Budget Resolutions and Economic Situation
Debate between Lindsay Hoyle and Stewart Hosie(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman is able to give way if he wishes to do so. The rule is for the first two speeches, after which it is up to the Member speaking. It is up to Stewart Hosie whether he gives way.
Stewart Hosie
In that case, because it is the right hon. Gentleman, I will happily take the intervention.
Budget Resolutions and Economic Situation
Debate between Lindsay Hoyle and Stewart Hosie
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. There are to be no interventions on this speech as the hon. Member for Dundee East (Stewart Hosie) is the SNP Front-Bench spokesperson. May I also advise all Members that I will be aiming for about eight minutes for contributions after this speech?
Stewart Hosie
Thank you, Mr Deputy Speaker.
Also, the Chancellor promised at the election that he would introduce a tax lock to prohibit any increase in the main rates of income tax, national insurance and VAT and would legislate for that. He is not a stupid man, and I gently say to him that legislating to stop tax rises is just a gimmick and no one is going to buy it.
We welcome the living wage announcement. That is very sensible, but it is worth pointing out that the living wage that was announced is currently lower than the living wage in play in Scotland and in London, so I ask the Chancellor directly to guarantee that the balance between the living wage introduced today and the welfare changes will ensure that nobody in work is worse off. He can nod if he agrees.
The Chancellor said a number of things today about productivity. He repeated these sentiments from the Mansion House speech:
“We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity in our nation is concentrated here in the centre of London.”
We would agree with that; indeed, we would probably blame the Government for much of that. He went on to say in that speech, and again paraphrased this today:
“We will tackle each and every one of these weaknesses with the same determination we have brought to tackling the deficit”.
I hope the plans to tackle productivity are rather more successful than the plans to tackle the deficit and the debt and borrowing, where he failed to meet every single one of the targets he set for himself.
The Chancellor also restated the problems the economy faces today, and he is right to focus on the issue of productivity because, as has been said, the UK lags way behind the US, Germany, France and even Italy in GDP per hour worked. Even on a GDP per worker basis, it is still uncompetitive, and, as I am sure he knows, the situation in Scotland is broadly similar—with, sadly, both countries sitting boldly near the top of the third quartile of productivity for advanced economies. We all know what could be done if we could increase total factor productivity by even a fraction of 1%.
While I welcome the fact that the Chancellor has identified productivity as the major challenge we face—as did the Chief Secretary in the debate on 17 June—there was little in this Budget actually to fix the problem. There should have been a laser-like focus on innovation, internationalisation and investment in infrastructure and skills, and a solid determination to promote inclusive growth so that no one gets left behind, but there was very little of that. For example, on innovation, although the last autumn statement increased the amount available for research and development tax credits, this Government actually reduced the qualifying expenditure, and there was nothing in today’s statement or in the Red Book on R and D tax credits or any other mechanism to help encourage innovation.
On internationalisation—on exports—we heard warm words but no substance. We need to understand the scale of the problem we face: the deficit in the trade in goods last year was £121 billion; and the deficit on the total trade current account was a record £97.9 billion. We would have expected a series of specific measures in the Budget to tackle that challenge, not least because the contribution to GDP from net trade was forecast to be negative throughout the entire forecast period. As we have found from the Red Book today, it is now actually worse. We would have expected action on that as there are likely to be further obstacles, particularly in our trade to the EU, because of euro depreciation and the difficulties in Greece. But we heard nothing, not even about promoting exports to non-EU locations.
On investment, particularly in infrastructure—this is key—the Chancellor spoke about roads and hypothecating vehicle excise duty, but he did not repeat the claim previously made, not least by the Chief Secretary, that the Government would be investing £100 billion in infrastructure over this Parliament. I was intrigued, because the Red Book from March suggested more than £350 billion of capital investment— annually managed expenditure and departmental expenditure limit—across this Parliament. We have just checked whether that £100 billion figure previously used and ignored today was real, new money or camouflaged a cut. Lo and behold, total capital spend is down every single year in this Parliament. The rhetoric was fantastic and I enjoyed the performance, but the actuality is going to be pretty difficult when local bodies and Parliaments are taking decisions.
Finally, on the issue of inclusive growth, which is essential if we are to narrow the inequality gap and vital for stronger economic growth, how can this Government say with any credibility that they are tackling the issue of inequality, given the scale of welfare cuts proposed today? The cumulative impact on the welfare budget over the five years is approaching £50 billion. In essence, that is £50 billion from the poorest and most vulnerable in the country, and it simply adds to the burden on those already hit by changes to incapacity benefit, reductions to tax credits, the freeze on child benefit, the removal of disability living allowance and the overall benefit cap. Given that 2.3 million children are in poverty—if we include housing costs the figure is 3.7 million—perhaps the Chancellor would have been better off listening to the children’s commissioners across the UK when they said that families and children should be protected from the welfare cuts. Instead, he pressed on with the cuts to tax credits, which are damaging for millions throughout the UK and counterproductive to economic growth.
One would have thought that there might, by now, have been better recognition of the economic benefits of an equal society, but having forgone 9% or so of GDP growth between 1990 and 2010 because of rising inequality, it seems the UK Government are prepared to be irrational and counterproductive, and make precisely the same mistakes all over again. Until we can raise wages substantially by increasing investment, productivity, internationalisation and innovation, cutting tax credits simply cuts household income and increases in-work poverty.
Let me turn to the impact on Scotland. As our First Minister said in March, between 2009-10 and 2014-15, Scotland’s overall budget fell by about 11% in real terms, with capital expenditure down by about 34%. That means Scotland’s budget was cut by about £3.5 billion in real terms. The Chancellor said today that the cuts in this Parliament would be much the same, and so we expect, before we see the detailed numbers from the Chief Secretary, that the cuts to Scotland will be of the same quantum as we have seen over the past Parliament—yet more trouble lies ahead because of the indifference of this Chancellor.
Of course, the Chancellor has taken a number of small measures, and I agreed with some and felt he could have gone further on others. Let me deal briefly with the annual investment allowance. I very much welcome the fact that we no longer have a cliff-edge from £500,000 to £25,000, because we asked for that cliff-edge to be removed, but in the past eight years, with six rates, we have gone from £50,000 to £100,000 to £25,000 to £250,000 and to £500,000—a modest extension. The cliff-edge has now been stopped, and that is to be welcomed, but let us be clear that we are still talking about a decrease of £300,000 a year, and six rates in eight years ain’t no way to run a tax system.
May I welcome the freeze on fuel duty levels, not least because in March, April and May there were rises in petrol and diesel prices? The prices in Scotland for both were the highest in the UK, and our prices have been above the average throughout that period. Surely today was the opportunity to put in place a proper fuel duty regulator to provide some certainty in the future. The Chancellor said little about energy today, but this was an opportunity at last to end the connectivity inequity of the £25 KW charge to connect to the grid in the north of Scotland compared with the £5.20 KW subsidy in London. Such a move would at least have counteracted some of the damage done by the ludicrous decision in the last few weeks to remove the onshore wind subsidies.
On tax evasion and avoidance, I welcome what the Chancellor said about finding £5 billion more and the action on offshore trusts, on removing some of the exemptions for foreign-controlled companies and on the non-doms, but would it not have been better to go a little further and to have moved more in the direction of Revenue Scotland, to base the general anti-avoidance principle more on “artificiality” rather than “abuse and artificiality”? Such an approach would make it easier to prove where an abuse is taking place simply by dint of the structure being artificial. May I also welcome the move on carry losses—tackling the so-called Mayfair loophole? He is taking action on that and it is long overdue. Let us hope it does bring in the £250 million to £750 million that the UK appears to be sacrificing each year.
Let me say something about the 40p tax threshold. We have made the point in the past that now nearly 5 million people pay that tax rate, which is far too many. I am pleased that the Chancellor has moved modestly today, although if he wants to reach his target of £50,000, he is going to have to move more substantially. I urge caution on that, because it would be wrong to increase that threshold too fast while the same scale of welfare cuts are taking place.
On the Royal Bank of Scotland, I wish to say one thing on the sell-off of the stock: the taxpayer must get their money back at the end—that is important.
On student grants to loans, I have a direct point to make: if the transfer of grants to loans sees a reduction in overall English education spending, we will pay a great deal of attention as to whether that has a knock-on consequence for Scottish funding. We would imagine that that would not be certified as an English vote for English-only Members, Mr Deputy Speaker.
At this Budget’s heart was the change to the fiscal charter rules. We know that under the old rules of achieving the cyclically adjusted current balance by the end of the third year of the rolling, five-year forecast, with the supplementary target of having public sector net debt as a percentage of GDP falling, this Chancellor was preparing to cut more than he needed to run a balanced budget. He made the point today that deficit and debt are falling faster than he planned, and that is a good thing. He then went on to boast about running a £40 billion surplus. That implies substantially more cuts than he needs to make in order to run the economy in balance. We have said before that he had flexibility and he still has that, and we hope he will change his mind.
What we really heard today is a denial of the damage done in the last Parliament and a determination to repeat those mistakes, but this time with an ideological edge. It was less of a plan to boost productivity, which should have been at the heart of this Budget, and more a sermon from the high priest of an austerity cult—I was very careful there, Mr Deputy Speaker. This was not the Budget the country needed and it was not the Budget that those who have suffered most over the past five years should have had to endure. The Chancellor was right in one regard: it was a Conservative Budget, taking from the poor, giving to the rich. The Tories have done it again.
Mr Deputy Speaker (Mr Lindsay Hoyle)
We will now have a maiden speech. Victoria Atkins.