inequality, even if we might disagree on specific taxation policies.

[Mr Gauke]

It is a pleasure to respond to the debate. Amendment 10 would require the Office for Budget Responsibility to report on the revenue raised by the additional rate of income tax. Amendment 14, meanwhile, seeks a report on the impact on inequality of all taxes, and amendment 30 seeks to provide a £250 reduction in the tax liability of all public sector workers earning less than £21,000.

I deal first with amendment 10. At the Budget, my right hon. Friend the Chancellor asked HMRC to assess the revenue raised by the additional rate. As I explained during the extensive debate on this clause in Committee, which the right hon. Member for Delyn (Mr Hanson) will well recall, HMRC will consider all the available evidence on the impact of the additional rate, including data from the 2010-11 self-assessment returns, which will become available next year. Data from tax returns are clearly essential in any assessment of the revenue raised, but of course they contain confidential taxpayer information and are best reviewed by HMRC. It already has the expertise in monitoring and evaluating tax measures and is resourced to do so in future. The Office for Budget Responsibility has a different remit in producing independent economic and fiscal forecasts, judging policy against the fiscal mandate and analysing the sustainability of the public finances.

[Kate Green]

I understand what the Minister says, but does that not suggest that one useful role that the Office for Budget Responsibility could fulfil would be to take a dynamic look at the effect of the 50% tax rates on, for example, the propensity of people to remain in the country and pay that tax and the longer-term impact on the economy?

[Mr Gauke]

I would not necessarily have put the hon. Lady down as an advocate of a more dynamic assessment of the tax measures, but perhaps I was mistaken in my understanding of her views. The purpose of the review that my right hon. Friend the Chancellor has announced will be to enable HMRC to see what has happened in the first year. It is right to say that there are long-term effects that will not necessarily be incorporated in that first year’s data, and I think anyone with an understanding of these matters would acknowledge that.

It is perfectly reasonable to make the point that if the 50p rate were to become a permanent feature of our tax system, it could damage the UK’s competitiveness. That is a point that the noble Lord Mandelson appears to support and I believe that the right hon. Member for Edinburgh South West (Mr Darling), who introduced the 50p rate as Chancellor, saw it as a temporary measure, while Tony Blair has made it clear that he thinks the 50p rate is a mistaken policy—full stop. Our view, however, is that at this time, because of the sacrifices we are asking people to make, the 50p rate does play a role, but we want to analyse what revenue it brings in the short term and to gain an understanding of its long-term effects.

As the additional rate was introduced by the previous Government, I can perfectly understand why the right hon. Member for Delyn is so interested in establishing whether it was a successful policy, but when he talks about public scrutiny of Budget measures I must ask him what public scrutiny was there when the 50p rate was introduced? To what extent was the analysis published then, and to what extent was it published when the 10p rate of income tax was doubled? What information was put into the public domain at that point? As a Government, we have done much more on putting information into the public domain by publishing our analysis. Announcements in this area will be made by the Chancellor at the appropriate time. It is peculiar, however, to hear the Opposition proposing more evidence-based policy making only to reject the notion, it seems to me, that this Government should consider the evidence before making any further commitments.

I turn now to amendment 14, which deals with the impact of tax on inequality. I realise that the hon. Member for Hayes and Harlington (John McDonnell) has his own views on inequality, some of which may not necessarily be shared by his Front-Bench team. I thank him for tabling this amendment, however, as it provides me with an opportunity to highlight the significant steps that the Government have taken in 13 months to address inequality through the tax system.

First and foremost, the Government are committed to ensuring that the income tax system gives more support to those on low to middle incomes, and rewards the efforts of those who choose to work. That is why the June 2010 Budget announced a £1,000 increase in the income tax personal allowance for those aged under 65. A further £630 increase was announced in Budget 2011. That will make the personal allowance £8,105 from next year. Together, those increases will benefit 25 million individuals, and take 1.1 million low-income individuals out of income tax—an important point that my hon. Friend the Member for Bristol West (Stephen Williams) highlighted. Basic rate taxpayers will gain by £210 per year on average. That is part of our stated objective to increase the personal allowance to £10,000, with real terms steps in that direction every year.

Income tax is not the only area in which the Government are tackling inequality. All local authorities in England have voluntarily frozen or reduced their council tax in 2011-12 and as a result have qualified to receive additional Government grant equivalent to a 2.5% increase in their band D council tax. We have committed £1.9 billion to ease the burden on motorists, including the 1p cut in fuel duty as opposed to the 6p increase under the plans of the previous Government. We are supporting pensioners through the triple guarantee of state pensions being uprated by earnings, prices or 2.5%, whichever is highest. The television licence will be frozen for the next six years.

Clearly, the Government have taken great strides to tackle inequality in this country.

[Kate Green]

What steps have the Government taken to reduce inequality by concentrating on taxation not at the bottom of the income spectrum but at the top?

[Mr Gauke]

As was mentioned earlier, we have increased capital gains tax rates from those that we inherited, and our income tax decreases have been focused on the low paid. That is an example of what we are trying to do. The point is how to ensure that we have a competitive tax system so that we have the growth that the economy needs and that benefits all our constituents.

Let me turn to the report requested by the hon. Member for Hayes and Harlington.

I draw his attention to the detailed analysis that the Government have published on the impact of direct tax, indirect tax, tax credits and benefit reforms, which can be found in annexe A to “Budget 2011”. The Government have gone further than any previous Government in presenting distributional analysis of how changes to taxes, tax credits and benefits affect households. We have published detailed analysis at Budget 2011, the spending review and the June Budget 2010. That analysis shows that the top decile sees the largest losses from the cumulative impact of tax, tax credit and benefit reforms introduced at Budget 2011 and previous fiscal events. In cash terms, the top decile loses more than twice as much as the ninth decile, and 10 times as much as the bottom decile. That is the case if one looks at the overall impact or in cash terms, as a percentage of net income, or across income or expenditure deciles.

Finance Bill

Kate Green Excerpts

Tuesday 28th June 2011 Commons Chamber

[Mr Jones]

I agree. The changes being made to housing benefit will not do anything to help families stay together. My hon. Friend is a London Member, so he will know that families will be forced to move out of central London because of the Government’s changes to housing benefit rules. That is one of the inconsistencies of this Government. On the one hand they say that a tax break of £150, or £20 a week, will help to keep the social unit together, and on the other they—the same Minister, I hasten to add—pursue policies on housing benefit and other benefit changes that will not help at all to keep families together but will lead to the root cause of most of these issues: the poverty that affects such individuals.

I turn to some of the problems with the Bill as framed, and to what we have before us. New clause 5 is not the measure in the Conservative party’s most recent election manifesto. This proposed change includes married couples but excludes civil partners, who would not be covered by the new clause. When there was an outcry and complaints about what had been proposed at the election, the Prime Minister included civil partners at the last minute.

People would have to opt in to this system and elect to transfer their part of an allowance. That would be very unfair to many people who do not understand tax codes. I have just got my annual tax return and I keep putting it to one side, as most people do, until the deadline arrives. Introducing a system whereby people have to elect to transfer a certain allowance may well help the more articulate middle-class people who can do that when they fill in the form, but I am not sure that some of the people on poor council housing estates in Glasgow whom the Secretary of State for Work and Pensions is trying to address will have the wherewithal or knowledge to do it even if they knew that the option was available.

The Government have told us that they wish to simplify the tax system, but the new clause would make it a lot more complicated. In trying to bolster marriage, it would help certain groups of people but not others. Whenever we do anything with the taxation system, we should try to make it as user-friendly as possible. If someone opted to move their allowance around, that would be quite complicated because people’s incomes change throughout the year, so they might have a certain allowance available in one year but not another. The system would incur not only the £3 billion-plus cost of having it open to everyone but the cost of trying to work out how the tax office would administer it. In that respect, the new clause is not well thought out.

The Government have got themselves into a bit of a logjam on this. The Prime Minister is clearly committed to this policy. His Back Benchers are now worried that it cannot be implemented because of the coalition agreement. Huge amounts of public money would be used, but would it have any effect on child poverty? No, it would not, and neither would it affect most families. Moreover, it would help people without any children, including pensioners.

[Kate Green (Stretford and Urmston) (Lab)]

Leaving aside couples where there are no children in the household, does my hon. Friend agree that married couples typically tend to come from the better-off social classes and that, while I am sure that this is not what the hon. Member for Congleton (Fiona Bruce) intends, a tax break for marriage would therefore benefit the better-off?

[Mr Jones]

My hon. Friend has great experience in this area, and she makes a clear point. People on lower incomes and possibly of lower educational standing than others will not look at the tax system and say, “I’m going to stay married because somehow I will be financially better off.” That is why it is important to simplify the tax system.

If we are looking to help children, this proposal would not do that. Indeed, some aspects would be detrimental to families, especially put alongside the Conservatives’ existing proposals on changes to the tax and benefits system. We need an honest debate on the family, child poverty and how we can build communities. By investing in Sure Start and child tax credit, the last Labour Government raised a whole group of individuals out of poverty. That was the way to do it. If money is tight, it needs to be targeted very carefully.

The approach that has been put forward, which recognises marriage, is not targeted and will not have the effect that the Secretary of State for Work and Pensions wants. That is unfortunate, because I think that he is well intentioned and has just come to the wrong conclusions. It will be interesting to see whether the Government accept the new clause. I do not think that they will, because it is not what the Prime Minister and the Secretary of State for Work and Pensions outlined in the manifesto or in the lead-up to the general election. It will be interesting to see how much pressure the Liberal Democrats can bring to bear to ensure that this proposal never sees the light of day. The coalition agreement says that they can sit on their hands if it is brought forward.

In conclusion, the individuals who are trying to address this issue, including the hon. Member for Gainsborough who is well intentioned and thoughtful in trying to do the best for families, have got it wrong in thinking that the answer is marriage. The root cause of social breakdown is not that people are not married, but poverty. We need to ensure that not only the tax system, but the benefits system and everything else, supports families, whether the parents are married, single, in a civil partnership or whatever. As has been said, and as the modern part of the Conservative party recognises, the modern family comes in all shapes and sizes. One size does not fit all and one solution does not fit all. Giving a pathetic sum of money to support marriage will not relieve child poverty; nor will it ensure that people stay together longer if the taxman will raid their savings or income if they do not. I do not think that this is the answer, and if it goes to a vote I will oppose it.

[Fiona Bruce (Congleton) (Con)]

Only a few days ago, on father’s day, the Prime Minister stated:

“I want us to recognise marriage in the tax system so as a country we show we value commitment”.

I believe that the Government’s commitment to introduce such a provision is genuine. It was in the Conservative manifesto, it is in the coalition agreement, and I trust that the Government will introduce it in this Parliament, just as they are addressing the couple penalty. I warmly congratulate the Government, and in particular my right hon. Friend the Secretary of State for Work and Pensions, on the work being done to address this subject.

[Kate Green]

I know that the hon. Lady and her colleagues feel strongly about the couple penalty. Does she not accept that the design of the benefits cap that her Government are proposing will bring in a couple penalty—something that I thought they were trying to remove?

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[Fiona Bruce]

If I may, I will move on.

On the subject of young people’s aspirations, it is striking that surveys demonstrate that approximately 90% of young people aspire to marry, yet that is not reflected in the marriage figures. I am not suggesting for a minute that fiscal considerations are the only factor, but the Government should at least ensure that it is not more financially detrimental to marry in this country than in other developed OECD countries, if we are to be true to our determination to become the most family-friendly country in Europe.

As a Government, we should send out a clear and credible signal to young people that we value marriage and encourage their aspirations in that respect, particularly as marriage acts as a stabiliser not just for the individuals within it but for the wider community. The prevalence, for example, of the isolation and exclusion of the elderly is influenced by the wider breakdown of family and community networks, as the Centre for Social Justice stated in its “Fractured Families” report.

On social well-being, the current problems in our local communities resulting from our failure to recognise marriage are pressing. As we have already heard, in December 2006 the CSJ’s report “Breakdown Britain” clearly resonated with the public. One of the key drivers of social challenges is family breakdown.

[Kate Green]

Will the hon. Lady give way?

[Roberta Blackman-Woods (City of Durham) (Lab)]

Will the hon. Lady give way?

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[Fiona Bruce]

I agree with my hon. Friend in that respect—nor are Conservatives seeking to take away the support that we give to other family groups such as single parents. We are saying that there should be a tangible affirmation of the very important relationship of marriage.

A child born to cohabiting parents has nearly a one in two chance of living in a single-parent family by the time they reach the age of five, but a child born to married parents has only a one in 12 chance of finding themselves in that situation at that age.

[Kate Green]

rose—

[Roberta Blackman-Woods]

Will the hon. Lady give way?

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[Kate Green]

Does the hon. Gentleman not accept that the reason why children from married relationships so often do better is that their parents come from higher socio-economic backgrounds, not the fact of marriage itself?

[Jim Shannon]

The evidence from the constituency that I represent would indicate that that is not necessarily the case. Those who are perhaps worse off financially are in stable relationships as well. The reason I am speaking on this issue tonight is that I am reflecting not only my personal views, but—I believe—those of a large majority of the people whom I represent. I am here as the MP for Strangford to put that on the record and ensure that that opinion is well heard this evening. Many people might not like what I have to say, but hon. Members will have to accept that it is my opinion.

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[Jim Shannon]

I thank the hon. Member for his contribution and for providing a bit of focus to this debate.

Given that the agreement pertains to a full Parliament, one ordinarily would not be concerned at the failure to action a commitment in just over a year. What we need is for legislative change to be approved by the coalition Government, to move forward and perhaps see this legislation coming through in two years. The latest publication of the international tax comparison, CARE’s “The Taxation of Families 2009-10” puts things in a very different light. It demonstrates that we are now headed to a place where the tax burden on a married family with children with one earner on an average wage is growing so much that it will soon be more than 50% greater than the OECD average. That breaks new ground, taking us into territory that not even new Labour dreamt of occupying.

Some will no doubt respond by saying that this is a result of the tax burden having to increase on everyone in the context of the debt crisis. I understand that, but it is not exactly the case. Let me quote a director of an influential think-tank, who said:

“Given that it will take some time between changing the law and implementing the actual recognition of marriage in the tax system, it is important that the Government makes this a priority, takes swift action. The change, or at least a recognition of it, should be made”.

I very much hope that that report can be taken seriously, that the Government can look further at the issue and perhaps bring it forward in future legislation.

[Kate Green]

I just want to ask the hon. Gentleman which report he is referring to and which think-tank?

[Jim Shannon]

The think-tank is ResPublica.

As the hon. Member for Gainsborough (Mr Leigh) said earlier, the tax burden on single people with no dependants on the same wage has been falling and far from being 50% above the OECD average, it is now actually below it. That is reflected in the fact that the tax burden on a one-earner married couple on an average wage with two children is projected to rise from 73% to 80% of that of a single person on the same wage by 2012-13, while the equivalent average burden among OECD nations is 52%.

In this context, it is strange that the Government have started investing what will probably end up being almost £12 billion on increasing individual allowances to £10,000. There is a cost factor there and an agreement within the coalition on how that is going to happen. That will cost us all. It is a measure that will have a disproportionately positive effect on single people, yet the Government will not have brought forward a much cheaper transferable allowance policy.

I do not believe that the current situation is sustainable. It is now urgent that the Government introduce legislation to give effect to the transferable allowance. I hope that the Minister will be able to provide robust assurances on this point and a commitment to ensure that as the tax burden increases in the context of the current financial difficulties, it is allocated in a way that is fair, sensitive to family responsibilities and recognises the real strengths that marriage brings to society. I also trust that the Minister will address the important points raised by other hon. Members, including the need urgently to address the IT implications of recognising marriage in the tax system. There are changes to be made, there are costs and a system will need to be set up.

I urge Members to support new clause 5. I believe it is worthy of support. I understand that there are differences of opinion. This is probably the first time that I have disagreed with many colleagues on the Opposition Benches, but I believe in my heart that this is an issue of some importance.

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[Dan Rogerson]

There is certainly an important debate to be had, but it is not based on income or the tackling of poverty. It is a different argument, although of course an entirely legitimate one. It is just one that has failed to convince me at this juncture.

In our long debate this evening we have explored the issues in some depth. Despite the excellent speech made by the hon. Member for Gainsborough, he has failed to convince me that the Government should act on his new clause.

[Kate Green]

This is an important debate and one that I am pleased to have the opportunity to speak in. The first thing to say is that it is important that we take great care with what the evidence tells us. That is in two respects.

[Mr Stewart Jackson]

The hon. Lady was not here earlier.

[Kate Green]

The hon. Gentleman is interrupting before I have even begun to expand on the evidence, but I shall be delighted to hear what evidence he has.

[Mr Jackson]

I merely had the temerity to point out that the hon. Lady did not grace us with her presence until about 20 minutes ago, so she was not in a position to hear the extremely articulate and well-made arguments made by my hon. Friend.

[Kate Green]

I am very sorry to have missed the contribution of the hon. Member for Gainsborough (Mr Leigh), but I should point out my own credentials—something that I do not often do. I bring to the House, if not exactly an interest, probably a bias. For four years I was proud to be the director of the National Council for One Parent Families. I worked with hon. Members, including Conservative Members, on what happens when relationships break down and children are involved. I know that I speak for hon. Members across the House when I say that our fundamental concern in this debate must be the well-being of children. I know that we come at that from different positions, but it is the debate that I think it is important we have this evening. The debate is not—however much hon. Members may, with the best of motives, care about it—about the social role of marriage and the societal messages that we send. I am interested in the well-being of children. It is incredibly important that we examine what we know about what marriage means for the well-being of children, what drives the factors that improve the well-being of children and the role of the financial position of families, and particularly of mothers, in the well-being of children.

I have had the pleasure of talking to hon. Members about this over many years, including Conservative Members. It is important for us as a House that we put it on record that this is what we really care about.

[Andrew Selous]

Will the hon. Lady give way?

[Kate Green]

I will with great pleasure give way to the hon. Gentleman, with whom I have had many important conversations on this point.

[Andrew Selous]

I acknowledge the hon. Lady’s considerable expertise, as I have been the beneficiary of some of it in the past. Does she agree that we should not set up a position of false opposition on this matter, and that many single parents are probably passionate supporters of marriage and might well like to get married again? We need to be a bit careful how we relate to this issue.

--- Later in debate ---

[Kate Green]

The hon. Gentleman is absolutely right, because the majority of people, including young people, want to be married. Most people who become lone parents never set out to do so; they did not enter into relationships expecting or wanting those relationships to break down. However, people often find themselves, at least for a time, bringing up children on their own. My point is that the well-being of children when that relationship breaks down must be a priority for this House. He probably feels as strongly as I do about that, and I hope that hon. Members will focus their attention on it when considering the new clause.

I want to say two things about the evidence that has been mentioned and debated by hon. Members this evening, the first of which relates to the cause and effect evidence. I perhaps raised this clumsily in earlier interventions, when I sought to point out that, to some degree at least, married couples are a bit of a self-selecting category. There is a preponderance of marriage among those who already had more financial and social resources before they married. Our policy should adjust to that where children who come from different social backgrounds may be disadvantaged, rather than seek to reinforce some of the societal disadvantages which mean that there is a prevalence of marriage among higher socio-economic groups.

[Dr McCrea]

As a minister, I have been marrying couples for the past 42 years and I do not know where the hon. Lady is getting her statistics from, as they certainly do not reflect the reality in the Province. She gives the idea that people who enter into marriage are at the upper end of the financial stability scale, but the vast majority of people who have been married have been at the lower end of the scale or in between. The reality is certainly not what she is describing to the House tonight.

[Kate Green]

I cannot question the hon. Gentleman’s evidence about Northern Ireland, but I can say that the position across the United Kingdom as a whole is that a higher rate of marriage correlates with people in higher socio-economic groups. We were helpfully reminded by the hon. Member for North Cornwall (Dan Rogerson) of an important question, which relates to the second point about the evidence: even if we could do something to spread the advantages of marriage across wider society, would a tax break do this? I have seen and heard no evidence, either this evening or during the many years that I have studied this subject, to show that a tax break persuades people to get married or to stay married. In that sense, particularly in these constrained fiscal circumstances, it seems extraordinary to spend public money on a mechanism that has no evidence to prove that it works effectively. There are real issues to address in respect of what the evidence shows us. Saying that does not devalue, in any way, the importance of marriage; I merely say that when we spend money, we need to know what outcome we expect it to achieve.

[Mr Burrowes]

I, too, recognise the hon. Lady’s expertise. It is difficult in these debates to unite on what we are for. She opened her contribution by discussing children’s well-being, and surely she would agree that there is evidence to suggest a correlation between children’s well-being and marriage. This issue should not just be the preserve of the few and the privileged; it should be an issue of social justice and extending it to the poorest, who can benefit from incentives and support in relation to marriage. That is what we are about, so surely we should unite in this House on that issue.

[Kate Green]

With the greatest of respect to the hon. Gentleman—I understand what he says—we do not know and we have no evidence to tell us that it is the fact of marriage that gives those children that advantage. That is where the evidence falls down, with the greatest of respect to the strongly held views of Conservative Members and of DUP Members, too. The evidence does not tell us that the fact and existence of a marital relationship, if we strip out all other social and economic factors, makes the difference for children. Commitment might be one important factor but there is another important factor: conflict. We know that conflict, in married relationships or outside them, is extremely damaging for children, so it is dangerous for us pick out one aspect of relationships or familial structures and to say that it makes or breaks children’s well-being. The evidence simply does not stack up to tell us that.

I said at the beginning of my speech that my concern was about the well-being of children in the context of the proposal to spend public money on supporting a particular kind of familial structure. I am concerned that we are diverting resources to families who are economically better off rather than to those who face the greatest risk of poverty.

The families who face the greatest risk of poverty today—hon. Members on both sides of the House agree on this point—are lone parent families. There are two possible policy responses to that, one of which is to try to stop those lone parent families becoming lone parent families. Saying that we should have fewer single parent families could be a policy response if we could see the mechanisms to achieve it and if we thought that it would genuinely work for children’s well-being. In the absence of evidence that this tax break or other mechanisms can compel families to stay together, we must also consider the second policy response mechanism, which is how to improve the economic prospects of children growing up in single parent families, particularly in light of the fact that one in four children in this country will spend some time in such a family. I suggest that if we are considering where the pressure of public resources need to be focused, protecting the best interests of those children, irrespective of the marital situation of their parents, ought to be our priority.

[Mr Stewart Jackson]

The hon. Lady is very generous in giving way, but surely she is avoiding one central fact. We alone in Europe have a tax system that is biased against families with caring responsibilities in which one member chooses to stay at home to look after the children. That is the central fact that she is avoiding.

[Kate Green]

The hon. Gentleman raises a number of important points. First, I have been struck this evening by the interventions by Government Members about the opportunity for couples to make a choice—particularly that which many of them would like to see, which is for one parent in the couple, often the mother, to take some time out of the workplace to stay at home and care for children. They seem willing to spend money on offering that choice to mothers in couple relationships and to spend more on offering it to mothers in married couple relationships, but not to offer it to single mothers. The economic pressure on single mothers to go out to work to support their children is being ratcheted up by this Government. If it is right for children to have a parent at home for a time, not necessarily just when the children are very young, it must be right irrespective of the marital status of the parents. Government Members must think about the child-focused approach to deploying resources. If we think it right that parents should have the choice to be at home with their children, all parents must have that choice, not just those in married relationships.

In response to the interesting and important point made by the hon. Member for Peterborough (Mr Jackson) about what goes on in other European countries, let me say that one of the distinguishing factors is that the experience of poverty among lone parent families in this country and the much lower experience of such poverty in other European countries shows that one can design a fiscal system so that lone parenthood need not be a determinant of poverty. It need not lead families and children into poverty. This is about the redistributive choices that we make in our fiscal system. When we have such pressure on the public finances, making a choice to spend money on favouring a group of families, many of whom are already economically advantaged, rather than focusing spending on those who are most economically disadvantaged is a strange priority, particularly given that we have no evidence of the efficacy of spending money on keeping people married as a route to keeping them out of economic disadvantage.

[Mr Kevan Jones]

My hon. Friend talks about international comparisons, but does she agree that there is also no evidence in European countries or anywhere else that having a tax system that encourages marriage leads to more stable marriages or more coherent family units?

[Kate Green]

It is very clear that putting the weight of expectation for supporting marriage on the fiscal system is a very unrealistic and unlikely way of providing adequate support for strong couple relationships. Of course everybody wants strong couple relationships to be sustained and of course it is right to use every instrument of public policy that we can—cost-effectively and in terms of outcome—to do so, but the evidence about what sustains strong couple relationships is not that we should give tax breaks to the already better-off, and particularly not to the already better-off who do not have children, if we are concerned about child well-being. The evidence about what sustains strong couple relationships is about a much broader landscape of social and emotional support. It is about early relationship and social education in schools and ensuring we have strong services to support families in the community, including the universally welcome Sure Start services and the very good-quality child care and play facilities that can be available to support parents in raising their children.

To isolate money and spend it in the fiscal system rather than direct our attention to what genuinely supports strong family relationships and children in whatever family structure they are growing up is in my view a misapplication of public funds, particularly at a time when those public funds are constrained. As hon. Members have pointed out, it is particularly strange to spend money on couples who have no children if we are concerned about child well-being, rather than to spend money in a way that specifically focuses on the well-being of kids. I am very concerned that the new clause would take money from those with higher levels of need and give it to many couples in lesser need. I accept that, as hon. Members on the Democratic Unionist Benches have said, some married couples are in low-income groups and in straitened circumstances, but in general we would be diverting resources to better-off families from lower-income families, and particularly from lower-income families with children.

Finally, let me address the issue of the couple penalty, about which we have heard a great deal and about which I am deeply sceptical. Let us start by remembering that there are economies of scale of living with another adult in one’s household. It does not cost twice as much for two adults to live in a household as it costs one. The couple penalty that has been much talked about by Conservative Members fails to identify that the material circumstances of children in lone-parent families are measurably worse than those of children in couple families. Whatever the intellectual and fiscal modelling might suggest about a financial couple penalty, the reality—the outcome—is that there is no such couple penalty. Indeed, the penalty works in quite the opposite way. To seek to extend the material advantage that couples enjoy at the expense of single parents seems to me a strange choice for a Government who are particularly concerned about social mobility and improving the prospects of the most disadvantaged children.

I hope that hon. Members will consider the new clause very carefully and the fact that it simply fails to achieve the laudable goals of Members on the Government Benches to improve the prospects of some of our most disadvantaged children. I hope that they will look instead at how best we can direct resources to support parents who are bringing up children on their own, usually through no choice or fault of their own. I hope that they will relieve what is often a burden from the parents who are often proud to take on that burden and who deserve to be rewarded for taking it on, as they are the parents who stay and make the commitment. Surely they are the parents to whom we should be giving extra financial support if there is extra financial support to be made available. I really do plead with Members on the Conservative Benches, and with DUP Members who I think are giving them some support this evening, to think again about the likely effect of such a new clause and about the children who would lose out. I am sure that their intentions are honourable, but I am afraid that the results will be anything but.

[Mr Stewart Jackson]

It is a pleasure to follow the hon. Lady, who always makes an intelligent, cogent and reasonable case, but she is completely wrong. I had not intended to trouble the scorers this evening, but it is important that we have a proper debate on new clause 5, that it is not rushed through, and that this is not treated as a procedural issue that the House can dismiss lightly. It goes to the kernel of what my hon. Friends and I believe in. We did not come into politics at any level—in my case, more than 20 years ago—to make people poorer, to embed disadvantage, or to have a tax system that favours some over others.

My party has a strong tradition of small “l” liberal and progressive social reform, from Disraeli onwards. One of the more depressing aspects of the debate is the straw men—or straw people, I should say—who have been set up, and the caricatures of the Conservative party that have been paraded before us.

--- Later in debate ---

[Mr Jackson]

My capacity to listen is in inverse proportion to the length of the hon. Gentleman’s peroration. Given that he spoke for an hour, at the end, like many others, I lost the will to live. I expect better of the hon. Gentleman because he has given some very informative speeches over the years. Sadly, that was not the case tonight. I am sure he is distressed at my observations.

The hon. Gentleman failed to take on board any of the comments that were made or the facts that were presented. A study by the Bristol Community Family Trust in December 2010 demonstrated that cohabiting couples accounted for 80% of family break-ups, whereas divorce accounted for only 20% of break-ups. He did not specifically seek to break the causal link that I was making. One in 11 married couples break up before their child is five, compared with one in three unmarried couples. None of us wants to see the dire social consequences of family breakdown. There is a consensus across this country about it, from the Prime Minister down.

[Kate Green]

Accepting at face value what the hon. Gentleman says—that cohabiting couples are more likely to separate than married couples—what evidence can he give us that a financial inducement would work to keep those cohabiting couples together?

[Mr Jackson]

I expected better of the hon. Lady, who is learned, intelligent and usually erudite, than rejigging the caricature, “Put a ring on your finger and get an extra 20 quid a week.” That has never been our argument. We seek to influence private behaviour with public policy, and I used the example of speeding fines and points on a licence as policies that are likely to influence future behaviour. As I said to the hon. Member for North Cornwall (Dan Rogerson), who is no longer in his place, the Liberal Democrats made a manifesto commitment, which we have accepted, to take more poorer working people out of tax. That commitment was made on the same basis. The point I keep coming back to, and which I repeat for the hon. Member for Stretford and Urmston, is that the international comparators support my case and not hers.

--- Later in debate ---

[Ian Swales]

Technically, VAT is a progressive spending tax because the average rate paid increases the more one spends. That is the definition of a progressive tax.

[Kate Green]

Does the hon. Gentleman accept that in relation to the proportion of a household income rather than its expenditure, VAT is a regressive tax? That is why we on the Opposition Benches are opposed to it.

[Ian Swales]

No, I do not accept that, because of the long list of items that are VAT-free. If everything had VAT applied, I would agree with the hon. Lady.

We have had no view about how the Opposition would fund the proposed cut in VAT. If they wished to borrow, which presumably is the answer, there are many options which are fairer to pensioners and the less well-off and more likely to encourage economic growth. Reducing VAT would be a flawed policy, just as it was last time, and I urge the House to reject new clause 6.

--- Later in debate ---

[Toby Perkins]

Absolutely. The VAT cut, like so many other Government policies, is hitting women hardest.

I do not know, Mr Speaker, whether you ever have the opportunity to visit the Conservativehome website, but if anyone does so today they will see an article entitled “The Conservatives are losing female supporters. Why?” We have had many debates that could have given them the answer, but basically every single economic policy that they have introduced has had an adverse effect on women. Women are more likely to be public sector workers; women have been badly hit by the pension changes; women are more likely to be impacted by the VAT increase; and women often manage the family budget and have noticed acutely the increase in and squeeze on the amount that they have to spend. The Conservatives are trying to analyse why women are deserting them, and we can lead them to the answer without the need for them to do much research at all.

The challenges that business face are significant. Before coming to this place, I was running my own business. Confidence is low. When customers are worried about whether they will be able to afford to pay their mortgage, they will not be spending money on anything that they do not need. The banks are not lending, public sector organisations are not buying from the private sector because they have less money, and IT suppliers are finding that they are not getting the business they relied on from the public sector. At the same time, public sector employees are not contributing to the private sector by buying all the things they would be buying if they had confidence in the security of their jobs. The cuts to the public sector are having a dramatic effect on the private sector.

We have had a Budget for growth that has led to no growth. We now need an assessment of the impact of the VAT increase so that we can understand fully the reasons we are not getting growth in the economy. We need to make decisions based on getting people back to work, getting money in people’s pockets, and seeing the economy grow back in the way that every single one of us wants it to.

[Kate Green]

It is a pleasure to follow my hon. Friend the Member for Chesterfield (Toby Perkins) and to echo many of his remarks.

I appreciate that it is late, and I will keep my remarks brief, but it would be remiss of me not to speak up on behalf of my constituents to express the genuine concerns about the impact on businesses and families of the Government’s fiscal policies, including, in particular, their policy on VAT.

The impact on families, especially the poorest families, of the Government’s fiscal measures is a cause of considerable concern. The other day, the Institute for Fiscal Studies told us that inflation is having a 60% greater impact on poorer families than on better-off households. The poorest fifth of families now face an inflation rate of 4.3%, compared with the richest fifth, for whom it is only 2.7%, and the higher rate is hitting pensioners especially harshly. I suspect that we all know this from standing on the doorsteps in our constituencies and listening to families talk about the pressures they are facing in managing the rising cost of living and the difficulties they are experiencing in making ends meet. Families across the piece are beginning to feel the squeeze that is resulting from the Government’s policies, and there is no doubt that the VAT increase is a significant element in that.

I am sorry that the hon. Member for Redcar (Ian Swales) is not in the Chamber, because there are one or two important points about VAT that we need to ensure that Conservative Members understand. First, VAT is a regressive tax because it hits the lowest income deciles disproportionately harshly. That is because it is a flat-rate tax that it is taken away from the poorest families at the same rate as from the better-off. All the sleight of hand that looks at expenditure deciles misses the point that families with lower disposable incomes are seeing more of their income eaten up on non-discretionary spend, where costs are rising.

My hon. Friend the Member for Llanelli (Nia Griffith) rightly pointed out that we are talking about spend not on luxuries but on household basics. We recognise that food and children’s clothes are exempt from VAT, but let us remember all the other household basics that families will still have to go out and buy: soap powder, washing-up liquid, shampoo, shoe repairs. These are not items of frivolous luxury but everyday expenditures that families have to meet. In addition, as families rightly seek to enter or stay in the labour market, there are the costs for adults of buying clothes and equipment for work. VAT is a regressive tax that harshly hits ordinary families on tight budgets, and that is an important first consideration for Conservative Members to bear in mind.

Secondly, as many of my hon. Friends have said, we need to think about the impact that the VAT rise is having on the economy as a whole. That is the thrust of new clause 10. Here again, there is a basic lesson in economics that my hon. Friends have been trying to get across. Some Government Members have said that businesses can reclaim VAT. That neglects the fact that VAT, wherever it is applied in the product chain, ends up being charged somewhere. It ends up being charged when the consumer goes out and buys the goods. It does not somehow disappear in the course of VAT recovery, but is charged ultimately to the customer, who is now faced with spending more on essential items and having less to spend on additional items. That is having a damaging effect on business, manufacturing, retail and jobs. That is the point that I and my hon. Friends have been trying to get across.

It is a pity that the hon. Member for Redcar has only just arrived as I finish this helpful, if rather basic lesson in elementary economics. You will not want me to repeat it all at this time of night, Mr Speaker, so perhaps the hon. Gentleman can read the Official Report tomorrow to gain the benefit of what I and my hon. Friends have been trying to get across.

As I said, I want to make a few remarks about the impact that this policy is having in my constituency. I have talked about the impact that it is having on families in my constituency. Hon. Members have alluded to the impact that it has had on HomeForm, which is a substantial business based in Old Trafford in my constituency. It has been forced into financial difficulties, and I am very concerned about that. I am also concerned about an exceptionally important and large retail centre in my constituency, the Trafford centre, with which hon. Members may be familiar. I am concerned about jobs at the Trafford centre, particularly because of the nature of those jobs. They are exactly the kind of jobs that low-income families and those who can manage only a few hours of work are reliant on: part-time jobs, shift jobs and low-skilled jobs. Those are the jobs that are being put at risk and those are the jobs that do something—not very much, but something—to keep families on modest incomes afloat.

I am concerned that there is an impact on families, an impact on industry, an impact on retail and an impact on jobs. As my colleagues have said, that translates into a fall in consumer confidence and a fall in retail growth. We are concerned therefore about the damaging effect on the economy overall.

As the House is aware, we are asking simply for an assessment of the economic impact of the Government’s VAT rise. I think that that is a reasonable thing to ask for, particularly given the Chancellor’s apparent greater open-mindedness towards the economic impact of the 50% income tax rate introduced by the last Labour Government for those with incomes of more than £150,000. It was interesting to hear him say explicitly in his Budget statement in March this year that he regards that as “a temporary measure” and that he is concerned about what its broader impact may be. We are asking simply that VAT—a tax that affects all families, all households, all businesses and our economy as a whole—be subject to the same degree of scrutiny and review. I am at a loss to understand why a responsible Government would not want to take on board new clause 10 and support us in the Lobby this evening.

[Mr Gauke]

We have had an interesting debate. I must admit that I am surprised that on the subject of VAT cuts I am responding principally to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) and that it is he who tabled the new clause calling for a VAT cut. After all, it was only on 16 June that, with much fanfare, the shadow Chancellor announced the Opposition’s flagship policy of a cut in VAT—the first paragraph to appear on the blank sheet that is Labour policy. Yet with an opportunity to legislate for that very policy today, the official Opposition failed to get around to tabling their new clause until the day before the debate—too late for selection.

The Economy

Kate Green Excerpts

Wednesday 22nd June 2011 Commons Chamber

[Mr Osborne]

So it is a Tory plot, is it, and the Bank of England is part of it? What about the IMF; is it part of this Tory plot? The right hon. Gentleman probably thinks the CBI is part of it.

What about PIMCO, the world’s largest bond fund: is it part of the Tory plot? It is based in Los Angeles, so it must represent the international branch of the Tory plot. It said this:

“We think the UK is implementing what is probably the best combination of fiscal and monetary policies”

in the western world. These groups—the serious commentators—have all come to the same conclusion as the coalition Government: that we need a credible deficit reduction plan to get our market interest rates right—to make sure that, even though we inherited a budget deficit higher than Portugal’s, our market interest rates are similar to those of Germany.

[Kate Green (Stretford and Urmston) (Lab)]

Who is paying the price for this approach to reducing the deficit? The Institute for Fiscal Studies recently pointed out that the inflation rate being experienced by the poorest families is 60% higher than that being experienced by the highest-earning families.

[Mr Osborne]

The truth is that the whole country has paid the price for the disastrous economic policies of the previous Government. There is no easy way to reduce the largest deficit in our history, but the Opposition oppose every single measure we introduce. That is incredible and it is precisely why they have been rumbled—rumbled by the serious economic press and by everyone else.

Oral Answers to Questions

Kate Green Excerpts

Tuesday 10th May 2011 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point, but it is crucial that we target help where it will deliver the greatest economic benefit. By targeting assistance on first-time buyers purchasing new-build property, the FirstBuy scheme helps to unlock stalled developments and stimulate additional house building, with a further 10,000 homes being built for open market sale, supporting 42,000 jobs directly and a further 24,000 jobs indirectly for a year. If we were to pursue the route my hon. Friend suggests, we would potentially lose the benefit of the financing that comes from home builders.

[Kate Green (Stretford and Urmston) (Lab)]

Is the Minister concerned that the proposed savings cap in the universal credit will make it more difficult for first-time buyers to save for the much higher levels of deposit that lenders increasingly require?

[Mr Hoban]

Everyone in the House will understand the challenges that face many first-time buyers in trying to save up for a deposit. That is why we announced this scheme at the time of the Budget, which has been widely welcomed. We should also recognise that a number of lenders are now reducing the loan-to-value ratio, to enable more first-time buyers to get on to the housing ladder with a smaller deposit.

Finance (No. 3) Bill

Kate Green Excerpts

Wednesday 4th May 2011 Commons Chamber

[Ms Abbott]

That is an important intervention. This is a Government who know the price of everything and the value of nothing. Had they been willing to continue both halves of our policy—taking away tax relief for higher-income taxpayers and extending child care to two-year-olds for low-income families—in the long run, they would realise a cash benefit. I know from my own constituency that the earlier we can make an impact on people, the earlier we can give families support with properly funded child care, the sooner we can save the state money on education and a range of social issues. As I said, these are people who know the price of everything and the value of nothing.

Clause 35 is the shell of something that the outgoing Labour Government introduced, but it lacks the counterbalancing measures that we were going to introduce. It reflects a Government who do not understand that families are struggling in the current climate, and who do not understand the significance of those tax and welfare arrangements for women. They will pay a price for that lack of understanding in the local elections tomorrow, as middle England looks on the Conservative-led coalition and says, not that this is the most family-friendly Government ever but that this is the most middle-income-family-hostile Conservative-led Government ever.

[Kate Green (Stretford and Urmston) (Lab)]

I am pleased to speak in this stand part debate. I, too, want to express concerns about the proposals on child care, particularly the intention to change taxation.

It is not the change to taxation in relation to child care with which I wish to take issue but the broader context of funding and provision for child care, and the lost opportunity that the clause represents. Opposition Members accept that in straitened financial circumstances it is appropriate to look at the taxation system and tax breaks for higher earners and better-off families, and that it may be appropriate to rebalance the tax take and those tax breaks. However, we believe very strongly that there are better ways to redistribute—a word that is perhaps more popular among Opposition Members than Government Members—that money for the benefit of families and children and, in relation to clause 35, to achieve adequate child care provision.

[Mr Robinson]

Did my hon. Friend attend Prime Minister’s questions, given that she said that “redistribute” was a word heard more often among Opposition Members, and redistribution is perhaps a policy more often pursued by the Opposition? The Prime Minister ruled out redistribution almost unilaterally as a means by which we could help—

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

Order. I listened to the Prime Minister at PMQs, and I did not hear him refer once to clause 35. This is rather specific. I know that the hon. Member for Stretford and Urmston (Kate Green) wants to talk about the broader generalities, but that is not what clause 35 is about; otherwise the debate would be very general indeed.

[Kate Green]

I am grateful, Mr Evans. I am mindful of the provisions in clause 35, which is specifically about taxation and tax breaks for child care. This is about redistribution, and I will say in passing—just one sentence, I promise—that I am proud of Labour’s record on redistribution. We do not talk about it as loudly and proudly as we should in my view, but a set of redistributive policies since 1997 took 600,000 children out of poverty.

To return to the meat of the clause, I am proud of the way in which we redistributed spending in favour of families and children, particularly the spending that we directed towards building significantly increased child care provision. That is a significant creation of child care provision. It is not perfect, as a number of families are still not provided for, but by any measure it was a step change in provision and a fundamental change in the child care landscape which resulted from Labour policies over the past 13 years.

--- Later in debate ---

[Ms Abbott]

Does my hon. Friend agree that the failure to grasp the opportunity to redistribute income in favour of child care for some of our more poorly paid families is the more surprising, given that the Tory-led coalition allegedly believes in the big society? What more important anchor of the big society is there than high-quality child care?

[Kate Green]

My hon. Friend is right. She highlights another of the Government’s key strategic objectives, an objective that commands great support and interest across the House, but the Government fail to put in the infrastructure and the investment that would enable them to deliver such an objective. Again, that is a matter of regret.

Any parent will say that child care remains an enormous challenge for families, particularly in terms of helping parents to access the labour market, but much more broadly than that. We know that UK parents already pay the highest child care charges of any parents in the OECD. That is probably why in the OECD report just last week on progress on child poverty across the OECD nations, it was specifically identified—

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

Order. This is turning into a general debate on child poverty and that is not what clause 35 is about. It is about higher earners. I am sure the hon. Lady has read the clause. Will she speak just to clause 35, please?

[Kate Green]

I beg your pardon. This was not intended to be a general discourse on child poverty. There was a specific reference in the OECD report to the importance of child care, and it is specifically that element of the report that I feel is relevant to the clause, but I entirely accept that we are discussing the implications particularly of the provision to remove the tax break for higher earners. My point is what do we do with that money. That must be a financial consideration too.

[Mr Robinson]

Does my hon. Friend agree that a big opportunity is missed to extend more widely the provision of child care for two-year-olds? That is directly relevant to clause 35. In my constituency, for example, there are two child centres that already have facilities in place for that extension, which cannot be funded because the Government have decided not to pursue the policy that we had in mind. That could have been the basis for using those facilities, which now lie idle.

[Kate Green]

Indeed, and that does not make good fiscal sense. It cannot be sensible for public money to be invested but then not exploited for the benefit of the community, those families and, indeed, the economy. In the context of this Finance Bill debate, that surely has to be at the heart of our scrutiny of its clauses.

It is also important that we understand just how much is going on to make it even more challenging for parents to afford child care, and therefore why it was all the more important to use the funding that the tax break before us is saving in order to replace some of the funding that is being lost for the provision of child care.

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

Order. Just to inform the House, I am not going to allow a general debate, either, about what the money could have been spent on. We are talking about the merits, just simply, of clause 35.

[Kate Green]

I am grateful.

What is important about the legislation behind clause 35 is that it retained all parents, higher-income parents as well as lower-income parents, in a single integrated child care market. It ensured that all parents received some financial support that helped to create, expand and ensure the quality of that market.

When lots of families participate in a child care market, the market is sustained, secure and improved in terms of what it can offer to families, and that is important for raising the aspirations of families and children, a particularly important strand of the Government’s social mobility strategy. If we are to remove higher-income families from the ambit of the child care market, and Opposition Members all understand why the Government might choose to do so, it is very important indeed that we recognise the potentially deleterious effects on the quality of the child care market for those families who remain within it—those families whom we want to remain within it because of the improvements that it can secure for children’s outcomes. Importantly, therefore, when removing that tax advantage we must be very careful to ensure that we compensate for any damaging effects that its removal might have on the general landscape of child care provision, including its quality and its availability for other families who remain within its ambit.

This is very much a debate in the context of a Finance Bill. It is therefore a debate about what works most effectively for the economic strength of the country, and it is very much a debate about how best we come through the recovery and start to promote the return of the growth that we all hope to see. We have just begun to see it return hesitantly and slowly, but we now want to see it improve.

[Ms Abbott]

My hon. Friend touches on the fact that this is a debate about clause 35 of the Finance Bill, but it is also about how we as a society get through the current financial crisis. Does she agree that one way we will get through the current financial crisis is by something that clause 35 undermines: social cohesion and the principle of universality? To have the clause without the counter-balancing arrangements of child care for two-year-olds and the lower paid is to undermine the process of social cohesion, which is the only way we will get through the current financial crisis.

[Kate Green]

My hon. Friend leads us into really important territory: the issue of universal provision. If we are going to start to eat into that universal approach, for good reasons, we have to be very mindful of and careful about the consequences, so my hon. Friend is right to highlight the consequences for social cohesion, which is a key fundamental of good economic growth.

We are not going to do well as a national economy if we have to compensate all the time for a fractured society, a society of strains and tensions, in which the public pick up the cost all the time in order to remedy the damage that that causes. My hon. Friend is therefore absolutely right to point out that undermining the universal approach has potentially dangerous consequences for our economic performance down the line—[Interruption.] I sense that the Chairman fears that I am straying slightly—

[The First Deputy Chairman]

Not slightly!

[Kate Green]

Not slightly—straying from the ambit of clause 35.

My hon. Friend’s point is correct: fundamentally, the clause removes a universal approach, an approach that keeps everyone in the context of the child care market and the wider social community. That is a really important point.

It is also important to recognise that we are talking about developing children’s long-term economic potential. I do not like to think of our children as future economic actors—I like to think of them enjoying and making the most of their childhood now—but they are the next generation of providers and sustainers of our economy and community care for us in our old age. Removing this financial support from some families and not placing it in the child care market means that some children will be more likely to lose the advantages that good-quality, professional, formal child care can bring.

[Andrew Gwynne]

My hon. Friend is adding great expertise to the debate with her background in this area of policy. Although clause 35 was a mechanism that was suggested by the previous Labour Government, is not the difference between our approach and that of the Government that we would have invested the money raised back into child care provision?

[The First Deputy Chairman]

Order. I am not going to allow any further discussion as to what the money could have been spent on. This debate is simply about clause 35. I know that the hon. Lady has expertise in this matter, so I ask her to restrict herself to clause 35, which relates to higher earners’ child care.

[Kate Green]

I am grateful, Mr Evans. I was mindful of your earlier injunction not to stray into a discussion of what the money be spent on, and I do not intend to do that.

[Ms Abbott]

Will my hon. Friend give way?

[Kate Green]

In a moment.

I should like to talk about what this provision will mean in terms of the number of children likely to access good-quality child care provision in future. The knock-on effect of clause 35 will be that not only the children of the families from whom this tax break has now been removed will be affected, but so too will the increased number of children who will fall out of the ambit of affordable, good-quality child care. I say that not only because of the importance of a universal market that tends to raise quality and aspirations but because starting to chip away at the money that is flowing into this market, which will inevitably happen, means that some parents who are currently able to afford to access the formal child care market will decide not to do so.

As money starts to be withdrawn from the market, provision generally will start to be reduced, and in turn other parents will find it more difficult to access it, whether or not they have financial support from other measures such as the child care element of the working tax credit to enable them to do so. Then we will be in a downward spiral. By removing funding at the top but not putting it back elsewhere, we start to shrink the child care market, and the more it shrinks the more it continues to shrink. The problem with this market, as we have seen again and again, is the insufficiency and unpredictability of provision, and those elements will be put under further pressure because there will be less money to sustain the market even at the current levels.

I am conscious that a couple of my hon. Friends wanted to intervene, and I do not want to deprive them of the opportunity to add their comments if they would still like to do so.

[Ms Abbott]

I have listened with great interest to what my hon. Friend has said about the effect of clause 35 on the child care market, which is very germane to the discussion. We heard from the Chancellor of the Exchequer many months ago that we were all in this together. What message does clause 35 send to people? It says to higher income tax payers that they are not in it with everybody else, and it says the same to the very poorest families with two-year-olds who will not get the improvement in child care that we would have promised them. That is a very divisive, non-communitarian message.

[Kate Green]

My hon. Friend is right. We are beginning to say that child care is only for some children, not for all children. Yet we know that it is universal, mixed child care settings that produce the best outcomes for the most disadvantaged children. It is key to social mobility and to raising aspiration that children engage with other children in mixed child care and educational settings. The clause will make further inroads into that approach.

[Mr Hanson]

Does my hon. Friend agree that the context in which the Labour Government decided to restrict the tax relief on child care for higher earners, as under clause 35, did not include the proposal to freeze and then cut child benefit for higher rate taxpayers? The context is therefore entirely different, even though some of the objectives in clause 35 are similar to those of the previous Government.

[Kate Green]

My right hon. Friend is right. Family budgets are under pressure, including the family budgets of higher-income families. They are under pressure from the serious and regrettable attack on the universal principle. The means-testing of child benefit at the top will put those families under financial pressure. We know, too, that families are facing higher living costs. We have talked in other debates about the rise in living costs, through VAT, fuel prices, food prices and so on. Families that are suffering the loss of a tax break for their child care costs are also seeing other costs going up.

Child care costs themselves will continue to rise. I cannot recall one year since the Daycare Trust began its annual survey of child care costs when they came down. It is highly likely that they will continue on an upward trajectory, and on a dramatic upward trajectory in some parts of the country. That is certainly the case in London, as it has been for a number of years.

[Mr Hanson]

Is my hon. Friend aware of any consultation that has taken place since the previous Government’s proposals on the restrictions in clause 35? The landscape has changed since the original discussions. Does she think that there should be wider consultation on this matter?

[Kate Green]

Of course, my right hon. Friend proposed a full review of the overall impact of the Government’s provisions on child care. Naturally, a full review would be informed by the fullest possible input from experts in the field, including child care professionals and providers, families and even children and young people. I certainly am not aware of any such consultation or discussion.

It would have been very useful if the Government had carried out such a consultation, because they would have begun to understand the impact of this provision not just on individual families but on the child care market. The impact of clause 35 on the child care market is just as important an issue because of the wide social and economic consequences that it will have for the Government. I am confident that a proper consultation at this point, taking account of the economic context and the other financial measures brought forward by the Government in the emergency Budget, the spending review and this year’s Budget, would produce useful input from experts and families on the pressures and stresses that would be faced, and on the consequences they would have, not least on the propensity to take, extend or remain in paid work. I think we can all agree that paid work will be key in getting our country out of recession, and into recovery and economic growth.

[Mr Robinson]

Listening to my hon. Friend, it is clear that she has an in-depth knowledge of this sector and of how child care can most effectively and cost-effectively be used. Reflecting on her experience, does she see any economic rationale or moral principle underlying the idea inherent in clause 35 that if only one parent is working and is in the higher rate tax bracket, they are not eligible for child care, but if two parents are working, they are? That seems to be a perverse incentive. All it will do—this is why some Labour Members had reservations about our Government’s policy, which led to clause 35 —is to put higher rate taxpayers in the same position with child care as they choose to be with comprehensive schools, whereby they do not bring their middle-class, extreme commitment to them. We will force them out of the national provision of child care and create social division as opposed to greater social cohesion.

[Kate Green]

I am confused by the Government’s direction of travel, specifically on the clause and on its interaction with their other choices about financially supporting parents to make or not to make decisions about child care, such as whether both parents in a couple go to work or whether one parent stays at home to care for the children—the Government’s preferred model that we seem to see in the development of universal credit and the different treatment of lone parents and parents in couple households, as well as in the differential support that the Government want to provide for child care that is targeted at the most vulnerable people. We might say that clause 35 is part of that package.

The Government have welcomed the work of my right hon. Friend the Member for Birkenhead (Mr Field), who suggested that bringing all children within the ambit of Sure Start, for example, is good for communities, families and children, so I am also confused about the philosophical direction of travel that the Government are taking in relation to child care. Indeed, I am forced to conclude that there is no philosophical direction of travel. There is entirely opportunistic fiscal decision making—grab a bit of money here, take a bit of money there, forget those families over there—that might save the Government some money in the short term, but it will be absolutely disastrous in the long term for our economic future and for children’s outcomes.

[Grahame M. Morris]

I wonder about the specific impact of clause 35 on bankruptcy and personal insolvency, given the loss of tax credits for middle-income families who will be faced with quite considerable personal burdens. That is part of the transfer of debt from the state to the individuals in low-income families, as highlighted by my hon. Friend and by my hon. Friend the Member for Walthamstow (Stella Creasy). The Insolvency Practitioners Association highlights the rapid increase in the number of personal insolvencies and bankruptcies, and perhaps the increasing cost of child care will be a factor—

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

Order. Interventions must, by definition, be short. That was wide of the mark and does not need a response.

[Kate Green]

We are aware of the difficulty in planning the paying for child care. Parents are often required to pay a lump sum at the beginning of term or for a group of sessions. They are often required to pay for sessions that they subsequently cannot use for various reasons, but there is no money-back guarantee. Parents will often pay for sessions for more than one child, but there is no financial advantage to them; there is regrettably no bulk discount when buying child care.

Removing money from parents that they could have used to meet some of the burden and the lumpiness in the structure of the way that child care charges are often levied will be a real financial burden on family budgets. Some families will take on debt to meet those commitments, because parents will always try to put their children’s best interests first. If they are happy with their current child care setting, they will do all that they can to keep their child in that stable child care place.

Even if parents are worried that they might be unable to afford that place because of the loss of the tax advantage but can see a time coming when they could resume paying for that place, they will none the less not want to give up that child care place. If they think that they can afford the place again in six or 12 months’ time because their economic prospects might improve, they will stagger on through those six or 12 months, desperate to keep their child in that child care place for two reasons. First, they know that child care places are like gold dust and that, if they give one up, they might not get one back again very easily. That is certainly the case in some parts of the country. Secondly, they know that it will be good for the child. If a child is thriving, doing well and prospering in a settled, high-quality child care place, a parent will make all sorts of sacrifices elsewhere to sustain that child in that place.

[Andrew Gwynne]

My hon. Friend has hit the nail on the head. Is not the underlying impact of clause 35 that the Government know that, although the allowance will be taken away from higher-rate taxpayers, many of those parents will still fund those places and make sacrifices elsewhere in their family budgets?

[Kate Green]

That is right. There is plenty of evidence that parents, especially women, will always make financial sacrifices for their children’s well-being. We should be concerned by the fact that families will have to stagger under considerable financial pressure for the best of reasons—to keep their children in good-quality child care places. They know that that will help their children’s well-being, because they will be happy and enjoy their child care setting and the friendships and relationships that they make there. Let us not underestimate the importance of social interaction in child development, and good-quality child care can offer that.

Parents will do everything they possibly can in the interests of their child’s well-being and happiness. They will do everything to hold on to a good-quality child care place, even if they find themselves under financial pressure, possibly for a prolonged period. That has a knock-on effect elsewhere in the family budget, which might lead to the problems of debt, financial difficulty and stress that my hon. Friends have mentioned.

Financial stress among parents tends to feed back into children’s well-being, and children become aware of it in the household. They are aware of tensions and anxieties in their parents’ attitudes and behaviour. We have to understand how central good-quality, sustainable and stable child care is to children’s much wider well-being. That is why it is of concern that funding for that child care provision is being eaten away at by the provisions of clause 35.

There are opportunities to compensate for what is happening within the market. I particularly highlight the need to ensure that we maintain a supply of well-qualified child care workers, because pressures elsewhere in the public finances may mean that we see fewer good-quality child care workers coming through from training. Indeed, the loss of education maintenance allowance may have an impact on that. There are real concerns among parents about the nibbling away at the different pillars of the child care market.

When we ask parents what they worry about in balancing the family budget, they repeatedly highlight the high cost of good-quality child care. They do not want to buy poor-quality child care if it is at all possible to avoid it, because they are mindful of the value of getting their child into a high-quality, professionally run child care setting with excellent developmental and social activity, which the children can enjoy and in which they can flourish. Parents know that quality costs, and they do not want to compromise or cut corners when it comes to their children’s well-being, so they want to spend all they can on quality care.

[Mr Robinson]

Does my hon. Friend agree that one of the encouraging things that took place under the previous Government was that the quality aspect of Sure Start and child care provision was emphasised right from the beginning? Expansion was not allowed to go unchecked—it could only follow the existence of quality. That high quality has, on the whole, been maintained, but of course it is now under threat from the cuts.

[Kate Green]

We are worried about whether the quality of child care will be maintained as less funding becomes available in the child care market. Achieving quality is partly about ensuring that children from mixed backgrounds—

[The Temporary Chair (Dr William McCrea)]

Order. The hon. Lady is aware that Mr Evans has drawn her attention to the narrow nature of the clause. I am sure that she would like to get back to the clause as soon as possible.

[Kate Green]

Of course, Dr McCrea. I was simply going to make the point that quality is partly about diversity and about children from a range of backgrounds and settings being able to meet, play and learn together. One of the consequences of clause 35 is that we will see less of that.

There are a lot of stresses and pressures on the financial support for the child care market, and they will also be felt in families as parents struggle to pay what is typically a very substantial proportion of their regular monthly outgoings. Child care takes a big bite out of the family budget. I am sure all hon. Members are familiar with parents who say, “It’s almost not worth my while going back to work by the time I’ve paid my child care costs,” but those parents want to go back to work, because they recognise that that is in their long-term interest and that of their children. It is also important to our national economy that parents continue in the workplace.

--- Later in debate ---

[Mr Gauke]

That is very clear, and I am grateful for that intervention. Clause 35 will result in a saving to the taxpayer of £100 million per year, because higher and additional rate taxpayers will no longer receive beneficial treatment. That target would not be met if the clause was defeated. The Opposition’s position is therefore very clear: they would spend this money on child care. That is an additional spending commitment that we will add to their considerable total of spending commitments. I understand that all additional spending commitments from the Labour party have to be cleared by the shadow Chancellor and the Leader of the Opposition, so I am sure that they have gone through that process. However, we note that additional spending commitment. We believe that we need to get the deficit down. I am sorry that the Labour party does not accept that, or at least does not have proposals to do it. We note also that even in this time of financial crisis in the public finances, it is making additional spending commitments.

[Kate Green]

It is not an additional spending commitment; it is a commitment to moving spending from one group of families to elsewhere in the child care market. However, will the Minister tell us what assessment he has made of the long-term economic impact of moving parents out of the workplace because of this cut?

[Mr Gauke]

Because of the crisis in the public finances that we inherited, we have taken a range of measures to provide credibility and to get our deficit down. That is what the country needs, and I am sorry that the Labour party is not willing or able to engage sensibly in that debate.

Employer-supported child care allows participating employers to offer their employees support with their child care costs. The latest HMRC modelling suggests that about 450,000 parents are members of ESC schemes, and that about 40% of them are higher or additional rate taxpayers. This support is offered through tax relief and the associated national insurance contributions disregard, with employers able to offer their employees up to £55 per week, free of income tax and NICs. Most employers offer this support through child care vouchers delivered either by salary sacrifice or flexible remuneration arrangements. Such arrangements can also benefit employers, because they, too, make NIC savings. At present, basic rate taxpayers can receive up to £900 of support a year through ESC, whereas higher rate taxpayers can receive up to £1,200 of support a year.

Amendment of the Law

Kate Green Excerpts

Wednesday 23rd March 2011 Commons Chamber

[Mr Amess]

I believe that the only commitment that we gave was to match spending on the health service.

[Kate Green (Stretford and Urmston) (Lab)]

I wanted to check whether the hon. Gentleman’s position of not relishing cuts—I am sure that he does not relish them—reflects the position of his party generally, given that the Chair of the Treasury Committee said this morning that he believed that public spending should be reduced, even if we were not in deficit.

[Mr Amess]

I was not at the Select Committee this morning—[Interruption.] I am afraid that I missed the speech that my hon. Friend the Member for Chichester (Mr Tyrie) made on the Budget. I will have to discuss the issue with him later.

--- Later in debate ---

[Mr Jones]

I am not giving way, I am afraid, because certain Members have taken far too long in the debate, thereby stifling others.

I am delighted that the personal tax allowance has been increased to more than £8,000 this coming year. It is vital that we free people from the shackles of tax, particularly those on lower incomes. It is excellent that 1.1 million people will be lifted out of income tax altogether—[Interruption.] The hon. Member for Stretford and Urmston (Kate Green) does not understand. The previous Government shackled people to income tax. They increased the minimum wage way above inflation year on year, but they did not increase the personal allowance, which meant that more and more people were sucked into income tax.

[Kate Green]

Will the hon. Gentleman give way?

[Mr Jones]

No. I am not giving way to the hon. Lady.

Moving on, I welcome the help that we are giving first-time buyers, although I would ask those on the Front Bench to consider a couple of issues. Can we build the properties that we need to sustain the scheme quickly enough? Would it be better to extend the scheme to older properties, as well as new-build properties? First-time buyers are the lifeblood of the property market and of any chain. I acknowledge that the policy will do a lot of good for the building industry, but we also need to put in place measures to ensure that the property market can sustain itself. Currently it is under intense pressure. Expanding the policy to cover the property market as a whole will do a lot of good and improve the situation for the industries that rely on it.

I make a plea for the Chancellor to look at stamp duty land tax in his next couple of Budgets, because it is quite punitive in terms of the slab rate, particularly up at the £250,000 threshold. Over this Parliament, if not during the next one, we need to look at putting in place changes to stamp duty land tax that result in more marginal rates, just as we have different levels of income tax.

I also make a plea for anything that is done in the property market to be implemented as quickly as is practically possible. Back in 2008, the Labour Government introduced a stamp duty holiday, but if I recall rightly, they suggested in the press that they were doing so about six or eight weeks before it was actually implemented. That had a dramatic and devastating effect on the property market and those involved in it during that interim period. Therefore, we need to ensure that we are expeditious in implementing policies.

This has been a great Budget for business, within the constraints that the Government face. I would like to mention fuel again. Many small and medium-sized hauliers in my constituency are struggling to cope with increases in the price of fuel. In the main, they have to pay for fuel at the pump, but they are not paid by those for whom they work for 60 to 90 days. I am sure that they will welcome the Chancellor’s announcement today.

Regulation is one of the biggest banes of business, particularly small and medium-sized businesses, and costs them £80 billion a year, so they will welcome a reduction in red tape and regulation. They will also welcome the fact that the Prime Minister is looking to reduce regulation in the European Union to make it more competitive as a whole, which is vital. I hope that Government Members will continue to press the Chancellor and the Prime Minister to ensure that those plans bear fruit, because they are important to freeing up our businesses and allowing them to expand and employ more people.

I want to mention the beer and pub industry. I am slightly disappointed that in today’s Budget we have not sought to do anything about the beer duty escalator introduced by the previous Government. Since 2008, beer duty has increased by 26%. Unfortunately, we have not looked to soften that blow today. However, I hope that those on the Front Bench will listen to what I am saying and look to soften the blow for both the brewing industry and the pub industry. We have hundreds of thousands of pubs closing every year. Our great British pub is under pressure, and we should look to support it. I hope those on the Front Bench will take that on board.

Finally, I want to mention the advances that we are making on skills, which are vital to ensuring that our work force can sustain the jobs that we will hopefully help to create in the economy with the additional measures that the Chancellor has mentioned this afternoon. It is fantastic that we will have another 250,000 apprenticeships over the next four years. I am heartened by that, because young people have for so long been cast adrift, and this will help to bring them into employment and training in a sustainable way, and also in a way that will perhaps enable them to garner the knowledge to create their own businesses one day and employ others, which is what we have seen over many years.

I welcome the university training colleges, and I am sure that the large industrial companies in the west midlands will welcome that approach. I hope that it will help people to acquire the skills to fill what those companies are describing at the moment as a void. Companies such as Jaguar Land Rover want to expand greatly, and they need a supply of skills to sustain any such expansion. They need skills from local people in the west midlands. We do not want to bring in people from other countries to fill that void.

Given the constraints that the Government are having to work under—it was far from a golden legacy that we inherited from Labour—this is a positive Budget with good intentions for business and for creating jobs with substance. It also contains measures to bring back to this country the prosperity that has been badly needed for many years.

Budget Responsibility and National Audit Bill [Lords]

Kate Green Excerpts

Monday 14th February 2011 Commons Chamber

[Justine Greening]

No doubt my hon. Friend will be encouraged to learn of our belief that our efforts to cut back-office costs and protect front-line services in Whitehall should be replicated in town halls.

Key to understanding progress against the Government’s fiscal mandate are strong, credible, independently conducted official forecasts. Our first goal is to balance the structural current deficit by the end of a rolling five-year forecast period; our second is to see the public sector debt ratio fall at a fixed date in 2015-16. The measures that we set out in the Budget, along with the departmental allocations that we set out in the spending review, constitute a four-year plan to meet that fiscal mandate. We are currently on track to meet the mandate one year early, in 2014-15.

[Kate Green (Stretford and Urmston) (Lab)]

I understand the Government’s objective to reduce public debt over a fixed period, but what flexibility does the Minister feel needs to be built into the system to take account of unexpected economic circumstances and shocks?

[Justine Greening]

I have just defined that flexibility. Although we want to balance the structural current deficit by the end of the rolling five-year forecast period, we are, as I have said, on track to meet the mandate one year early. We are clearly ensuring that we will achieve our overall objectives. By the end of the current Parliament we will have completely eliminated the structural current deficit, and the debt ratio will be falling. That is our four-year plan for restoring order and stability to our nation’s finances, which has been praised by the international community and welcomed by the financial markets.

--- Later in debate ---

[Kate Green (Stretford and Urmston) (Lab)]

Like colleagues throughout the House, I welcome putting the Office for Budget Responsibility on a statutory footing and the opportunity that it offers for independent forward financial forecasting. That will enable us to see clearly the impact of policy decisions on the public finances, and it will set the context for, and inform, future policy choice. However, as has been pointed out, the OBR and its forecasting mechanism do not of themselves correct or reshape policy mistakes. It is the Government who set the fiscal mandate, and the OBR is there to say whether that mandate has been met. There is no requirement on the OBR to offer any critique of that mandate, or to judge whether it is fair.

We cannot examine only whether the Government have achieved their forecasts. I support the remarks of my hon. Friend the Member for Wirral South (Alison McGovern), who suggested that there was a larger context to address—whether the Government’s policies reflect the right policy ambitions and produce the right social outcomes, and whether the spending on them is effective. To that extent, I am particularly interested in Ministers’ comments on the relationship between the OBR and the other organisation highlighted in the Bill, the National Audit Office.

Like my hon. Friends, I am concerned about the Government’s current mandate to eliminate the deficit within four years. We are concerned to critique not just the mandate but the policies that will bring about the achievement of it. We are extremely concerned that those policies will have a harsh impact on the lives of the people across the country whom we represent, and we are concerned about their impact on growth, employment and intergenerational fairness. That last point is specifically highlighted in the draft charter, and I would be interested to hear the Exchequer Secretary explain how the OBR will judge and assess long-term intergenerational fairness. It is not sufficient simply to say that we cannot pass on to tomorrow’s children the deficit of today, because today’s children are bearing the burden of the policies that the Government are adopting to address that deficit. I would welcome an explanation of exactly what Ministers mean by intergenerational fairness and how the OBR will assess it.

[Alison McGovern]

Does my hon. Friend think that in addition to that, the Government ought to consider the effect of unemployment on a person’s long-term career, and therefore on their family, as part of intergenerational fairness?

[Kate Green]

My hon. Friend makes an excellent point. Some superficially appealing terminology has been bandied about in relation to the Bill, but we need to know the substance of what Ministers understand to be fair.

Members in all parts of the House welcome the opportunity for transparency that lies within the Bill, but as others have pointed out, that transparency is potentially undermined if the OBR does not secure the resources necessary to ensure that its independence is not compromised. The OBR needs to be adequately resourced to carry out a full and proper analysis. In that context, looking at the full impact of policy includes modelling imputed behavioural change, about which the Government have so far shown themselves to be casual, including in their analysis on the introduction of the universal credit, which is one of their major policy proposals. Great claims have been made for the universal credit’s impact on increased benefits take-up and labour market participation, but the Department for Work and Pensions’ analysis of such behavioural changes to drive such outcomes is remarkably thin. How deep can the OBR dig when departmental analysis apparently does not do so?

There is two-way traffic in policy making and in analysing the impact of policy initiatives. The OBR has been set up specifically to reflect in its forecasts what we might call policy “knowns”, but as was pointed out, there are opportunities to allow for dynamic forecasting so that we can judge the impact of new policies on the public finances in future. I believe strongly that the creation of the OBR offers an opportunity to tie those two aspects of policy forecasting together, so that it is possible to verify departmental impact assessments at the time when policy is being considered—prior to its implementation—and as part of the process of legislative scrutiny and approval by the House.

As my hon. Friend the Member for Wirral South pointed out, there are tensions involved in ensuring that the OBR has a role in scrutinising policy making as it develops and emerges, but there is an important opportunity to enable Parliament effectively to critique, to challenge and to improve. How do Ministers see the OBR’s role in the context of iterative policy making, and how do they think that tension will be resolved?

I look forward to the ongoing process of the passage of the Bill to implement the OBR, and to its independent reports and analysis. However, it is important to understand that the Bill is a step on the way to better policy making and scrutiny rather than a job fully done. Of course, the OBR offers great potential to aid our understanding, but I am clear that it is just one element of how we judge policy cost and impact, and most importantly, policy success.

Banking

Kate Green Excerpts

Wednesday 9th February 2011 Commons Chamber

[Mr Osborne]

I do welcome that research. We need to ensure that we get the tax revenues up. We have introduced the permanent bank levy, which was opposed by the Labour party. We have forced the banks to sign up to the code of practice, which Labour announced in a fanfare from this Dispatch Box, but managed to get only two banks to sign up to—we have got all the banks to sign up. We are looking at the tax avoidance measures that have been used, such as disguised remuneration, which the previous Government had 13 years to address, but failed to do.

[Kate Green (Stretford and Urmston) (Lab)]

Not every worker in a bank is on a multi-million pound salary. Clerical, back office and counter staff frequently earn well under £20,000 a year. Is the Chancellor confident that these measures will begin to reduce pay inequality in the banking sector, and will he have discussions with senior bankers about worker representation on remuneration committees?

[Mr Osborne]

I am certainly happy to raise the issue about representation that the hon. Lady mentions, but—[Interruption.] These people seem to forget that they were running the country for 13 years and had every chance to do the things that they complain about now, and they completely failed.

To return to what the hon. Lady said, I will raise the specific issue of the representation of workers within the banks. As I have said, most people, including myself, find some of the levels of pay in the financial services sector extraordinary. We are seeking to start to constrain them, although we obviously have greater control over the semi-nationalised banks. I hope that we are also ensuring that we get the tax revenues required to help pay off the nation’s credit card, the budget deficit.

Oral Answers to Questions

Kate Green Excerpts

Tuesday 21st December 2010 Commons Chamber

[Mr Hoban]

My right hon. Friend the Prime Minister is working with his international partners to freeze the EU’s budget over the next financial perspective.

[Kate Green (Stretford and Urmston) (Lab)]

22. What his estimate is of the number of single-income families which will be affected by the decision to end child benefit for households with a higher-rate taxpayer.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The withdrawal of child benefit from families containing a higher-rate taxpayer in 2013 will affect around 200,000 single-income households.

[Kate Green]

The Minister will be aware that receipt of child benefit by full-time mothers with no other income triggers national insurance caring credits, which count towards those women’s pensions. Will he explain how the full-time mothers who will lose child benefit under the Government’s proposals can retain their link to the national insurance system and their pension contributions?