Budget Resolutions and Economic Situation

Nia Griffith Excerpts

Wednesday 18th March 2015 Commons Chamber

[Nia Griffith (Llanelli) (Lab)]

I should like to set the record straight. People will see through the Budget very quickly. They know that a few gestures from the Chancellor and the recent lull in inflation will not make up for the loss of purchasing power that households up and down the country have suffered over the past five years.

Let us set the record straight on the Labour Government. There was a financial crisis in 2007-08. It was a worldwide banking crisis. At that time, Conservative Members agreed that we had to back the banks and bail them out to protect people’s savings and homes. The Labour Government understood that the only way to get the deficit down was to ensure that we got the economy growing first. By the time we left office in 2010, there was an annual growth rate of 4%. The first thing the Conservative-Lib Dem Government did was to choke off that growth. By the end of 2010, growth was down to 0%. As a result, the recovery has been much slower and demand has remained low, which has hit our manufacturing industry, and therefore tax receipts have been low, which has made it difficult to reduce the deficit.

The Government’s priorities have exacerbated the problem, because capital expenditure has the greatest impact on growth in an economic crisis. Money that is spent to improve our infrastructure and attract investment—capital expenditure—provides jobs in the UK and puts money in the pockets of local people, who spend it in our local economy. Capital expenditure also helps us to keep the skills base. For example, in construction, public capital expenditure has provided work and kept the skills base when there has been no work in the private sector. The Labour Welsh Government have tried to keep capital expenditure going in Wales. The Government parties have done nothing except cut back on that type of expenditure and then try to rewrite history.

For example, we had already agreed that the main line from London to Swansea would be electrified, but then the Government parties cut the funding before pretending to give it back, first to Cardiff and then, after a long struggle, to Swansea. They tried to take credit for that, but, to be frank, they should not have cut it in the first place.

The choices the Government parties have made on taxation are not only morally wrong, but economically unwise. Those on low and middle incomes, of necessity, spend their income back into the local economy much more quickly than those on the highest incomes. There is not a trickle-down effect, as the Tories seem to believe, and much of the tax cut for millionaires has probably gone on expenditure overseas. Those on low and middle incomes—the working poor—have been particularly badly hit. VAT is a very regressive tax that is levied on all sorts of things that are not luxuries, such as bathroom items, including toilet paper. Such items add up in household shopping baskets. In fact, families find themselves £1,000 a year worse off under this Government. That has been fuelling household debt and driving people to food banks. In Wales alone, which has 5% of the UK population, 79,000 people have visited a food bank in the past year.

I want to address some specific issues mentioned by the Chancellor. The first is his announcement about the Severn bridge toll rates for 2018. I remind the House that it was a Tory Government who set up the private finance initiative scheme for the Severn bridge in the first place and landed us with all the payments we have to make. It is also reasonable to say that prices will come down in 2018 anyway, because that is when the concession will end and we will finish paying for the building of the bridge, and VAT will be removed because it will return to being a publicly owned asset rather than a privately owned company. That will happen anyway, so it is not good enough simply to say that prices for white vans will be reduced. Haulier companies such as Owens in my constituency, which employs 500 people, pay a massive amount in Severn bridge tolls every year. Obviously, they find it difficult to compete against companies based in England, so we expect much more than the little reduction in 2018.

The rise in the tax threshold is welcome, but, as my hon. Friend the Member for Bishop Auckland (Helen Goodman) has said, too many people do not earn enough and will not benefit very much because of cuts to housing benefit and tax credits. Those who will benefit are much further up the tax scale, so the policy is not going to help half as much as it ought to and the people affected are still being hit by the increase in VAT.

On the issue of greater freedom for pensioners to use their money in different ways rather than purchase annuities, it is absolutely vital that stringent regulation is established straight away to ensure pensioners are not ripped off by the unscrupulous, who are, doubtless, rubbing their hands with glee and hoping to cash in on the unsuspecting.

I certainly welcome any measures that ensure that tax owed is tax paid, but tax avoidance measures taken by the Labour Government are now bringing in 10 times as much revenue as any measures taken by this Government. I draw the House’s attention to one problem in particular. January saw the introduction of new EU rules on the collection of VAT from companies that operate in more than one country. Clearly, the rules are necessary and were designed to stop big companies wriggling out of their moral tax responsibilities, but the practical procedures required by Her Majesty’s Revenue and Customs are threatening to put small digital businesses out of business. Such businesses sell knowledge-based products online; they may be very small domestic businesses selling recipes or knitting patterns that involve a small transaction. If sales are carried out in many different countries over the internet, those tiny transactions have to be logged in great detail, so I ask that HMRC takes another look at what it can do to ease the burden on those small businesses.

Let us be absolutely clear: the Chancellor is proposing massive cuts over the next few years to public services and welfare, and he has not even hinted at how they will affect people. The key issue is that, by doing so, he will repeat the problem of choking off growth and we will be back to a state similar to that in which we found ourselves at the end of 2010. This Budget is going nowhere. If we want to get a better system, we need a Labour Government to make sure that we tackle the energy crisis, prices and the problems that people face so that they are then able to spend more and get the economy going again.