Autumn Statement

Michael Connarty Excerpts

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I agree. The school of no more boom and bust gave us the biggest boom and the biggest bust in our history—it was spectacularly unsuccessful. One would think that those who had been through that would have learned their lesson and be keen to see borrowing controlled, public finances in good order and the deficit come down, but they are not. That speaks to a broader truth, which is that in bad times the Opposition say, “Borrow more because the country needs it” and in good times they say, “Borrow more because the country cannot afford it.” What they never say is, “Let’s get a grip on the public finances.”

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I do not know if the Chancellor does irony, but does he realise that the fundamental structure of his economic plan is similar to the strategy used by RBS, which was revealed in his own Tomlinson report? RBS looked after its big clients and attacked the financial circumstances of its small clients, driving them down into debt, poverty and eventually into bankruptcy, and then selling off their assets. That is, of course, what he is doing at the moment. The small folk in a democracy can vote out the Chancellor, unlike with the banks. One question I have raised in writing with the right hon. Gentleman relates to companies moving their assets of their pension funds to offshore funds—for example, in the Channel Islands—and declaring bankruptcy. The workers then have to go to the Pension Protection Fund. When will the Chancellor do something about that? I was told in a letter from his Department that that is legal, but those companies are clearly cheating the taxpayer and cheating their workers.

[Mr Osborne]

I am happy to look further at the hon. Gentleman’s point. The rules on pension protection and the pensions regulator are designed to prevent people from deliberately crashing their pension scheme to avoid their liabilities, and for those liabilities to fall on to the state or other companies. I am happy to look at any specific case he has. On his broader point on the economy, unemployment has come down by 11% in his constituency. The measures I announced today—abolishing the jobs tax for young people and the £1,000 discount for shops, cafés and pubs on the high street—are all designed to help small businesses, which are the engine of any recovery.

Oral Answers to Questions

Michael Connarty Excerpts

Tuesday 10th September 2013 Commons Chamber

[Mr Osborne]

The business bank is up and running, and £300 million is in the market to help support small business lending. My hon. Friend has gone around the country promoting some of the investment tax breaks we have provided, such as the seed investment tax break, which provides that crucial, early-stage capital so that the many businesses now being created have the money to grow.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I am glad the Chancellor mentioned the banks. The small businesses in my constituency report that the predatory and risk-averse nature of the banks is still their biggest problem. One particular company has large contracts, including one in Parliament, which the banks have funded and which has just got started on time—the company is tooling up. However, the bank is now talking about stripping its assets and threatening its viability. What can the Chancellor do to stop banks in this country being so risk-averse and get them to support business?

[Mr Osborne]

That is a good question from the hon. Gentleman. The repair of the financial system perhaps remains one of our biggest domestic economic challenges. We are conducting a review of the future structure of the Royal Bank of Scotland and I will report back to Parliament this autumn on that specifically. More generally on the banking system, the funding for lending scheme, as a monetary intervention, has helped to support lending. Account switching, which will be possible from next Monday as the result of Government pressure, will help small firms to change their bank account much more easily and, as a result, get a better service.

Trident Alternatives Review

Michael Connarty Excerpts

Wednesday 17th July 2013 Commons Chamber

[Mr Jones]

But I have the quote here:

“The idea that you should produce weapons of mass destruction in order to keep 1,500 jobs going in the Barrow shipyard is palpably ludicrous. We could give them all a couple of million quid and send them to the Bahamas for the rest of their lives , and the world would be a much better place, and we would have saved a lot of money.”

If that is the Liberal Democrats’ policy, I am sure that the people of Barrow and other places in the supply chain will have a clear view on it. He will have a chance later to tell us whether he has changed his position on sending my hon. Friend’s constituents to the Bahamas.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I must chide my hon. Friend. If he reads the reports on alternatives to Trident, he will see that even the one on the future of Barrow-in-Furness makes the very important point that no one should ever argue for making weapons of mass destruction on the basis of employment, because there are alternative places for people to work. Both reports produced so far have said that alternative work could be found if we invested properly in other things. It is wrong to argue that employment is a reason for having weapons of mass destruction.

[Mr Jones]

I am not saying that; I am saying that we cannot dismiss the fact that these industries do not just employ people. I am proud of the high-technology industries in this country that support the nuclear programme. If the Liberal Democrats are not proud of that technology and the individuals involved in it, then that is their position, but I am certainly proud not only of their skills but of the wealth they create for many communities across the UK. I agree that that is not the only reason we should have the nuclear deterrent, but it is a very important one.

Financial Transaction Tax and Economic and Monetary Union

Michael Connarty Excerpts

Tuesday 18th June 2013 Commons Chamber

[Greg Clark]

We have been very clear, and the single supervisory mechanism is a good example, as I have said. We have our arrangements for the supervision of our banks, which are centred around the Bank of England, and it is absolutely right that they should continue in that way, but as each of these proposals is made, we will need to look to our national interest and make sure that our rights are protected.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

That was a specific point, but I want to say that it is not only Members of the right hon. Gentleman’s party who have serious questions about primacy. On the European Scrutiny Committee, there is a cross-party problem in particular with the President of the EU’s report “Towards a Genuine Economic and Monetary Union”, which talks about contracts written by the EU—by the Commission—that will be binding on the countries that sign them, and that will then have penalties if they do not carry them out, taking power away from those countries. There is also the question of what happens then with the impact—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Mr Connarty, you were late coming in, so then to make such a long intervention is not good for the Chair either, especially as you will want to speak, as will a lot of other hon. Members. Short interventions are required.

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[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I have news for the hon. Member for North East Somerset (Jacob Rees-Mogg). Bill Gates was not an academic. Indeed, the hon. Gentleman might want to make a comparison with his own career, which his declaration of interest shows to have been in banking. He has defended that business strongly. Bill Gates is now doing something that a financial transaction tax would achieve universally, across the world. It would raise money from the speculative, gambling casino economy that the world has become and give it to those who are often mineral rich or agriculture rich but massively exploited by those of us who live on the fat of that speculation.

For me, a financial transaction tax is suitable only if it is a worldwide arrangement. It is certainly not suitable for the money-raising powers of the European Commission, yet that is what the Commission is proposing: just another mechanism for a fat, gorged organisation to take money from yet another sector of the economy. If it got rid of the common agricultural policy failures, 40% of the EU budget would be available for positive use, so perhaps the Commission should look at that, rather than at trying to get more money in from a transaction tax.

I was glad to hear my hon. Friend the Member for Nottingham East (Chris Leslie) clarifying our position on this matter, because I was worried that the drafting of our amendment did not make it 100% clear that we opposed the introduction of a European transaction tax at any time. Only in the context of advancing development worldwide can we justify the imposition of such a tax. If it is not done on that basis, it will have an adverse effect.

The hon. Member for South Northamptonshire (Andrea Leadsom), who is no longer in her place, spoke against the introduction of any kind of financial transaction tax. She did not seem to realise that, according to her argument, stamp duty, which is basically a national levy for national spend, should theoretically also be abandoned. Her argument was that any kind of financial transaction tax prevents jobs from being created. However, as we use taxation for positive purposes in most cases, there are reasons why people should pay taxes—even those fat bankers with horns on their heads whom the hon. Member for North East Somerset described.

[Mark Lazarowicz]

Before my hon. Friend moves on, I want to ask a question related to an international financial transaction tax. It appears that progress has been made on getting the UK overseas territories to be more transparent on tax. Is this not a good opportunity to encourage them also to be part of an FTT system, because we all know that a lot of the dodgy transactions take place in bank speculation in some of the countries for which we have an indirect responsibility?

[Michael Connarty]

That is part of a separate debate, but I agree that all territories controlled by any of the world’s major economies should be not just transparent, but properly taxed. Just because someone sticks a name on a door in the Cayman Islands and pays a Cayman citizen theoretically to be the director, there is no reason why they should not pay taxation wherever they make their money in the world. That would certainly be helpful.

Turning to economic and monetary union, the hon. Member for Stone (Mr Cash) lauded me highly, but slightly falsely. My main concern with Olli Rehn’s paper on a blueprint for a deep and genuine EMU is that it strongly suggests that countries will have their primacy removed. That is even more the case with the van Rompuy paper, “Towards a Genuine Economic and Monetary Union”. It is clear that those documents take away, in the first place, from the weakest of the 17 any right to set their own budget or any budget that has not been agreed by the Commission, and the associated penalties would further damage the economies of those countries.

My great problem with the proposals is that they are a threat to the European Union. I believe that they have become obsessed with the euro. Their documents refer again and again not to the European Union, European citizens, European Governments or European projects, but to the euro. The countries that are not keeping in line with the stability and growth pact are a threat to the euro, which has become the raison d’être of the European project for many people at its centre. The hon. Member for North East Somerset has described it, correctly, as a token for them to control Europe through a single body, the European Commission, in partnership, as its documents keep saying, with the European Parliament. We have no real say in this. The European Parliament legitimises what is done by the European Union. The power of the Lisbon treaty has not just tipped over; it has fallen into the abyss of the Commission-controlled EMU.

There is a negation of primacy and countries are being forced to do things in their budgets that are bad for their citizens. We are supposed to be a co-operative European Union. I voted for it in 1975 and would do so again, but I would like more tools to fight against those centralising powers.

There is also a failing austerity plan in all these countries: Greece, Italy, Portugal and Spain will be weaker economically and more impoverished and indebted at the end of this than they were at the beginning, but for what reason? What contribution will that make to the stability of a new economy? It means that the powerful countries in the north will become more powerful over the rest. I believe that when they are finished with the weaker countries, they will come for the rest of the 17 and start to control their budgets. If they had their way and if we were not outside the euro, they would be telling us that we could not do what we are doing to try to deal with our economy—not that it is being done very well in this country, because the austerity measures here parallel those demanded by the European Commission of the failing economies in the south of Europe.

I am worried that we will not have the ability in the future to ameliorate what will happen in the general European economy. That is what I mean by primacy. Not only will the primacy of those countries be destroyed; our ability to effect and do something positive for the economies of the European Union—through growth and sharing burdens, rather than through penalising and punishing countries—will be weakened.

Finally, when did the stability and growth pact not have any teeth or do anything? It was when Germany broke it again and again as it built investments in its own economy to make it what it is now: a strong, growing economy. I am worried that, as a result of the primacy that will be lost all over Europe, countries will lose the ability to reflate and build a proper economy.

Economic Growth

Michael Connarty Excerpts

Wednesday 15th May 2013 Commons Chamber

[Mr Hood]

The hon. Gentleman has been saying exactly what he said in the Maastricht debate ever since, at every opportunity. It will surprise no one, including me, if he continues to say those things, but I am speaking to the reality. Some say that the Conservative amendment is a UKIP amendment. In fact, the hon. Member for Harwich and North Essex (Mr Jenkin) accepted that he agrees with a lot of what UKIP says.

I remind the House of something the Prime Minister said in his Conservative party leadership campaign. He promised the country and his party that he would make the Conservatives electable again, and get rid of the “nasty Tory” image. He travelled to the Arctic to embrace huskies, and came back here and cuddled hoodies. These are changed days. Where is he now? This week, with conspiracies going on behind his back in his own party in Parliament, he is away negotiating an EU trade deal. You could not make it up! As my grandmother used to say, when the cat’s away, the mice will play. That is what is happening to him.

The debate and the run-up to it are more like Shakespeare’s assassination plot in “Julius Caesar”. The big question is who will be Brutus. Margaret Thatcher’s political assassination in 1990 had nothing, or nothing much, to do with Europe, but we have the same modus operandi. As my hon. Friend the Member for Bolsover (Mr Skinner) pointed out in a speech two weeks ago, the Conservatives kicked Mrs Thatcher out on the street like a dog.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

My hon. Friend is asking questions, but not pointing fingers. Does he think it was significant that the Chancellor made a very anti-European statement today? He made it clear that he is in line with the people who are calling for the referendum, and demanding we join them, while the Prime Minister is away. He may not be the great wizard, but he is certainly the great Machiavellian.

[Mr Hood]

I do not disagree with that. The Chancellor is supposed to be the campaign manager for the Conservative party and he could well fit the title of Brutus. I do not want to accuse him of being a Brutus, because there are so many of them about. It will be interesting to see who is the first to stick the dagger in. I should thank the hon. Member for Croydon South (Richard Ottaway) for having the temerity to speak up from the Government Benches in a pragmatic and sensible way on our membership of the European Union.

One of the many questions thrown at our Front-Bench team is whether they support a referendum. Hon. Members should not bother to ask me. I do not support a referendum on staying in the United Nations, I do not support a referendum on staying in NATO and I do not support a referendum on staying in the European Union. Yes, the EU needs reforming, but it can only be reformed from within. We cannot reform it and influence it from outside, and I hope that can be taken as read.

It is my judgment, supported by a considerable weight of evidence, that today’s Conservative party is so far to the right that it refuses to select candidates that are moderate, pragmatic or pro-Europe. There lies the difficulty. I started my younger political life being anti-Europe, but I accepted that the world moves on and I moved on with it. In the Labour party in the late ’70s and ’80s, it was difficult to be a candidate for a European seat without being anti-Europe. That is exactly where the Conservative party is now. The selection process is causing all the difficulties for its leader today in Parliament.

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[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I am very grateful to be called to contribute to this debate, particularly since some Members have decided to put Europe, which is one of my interests, firmly on the agenda.

This debate should be framed in the context of a paper passed by the Council of Europe in the last year entitled “The young generation sacrificed”, and the follow-up papers in which I have been involved. They address educational needs and opportunities for young people, the need for technical training and skills, and the right of youth to fundamental rights and access to a better life, because that is the generation we have stolen from as a result of our errors both in this country and across the EU. We should measure our Government’s wider performance alongside how that generation is treated.

In the European context, I have spent two days in Brussels and the Netherlands with the Chair of the European Scrutiny Committee, the hon. Member for Stone (Mr Cash), and others. I was astonished at the extent to which not just the EU but the eurozone are straitjackets preventing growth. We met Olli Rehn, Commissioner for Economic and Monetary Affairs, who had a blueprint, put forward on 5 December. We also met Herman Van Rompuy—one more president of Europe—who put forward a blueprint for a deep and genuine economic and monetary union in December 2012. On 29 January 2013 José Manuel Barroso, the other current president, spoke at a European conference in support of Van Rompuy’s blueprint, saying it was the only way forward. However, what it was, in fact, was a constraining arrangement in economics—in countries’ banking systems and budgets—as the Chair of the ESC said. The arrangement would be contracted and would have penalty clauses, and it would punish Governments who are already in dire straits, and the people of their countries, for not coming up to what are, in fact, the aspirations of the northern European countries, who are making so much out of the European arrangement at present.

In fact, the statistics showed that we had a growth-free, recession-bound EU, and alongside it we have a growth-free, austerity-choked UK economy. As we have heard, even in these times, our deficit against the EU has gone up to £72 billion, which represents more than £1.25 billion every week. These countries are in a bad condition, but we are still in a worse condition. Oddly, the G7—our Prime Minister was there—reported how happy it is with the arrangements for the EU to continue to squeeze and choke these people, but that contradicts what the Chancellor said today. What he said about the ECOFIN meeting suggests that there would appear to be an argument against how the EU is performing and constraining people. I do not know who is telling the truth—was he just making his speech because of the leadership bid in the background, was he playing to the dissidents on his Back Benches, or was he genuinely saying that an attempt is being made in Europe to unlock that terrible arrangement set up in response to the eurozone crisis?

The crisis is a eurozone one. Everyone we spoke to did not talk about the countries in the south being a danger to the EU; they said that they were a danger to the euro. The euro has become the symbol of what they are doing to others to punish them, because the euro is more fundamental than the European project, and that really worries me. There is a growing meanness of spirit in what is being talked about in the EU: people are to be punished because the euro is being threatened. That is very strange, and it is certainly not what I voted for when I voted yes in the referendum to join the EU. There are serious questions to answer here, because I do not think the renegotiation being talked about by the Prime Minister has anything to do with that—it is on the fringes. His renegotiation is to do with justice and home affairs and Schengen agreements; it is not about the fundamentals of the European project, which is now an economic project driven by the euro and not by the interests of the people of Europe.

I wish to remark on some things in the Queen’s Speech, one of which is apprenticeships. We must be frank about them. Apprenticeships are now talked about by McDonald’s, which has them—in-service training for six months constitutes an apprenticeship. Tesco and Sainsbury’s say that they have apprenticeships, too, but these are not apprenticeships. The reality is that 60% of the skills shortages are in non-graduate technical skills—we are not training proper apprentices to do the jobs that need to be done.

Secondly, my constituency contains a large petrochemical industry that is losing money hand over fist; it is burdened by massive energy taxation that is not paid by the rest of the world, and even has a 5% to 10% disadvantage against the EU. What is there in the Queen’s Speech to remove those burdens from our industries to let them take people on? If those burdens are not addressed, we will not deal with the problem in the beginning, that of the youth who have been betrayed by this Government and, basically, by the European project.

Oral Answers to Questions

Michael Connarty Excerpts

Tuesday 11th December 2012 Commons Chamber

[Greg Clark]

I am glad the hon. Gentleman has asked me that question. I agree that customers who have been mis-sold products need quick redress, so I have pushed the FSA and it has agreed to implement a six-month maximum time scale for the banks to complete the review and provide the redress. I have also asked the banks and they have agreed to stop payments on these products for businesses facing financial difficulty.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr George Osborne)]

The core purpose of the Treasury is to ensure the stability and prosperity of the economy. I can announce today that Budget 2013 will be on Wednesday 20 March.

[Michael Connarty]

I thank the Chancellor for probably the most complete answer he has given today, at a time when every city in our countries has food kitchens feeding the poor and in London people are queuing up to get second-hand reject food from stores and Pret A Manger. I know that the Chancellor borrowed £425 million from the good causes fund of the lottery for the Olympics, and the National Audit Office has said there is an estimated £377 million profit from the Olympics. Could he now return that to the good causes so they can give it to the charities looking after the poor in our country, which he clearly is not?

[Mr Osborne]

It is a credit to those who delivered the Olympic games that they came in under budget. The Olympic underspend is money which, if we spent it, would add straight to the deficit. It is not a pot of money sitting in some Government bank account. That would be a difficult decision to take and would have to be balanced alongside other decisions, but I make a broader point: we are trying to sort out the economic problems that this Government inherited. The problems that the hon. Gentleman talks about are problems caused by the deepest recession and the biggest financial crisis of the 21st century, and perhaps one day a Labour MP will get up and apologise for it.

The Economy

Michael Connarty Excerpts

Tuesday 11th December 2012 Commons Chamber

[Gordon Birtwistle (Burnley) (LD)]

I congratulate the new hon. Member for Middlesbrough (Andy McDonald) on his interesting and excellent maiden speech.

I listened to the autumn statement with a lot of interest because I, a simple mere Back Bencher, was able to put forward a proposal to the Chancellor of the Exchequer and the Chief Secretary to the Treasury, suggesting that industry would blossom and grow if we included in the autumn statement something to help with capital allowances. I was delighted to see that such a measure was included in it. Industry needs confidence to grow and it needs confidence to start to invest. I believe that this major part of the autumn statement has not much been picked up around the country. Companies in Burnley, to which I spoke prior to the autumn statement, assured me that such a measure would help them to invest in brand-new plant and equipment, so I shall follow up to see if they have delivered on that.

Some plant and equipment could be made mainly in the UK, but some of it will come from abroad. The main point, however, is that the companies investing in this plant and equipment will need more people to work on the new pieces of kit. They will also become more efficient and deliver more profits—and hence provide more tax. That will obviously help the country along.

Another interesting feature of the autumn statement that was not published anywhere else was the increase from 100% to 120% in the Government Actuary’s Department rate for self-invested personal pensions. We have tied pensions to the triple lock, so that the vast majority of old age pensioners will receive an increase that is way above the inflation rate. However, this is a major step that will benefit those who have made their own arrangements through various SIPP and self-administered pension schemes. They will now be able to spend more of what they have invested in pension funds, rather than the Government’s holding it back, and that will create growth because they will start to enjoy spending money that they have saved over many years.

The main thing that we must do is invest in manufacturing. I used to be in manufacturing myself: I worked in the aerospace industry. Over the next 20 years, the airlines of the world will spend some $7 trillion on new aeroplanes and helicopters, and, as the second-biggest manufacturer in aerospace equipment, we must get involved. That will mean a growth of 5% in the industry every year, so over 20 years we will have to double our capacity to produce aerospace components. Well over 100,000 people already work directly in the industry, and the supply chain employs even more. The country must get involved, and in order to do that we must expand.

Another aspect of the autumn statement that was not picked up by any of the newspapers was the £100 million that the Chancellor has put into the aerospace supply chain. In Lancashire, the North West Aerospace Alliance has bid for a national aerospace supply chain centre to be built somewhere in the north-west. I hope that it is built in Burnley, but as long as it is built somewhere in the north-west, I shall be delighted. I am sure that you would love to see it built in Chorley, Mr Deputy Speaker, but I suspect that it will go to BAE’s new industrial park in Samlesbury.

We need a massive investment in the aerospace industry, but one of the big problems with the doubling of the industry over the next 20 years is the provision of staff with the necessary skills. Over the last 30 years, various Governments ignored apprenticeships—and the last Government were just as bad as their predecessors. I am glad that the coalition Government are investing in apprenticeships, but the wreckage of 20 or 30 years cannot be turned around in two years. Apprentices need to be given more time in which to learn the job, and I am delighted that that is happening.

The last Government wanted 50%, of students, or even more, to go to university and study subjects which, in the main, were no longer applicable. What we want is for young people either to go into apprenticeships or jobs or to go to university to study the subjects of the future rather than the past: subjects such as high-tech manufacturing, including high-tech food manufacturing.

When I visited the British Aerospace apprentice school in Warton, I met the apprentice of the year, a young lady who had been on BAE’s apprentice scheme. She had been told by her college not to be an engineer but to go to university and study something else, because she was far too clever to be an engineer. It refused even to advise her on what an engineer was.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

I have been at a meeting of the all-party parliamentary apprenticeships group in the last couple of hours. About 30 apprentices were present. One of them, a woman who is now at Vauxhall, said that her school had spent all its time trying to persuade her to try to get into university rather than becoming an apprentice. It was clear from what she was saying that those at the school thought that it would be higher in the league table if people passed A-levels and went to university rather than entering what that woman said was a very fulfilling career. That seems to be the pattern in many schools today.

[Gordon Birtwistle]

I am grateful for that intervention, and I entirely agree with the hon. Gentleman. I am the chairman of the all-party group on apprenticeships. Unfortunately, I have been sat here in the Chamber today waiting to speak, instead of being at that all-party group meeting, and I am sorry I missed hearing from those apprentices.

The hon. Gentleman may recall that two Airbus apprentices came to a previous meeting. Both of them had turned down the chance to go to Oxford university in order to be apprentices at Airbus. Both of them said, “We’ve come to Airbus, and it has taken us through its apprenticeship programme and paid for us to go to university.” Both of them were proud to say they had bought new cars and were happy to pick up their friends, who had gone to university and now had not got jobs, and to take them out on a Friday night.

We must encourage young people to go to university via companies such as Airbus, Rolls-Royce and BAE Systems. I agree with the hon. Gentleman that it is wrong for schools to advise young people to go to university just to ensure that their figures for pupils attending university go up. That is outrageous, and it needs to be looked at. I have argued that case for quite some time.

Air Passenger Duty

Michael Connarty Excerpts

Thursday 1st November 2012 Commons Chamber

[Mr Brady]

That is absolutely right. It is also important to note, as the hon. Member for Belfast East (Naomi Long) did, that the Government have recognised the strength of this argument, not just in general terms about levels of taxation applied to business but specifically in relation to APD. They understand that in the case of Northern Ireland competing against the Republic there was an unanswerable case for a reduction in APD. It is apparent to us all that precisely the same argument applies to the UK and particularly to the regional airports—which many Members have mentioned—that compete with airports in continental Europe.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

The hon. Gentleman seems to be talking as though every tax has a similar effect. It is quite clear that this tax is damaging industry, damaging our enterprise and damaging investment, particularly in the regions, although we have even heard from Essex, which is close to London. Would it not be better for the Government not just to rely on broad taxation, such as the 5p reduction for people earning over £100,000, which has no real targeted effect on industry and enterprise, but perhaps to take the revenue from that broad source and offer relief from this damaging tax?

[Mr Brady]

I do not always agree with the hon. Gentleman, but I am pleased to agree with him about that. This tax precisely targets investment and international trade, which are exactly the things that the United Kingdom needs to focus on if we are to grow our way out of the problems we face.

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[Henry Smith]

My hon. Friend is right. Air passenger duty is a bad tax for the UK as a whole, regardless of which nation or region within it Members may happen to represent.

[Michael Connarty]

The hon. Gentleman is making a very good case. It is estimated that air passenger duty raises £2.6 billion, which is nearly £1 billion more than the £1.76 billion that it raises in all the other European countries. It is a tax on tourism and trade, and the Government should act before it does more damage. It is estimated that up to £3 million will be lost in trade by 2016 if the present position continues.

[Henry Smith]

The hon. Gentleman is absolutely right.

Members have suggested that we adopt some form of regional banding, but I think that that would be a mistake. I think that the solution is for us to get rid of air passenger duty altogether over time, or at least reduce it to a very modest level. I do not think that we should pit one part of the United Kingdom against another. We, as a relatively small country, achieved global dominance because we are a trading nation, and we either stand together or fall apart when it comes to trade. I think that we need to view the argument holistically, and to see this as very much a British issue.

In the remaining time available, let me deal with some of the misnomers that have been applied to air passenger duty. First, it is not an environmental tax. If it were I would support it, because I think it important for us to reduce our emissions whenever possible, but it is purely a revenue-raising tax—albeit a misguided one and a false economy, because it costs our economy far more than it raises. In fact, we are subject to double taxation when it comes to air duty. The European emissions trading scheme, which was introduced at the beginning of this year, is an environmental tax, and I have no complaint about it; but air passenger duty is almost certainly not.

I also want to debunk the myth that we need APD because aviation fuel and air tickets are not subject to value added tax. Under the conditions of the Chicago convention, it is impossible to charge VAT on aviation fuel and air tickets, but even if it were possible, the current APD represents a far higher amount than VAT would. We are, therefore, greatly overtaxed.

A year ago I had an Adjournment debate in which I asked the Government not to increase APD. I am sorry that I failed in that, and APD went up. Today, we are not calling for a cut in APD, however; we are simply calling for APD to be frozen at its current level until the Treasury assesses whether it is costing our economy more than it brings into the Exchequer, as I contend. The Treasury conducts surveys and studies all the time, and it is perfectly reasonable to ask it to carry out a study on this matter so that we can have some proper facts and figures and are able to make an informed decision.

The stakes are very high. We are a trading nation with competitors, not only in continental Europe but around the world, who are eager to take our business. We will lose out to them if we do not carry out an assessment so that we can understand APD’s impact on our economy and take action if necessary. I therefore hope the Government will respond positively to this reasonable motion. They should carry out a study of the effects of APD. Until that is done, we must not harm the British economy by increasing APD still further.

Jobs and Growth

Michael Connarty Excerpts

Thursday 17th May 2012 Commons Chamber

[Mr Osborne]

Let me make some progress and then I will take some more interventions. I want to say something about some of the Bills in the Queen’s Speech, as we are debating the Queen’s Speech. I want to talk particularly about the banking reforms—something else that the shadow Chancellor mentioned in only half a sentence, so we have no idea whether he supports the reforms or not. [Interruption.] Perhaps he can intervene and tell me when I have made these points.

First, we have the Financial Services Bill, which was carried over from the previous Session. It already seeks to rectify one of the greatest errors of policy making—the decision that the Labour party took in 1997 to remove banking supervision from the Bank of England. The Governor of the Bank commented on that in his lecture on the “Today” programme the other day. That Bill, which is crucial, brings prudential supervision back under the control of the Bank of England, giving it new powers to monitor the build-up of dangerous levels of debt and asset bubbles and to deal with them rather than, as last time, letting disaster strike.

In this Queen’s Speech, we prepare to go further and address the structure of banking itself. We will introduce the Bill that implements the reforms proposed by Sir John Vickers and his Independent Commission on Banking that ring-fences retail banks from the riskier investment banking arms and provides more loss-absorbing capacity so that private investors will bear losses, not the taxpayer. Taken together, those Bills seek to give Britain a safer, more competitive banking system and will allow our country to have successful banks with a global reach while better protecting the taxpayer at home should one of those banks fail. I hope the Bills will command broad support across this House.

I hope that the Bill to reform public service pensions also commands broad support across the House. After all, those reforms are based on the proposals of the Labour former Pensions Secretary, John Hutton. They provide for generous pensions and security in retirement for hard-working public servants that are quite frankly beyond the reach of almost all in the private sector.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

Can the Chancellor really justify asking fire brigade workers, who undertake some of the most high-risk tasks in our society, to pay 13% of their income towards their pension?

[Mr Osborne]

We have to have public sector pensions that are affordable. The truth is that people are living longer in retirement, which is a good thing, and that if we want to maintain generous pension provision for firefighters and others we have to make reforms that mean the country can afford that. So, the answer to the hon. Gentleman’s question is yes, and we have been in a long and good negotiation with the Fire Brigades Union and others on those reforms. As I have said, we seek to make public sector pensions affordable and it is pretty striking if the tone of interventions from the Opposition is going to be that we do not have support for this far-reaching reform that will put public service pensions on a sustainable footing. Opposition Members are going to have to ask themselves whether they speak in this House for their tax-paying constituents or for the unions that sponsor them.

We look forward to hearing, in the wind-ups, from the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), whom we welcome to his place. Perhaps he will tell us what Labour’s attitude to these Bills will be. We are sorry that he has been removed from his role as Labour’s policy chief. He is yet another Labour politician who has found that their career takes a knock when they try to tell their party some hard truths. He did extremely well in his new job of handing notes to the shadow Chancellor as he spoke today, but there was a time when he wrote his own notes rather than just handing them. There was the time when he wrote that note saying, “I’m sorry, there’s no money left”, but his party’s only message is to spend and borrow more. To be fair to him, he is the politician who tried to tell Labour to get serious about welfare reform and about dealing with the deficit. He was famous in my Department for the very precise memo he sent to civil servants on how to prepare his morning cappuccino and his afternoon espresso. How ironic that what did for him was his attempt to get Labour to wake up and smell the coffee. [Laughter.] I have to say that it was quite late last night when I thought of that one.

Who replaces the right hon. Gentleman as policy chief? The new policy chief for the Labour party is the hon. Member for Dagenham and Rainham (Jon Cruddas). We did some research on how he might approach the job and we found these illuminating remarks from a few weeks ago:

“What interests me is not policy as such; rather the search for political sentiment, voice and language; of general definition within a national story. Less ‘The Spirit Level’, more ‘What is England’.”

Well, that is clear then. Perhaps when the Opposition find out “What is England” they will let us all have the answer. The striking thing is that there is no policy from the Opposition at a time when tough decisions need to be taken about our country’s future and when far-reaching reforms need to be made to secure its prosperity.

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[Stephen Timms]

My hon. Friend is absolutely right. Step one would be to allow the data to be published. Instead of banning everybody from saying what is happening, the Government should let us have some numbers so that we can see what is going on. That would offer the chance for clarification.

[Michael Connarty]

I am grateful to my right hon. Friend for making those points about St Mungo’s. I took the trouble to visit the project in Hackney, and I was very impressed by what was being done for people with long-term dissociation from society to give them skills and jobs. It is a tragedy if the charity has decided that the Government have nothing to offer them. The project is wonderful and the Government, given all their rhetoric, should be supporting it wholeheartedly.

[Stephen Timms]

My hon. Friend is right. Not one person has been referred to St Mungo’s since the Work programme started. If the homeless are not being referred to St Mungo’s, we can be very confident that they are not being helped by anybody, and that is at the heart of what is going wrong. We certainly need guidance so that people can start telling us what is going on in the Work programme.

The hon. Member for Wolverhampton South West (Paul Uppal) is rightly concerned about the challenges of securing investment. I am disappointed that no communications Bill was announced in the Queen’s Speech. A year ago yesterday, the Department for Culture, Media and Sport announced the first stage of what it described as a

“comprehensive period of consultation that will inform a Parliamentary Bill.”

Unfortunately, no such Bill has been announced.

The Communications Act 2003, which I was responsible for, is excellent, but technology has moved on and the regulation needs updating. The problem is clearly highlighted by the failure on 4G mobile services. Capital Economics estimates that a go-ahead for 4G in the UK would trigger private sector investment of more than £5 billion and raise gross domestic product by the end of the decade by half a percentage point. It says:

“The UK is off the international pace. The technology has already been deployed commercially by more than 50 operators in over 30 countries.”

In the UK, we still do not know when the spectrum auction, and liberalisation of restrictions on existing spectrum, will go ahead. We cannot afford further delay. The destructive promotion, which we have unfortunately seen, of the narrow interests of individual operators must now give way to the speediest possible implementation, allowing investment to be made. One of the benefits will be viable access to superfast broadband for a significant part of the country where landline services will not be available in any reasonable time scale.

We shall need new legislation and I hope that Ofcom and the DCMS will press ahead to make sure that the changes that are needed—the auction and liberalisation of the existing spectrum—proceed without further delay. We have waited long enough already.

I welcome the inclusion in the legislative programme of the draft Groceries Code Adjudicator Bill, following the initiative of the previous Government.

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[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

This Queen’s Speech can be summed up by the Prime Minister wandering around the country saying that he is not for turning. I remind him and his party that the last person who said that—Lady Thatcher—was tossed out by the country when people found out that they were getting uncaring Conservatism once again. [Interruption.] Yes, she was, of course, tossed out by her own party.

This is a Government who continue to attack, with ingrained unfairness, the personal income of all apart from those in the super-rich bracket. They boast of attacking citizens’ and workers’ rights. With 100,000 public sector job cuts, it is good to see the Secretary of State for Work and Pensions in his place. How many of the present employees of Remploy will, to his shame, end up on the unemployment list? Only 50% of the jobs have been replaced by the private sector, and many of them are part-time and temporary jobs. Of 16 to 24-year-olds, 21% are in part-time jobs, while analysis suggests that 40% are on temporary contracts.

The national debt is higher, not lower, and the UK is in a double-dip recession for the first time in 30 years. Of course I welcome investment in car manufacturing from US companies. Their choosing a UK work force in a flexible trade union environment and our being near the EU market has nothing to do with the Government, and it follows the investment of Japanese and other international companies that invested under the Labour Government.

I am an economics graduate, so I know that economic growth is based on confidence in business and in consumers. The Chancellor is a one-trick pony, with low interest rates. His stated aim is that interest rates are being held low for the sake of the Government’s bond sales, but this has the effect, for example, of attacking the disposable income of pension funds and investment funds, thus hitting the mainly frugal elderly. Quantitative easing has also hit their income and made them poorer. This signals to UK businesses that the Government believe that the economy has to be held in check, as it is fundamentally too fragile to grow without creating threatening levels of inflation. This is caused by a failure to expand the resource base of the economy so that growth can be inflation-proofed for the future.

I looked at the “Prospects for inflation” chapter of the inflation report of May 2012, which states:

“Output has barely grown since the middle of 2010, and is estimated to have contracted slightly in each of the past two quarters.”

That is what this Government have delivered through their policies. Human resource expansion is required to deal, for example, with training and skills shortages. The ageing population needs to be replaced in industries with which I am involved. There is OPITO—the Offshore Petroleum Industry Training Organisation, which deals with offshore oil, and the subsea employers association—talk about 44% of its vacancies being in non-graduate technical jobs, with an additional 20% in technical graduate jobs. The Chemical Industries Association says that it fishes in the same pond for staff, and it demands science education in schools to provide a base of people who can be skilled up for growth. Mike Mack, the world president of Syngenta, says that he fears he cannot sustain his investment in this country because of the shortage of skilled labour. He steals from other companies, and they steal from him. We need technical apprenticeships. Forget the boasts about the number of apprenticeships that have been started; how many have been concluded? How many newly qualified technicians have we got? The SNP Government falsify the statistics. They say that there are 25,000, and write to companies asking them to include people who are doing part-time work as apprentices in order to supplement the figure.

Business investment is 6% lower than the target set by the Chancellor. There is £950 billion in company accounts that is not being invested. Companies are holding on to it: they are afraid to invest, because the signals are all wrong. The Chancellor has gone for corporation tax reductions, but they are a blunt instrument. VAT increases hit the supply chain for customers, for business and for personal consumption, whereas VAT reductions—a targeted programme such as the one that the French use, reducing VAT—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The hon. Gentleman’s time is up.

Finance (No. 4) Bill

Michael Connarty Excerpts

Wednesday 18th April 2012 Commons Chamber

[Stewart Hosie]

That is absolutely right, but I want to be careful in answering. It is not good enough to say that people in the north or Wales or Northern Ireland or Scotland will lose, because unemployment and poverty in London is enormous. The geographical areas are not the ones traditionally described in lazy journalism—it is not that the north is poor and the south is rich—because pockets of poverty and of wealth exist in every single constituency in the country. The hon. Lady is right, however, that there are such pockets.

Even with all the pain and austerity, and the social and economic problems that the Government’s plans will cause, the Chancellor has been able to find a tax cut for millionaires. How does he justify it? Whatever his justification, the measure does not make sense economically, to answer the points made by the hon. Member for Vale of Glamorgan (Alun Cairns), who seemed to think that the measure is economically robust.

The Government’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under enormous pressure. The problem—this is the evidence we ought to look at—is that the deficit in this Budget was forecast in the 2011 Red Book for 2011-12 to be £90 billion, but it is now forecast to be £98 billion. That is £8 billion worse than planned. The net borrowing requirement in the 2011 Red Book was forecast for 2011-12 to be £122 billion; it is now £126 billion. That is £4 billion worse than planned. The national debt or the treaty ratio that was due to peak at 87.2% of GDP—£1.25 trillion—in 2013-14 is now expected to rise, on the same count, to 92.7% of GDP in 2014-15. That is up again; it is worse than the Government’s forecasts. Everything is going in the wrong direction, so this is the wrong time to forgo revenue yield.

[Michael Connarty (Linlithgow and East Falkirk) (Lab)]

The hon. Gentleman has set out the figures for the overarching macro-economic situation very well, but is it not clear from the OBR that the effect on business investment will be minus 6.8%? The Budget incentivises no one in terms of the real growth that we require.

[Stewart Hosie]

The points on business investment are incredibly well made. The Government’s targets were based on heroic rates of growth over four and five-year periods, but the 2011 Budget forecast for 2011 business investment growth was 6.7%. By the time of the 2012 Red Book, the forecast was 0.2%. The 2011 Budget forecast for 2012 was 8.9%, but as the hon. Gentleman says, that has been marked down to only 0.7%. Of course, that makes it even more extraordinary that there is a net fall year on year of central Government consumption and investment, which in normal circumstances in normal countries would be called an automatic stabiliser and would compensate. Of course, this country does not have that.

That means that for the Government to stay on their course, they almost certainly need the revenue yield that the 50p rate would have delivered. There is a debate on precisely how much that yield is. It could be the £360 million over four years forecast in the Red Book, or it could be the higher £3 billion a year static forecast we have heard cited. Whatever the actual figure, given that all those other metrics are going in the wrong direction, it is extraordinary that the Chancellor is prepared to forgo any revenue yields, whether they are in the hundreds of millions of the £1 billion range.

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[Charlie Elphicke]

I completely disagree. The Government are doing a great job. We have had the most difficult year, in which recovery was effectively postponed because the European and eurozone crisis caused massive uncertainty. I will not shirk from the point: that uncertainty has caused businesses to delay the business investment that was expected by about a year. The OBR, in the blue book that the hon. Gentleman says I am waving around, makes that perfectly clear. I will happily take him on on the issue of business investment. The situation has come to pass basically because of the eurozone. Also, the OBR says that business investment for the fourth quarter can be a bit lower than expected but that it often, statistically, bounces. It also says that the Government’s pioneering reduction of business taxes will have a positive effect in helping the country to grow.

The bottom line of economics is that we need to ensure more jobs and money as quickly as possible to help the country to grow faster despite the chaos and financial mismanagement in the eurozone. Let us not forget that Labour, if it had had its way, would have taken us into that chaos and into the euro. If Labour had won the election, it would also have carried on spending at an unsustainable rate and rapidly taken us the way of Greece, Spain, Italy, Portugal and Ireland, which would have put us in an extraordinarily difficult position.

On the revenue numbers, Labour’s central argument is that we should not cut the 50p rate because, first, we need to hit the rich and squeeze them until the pips squeak and, secondly, we are letting money go that would otherwise be brought into the Exchequer and are looking after our rich friends. That is its analysis. However, the summary in paragraph 4.7 on page 84 of the OBR report states:

“The Chancellor’s decision to cut the”

50p rate

“has an estimated direct cost to the Exchequer of £0.1 billion, excluding the impact of ‘reverse forestalling’ as people shift…income from”

one year to another

“to take advantage of the lower rate. The figure is small because the additional rate is now assumed to be close to its revenue-maximising level.”

In other words, it does not make much difference—£100 million here, £100 million there, out of a total budget that I believe is getting on for £700 billion, is a small amount, particularly given that it sends a positive message to aspirants, entrepreneurs and the people who work hard to deliver so much value-added for our country.

[Michael Connarty]

We can all pick selectively from the OBR report—I have referred to it quite a few times—but this is a comment based on the Government’s own estimate that there will be an inflow of £2.9 billion from increased activity by those who pay the 45% rate. There is absolutely no fact behind that yet. It is basically a comment based on a prediction by the Government. In other areas, again and again since they took office, they have been very wrong. It is a hope, not a statement of fact. The actual cost will be £3 billion until the money comes in that the OBR has accepted from the Chancellor’s estimates.

[Charlie Elphicke]

I thank the hon. Gentleman for bringing me on to my next point. The hon. Member for Pontypridd is fond of saying, “Ah, look at the HMRC impact report. It brought in £1.1 billion but the estimate was that it would then have brought in much more.” [Interruption.] Some £3 billion, he says. That was the estimate in the March 2010 Budget, which mentioned an additional £2.6 billion. In the June 2010 Budget forecast, that increased to £2.7 billion. However, when we look in detail at what happened and how much was brought in, it appears that the OBR and HMRC now estimate the figure to be £0.6 billion in 2012-13.

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[Owen Smith]

Will the hon. Lady explain which anti-avoidance measure Labour Members voted against? I tell her very straightforwardly that all Chancellors ought to tackle tax avoidance in all Budgets. The current Chancellor has risked far too much credibility on his belief in his ability to tackle tax avoidance and his belief that he is doing more than previous Governments did so. The facts bear out my claim—the IFS, not the Labour party, has done the analysis—that Labour Chancellors, in seven out of last 10 Labour Budgets, raised more money for the Exchequer through tackling tax avoidance than the current Chancellor will do with this Budget.

[Michael Connarty]

Is my hon. Friend aware that since they came to power the Government have had the ability to forbid the Cayman Islands to refinance its sovereign debt unless it revealed all the transactions taking place in the Cayman Islands? I understood that to be one of the things they aspired to do to stop people putting money into tax havens to avoid paying tax in this country. They have failed to do so and allowed the Cayman Islands to refinance its sovereign debt without any conditions whatsoever.

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[Owen Smith]

By and large I would agree with the hon. Gentleman. Tax policy ought to be predictable. Indeed, the current Government deserve some credit for continuing with the trajectory set by the previous Government on tax policy planning and tax making, by seeking to consult significantly and publish things well in advance. [Laughter.] For some reason the Minister is chuckling. I would point to the introduction of the 50p rate, which was first mooted in 2009 and introduced in 2010, which was probably what led to all the forestalling. However, that approach is a good idea, by and large. We ought to consult carefully on tax policy, because as this Government are learning to their cost, so often there are unintended consequences of tax policy. I might highlight, for example, the simplification introduced so blithely by the Chancellor in his Budget speech, when in just one sentence he waved away Churchill’s special personal allowance for the elderly and introduced the granny tax. That was a simplification that seemed sensible at the time, but in hindsight it has had unintended consequences.

[Michael Connarty]

We would all agree—hopefully one day Governments and Chancellors will also agree—that we should not do unpredictable things in tax policy. The thing that has damaged the economy tremendously and harmed all our constituents is the production tax on oil and gas in the North sea, which has disincentivised people massively and sent the price of fuel through the roof for people who cannot afford it, damaging their employment prospects and the economy of the country.

[Owen Smith]

At the risk of stepping off-piste again and incurring your wrath, Sir Roger, all I would say is that that is another example of this Government’s incompetence. A year ago they were trying to squeeze the oil and gas companies by introducing new taxes on them. Then the Government were lobbied like billy-o for a year, and what have they done? They have effectively reversed the position. They have introduced a slightly different measure, but bluntly, they have taken money from one pocket and put it back in the other. If the Government had been a little more competent, if they had shown a little more foresight and if they had thought things through a little, as they so clearly have not done with this desperate Budget, they might not have made those mistakes.