HMRC Office Closures
Kelvin Hopkins Excerpts(8 years, 5 months ago)
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Hannah Bardell
I could not agree more with my hon. Friend. It is yet more evidence of this Government’s lack of respect for Scotland and for Scottish workers.
Following the announcement, the BBC reported that more than 2,000 jobs could be lost in Scotland. As yet, we have no detail. With your indulgence, Madam Deputy Speaker, I will list the offices that are set to close across Scotland to highlight the scale and impact of the decision: one office to close in Aberdeen by 2021; one office in Bathgate and Livingston, my own constituency, by 2020; one office in Cumbernauld by 2020; two offices in Dundee; three offices in East Kilbride; three offices to close and consolidate into one large office in Edinburgh; and two large offices to close and consolidate into one large office in Glasgow.
Kelvin Hopkins (Luton North) (Lab)
I am pleased to say that I support the motion. The motion also refers to HMRC offices throughout the UK. Does she have statistics for the whole of the UK as well as for Scotland?
Hannah Bardell
I do not have them to hand, but I would be happy to hear the hon. Gentleman’s specific views and discuss them with him.
Royal Bank of Scotland
Kelvin Hopkins Excerpts(8 years, 6 months ago)
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Jeremy Quin
I understand the attraction of that argument. The hon. Gentleman is an economist of fine standing, and his point, which was also made by the hon. Member for Edmonton, is one to which we would all like the answer yes, but it is not as simple as that. The reality is that the value of a share is what people are prepared to pay for it. We know what the value of RBS is at present. A lot of actions were taken within RBS that might have been right for the UK economy but not have added to the value of the share price. If we are expecting RBS to act in the interests of the UK, that may not always be right for their share price.
Jeremy Quin
I will, but let me make one final point in rebutting the point made by hon. Member for East Lothian (George Kerevan), and then I am sure the hon. Gentleman will have another go. The Rothschild report is thorough—it is bigger than the two pages produced by the Governor of the Bank of England—and sets out why the taxpayer can expect to at the very least break even and probably make an overall profit on their investment in the banking system. That is a remarkable achievement, given that back in 2009, when the Labour party was in government, the Treasury was talking about a £20 billion to £50 billion loss.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I congratulate my hon. Friend the Member for Edmonton (Kate Osamor) on securing this debate. I totally agree with her that, given the fact that RBS is a major public asset and that its proposed sale is of huge significance, the level of both public and parliamentary debates has been very limited. This debate will at least go some way towards addressing that.
I will not labour that point, but I will start from the perspective of the taxpayer, who has a huge interest in the issue. There are two specific but overlapping interests. The first, which has already been debated, is the issue of recouping the money the taxpayer has invested in the bank. The second is the need to ensure that, even if the bank is sold, it supports the wider community interest and the overall economy in a way that will boost the economy and future tax receipts. The sale as mooted does not seem to do either of those things.
I am grateful to the New Economics Foundation for some of the figures I will mention. From February 2014 to February 2015, RBS traded at an average of 349p per share, way below the UK Financial Investments assessment of the 482p per share needed to recoup the taxpayers’ investment. If we also consider the additional uncertainties about the costs of fines and litigation related to the mis-selling of products and the manipulation of LIBOR, we will see that there is a big question mark over what the market will stand.
Failure to recoup taxpayers’ money might, in certain circumstances, be justified if the returns from the capital receipt contributed substantially to public finances. The Government have committed themselves to using the money raised from the sale to pay off public debt, but, as things stand, interest rates are low and the amount that would be paid off would be modest. It is reasonable for the House to ask for an exercise to be completed calculating the amount that would be paid off compared with the amount the taxpayer may get as a result of restructuring the bank and of the investment in our wider economy and the increased tax receipts that would generate. That would not be a simple exercise, but, given the significance of the proposed sale of the bank, it is reasonable to expect the Government to perform it and to put it before the public and Parliament before they justify their decision.
I will make a few comments about the financial services industry in general. Britain is a world leader, and I would not wish in any way to detract from the industry’s crucial position in the economy. However, in fulfilling its secondary objective of underpinning growth in the rest of the economy, it has been much less successful and lags behind many of the banking services of our key international competitors. UK banks have increasingly favoured lending to other banks and for real estate, rather than to production sectors of the economy such as construction, manufacturing, transport, communications and retailing.
That has really been brought home to me by recent events. It is ironic: we have a Government who talk about the status of our financial services industry and are philosophically and ideologically committed to the free market and the capitalist process of wealth creation, yet when we need major investment in infrastructure and regional development, they have to cosy up to China, the foremost communist country on the globe. I do not think that there can be any clearer demonstration of the total dysfunctionality of our financial services market.
Kelvin Hopkins
It is ironic that the Government are intent on privatising, yet when they privatise they often sell off British assets to foreign Governments. Nationalisation is all right so long as assets go to a foreign Government, not to the British Government.
Mr Bailey
The hon. Gentleman’s intervention reinforces the sheer incoherence, inconsistency and irony of the Government’s policies towards the financial sector.
I want to speak for a few moments about small and medium-sized enterprises. The Government talk about rebalancing the economy, first from service industries to manufacturing and then from London and the south-east to other regions. If we look at the economy, we see that that must be done through SMEs. They constitute 90% of our businesses, 60% of employment and 50% of output. Although those in manufacturing may represent only 12% of our total GDP, they are hugely significant and crucial to driving up productivity and in our export performance, which are key pillars in driving forward our economy.
It would be reasonable to look at our financial services sector to see what it delivers to help to drive forward the economy. Finance and investment are the fuel for this engine of growth, but the problem is that the fuel is flowing in exactly the wrong direction. Despite Government schemes to boost investment loans to small businesses, the number of such loans has declined. The level of lending is highest in London, which has the smallest manufacturing sector and the largest service sector, and lowest in the regions, where there is a higher proportion of manufacturing. Take my own region of the west midlands, the region with the highest manufacturing output: it receives 9% of investment while London receives 20%.
As was articulated by my hon. Friend the Member for Edmonton, one of the reasons behind the situation is the decline of branch banking. We have an over-centralised system. The demise of local banking and the growth of digitalisation have led to a consequential reduction in the local knowledge and insight required to understand the needs of both local communities and local business.
Kelvin Hopkins
It is tragic that Britain’s manufacturing as a proportion of GDP is about half that of Germany’s. Germany has used its banks properly; we have not. We now have an absolutely enormous balance of trade deficit simply because we cannot produce enough for our own use.
Mr Bailey
That was a well-timed intervention because my next comment was going to be that the opposite is true in countries such as Germany, where there is a tradition of regional banking, local engagement and long-term support for small businesses.
We would reasonably expect the Government, given their stated policy objectives of rebalancing the economy and boosting our exports and productivity, to look at the banking system as a whole and, given their ownership of RBS, to consider what they could do to address the gap in the market and achieve their policy objectives. Even their flagship British Business Bank seems to be replicating the sort of business-support models that have not previously worked. That market failure has led to the growth—I might add that that growth is very welcome—in community finance companies and peer-to-peer lending. They are playing a vital role in providing sources of finance in ways not addressed by the major, highly concentrated banks in this country. We would reasonably expect a Government who own RBS to look at its potential to support businesses.
The alternative Government policy seems to be to correct market failures through local enterprise partnerships and the regional growth schemes, some of which have been quite successful. One of the most successful schemes, operating through a community development finance institution under a £60 million regional growth fund programme, has outperformed nearly all other RGF schemes. What will happen? Nobody knows, because there is no commitment to fund it after 2016. The Government are selling off a bank that they control to the private sector, which has no record of supporting the very areas of business we most need for economic growth yet they are neglecting the sector that can deliver such investment.
In February, the British Business Bank commissioned a report on the community development finance sector. The report was supposed to be ready in time for the comprehensive review, but there has been a four-month delay and no report has yet been made. The sector therefore has no idea what its future funding support will be in continuing very effectively to deliver investment for small businesses that are being neglected by the existing banking sector.
To summarise quickly, we have a banking sector that is brilliant at making money, but fails to use its strength for the rest of the economy. The sector is over-centralised and fails to reflect the diversity of provision needed to meet the wider demands of our economy. Government schemes have failed to reach their full potential because they use existing banking structures. Where alternative structures exist, banks do not engage as they should. That is a major obstacle to delivering the Government’s policy objectives on exports, productivity and regional growth. In that context, the Government have a window of opportunity to make a change, and they have an enormous investment in a significant bank with the potential to drive such a change.
As it currently stands, the policy decision is based on political expediency, rather than the needs of the economy or the stated objectives of Government policy. Indeed, it actually contradicts elements of Government policy. I support the motion because it is time to think again.
Mr Steve Baker (Wycombe) (Con)
Some lessons of history are so well established as to virtually be axioms: the Government ought not to own banks and private enterprises ought not to be bailed out by the taxpayer. Unfortunately, the Government do own banks and those banks were bailed out by the taxpayer. I think that the taxpayer bail-outs, which involved the privatisation of profit combined with the socialisation of risk, together with all the conduct issues that we all know so well, have done a great deal to undermine faith in the market economy, which we know is the only way to sustain billions of people on the face of the earth.
Some of the issues that have come up today go to the heart of how we should structure a market economy. In my view, in a market economy there should be a plurality of ownership models for banks. One of the great mistakes of the 1980s was the demutualisation of building societies. [Interruption.] I see my hon. Friend the Member for Horsham (Jeremy Quin) nodding furiously in agreement, for which I am grateful. As a teenager, I knew instinctively that the mutual model aligned interests in a way that the shareholder model did not. I was opposed to the demutualisation, or carpet-bagging as it was called, that went on then. These days, I have more theoretical grounding for my views and I certainly believe that we should have a more diverse banking sector, with more mutuals and co-operatives.
I should say briefly that the systemic problems that have affected the entire banking system around the world, irrespective of ownership models, are symptomatic of far deeper problems in the institutional arrangement of money and banking, which I have talked about at great length on other occasions.
Kelvin Hopkins
The problems around the world derive from the fact that we have a globalised financial system with no boundaries between countries, so money can flow freely around the world. Had we been insulated from what happened in America, we might have survived rather better.
National Insurance Contributions (Rate Ceilings) Bill
Kelvin Hopkins Excerpts(8 years, 8 months ago)
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Kit Malthouse
My hon. Friend has made a powerful point. Some of the sectors that are the most critical to the UK’s future success—aerospace, technology and life science, in which I have a particular interest—are international businesses that make huge bets on countries on a regular but long-term basis. Some predictability is therefore absolutely key.
My final point is about inflation. We are living in a financial atmosphere in which inflation will be of concern over the next five to 10 years, and we need to be careful to ensure that it does not get out of hand. We have been extremely successful in doing that so far. As I have said, national insurance forms a large part of prices. The Government—any Government—must bear in mind that if taxes rise, so do prices, over time. By injecting an element of freeze into the national insurance bill, we are also doing our bit to relieve whatever inflationary pressures may be generated in the economy.
Kelvin Hopkins (Luton North) (Lab)
The hon. Gentleman talks about inflation as if it were the danger, but the real danger at the moment is deflation. Japan has been struggling with deflation for a decade and more. There is a serious problem across the world caused by prices rising below the threshold deemed appropriate by central banks, especially in Britain, and in America, the threat of rising interest rates is terrifying the world that we may be plunged into another economic crisis. It is deflation that is the problem; inflation is not even on the horizon.
Kit Malthouse
The hon. Gentleman may have a point at the current time, but some of us are of an age to remember the destruction that was wreaked on the last generation by inflation. My grandparents’ pensions were destroyed by it. I hope he will forgive me for having an atavistic fear of it, a fear that it may, at any point, appear over the horizon. Anything that we can do to defray that fear, either now or in the future, will be welcome.
I support the Bill. I think that it is a good idea. I will vote for it first because of the certainty that it will bring for business, secondly because of the international signal that it will send, and thirdly because I think that anything we can do to bear down on any inflation, either now or in the future, will be extremely welcome.
Stewart Hosie (Dundee East) (SNP)
As the Minister said, the Bill will prevent any increase in the current rates of class 1, class 1A and class 1B national insurance contributions paid by employees and employers for the duration of the current Parliament. It will also provide that, for each year, the annual upper earnings limit cannot exceed the higher-rate threshold, which is the sum of the personal allowance and the income tax basic rate. All that is very sensible. There is nothing wrong, in principle, with any Government’s providing certainty in the tax code for the duration of their term in office. However, we clearly do not need legislation to do that.
As has already been said—so I shall say it only once—the Bill is a gimmick. It also demonstrates, in many ways, a lack of confidence. I shall say more about that shortly, but the key point is that placing such an arbitrary and unnecessary restriction on the Government’s ability to respond to unforeseen events may yet come back to haunt them.
The Bill results from the Finance Bill, which was published in July, and which provides for the tax lock on national insurance contributions, income tax and VAT. As was said earlier, it is intended to apply to a tax year that comes after the date of the Bill’s Royal Assent and before the first general election after that date. The time scope is therefore rather limited. There is also a technical issue. This is a separate Bill; the measures are not in the Finance Bill because statutory provisions for NI cannot be included in it.
However, none of this should be any surprise to us. The Conservative manifesto said that in government the Tories would not increase the rate of VAT, income tax or NICs in this Parliament. That should have been enough; the legislation is not required. In a speech ahead of the general election the Prime Minister confirmed that the tax lock also meant there would be no extension to the scope of VAT or any increase in the ceiling set for the main rate of NICs for employees.
Kelvin Hopkins
The hon. Gentleman mentioned VAT and the lock that the Government propose. Does he agree it would have been more impressive if they had had that lock before they raised VAT from 15% to 20% rather than after?
Stewart Hosie
That is the kind of thing any Opposition politician should say about any set of Tory policy decisions that ends up with the kind of outcomes the hon. Gentleman describes.
The Government also committed to legislating within 100 days of the election to rule out increases in the rates, which is what we are seeing today, but of course serious unintended consequences for spending and for other taxes may flow from this measure. Let me explain. The Government laid out in the summer Budget discretionary consolidation—that is, cuts and tax rises to you and me—amounting to £97 billion in this Parliament. Of that, new draconian cuts to welfare amounted to a full third—£33 billion—but the entire spending plan was predicated on, among other things, NICs bringing in £115 billion this year, £126 billion next year, rising to almost £152 billion in 2021. That is a forecast rise in revenue yield from NICs of 9.6% this year to next, 4.3% the year after, 4.7% in 2017-18 to 20118-19, and a rise of over one third—£37 billion—between last year and the end of the forecast period.
One of the questions the Minister has to answer today is this: given the arbitrary freeze on NICs and some other rates, should the forecast yield be significantly less than expected, will other taxes rise and if so, which ones; and will the Chancellor take the axe to yet further spending, perhaps on pensions, or will borrowing rise and deficit reduction forecasts simply be abandoned, delivering exactly the same failure on debt and deficit we saw in the last Parliament?
Stewart Hosie
The £1.5 trillion black hole, which is the UK national debt, is of rather more significance than any cyclical deficit any country may have, but then I suspect the hon. Gentleman probably knew that already.
Returning to the scope of the Bill, it is important that the Minister says what will happen should the yield forecasts be less than planned. That is important for his Government, too, because their rationale, as stated in their manifesto, was focused on
“reducing wasteful spending, making savings in welfare and continuing to crack down on tax evasion and aggressive avoidance.”
That allowed them to commit to no increases in VAT, income tax or NICs. They argued:
“Tax rises on working people would harm our economy, reduce living standards and cost jobs.”
I have no problem with tackling genuinely wasteful spending, such as Trident, or clamping down on tax evasion, but it is this Government’s attack on welfare which is harming the economy, reducing standards of living and threatening the growth needed to ensure the forecast yield from NICs is maintained in the way the Red Book forecasts suggest.
Kelvin Hopkins
I have a great deal of sympathy with what the hon. Gentleman has been saying. He mentioned the tax rises that have taken place which have brought the Government considerable increases in revenue, but does he agree that those taxes tend to be regressive and the one thing the Government are protecting is the progressive tax, which is much fairer, called income tax, which they have sought to reduce for high income earners?
Stewart Hosie
It is certainly the case that during the downturn the decision to remove the 50p rate of tax was wrong. We would certainly argue that in the current climate that 50p rate should have been maintained. In that respect at least, I agree with the hon. Gentleman.
I wish to raise at this point the Conservatives’ future plans to replace national insurance because that is pertinent to the measure under discussion. In July, the Financial Secretary commissioned the Office of Tax Simplification to review the interplay between income tax and NICs. He said:
“I would like the Office of Tax Simplification to look at what the impacts, costs and benefits of closer alignment would be and to set out what the necessary steps would be to achieve closer alignment. We believe greater integration of the two systems has the potential to remove economic distortions, reduce burdens on business, and improve fairness across individual earners.”
These are all sensible objectives, and I assume this is still a longer-term Government objective, so let me ask the Minister how this Bill assists in the delivery of that aim.
I said earlier in my contribution, and also in a debate on the financial statement in July, that the Chancellor promised a tax lock but that legislation to stop tax rises was
“just a gimmick and no one is going to buy it”—[Official Report, 8 July 2015; Vol. 598, c. 348.]
Indeed my hon. Friend the Member for Edinburgh East (Tommy Sheppard) made the same point:
“If these provisions are included in what”
is now this Bill today
“it will only take a clause”
in future legislation
“to overturn them. They are therefore literally not worth the paper on which they are written.”—[Official Report, 21 July 2015; Vol. 598, c. 1441.]
He was right, of course, and that ties in with what I said earlier about a lack of confidence.
Of the Bill that became the Labour Government’s Fiscal Responsibility Act 2010, where levels of debt and deficit were planned but there was no sanction if they were broken, the current Chancellor said that it would achieve
“a constitutional first of imposing no legal sanction on the person who is likely to break it. No other Chancellor in the long history of the office has felt the need to pass a law in order to convince people that he has the political will to implement his own Budget”—[Official Report, 26 November 2009; Vol. 501, c. 708.]—
until now.
Let me reprise that for this Bill. This is a constitutional second. Only one other Chancellor has felt it necessary to bring legislation before this House in order to convince people that he has the confidence to implement his own Budget. We saw Gordon Brown go from Joseph Stalin to Mr Bean; I fear the First Secretary may be reverting to a rather rusty clunking fist.
As has been said, a large number of stakeholders have contributed to this debate, and key from our point of view are the words of Howard Archer, chief European and UK economist at IHS Economics, who said that such a move would restrict the Chancellor’s ability to achieve his targets:
“In particular, if the public finances fall markedly short of their targets, the chancellor would have to face making even more spending cuts and/or raising other taxes. Or just accepting the missed targets. There really still needs to be a lot more clarity on the whole Conservative fiscal policy”.
That is absolutely right.
It is also worth noting the comments of Jonathan Portes from the National Institute of Economic and Social Research. He said the pledge not to increase the main taxes
“considerably reduces our flexibility if things turn out different from expected. This is why I have absolutely no doubt that Treasury and Bank of England officials were tearing their hair out at this.”
What discussions, if any, have the Minister, the Chancellor or the Treasury had with the central bank about these proposals and the inherent lack of flexibility that they generate?
Let me turn now to some of my final questions. I ask Members to bear with me as I describe some of the complexity of the current NICs regime. Employees pay NICs on their earnings if they exceed the lower earnings limit, which is set at £112 a week. A zero rate of NICs is charged on earnings between the lower earnings limit and the primary threshold of £155 a week. Earnings above the primary threshold are charged NICs at a rate of 12%, subject to a cap on the upper earnings limit, which is set at £815 a week. Earnings above that are set at 2%.
Employers pay NICs on employee earnings at a rate of 13.8% on earnings above the secondary threshold, which, at £156 a week, is a difference of £1 from the primary threshold for employers. There is no ceiling on secondary class 1 NICs.
As everyone in the Chamber knows, self-employed people pay a weekly flat rate class 2 NIC. They may apply for an exemption from paying class 2 contributions if there are no profits, or if their profits are less than, or expected to be less than, £5,965 for the year. This replaced a small earnings exemption from April this year. In addition, they may be liable for separate class 4 earnings, and on it goes.
Tax simplification is a great idea, and we can see precisely why. Will the Minister explain how these proposals will make the NICs regime more straightforward? In addition to those categories, individuals may be entitled to make voluntary class 3 contributions to avoid or fill gaps in their NI record to ensure that they qualify for basic retirement pension and bereavement benefits. Does the Minister expect more or fewer people to make additional voluntary contributions as a result of the tax lock to the NICs described in the Bill, and will there be any encouragement for them to do so?
The majority of NICs receipts are paid into the national insurance fund, which is separate from all other revenue raised by taxation. The fund is used exclusively to pay for contributory benefits. If the revenue yield from national insurance does not rise in the planned heroic way that I described earlier, can we expect to see cuts directed at the contributory benefits that people have already paid for? There is often unintended consequence from any legislative change—and sometimes perfectly foreseeable behavioural change that may affect yield forecasts. That is an argument that Treasury Ministers have, from time immemorial, fallen back on when they are implementing bad decisions. What assessment have the Government undertaken to predict whether any negative behavioural change is likely to result from these measures, particularly given the differential in rates and thresholds between employee, employer and self-employed national insurance contributions?
Finally—this is really my most important question and at the heart of our disquiet over a legislative attempt to provide certainty over this Parliament—as the majority of NICs receipts are paid into the national insurance fund and that fund is used exclusively to pay for contributory benefits, may we have a cast-iron guarantee from the Minister today that this Bill is not and will not be the start of an attack on, or an erosion of, the contributory principle that applies to national insurance contributions?
Kelvin Hopkins (Luton North) (Lab)
I apologise, Madam Deputy Speaker, for having to leave the debate for a short while, but I managed to catch the major part of the speech by my hon. Friend the Member for Bishop Auckland (Helen Goodman). It was an excellent speech and I agree with every word of it, but I did not know that she was half Danish. I want to say something about Denmark, a very sensible country with a more appropriate taxation system than we have. As the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) said, would Members prefer to live in Denmark or Mexico? I know which I would choose; Denmark is clearly a more sensible country.
I have been to Denmark on a couple of occasions and it does two very sensible things. First, the Danes have retained their own currency, which is sensible, but they also seek to manage its value, which we do not, and that is also sensible. One result of the Danes’ sensible taxation system is that they can sustain students without fees but with grants until the age of 25. A few years ago, I understand, the average class size in schools in Denmark was 15. No wonder they have advantages that we do not; they are prepared to pay for them—[Interruption.] I shall talk about national insurance, but I wanted to mention the sensible country of Denmark, which I so admire, before I started.
The lock on the taxation system is a gimmick, as my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) has said from the Front Bench. Surely a promise from the Chancellor of the Exchequer would be appreciated, understood and believed by the business sector. A Conservative Chancellor making a promise is enough. This Bill is like saying, “I promise not to rob the bank any more, but do put the handcuffs on me.” He is clearly not a bank robber, but does he need to have those handcuffs on him just to do what he believes to be the right thing? He has given away flexibility in any case, and I certainly would not do that, because we cannot foresee what will happen.
There is a real possibility, for example, of another financial crisis coming down the road. I mentioned in my speech on the Budget forecasts that there will be another serious economic crisis in the not-too-distant future. Precisely when that will happen, we do not know, but we ought to retain flexibility with all the economic levers at our disposal to ensure that Britain is protected if that happens.
In the previous crisis, the British Government, led by Gordon Brown, persuaded the world to recapitalise the banks. If we had not done that, the whole financial system might have collapsed and we would have been in a much worse situation. I am not saying that I agree with everything that my former right hon. Friend did, as I was often a critic of our policies. Nevertheless, that had to be done, even though in a sense it rewarded the gamblers who had gambled away our future and made our lives so much more difficult. Those difficulties continue today, but it was the bankers gambling on the free financial markets who caused the problem. It was nothing to do with the Labour Government, and, indeed, all sorts of economists say that Labour did the right thing when the crisis happened.
Kwasi Kwarteng
We are wandering rather further from the topic of the debate than I would like, but how would the hon. Gentleman explain the consistent deficits we ran from 2001, as the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) suggested? We were in deficit every single year for the last nine years of the Labour Government.
Kelvin Hopkins
I can only refer the hon. Gentleman to the excellent article by the economist Ben Chu, which goes into detail showing why Labour was not to blame and was not responsible. The crisis caused the deficits, but if we had not recapitalised the banks, where would we be now?
Let me go back to the instability mentioned by the hon. Member for North West Hampshire (Kit Malthouse), who is no longer in his place. He talked about businesses wanting stability. Instability arises because of the globalisation of financial markets. Before 1979, we managed financial markets with exchange controls. The breakdown of the Bretton Woods agreement is what caused the problems.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The hon. Gentleman is completely right to say that this is purely a gimmick by the Government. There is no need for a legislative vehicle to enact this policy; the announcement could be made in a Budget statement or an autumn statement, as appropriate. Does he agree that, if the Government were serious about helping working people, and people on low incomes in particular, they would increase the threshold at which national insurance contributions kick in to the level of personal allowances for income tax, rather than implementing the pure gimmick of this Bill?
Kelvin Hopkins
That would certainly be one way of dealing with it, but I think that not cutting tax credits, which are coming up for debate this afternoon, would be a much more important way of helping people on low incomes. We should certainly do that.
Graham Stuart (Beverley and Holderness) (Con)
The hon. Gentleman, as ever, is gracious in giving way. He suggests that the Labour Government were not responsible. Surely, bankers are driven by the incentives in the global markets he described to make money and the job of Government is to regulate those markets so that they benefit the public and do not poison the public well. On that fundamental duty, including the dismantling of the previous Bank of England supervision regime, the Labour Government failed.
Kelvin Hopkins
I have to agree with the hon. Gentleman, but the great deregulation occurred in 1979 with the abandonment of exchange controls. During the period of the New Labour Government, I was one of those who called constantly for reregulation rather than deregulation. I was out of step with my colleagues at the time, but I think we have now learnt a lesson and believe in more regulation. I certainly look forward to a more regulated economic world in the future, and if we have another crisis, I believe that regulation will come back.
I ought to get on to the question of national insurance contributions, as those comments were by way of a preamble to my speech. The suggestion has come from the Conservative Benches that we should abandon national insurance contributions and merge them with the tax system. That has been discussed over some time and I have flirted with the idea myself, but I have come down against it. I believe that although there should be a threshold so that people on very low incomes do not pay national insurance contributions, they reinforce the sense of all of us paying into a system and having a sense of entitlement to what the system can do for us when we are in need.
Tying us all into a system on a relatively equal basis for at least part of the income revenues is important. We pay national insurance contributions and we therefore have a right to pensions, the health service and so on. There is clearly not enough and much more has to be paid out of other forms of taxation. I prefer the more progressive forms of taxation, income tax being the most important, and I regret that income tax rates at the higher end have been cut pretty savagely since 1979. I remember the 1988 Budget, when Nigel Lawson cut the top rate from 60% to 40%. I had lunch in the City shortly afterwards with a number of City people, and they were amazed by it. They had watched the Budget on television and asked, “Why has he done this? We don’t need the money.” That is what people in the City were saying about the cut in the top rate of tax. I have no doubt that there are some people in the world who are so greedy that they want even more money, despite having millions already, but most people think that having a high rate of tax for the very highest earners is a good and progressive thing.
Graham Stuart
The hon. Gentleman must have seen the figures. Every time the higher rate of tax was cut, the amount paid by the richest, in both absolute and relative terms, went up. The truth is that Governments receive more money when they impose fair taxation and less when they follow the policy that he is advocating.
Kelvin Hopkins
I thank the hon. Gentleman for that intervention, but the fact is that successive Governments have failed to ensure that the rich pay their taxes properly. We have a tax gap of £120 billion a year. The fact that fewer people might fiddle their finances is not an argument for reducing the top rate of tax. We ought to have a proper regime for enforcing tax payment by those who get away with it: the corporates and the billionaires who manage to avoid and evade tax on a massive scale. If we collected only a third of what is fiddled every year, we would have another £40 billion a year to spend. I think that we have failed on that because all Governments have opted for a light touch on the rich. That is the truth.
Simon Hoare
The hon. Gentleman obviously has the inside track on the voice of the City—he has referenced lunches he has had in the square mile—so could he illume the House on what the City’s view is on the new policies of his right hon. Friends who now occupy the Opposition Front Bench?
Kelvin Hopkins
I must say that I have not had lunch in the City recently. Indeed, my contacts with City people have not been of the highest order since 1998. I once had lunch with the Governor of the Bank of England, shortly after being elected, and very enjoyable it was too. That was when “steady Eddie” was in charge—he was a splendid Governor and I am sorry that he is no longer with us.
I believe that there are ways of ensuring that we collect the taxes that are due from the rich. Personally, I believe that I should pay more income tax, along with everyone else on my kind of salary—I earn £74,000 a year. Indeed, the majority of the population have said that they would be happy to pay a little more tax in order to help our health service, which is still seriously underfunded.
I believe that national insurance contributions set at a modest level are an important part of our tax and revenue-colleting system. It gives us all a sense of collectivity, which I think is right. We call that the contributory principle. It means that we have a sense of duty in paying taxes as well as a sense of entitlement in receiving what they pay for. I agree with my hon. Friend the Member for Bishop Auckland, who is no longer in her place, on the upper earnings limits.
VAT is a regressive tax. It was noticeable that Gordon Brown, when Prime Minister, cut VAT from 17.5% to 15%, which boosted demand at the moment that was needed and, together with a substantial depreciation of sterling, helped to keep the economy relatively stronger than some other economies. We have since survived, but I think that we are now making a mistake in allowing sterling to appreciate. It has moderated a bit in recent weeks, but it is still far too high, and manufacturing is suffering as a result.
I understand that the Opposition are going to acquiesce in what the Government are proposing today, but I agree entirely with the view put forward by my hon. Friend the Member for Bishop Auckland. I look forward to my party coming into government next time around with our new leader committed to ensuring that the rich, the corporates and those who have been getting away with it for years pay their taxes so that we can build a decent society on the revenues that they should provide.
Kwasi Kwarteng (Spelthorne) (Con)
I am pleased to follow the hon. Member for Luton North (Kelvin Hopkins), although I felt as though I was entering a time warp when listening to his speech; it is a long time since I have heard anyone defend exchange controls. I believe that the limit on the amount of money that someone could take out of the country was £50, and they had to declare everything else. Given the current political climate, it is very interesting to hear a Labour Member advocate such a policy.
Kelvin Hopkins
It was a temporary limit imposed on holidaymakers by Harold Wilson, but most had no problem spending money abroad. What we did was ensure that the bankers and international speculators did not have free rein.
Kwasi Kwarteng
I am glad to hear that everything was all right because it was Harold Wilson who imposed the limit, which I think was £40.
Of course this is a sensible Bill. Of course it makes sense to limit national insurances contributions, because they are, after all, as has been pointed out, a tax on jobs. My hon. Friend the Member for North West Hampshire (Kit Malthouse), who is no longer in his place, made an excellent point about the things we do here being a signal to people outside, such as investors, potential entrepreneurs and people who want to set up businesses. If the Government get the Bill through, I am confident that it will send a very good signal to people who want to invest in the British economy and in our constituencies and who want to set up small businesses.
My constituency of Spelthorne is very near Heathrow airport and lies on the Thames, and it is a case in point. It is an area where small business and private enterprise is at the core of people’s way of life. It is the basis on which people go to work, save and plan for their retirement. Essentially, they are people who are driven and motivated by small business. Therefore, a Bill that caps national insurance tax is an excellent development that will be warmly appreciated across my constituency.
We have heard a number of arguments this afternoon that simply do not make sense. On the one hand, we have heard from Labour Members that the Bill is a gimmick and that it is wrong. On the other hand, they have said that they will support it. Indeed, we have also heard that they were apparently the first people to come up with that gimmick. It seems very odd. I am still utterly confused about their position.
The hon. Member for Dundee East (Stewart Hosie) made a very good point, but I recall that before the general election his party was the biggest deficit denier—it was even worse than the Labour party in denying the deficit and ranting against austerity. It is a very confused picture. I would be very interested to see what the SNP will do if the House divides on the Bill.
Mr Gauke
I understand why the shadow Minister does not want to defend the position of the current leader of the Labour party, but let me make this point clear. The Prime Minister came into office in 2010 with a mission to turn around the UK economy. He succeeded and was re-elected with a majority in 2015.
The hon. Member for Luton North always makes entertaining and thoughtful speeches. I noted that he praised the tax system of Denmark, but I would point out that its VAT rate is 25% and it does not have any lower rates. I can assure him that we will not follow Denmark’s example and put VAT up to 25%.
Kelvin Hopkins
I would be happy if the Danes lowered their VAT rate, but can the Minister tell us what Danish income tax rates are?
Mr Gauke
I do not have all the numbers in front of me, but I take it from the hon. Gentleman’s remarks that he would like to put income tax rates up, not down—[Interruption.] Well, I know he is very close to the Labour leadership and I suspect that he may prove to be an influential figure in deciding policy.
I am delighted that we do not appear to be divided on this measure, even though we heard some doubts about it from Labour Back Benchers. I am grateful to hon. Members for their contributions. This is an important part of the Government’s long-term economic plan, providing certainty and stability to the taxpayers of this country. I am pleased that we are making progress on providing that certainty and stability, as well as protecting the British people from tax increases, at least for the course of this Parliament and—we hope—future years as well.
Question put and agreed to.
Bill accordingly read a Second time.
NATIONAL INSURANCE CONTRIBUTIONS (RATE CEILINGS) BILL (PROGRAMME)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the National Insurance Contributions (Rate Ceilings) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 27 October 2015.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Charlie Elphicke.)
Question agreed to.
European Union (Finance) Bill
Kelvin Hopkins Excerpts(8 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gauke
Absolutely. I am keen to make that commitment and I am grateful to my hon. Friend for making that point. Those of us who participated in the equivalent debates after the previous multi-annual financial framework was agreed and on the Act that performed the task that this Bill will now perform will recall that we spent some considerable time focusing on the fact that a large part of the rebate had been surrendered by the previous Government for little or nothing, merely a promise of reform of the common agricultural policy that had not been delivered.
Kelvin Hopkins
Following on from the point made by the hon. Member for North Dorset (Simon Hoare), I have said many times in this House that the deal done in 2005 was a terrible mistake. The Government have made frequent references to it. Is it not now appropriate to consider trying to regain what was lost in that deal, particularly because our net budget contributions have been rising so strongly in recent years?
Mr Gauke
My hon. Friend makes an important point. I would perhaps go further: it is not just member states that recognise that things need to change and that there needs to be better value for money. Vice-President Georgieva, who has responsibility for the budget, also recognises the need to ensure that money is spent in a better way. The Prime Minister has consistently set out the fact that there are two sensible objectives: to cut the whole budget and to protect the rebate. We will continue to make that case.
Kelvin Hopkins
I thank the Minister for giving way once again. The hon. Member for Boston and Skegness (Matt Warman), who is not in his place, made a useful point about expressing our contributions in terms that the citizens will understand—contribution per head, per month or whatever. Would it not be useful to look at the expenditure side of, for instance, the common agricultural policy, and say how much that costs in net terms per head of population, and how much it has cost over many decades in higher food prices? People would be very interested to know that.
Mr Gauke
The hon. Gentleman draws me into deeper waters and wider issues. Perhaps I should resist, Mr Streeter, before you advise me not to spend too much time on the common agricultural policy and some of its costs. It is worth pointing out that the CAP as a proportion of expenditure by the EU is falling and has fallen fairly significantly. The hon. Gentleman’s point is about making things clearer and ensuring that the British public have a better understanding of where their money is spent. There is a wider point, because that does not apply only to EU contributions. I am sure that he and all hon. Members welcome the fact that Her Majesty’s Revenue and Customs sends out tax statements to the British public so that they can see details of where money is spent in various Government Departments and the details of the money spent on our net contribution to the EU.
The scrutiny Committees of both Houses closely scrutinised and cleared the proposal for the new ORD, which was agreed unanimously by member states in May 2014. The Bill and the Prime Minister’s 2013 deal demonstrate that, working with allies, we can achieve change in Europe, and secure a good deal for the UK and for Europe. I commend the clauses to the House. They should stand part of the Bill.
Mr Gauke
I take my hon. Friend’s point. We are, I hope, moving in the right direction. The new Commission has been in place for the past few months or so, and the early signs are—I shall return to the point—that it appears to be more focused on the task. I think there is a link: there was a reduction in the EU budget, which has somewhat focused the mind.
Kelvin Hopkins
Following what the hon. Member for Torbay (Kevin Foster) has said, would it not be sensible and appropriate for our Government to carry out a comprehensive review of how we think the budget should operate, and make that a firm public submission, whatever is undertaken by the EU itself?
Mr Gauke
I am grateful for the hon. Gentleman’s intervention, which he makes in a characteristically constructive way. Clearly, it is important for us to work with other like-minded member states to ensure that we get the focus we need and the prioritisation of expenditure in the areas that add the most value. There are different ways of achieving that, and we can discuss that. It is only fair to note, however, that some progress has been made, as I shall touch on in a few moments.
New clause 2 imposes a requirement on the Government to request a review by the Council of Ministers of the EU
“budget priorities, waste and inefficiency”
in advance of ratification. The new clause relates not to financing, but to expenditure, so I again point out that we will reject it. Although the Government recognise the need to cut down on wasteful spending, requiring the Government to write and ask for a review of waste and inefficiency would add little to what the Government are already doing in this area. We know that there is waste and inefficiency in the EU budget. We need action, not words—and action is what the Government have taken. Our most important step has been to cut the EU budget. Just as Governments across Europe are making tough decisions to consolidate public finances, the multi-annual financial framework deal negotiated by the Prime Minister has forced the EU to make tough decisions to bear down on waste and to economise. By imposing restraint on the EU budget, we can create a culture change in the Commission. The days of Commission officials measuring their success by how much of the budget they have been able to spend should be behind us.
Tom Tugendhat
Would the hon. Lady let me know which of her hon. Friends are so supportive of her? There appears to be somewhat of a dearth of support.
Kelvin Hopkins
I rise to assure my hon. Friend that I am supporting her very strongly today.
Barbara Keeley
I think the hon. Gentleman will see when we come to the vote that we do have support.
Our new clause 3 would also improve accountability and transparency by inviting EU budget representatives to appear before the European Scrutiny Committees in this House and the other place each year before the EU budgets are negotiated. I appreciate the points made by Conservative Members that of course there should be no interference with the work of the European Scrutiny Committee in this House, but what we have tried to do in these new clauses is send the strongest statement we can send and give the strongest possible support to all those in this House who want to see these important aspects of value for money and budgetary control put in place.
Kelvin Hopkins
My hon. Friend is making a fair point. It has been suggested that, in real terms, we should be paying 7% less into the European Union budget by—I think—2020. Given what she has just said, is it not likely that that will not turn out to be true, and we will not see a reduction of that kind?
Barbara Keeley
Indeed, that is a very real fear. If we look down the list of commitments and compare it with the payments made, we will see the level of commitments that are still to roll forward, which is a very frightening prospect. I go back to the point that I have just made. This is a system designed to drive up budgets. We support what has taken place and recognise that the House voted for it back in 2012, but unless this system changes we will be in a situation in which commitments are being made in the period up to 2020 of €960 billion, which is €52 billion more. It is a serious matter. Clearly, it is serious if the Commission is taking on budgets and then not paying bills, but it is the upward pressure on the budget process that is the great concern.
In our last debate on this Bill, the hon. Members for Corby (Tom Pursglove), for North East Somerset (Mr Rees-Mogg), and for Daventry (Chris Heaton-Harris) and my hon. Friend the Member for Luton North (Kelvin Hopkins) referred to a range of concerns that their constituents had about EU finance, how the EU budget is spent and the need for control of the budget. That is a point to which we will keep returning.
In the debate of 15 January 2008 on the Committee stage of the European Communities (Finance) Bill—I have already mentioned this—the Financial Secretary, then shadow Treasury Minister, and his shadow Treasury colleagues called for a report on “all aspects of EU spending”. Clearly, both the Opposition then and the current Opposition have had concerns about this. The Minister and his colleagues called for that report in 2008. I hope that we still have time in the rest of this debate for him to repent his view that we do not need further reviews.
As I have mentioned, there were complications in the wording of the amendment in 2008. I have read through the debate. The difficulty that the hon. Gentleman and his hon. Friends on the shadow Treasury team at that time ran into was that the amendment called for Treasury certification that it
“considers the outcome of the review is satisfactory to the interests of the United Kingdom”.
That seemed to be the sticking point. We have avoided such complications in this Bill by tabling simpler amendments that ask for an analysis of the basis used for appropriations and the study of alternative arrangements.
The Minister has said that such a review is ongoing. Will he tell me at this point when we will see that review?
Barbara Keeley
I am not making that point in particular. What we are asking for in this clause is a review of budget priorities. We can see from the percentages that competitiveness for jobs and growth is the most important. I am not making specific points about specific countries. Under the new method of agricultural spending, I think that there is a great deal of flexibility for allocating the funding between countries.
Kelvin Hopkins
My hon. Friend made a very strong point about the CAP. If there were no CAP, would it not be sensible for us to subsidise sections of our own agriculture according to what we think is right rather than what the European Union thinks is right?
Mr Rees-Mogg
There are great advantages to having small, family owned farms, but we need an efficient agricultural system that provides the food and produce the country needs. I do not think one should be unduly sentimental for agriculture against other industries. As a lover of the countryside and of our rural traditions, I am tempted to fall in line with the hon. Member for Glenrothes (Peter Grant). The constituency was called Central Fife when I stood there—unsuccessfully, just for the record. However, although I am sympathetic to his point, I think it is important to have efficient agriculture first when spending other hard-pressed taxpayers’ money. It ought not to be entirely about sentimentality.
Kelvin Hopkins
It is a great pleasure to follow the hon. Member for North East Somerset (Mr Rees-Mogg). Before I turn to the main part of the my speech, I would like to comment on what he has just said. Some 34 years ago, my then 11-year-old son had a discussion at his primary school about what was then called the Common Market. He was asked about the common agricultural policy, which he knew a lot about because he listened to me at home. His teacher asked him, “What is the CAP?” He said, “It’s the common agricultural policy.” His teacher asked, “What is that about, then, Daniel?” He said, “It’s a way of subsidising inefficient small farms,” and 34 years on, the hon. Gentleman has raised exactly the same point. Some things do not change very much. I think my son is the same age as the hon. Gentleman.
It is also a great pleasure to follow my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), who sits on the Front Bench, and support two of her new clauses and her amendment. On new clause 3, I am pleased that she has acceded to the sensible point made by the hon. Member for Stone (Sir William Cash), the Chair of the European Scrutiny Committee, of which I am also a member. I will, however, support my hon. Friend in the Lobby later on her other new clauses.
I have spoken probably 100 times in European debates in this Chamber over the past 18 years. I have said some of what I am going to say today a number of times before, but in order to make an effect in politics I think we must sometimes repeat messages over and over again, hoping that, in time, one’s colleagues, particularly those on the Front Bench, will listen, agree, take note and act accordingly.
I was also much taken by the hon. Gentleman’s comment that when he rebelled he was trying to help his Front-Bench colleagues. That is a splendid idea. If ever I am moved to rebel in future, I shall tell my Whip that I am trying to help our Front-Bench colleagues and I hope she will accept it in that spirit.
The most interesting new clause is new clause 2, which is about expenditure. I have said many times that I believe that the common agricultural policy ought to be repatriated to member states for them to decide how to subsidise their own agriculture, and that the CAP’s structures should be dismantled. We would certainly benefit from that financially in more than one way, including by not paying in so much. We could subsidise at exactly the same level and possibly in exactly the same way, but still be better off because we would not be paying into something where we are net losers.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I do not know whether the hon. Gentleman has ever been to Iceland, Norway, the Faroe Islands or places further north of Scotland, but he would see greater use of land there than in the highlands and islands of Scotland, because the agricultural support is so much better. On repatriation, would there not be a danger to some countries that the Anglo-Saxon or Anglo-American model of economics would suck out the little money that is there and give it to London, which does not put it around its own state? At least with Europe we have some sort of guarantee that we will get the money, even though we are among the least favoured areas of the land.
Kelvin Hopkins
The hon. Gentleman’s point tempts me to talk at greater length about a broader, more socialist approach to running the world, with which I strongly agree. If I did so, however, I think I would set too many hares running and Mr Williams would call me to order very quickly.
The CAP is nonsense. We ought to abolish it and repatriate agricultural policy to member states. We can decide in our own country which parts of agriculture should be subsidised and to what extent, and we can decide where and when we buy food. We might choose to subsidise to keep agriculture sustained in this country for strategic reasons. During the second world war we needed to produce food for ourselves, and all countries have to bear those sorts of factors in mind when deciding what they produce.
Interestingly, the right hon. Member for Gordon (Alex Salmond) obviously does not like the common agricultural policy or the common fisheries policy very much. I am surprised that the SNP is in favour of the European Union at all.
Alex Salmond
The hon. Gentleman is mistaken. I think that the CAP is a failure of UK Government negotiation, as I have tried to explain. On the CFP, however, he is on much stronger ground: I would support a treaty amendment to change it substantially and remove it from central control.
Kelvin Hopkins
We are in strong agreement on that point. I have said many times in this Chamber that we ought to give notice of withdrawal from the CFP if it is not abolished in total. Countries could then manage their own fisheries with a 200-mile or 50/50 limit. In that way, fish stocks could be recovered, because they would be managed at a national level and we would license fishing for our own fishermen. In addition, if any other fishing boats came from outside, they would have to be licensed and managed properly.
Alex Salmond
To pursue my point, is it not strange that the Government never mention treaty amendment to the common fisheries policy as an objective, even though it would certainly be within the competence of this financial Bill? Everything else is mentioned as an objective in the renegotiation, but to my knowledge the Prime Minister has never identified the common fisheries policy as something that he is even trying to get change on, far less a treaty amendment.
Kelvin Hopkins
The right hon. Gentleman makes a strong point. That is one of my red lines, and I shall put that case to the Prime Minister when I have an opportunity. I have said that many times before in the Chamber.
Jim Shannon
As I said earlier, I represent the constituency of Strangford, and the fishing industry is particularly important to me. We have had a cod recovery programme in the Irish sea for the past 10 to 12 years, and there are greater numbers of cod than there have ever been during that time and the fish are bigger. However, Europe restricts our fishermen’s ability to fish those cod. That is an example of why we need a new common fisheries policy that local people can control and have an input in.
The Temporary Chair (Hywel Williams)
Order. I hope that the hon. Member for Luton North (Kelvin Hopkins) will not go too far down that line of discussion.
Kelvin Hopkins
I shall move on to my other points in a second, Mr Williams, but I agree with the hon. Member for Strangford (Jim Shannon) that if member states control their own fisheries, they will be able to stop irresponsible fishing and the plundering of fish stocks by other nations.
Sir Greg Knight (East Yorkshire) (Con)
Going back to what the hon. Gentleman said a few moments ago about agriculture, is he aware that many farmers do not want to leave the EU because they feel they would be treated less generously? However, if Britain came out of the Union, would we as a net contributor not have more money to spend on farming if we wished to do so?
Kelvin Hopkins
The right hon. Gentleman makes a strong point. I have said that if we were outside the EU, we would be better off financially and could choose what we subsidised, how and to what extent. We could choose what sort of farming we wanted to sustain. I have made the point before that small hill farmers in Wales, who are part of our rural culture, ought to be preserved. They might not be very efficient, but we could perhaps choose to subsidise them. For other forms of farming we might choose to maintain the subsidies at the current level, but we would make that choice democratically through our Government and this Parliament.
Mr MacNeil
The glib answer that has often been given to me in the House in years past as to why we should maintain the common fisheries policy is that fish do not have passports. Of course that neglects the reality that there are three types of stocks: migratory stocks, non-migratory stocks and straddling stocks. We can look at what happens in countries that control their own fisheries, such as Iceland. Jóhann Sigurjónsson, the chief fishing scientist of Iceland, tells me that its fishing has so improved, and trawlers are catching the cod stocks so much more quickly, that fishermen are actually getting frustrated. They are being so successful and doing their work in so little time that they want to go and catch more. That is a sign of their success, having managed their own stocks for a number of decades.
Kelvin Hopkins
Indeed. The hon. Gentleman is well ahead of me in his expertise in the matter, but the basic point is that we should control our own fish stocks and manage them properly.
I have one or two other points to make about expenditure in the EU budget. From time to time we have discussed international aid. My view, and I think the view of the Department for International Development, is that we would spend international aid better than it is spent through the European Union. We would target and manage it better and try to ensure that it was spent in a less corrupt way in certain countries. Countries would do better to manage their own aid donations abroad than have them dealt with through the European Union. Aid is therefore another component of the EU budget that could be taken away.
Then we come to structural funds. Again, I believe that member states, particularly our own country, are best able to judge what regional assistance they need to provide. We could target that assistance better than when it is decided by the European Union. As part of our regional policy, we might want to have state aid to assist the growth of manufacturing in some of the less successful regions of our country. Manufacturing is too small as a proportion of our economy, and if we want to expand and improve our manufacturing sector to help investment, we might want to use state aid, which is forbidden under the EU arrangements.
Mr MacNeil
Is not the great danger that the high priest of the austerity cult, the Chancellor of the Exchequer, would drive austerity further and we would not see the spending that we currently see in areas of Wales and in the highlands and islands of Scotland?
Mr MacNeil
He would keep it all in London. If that were to happen, we would need full fiscal autonomy, or indeed independence, to ensure that areas of Scotland were well protected.
Kelvin Hopkins
I thank the hon. Gentleman, but it is a counsel of despair to say that because we cannot trust our own Government, we have to go to the European Union. I was on a march through London opposing austerity last Saturday, and there were tens of thousands of people there who felt strongly about it. Even though we may have Governments we do not like from time to time, we have the chance of pressurising them in the short term and getting rid of them and replacing them with more progressive Governments in the long term. Pressurising Governments is what I do in politics, as I think Members of all parties do. I want to see the Government elected in this country governing this country, not giving away our powers so that we are governed by a bureaucracy in Brussels or wherever.
I have mentioned spending on the CAP, aid, structural funds, regional policy and so on. If we had responsibility for those things, some of the fiscal transfers that effectively take place between the richer and poorer countries in the European Union might no longer happen. If we want fiscal transfers, the way to do it would be for us to make substantial contributions to a fund that could be allocated to the Governments of less well-off countries. Lithuania, Latvia, Poland or wherever could benefit from donations, but they would go to those countries’ Governments, who would decide how that money ought to be spent in their countries. It would not be about the European Union subsidising certain sectors in a way that may or may not be beneficial to those countries. As I said, in Lithuania, and no doubt in other countries, they are being paid not to grow agricultural products and their own food. That is nonsensical, and I wish to see an end to it. If we want fiscal transfers, let them be up front. Let us contribute to a fund that poorer countries in the EU, or in a new association of member states, could draw on. That would be a more sensible way forward.
Of course, that would loosen the bonds of the European Union. We would not have decisions about all sorts of sectors being made by the Commission in Brussels. They would be made by democratic Governments, and we would have a looser association of states within Europe, which would be a much more sensible way of operating. I support what my hon. Friend the Member for Worsley and Eccles South said, and I support her probing new clauses and her amendment 1, which we hope to be voting on soon.
European Union Referendum Bill
Kelvin Hopkins Excerpts(8 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Kelvin Hopkins (Luton North) (Lab)
My hon. Friend is making an excellent speech and bringing TTIP into the argument. Does he agree that if the EU is seen as a vehicle for imposing TTIP on us, that would have a significant bearing on the outcome of the vote? Millions of trade unionists will be fearful of voting in favour of the EU because they may get TTIP with it.
John McDonnell
I thank my hon. Friend for bringing me back into order. That is exactly my point. If we are to have any chance to shape the Prime Minister’s negotiations with other European leaders, this is our opportunity. I want to place on the agenda what is happening with TTIP. I want the Prime Minister to address that in his discussions, and when he reports back to the House and the country about the way forward, I want him to detail the achievements he has made, to open up the transparency and openness of those negotiations.
Sir Gerald Howarth
I should tell my hon. and gallant Friend that if he thinks the European Commission will be impartial in those matters, he has another think coming. I am sure he is far more worldly-wise than to give the Committee the impression that the European Commission will be even-handed. There is no evidence whatever that it has done anything other than use our money to promote the European project. That is what it is on about and what it believes it is necessary to do. It shows no signs of reluctance in pursuing that.
That is all I wanted to say. My hon. Friend the Member for Gainsborough, who is back in his place, is right in his amendment 53 to suggest that there should be equality of resources. Sir John Major was responsible for imposing initial limits on party spending at general elections some time ago. We can all see the absurd situation in the United States, where it cost $1 billion to get President Obama elected. We do not have that absurd system in this country and it is right that we have a limit. My hon. Friend’s amendment moves in that right direction, so I support it.
Kelvin Hopkins
Just to reinforce the point that the hon. Gentleman makes about America compared with Britain, I was recently on a parliamentary visit to Washington where we met a senior member of the Democratic party. I explained that there were limits on electoral expenditure in general elections in Britain, unlike in America, and he said, “How civilised.”
Sir Gerald Howarth
That is a very civilised remark from a very civilised Member, who together with me champions the cause of the sixth-form colleges. He and I have the finest sixth-form colleges in the country. Mine is slightly better than his, but there we go.
This debate in Committee is important. If we do not refine the detail in every possible manner, compatible with what my right hon. Friends on the Front Bench know has to be done in order to comply with the law and so on, we have Report stage, when things can be sorted out. However, it must be made crystal clear that we will not have the European Commission interfering in that referendum in the United Kingdom in any shape or form. Amendment 10 gives us the vehicle to send the clearest possible message to Brussels that that is something up with which we will not put.
European Union (Finance) Bill
Kelvin Hopkins Excerpts(8 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr David Gauke)
I beg to move, That the Bill be now read a Second time.
This is a short but important Bill. Let me begin by explaining the background to it. A little over two years ago, at the February 2013 European Council in Brussels, the Prime Minister secured an historic deal. On the expenditure side, it meant that the EU budget was cut in real terms for the first time, and on the revenue side, it protected our rebate.
As Members will recall, under the financing arrangement that was agreed in 2005 and is currently in force, the then United Kingdom Government gave away part of the UK rebate. That has had, and will continue to have, an impact on the UK’s contribution to the EU budget. The European Commission estimated the cost at £6.6 billion over the previous seven-year financial framework, and in future it will cost us about £2 billion a year.
Kelvin Hopkins (Luton North) (Lab)
I was one of those who complained bitterly about the supposed renegotiation of the British rebate, which was actually a giveaway. What is the cumulative cost, and will the Government seek to reverse the position that was negotiated in 2005?
Mr Gauke
As I have said, the estimated cost over the previous seven years was £6.6 billion, and in future it will be about £2 billion a year. I understand the point that the hon. Gentleman is making: he want us to clear up yet another mess that was created by the last Government, although I acknowledge that he was as disappointed by his Government as we were. As for what the UK Government can do about the financial position, let me explain what we did in the 2013 negotiations. Whereas the last Government had agreed to an 8% increase in the spending ceiling, we proceeded with an agenda that was in the UK’s interests. This time, the two sensible things that we could do to protect the British taxpayer were to get the overall budget down and to protect our rebate, and that is precisely what we achieved.
The agreement that the Prime Minister secured back in 2013 was good for Europe and good for the United Kingdom. At the time, some argued that it was not possible, and that the interests of the UK were in some way incompatible with the wider aims of the European Union, but the Government showed them that they were wrong.
Mr Gauke
Let me make a little progress.
This Bill relates only to agreement reached on the revenue side of the EU budget. This is an area that receives much less interest, but is no less important—nor any less of a success for the UK—than the cut to the EU budget. I would like, however, to first remind hon. Members of the details of the deal reached on expenditure, before moving on to revenue, the nub of the Bill.
When others argued that the EU would never reform, and certainly would not cut its budget, we argued that a cut in the EU budget was the right thing to do, especially at a time when so many countries had had to make difficult decisions in their own budgets. We argued that EU spending should be focused on where it could provide real growth, in areas such as high-value research and development, and tertiary education—from which Britain’s universities are particularly well-placed to benefit. We made sure that the UK would not be overly disadvantaged by reductions in spending: so, for instance, we ensured that structural funds would continue to flow to our less well-off regions. Above all, we argued from the point of the view of the British taxpayer, who expects and deserves good value for money—and I should add that the British taxpayer is not unique in this respect. So the seven-year EU budget deal—2014 to 2020—secured by the Prime Minister represents a real-terms cut to the payments limit to €908 billion in 2011 prices. Overall spending on the CAP over this period will fall by 13% compared with the 2007-13 EU budget period. At the same time, spending on research and development and other pro-growth investment will now account for 13%, a 4% increase on the previous budget. That is a good deal for Britain, a good deal for the taxpayer, and very different from the previous time round.
Kelvin Hopkins
Returning to the issue of the structural fund income to Britain, would it not be easier if we had control of those funds? We could allocate them better, and we would be better off by not having to contribute to the budget. Would it not be more sensible to have regional funds repatriated to Britain, so our Government can decide what and where to spend?
Barbara Keeley
I think people do understand that. The point is that the benefits are not understood. [Interruption.] The right hon. Gentleman has his view, and other people have a different one. The process could be made clearer, and it is my contention that we will have to do that. As we put this important decision in front of people in the coming months, they will have to be able to understand this better than they do at the moment.
Interestingly, the European Commission recently sent hon. Members a document promising to tell us “How the European Union works”. We have a host of new Members with us today, and I do not know whether any of them have seen that document in among the mountain of material that has landed on them recently. It is a 40-page document, but it contains only two short paragraphs—indeed, 10 lines—about the EU budget. It does not give figures for that budget, nor does it describe how the money is spent. Yet in the months ahead, as I said, that will be a key aspect of the debate for the people of this country.
The debate in the House in February 2013 and other debates since have focused on the fact that substantial reform of priorities is still needed in the EU budget. We have had questions about the balance of agriculture spending, but the Labour party believes that growth and jobs should continue to be prioritised by cutting back even further on agriculture spending and other similar priorities. Spending on the common agricultural policy fell as a proportion of the budget from 55% in 1997 to 46% in 2010. We welcome the continued decline in agriculture spending as a share of the European budget; it will drop from 41% of EU commitments in 2014 to 35% in 2020. The difficult reflection for people outside Parliament, however, is that with agriculture making up only 1.6% of the total output of the European Union, why does it still account for 30% to 40% of the budget? There is still much more to do.
Kelvin Hopkins
I welcome what my hon. Friend is saying, but although the proportion of the budget commanded by agriculture is falling, in money terms over the past eight years there has been a fairly significant increase of 26%—so agriculture is still increasing in money terms.
Barbara Keeley
Indeed, and that is why I am making the point, with which I am sure my hon. Friend would agree, that if we want more of a focus on growth and jobs in a smaller budget, which we do in the Opposition, there have to be further cuts and changes in priorities.
In the debate on the settlement in February 2013, the modest increase in funds targeted towards growth, infrastructure, research and development, and innovation was welcomed, but we also expressed concern that the balance away from agriculture spending towards the spending on growth and jobs was not sufficient. We need constantly to remind ourselves about unemployment —24 million people are unemployed throughout the EU, including 4.8 million 15 to 24-year-olds. In the UK, of course, we still have 735,000 16 to 24-year-olds who are looking for work. We want to see greatly increased investment in the funds targeted on growth, infrastructure, research and development, and innovation. We need the European Union to provide a better framework and strategy to achieve the growth in jobs. Our missions go further than that, however, and we also need the EU to act as a guardian of rights and protections at work. The Opposition want to talk about creating jobs and to focus on the right type of jobs and on the quality and security of those jobs.
We have supported a cut in the EU budget, but we will continue to press for a reform of budget priorities. During the passage of the Bill, therefore, we will call for a fundamental review by the end of 2015 of the budget priorities and of waste and inefficiency in the EU budget. Debates in the House have included many references to outdated practices such as relocating the European Parliament to Strasbourg each month, which costs €200 million a year. There are a number of other areas where savings can be made.
In previous debates, hon. Members from both sides of the House have suggested many ways in which money could be saved and inefficiencies prevented in the European Union, ranging from cutting spending on the House of European History Museum, costing a reported £137 million, to cutting export refunds. Hon. Members repeatedly raised the need to reform the CAP—today is no exception—and a number have also mentioned the levels of salaries and benefits for EU staff, including their differential tax rate and housing allowances.
Chris Heaton-Harris
My hon. Friend is completely right about that, so I thought I should also share with the House the gross contribution figures given by the Office for Budget Responsibility in its March 2015 economic and fiscal outlook report. The gross contribution figures were £14.1 billion for 2013-14, £14 billion for 2014-15 and £14 billion for 2015-16. We are talking about massively significant sums and this Bill therefore needs some scrutiny, because it is the one that tells us how the EU budget is funded.
Kelvin Hopkins
These annual sums bear a striking similarity to the amount the Chancellor is proposing to cut from welfare spending. I would much prefer to see welfare spending increased and spending on the European budget reduced.
Chris Heaton-Harris
I hope the hon. Gentleman is able to spread that message far and wide across the Opposition Benches. What he says is true: wherever we have a cost in our finances, we make choices in other places. This is a significant sum, but it is one we have chosen to pay over. We must therefore ensure that we allow ourselves, as this decision on the own resources decision rightly does, to keep a check on how our money is being spent.
The European Union Act 2011 requires this House to give approval to own resources decisions. There has always been an Act of Parliament that does that, but the 2011 Act was a good piece of legislation—again, Labour Members came to it late in the process. It allowed greater scrutiny of how the Executive choose to act in European matters; it introduced the referendum lock on certain things; and it made sure that we get a debate on significant matters such as the one before us today. Although we have always had an Act of Parliament in place to do this, I welcome the greater scrutiny.
I should remind hon. Members of what the “own resources” of the European Union actually means. What are these figures for and where do they come from? Well, 12% of the own resources budget is comprised of customs duties, including those on agricultural products; a tiny sum, less than 1%, is sugar levies; there are contributions based on VAT, which comprises about 13%; and the remaining 74% or so is based on gross national income-based contributions. A significant mix of different things goes into our £14 billion gross contribution to the EU.
Actual European spending is set by the annual EU budget, but, as my hon. Friend the Minister said, the annual budget expenditure is governed by the ceilings set by the EU’s multi-annual financial framework. I was pleased to be reminded by him of the good job our Prime Minister did to ensure that the last MFF gave us an unprecedented real-terms cut in EU spending ceilings for 2014 to 2020, which was welcomed by Members on both sides of the House—it was eventually believed by the then Labour economic team.
Unlike the own resources decision, under EU treaties the multi-annual financial framework does not need the national approval of member states in accordance with their conditional requirements. Thus, it is already in force and this Bill deals only with the own resources decision. Alongside the agreement of the new MFF, we had this new own resources decision, which was formally adopted by unanimity by the Council in May 2014, and the Bill approves it for UK purposes. As the Minister said, the rules governing the UK rebate remain unchanged compared with the existing own resources decision. Alas, they do, however, repeat, and this answers a point mentioned earlier by the hon. Member for Luton South—
Chris Heaton-Harris
I mean the hon. Member for Luton North (Kelvin Hopkins). They roll in the old rebate loss that the former Prime Minister Mr Blair negotiated in return for common agricultural policy reform that we never achieved.
I have a couple of questions for the Minister, one of which has been raised previously by my hon. Friend the Member for North East Somerset (Mr Rees-Mogg). The Minister mentioned the minor additional costs that this might bring to us, because there do seem to be some compared with the existing own resources decision. He talked about their being offset by other corrections and I wonder whether he could detail what they are, because I could not find them in the explanatory notes. I also seek clarification on the answer he gave to my hon. Friend the Member for North East Somerset on the change in the European system of accounts. I did not quite understand the answer and I would appreciate it if he could go into a tiny bit more detail.
I welcome the Bill and the scrutiny it is giving to EU accounts, and I welcome the opportunity to talk about this in greater detail when we go into Committee next week.
Kelvin Hopkins (Luton North) (Lab)
I congratulate the hon. Members for East Lothian (George Kerevan) and for Tonbridge and Malling (Tom Tugendhat) on their maiden speeches. They are very impressive new colleagues. I welcome them warmly to the House and look forward to working with them in the coming years.
I agree with the view of my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) on the Front Bench that matters pertaining to the European Union budget should be made more clear. EU finances are controversial and we ought to be clear what we are arguing about and make sure that our constituents understand as well.
The problem is that numeracy is not given to everyone, especially when it comes to very large numbers. I used to teach economics, and the first question I used to ask my students was, “What is the difference between a million and a billion?” Many of them did not know, except that a billion was probably a bit bigger than a million. When I put the question in terms of the number of houses that they could buy for £1 million and £1 billion —perhaps four for £1 million and 4,000 for £1 billion—the students started to get the message that £1 billion is a substantial amount of money, and many billions are even more substantial.
Our net contribution, be it £10 billion or £12 billion—there might be some debate about the precise figure—is a large sum. Rather than talking billions, I tried to work it out in a way that my constituents would understand. For example, it is the equivalent of about 3p on the standard rate of income tax. People understand that. It is getting on for £200 per person per year. People understand that. For a family of four, £700 or £800 a year is a significant sum, and that is what they are contributing net to the European Union. Our net contribution has trebled in the past six years since 2008. That trebling—people understand an amount multiplied by three—is a very large increase in those years. We do not know how much that is influenced by the poor deal done in 2005. Nevertheless, that is where we are today.
Much has been made of the UK rebate, which was reduced, as we know, but even since 2008 it has gone down as a proportion of our gross contribution. In 2008 our rebate was 38% of our gross contribution; in 2014 it was 25% of our gross contribution. In that sense we have lost out even further. The 2005 deal was described by The Economist at the time as such a bad deal that no deal would have been better than that deal. I have said a number of times in this House, to the previous Government as well, that if they are so worried about it, why do we not at least try to restore the position pre-2005? That has not been taken up. Personally, I would go further than that.
Our net contribution over 40 years has been on a substantially rising trend. It started quite small but it is now much, much larger. The cumulative effect on our economy, on growth and living standards, has been substantial. My good friend John Mills, who runs the Labour euro-safeguards group, has done calculations to estimate the impact on growth during that period and it is substantial. We could have been a richer country by some way, had we not had to pay a substantial sum net into the European Union budget every year.
Kelvin Hopkins
Indeed. The hon. Gentleman is right. I have the Library note. The only time we had a net receipt from the European Union, or Common Market as it was then, was in 1975.
The major problem for us has been the common agricultural policy, which has been the major drain on the EU budget and to Britain’s enormous disadvantage over that time. Mrs Thatcher’s negotiation of a rebate was based on the fact that our agriculture was very different from that of most of the rest of the European Union and we were substantial net contributors, which was seen to be unfair so we secured a rebate. That rebate is no longer as large as it should be. Nevertheless, we did secure a rebate, which arose because of the CAP.
The Prime Minister would do well to seek Britain’s withdrawal from the CAP in his negotiations. That is certainly one of my red lines in the negotiations. The common agricultural policy is not a good thing for anyone, and certainly not for Britain. Last year I went with the European Scrutiny Committee to Lithuania. Lithuania used to be self-sufficient in food. Now it is being paid not to grow things. Large swathes of the land of Lithuania are being left fallow because the farmers are being paid not to grow things under the CAP, which is nonsense.
If we were outside the CAP we could continue to subsidise our own agriculture at the same level as occurs now, saving vast sums of money for the Exchequer while subsidising our farmers at the same level; or, more sensibly, we could decide how and where we subsidise more precisely, according to our own needs and what is better for Britain. We might want to preserve Welsh hill farms which may not be so efficient but are part of our culture and our environment and it is nice to keep them going, but we would not necessarily want to give such large subsidies to very large grain farmers in East Anglia, and so on. We could target the subsidies more sensibly, according to what we in this Chamber think, rather than what is decided in Brussels.
We should also be free to buy agricultural products on world markets and not have to pay EU duties on such imports. The EU still subsidises the dumping of sugar surpluses on world markets, a nonsense which discriminates against developing and poorer countries that produce sugar. There are many nonsenses in the EU budget and, as was pointed out earlier, it has failed to be signed off by the EU auditors for more than a decade and a half—a scandal. No business could operate having been refused audit approval for 15 or 20 years. It would be illegal to do so, I suspect. I want to see the EU budget substantially reformed.
Barbara Keeley
My hon. Friend is making an excellent speech. Does he wish to comment on the sheer difficulty of bringing about reform? In the October 2012 debate the then Financial Secretary to the Treasury, now the Secretary of State for Communities and Local Government, the right hon. Member for Tunbridge Wells (Greg Clark), said that the British Government had asked the Commission to model cuts of €5 billion, €10 billion and €15 billion in staffing costs. I know that my hon. Friend took part in the debate, but it is worth looking at the Commission’s response to our Government when they asked for that work to be done:
“We declined as it’s a lot of work and a waste of time for our staff who are busy with more urgent matters…we are better educated than national civil servants. We’re high fliers, not burger flippers”.—[Official Report, 31 October 2012; Vol. 552, c. 297.]
If that is the response that we get, is it not time that we took a more robust approach?
Kelvin Hopkins
I agree very strongly with my hon. Friend, who anticipates my next point: you do not go into a negotiation with the other side knowing that you will give way in the end; you go in making them think that if they do not give you something, you will walk away. Before entering this House, I spent many years working as a researcher in the trade union movement. Trade union negotiators do not go in quietly giving way to the employers. They start off with a tough stance and try to get something real out of those negotiations. We should be doing the same.
The new hon. Member for Uxbridge and South Ruislip (Boris Johnson), currently the Mayor of London, has made the point that we should be prepared to say to the other side in these negotiations that if we do not get a satisfactory conclusion, we would not be resistant to the idea of leaving the EU. A strong negotiating stance is necessary to win anything at all. I think that should be our position. I have a number of other red lines, which it would be inappropriate to go through in this debate, but the budget and the many irrationalities and nonsenses within it, primarily the common agricultural policy, should be addressed in the negotiations.
Royal Bank of Scotland
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Harriett Baldwin
I welcome my hon. Friend, who has a wealth of experience in insolvency practice that he has clearly put to good use in his first question. Rothschild and the Bank of England Governor have said that one of the challenges facing this stake is the illiquidity of the float—the stock is not liquid enough to be in any of the major indices, for example—so there are liquidity benefits and potential price benefits from putting an initial float in the private sector.
Kelvin Hopkins (Luton North) (Lab)
May I welcome the hon. Lady to her post and say how much I agreed with the measured, sensible and absolutely correct points made by my hon. Friend the Member for Bolsover (Mr Skinner)? I can confirm to the hon. Member for North East Somerset (Mr Rees-Mogg) that the old clause IV is certainly alive in my heart. In 1983, I was pleased to stand for election on a manifesto that called for the nationalisation of the banks. Had the banks been nationalised—in public ownership and accountable to the public—all the profits would have accrued to the public purse and they might have been shielded from the world banking crisis. By giving RBS back to the private sector, are we not simply inviting more gambling, more greed, more irresponsibility and more crises in future?
Harriett Baldwin
May I express my thanks to the British people for ensuring that we have a Government focused on the economic future of this country, not on the failures of the past and the longest economic suicide note in history?
Section 5 of the European Communities (Amendment) Act 1993
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Mr Gauke
We seem to have entered day five of the Budget debate. Let me make one or two brief points in response to the hon. Lady. First, let us remember what the state of the economy was in 2010, and the state of the public finances. Our borrowing levels were over 10% of GDP, which is a peacetime record, and we were forecast to have the highest level of borrowing in the G20. Over half of that amount has now been dealt with, but we have further to go and further steps are needed to deal with borrowing. That is why this House overwhelmingly voted for the charter for fiscal responsibility, which means that the cyclical current budget will be balanced by 2017-18. That is a target that those in all parts of the House signed up to, including Labour Members, but we heard nothing from them during the Budget debates, or today, about how they would meet that ambition. Whereas my party has set out our plans for finding £12 billion from welfare cuts, £13 billion from departmental spending and £5 billion from tax evasion, tax avoidance and aggressive tax planning, we have had no such indications from Labour. There is a huge hole where there should be an Opposition party policy.
Kelvin Hopkins (Luton North) (Lab)
The hon. Gentleman constantly talks about cuts—very unpleasant cuts that are going to affect a lot of poor people—but the real problem is an income problem, because we have a tax gap of £120 billion through evasion and avoidance that the Government refuse to recognise to its full extent. If we looked at the income side and made sure we collected the tax that should be paid, then we could address the problems with the deficit—if they are serious problems—and, at the same time, not inflict cuts on poor people.
Amendment of the Law
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The Secretary of State for Business, Innovation and Skills (Vince Cable)
It is a privilege to respond to the Budget. I have calculated that, if we include emergency Budgets, this is the 20th successive Budget to which I have responded. I have begun to recognise some common traits, one of which is that the shadow Chancellor, whoever it is, has to adopt a tone of outrage. The current shadow Chancellor does outrage very well—I will concede that—but what he does not do so well is memory. He has the same problem as his party leader of forgetting important things.
The shadow Chancellor seems, for example, to have had problems remembering his own version of the millionaires’ tax cut, when throughout almost all the period of Labour Government the top rate of tax for millionaires was 40% rather than the 45% it is today. I think he has forgotten his authorship of that famous phrase, “No more boom and bust,” and his own role in boosting the banking sector such that it became overweight, toppled over and caused much of the damage and hurt we are still living with today. I think he has forgotten his record as a forecaster: we all remember his triple-dip recession—there was no triple and there was not even a recession.
There is help at hand, however, because one of the genuinely good legacies of the previous Labour Government is the Crick Institute, which will open shortly and will do medical research. I understand it will be taking forward some of the excellent work of University college London on neural pathways. That will open the door to a cure for amnesia, which seems to be the shadow Chancellor’s main problem.
Kelvin Hopkins (Luton North) (Lab)
Does the Secretary of State not accept that the real change took place when Mrs Thatcher and Geoffrey Howe abolished exchange controls, raised interest rates, raised the value of the pound, destroyed manufacturing and shifted power to the City?
Vince Cable
From what I remember of the facts, the biggest decline in manufacturing took place when the hon. Gentleman and his colleagues were in government. I will come back to that later.
Kelvin Hopkins (Luton North) (Lab)
I shall be sorry to see the hon. Member for Dudley South (Chris Kelly) leave us. I have greatly enjoyed his company as a fellow member of the European Scrutiny Committee. Although we disagree about politics and I want Dudley South to become a Labour seat, I shall miss him.
The Budget statement was a process of glib window-dressing for election purposes: let us not kid ourselves about that. It was full of holes, and it failed to mention the harsh realities of the ongoing cuts agenda—an agenda that is really about reducing the role of the state on a road to the Hayekian nightmare of a world governed by private markets rather than democratic government.
My right hon. Friend the Leader of the Opposition spoke trenchantly and, I think, very intelligently yesterday in criticising the Chancellor, and my right hon. Friend the shadow Chancellor did the same today. My hon. Friend the Member for Halton (Derek Twigg) spoke very well about the effects of the cuts agenda on local government, and on child protection and adult and elderly care. We are already seeing vulnerable people being left at risk. There are crises of child abuse and insufficient child protection, and more elderly people are suffering from dementia. All those people depend on local government, which is being cut. We need more resources for local government, not less, and quality care for those who need it.
Millions of people are also in need of decent homes, as my hon. Friend the Member for Halton mentioned. In Luton, we have 8,000 on the waiting list. The only real solution is to recreate and restore the council housing sector. It was first attacked in 1972 with the then Housing Finance Act, which I well remember as a councillor at that time. Subsequently, we have had forced council house sales, which have left millions on waiting lists unable to get into a decent home, and a high proportion of those council homes sold did not end up in owner-occupation; they are now being let out as private rents.
The NHS is also threatened with deep cuts and creeping privatisation, inexorably driven by Government policies. It is substantially under-resourced now. Germany and France spend about 2% more of their GDP on health than we do, and that would amount to about £60 million per constituency per year. I would like my £60 million for Luton North now. It would make a tremendous difference.
The police have had savage cuts already, with more to follow, yet at the same time they are being asked to deal with terrorism threats and child abuse, looking at historical as well as current cases. They cannot do that unless they have the resources to do it, and they need more, not less.
On the subject of the deficit, the Government have refused to take the tax gap seriously, which is in reality £120 billion a year, not the £30 billion or so that they claim. What have the Government done? The Chancellor has decided to let another several million people not fill in tax returns, which is inevitably going to reduce the income to the Exchequer and make the tax gap, and the deficit, worse. Thousands of Her Majesty’s Revenue and Customs staff have been sacked already or lost their jobs, with more to follow, yet it is estimated that senior HMRC staff collect 20 times their own salary and junior staff 10 times their own salary, so more staff means getting in many more times the cost of those staff and helps to bring income to the Treasury. It is income that is the problem, not expenditure. The Chancellor’s biggest mistake, however, which I think he may come to regret, is abolishing tax returns for many people.
Today’s debate is really about business, however. I and many others are concerned about manufacturing. What the Chancellor has failed to recognise, despite pressure from me and others, is the crucial role of the exchange rate. After 1931, we had recovery after a big devaluation; after 1992 and the collapse of the exchange rate mechanism, we had a devaluation that drove recovery; after the 2008 crisis, we had a very substantial depreciation against both the euro and the dollar. We depreciated sterling by 27% against the euro and 31% against the dollar, which saved Britain from becoming another Greece, but writ large. We have survived simply because of the ability to devalue and the Government should thank my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) for keeping us out of the euro, which will be the case indefinitely now. That devaluation has saved us from a worse fate. It has still been difficult, but nothing like as bad as it would have been if we had not been able to devalue.
However, despite that depreciation we are still overvalued. We still have a massive trade deficit, with the EU in particular, amounting to about £1 billion a week, which is about 1 million jobs that we have exported to the continent of Europe. We must get an appropriate exchange rate for our economy that is considerably lower than it is now. Because the euro is depreciating, the pound is appreciating, which is going to make things worse. We therefore have what is called the J-curve effect: things seem to get better initially, but will get much worse later on when our competitiveness is seriously damaged by a depreciating euro. We therefore ought to be addressing the exchange rate, seeking to manage it down to an appropriate value, which will give us long-term protection for our manufacturing. As a result of consistent over-valuation over decades, manufacturing has fallen to half the size of that of Germany. Germany manages its exchange rate; it cemented it against all its competitor countries in the EU, which has protected it. We must do something similar, not by joining a fixed currency, but by managing our exchange rate. Our balance of trade is a serious problem that has to be addressed.
If competiveness is damaged by a poor exchange rate, investment is less likely. We still have a low level of investment compared with the average for the rest of the world, and it is a tiny fraction of China’s investment. We therefore still have low productivity. We have the second lowest productivity in the G7, above only Japan. All these factors are affected by the exchange rate. I hope the next Government—it should be a Labour Government—will address the exchange rate and ensure that we have a long-term appropriate exchange rate to make sure our industries survive and prosper.
Oral Answers to Questions
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Danny Alexander
I congratulate the hon. Member for Harrogate and Knaresborough (Andrew Jones) and my hon. Friend on the their work, and I met them recently to discuss it. There is a strong case for investment in the Harrogate-Leeds-York line and in the rail link to the airport that my hon. Friend describes. Ensuring that degree of connectivity for one of the fastest growing airports in the country, which has huge potential for growth, could also take off the roads the traffic caused by people travelling to other airports in the country. We shall be considering the matter carefully.
Kelvin Hopkins (Luton North) (Lab)
The Minister will have noticed the substantial depreciation of the euro in recent times, which is bound to cause damage to the British economy. When will the Government take the exchange rate seriously and seek to secure an appropriate exchange rate for sterling?
Danny Alexander
We take seriously the need for this country to have a set of policies that ensure the long-term health and growth of the UK economy, and the appropriate mix of fiscal policy, monetary policy and long-term investment. That is why we have the fastest growth in the United Kingdom of any advanced economy, and why there are now more than 2 million more people in work in the private sector than there were in 2010. That is a record I am proud of, and the hon. Gentleman should congratulate the Government on it.