Oral Answers to Questions
Kelvin Hopkins Excerpts(13 years, 3 months ago)
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Mr Gauke
I appreciate my hon. Friend’s concerns about online filing. It is the case that one of the providers has been unable to meet the timetable that HMRC set out, although a number of other software providers have been able to do so. We are seeking to ensure that we implement this in a way that is sympathetic to businesses, but we want to stick to the original timetable. Those businesses that have delivered should not be punished because of the failures of another.
Kelvin Hopkins (Luton North) (Lab)
Manufacturing has undoubtedly been helped a lot by the depreciation of sterling, which took place under the last Labour Government. That was only possible because Labour wisely kept us out of the euro. There is now a possibility that interest rates might rise. Will the Chancellor be putting pressure on the Monetary Policy Committee not to raise interest rates?
Mr Osborne
The Monetary Policy Committee is independent of this Chancellor—and, indeed, of previous and future Chancellors—and that is how we intend to keep it. On the hon. Gentleman’s point about the devaluation of the currency, I would just observe that it is incredibly important that the manufacturing industry makes itself even more competitive, and it could use the devaluation as an opportunity to do that. Some Government policies—on taxation and on employment law, for example—will also help in that regard, but the thrust of his question is right: we should not rely solely on the devaluation to make our manufacturing industry globally competitive.
Court of Auditors 2009 Report
Kelvin Hopkins Excerpts(13 years, 3 months ago)
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The Economic Secretary to the Treasury (Justine Greening)
I beg to move,
That this House takes note of the Unnumbered Explanatory Memorandum dated 25 November 2010 submitted by HM Treasury on the implementation of the 2009 EU budget, the Unnumbered Explanatory Memorandum dated 24 November 2010 submitted by the Department for International Development on the activities funded by the Eighth, Ninth and Tenth European Development Funds in the financial year 2009, European Union Document No. 12393/10 and Addenda 1 and 2 on Protection of the European Union’s financial interests, European Union Document No. 13075/10 and Addendum, relating to an annual report to the discharge authority on internal audits carried out in 2009, the Unnumbered Explanatory Memorandum dated 22 October 2010 submitted by HM Treasury on the European Anti-Fraud Office’s tenth activity report for the period 1 January to 31 December 2009, and European Union Document No. 16662/10 and Addenda 1 and 2, Commission Report to the European Parliament and the Council on the follow-up to 2008 Discharge; and supports the Government’s continued engagement with its EU partners to improve financial management of the EU budget.
I should start by saying that it is a pleasure to have this debate on the Floor of the House, as I believe that this is the first time that that has happened. European Union issues are occupying hon. Members’ thoughts at this time, so holding this debate on the Floor of the House demonstrates how important it is to focus also on the crucial issue of ensuring sound financial management of the EU budget. I therefore wish to emphasise at the outset the seriousness with which this Government take the issue. Managing taxpayers’ money properly is crucial.
Kelvin Hopkins (Luton North) (Lab)
Yet again, the European Court of Auditors has failed to approve the European budget. Will the Minister tell us for how many consecutive years that has occurred?
Justine Greening
I completely reject the hon. Gentleman’s intervention about this Government being soft on Europe, and I think that even he does not believe it. Far from being soft, we have taken a proactive approach to managing down the EU budget and getting control over it. We are dealing with a key part of that because, as he is aware, we have been leading the debate on the size of the EU budget, with some success. We plan to lead the debate as we enter the next financial perspective about how large the budget should be and the need for it to reduce in real terms over time. He will also be pleased to hear that we are steering the debate on what we should be spending the budget on. However, we are here tonight to debate the fact that although that is crucial, if we do not have the final piece in place—ensuring that once the decision has been taken on that money it gets spent in the way that was intended—we are not fulfilling what we need to fulfil. That means we are not getting value for taxpayers’ money, and that is why this debate is so critical.
The hon. Member for Glasgow South West (Mr Davidson) asks how we can make a difference. I hope the fact that I am an accountant will bring some—[Interruption.] He is groaning, but it is a good thing to be an accountant in this role. I understand some of the technical issues involved in auditing and managing financial accounts and in managing budgets, and I assure him that I shall bring that experience to my role as Economic Secretary on behalf of the Government.
Let me set out for the House the background to this issue before taking more interventions from hon. Members who rightly want to have their say on this topic. First, managing taxpayers’ money properly is crucial at any level, be it local or national Government or across the EU. It is a key part of the responsibility of Government and essential to the credibility of the EU budget and the European Union as a whole. As I have said, this Government and I, like other Members of the House, find it completely unacceptable that the Court of Auditors was, for the 16th year in succession, unable to provide a positive statement of assurance on the EU’s accounts. That is a continuing blot on the EU’s reputation and it raises serious questions about the management of EU funds. As I have said, British and EU taxpayers need to know their money is being well spent, but the Court of Auditors cannot provide that assurance. We are talking about large sums of money and it remains difficult to spend them effectively to deliver clearly the results we want—growth, jobs and a stable EU.
Kelvin Hopkins
As an accountant, the Minister will understand large numbers. In 2009, reported irregularities in agriculture increased by 43%. Things are getting worse, not better.
Justine Greening
The hon. Gentleman is right that in some areas things are getting worse, but in others they are getting better. The problem is that there is no clear pace of improvement at a rate that will make a big enough difference fast enough. The key challenge that we have to debate tonight and that the Government are keen to push within Europe is how to get that step change. What will it take to make sure that core financial management of EU funds is further up the agenda in the European Union than it has been? I will discuss later how to manage that more effectively.
Justine Greening
My hon. Friend is right to raise that issue, for lots of different reasons. Two spring to mind. The first is the macro level of the argument, which is that new members joined the EU during the ’80s. Those member states got cohesion funds to help to develop their economies. There is a question as to the effectiveness of that spend. We are about to embark on investment in a new group of countries that are coming in. The assumption about and the argument made for the accession countries is opening up markets, but we need to see those economies develop for that business model of the EU to work.
My hon. Friend will be pleased to hear that yesterday I met the Bulgarian Minister who oversees the EU funds in Bulgaria. His entire job is administering those funds. He has been in place for about a year. For the reasons that my hon. Friend mentions, I was keen to talk to the Minister about Bulgaria’s perspective. He made the point, which I thought was right, that in the past people said to countries like Bulgaria, “You’re not spending the money that we are giving you.” His point was that those countries are keen to have it spent effectively, because that is in their interest.
Clearly, countries such as Bulgaria are at an early stage of putting in place the structures and processes. The Minister talked to me about the work that they are starting to do at national level and at regional level to enable better financial management of EU funds. That is a move in the right direction. The question for other member states is what we can do at pan-EU level to make that easier. We should get rid of unnecessary complexity and consider what we can do to help those member states to get along the road to stronger financial management faster. I believe they want to do so.
States such as Bulgaria understand that it is important for their relationship with other EU member states to be seen to be stronger financial controllers of the money that they are getting. They understand why that is important, not only in the medium or long term, but in the short term. The challenge for us is to ensure that we improve the framework within which they are working, and transparency is part of that.
I am aware that I have taken several interventions. In part, that is forcing me to jump to bits of my speech that I will come to shortly anyway. Perhaps I can make a little progress and talk to the House about what I think we need to do, some of the steps that we are taking, and what a better system of financial management at EU level would look like. I shall begin with a little more background to the European Court of Auditors report and go on to the discharge negotiation, of which this debate is an important part—in other words, how we get those accounts signed off.
On the report, it is fair to say that there are some improvements. We have had a positive statement of assurance on the reliability of the EU’s accounts, but as we can see and as we have already discussed tonight, everybody agrees that much more needs to be done. The pace of change is too slow, and we see no discernible trend in the right direction. We want to see financial management clearly supporting and controlling spend by the EU.
I shall set out the steps that the coalition has already taken to drive through improvements since we took office in May. It is worth reminding the House that the European Court of Auditors report relates to 2009, prior to the time that the coalition Government were in office. In October, when I was in Brussels having some of my meetings in relation to the EU budget, I took the opportunity to meet the Commissioner in charge of financial management in the EU, Commissioner Šemeta, to talk about our concerns and some of our ideas, and to push the case for transparency and sound financial management. I believe the Commissioner was receptive, and I think he understood that in his role, that needs to be a more fundamental priority than it has been for Commissioners in his position in the past. Since then, we have had a firm but constructive line throughout the negotiations among the member states. Let us not forget that they are responsible for management of 80% of EU funds spent.
The Government and other like-minded member states have pushed for concrete processes in several areas. First, at the pan-European level we must have further simplification of what are excessively complex rules that often hinder, rather than help, strong decision making that drives strong value for taxpayers’ money. We must push EU-level auditing toward a more risk-based and proportionate system. Simply checking through receipts in member states that are randomly selected really will not work in future. We need to move towards a system where the European Court of Auditors operates a risk-based approach, where the focus is on member states for which there seems to be evidence of poorer and weaker financial management, and where we understand exactly where the management is breaking down in those processes and control systems. We are keen to ensure that what we do at the level of the European Court of Auditors is done more effectively than it has been in the past, and I plan to meet the European Court of Auditors to discuss those issues.
We are also encouraging member states to take greater responsibility for the funds that they implement, which, as I have said, is the vast majority of the budget. In practice, that means that we are lobbying for member states’ annual summaries to be upgraded and published. The UK is currently one of only four member states that publish the sort of consolidated statement that we are debating today. We want more transparency, which we think will drive better financial management; it is not the only consideration, but a key one. The Government have pursued that agenda at the domestic level because we think that it is worth while, so we are pursuing it at the EU level. We need those annual summaries to be published and to contain more meaningful information so that people can use and interpret them.
Kelvin Hopkins
Is there not a vested interest in countries that are net recipients having a relaxed approach to the budgets? It is a bit of a slush fund for them to keep them on side. We are the ones who will be upset about it, because we are net contributors.
Justine Greening
I can see why the hon. Gentleman says that, and there is always a risk that that might be the case. Interestingly, when I met the Bulgarian Minister in charge of EU funds, that was precisely not his attitude, because clearly there is a debate about what will happen to structural and cohesion funds in future, given that new member states are now involved and want to see investment to help grow their economies. They also want value for money; they do not want billions of pounds handed over if it makes no difference on the ground. As member states, we need to drive that agenda and point out that it is unacceptable for a 16th audit report not to be given the statement of assurance. At the same time, we must have a positive agenda to work with member states to improve not only our own ability to control the finances and funds that come from the EU, but the ability of other member states to do so.
Kelvin Hopkins (Luton North) (Lab)
It is a pleasure to follow the hon. Member for Stone (Mr Cash), who does such an excellent job in chairing the European Scrutiny Committee, of which I have the honour to be a member and in which I do my best under his chairmanship.
The problem that we face has existed for many years. This is the 14th speech that I have made on these matters. I made the first 13 in European Standing Committees, and I am pleased to be able to make this one on the Floor of the House. Although we are given less time on the Floor of the House, there is a greater focus on debates here and they gain a higher status.
Although I may have said the same thing repeatedly for 14 years, at least the numbers change. Let me introduce a few facts to the debate. In agriculture, which I mentioned earlier, the number of reported irregularities increased by 43% in a single year. The number of irregularities relating to cohesion policy increased by about 20%, and the number of irregularities involving pre-accession funds by 35%. Those are significant figures.
My hon. Friend the Member for Bristol East (Kerry McCarthy) cited some of the positive conclusions of the report by the Court of Auditors. The big negative is that it was
“unable to give a positive Statement of Assurance on the legality and regularity of expenditure in the areas of agriculture and natural resources, cohesion, research, energy and transport, external aid, development and enlargement and education and citizenship”.
That is pretty much what the budget is about. There is not much left, really.
Henry Smith
Does the hon. Gentleman believe that, despite the best and, I believe, sincere efforts of Her Majesty’s Government, the Court of Auditors will ever be able to sign off an EU budget? I doubt it.
Kelvin Hopkins
The evidence that we have seen so far is not very encouraging, is it? I must say that I agree with the hon. Gentleman.
The hon. Member for Stone made the serious point that the Court of Auditors is not really a separate organisation in the sense that the National Audit Office is in Britain. I should like it to be much stricter. If it were stricter, it might reveal even more irregularities and fraud than it does now, and might bring the European Union into even greater negative focus.
At the end of our last presidency, I urged the Government—from the other side of the Chamber—to call for the abolition of the common agricultural policy, which is the main problem in relation to the budget. We were given endless assurances about reform of the CAP at that time. Apparently, at the end of our presidency, the then Prime Minister, Tony Blair, went to the European Union to call for its reform, if not its abolition, but what he came back with was no reform at all. As was pointed out by the Economic Secretary to the Treasury, he had given away a substantial proportion of our rebate. According to her, it amounted to some £10 billion over a five-year Parliament, or £2 billion a year, which is four times the sum that the Government plan to save by abolishing education maintenance allowance. Tony Blair gave that money away, and not one question was raised before he did it. Apparently he did it on the spur of the moment, hardly even checking with the then Chancellor of the Exchequer.
The Economic Secretary and others have mentioned the previous Government. I believe that the former Prime Minister, who is still a Member of Parliament—my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown)—was on our side, in a sense. He prevented us from joining the European single currency despite immense pressure from Tony Blair and others, and it could be said that by doing so he saved us from worse difficulties.
Mr Davidson
Does my hon. Friend accept that, at this moment, there are more Members on the Government Benches who are in favour of joining the euro than there are on our Benches?
Kelvin Hopkins
I do not see many Members on any Benches who are in favour of it at the moment, and I am greatly encouraged by that. I believe that we have a kind of common sense.
I should say to the Economic Secretary that I appreciate her sincerity. I believe that she will fight as hard as she can to support our interests, and the interests of the European Union as a whole as well. It is important for other countries as well as ours that we get these things right as much as we can. As the hon. Member for Stone has suggested, the Economic Secretary and everybody else faces serious inherent problems when considering these matters. It is the system.
The common agricultural policy is one of those problems. If it did not exist and member states simply managed their own agricultural industries, choosing to subsidise where they thought appropriate, not where someone else thought appropriate, the system would be much better. The CAP will cause more difficulty, because when it comes into full effect in respect of the new member states, it will cost much more than anybody anticipated. That is because wages have risen in those countries, so the cost of subsidising agriculture in them will be much higher. There are ongoing problems with the CAP and we ought seriously to suggest to the European Union that the CAP should be abolished, by being phased out or whatever. Let us give notice that we want it abolished—let us say within the next five years, in order to give France time to adjust. That would save a lot of problems, as a range of difficulties in the budget would disappear.
Other areas of the budget have problems, too. The suggestion that I have made several times in the Chamber and in Committee is that we should get rid of the budget in its current form, which is about fiscal transfers. It is about transferring income or money from the more wealthy nations to the poorer ones; it is a redistribution policy. It does not work very well because of the formulaic way in which it is done, with some countries unfairly contributing too much and other countries unfairly receiving too much.
Let us suppose that there were no such thing as the CAP and all the other budgetary arrangements, and the European Union simply transferred a substantial sum to countries that needed it from countries that could afford to pay. For example, we might contribute 0.5% of our gross domestic product and Romania might receive 1% of its GDP. A lump sum would be handed over to the Governments of the countries involved and they would then decide how to spend that largesse. That would be more accountable because those Governments would be accountable to their own electorates. At the moment, no direct accountability is involved and we cannot do much to control the budget spending, but the member states themselves, with their own democratic Parliaments and Governments, could control that spending. That could be done in Britain at least and one hopes that that would spread to other countries.
I have suggested many times that instead of having this complicated arrangement of special budgets for all sorts of different things, we should have a system of a simple payment each year from the more wealthy countries to the poorer countries, in proportion to their living standards. So the wealthiest nations would give according to their wealth and the poorer nations would receive according to their need.
Henry Smith
Does the hon. Gentleman think that the concept of zero-based budgeting would be helpful?
Kelvin Hopkins
The hon. Gentleman would have to explain the position to me, because I am not an accountant, but if there were no budget and no European Union at all, that would solve the problem entirely. Given that we are generous by nature and would want to help our fellow European countries to develop, some sort of transfer might be helpful and the European Union would be a way of doing it. So I am not against the idea of wealthy countries contributing to poorer countries, but the current cumbersome approach, which invites corruption and irregularity, is not the way to do it and does not work out fairly. I have made my suggestion a number of times and I hope that, in time, our Government at least will take it seriously. Perhaps we will be able to debate that in the European Councils themselves and discuss completely changing the method by which these fiscal transfers take place. I have made my point and I have spoken for long enough.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Before I call the next speaker, may I remind hon. Members that at 8.54 pm I am going to call the Minister to do a three-minute wind-up? There are three speakers to come. The first will be Chris Heaton-Harris.
National Insurance Contributions Bill
Kelvin Hopkins Excerpts(13 years, 4 months ago)
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Mr Hanson
The clue to the proposed changes before us is in the words that the Clerk read out, “not amended in the Public Bill Committee”. The proposals were reflected on and discussed in Committee, and I hope that the Exchequer Secretary to the Treasury has had time, with a good break behind him over Christmas, to reflect on the common sense in them.
I would find it amazing if the Minister were not able to accept new clause 1, because it simply asks for information that, if he looks carefully, he knows I could table questions—with probably more work for him and his officials—to secure in due course. It is important that he assesses the scheme to ensure that we have a national insurance holiday, which, under the current Bill, includes the whole United Kingdom minus three regions—London, the east and the south-east.
The Opposition support, welcome and recognise the Government’s objectives in seeking to use the mechanism of forgoing national insurance income to encourage businesses, but it is important that the Government, the Opposition and, indeed, the House, who endorse that proposal, know its impact over the relevant period.
New clause 1 asks the House to ensure that, following Royal Assent, there is an annual report to Parliament on the outcomes of the scheme, meaning that between now and 2013 we would potentially have three annual reports with the information outlined in the new clause. Essentially, that would include the total sum of national insurance expenditure saved by businesses under the scheme by constituency, but, if the Minister wanted to reflect on the proposal and have it brought back in another place, I would be happy for the information to be listed by sub-region or by region. The information would also include the number of businesses availing themselves of the secondary contributions holidays, the number of employees in each business and the total expenditure saved by businesses under the scheme.
I tabled new clause 1 for several reasons. It is important that we know the facts. The Minister said in Committee that he expects about 400,000 businesses to take part in the scheme during its operation. That figure is a valuable indication and a good benchmark by which we can judge the success of the scheme. When the Committee sat before Christmas, we were already effectively five to six months into the operation of the scheme and about 1,100 businesses had applied for it. An annual review to Parliament would not only have provided an indication of whether Parliament should pass the Bill but would have ensured that we know exactly the take-up of the scheme. New clause 1 refers to the fact that we would also know the take-up by constituency and by businesses.
That is important for two reasons. We need to know the trajectory of the take-up. Is the figure of 1,100 to date what was expected? What will the trajectory be for those businesses in 2011 and 2012? If we have our first annual report in, let us say, December 2011—when the scheme will have been operating for 18 months—what will the take-up of the scheme be? Is the trajectory for the remaining two years likely to mean we get to the 400,000 figure that the Minister has mentioned? An annual report would provide transparency and openness, to which the Government are committed, on those issues and those take-ups. There would be nothing in the report that I could not ask the Minister in a parliamentary question in December this year, next year or the year after. It would simply be good business for the Government to supply that information as a whole.
It is important to consider the number of businesses in each constituency, and we will return to the exclusion of London, the south-east and the east region when we discuss other amendments. Given the deprivation in many of the London constituencies represented by my hon. Friends in the Chamber this afternoon, we feel particularly strongly about that matter. The Bill will have a significant impact on 400,000 businesses across the remainder of the United Kingdom, but will it and the proposed holiday impact on areas that have the highest public sector employment, which is the Minister’s primary objective, and areas of high deprivation and unemployment?
We discussed unemployment and deprivation in areas of the United Kingdom a number of times in Committee. For the purposes of explanation, I shall randomly look at constituencies that currently benefit from the national holiday under the scheme and will benefit if the scheme goes ahead. The annual report is important because unemployment in the Tatton constituency of the Chancellor of the Exchequer is about 2.1%, in the Richmond constituency of the Foreign Secretary it is about 1.8% and in the Rushcliffe constituency of the Justice Secretary it is about 2%.
It is important that we look at where the scheme ultimately is taken up and who will benefit. If businesses are opening in Tatton, Rushcliffe, Richmond and, indeed, other constituencies with low unemployment, that is all well and good, but it will not tackle deprivation in Manchester Central, Liverpool, Riverside or Newcastle upon Tyne East, which ultimately also might benefit from the scheme. For transparency, it is important that the Minister produces an annual report showing not only how many people and businesses have taken up the scheme, but in which constituencies it was taken up outside London, the south-east and the east region.
Kelvin Hopkins (Luton North) (Lab)
I very much welcome what my right hon. Friend is saying. One of the estimates we should perhaps make is whether the loss of jobs as a result of the VAT hike will wipe out any possible advantage of the Bill?
Mr Hanson
My hon. Friend makes an important point. He will know that the Opposition are extremely concerned about the impact of the VAT rise on businesses, on consumer confidence and on consumer expenditure. Although the measure is not directly linked to the VAT increase, its aim is to help businesses in difficult times. From the Minister’s perspective, the measure is primarily designed to help businesses take up the slack caused by the massive 500,000 people who will lose their jobs as a result of public spending cuts. We will come back to the impact of that on London, the south-east and the east region, where many public sector related employment opportunities will be lost and there will be no benefit from the scheme.
It is important that the Minister not only takes on board where job losses will be but that he looks outside the three excluded regions at the benefits that the scheme will bring to England, Wales, Scotland and Northern Ireland. The production of an annual report will show with full transparency where the businesses are that benefit from and take up the scheme. If those businesses are in areas where there is already low unemployment and deprivation, or they are in areas in the rest of England or Wales where there is not high public sector employment, the objectives set by the Minister will not have been met. In the interests of transparency, it is important to have such a report.
Mr Hanson
My right hon. Friend touches on an important point to which I will return when we discuss the group of amendments on London’s exclusion. She will be interested to know that the number of business deaths in London was 13.7% higher than anywhere else in the country. While business births are higher in London, at 12.6%, the figure for business deaths shows that there is a higher turnover and a greater loss of businesses in London than anywhere else.
London, the south-east and east region is not included in the Bill. However, even with the Bill as currently constituted, an annual report by constituency would clearly show where the business successes are, where new start-ups take place, and how many employees are being employed as result of the scheme—in other words, it would clearly show its success in meeting the Minister’s stated objectives. Without the annual report, I will have to table questions to find out that information. The Minister will need to have the information to monitor the progress of the scheme and look at its take-up and distribution, but it will not be public unless we have an annual report.
Kelvin Hopkins
On business deaths and bankruptcies, does my right hon. Friend agree that we have yet to see the full impact of the cuts in the school building programme, which will affect many small sub-contractors who work in the construction sector—precisely the businesses that might have benefited from the Bill had they continued to exist?
Mr Hanson
Indeed; my hon. Friend makes an extremely important point. The Minister’s objective in the Bill is to help new businesses to develop to compensate for the loss and shrinkage of public sector businesses in other parts of the country; that is his main focus. The annual report would clearly show not only where new businesses are commencing but, through other information that we will be able to glean, where businesses such as construction firms are shrinking because of cuts in public expenditure on schools, hospitals and other major capital projects. I can think of building firms in my own constituency in north Wales that depend on public sector contracts in housing, education and health for their work. As my hon. Friend says, if that sector shrinks, those employment opportunities will shrink too.
I would be interested to know how many new businesses commence, and how many people are employed in each of them, in my own area in north Wales as a result of this measure, but I will not have that information unless I table parliamentary questions.
Mr Hanson
We are forgoing £940 million of taxpayers’ money, in the shape of national insurance contributions, to pay for this scheme—£940 million that could be put into the Building Schools for the Future programme and hospital expenditure. I would have thought that the hon. Gentleman was interested in where and how that money was being spent and whether it was being spent effectively. The annual report would show clearly how that £940 million of forgone expenditure was being spent, and which constituencies or regions were receiving the benefit and which were not. My main focus is to ensure, from my perspective and that of my right and hon. Friends, that areas of unemployment, deprivation and high public expenditure get that resource, not areas that already have low levels of unemployment and high levels of prosperity, and do not require this level of resource.
The House is bound to consider how we expend public resources, and it is incumbent on the Government to provide that information. The Minister will have it as he monitors and receives reports on progress on projects, as I did when I was a Minister, and I do not see why he cannot publish it. Ultimately we can drag it out of him through parliamentary questions, but it would be far better for him to be transparent and open, in accordance with this proposal.
Kelvin Hopkins
On the point made by the hon. Member for Skipton and Ripon (Julian Smith), is it not important to disaggregate the statistics to show the specific impact of this Bill rather than taking them out of the general trends in small business creation and so on?
Stephen Hammond (Wimbledon) (Con)
I did not have the benefit of sitting on the Committee, although I did attend Second Reading and I think that I made a short intervention on the Minister.
I will make a short contribution in response to the new clause. I listened carefully to the Opposition spokesman’s speech, and to his closing remark that this is a sensible case that the Minister should accept. I ask the Minister to think carefully about the case that has been put to him. First, the full impact of the policy will inevitably not be shown after the first or second year. With such policies, there can be a significant cumulative effect, which is what the Government are looking for.
Secondly, it has been estimated that the scheme will have considerable benefits. The Opposition spokesman did not query the basis of the estimates made by the Government and outside bodies on the impact of the holiday. We have a pretty good assessment of its impact, so the Government should consider whether the annual report would add to that.
Thirdly, I ask the Minister to consider that the policy is temporary. Although it is a recurring cost, it is only for three years. Were the policy extant for a longer period, the Opposition spokesman’s arguments might have more basis.
Fourthly, the Opposition spokesman made the point several times to the Minister that he could table questions. He did not say whether he thought an annual report would be cheaper than that. If he wanted to do so, he should have given a cost analysis. I fear that the proposal is an expensive way of getting at the information that he wants, and probably does not cover everything.
Finally, when the panoply of talent on the Conservative Front Bench was not as great, I spent four years as an Opposition spokesman. I spoke on various measures that, like the Bill, were extant for the life of the Parliament, such as the Concessionary Bus Travel Act 2007. I made similar requests for annual reports and, time after time, Ministers told me that such proposals would be costly and serve no purpose; that they would of course keep the scheme under review; and that there was transparency through other sources of information available to me. Therefore, before the Minister is tempted by the beguiling words of the Opposition spokesman on transparency and the need to review the policy, I ask him gently to remember that, freed from the responsibility of Government, the Opposition are not accepting the arguments that they made in government.
Kelvin Hopkins
I welcome what was said by my right hon. Friend the Member for Delyn (Mr Hanson), and support strongly new clause 1 and amendments 5 and 6.
In the context of the current economic situation and the level of the cuts being imposed by the Government, the Bill is a relatively small reflationary measure. It is a supply-side measure, rather than the direct reflationary measure of additional spending that I would like to see. If I was in government and had £1 billion to spend—I would love that opportunity, but am unlikely to get it, at least in the short term—I would not spend it in this way. We could, for example, increase capital spending programmes in sectors such as construction and restore school building programmes; £1 billion would sustain a much larger capital programme as a measure of revenue support, so that is the direction in which I would go.
Stephen Hammond
I am interested to hear the hon. Gentleman’s argument. Has he noticed the latest academic evidence on the size of the public expenditure multiplier? It suggests that in an open economy, the actual size of the multiplier is something like 0.1%.
Kelvin Hopkins
I have not seen that academic work, but I will be interested to read it in due course. I remain fairly convinced that spending capital funds on school building actually generates a lot of employment, certainly in my area. The cuts in school spending programmes will have a damaging effect on local employment in Luton. We can debate that in another economic seminar, perhaps, and we shall see. Nevertheless, the measures in the Bill pale into insignificance compared with the overall level of cuts that will be imposed. Some have suggested that the VAT rise alone will cause 250,000 jobs to be lost, which is a staggering figure and surprised me greatly.
In Committee, the Exchequer Secretary leapt on the fact that I was giving lukewarm support to a measure of tax relief, which is not normally my politics. However, it was lukewarm—I said that the Opposition had decided to acquiesce in what the Government were proposing, but that our Front Benchers had tabled substantial amendments. I still believe that tax reliefs are the wrong way to go. They tend not to be as reflationary as direct spending on jobs, particularly in areas where manual workers on relatively low wages tend to spend all their money, which is then circulated in the economy, causing the multiplier effect that the hon. Member for Wimbledon (Stephen Hammond) mentioned. Tax reliefs tend to go at least partly, and sometimes substantially, into savings and have less of a reflationary effect, so I prefer direct spending to help job creation.
The Chartered Institute of Personnel and Development has suggested that there might be as many as 900,000 job losses in the private sector, which is a vast number. Added to the nearly half a million jobs being lost directly through public expenditure cuts, we are talking about 1.5 million jobs being lost. The Bill will go only a tiny way towards countering those massive losses. Indeed, the effect of those job losses, added to the 2.5 million people already unemployed, means that nearly 4 million people will be unemployed, which is a staggering figure. That will be deflationary, because people will become frightened of losing their jobs and stop spending in the shops.
Stephen Hammond
I wonder whether the hon. Gentleman would like to clarify the number of private sector job losses that he has just mentioned. Actually, we have seen in the past two quarters—the evidence from the following quarter is the same—that the private sector is creating jobs.
Kelvin Hopkins
I thank the hon. Gentleman for that intervention, which gives me the opportunity to say what I have said many times in recent weeks and months. We are still benefiting from the pre-election reflation of the Labour Government. To save the economy from a massive depression, and perhaps from sliding into serious long-term deflation, Labour sharply reflated the economy, and it was absolutely right to do so. We are still benefiting from that, because of the time lag effect in economics.
John Cryer (Leyton and Wanstead) (Lab)
May I remind my hon. Friend that some time ago, leaked Treasury papers demonstrated clearly that unemployment in both the private and public sector would rise very sharply during this Parliament? When the Prime Minister was questioned about those figures on the Floor of the House, he refused to answer the question.
Kelvin Hopkins
I am not at all surprised that the Prime Minister was not prepared to be drawn on that. What happens in a year’s time, and in two years’ time, as a result of what the Government are doing now will be the true measure of whether their policies are successful. I suspect that we will have a massive rise in unemployment, as forecasts suggest. That will tend to damage confidence among consumers, businesses and everyone else in the long-term future of our economy, so the Government are pursuing a dangerous policy.
The Bill, although welcome, is modest in comparison with what the Government are doing as a whole. The precise impact of what it will do needs to be measured and published, so that we can set it in the context of the rest of the economy rather than let it drift along, with the Government perhaps making exaggerated claims for its success.
Dr Stella Creasy (Walthamstow) (Lab/Co-op)
Does that mean that my hon. Friend agrees with the Minister, who told me in a letter that £940 million was a large sum of money to allocate for an uncertain benefit? That is exactly why we need to see the figures, to see whether the Bill is working.
Kelvin Hopkins
My hon. Friend is absolutely right, and in the context of the current economic situation, the level of Government cuts and what the Government are spending on the European Union, bailing out Ireland and so on, £1 billion is a small amount of money, especially when it is spread over a number of years. My right hon. Friend the Member for Delyn is right to insist that the new clause be inserted into the Bill, so that we can measure its true impact.
I will leave my comments there, although I will wish to speak to other amendments later. The Bill is modest, and, as my right hon. Friend has suggested, we must ensure that a true measure of its impact is published.
The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to return to the Bill and to some of the arguments that were made many times in Committee, and indeed many times in the speech of the right hon. Member for Delyn (Mr Hanson) this afternoon. It is always fascinating to hear Opposition Members talk about the beneficial effect on employment of reducing employers’ national insurance contributions, although to be fair, I should exempt the hon. Member for Luton North (Kelvin Hopkins) from that comment.
I do not intend at this point to address all the points about regional matters and so on that the right hon. Member for Delyn touched upon, because we will return specifically to them later. I shall address new clause 1, which would require the Treasury, after Royal Assent, to provide to Parliament an annual report on the national insurance contributions holiday for new businesses. The report would be required to contain the total sum of business expenditure saved under the scheme and a breakdown by constituency of
“the number of businesses availing themselves of the secondary contributions holiday…the number of employees designated qualifying employees under the scheme; and…the total expenditure saved by businesses under the scheme.”
I think it would be fair to say, as my hon. Friend the Member for Wimbledon (Stephen Hammond) did, that it is not uncommon for Oppositions to table amendments requiring reports on the implementation and operation of a Bill, and for Governments to resist them. I say to the right hon. Member for Delyn that I do not believe the new clause is necessary, because in Committee I undertook to provide updates to the House and the public on the operation of the scheme after the end of the tax year, including information at regional level. His point that we should provide such information was entirely reasonable, and I can now give a little more detail about what we intend to provide.
We envisage a factual report that will state, regionally and nationally, the number of new businesses applying, the number of applications rejected, the number of qualifying employees for whom a holiday has been claimed and the amount claimed. The main difference between what I am saying we will do and the requirements of the new clause is that the latter would require a constituency-level breakdown, even though the scheme is regional in England and will not cover every English constituent.
The central point, which I made in Committee several times—the hon. Member for Luton South (Gavin Shuker) also touched on it—is that the locations of people’s work and of the businesses for which they work are not necessarily the same as the locations of people’s homes. Many people travel to work, and operating specifically on a constituency basis could result in a somewhat misleading view of the way in which the scheme works. We could identify one constituency that falls within a relevant region, where many businesses that benefit from the scheme are created and have many employees, and where public sector employment or unemployment is not high, and the right hon. Member for Delyn might then say, “This is an example of the scheme not operating as it should. Money is going into a relatively prosperous area and is not well targeted.” However, that ignores the fact that many employees who benefit from the scheme could live in neighbouring constituencies that are heavily dependent on the public sector, or where unemployment is high. I believe that looking at the matter on a constituency basis does not necessarily give a fair indication, and that examining it on a regional basis is better and more accurate. I therefore intend to prepare my reports on not a constituency but a regional basis. None the less, that should be helpful to hon. Members.
Dr Creasy
The hon. Gentleman raises the interesting question of how we guarantee that. That is precisely the point that I am coming to, because his Government made a pledge to my Walthamstow constituents that they would “cut the deficit, not the NHS”. As my right hon. Friend the Member for Wentworth and Dearne (John Healey) has set out in his remarks, there is some uncertainty over whether that is the case. Indeed, we could be seeing cuts in the NHS unless we can be sure that the money it needs will be generated. The amendment provides the Government with an opportunity to show how and why they will do so and to consider hypothecation through the national insurance contributions fund, which has been accepted as a principle across the House, to ensure that the money is provided.
There has been sleight of hand in the investment promised by this Government for the NHS through the attribution to social care. As a former local councillor I know that social care is one of the largest costs that any local authority will face, so the cuts that we have seen in local authority budgets over the last couple of months raise severe questions about the ability to deal with adult social care—even before we consider its relationship to health care at local level. It is very clear to me that there are real concerns about the funding that will go to the NHS in the years ahead.
The amendment would mean that we could all have confidence in the fact that money would go to the NHS budget, about which I know Members across the House care, so that the real-terms increase that my constituents and the Minister’s constituents were promised can be made good—not to mention concerns about job losses in the NHS as a direct result of some of this Government’s policies. If Government policy is about job creation and the Bill is about ensuring that people are employed and the economy is in recovery, cuts in the NHS that will lead to job losses will provide a real challenge. The amendment is designed to make sure that, given the pressures on its budget, the NHS has the money that it needs, and that the public’s expectation, which is reasonable and proportionate given the statements made by Ministers both before and after the general election, will be met.
I note in particular that before the election the Chancellor was very concerned about what the national insurance contribution rise might do to the NHS budget. I am sad to see that the Chancellor is not in his place today; I wish he was here to talk to us. I know that my right hon. Friend the Member for Wentworth and Dearne wrote to him, encouraging him to participate in today’s debate. The Chancellor should apply the same degree of concern to ensuring that the money is there for the NHS.
As a member of the Public Accounts Committee, which deals with the National Audit Office, I particularly support the amendment. The amendment would involve the NAO, which has a strong track record of ensuring not just probity but value for money. It is a key concern for us all in these times of economic austerity to ensure that the money goes to the front line in the NHS, that there is a real-terms increase, as we have been promised, and that the Government are held to account if we do not get that, because my constituents living in a poor area such as Walthamstow are already losing out by not getting the national insurance holiday and should at least have confidence that when national insurance contributions go up, the money will go to the NHS, as many of us hope.
I hope that the Government will accept the amendment. It is a reasonable amendment to help the Government keep their promise to the people of Britain that the money goes to the NHS so that we can all have confidence that the NHS will thrive in the years to come.
Kelvin Hopkins
I shall speak briefly in support of the amendment. I strongly endorse what my right hon. Friend the shadow Health Secretary and, indeed, my hon. Friend the Member for Walthamstow (Dr Creasy) have said. Strains in the health service are already being felt, as are pressures on jobs. In my constituency, we are already seeing job losses in the primary care trust and the hospital trust.
There are obvious points to be made about the increasing costs of modern treatments and the reorganisation mentioned by my hon. Friend the Member for North Durham (Mr Jones), who is no longer in the Chamber. Even Conservative Members have suggested that that reorganisation will lead to further privatisation of the health service, and private health services are inherently more inefficient than public health services. The Americans spend twice as much on health as we do, yet millions of Americans have no proper health cover, because private sector health care is much more expensive than public sector health care. We want to keep public health care in the public sector. Indeed, I believe that even the services that have already been privatised should be returned to a full public national health service. I am sure that Nye Bevan would agree. No doubt he is turning in his grave at this moment at the thought of what the Tories are going to do to the health service, but that is a debate for another day.
However, there are other, less obvious points to be made about the health service. It is, for example, inherently labour-intensive. Unlike manufacturing, it cannot take advantage of productivity gains. Its costs rise not in line with inflation, but in line with average earnings. If we are to ensure that health service employees are properly paid, there must be real-terms increases equivalent to the rise in earnings, not just the rise in prices. In general, earnings rise more quickly than prices as the economy grows, although that is not necessarily the case at present. If we are to have a health service that is as good as we wish it to be, we must bear the employment costs in mind.
I agree with what my right hon. Friend the Member for Wentworth and Dearne (John Healey) said about what Labour achieved during its 13 years in office by increasing spending and improving the quality of the health service. The previous Tory Government had left it in a terrible state. However, although the improvements have been massive, there is still more to do. We must not allow health service funding to be threatened in the ways that have been mentioned today. Amendment 8 is important because it will ensure that that funding is protected. There are many other problems in the health service, and we must not put more pressure on it. We do not want what happened at Stafford hospital to happen elsewhere because of underfunding and understaffing in wards. We must ensure that the service is properly funded.
Steve Baker (Wycombe) (Con)
I cannot help wondering whether the hon. Gentleman realises that Buckinghamshire, for example, has inherited an underfunding of 17% per head in comparison with the national average. I am afraid that Labour did leave us a legacy of underfunding, although only in certain parts of the country.
Kelvin Hopkins
I believe that there is a massive difference between the proportion of gross national product spent on health under the Tories before 1997 and the proportion spent on it now. Although I think that we should spend more on health—I have always argued that we should spend as much on it as Germany and France, but we have still not quite reached those funding levels—we have made massive improvements.
For a long time I complained that health service spending in Luton was below the fair funding target. We lobbied our own Ministers heavily on the issue, and I think that we made some progress in persuading them to move in the right direction, but we must ensure that health funding in all areas increases as a proportion of GDP. I hope that Buckinghamshire as well as Luton North will benefit in that regard.
We must accept that improving health care sometimes means increasing rather than decreasing labour intensity. Health care will improve if a ward containing 20 beds and two nurses is given a third nurse. That is certainly true in the elderly care sector, about whose future I am seriously concerned. The fact that our population is ageing is an additional major burden for the health service. We all want to ensure that we are cared for properly when we are elderly—even more elderly than I may be at present. When we are elderly and need care, we want that care to be properly funded, so that we do not suffer in the later stages of our lives.
I strongly support what was said by my right hon. Friend the Member for Wentworth and Dearne, and I hope very much that the Government will accept the amendment.
Sheila Gilmore (Edinburgh East) (Lab)
It has puzzled me slightly over the years that successive Governments, and the Treasury in particular, have been so reluctant to engage in hypothecated funding. I know that there are arguments for and against it, but one of the main arguments for it—as has been borne out by the changes in 2003 involving the hypothecation of increased national insurance contributions—is the building of public support for the deed itself. It is true that if we want good services we must pay for them, but people want to know for sure that their money is going where they think it is going.
People in Britain tend to say that we should have Scandinavian-style public services with American-style taxes, but the two simply do not fit together. Scandinavian-style public services come with high taxation. If people can feel confident that their money is going where it is most needed, they will be much more committed to spending it. As I said earlier, I have not always understood why even my own party’s Governments have not necessarily been particularly keen on that point of view. It seems that Members have been captured by the Treasury as soon as they have become Treasury Ministers. However, an innovative step has been taken.
Amendment 8 does not ask for the national insurance increase to be hypothecated at this stage. It merely suggests that the door should be left open, and that if it proves impossible to reach the health service spending target to which the Government have committed themselves, it should be possible to use the national insurance increase to ensure that that commitment can be fulfilled.
Mr Gauke
First, may I welcome the right hon. Member for Wentworth and Dearne (John Healey)? It is a great pleasure to debate with him again. My first experience as a Front Bencher was debating with him and, although we now sit on different sides of the House, it is good to do so once again. I am pleased to be sitting on the Government Benches now, rather than on the Opposition side, but I am sure he has ambitions to return to these Benches. There are not many subjects on which I agree with the vast majority of Labour MPs, but one on which I do is the high regard in which they obviously hold the right hon. Gentleman. I am pleased by his popularity and the progress he has made.
Amendment 8 would require the National Audit Office to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. It may be useful to clear up one or two potential misconceptions. The amount that is to be spent on the NHS was confirmed at the spending review, and is unaffected by whether funds come from national insurance contributions or elsewhere. The amount of national insurance contributions allocated to the NHS depends on economic circumstances as well as the proportions specified in legislation. I would like to reassure the House that it is no part of Government policy to cut NHS funding automatically if, for example, global economic conditions lead to a reduction in national insurance contributions allocated. To be fair, that has not been the position of any Government, notwithstanding the fact that there has been an allocation element of national insurance contributions not just from 2003, but from 1948 when the NHS was created.
Kelvin Hopkins
We have to be very precise about what we mean when talking about cutting funding. Previous Governments and Ministers have talked about funding not being cut when it has stayed the same in money terms, which is a real-terms cut. Even raising funding in line with one or other measure of inflation may mean a cut. We have to talk about this in real terms in the sense of what is actually done within the health service. That is the measure we should use, in order to make sure nothing is cut inside the health service.
Mr Gauke
I note the hon. Gentleman’s remarks. The position is set out in the coalition agreement, and the October 2010 spending review met the Government’s commitment on HNS funding in full, and did so without changing the allocation of national insurance contributions to the NHS. The effect of our policy is to maintain the level of national insurance contributions allocated to the NHS and to allocate additional revenues from rate rises to the national insurance fund. This helps ensure that plans for payment of pensions and other contributory benefits are sustainable in the long term. We can protect pensioners by the new triple-lock, which guarantees each and every year a rise in the basic state pension in line with earnings, prices or a 2.5% increase, whichever is greater.
In ordinary circumstances, we should expect contributions to rise broadly in line with earnings, and therefore to rise in real terms. Therefore, under the Government’s proposals we should expect allocations to the NHS to rise in real terms in a typical year. Amendment 8 would require the NAO to report on how much would be required from the additional rates in order for the health service allocation to grow in real terms every year. The Government’s view is that this would be a pointless exercise, since whether or not the NHS allocation grows, the Government have decided on the amount the NHS will spend. In any case, the amount allocated to the health service from national insurance contributions would, other factors being equal, be expected to grow in line with earnings and therefore grow in real terms every year under the terms of the Bill. This amendment is therefore unnecessary, and I recommend that the right hon. Member for Wentworth and Dearne withdraw it.
I have focused my remarks narrowly on what the amendment is about and why it does not do what is intended. However, I must remind the House of Labour Members’ comments on the subject of health spending more widely. The right hon. Gentleman’s predecessor as shadow Health Secretary, who is now shadow Education Secretary, has said:
“It is irresponsible to increase NHS spending in real terms within the overall financial envelope that he, as chancellor, is setting.”
It was also not that long ago that the shadow Chancellor, whose remarks we study closely, said that there was
“no logic, sense or rationality”
to the policy of ring-fencing NHS spending. I am pleased that Labour Members are now taking a different approach. It has been clear from the remarks made by the right hon. Member for Wentworth and Dearne that they are in favour of real-terms increases in health spending, and we are pleased that the Government have won that argument.
Kelvin Hopkins
My hon. Friend mentioned inflation costs, over which the health service currently has no control, because they relate to things such as energy, fuel and food. All those costs are externally generated, because we import a lot of those things, and so we have no real control over the costs. Therefore, the health service has to be compensated properly for the extra costs.
Chris Leslie
Absolutely. My hon. Friends the Members for Luton North (Kelvin Hopkins), for Walthamstow (Dr Creasy) and for Edinburgh East (Sheila Gilmore) have all mentioned that these costs are increasing. As we know, the drugs budgets and so forth are increasing, so this issue will be right at the centre of the national political debate. We know that this Government have a habit of casually casting aside the commitments that they made in the coalition agreement. We really do not want them to rack up yet another broken promise, but it is starting to look as though the Treasury is in that particular space. This situation is not good for our constituents, we want the national health service to grow successfully and we thought that this amendment would offer the olive branch of friendship across the Chamber so that the NAO could, once and for all, clarify whether the Government are living up to their promise. The Minister’s description of our attempt as “a pointless exercise” is hurtful and, for that reason, we probably have to divide the House to ensure that we can at least test this issue and try to keep the Government to their commitments.
Question put, That the amendment be made.
The House divided: Ayes 90, Noes 262.
Kelvin Hopkins
I strongly support the amendments, which my right hon. Friend the Member for Delyn (Mr Hanson) moved so ably. As it stands, the Bill has crude, arbitrary and unfair discrimination built into it. The amendments would remove the unfairness and discrimination at a stroke and turn the measure into something that we could all happily accept.
I have to declare an interest: my constituency is in one of the excluded areas. The proportion of public sector employment in Luton North puts it at the top end of the table—number 48 out of 650 constituencies. Some 41.2% of employment in my constituency is in the public sector, so it will suffer substantially as a result of the Government’s cuts in public spending. If 450,000 jobs go nationally, we could be talking about 1,000 jobs in my constituency at the very least. Already it is suggested that 500 jobs might be going in Luton as a result of the cuts, and a higher proportion of those will be in Luton North because of the degree of public sector employment there. I therefore have a vested concern and a constituency interest.
I am more concerned, however, about the overall principle, which will affect so many other people unfairly. My right hon. Friend the Member for Delyn suggested that because of the likely decline—certain decline, I think—in economic activity and rising unemployment, take-up will be much lower, owing to the fact that far fewer businesses will be formed in an atmosphere of the economy entering recession, with jobs being lost in both the public and private sectors. If the economy were expanding, of course, we would expect many more small businesses to be created, and therefore a much higher take-up. The take-up will probably be well below anything that the Government anticipate, simply because the economy is going to enter—I believe—serious recession as a result of their policies.
It is strange that the Government have chosen the British standard regions to discriminate in this way. They have actually played down regionalism—they are abolishing the regional development agencies—and are diminishing the regions as a basis for policy in other areas, but they are using the standard regions as a basis of policy in this area. That seems to be contradictory. If we are to provide assistance to industry and employment, it would be preferable to target it much better and in other ways. Given that the Bill will work in such a way, however, the only fair approach is to apply it across the country as a whole. As my right hon. Friend the Member for Delyn said, the costs would not be so great of including the three regions excluded in the Bill and ensuring that every small business across the country has the advantage of the subsidy.
Neil Carmichael (Stroud) (Con)
Surely the whole point of the regional argument is that we should be focusing on the regions that need extra help to encourage the development of smaller business. On the hon. Gentleman’s point about the state of the economy, it is the growth of new small and medium-sized businesses that will boost the economy. That is what we want to encourage through this legislation.
Kelvin Hopkins
I thank the hon. Gentleman for his intervention, but the Government have chosen to play down regionalism by getting rid of RDAs, yet have chosen regions as a crude way of excluding certain areas from the policy in the Bill. Within those regions, of course, some areas really require assistance, and by any standards, Luton is one of those. We have seen a massive loss of jobs there as a result of the decline in manufacturing industry. Fortunately, we have an airport, public sector employment and so on, which has helped, but we have also lost a lot of jobs and need assistance more than most other areas not just in the south-east, but elsewhere in the country.
Stephen Williams (Bristol West) (LD)
The hon. Gentleman said that the Government have abandoned regionalism. It is true that RDAs are going, but they have been replaced on a more localised basis by local enterprise partnerships. If he and his colleagues have a really compelling case for investment in the Luton or greater Bedfordshire area, surely a bid to the LEP would benefit his town, even though it cannot benefit from the scheme in the Bill.
Kelvin Hopkins
I am strongly in favour of proper targeting, but the RDAs could do that: they could look at their regions, advise on which areas needed the most support and provide assistance in that way. I am in favour of targeting, but if we are to exclude areas, it should not be done regionally, because within regions there are areas that need strong support and other areas that need less support. As I said in earlier debates in the Chamber today, I would use that £1 billion in other ways and target it rather better. We in Luton feel unfairly discriminated against for the reasons that I have set out.
There is also a problem with regional boundaries, which have been mentioned before. In Committee I mentioned a regional boundary that goes right through a small conurbation not far from me, Leighton-Linslade. Linslade is in the south, in Buckinghamshire, and Leighton Buzzard is in Bedfordshire. We therefore have a conurbation that is split by the regional boundary. How will people in that small conurbation feel about one side of the town getting a benefit and the other side not getting it?
I think I have probably made my point, and others wish to speak. The Government have got this wrong. I hope that they will accept the reasonable amendments tabled by my right hon. Friend the Member for Delyn and make this a fair Bill that we can all support.
Mike Gapes
Allegedly, we are all in this together. If so, why is it that those of us in east London, along with people in the 21 authorities in the Thames Gateway, which include authorities in Kent, where there is not a single Labour Member of Parliament—they are only Conservatives—and those in Essex, are excluded from the package that we are discussing? We heard earlier today about the Maoist chaos of the Government’s regional policy. That is not the responsibility of the Treasury; it is the responsibility of its close allies and partners, and the Business Secretary. However, as we are all in this together, presumably the Treasury is also involved up to its neck.
We have also heard that, apparently, the Government are refocusing regional policy. Well, that regional policy refocus includes, in today’s measures, discrimination against poor people in poor communities. My right hon. Friend the Member for Delyn (Mr Hanson) spoke from the Front Bench about a number of boroughs and constituencies that have high unemployment—higher than the national average—and where, at the moment, there are also high levels of public sector employment. Those areas will take a disproportionate hit because of the measures announced in the comprehensive spending review and the Government’s policy to reduce, for ideological reasons, the size of the public sector so drastically and quickly.
So, we are not all in this together: some of us are in it much deeper than others. I suppose that we are a bit like the residents of Brisbane, Australia. When the tsunami or flood comes in, we hope that it will meet a certain ceiling point before going back down, and that the next day it will go no higher. Some people have a little footbridge or step to get them above the water, but others are pushed down below it. People in the small business sector in my community—in Ilford and Redbridge, which is a Conservative-Liberal Democrat borough—will not benefit from these measures. When it comes to benefits, we are not in this together with those in Tatton or elsewhere. We will lose out.
Other Members represent poorer communities than mine, but I have wards in my constituency with very high unemployment. I also have a very diverse community. One of the interesting features of excluding London from the proposals is that it is not only discriminatory geographically; it could also be discriminatory ethnically. That needs to be taken into consideration, given the way in which the measures disproportionately affect different communities in different parts of the country.
I do not want to delay the House for long. I spoke on Second Reading in November. I hoped at that time that the Government would come forward with some changes to their proposals. I hoped that they would listen to the logic, but they did not. We have already had Committee stage and Report brings us to today.
The Thames Gateway Partnership for London, Kent and South Essex recently wrote to Members, urging us to make representations to the Minister—[Interruption.] He might wish to listen to this. It wanted us to write to him to point out the discriminatory nature of the proposals and to urge the Government, even at this stage—I say again, even at this stage—to see what they can do to help the Thames Gateway authorities. The partnership pointed out that there are 3.5 million residents in the Thames Gateway local authorities area and that it believes that in
“excluding London and the South East from the regional freeze on National Insurance contributions the government is failing to take proper account of local economies, particularly the challenges faced by the Thames Gateway growth corridor.”
My right hon. Friend the Member for East Ham (Stephen Timms) has already referred to that.
The Bill is damaging to a potential growth sector of our economy. The Thames Gateway is part of the future of London as a global city. It is vital to the prosperity of our nation, yet this short-sighted, quasi-Maoist Government are operating in such a chaotic way that they cannot see the damaging consequences of what they are proposing. Next year, I hope, they will come seriously to regret what they are doing. I urge all local authorities in the Thames Gateway area to look very closely at the Division lists for today and to register which Members from Essex, Kent and London went through the Lobby in favour of such discrimination against London, Kent and Essex and which Members voted against it. Then, hopefully, those local authorities, councillors and communities will hold those Members to account.
Kelvin Hopkins
The chief economic adviser for the Chartered Institute of Personnel and Development has said that
“the VAT hike will prove a far more significant ‘tax on jobs’”—
to use the Government’s term—
“than the hike in…National Insurance contributions”.
That outside organisation estimates that 250,000 jobs will be lost because of the VAT rise.
Oral Answers to Questions
Kelvin Hopkins Excerpts(13 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Danny Alexander
The Treasury will respond in the normal way to that report, and it would not be proper for me to comment on it until we have published the relevant Treasury minute. The Treasury and the Cabinet Office are working closely together to ensure that the PFI industry contributes its fair share of savings from operational projects.
Kelvin Hopkins (Luton North) (Lab)
PFI was, of course, invented by the Tories; I may be in a small minority in having consistently opposed PFI and urged that we should have public investment instead. In making an assessment of PFI, will the Government make comparisons with superb public investment projects such as Luton sixth-form college, which has been rebuilt at far less cost than it would have been under PFI?
Danny Alexander
I am grateful for that comment. I hope that the hon. Gentleman will welcome the decision that we took in the spending review to end the PFI credit system. Departments now have to look at the best way of funding projects within their own budgets; effectively, the PFI credit system meant that they could top-slice local government funding for local authority projects. The change that we have made means that Departments will have to make a proper comparison between PFI costs and the sorts of costs that the hon. Gentleman has described. I am sure that the House will have heard what he has said.
Loans to Ireland Bill
Kelvin Hopkins Excerpts(13 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Cash
The provision appears to apply to the Irish component, but because of the implications of what I am saying and the interlocking aspects in the kaleidoscope, it is extremely difficult to work out exactly what is intended by such opaque words. What I am asking for is very modest: simply the removal of all doubt by making it clear that any such loan would be
“other than a loan by virtue of any provision by or under the European Communities Act 1972.”
If all doubt were to be removed in that way, it would be the end of the story and there would be no problem, so why not do it? I look forward to the Minister’s response.
Another issue arises under paragraph 6 of the summary of key terms document. The paragraph covers events of default, and sub-paragraph (h) states that one event of default will be
“the Borrower”—
Ireland—
“not being or ceasing to be a member of the European Union”.
Why would such a provision be wanted if it were not integral to the fact that Ireland is a member of the European Union? I do not think I need to advance the case any further as it is very simple: if we would exclude Ireland from the arrangements by virtue of its ceasing to be, or not being, a member of the EU, that must have special significance, otherwise it would not be stated. That is another exceedingly worrying feature.
Paragraph 8 refers to the governing law, and it states:
“The credit agreement and any non-contractual obligations arising out of or in connection with it will be governed by English law.”
Paragraph 9 is on enforcement, and the document’s authors have clearly thought a lot about this matter, and the more they think about it the more worried I get, because they are transposing their thinking into the provisions of the Bill and this document:
“The English courts will have exclusive jurisdiction in relation to any dispute including a dispute relating to non-contractual obligations arising out of or in connection with the credit agreement.”
That gets to the heart of the problem, because anything that within law is under the jurisdiction of the European Union and within the framework of the European Court under the European Communities Act 1972 cannot be excluded from that jurisdiction by such words in a document of this kind that is “for information purposes”—hence our European Scrutiny Committee report on the relationship between parliamentary sovereignty and the judiciary. Therefore, merely writing in such a document that something will be governed by English law and that the English courts will have exclusive jurisdiction in relation to any dispute is not worth the paper it is written on.
If it is within the European Union legal framework, that means the European Court will get its hands on it. It may be that if there was a dispute or default or any of the other difficulties that could arise from the agreement in the Bill as enacted—as I rather suppose it will be—that will in no way alter the fact that ultimately, as long as parliamentary sovereignty prevails in the light of the European Communities Act, the Supreme Court will not prevent it from falling within the framework of the European Court of Justice.
Of course, it would be open to any future parliamentary Bill to try to unravel the arrangement, but what a pity it would be if we found that the fast-track arrangements we are experiencing today led us to the situation that I have described, simply because we were not prepared to listen to the argument that could resolve the problem by excluding the European jurisdiction. The legal advisers, the Treasury officials and the Minister may well be wrong. If they are wrong, we are in deep trouble. If they are doubtful, perhaps they could listen to those of us who have been proved right on a number of past occasions.
These are my final words—not from Cassandra, but from me. When things go wrong, it is much better to have taken advice beforehand and keep ahead of the curve, rather than allowing the curve to catch up with us.
Kelvin Hopkins (Luton North) (Lab)
It is a pleasure to follow the hon. Member for Stone (Mr Cash); I very much agree with what he has been saying. He is clearly much more erudite on these matters than me, but I understand what he is saying—that today, we are making to our closest friendly neighbour country a bilateral loan which has nothing to do with the European Union and which is not part of the panoply of EU arrangements. I am happy to go along with such an arrangement.
The right hon. Member for Wokingham (Mr Redwood) has said many times that, if there are problems in the eurozone with the eurozone, they should be sorted out by the eurozone, not by countries outside the eurozone. I agree with him very strongly. This is a country that is our closest neighbour, with which we have deep, long historical relations—very friendly relations now, we are pleased to say. Indeed, I have many Irish constituents who are concerned about their country. We are making a friendly gesture to a neighbouring country—our nearest friendly neighbour—that happens to be in the eurozone, which we happen not to be.
We do not want to be in a situation where, if another country gets into difficulty, it says, “You made a loan to Ireland—you can make a loan to another country in the eurozone.” That would not be acceptable.
Mr Hollobone
That is exactly the danger. Under the present discussions about the permanent crisis resolution mechanism, the draft conclusions of the European Council state:
“Member States whose currency is not the euro will be associated to this work.”
So the danger is that this Bill could be a precedent for the “Loans to Portugal Bill”, the “Loans to Spain Bill” and the “Loans to Italy Bill”, which may be just round the corner.
Kelvin Hopkins
I thank the hon. Gentleman for his intervention. The amendments from the hon. Member for Stone will hopefully clarify the position and change the Bill to the way we would like it to be, so that it will not have implications for other members of the eurozone.
As I have said, however, if the Irish are to recover from their situation, they must remove themselves from the eurozone, re-create the punt, depreciate their currency and bring it into line with sterling, because we are their natural trading partners. Their economy and ours are the most closely integrated, and that is the sensible thing to do. I have said that before in this Chamber, and I have said it in private to senior Irish politicians on two occasions—I must say that it was not received in a very friendly way. Nevertheless, that is the logic, and even now we are looking towards a progressive deconstruction of the eurozone, partial or complete, in the not-too-distant future.
It would be better to deconstruct the eurozone in a rational and controlled way, rather than in a disastrous crash. So I hope that the eurozone members will be sensible and start to deconstruct it as practically and sensibly as they can and not allow it just to go into a massive crisis, which will benefit nobody. Even deconstructing it through country-by-country removals will cause problems, because many other countries have money in Irish and Greek banks, so it will be devalued and people will lose. Nevertheless, it is better to do that than to allow the situation to continue and the elastic eventually to break, causing the whole thing to come crashing down.
Finance Ministers’ Meeting (Ireland)
Kelvin Hopkins Excerpts(13 years, 6 months ago)
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Kelvin Hopkins (Luton North) (Lab)
I have a large number of Irish constituents, and I am naturally concerned about their families and livelihoods back in Ireland. The fact is that the Irish crisis is part of a wider crisis in the eurozone, affecting a number of countries that will be unable to sustain long-term membership of the euro. Is it not time to have discussions—privately, perhaps—about the possibility of reconstructing national currencies, particularly the punt, so that the Irish can join the sterling zone, where they belong, and not the eurozone?
European Union Economic Governance
Kelvin Hopkins Excerpts(13 years, 6 months ago)
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Chris Leslie
The hon. Gentleman has made his point in his own inimitable way, but I do not want to be diverted from the substance of what is before us. There is a substantial proposition on the table, and I think it is important for all Members to understand it. The detail that will eventually emerge from the final taskforce report is important, and it would be useful if the Minister could deal with some of the question marks that hang over some of the detail, to which Members have already alluded.
For example, a series of new fiscal disciplines—as they are called—will be pursued across the European Union but, of course, largely for eurozone countries; yet the adoption of enforcement measures will apparently be subject to the negative qualified majority voting procedure. That presumably means that the United Kingdom will take part in any of those decisions. If that is so, can the Minister say how we will inform our policy position if we are involved in votes on enforcement measures? While we may not have a vetoing power here, our role could be strategically significant.
Kelvin Hopkins (Luton North) (Lab)
My hon. Friend is using terms like “largely” and “presumably”. These are not definite enough for me. Please will he be firmer and clearer in what he is saying?
Chris Leslie
I wish I could be firmer and clearer, but we are dealing with a malleable set of proposals. The bundle of directives keeps changing, moving and morphing from phase to phase, and the directives will clearly go into a different phase when the European Council meets in December, but we can discern the rough direction of travel, and many Members will take a firm view on that.
The Minister talked about the sanctions. Yes, it is the case that they may not apply to the UK because of our opt-out from the euro, but the range of non-binding standards and early warning requirements in the event of significant deviation from the adjustment path apparently would apply to the UK; I should be grateful if the Minister would confirm that that is the case. Even if the UK is to be subject only to such commentaries, public observations or other non-binding standards, the Minister should tell the House how they would work and what the implications for us would be. Clearly, what the taskforce report calls the new reputational and political measures will be phased in progressively, but is it correct to read the proposals as also applying to the UK? In other words, is it not true that we will be subject to reporting requirements, potential formal reporting to the European Council in certain circumstances and enhanced surveillance—whatever “enhanced” may mean—if the situation dictates? Is it not also true that we will be subject to onsite monitoring from a mission of the EC—which I thought was curious, and which certainly might be of interest to some Conservative Members—and possible publication in the public domain of these reports and surveillance? Will the proposed regulations to strengthen the audit powers of Eurostat also apply to the UK, and what are the anticipated compliance costs of those changes for the UK and the Treasury? If we fail to comply with the proposed requirements, is it not the case that sanctions could be applied to the UK?
Chris Leslie
Those of us in opposition are merely asking questions and scrutinising what is on the table, but we are trying to find out what will be the impact on the UK. Ministers are arguing, “Don’t worry, absolutely nothing changes and there is no impact whatever.” As far as I can see, there are strands and suggestions that there will be an impact, both direct and indirect. In that respect, although we might have different views, there might be a point on which we can agree.
If the eurozone deflation and the shrinkage of European economic markets affect our exports, that matters, because the Treasury has depended on them so greatly. The June Budget and the spending review were predicated on a return to strong economic growth here in the UK, based principally on higher business investment and strong export growth. The Office for Budget Responsibility analysis shows that the cuts imposed because of the Chancellor’s austerity programme and his overly speedy deficit reduction strategy will see private consumption shrink rapidly and Government consumption doing the same.
Cuts in domestic expenditure will hit growth—that much is clear—but the Chancellor has bet the shop on the countervailing growth in trade and business investment. The Treasury states clearly that it needs £100 billion of growth in exports and business investment, yet the last time we saw such a massive rate of growth for exports was in 1974 and we achieved that rate of improvement in business investment only in 2005, but the Chancellor’s sums depend on the UK achieving both those record levels in each of the next three years—a very tall order indeed, equivalent to tripling our exports to the US and seeing our exports to China grow 20 times or to India 40 times.
Clearly, our reliance on the eurozone’s appetite for our exports is central to the Chancellor’s strategy, so there are implications for British fiscal policy here.
Kelvin Hopkins
I thank my hon. Friend for giving way yet again. He focuses on trade, but it is in trade that we have our worst possible relationship with the rest of the EU. We have a gigantic trade deficit. We buy billions more from them every month than they do from us. The only advantage we have had in the last year or two is that we have depreciated the pound relative to the euro and we have started to see a slight improvement in our trade balance with the EU.
Chris Leslie
If we see growth dented here in the UK because those ripples flow from the eurozone—changes as a result, perhaps, of the measures we are debating—we could see further implications for spending cuts here in the UK in respect of vital public services and more austerity when perhaps stimulus would be the order of the day. However, there is a balance of risks here and it is clearly important for fiscal discipline to be exercised, but responsibly so. We have argued for a sensitive and measured approach to deficit reduction in this country, rather than the doctrinaire approach of steep and swift cuts favoured by the parties whose Members sit on the Government Benches.
I am glad to note the ironic analysis of the Minister in the explanatory memorandum that was referred to, which he signed last week. He said that he believed
“that the main consideration should be whether a Member State’s debt is on a downward trajectory, rather than the specific pace of annual debt reduction”.
He also said that the numerical pace should remain
“only as an indicative benchmark…that…is not used as a concrete rule by which Member States’ debt reduction plans are judged.”
How right he is—if only he applied such pragmatic sense to our economy and public services in the UK, too.
Kelvin Hopkins (Luton North) (Lab)
I shall speak briefly, but it is important for the House to know that there are also Members on the Opposition Benches who will be voting against the Government motion, and on similar grounds to do with the implicit transfer of sovereignty in the Commission’s initiative. I congratulate the Chair of the European Scrutiny Committee, the hon. Member for Stone (Mr Cash), on ensuring that the House is fully aware of the concern about such matters and on the fact that we are having this debate, as it is largely down to him.
There is serious confusion about the wording of the documents. The terms “all member states”, “eurozone states” and “non-eurozone states except the UK” are used at different points throughout. It would be simpler if only the term “eurozone states” was used throughout, so that we could be absolutely clear that the provisions apply only to the eurozone states. In the first draft regulation—on the preventive arm of the stability and growth pact, as it is called—reference is made to all member states. In the second draft regulation—on what is known as the excessive deficit procedure—reference is made to all member states, but a little later it refers in two places to the eurozone. The third draft regulation talks about eurozone states. The two further regulations, on macro-economic imbalances, refer to member states—not “all member states”—or, alternatively, to eurozone member states, but right at the end there is a reference to non-eurozone member states except the UK. I want to be clear that the provisions apply to the eurozone, not to the United Kingdom, so that we can know precisely where we stand on sovereignty over our own economy.
Stephen Williams (Bristol West) (LD)
I, too, had to read the documents several times before I began to understand what was being proposed, but is not the simple distinction that the information-sharing provisions apply to all EU member states, whereas the sanctions under the stability and growth pact apply only to eurozone members?
Kelvin Hopkins
The Minister himself said that any information about the economy that was needed could be found by Googling it, and there is also the Library note on economic indicators, which I use regularly. All the information is there—for example, in the Budget statements and so on—and we do not need to provide much more than that. There is masses of public information. We do not need to have it in regulations. It can be provided as a matter of course. We must put down a marker for the European Union saying that we will not go this far, and that we do not want changes that show political creep or gradual encroachment of the European Union into British sovereignty over our own economy, going beyond the treaties.
I agree with my hon. Friend the Member for Great Grimsby (Austin Mitchell) about the nonsense of the eurozone and the economic arrangements that it entails. There is a reference to “surveillance of macroeconomic imbalances”, but the trade imbalance that I focused on earlier in the debate is serious. We have a massive trade deficit with the rest of the European Union, particularly Germany, which sustains a massive trade surplus. Will the European Union focus on that imbalance?
In 1944, Keynes said that countries running massive trade surpluses should be required to appreciate their currencies to bring them into line. Will that be suggested to Germany? That cannot happen because Germany is in the eurozone, and all those other countries that cannot compete and cannot inflate at a greater rate are having severe difficulties, which are becoming worse year by year. Will that imbalance be addressed? When it is, I will start to take the European Union a little more seriously on economic matters.
I have probably said enough. I intend to vote against the motion, and I hope that the Government will challenge the European Union to make the wording of its documentation right and acceptable to the United Kingdom.
Draft EU Budget 2011
Kelvin Hopkins Excerpts(13 years, 7 months ago)
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Justine Greening
The hon. Lady is assuming that those Members who have tabled amendments will press them to a vote. Perhaps she is prejudging the outcome of the debate. We welcome the debate because, tomorrow, I shall be in Brussels pressing our case in respect of the European Union budget, and it is vital that we are able to say that we have scrutinised the document thoroughly in our European Parliament.
In regard to the European Union, matters such as the single market, enlargement and environmental standards have seen real progress, but the EU budget does not have pride of place among the EU’s achievements. I will not hide from the House the Government’s frustration that some of our partners—and those in EU institutions—do not seem to understand how bizarre it is, when national budgets are under such extraordinary pressure, that the EU should be immune from that. So here in the UK, the week before a very tough spending review, it is only right that we should subject the EU’s budget for 2011 to the same level of scrutiny as our own national accounts.
As I said to the hon. Member for Birmingham, Edgbaston (Ms Stuart), I will be in Brussels tomorrow, holding discussions with Commissioner Semeta, the Belgian presidency and MEPs on this very subject, pressing them to take the close, objective, pragmatic and responsible look at the EU budget that is long overdue, just as we are doing in the House today. I will, of course, come later to the previous Government’s giveaway of the rebate, which is one of the main reasons why we will see our contributions rising over coming years, but let me begin by summarising this Government’s approach to the Commission’s EU budget proposals.
At the beginning of the debate, let me also clarify our response to the amendments: I absolutely agree with the sentiments of both. Amendment (a) was tabled by my hon. Friend the Member for Stone (Mr Cash) and I would like to take this opportunity to pay tribute to the time, effort and work he has put into scrutinising not just the EU budget but a whole range of areas in which the EU has become involved. His persistence has certainly paid dividends in ensuring that this matter has maintained the prominence in the UK Parliament that it absolutely deserves.
Kelvin Hopkins (Luton North) (Lab)
I agree with much of what the hon. Lady has said, particularly about the splendid work done by the Chairman of the European Scrutiny Committee, of which I am also a member. The Government now have the power to do something about the budget. Having complained about it for so long—I agree with those sentiments—is it not time for the Government to say no to the European Union on these matters?
Justine Greening
In fact, we are doing just that. I will come on to more detail about what we are doing now and what we plan to do, clarifying the arguments that we are putting to the European Commission.
Let me be clear that the Government will support the amendment tabled by my hon. Friend the Member for Stone. We very much welcome the pressure applied to the European Parliament to reject the proposed rise. We will do our bit as Ministers and as a Government to put pressure on that Parliament, and particularly on our MEPs, to reject any proposed rise. When the shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) makes her speech following mine, I very much hope that she will confirm that the Opposition will press their MEPs to oppose any rises in the EU budget. Perhaps my hon. Friend the Member for Stone will want to press her further on that.
Amendment (b) was tabled by my hon. Friend the Member for Clacton (Mr Carswell) who, despite spending less time in this House than my hon. Friend the Member for Stone, has also clearly established his role as one of those MPs who scrutinises all EU matters carefully in a way that adds quality to our debates. I want to make it clear to him that we absolutely agree with the sentiments behind his amendment. We want to see the 2011 budget cut. The problem with the amendment is that if we withdrew our money from the EU, under its terms that would be illegal. We cannot support an amendment that would make our action illegal, so we will have to reject it, but I can tell my hon. Friend that if he had worded the provision slightly differently, we might well have been able to support both amendments. It is with regret that we have to reject his amendment, despite agreeing with its sentiments.
Let us talk about our concerns over the EU budget. It is not just the size of the draft EU budget but its effectiveness that is an important matter of concern.
Kelvin Hopkins
I am sure that it is of interest to the House that the amount to which the Minister has referred is twice the amount that the Government propose to save by cutting child benefit.
Justine Greening
That is the sort of argument that I have been presenting to other European countries, including the French Minister who was in London a few weeks ago. As the hon. Gentleman says, it is simply untenable for the EU budget to remain unchallenged when across Europe we are making incredibly difficult decisions on our national budgets. The way in which the hon. Gentleman phrased his argument is exactly the same as the way in which I have been pitching ours to our European partners. We are hopeful that, over time, there will continue to be a growing sense among them that we do indeed need to start challenging the European budget that is currently proposed.
Justine Greening
So, my hon. Friend is right to raise that issue.
In conclusion—
Justine Greening
No, I think I need to wrap up.
We are absolutely committed to pressing for the EU budget to be smaller. We will not have rises in the EU budget undermining our attempts and our desire to tackle our fiscal deficit. We will challenge the 2011 budget, which does just that.
I welcome the support of this House in sending a common view to Europe. I hope that we will be able to do that later tonight and I look forward to seeing whether we get support from the main Opposition party on this matter, too.
Kelvin Hopkins (Luton North) (Lab)
It is a great pleasure to speak in this important debate, although I will not detain hon. Members for long. First, I commend the Chair of the European Scrutiny Committee for what he said. It is interesting to see him as a restraining voice in Euroscepticism. What he said is common sense. The Government have to go to Brussels or Strasbourg—or wherever they meet—with, one would hope, the united backing of the House or, if not, at least the united backing of those on the Government Benches. I will certainly be supporting the hon. Gentleman’s amendment; indeed, I will support both amendments if they are put to a vote.
I have been a member of European Standing Committees for some 13 years. Over those years I have debated European budgets countless times, yet in all that time none of them has been approved by the European Court of Auditors. We just seem to nod through the fact that a budget costing the countries of Europe billions every year is not approved by auditors. We just accept it. One cannot imagine the British Government doing that—not having their Budget approved by auditors—every year.
There has been a significant increase in our net contribution, and that will continue. Attention was drawn to the problem yesterday—very well, I thought—by the hon. Member for Bury St Edmunds (Mr Ruffley) in Treasury questions. Indeed, I have spoken many times about the Blair deal—the deal made that December night a few years ago when, apparently without consulting very many people, he arbitrarily gave away a significant proportion of our rebate. The Economist—not a supporter of left-wing Eurosceptics such as myself—said that no deal would have been better than that deal, and it was right. I shall therefore be supporting the amendments.
The budget is fundamentally flawed and has been so since its inception. Throughout that time, the core of the problem has been the common agricultural policy. I have called many times for the common agricultural policy to be abandoned and for agriculture policy to be returned to member states. Member states have different agricultural industries, and each of us would choose what to subsidise and how to subsidise it. Our own agricultural sector needs some subsidies, particularly in certain areas—an example would be Welsh hill farmers—to preserve our rural heritage and industries; it is sometimes necessary for them to be sustained by subsidy. The way the CAP operates is nonsense, however. We have changed it over time, but it has not been properly dealt with.
Another problem is that the net redistributive effect of the budget acts in an arbitrary way, in that some relatively rich countries are net recipients, whereas some relatively poor ones are, unjustly, net contributors. We have a smaller agricultural sector than many other countries, and we have, unfairly, been a net contributor. I would not agree with Mrs Thatcher on many things, but I thought it was right that she negotiated a rebate. [Hon. Members: “Hear, hear!”]
I shall differ from Conservative Members now, however, by saying that I should like a socialist approach to Europe, whereby the redistributive effects of the budget are balanced in such a way that the poorest countries are net recipients and the richest are net contributors, in proportion to their relative living standards and the success of their economies. As one of the richer countries, we would no doubt be a net contributor, but such a system would be rational and fair. The budget as it stands is neither rational nor fair.
We ought to return to the Blair agreement. If we are to negotiate a more sensible budget with our European colleagues, we should start to look at contributions again. If our own contributions had been negotiated in sterling cash terms, rather than euro cash terms, we might not have suffered so much as a result of depreciation. We are paying more because we necessarily depreciated our currency, although I am glad that we kept our own currency and that we are able to flex it according to our own needs.
Other countries have suffered terribly through being unable to do that—Ireland is a case in point. In real terms, it is part of the sterling economy, not the euro economy, and it has suffered as a result of our depreciation, because it has been unable to depreciate its currency. I have told Irish colleagues whom I have met through the European Scrutiny Committee that the logical thing for them to do would be to recreate the punt and devalue against the euro to come into line with sterling. That would be very beneficial for the Irish, and I hope that they will consider doing it at some point. It would be fairer for us if contributions were measured as a proportion of gross domestic product, because they would not be subject to change as a result of depreciation.
I have spoken many times on the European budget, and I believe that it is nonsense. I am waiting for common sense to appear on the horizon, but it has not done so yet. I hope that, if we have to have net fiscal transfers in the future, they will be considerably smaller because there will not be a CAP. I also hope that they will be related to the relative prosperity of the member states, so that the poorer nations benefit and the richer ones contribute.
Michael Connarty
I respect my hon. Friend’s logic, even though I do not support his conclusions on the European Union. He has a background as a trade union negotiator, and I cannot understand why he thinks we should tell the Government that they cannot have a negotiating position and that they must adopt the position that they are given. Surely they need to be able to negotiate what they are looking for—namely the cash equivalent—regardless of how it is balanced within the budget. They will be negotiating with 27 other countries, along with the Council and the Parliament. Is not my hon. Friend’s instinct as a trade unionist to give the negotiators the flexibility to come out with a deal, rather than to given them strict instructions on what they must come out with at the end of the negotiations?
Kelvin Hopkins
I thank my hon. Friend for his intervention, but I believe that all negotiators need to have something in their back pocket—something to argue with. If the Government go into the negotiations saying, “My members will not tolerate an agreement unless it is satisfactory”, that will give them some strength. I hope this House will provide that kind of support to negotiators. I would much prefer to be on the Government than the Opposition side, but I hope that the Government will stand up and do the right thing.
Finally, the Minister spoke about standing up for British interests, but that sort of nationalistic approach does not go far enough. What we need is an arrangement that will secure the support of other member states. We have to persuade them that we need a more rational and sensible approach to the budget that is also fair to all concerned—and, indeed, considerably smaller in view of the need to abolish the CAP. If we can get others on our side, we might start to make progress, but if we argue simply in nationalistic terms, I do not think we will.
That said, Britain has a strong negotiating position. If we were in a position to push hard, we would know that the EU needs our membership more than we need to be a member of it. We have a massive trade deficit with the rest of the EU, which gives us a strong negotiating position. If we were challenged by other strong states, they would know that their economies would suffer if we were no longer part of the EU. If we had trade barriers between member states, they would suffer much more than we would. The point has been made many times.
I have some figures with me. Our trade deficit with the rest of the EU in July—the last month for which figures are available—was £3.9 billion. That is for one month, so we need to multiply that by 12 to get an idea of the annual figure. That amount was an increase on the £3.2 billion of the previous month. The EU needs Britain, so let us try to make an EU that is looser, more democratic and leaves greater powers to member states. Let us have an EU that has not a nonsensical budget, but one that is fair and beneficial to all concerned.
Mr Clappison
If there were a search for economies in the European budget, one of the best places to start would be the External Action Service. I have a suspicion that although some of its activities might be worth while, the prime motivating force behind the establishment of what is in effect a diplomatic service is the promotion of the European Union itself rather than the interests of member states or their citizens. I suspect that there might be scope for economies.
Let us be clear that what is being sought is planned increases in the External Action Service. Let us spell out the facts of what it will cost so far as it stands—as the Economic Secretary made clear. So far, the cost of the External Action Service, which is on the record under the so-called budget neutrality, is €400 billion. The diplomatic service has 3,700 employees and posts in about 130 nations in the world, many of which already have British diplomatic representation. Spending of that magnitude compares, I am afraid, with the search for economies that is being made in our Foreign Office, where savings of much smaller amounts of money are sought all the time in the face of the demands that have been made to try to economise. It would be sad to see the Union flag taken down in some countries in the world while the European flag was run up. I would regret that, as I think our Foreign Office does a good job in the world and represents the interests of our country. Its prime consideration is to represent this country and our citizens’ interests, rather than searching for exterior political objectives to do with the European Union.
This has been a very good debate. I commend the line that has been taken by the Economic Secretary. The facts are stark and anybody who reads these budget documents will be shocked that such increases are sought by the European Union at this of all times. It also prompts a question about the relationship between the European Union institutions, the Commission of the European Union, our constituents and the man on the street in every European state. What must be the attitude at a time when there is so much concern about the economy, when people are suffering and when cuts are being made if the European Union somehow feels that it is immune from those pressures and can go on increasing its expenditure?
Kelvin Hopkins
Let me reinforce that point. When referendums have been held in a number of countries, the people have voted against the European Union, in essence. That has happened in France and Holland, and in Sweden when they voted against having the euro. The hon. Gentleman is absolutely right.
Mr Clappison
I am grateful to the hon. Gentleman for that contribution. He has a very consistent record on this issue.
An increasing proportion of our laws, certainly as a result of the past 13 years, are being passed in the European Union, which searches constantly for new fields over which to exercise authority. It has made its way into home affairs and justice and it has huge ambitions regarding security and criminal justice. It also seeks to have an increasing influence over foreign affairs, with the establishment of a Foreign Minister and a diplomatic service. We know that it has all those great ambitions and we would do well to reflect, in the House, on what the increases in the budget say about the EU’s attitude toward individual citizens and its accountability to them.
Finance (No. 2) Bill
Kelvin Hopkins Excerpts(13 years, 7 months ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
As observant Members will note, this is the second Finance Bill of this Parliament and the third one this year. The date of the general election earlier this year reduced the time available for scrutiny of technical measures in advance of that election, and the short timetable available between our emergency Budget and the summer recess has made it necessary to have a third Finance Bill to address various technical measures.
Given the content of this Bill, I suspect that there will be a fair amount of cross-party consensus on the matters in it but, in any event, I would like to congratulate the newly appointed shadow Treasury team. In particular, I congratulate the hon. Member for Wallasey (Ms Eagle), the shadow Chief Secretary to the Treasury, both on her election success as a member of the shadow Cabinet and on her appointment to her current position. She will bring considerable experience of Finance Bills to the shadow Treasury team, both as a former Minister and from the Finance Bill earlier this year.
Although he is not present, I should like also to congratulate the newly appointed shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson). He stated over the weekend that his first task was to read an economics primer, but he also expressed the need to hit the ground running, because of the Finance Bill today. Whatever his education programme, I suggest that he should not necessarily begin with the scrip dividend treatment of real estate investment trusts or the taxation of long cigarettes. However, we wish him well in that process.
At the emergency Budget in June, my right hon. Friend the Chancellor set out this Government’s fiscal mandate, acting swiftly to tackle the deficit and restore credibility to the public finances. In the short, summer Finance Bill, we quickly put the core elements of the Budget on to the statute book, reassuring the British people and the financial markets that we would not allow Labour’s debt to spiral out of control.
Kelvin Hopkins (Luton North) (Lab)
The Minister mentioned cigarettes. Are the Government going to do anything to tackle the £4 billion that is lost through cigarette smuggling? That is four times the amount of money that they are apparently hoping to save by cutting benefits to the better off.
Mr Gauke
The hon. Gentleman makes the fair point that there is too much cigarette smuggling, and this is a matter that we are keen to address. My right hon. Friend the Chief Secretary to the Treasury has already announced proposals to provide additional funding to Her Majesty’s Revenue and Customs to tackle cigarette smuggling, among other things. I very much welcome the hon. Gentleman’s intervention but, let us be honest, it would be unrealistic to say that we could prevent all cigarette smuggling. We can, however, take steps to reduce it. That would be to the benefit of the Exchequer, and I am pleased that the Government are moving ahead and doing that.
It is our determined actions that have restored confidence in the economy, stabilised the nation’s credit rating and halved interest rates on Government short-term borrowing. We are saving money today so that we can invest in tomorrow. Ours is the right approach for the country, and that has been widely recognised. Only a fortnight ago, the International Monetary Fund said that our deficit plan was essential to restoring confidence in the UK’s public finances and “supports a balanced recovery”. That is the approach that we will take forward, including in the spending review.
Ms Eagle
The hon. Gentleman is even more melodramatic in his rewriting of history—his historical revisionism of what was going on in the UK economy—than the Chancellor. I had thought, having watched that performance, that that was impossible, but perhaps the hon. Gentleman should try out pantomime this year as Christmas approaches.
I was about to say before I was so rudely interrupted that, rather than encumber himself with the tedious technical detail in this Budget, the Chancellor decided to start behaving like the Liberal Democrat student activists we all come across at university and to take it in parts. This is part two. As a result, we have in today’s Bill what can best be described as the technical innards of a Budget; I think that the Exchequer Secretary used other words. In fact, most of the clauses, as he pointed out, are the technical innards of the last Labour Budget, which was presented in March 2010. However, it is the duty of the Opposition to scrutinise the detail of all Budgets, and we certainly intend to fulfil that obligation tonight.
Measures included in the Bill are important to the workings of the taxation system—the Minister did the House a service by going through them in great detail—but they have failed to inspire much interest or controversy in the outside world, perhaps because they have been signalled for a long time. The measures were subject to consultation under the previous Government as well as the current one when they were in development. Some might even say that they were prototype proposals, because that is the way that things tend to be done in the Treasury. That is attested to by the lack of much comment on or reaction to the proposals even among the taxation professionals who usually pore over the technical details of Finance Bills with fine-toothed combs. In respect of this Finance Bill, those professionals have been strangely unmoved—I might even say indifferent.
Kelvin Hopkins
I, too, congratulate my hon. Friend on her appointment to the Front-Bench team and I am pleased to see her there. Is not the fact that this is a mouse of a Bill, given that we face a £120 billion tax gap that the Government are doing nothing to reduce, and that 1% of that sum would save more money than their cut in benefits?
Ms Eagle
My hon. Friend is right to point out that there are two sides to the deficit reduction equation. Clearly, one side of that is collecting the taxes that are due in an appropriate fashion, and I shall say more about that later in my speech. He is right that we need constantly to keep that side of things in mind.
I was about to pay tribute to the Institute of Chartered Accountants, which was one of the few organisations to submit comments on the Bill when many had fallen by the wayside. Perhaps it is up to the Opposition to be vigilant when others have taken their eyes off the ball.
As my hon. Friend said, it is odd that we are debating a seemingly uncontroversial and overwhelmingly technical Finance Bill in the midst of one of the most difficult and dangerous periods for the UK and world economies in many generations. We have lived through the largest banking and financial crisis in the global economy since the Wall street crash of 1929. It has caused a deep and painful global recession, and we are struggling with the aftermath of the rescue of the world financial system from the colossal market failure that was dramatised by the collapse of Lehman Brothers in 2008. That inevitably caused budget deficits to soar everywhere, but especially in the more advanced western economies.
The UK was particularly affected, in part because of the size of our banking and financial services sector. The concerted action co-ordinated at the London G20 conference averted a catastrophe, and we are now witnessing a tentative economic recovery. However, that recovery remains distinctly fragile.
Ms Eagle
That is true. Clearly, the Chancellor and Prime Minister are on record, up to and including in 2008, as doing precisely what my hon. Friend says and supporting our spending commitments as they were at the time.
Although the recovery remains distinctly fragile, the June Budget took a huge and risky gamble with it. Since then, confidence in the UK’s economic prospects has fallen off a cliff and business surveys, such as that by Deloitte which I asked the Exchequer Secretary about, demonstrate that economic sentiment is darkening. There are increasing signs that the tentative recovery is stalling and that the economic storm clouds are gathering once more.
Kelvin Hopkins
I agree entirely with what my hon. Friend is saying. Is it not true that those who invest and those who are lacking confidence now are simply aware that cutting spending, cutting jobs and cutting benefits will drive the economy into recession, and that nobody will invest when we are diving into a recession? Does she agree that in the early part of this decade Britain had a relatively low level of public spending as a proportion of gross domestic product compared with, for example, Scandinavia?
Ms Eagle
My hon. Friend is right on both points, but he also raises an important issue about what Keynes called “animal spirits”. It is fair to say that all the signals are that the animal spirits are somewhat more depressed now than they were a few months ago and that the things that have depressed them are the decisions that were announced in the June Budget.
Ominous noises are coming out of the recent International Monetary Fund meeting about currency wars and competitive devaluations, and they offer worrying echoes of conditions that led to the great depression in the 1930s. Dominique Strauss-Kahn was not joking or exaggerating when he warned the IMF meeting about the dangers that the huge increases in unemployment will pose for our democratic institutions. Yet none of this is referenced in the measures before us today.
Ms Eagle
I remember the detailed discussions that we had on that issue in previous Finance Bill debates. The hon. Gentleman has probably been in more of them than I have. The issue is not the abolition of allowances that are 40-odd years old and increasingly do not recognise the changed shape of UK industry. It is about abolishing allowances completely to fund a cut in mainstream corporation tax, with the result that the incentives for investment are taken away at the point of investment.
One of the measures that the Bill ought to have contained but does not is the creation of a tax relief for the video games industry. We all know in the House that in the UK we have a particular expertise in creating video games, which was beginning to create high-value jobs in the UK in what has become a multi-billion-pound industry. We also know that our brightest software engineers are being tempted abroad by generous and possibly illegal tax breaks, and that we risk the decimation of our UK base if we do not respond. That is why, while we were in government, we developed the video games tax credit, which was to operate along the same lines as the film tax relief. In opposition, just before the election, the Conservative party supported that. On 13 April 2010 the hon. Member for Wantage (Mr Vaizey), now the Under-Secretary of State for Culture, Olympics, Media and Sport, said:
“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.”
Like so many other things said during the general election campaign, that pledge was abandoned immediately after it. We will want to explore the issue further in Committee.
Before the Minister uses the standard Treasury line about how the video industry can always make use of the research and development tax credits that are available more generally, he might care to put all our minds at rest and deal with the nasty rumours swirling around that the entire R and D tax credit may be at risk in the cuts to come. Perhaps the Economic Secretary will reassure us on that point.
Another notable omission from today’s Bill is any reference to increasing the resources which will allow HMRC to build on its already excellent work to tackle the tax gap. Obviously, as was said earlier, the more that tax due is collected, the more effectively the deficit can be tackled and the less pain our society will be forced to endure during the adjustment ahead. During the conference season the Deputy Prime Minister made much of the need to close the gap between the taxes that are due and those that are actually collected. He made grand and welcome pronouncements that it is “ethically wrong” to avoid paying our taxes. He was followed by the present Chief Secretary to the Treasury who announced, interestingly, that he regarded both tax avoidance and tax evasion as “morally indefensible” in times like these.
Kelvin Hopkins
I agree entirely with what my hon. Friend is saying. PCS, Richard Murphy and others have made the simple point that appointing more tax officers would solve the problem. They collect many times their own salary, and it would be highly beneficial to the Exchequer if that were done.
Ms Eagle
My hon. Friend is well known for his views on the subject.
Neither of the Ministers whom I just quoted revealed just how successful HMRC has been in pursuing this work in the past three years. HMRC increased the yield from compliance interventions by 60% in the three years to 2008-09. However, we all know there is more to be done and we would all support sensible measures to make such work even more effective.
Following all the fuss about that and the headlines generated, I would have expected to see some extra action in the Bill. However, despite the dramatic headline- grabbing moral assertions, nothing has been added to the Bill to signal the Government’s determination to launch a further crackdown. The worry is that the 25% to 40% cuts in departmental staffing due to be announced in the forthcoming spending review will seriously damage HMRC’s ability to maintain its work on improving tax collection, let alone to launch a further successful crackdown on the tax cheats. Again, this is a topic to which we will return in Committee, but I would be grateful for any reassurances the Minister may be able to offer us tonight that the operational capacity of the HMRC in this crucial area will be enhanced rather than decimated in the cuts to come.
Perhaps the hon. Lady can also explain to the House precisely what signal on tax collection the Government intend to send by appointing Sir Philip Green to advise the Prime Minister on Government efficiency. His own tax arrangements include paying a £1.2 billion dividend to his wife, who just happens to be domiciled in Monaco for tax purposes. Although this is not illegal, the Business Secretary has gone on record as saying that he is unhappy about it, and the Energy Secretary has said that it sends the wrong message. Can the Minister explain how this example squares with the Chief Secretary’s grand pronouncement that both tax evasion and tax avoidance are immoral in times like these? Once more, we must look at this Government’s actions rather than their words. Their decisions will be far more eloquent than thousands of well-crafted press releases or any synthetic outrage.
As we await the spending review, it is abundantly clear that the centre of economic and political attention lies not with the Bill but elsewhere. We would have wanted this legislation to contain at least the beginnings of a plan for growth, but it does not. It should have contained some extra and concrete plans to back up with credible action the Deputy Prime Minister’s fine words on the immorality of avoiding taxes, but it does not. In choosing to cut the deficit further and faster than we proposed, the Government have taken a huge gamble with our economic prosperity. A synchronised deficit reduction throughout the developed economies risks plunging the world back into either recession or a Japanese-style jobless recovery. The Irish example should be a salutary lesson to the Government of the risks that they run with their economic approach.
In the meantime, we will look closely at the Bill and take a keen interest in it as it goes through Committee. We will see whether some of the issues that I have raised can appear as amendments during its passage through the House.
Mark Simmonds
The hon. Lady makes a fair point, and I should say two or three things. First, the national insurance changes that the coalition Government have made will make it better and easier for employers to take on new employees in the private sector. Secondly, the Treasury is working on the regional fund to address the difficulties that are faced in some regions, which, I would argue, are over-dependent on public sector jobs, so that people can move into the private sector quicker than would otherwise be the case.
The second element of the expansionary fiscal contraction is to encourage business to invest, and I do not agree with the fundamental argument of the shadow Treasury spokesperson. There is a direct inverse correlation between Government borrowing and business investment, which means that when Government borrowing declines business investment goes up, and vice versa. That would be especially true if it were supported by expansionary monetary policy, which it is and, I hope, will be for the foreseeable future.
Opposition Members may say, “That all sounds very well theoretically, but has it ever happened in practice?” The simple answer is, yes. It has happened twice in recent times—not only in the early 1980s, when the then Chancellor of the Exchequer, Geoffrey Howe, reduced public expenditure and interest rates and, therefore, stimulated economic growth, but—
Mark Simmonds
In a minute, because the hon. Gentleman might be keen to comment on this point. The correlation also occurred under the previous Labour Government, between 1997 and 1999, when they stuck to the preceding Conservative Government’s expenditure plans. That is when GDP growth under the previous Administration was at its highest, averaging roughly 3.5% per year—significantly higher than during the rest of their tenure. So, the correlation has occurred before, and I see no reason why it should not occur again.
Kelvin Hopkins
I hesitate to say this, but I was around in 1979, and I remember it very well. The Government at that time massively increased VAT and increased interest rates. The pound rose, and neo-classical economists, like the hon. Gentleman no doubt, said that unemployment would fall to below 1 million. It actually rose to more than 3 million, and one fifth of manufacturing disappeared. It was only when the Government later reversed those policies that the economy started to expand, but sterling depreciated by 30%, during Nigel Lawson’s tenure, when the economy started to grow again.
Mark Simmonds
I am grateful for that intervention. The hon. Gentleman will not be surprised to hear that I do not share his analysis. In fact, the parallels are interesting. I would argue that in the early 1980s Geoffrey Howe and Margaret Thatcher were clearing up the mess that they inherited from the previous Labour Administration, just as the Chancellor of the Exchequer and Liberal Democrat colleagues in the coalition are tidying up the mess that we inherited from the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) and Tony Blair, his predecessor.
Claire Perry
As always, my hon. Friend makes an excellent point based on his substantial experience in the business world. During that process, we showed a clear commitment to doing the right thing for the British economy. We did not do things to maximise political headlines, of which the previous Government were guilty on an almost weekly basis.
What is the result of taking those bold actions? Let us talk numbers. The risk premium on the British economy has dropped by 30% since the election. Long-term interest rates—the 10-year interest rates—have dropped by more than 1%, meaning a 25% reduction in the cost of borrowing. These are not arcane measures thought up by a load of greedy bankers; they materially flow through to the borrowing costs of our constituents, both for mortgage and small business borrowers. The measures mean real growth for the British economy.
Why did we not consider tax measures in the first Finance Bill of this Parliament? The point made earlier on transparency and consultation is a valuable one. We said that we will be a Government who are far more transparent and that we will allow time for consultation.
Kelvin Hopkins
I am listening with interest to the hon. Lady. She said that the Government did not introduce tax measures, but what about the rise in VAT, which is a regressive tax? The introduction of a more progressive tax—for example, a tax on the rich or on big business—might have been more acceptable, but a regressive tax will deflate the economy by taking money out of the pockets of ordinary people, who spend most.
Claire Perry
I would debate regressive and progressive taxation and the question of income or expenditure with the hon. Gentleman, but I would like to make a little progress, if he will allow me, and focus specifically on the technical measures in the Bill.
The measures were published on 12 July, and I believe that we have had a number of responses to them, and we now feel that we have had adequate consultation to proceed. The House feels that we can cope with the split between two Finance Bills, but I would like Ministers to reassure us that we will revert to one Finance Bill as soon as possible, as the situation normalises. In that way, the whole finance package can be given proper scrutiny, and we will not have the kind of piecemeal debate that we are having today.
Finally, let me give some context to the measures. We have heard this before, but I make no apologies for saying it again: we have a record deficit. That is not the result of a financial shock that emerged like the creature from the swamp from America in 2007, but the result of a Government who spent more than they earned in taxes every year from 2002. I have listened with great interest to the representations made by Labour Members. They say, “We were investing. We weren’t ‘spending’; we were building schools and hospitals.” They were building schools and hospitals, but they were borrowing money to do so. In the process, they put the bill on future generations of taxpayers. They talk about being progressive, but that is not a progressive thing to do with the British economy.
The previous Government bequeathed us interest costs of £120 million a day. That is paid largely to foreign Governments, so that they can build their schools and hospitals off the tax pounds that we collect from our taxpayers. There is nothing progressive about that.
What do we get when we discuss the measures? Do we get the intelligent, grown-up debate that the hon. Member for Wallasey (Ms Eagle), the shadow Chief Secretary, asked for? We certainly do not get intelligent, grown-up debate on how to cut the deficit from the few Labour Members in the Chamber. With a very few honourable exceptions, we get opposition to everything. That was amply demonstrated during today’s statement by the Secretary of State for Work and Pensions. We now have the extraordinary situation of Labour Members, in opposing everything, wanting to tax the poorest families in this country to pay £1 billion in child credit to the richest 15% of families. I suggest that, by opposing everything, Labour Member get themselves into some extraordinary technical tangles.
Conservatives want to talk about deficit reduction, but Labour Members put up the ideological barricades, saying, “You’re bad Tory cutters. You’re bad Lib Dem ideologues.” Behind the sound and fury, one question remains unanswered: what would Labour Members cut? Where would their £44 billion-worth of spending cuts fall? If they oppose everything in our deficit-reduction plans—the plans are supported by the International Monetary Fund, the OECD, the CBI, the Bank of England, Tony Blair, Peter Mandelson and everyone but Labour’s Front-Bench team—they weaken their status as a viable Opposition.
I shall finish if I may by quoting Labour’s new shadow Chancellor, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson). No, this is not about his need for an economics primer; it relates to what he has said about the British people. He said:
“I think the reason why they took to the coalition is they thought, well, here’s someone rolling their sleeves up and getting down to the job.”
We are getting on with the job. The measures in this Bill are part of that, and I urge every hon. Member here tonight to vote for the Bill, as I shall be in the not-too- distant future.
Charlie Elphicke (Dover) (Con)
I wish to add my congratulations to my hon. Friend the Member for Skipton and Ripon (Julian Smith), who spoke in the most heartfelt way about his heartbreakingly lovely and beautiful constituency and in the most thoughtful and considered way about the impact of regulation on smaller businesses. I also wish to congratulate the shadow Chief Secretary to the Treasury on her elevation and the hon. Member for Nottingham East (Chris Leslie) on returning to the Front Bench, even if it is not the Front Bench that he would have preferred to be on—no doubt he is a patient man who will wait to have another go in due course.
This Budget, with this Finance Bill, is an essential piece of legislation. We have a country that is all but bust; its budget deficit is more than £150 billion and we face a structural deficit of £109 billion, according to the Office for Budget Responsibility. What does that tell us? It tells us that two thirds of the current extra borrowing each year has nothing to do with the recession and the global financial crisis, and has everything to do with the economic incompetence of the previous Government. The Leader of the Opposition urges that instead of adopting a fiscal position of raising taxes by one third and cutting spending by two thirds, we should make it 50:50. My hon. Friend the Member for West Suffolk (Matthew Hancock) has calculated that that would raise people’s taxes by another £1,300. Such a massive bombshell would not be constructive in this difficult fiscal environment. The Government have taken difficult decisions on taxes, but the further tax rises that the Opposition urge on us are not at all responsible or helpful.
It is therefore right that the coalition is taking the economically responsible and sensible position to step right and stabilise our country and its finances, but we need to have growth and a growth agenda. It is helpful that corporation tax is being reduced to 24% over the next few years, and I hope that in time the Government will be able to go further and bring it down to about 19%. I hope that they will give serious and substantial consideration to a holding company regime such as exists in places such as the Netherlands and Luxembourg, so that the UK becomes a holding company international headquarters of the European time zone. The UK and London, rather than the continent itself, would thus become the jumping off point for Americans investing in Europe, which would provide a massive fiscal stimulus to the UK economy and would make it the financial headquarters centre and the international business centre of the European time zone. We should be very alive to the competitive fight that we have with our European friends, and seek to maximise our position and that of London as the international financial and business centre of this time zone.
We may get a fiscal bounce out of encouraging large businesses to move to this country, set up here and stay here—I note that WPP and Hiscox have left and moved overseas, as have others—but if we want long-term sustainable development and growth, and more jobs and money over the longer term, we need to consider smaller business, because it has a stronger sense of growth over the long term and it supplies the entrepreneurial flair that creates more jobs and money.
Kelvin Hopkins
I entirely accept the need to sustain small businesses, but small businesses live off two things: first, big businesses, which make orders for them; and, secondly, demand in the economy, as we go for meals out, get building alterations done to our homes and so on. If people are not spending because they are frightened of losing their jobs and having their pensions and benefits cut, that damages small businesses at least as much as it does big businesses.
Charlie Elphicke
I would agree with the hon. Gentleman that confidence plays a massive role in our economy—and nowhere more so than with our smaller businesses. The confidence that we have seen since the election seems to be feeding through to the growth figures, which seem to suggest that we are coming out of the recession faster than anyone thought we would. Personally, I think we should be more positive about the prospects for the economy and the prospects for faster growth over the medium term, given the nature of the stabilisation and the confidence that the coalition Government have provided to the country. However, that does not mean that there is not more we can do for small businesses. We can and must, as my hon. Friend the Member for Devizes (Claire Perry) and others have said, have more liquidity for the small business sector. It has been too locked up in banks preparing their balance sheets—we need more lending.
Finance Bill
Kelvin Hopkins Excerpts(13 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
The hon. Gentleman was a Member of the House in the early days of the previous Government, so he knows all about rolling up numbers. I could roll up the numbers for how much will be raised from the bank levy—I do not have the details in front of me, but we would get to about £8 billion—but I am not sure that that is a terribly helpful way of approaching things.
The corporation tax reduction is just one part of the wider package to build a private sector-led recovery. Instead of increasing the small profit rate by 1%, we will cut it to 20% in next year’s Bill, which will benefit some 850,000 companies from April 2011. We are increasing the threshold at which employers start to pay national insurance contributions and have announced a package of support for small businesses. The package will also include a reduction in the writing-down value of plant and machinery allowances to 18% and a reduction in the annual investment allowance to £25,000. That will still provide for allowances that are broadly in line with depreciation, while the annual investment allowance will still cover the annual qualifying expenditure of 95% of businesses. Furthermore, we are reducing the main rate of corporation tax this year and changing allowances in 2012. We are giving companies a timing benefit that will form part of the £13 billion extra that will be invested as a result of the changes.
The third and final area that we are addressing is fairness. Clause 2 increases the rate for capital gains tax for higher rate payers to 28%. That progressive change will substantially reduce the incentive for individuals to disguise their income as a return on capital. It will ensure that the appropriate rate of taxation is paid, which is fair in itself.
Avoidance is a significant issue for the Government and it has been a significant topic throughout the Bill’s passage. It was raised with reference to corporation tax and capital gains tax, and it is the target of clauses 8 and 9, which protect about £200 million of revenue a year. I assure the House that the Government are absolutely committed to tackling avoidance and evasion robustly.
Mr Gauke
If the hon. Gentleman will forgive me, I am keen to press on.
We have inherited plans to limit tax relief on pension savings for the wealthiest. Under the approach in the Finance Act 2010, individuals on the highest incomes who were able to make very large pension contributions could have continued to get pensions tax relief worth up to £51,000 a year. We have concerns about the complexity and fairness of the previous Government’s approach. Given the state of the public finances, we cannot ignore the £4 billion or more of revenue that the policy was set to raise, and as we are committed to protecting the public finances, the alternative needs to raise no less revenue than the existing plans. We are looking at an approach whereby the annual tax relief available will be restricted to less than half that under the previous Government’s plan, which will significantly curtail the ability of the super-rich to benefit from pensions tax relief.
We have touched on annuities. We want to enable people to make more flexible use of their pension savings. We intend to end the obligation to annuitise by the age of 75 from April 2011, and last week we launched a consultation on the details of the change. Before a new system is introduced in next year’s Finance Bill, this Bill puts in place interim measures that will delay such decisions until an individual is 77. That will prevent anyone turning 75 on or after Budget day from being disadvantaged by having to make a decision before the new rules are in place.
The Bill is at the heart of the Budget changes that are necessary for this country’s tax system. Unlike our predecessors, we do not believe that, in a pit of debt, we should still be digging. We do not believe that we can just borrow to pay for front-line services. In the words of the previous Chancellor:
“If we are not credible in what we do and say, people will assume there will be more borrowing or huge tax rises to come.”
Our predecessors failed that test but we are succeeding.
In the words of the shadow Business Secretary, we cannot wish the deficit problem away. The Bill will promote enterprise. It is progressive and responsible, and I commend it to the House.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
I am very grateful for the opportunity to say a few things in conclusion to our debate about the panic Budget that has been sped through this place. To all those who have observed these debates about the Budget and the Finance Bill, it is now clear that the Budget is born not of economic necessity, but of political anxiety—anxiety that, if Liberal Democrat Members are allowed to see any more evidence of the damage that the Budget is doing to confidence and growth, they will remember where they buried their Keynesian tradition, disinter it and refuse the Chancellor their support.
The great question that this Budget and Finance Bill should have answered is how do we lock in the recovery that Labour left? Winning that recovery dominated our final two years of office. Not since 1945 has the world been hit by a recession on the scale of that which hit our shores in 2008. The global economy shrank by some 1% for the first time since the war, G7 economies shrank by some 3% and world trade fell by some 12%. What started as a collapse in confidence on Wall street rapidly infected the world’s financial system and triggered a disastrous domino-like collapse in confidence among markets throughout the world. No country, not least one of the world’s great trading nations, could be isolated from its effect, and we were not.
Kelvin Hopkins
My right hon. Friend referred to the 1940s, when the deficit was massively higher than it is now. Of course, the magnificent Labour Government of 1945-51 grew their way out of problems by keeping full employment and public spending going.
Mr Byrne
Precisely. The Minister could not understand that point from his own Budget, but I shall explain it in more depth in a moment.
On Friday this week, we will be able to test the durability of the recovery that Labour delivered. Almost two years on from the oil price hitting $147 and the collapse of Lehman Brothers, the Office for National Statistics will publish growth figures for the second quarter of 2010, which I am sure all hon. Members await with some interest. But this much we already know. The ONS has told us that our economy has grown by 0.7% since its low point last year; that growth in the first quarter of 2010 was some £8 billion larger than it was in the final quarter of 2009; and that output is growing by about £88 million a day.
The National Institute of Economic and Social Research has also already estimated that output in the second quarter of this year could hit 0.7%. If that comes to pass, it will be no mean achievement, especially when our neighbours tell us precisely how hard it is to sustain recovery. In the first quarter of this year, our last quarter in office, growth in this country reached 0.3%. In Germany, it was lower; in France, it was lower still; in the eurozone, it was lower; and Spain, Ireland and Greece are all forecast to see negative growth this year. Labour is proud to be the party of the recovery, and the question that the Bill should have answered is, how do we guarantee the recovery’s future?
We are proud to have been the party that brought together a global response to the recession. Here in London, countries from throughout the world agreed a plan, including a £1.1 trillion support package, that helped to ensure the revision of global growth from 1.9% last year up to 3.5% this year. We are very proud to be the party that stopped the British banking system collapsing in the face of its exposure to melting international credit systems, and we are very proud to be the party that put in place here at home the most comprehensive recovery plan to protect people’s jobs from the axe, homes from repossession and employers from liquidation.
Ms Eagle
I will not give way because the hon. Gentleman has not been here for the entire debate; if he had been, I would have done.
We see in this Finance Bill that the Tory-led Government have made precisely that error with their deliberate, ideologically driven choice to go for a much more aggressive and reckless slash-and-burn strategy for public spending than the objective economic conditions, or even the bond markets themselves, required. The decision to opt for a balanced budget in four years is driven not by the objective economic conditions but by an ideologically driven political belief in a small state, a belief which is now apparently shared by the Liberal Democrats. Similarly, the decision to cut the deficit by imposing a 77% to 23% ratio of public spending cuts to tax rises is a choice driven not by the objective economic conditions but by the same belief in a small state apparently shared by the Liberal Democrats. It is a ratio of pain never before achieved in the UK, and it was not shared with the voters before the election. No mandate for this was established in the general election. Ministers have admitted that the cuts will be painful, but they have failed to acknowledge the scale of the pain that they have chosen to inflict. The apparent relish with which they choose to announce huge and ongoing cuts does them no credit whatsoever, and it will be seared into the memories of the millions of victims of their sadistic fiscal policy for years to come.
The propaganda techniques are chilling. Carefully chosen, extreme examples of excess in public expenditure are leaked by the Government to sympathetic tabloids to be highlighted in screaming headlines and make the case for more cuts. Government websites coarsen the debate still further by parading a stream of ignorant vitriol whipped up by sensationalist reporting, so it is suggested that workhouses are to be reopened, benefit claimants sterilised, and immigrants deported. If this is the nice face of the Tory party, then God help us, and shame on the Liberal Democrats for going along with it. The apocalyptic and absurd scares that they have issued about the UK economy resembling that of Greece—we heard it again today—have been not only fundamentally wrong but deeply irresponsible, and they have risked precipitating the very loss of confidence they purport to avoid.
This Finance Bill signals the biggest and most sustained public spending cuts in UK peacetime history, coupled with increases in taxes such as VAT that will directly take demand out of the economy just when recovery is fragile and still needs nurturing. That is why it is such a gamble. Labour Members are not the only ones who are deeply worried about the choices that have been made in the Bill. Following the Chancellor’s “austerity Budget”, the International Monetary Fund has just cut its growth forecast for the UK for both this year and the next. The OECD has criticised the decision to abolish the future fobs fund and other employment support packages as short-sighted and warned that the scale of job cuts in the public sector will slow down the recovery.
As a direct result of the June Budget and this Finance Bill, the now notoriously named Office for Budget Responsibility has had to revise upwards its estimates of job losses in the public sector. At the same time, it has revised downwards its growth forecasts and hoped that no one would notice that it excluded 550,000 people who work in state-owned enterprises from being in public sector employment, even though the Office for National Statistics classifies them as such: thus public sector job losses are likely to be even higher. The OBR’s prediction that the anticipated “recovery” will generate 2 million extra jobs in the private sector in just five years has caused widespread incredulity, because that target has never been achieved in the modern era. It has certainly never been achieved at a time when huge public spending cuts are likely to dampen employment prospects in the private sector and austerity measures are being imposed simultaneously in almost every developed economy in the world.
Kelvin Hopkins
Exactly the same predictions were made about unemployment falling because of the 1979 Budget—in fact, it went up to 3 million.
Ms Eagle
People should learn from their economic history; I only wish that this Government would.
The OBR’s heroic assumptions about export growth and business investment also strain credibility, but Sir Alan Budd will not be around for much longer to defend his forecasts, whatever happens in the real world. One thing is clear: we cannot all export ourselves out of trouble at the same time. Because world trade has been so badly impacted by the global credit crunch, the UK has experienced a 25% devaluation of its currency without any noticeable upturn in export performance. Prime ministerial trips to China accompanied by huge cuts in Government support for new industrial activity in the UK do not seem to be the right response to this challenge.
The Finance Bill contains no strategy for growth, yet growth is the best way of dealing with any deficit. In place of a growth strategy, we see a pious, dogmatic belief—often restated today—that the private sector will miraculously spring to life and fill every space vacated by the Government. This is in the teeth of massive private sector deleveraging, damaged confidence and an ongoing lack of affordable bank lending. The huge hike in VAT will damage demand at a crucial moment. This is an example of blind economic faith—it is not a serious growth strategy. The Bill contains no hint of an alternative if this blind economic faith turns out to be misplaced. There is no fallback position if the economic gamble that the Chancellor has outlined starts to go wrong. How high will unemployment have to rise before the Chancellor looks again? Why, once more, is unemployment a price worth paying?
Finally, I want to look at who is paying for the measures contained in the Finance Bill. The Chancellor has repeatedly asserted, “We’re all in this together”, but we have to judge him by his actions rather than fine words, and his assertion of social solidarity turns out to be a cruel joke. The Finance Bill and Budget measures are regressive, not progressive. They hit the poorest hardest. The VAT hike is the regressive centrepiece of a regressive budget. The stealth move from retail prices indexation to consumer prices indexation for all benefits and all pensions takes £6 billion in savings from the poorest and most vulnerable and gives at least £50 billion, and possibly £100 billion, to employer pension schemes, at the risk of employee representatives. The losses mount year on year, for ever into the future.
Analysis has shown that the Budget takes a massive 21.7% of income from the bottom 10% of the income distribution and a mere 3.6% from the top 10%. My right hon. Friend the shadow Secretary of State for Work and Pensions has shown that of the £8 billion net revenue raised by the measures before us, £6 billion will be raised from women and children, with only £2 billion being raised from men. Like Flashman in a tight spot, the Chancellor has chosen to put women and children first. He has put them first in the firing line, bearing the brunt of his tax rises and spending cuts.
This Finance Bill takes a huge gamble with our still fragile economic recovery. It gambles that a vicious bout of self-inflicted austerity will not tip us back into a recession or a long period of low growth, and that we will be able to export our way into growth at a time when a globally synchronised austerity signals otherwise. It is regressive, threatens social cohesion and hits the poorest hardest, and we cannot support it.