Finance (No. 3) Bill

Mike Gapes Excerpts

Tuesday 3rd May 2011 Commons Chamber

[Stella Creasy]

It is a pleasure to follow my hon. Friend the Member for Scunthorpe (Nic Dakin) and his eloquent description of the problems facing us as a country. I rise to speak to clause 72 and amendment 9 because this debate is about the bank levy and whether it is being applied in the right way and to the correct extent.

I support the amendment, because it seeks to address the challenges of any new legislation and answer the question of how we as a Parliament ensure that the legislation that we pass is effective at doing what we want it to do. The amendment would meet the challenge of asking whether bankers pay their fair share of the cost of dealing with the global financial crisis, just as we as taxpayers have paid more than our fair share, some might say, in trying to support them. That goes to the heart of today’s debate about clause 72 and what the Bill will do for the financial future of this country, so I support the amendment because it highlights the need to address the adequacy of the bank levy.

I also pose a wider question about how the clause will work to ensure that all those who have benefited and, indeed, continue to benefit from the financial crisis that this country has endured pay their fair share in helping the economy out of recession and back into growth, not least because I am deeply concerned, as many Members know, about this Government’s policy of reducing the national debt by increasing private household debt, and about what that might mean for many of our constituents.

I spoke at length on Second Reading last week about the impact of that policy on families throughout the country, and I do not propose to repeat the measures that I put forward, but, on the adequacy of the bank levy, the clause makes an omission that I hope the amendment will address. High-cost lenders are benefiting disproportionately from the impact of the Budget on our people, and from the fact that mainstream lenders are not lending because of banks paying out more in bonuses than they do to the people of this country, who need that money. Indeed, perhaps the omission calls for a new clause to deal with that issue and, therefore, to make sure that that money benefits our economy.

The industry has certainly benefited greatly from this Government and from the events of the last year alone. Of the £216 billion of unsecured lending in this country, £8.5 billion comes from that market, which has increased by £1 billion in the past year, and £8.5 billion is the same amount of money that it would cost to repair all the schools in England—a cause dear to many Opposition Members. It is also the entire budget of the Department for International Development; we are talking about a substantial amount. The market is growing not least because of the lack of regulation—the lack of Government action to deal with the high-cost credit industry—and the amendment could deal with that omission.

[Mike Gapes (Ilford South) (Lab/Co-op)]

My hon. Friend refers to schools, and she knows from her constituency and borough how the coalition parties’ drastic, ruthless and unplanned cuts to Building Schools for the Future have caused great grief to her constituents, yet she says that they could have been compensated for by the measures to which she has just referred—

[The Temporary Chair (Mr James Gray)]

Order. I have been quite generous so far in not picking up hon. Members on what they have said, but we have to focus on the bank levy, how much it should be and whether it should be reviewed annually. Debating the way in which the Government might spend the proceeds from any such levy is not in order during discussion of this amendment.

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[Mr David Lammy (Tottenham) (Lab)]

It is a great pleasure to follow my hon. Friend the Member for North Durham (Mr Jones), whose eye for forensic detail and lucidity in these matters are second to none. He could not be described as brief, and on this occasion I intend to be a bit briefer. The amendment seeks a review of this proposal because, at its heart, this is about equity and fairness. You, Dr McCrea, understand better than anyone what fairness and equity mean.

There has been much talk about small business men. A small business man came to see me a month ago about the lack of finance from Barclays bank. It is true to say that even though we all have stories of small businesses that are unable to get loans, many constituents come and ask Members specifically not to contact their banks, because they are scared, frankly, that they will be cut loose and that the intervention of a Member of Parliament could make things worse. The fact that across the Chamber no party is suggesting that we have got back to a situation in which there is access to loans indicates that industry and small businesses in this country are in a very serious way.

That brings me to the other deceit, or conceit, that lies at the heart of what has been suggested. Much has been made of the manufacturing sector. Yes, it is hugely important, but it employs 4 million people or thereabouts, whereas 23 million are employed by the service sector, which is a depressed sector. That is perhaps why, alongside the public sector cuts we are now seeing, unemployment in Tottenham is the highest in London. The levy, set at the right amount and consistently reviewed, could have done something to ameliorate that.

It is about fairness and equity, and it is also about what the Government’s story on growth really is. Some of what we are hearing on how they see the levy and the box into which they want to put it, with the constraints of £2.5 billion only, can only mitigate the growth that we want to see in our constituencies.

The single mums who came to see me a few weeks ago because the after-school activity club is being cut for their young children and they are wondering how they are going to get back from work by half-past 3 to pick them up need to feel that bankers, too, are making a contribution. The elderly suffering from Alzheimer’s in one of my local residential homes, against a backdrop of three being closed because the local authority is being squeezed, need to feel and want to believe, because of the age they have reached and the contribution they have made to this country, having paid into the system, that the banking sector is also making a contribution that is fair. The many public sector workers who received their payslip for the last time just a few days ago also want to believe that bankers are making their contribution.

These people cannot understand why, despite the fact that growth in our economy is so sluggish, at barely 2% over the most recent period, City workers are taking home an increase of 7% on average. Why have 231 workers at Barclays bank managed to receive bonuses of £554 million between them? How is that possible, when the dividend for those who have shares in that bank was just over £600 million? That is a bonus culture that has not been checked, that has not been sorted out, and that feels brutally unfair.

When I was canvassing in Slough at the most recent general election, a 90-year-old said to me, “Love, you know what it is? The poorer you are, the more you give in this country.” That is how it feels at this point, when we have to come back to a subject on which really we ought to agree. We know that the banking sector led to this depressed economy, so why should it be let off the hook at this time?

When my hon. Friend the Member for North Durham asked, “Where did we get this £20 billion from?”, I asked the Minister to begin his contribution with the answer. Where did that £20 billion allowance come from? It is a staggering amount of money to slot in at the last minute so that the figure drops beneath the £3.9 billion mark which the industry itself originally predicted. Where did that money come from, and how did we secure the millions in tax relief for that sector? We owe a bigger contribution from the banking sector to the young people of this country, one in five of whom is currently unemployed.

This Government have led us to a situation in which the new arrangements for funding higher education are between the student solely and the university. They have taken the state entirely out of the picture, cutting teaching funding by 80% and abandoning arts and the humanities and any contribution to them. Effectively, with a proper banking levy they could have said that the state could stay involved. Industry, the other sector that benefits, could have made a contribution, too, but the banking sector is certainly somewhere where we could have started. The Government, however, turned their face against that, saying, “No, we’ll land the debt on our young people and let the very people who have led to their unemployment off the hook.”

I want to understand why the Minister has made that decision, and how we will get back to growth, given that young people are to be dealt with in that way.

[Mike Gapes]

My right hon. Friend asks why. Is it not clear why? This is a Government of millionaires and toffs, and they are in the pocket of the banksters. That is what it is all about.

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Finally—this comes back to the earlier intervention—let us look at what the Government have brought forward in what they call their growth zones. Enterprise zones? I mean, come on! As for the idea that they are an appropriate growth strategy, we need only look back at the experience of previous enterprise zones to know that creating jobs under such a regime is prohibitively expensive. The national insurance holiday is another centrepiece of what the Government said they wanted to do. However, although they will not release any concrete figures, it was already clear from an article in the Financial Times in January that, far from 400,000 businesses being helped over the four or five years of the policy, at that time only 1,500 had been helped.

[Mike Gapes]

My hon. Friend mentions the national insurance holiday for new businesses, but it discriminates against London and Londoners. Some of the poorest people in the poorest communities in the poorest boroughs in this country are in London, as are some of the areas with the highest unemployment, yet the national insurance holiday does not cover London, which he, as a London Member, knows as well as I do.

[Mr Love]

I thank my hon. Friend for that intervention. He is correct. When that legislation was passed, we argued that many parts of London had suffered tremendously from the credit crunch and were as deserving as—if not more deserving than—other parts of the country. However, that argument was not listened to. Perhaps the policy would be a little more successful if the Government had included London, along with all the other parts of the country.

The policy has clearly not been a success. The Government’s growth strategy is not producing growth. I would therefore like to suggest an alternative growth strategy, the merit of which is that it was beginning to bear fruit at the time of the general election.

I will pick out just a few areas at which the Government need to look carefully, while searching their conscience and trying to construct a positive growth strategy and address these concerns. First, youth unemployment is just about topping 1 million. One in five of our young people aged 16 to 24 are unemployed, and to focus on getting young people back into work, as we were trying to do before the general election, would pay dividends. We shall lose a whole generation if we do not address the youth unemployment problem, and that should be a priority for the Government.

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[Ian Mearns]

What happened over a number of years—I am afraid that our Government were not immune from this—was that, rather than planning roads to encourage economic growth and development, we planned them to accommodate congestion. That was not always the best thing to do from an economic perspective. Down that road lies ruin, if you will pardon the pun.

The Federation of Small Businesses has asked for a fuel stabiliser. I am not saying that I necessarily agree with the federation, but stability in fuel prices is important. The Chief Secretary said of a fuel stabiliser:

“It’s a complicated idea and it’s difficult to see… how we achieve it, but it’s something that we are looking at very carefully to see if we can reduce the burden of fuel duty”.

I wonder whether the concept could be more straightforward. When oil prices increased, the stabiliser—or a stabilising impact effect—would allow the Government to reduce duty to a lower limit; when oil prices fell, the Government would be able to raise duty to a higher limit.

Critics cite the difficulty of knowing whether the fluctuations in the price of oil are temporary or likely to persist beyond the near term, saying that it would be difficult for a fuel duty stabiliser to set fuel duties effectively. To counter the volatility in the price of oil, a fuel duty stabiliser or a stabilising measure would need to be based on an official forecast of the future price of oil, and then adjusted regularly according to the actual oil prices. It will be difficult, given the volatility in how the international oil markets are working at the moment, but we need to try to find some measure to help our small and medium-sized enterprises through this difficult process at this difficult time; otherwise, we are in real danger of seeing fuel become a major blockage to economic growth, not only in particular regions, but across the whole nation.

Would this be bad for the public finances? The Chief Secretary said that we cannot “sacrifice income willy-nilly”. Critics argue that a stabiliser or a stabilising effect would be too expensive to implement during a time of austerity, but that criticism fails to take into account the wider implications of high fuel prices on the UK economy. If set correctly, the measure could be fiscally neutral for the public finances and help to provide much-needed economic stability for the UK economy. My main point in asking for some sort of analysis in a review is that the measure is needed so much more in the regions of England, particularly regions such as the north-east, but the south-west as well.

[Mike Gapes]

The amendment states that the Chancellor should

“publish, within 3 months… an assessment of the impact of taxation on fuel prices.”

I will address my remarks to the scope of such an assessment. It is important not to focus solely on the narrow issues surrounding VAT, although they are important, or on the global increase in fuel prices, which is one of the factors causing the revolutions in north Africa and elsewhere in the world as people suffer from rising food prices as a result of rising fuel prices.

There is something very specific about how we in this country choose to tax fuel. Compared with other European Union countries, we choose to have very high taxes on fuel. One consequence is the problems from which our road hauliers have suffered in comparison with some of their competitors in European countries that have road pricing.

It is interesting to note that in the 2010 general election, the Liberal Democrats proposed to move towards

“a rural fuel discount scheme which would allow a reduced rate of fuel duty to be paid in remote rural areas, as is allowed under EU law”,

as well as to prepare for a system of road pricing to be introduced “in a second parliament”. That was the Liberal Democrat position. The Conservatives, of course, had a completely different view, promising a “fair fuel stabiliser”, presumably designed to help people in the rural communities.

I represent an urban area. My constituents suffer high fuel prices in London and, unlike some people in rural areas, they do not have the advantage of having to pay only 11.14p duty on a litre of so-called red diesel, instead of 57.95p duty on a litre of low-sulphur diesel. We know that there is abuse of the red diesel system by certain people who, when driving on main roads, use diesel that should be used only for off-road activities. That opportunity is not open to my constituents. People living in Ilford and elsewhere in Greater London do not have access to red diesel that they can abuse in order to avoid paying tax. However, people who are represented by the Liberal Democrats, who are in favour of giving priority to remote rural areas but not to those of us who live in urban areas, or by Conservative Members who are happy not to enforce adequately the provisions against abuse of the red diesel system, are not concerned about that. I want the review to examine the abuse of the red diesel system. I believe that a lot of money that should be going to the Exchequer is not doing so and that there is discrimination against people who live in urban areas and have no access to red diesel for their motoring purposes.

[Mr Kevan Jones]

I take my hon. Friend’s point about the abuse of red diesel, but may I disabuse him of the fact that it is not available in urban areas? When I was chair of trading standards in Newcastle, the abuse of red diesel in urban areas was just as prevalent as it was in some rural areas. The fact is that certain criminal elements in London can gain access to red diesel fairly easily.

[Mike Gapes]

Obviously I am not as accomplished as my hon. Friend at making contact with the criminal elements in London. However, he has raised a serious matter: there are criminal elements who exploit differentials in duty. We have seen that in Northern Ireland, when terrorist organisations financed their activities by smuggling fuel across the border from the south to the north and vice versa, and we have seen it in other contexts.

If we are to have a policy on fuel taxation, we need to ensure that if we introduce measures that discriminate in favour of certain people in remote rural communities, we do not also create loopholes that will be used in a discriminatory way to undermine the sense of justice and fairness that our people want us to exercise. If we have high levels of fuel taxation in this country, which we do, and if that causes problems for our road haulage industry and discrimination between rural and urban areas, when the review is conducted—I hope that the Government will support the amendment, because it is vital that we look at these issues in—

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

On a point of order, Mr Hoyle. The amendment is very narrowly drawn. I have listened to the debate very carefully. Can you tell the Committee whether it is in order to discuss the matters that have been raised in it, ranging from the abolition of child benefit to the widening of the A1 and, now, the abuse of red diesel?

[The Chairman]

The Chair will decide that. I find it strange that the hon. Gentleman, who is a very senior Member of the House, is questioning the judgment of the Chair.

[Mike Gapes]

Red diesel is taxed at a lower level than other diesel. We are discussing the taxation of fuel and the need for a review of fuel taxation. Surely that is extremely pertinent to the terms of the amendment.

[Mr Kevan Jones]

The amendment states:

“The Chancellor shall publish, within 3 months of the passing of this Act, an assessment of the impact of taxation on fuel prices.”

I am sure that that includes diesel.

[Mike Gapes]

I entirely agree.

I believe that one of the difficulties in our economy, which affects our haulage industry, arises from our tax levels compared with levels in other European Union countries. We all know that if we drive across to France and fill a tank with diesel, or “gas oil” as they call it, it is possible to pay—depending on where we are—40%, 50% or 60% of the amount that we would pay in the United Kingdom. The haulage industry based on the other side of the channel therefore has a competitive advantage. The great lorries with Polish and other countries’ number plates that we see bringing goods into this country have a competitive advantage over those of our own haulage industry.

We need to look at these matters. I have to say that I think the Liberal Democrats were right. [Interruption.] Yes, occasionally they are right, and I think they were right when they said we need to look at road pricing. Unfortunately, the only person who has done anything serious about road pricing is, of course, the former Mayor of London, Ken Livingstone, who introduced the congestion charge, which the Conservatives have now accepted even though they opposed it when it was first introduced.

[The Chairman]

Order. I think we are now beginning to stray a little from the subject under discussion. I am sure we will return to the topic of the fuel levy.

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[Mike Gapes]

Thank you, Mr Hoyle. I will, as always, take your sagacious advice.

We need to look at the consequences of the way in which our economy is integrated globally, and the knock-on consequences of our competitive position in European markets. We need a review of fuel taxation, taking account of the position of the haulage industry and the discrepancies and disparities between different parts of the UK—I accept what my hon. Friend the Member for Gateshead (Ian Mearns) said about the north-east region. There are difficulties and we need to look at this issue in the round. It is eminently sensible to have a comprehensive review of fuel taxation policy, as called for in the amendment.

Everybody agrees that the current arrangement is not working well. There is a huge amount of public disquiet—all of us receive e-mails and letters on the subject, and the Federation of Small Businesses and others write to us. People are concerned about high fuel prices. There are things we can control, such as not increasing VAT on fuel, and there are things we cannot control, such as the impact of global events, but as long as we have an economy that is dependent on fossil fuels and oil, we will always be vulnerable to such things. The debate embraces wider issues than are dealt with in the terms of the amendment. I will not talk about those issues now Mr Hoyle, but it is important that we address them in a comprehensive review of fuel taxation policy. I therefore support the amendment.

[Hugh Bayley]

First, I want to compare the records on fuel taxation of the most recent Labour Government and the previous Conservative Government. My view is that the Labour Government were a great deal kinder to the motorist, and the following figures are provided by the current Government. Figures from the Department of Energy and Climate Change show that in 1990, when the Conservatives were in power, 59% of the price paid at the pump by the motorist and road haulier for unleaded petrol was taken by the Government in fuel taxation, and that it rose to 75% during the following seven years of Conservative rule; the Government therefore took more and more and more in taxation. When Labour was in power, however, the proportion of the price of unleaded petrol taken in fuel taxation fell to 65%. The figures for diesel are almost the same. Under the Conservatives, the tax take rose from 57% to 74%, whereas Labour brought it down to 64%.

I would like the Economic Secretary to the Treasury to answer one question in her response, on the following subject. Since the general election, Government policy—not just Conservative policy, but Conservative and Liberal Democrat policy—has been to increase the tax on fuel by about 3p a litre through the increase in VAT and to give back roughly a third of that, 1p a litre, through the reduction in duty. That policy will slightly help road hauliers, because the duty element will reduce. The VAT element increases, but hauliers are able to recover the VAT, or at least pass it on in the VAT they charge their customers. So the effect of the Government’s policy will be to clobber the private motorist to the tune of 2p a litre, because they will have to pay the VAT increase out of their own pockets, while providing slight relief to businesses, particularly hauliers. I say “slight” because the price of fuel has increased as a result of a number of factors, including the increase in the cost of oil and the fall in the value of the pound on the international exchanges. So motorists and hauliers have been clobbered by the market and by the Government, but hauliers are being hit slightly less hard than the private motorist because they are able to recover the VAT increase.

My question to the Economic Secretary is as follows: is it a deliberate act of Government policy to make life slightly easier for businesses but to clobber the private citizen, or is it just an accident that that has happened? This is one of the things that ought to be studied in the review that the Opposition amendment proposes. We should examine the relative merits of taxing fuel for vehicles through VAT as opposed to through fuel duty, and who the gainers and losers are.

My hon. Friend the Member for Wirral South (Alison McGovern) made a very powerful speech about the impact that the increase in VAT on fuel has had on family budgets, and the impact that inflation generally, and fuel inflation in particular, is having on families who are having their earnings squeezed. My Front-Bench colleagues’ amendment proposes that the review ought to consider that matter.

I would like such a review also to consider one other issue, because I do not believe that the Government have yet done so—although I would be delighted to be corrected if they have carried out the sort of analysis that I propose. The review should also examine the impact that taxation has on the demand for fuel. The previous Conservative Government, one and a half decades ago, introduced a fuel price escalator. I understand that their reason for doing so was environmental: they wanted to increase the price of fuel to depress the demand for it, and so reduce carbon emissions. That was the policy intention, and it is one of the reasons why Conservative policies cost taxpayers and consumers so much. I mentioned that the fuel tax take rose from 59% to 75% in their last seven years in office. I wonder whether the Minister can tell me whether that sharp increase in fuel taxation under the previous Conservative Government actually did depress the demand for fuel, because that is an important consideration. If we change the marginal rate of fuel taxation, economics suggest that there should be some elasticity in demand.

The Government say that they want to be the greenest ever, so they ought to consider the carbon emission consequences of changes to fuel duty and VAT on fuel. I hope that Treasury Ministers have taken advice on that from both the Department of Energy and Climate Change and the Department for Transport. They ought to have done, if they really are—[Interruption.] Does the Financial Secretary to the Treasury want to intervene? No, he is back in his seat. The Government ought to take advice before they make such proposals, so that they can assess the environmental impact of a fiscal measure. I am waiting to hear from a Minister, but it sounds as though that has not happened. It ought to if the Government are serious about the environmental consequences of their fiscal policy.