Finance (No. 3) Bill
Nic Dakin Excerpts(12 years, 10 months ago)
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Andrew Percy
I will try to avoid further outbursts over the EU, Madam Deputy Speaker—I can never resist the opportunity to get my views on the EU written into Hansard.
I agree with much that has been said. I am not going to get into an argument with the hon. Member for Hartlepool (Mr Wright) over whose constituency glows redder, but in my constituency a significant amount of power is generated locally—by the Drax power station, which is just outside, by Eggborough power station and by Keadby gas power station. Furthermore, I share the Scunthorpe steel works in my constituency with the hon. Member for Scunthorpe (Nic Dakin)—unsurprisingly —and I will say something about that in a moment.
I echo some of the concerns expressed by colleagues on both sides of the House. In the Humber, the petrochemical industry is a huge employer, and we are hoping for further growth. Indeed, the whole renewables sector in the Humber is incredibly important, and it would be perverse were we to bring Siemens and other tower and turbine producers to the Humber only for them to be unable to use steel from Scunthorpe because it has been rendered uncompetitive.
I am not going to rehearse all the arguments on climate change. I am not a scientist—I do not understand a lot of these things—but I understand that it is probably a good thing to do something about the amount of carbon we are putting into the atmosphere. Of course, however, jobs must always come first. We need no greater reminder of that than what is happening in Scunthorpe at the moment with Tata Steel—1,200 jobs are going already because of losses going back a few years. In fairness to Tata, it has not blamed this policy, but it has said that it has considerable concerns about its impact on future growth at Scunthorpe. I would like to hear from the Minister—she and I have had conversations about this on several occasions, as she will remember—what the Government plan to do to support the high-energy users. The Humber economy is very much based around high-energy use, so this policy could impact on us disproportionately. I know that the Government are considering that point, but the sooner we can get some certainty the better.
As I mentioned, much has already been said, and in the interests of brevity I do not propose to go over it all. [Interruption] But I have not quite finished. Something needs to be said about general support for manufacturing. What has happened to manufacturing in this country not only over the past decade but over the past couple of decades is a scandal. I welcome the fact—I believe in being as positive as possible—that the Government are committed to a resurgence in manufacturing, which, as I said, is very important in the region represented by me and neighbouring colleagues. That is why we welcome the enterprise zones, which the hon. Member for Hartlepool mentioned, and we are hopeful of getting another one approved for the Humber shortly. I welcome the emphasis on skills and sending young people the clear message that working in manufacturing is just as valuable as trotting off to university to get a degree and become a doctor.
We are hearing all the right things from the Government, and I support that entirely. However, I have concerns about where we are heading with this policy, which is why I think that both the amendments have some merit. Before deciding how to vote, I will listen to the response from the Minister, who I know is very much alive to the issue. Clearly the Government will not want to do anything that puts manufacturing jobs at risk, so I look forward to her response. On that note, I will end this brief, four-minute speech, and look forward to hearing from other hon. Members.
Nic Dakin (Scunthorpe) (Lab)
I am pleased to follow my neighbour, the hon. Member for Brigg and Goole (Andrew Percy), and I support many of his comments.
For the Government to unite the representatives of manufacturing industries with Greenpeace, Friends of the Earth and the World Wildlife Fund in opposition to their proposals is a masterstroke. I do not accept the ingenious argument that the Economic Secretary to the Treasury gave in Committee, which was that such a range of opposition to the tax was proof positive that the right balance had been achieved. That is patently not the case: as we have already heard, the arguments of the high-energy manufacturers and the environmentalists are complementary, not contradictory. The key challenge that we face as a nation is how to balance greening the economy with growing the economy. The Government’s proposals fail to meet that challenge. The UK is competing internationally for investment. The Humber is competing with Bremerhaven and Esbjerg for green investment. As we have already heard, those making investment decisions too often sit outside these shores. In the real world, the carbon floor price represents a serious threat to our competitiveness. We are in danger of seeing multinational companies choose to invest not in the UK but elsewhere.
Martin Vickers (Cleethorpes) (Con)
The hon. Gentleman is making a persuasive case. He and I know the seriousness of the situation from our regular visits to Tata Steel in Scunthorpe, and he will be familiar with the Able UK site in my constituency. One of the arguments for the company coming to our area was the proximity of the steel works, which, ironically, Able UK wants to use for production in the renewables sector. I am sure the hon. Gentleman agrees that it would be tragic if that steel were produced elsewhere, thereby creating greater emissions.
Nic Dakin
The hon. Gentleman makes a cogent and sensible point. [Interruption.] Indeed, I note that the Economic Secretary is writing it down, so I hope that she will respond to it later.
We are in danger of exporting UK jobs to places such Ukraine and Russia, thereby boosting global warming rather than reducing it. As we have heard, my community in Scunthorpe faces serious challenges after Tata announced that 1,200 jobs were at risk. We have also heard the chief executive of Tata Steel, Karl-Ulrich Köhler, quoting the carbon floor price as part of the context of the decision. However, other, local companies are equally concerned. Richard Morley of Caparo Merchant Bar in Scunthorpe said to me:
“As well as supporting growth and jobs, companies like mine are well-placed to provide many of the technical and material solutions necessary to address climate change”—
the point that the hon. Member for Cleethorpes (Martin Vickers) made a moment ago—
“but we can only do so if we are able to remain competitive. The unilateral introduction of the”
carbon floor price
“at too high a level could threaten this.”
Richard Stansfield of Singleton-Birch has examined in more detail what the carbon floor price means:
“The CFP does not actually set a…price of £16 in 2013 as has been implied. The figure of £16 has been arrived at by using a 2009…carbon price of £11.06 and adding a £4.94 tax, called the carbon price support, to reach the £16. The current forward price of carbon in 2013 is already around £16, so adding this £4.94 will make the price of carbon £20.94. This will be £4.94 more than our European competition will be paying and £20.94 more than the rest of the world.”
Only last month we heard the new director general of the CBI, John Cridland, expressing concerns about the impact of the carbon floor price on high-energy manufacturing.
In a written answer to a parliamentary question, the Economic Secretary confirmed that the carbon price support provisions would put up consumer energy bills and deliver windfall profits of £50 million a year from 2013 to existing nuclear reactor operators. Greenpeace has calculated that the figure exceeds £1.3 billion up to 2020. The Government’s proposal is therefore a bad deal for bill payers. Almost £1 billion will be given to the nuclear industry for doing absolutely nothing new. The proposal will add nothing to energy output or Britain’s energy security, and there will be no requirement for the companies to invest the windfall in national priorities such as energy efficiency programmes or meeting our renewable energy targets.
I am afraid, therefore, that in its present form the carbon floor price is a badly designed tax. It will not drive the significant investment needed to develop clean, safe alternatives to fossil fuels or the technological improvements needed in energy-intensive industries. As research by Waters Wye Associates concluded:
“The outcome of implementing policies as they are currently conceived will…be poor both economically and environmentally. Global greenhouse gas emissions may well increase as well as hitting both investment and jobs.”
The current approach risks penalising British industry and endangering British jobs. It will hurt the consumer and fail to deliver our green ambitions. I urge the Government to think again.
Angela Smith (Penistone and Stocksbridge) (Lab)
I want to speak in support of amendment 12 for three reasons. First, the Government’s statements on subsidies for nuclear power have been absolutely clear. The amendment calls for a report, so that the Government can at least be transparent about how they will use the subsidies raised through the carbon floor price. Secondly, the impact on fuel poverty has to be measured and so, again, has to be transparent. Finally, like the hon. Member for Redcar (Ian Swales) and my hon. Friends the Members for Hartlepool (Mr Wright) and for Scunthorpe (Nic Dakin), I particularly support proposed new subsections (4)(c) and (f) of clause 78, which relate to the impact on energy-intensive industries.
The report should detail the impact on energy-intensive industries and make clear how the revenues will be used. The Government should commit this evening to using some of the revenues raised from the carbon floor price to mitigate its impact on the competitiveness of our industries. If we look at the numbers employed in energy-intensive industries across the UK, we see that at least 225,000 people are directly dependent on such industries, with around three times as many indirectly dependent on them through the supply chain.
The impact of the proposed measures would absolutely be felt in my constituency of Penistone and Stocksbridge. Tata Steel in Stocksbridge is a major employer, currently providing more than 800 jobs, and has recovered from its hiatus in 2008, when it was on the brink of going bankrupt and out of business. Tata Steel is now back in profit, employing as many people as it did in 2008, if not more. That is a success story for UK manufacturing and a vote of confidence by Tata Steel in the capacity of UK manufacturing and its ability to compete globally. In my constituency we also have Fox Wire, which makes world-class cabling for drilling and welling operations globally, and Naylor Industries and Hepworth, which manufacture clay pipes for all sorts of applications across the world. We also have Pilkington glass and Georgia-Pacific, which produces paper. That makes well over 1,500 jobs that are directly dependent on energy-intensive industries.
As my hon. Friend the Member for Scunthorpe set out in detail earlier, the impact of the carbon floor price is clear: the cost of carbon will increase from £16 a tonne, rising from 2013 to £30 a tonne by 2020. As he pointed out, that will create a significant risk that the industries that we are talking about this evening will be placed in an uncompetitive position globally, not just in relation to Europe, but in relation to the US, China, Ukraine and Russia. We share the view of the head of Tata Steel’s European operations that this will threaten the future of those industries in the UK.
What is it about those industries that makes them so special, and why should a special case be made for them? The argument is crystal clear: it would be very short-sighted to damage those industries in relation to the rest of UK manufacturing because their products are increasingly being geared towards improving fuel efficiency, and they are reducing their carbon emissions in their manufacturing processes.
Finance (No. 3) Bill
Nic Dakin Excerpts(12 years, 10 months ago)
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Stella Creasy
I am happy to share the figures with the hon. Gentleman, although I am afraid to say that his interpretation is incorrect. One of the things that I have done—perhaps I am getting a reputation for it in the House—is my homework on this market, and I have sought as much accurate information as possible. That was why I made the freedom of information request, and I would be happy to share the data with him. One of the challenges is that the Government have information about how quickly this market is growing, but they are timid about confirming it.
Nic Dakin (Scunthorpe) (Lab)
My hon. Friend is setting out carefully and deliberately the challenges that people face. Does she agree that the exponential growth in this high-cost credit lending is the very reason the Government need to act to address this issue sooner rather than later, in line with the consensus across the House?
Stella Creasy
I absolutely agree. I am quoting research by the consultancy practice, R3. It is conducting surveys because it is worried about the mix and range of credit that people are taking out and the high-cost credit itself, which is causing people to get into debt. That is why I am passionate about tackling the problem sooner rather than later. Contrary perhaps to some of the briefings that hon. Members might have had from the payday industry, the majority of people borrowing from these companies are on comparatively low incomes. In particular, one in 10 UK payday customers has an income of less then £11,000, and 46% have incomes of less than £15,000 a year. It is evident how quickly high repayment charges eat into an already meagre wage.
Finance Bill
Nic Dakin Excerpts(12 years, 10 months ago)
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Ian Swales
I thank my right hon. and learned Friend for reminding me of that fact. One of the things that have been absent from Labour Members is alternative policies to those being pursued by the Government.
The week after VAT was reduced by 2.5%, Cristiano Ronaldo, the premiership footballer, saved £4,000 on the cost of his new Ferrari. He will also have made massive savings on many of his other purchases during that period. I doubt whether any constituent of mine saved £4,000 as a result of VAT being reduced.
VAT as applied in this country is a progressive tax on spending. The more people spend, the more they pay, so the inconvenient truth is that cuts in VAT benefit people in proportion to how wealthy they are.
Nic Dakin (Scunthorpe) (Lab)
Does the hon. Gentleman think that when Save the Children says that
“the discount rate and exemptions doesn’t take into account the incomes of people buying goods and services—so they are not enough to make VAT fairer”,
Save the Children has got it wrong?
Mr Hanson
Not just Labour MPs are concerned about this increase. The hon. Member for Colchester (Bob Russell), a Lib Dem MP, said in a debate last year that he wants to help charities that have been hit by this move.
We all accept that VAT is a difficult issue for charities, but it has been made more difficult by an extra 2.5% increase at a time of squeezed budgets, and when the Government are asking more of the charitable sector by cutting public sector spending generally. That issue of great concern was highlighted by my hon. Friend the Member for Wrexham (Ian Lucas).
Mr Hanson
I do. My hon. Friend spent many a happy hour in Committee discussing those very issues.
If the Government are not interested in master builders and the voluntary sector, and if they are not interested in the impact on public sector operations such as hospitals, schools and universities, perhaps they will listen to the British Retail Consortium, which states:
“Increasing the VAT rate to 20 per cent would cost 163,000 jobs over four years and reduce consumer spending by £3.6 billion over the same period.”
Only today, there were job losses at Jane Norman. There have been job losses at Habitat, Focus DIY, HMV, Mothercare, Comet and HomeForm.
The Economy
Nic Dakin Excerpts(12 years, 10 months ago)
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Nic Dakin (Scunthorpe) (Lab)
It is a pleasure to follow the hon. Member for Ipswich (Ben Gummer), who enriched us by deploying such a rich lexicon in dissecting the motion. Indeed, this debate is, in part, about language. I began my working life as a teacher of English, and although I have moved on from that, I can still identify a good yarn when I read or hear one, and that is what the Conservatives have been spinning since the general election. They have been spinning a good yarn—a seductive fable—but in truth it is a Tory tale of woe, with brief Lib Dem notes in the appendices. Regardless of how seductive and engaging people have at times found this yarn, it is not an accurate account, because the reality is very different.
The truth is that the country is facing difficult times because there has been a global banking crisis that required strong and decisive action to avoid a global catastrophe. That action was partly led by the then Prime Minister of this country. The situation is still challenging for our economy and others across the western world, as we have heard in the debate, but we must tackle the challenge in a sensible way.
In the general election campaign, the people of this country had every opportunity to hear the different arguments about how best to tackle that challenge, and they mostly supported candidates who proposed addressing the deficit in a serious and sensible way by halving it over the lifetime of a Parliament. The electorate voted for more candidates who supported that than Conservative candidates who, quite fairly, proposed a different approach. This is in part a sorry tale, therefore, because there is no mandate for the Government position.
When Labour left office a year or so ago, the economy was starting to grow strongly: inflation had fallen, and unemployment was falling month by month. As a result, in 2009-10 the Government borrowed more than £21 billion less than had been expected. Yet a year ago today, the Chancellor announced in his Budget speech that instead of following Labour’s plan to halve the deficit over four years—the plan that had been backed by the British people through votes cast in ballot boxes only a month earlier—he would eliminate the structural deficit by the end of this Parliament. That was a reckless decision; it was a choice to go too far, too fast, and the country is now facing great difficulties as a result.
In our debate, my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) has highlighted that figures for construction and retail sales have been falling, that the consumer prices index target rate is higher than hoped, and that VAT has stimulated inflationary pressures. We have also heard that we have flat growth and that seasonally adjusted trade figures also remain flat.
The European Commission has just published the full results of a survey that shows a high level of dissatisfaction with the Government’s laissez-faire approach to tackling unemployment. The survey’s 22,560 respondents were asked whether they agreed that the economic crisis means that we should increase public deficits to create jobs. Two third’s of the UK respondents agreed with the statement, which is a much higher proportion than in any other major western country. They agreed that there should be investment in infrastructure. The Government have pulled Building Schools for the Future and various other infrastructure programmes, which has had a devastating impact on the construction industry.
In the community I represent, which is still quite dependent on steel jobs, the collapse in demand for construction has led to Tata Steel’s announcement of 1,500 job losses in its long products business. It is not surprising that Karl-Ulrich Köhler, when he came to Scunthorpe to make that announcement, gave two reasons for the decision: the fall in demand for section steel, both globally and domestically; and the threat of carbon taxes rising in 2013.
The Government’s decisions are having an impact today and for tomorrow on British manufacturing. We need to get behind projects such as the high-speed rail endeavour, which we hope, if it goes ahead, will be built with British steel. The Government have failed to deliver on their promises to invest in the British people. They have brought severe medicine to the country, much severer than was needed. There is real danger that the country will be left in a very difficult situation, after the legacy of an improving economic situation that they were left, which should have been—
Hospices (VAT)
Nic Dakin Excerpts(13 years ago)
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Mr Gauke
I wanted to apply this initially to the broad issue of costs incurred by charities as a whole. Clearly, there can be an issue in the provision of care and welfare services more generally, and I was looking at it in that context rather than specifically with regard to hospices.
It is true that the NHS can recover the portion of its VAT costs that relate directly to out-sourced services used in the provision of free healthcare—for example, cleaning, laundry, catering and estate management. That amounts to about 20% of the total VAT incurred across the NHS. This ability to reclaim some VAT costs is taken into account as part of the overall funding arrangements for the NHS. Refunds do not extend to VAT paid on goods and services purchased to support business activities that are exempt from VAT, such as private health care and property rental.
In addition to the obligation placed on the Government to ensure that the VAT system is fiscally neutral and does not distort competition, it is not within our gift to change unilaterally a VAT system unanimously agreed in Europe and applying in the single market. We need to apply the mandatory exemption in relation to the business supplies of health care providers, with the associated block on recovery. Similarly, under European agreements the Government cannot extend existing VAT zero rates or introduce new ones. Reduced rates can be applied only to a specific list of goods and services, and there is no such reduced rate that applies to all supplies made by all charities.
Nic Dakin
The Minister is giving a detailed explanation, which is very helpful. May I refer back to situations in which a hospice, for example, takes over services that were previously run by the NHS, for which the NHS could recover VAT on non-business services? Surely such an imaginative Minister can find a way of transferring that across to the hospice movement so that it is cost-neutral for the Exchequer, but beneficial to the community.
Mr Gauke
If the hon. Gentleman will forgive me, I will come back to that point. It is kind of him to say that I am going through this in a detailed way. If I may, I will proceed and then come back to what we can do. It is worth making the point that the last time we tried to change the list of matters that can be zero rated for VAT, it took six years and some negotiation.
It is worth highlighting the help that Government provide for charities. We are limited in the support that we can give through changes to the VAT system, but it is important to understand that the Government can and do support charities more widely through the existing VAT system and in other ways. We are committed to retaining the existing VAT zero rates that apply specifically to charities, which provide a benefit of about £200 million a year. Those include VAT zero ratings for qualifying charities on sales of donated goods, for medical and scientific equipment, and for goods for use by disabled people. Charities are not charged VAT on the costs of advertising and public media. They also qualify for zero rating on the construction of certain buildings to be used for charitable purposes. All those zero rates are derogations from the normal EU VAT rules and are not enjoyed by charities in other member states. Charities also benefit from the more widely available VAT zero rates that are applicable to purchases.
The UK has one of the most generous tax systems in the world for charities. Our existing reliefs for charities are worth more than £3 billion a year. Gift aid is the largest single relief, and it is now worth nearly £1 billion to charities each year. Our position, which is in line with that taken by successive Governments, is that the most appropriate way of supporting charities is to encourage charitable giving, rather than to create a complex and burdensome system of additional reliefs or refunds.
Finance (No. 3) Bill
Nic Dakin Excerpts(13 years ago)
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Chris Leslie
The ongoing implicit taxpayer guarantee for the banks is very significant. Indeed, I understand that the Bank of England has suggested in its financial stability reports that an implied subsidy of about £100 billion each year offers a safety net for the profitability of the banks. Without that taxpayer guarantee, banks’ borrowing costs would be higher, they would not be able to make such great profits and, therefore, their remuneration and bonuses could not be so high. Many bonuses and excessive profits are being made on the back of the taxpayer, but does that encourage the Treasury to take action? It certainly does not.
Nic Dakin (Scunthorpe) (Lab)
At a time when Roger Bootle of Deloitte reports that for the first time for four years in a row the real incomes of real people are falling, does my hon. Friend not think it particularly peculiar that the real incomes of bankers—of all people—are likely to rise?
Chris Leslie
My hon. Friend is entirely right, and that is why we have to take a step back and look at the context of today’s debate. The Government are clearly still on the side of the big banks at a time not just when the living standards and wages of ordinary people are being frozen or reduced, but when vital public services are being slashed. Indeed, it is worth reminding ourselves of the consequences of the cuts that the Government are pursuing.
Teaching assistants, youth workers, library staff and lollipop ladies are being made redundant; binmen, street cleaners, environmental health officers and park keepers are disappearing from our neighbourhoods; police detectives, forensic scientists, 999 operatives and police community support officers are no longer affordable in the fight against crime; and hospital cleaners, nurses, paramedics and ward clerks are having their posts eradicated when the NHS needs them more than ever. How dare Ministers say that we are all in this together when they take such a weak and feeble approach to the banks.
Chris Leslie
It is a crying shame that there will not be more publicity for this debate; perhaps the complexity of bank taxation is difficult to report, for whatever reason. If people knew about the Government’s weakness in trying to claw back the money that is owed to the taxpayer and their enthusiasm for cutting public services and raising taxes on ordinary people, they would see that it is a scandal.
Chris Leslie
Of course, the Liberal Democrats advocated the opposite of that before the general election. Obviously they had good, sound reasons to change their view rapidly over a weekend.
Chris Leslie
It is the inactivity of the Government, as the shareholder, that perplexes me. Ministers laugh with scorn at the idea that they, with the stewardship of the taxpayer’s share, should take any action in regard to the current activity of the banks. If the Minister wishes to intervene on the specific issue of his inactivity as a shareholder I shall be more than happy to give way to him, but he clearly does not wish to say anything at this stage.
Ian Lavery
I agree 100% with my hon. Friend’s suggestion, but as I have just suffered the wrath of the Chair, I shall not try to respond.
The OBR’s November 2010 forecast showed that the bonus tax brought in revenues of £3.5 billion in 2010-11. We cannot know how much a repeat of the tax would yield in 2011-12, but a cautious assumption by any measure would be about £2 billion. The Labour party’s view is that that estimated sum would go a long way to supporting many projects, such as, first, establishing a youth jobs fund and creating up to 100,000 new youth jobs at a time when youth unemployment is almost 1 million, its highest since records began in 1992-93. That is one thing we could do with the bank tax.
Secondly, we could build 25,000 new homes for low cost home ownership and affordable social rent. This could create tens of thousands of jobs and help create 1,500 construction apprenticeships. It is important to ensure that young people can get on to the property ladder. Thirdly, an additional £200 million could be provided as funding for the regional growth fund bids. Getting more people in work and paying taxes is the best way to bring the deficit down. The Tory-led Government are cutting too deep and too fast, and now the economy has stalled and unemployment is higher.
There is a better way. Instead of giving the banks a tax cut this year, next year or the year after, the Government should repeat Labour’s bank bonus tax and use the money raised to invest in creating more than 100,000 jobs for young people and in construction, and to build 25,000 affordable homes.
The cuts are going too deep and too fast. There is an alternative. If we were still in government we would be halving the deficit steadily over four years, in line with the pledges made by major economies at the G20 last year, not trying to cut it further and faster than any other major economy in the world. Yes, tough choices are required. The deficit cannot be brought down if the economy is not growing strongly and hundreds of thousands of people are being thrown out of work. That is a simple, basic message.
In conclusion, I repeat that the most important factor in getting the deficit down is what happens to jobs and growth in the economy. That is why last year, as the economy started growing again and unemployment was falling, the deficit came in more than £20 billion lower than expected. That changed as the economy stopped growing at the end of last year and unemployment is higher. Stop the tax cuts to the banks, invest in the future of our young people, invest in this nation, invest in jobs and growth and adopt the Labour example of the bonus tax on banks.
Nic Dakin
It is a pleasure to follow my hon. Friend the Member for Wansbeck (Ian Lavery), who gave a comprehensive account of why we should support the very precise amendment on the bank levy.
A banker writing in the 1920s wrote:
“April is the cruellest month, breeding
Lilacs out of the dead land, mixing
Memory and desire”,
and went on to talk about the present month as “depraved May”. I quote T. S. Eliot—
Nic Dakin
I quote T. S. Eliot to remind us that bankers have played good parts in the world of culture, finance and many other things, and to remind us through his words of the pain of growth and rebirth. Economic growth is a difficult business. That is the business that we should be in, and we should make sure that bankers play their part in that.
Bankers were not always about bonuses, and conversations about banks were not always about bonuses. Sadly, since the credit crunch and the global financial crisis, more attention has been focused on how great the anomaly is. We have heard the telephone-number salaries quoted and compared with the situation of people in our constituencies who are doing their best to bring their families up to be aspirational and to move forward in their lives.
Helen Goodman
Does my hon. Friend agree that the criteria for awarding bonuses are strange? Is it not ironic that at a time when the clearing banks are closing branches in our constituencies, bankers are taking huge bonuses?
Nic Dakin
I thank my hon. Friend for that intervention. She draws attention to the fact that people see banks closing and services becoming less available and more remote at the same time as large bonuses are being given out, with no apparent transparency and no clear criteria.
The Bill delivers a tax benefit for banks—a bonus for banks, rather than for UK plc—in the form of the £2.5 billion bank levy, which should be compared with the £3.5 billion bank bonus last year, and with £100 million being given back through cuts in corporation tax. At a time when the banks should be putting more in to atone for the situation we are in and to help the engine of the economy, the Government are allowing them to take more out. That does not seem fair to me, and it does not seem fair to the people I represent.
Mr Kevan Jones
Does my hon. Friend agree that it is an absolute disgrace not only that those involved directly in the big five banks are earning such bonuses, but that those who have earned a lot of money from the misery that has been caused over the past few years are also doing so, including those companies that offer advice, such as Goldman Sachs, whose average bonus is about £270,000 per individual?
Nic Dakin
My hon. Friend draws attention to another interesting area where we would wish the Government to apply their imagination and attention to try to get more money back for the taxpayer so that it can be invested in the economy, in public services and in growth, the engines that would drive us forward. This is a no-mandate Government. A year ago there was clearly no mandate for what they are doing. They are taking their approach to bankers’ bonuses even though there is a clear mandate from the population—one of the few that exists—for cracking on, getting on top of bankers’ bonuses and ensuring that they play their part in reinvigorating the British economy. Where there is a mandate, the Government fail to act and give a dividend to bankers instead of a tax. There is no mandate for the things the Government are doing, such as the NHS reorganisation.
Jeremy Corbyn
My hon. Friend seems to have skated over the point that the majority of the banks are actually state owned, or have a majority state shareholding. Surely it is incumbent on the Government to intervene, either by appointing their own directors or sending directives to the banks on how they should behave, rather than pretending that it is nothing to do with them even though the banks are already publicly owned.
Nic Dakin
I thank my hon. Friend for his intervention about intervention. More intervention is needed from the Government, who have a stake in the banks. In fact, it is taxpayers and the public we serve who have that stake in the banks. He is quite right that the Government should be exercised about how they get the benefit back to the British people.
Mr Love
Have the Government not failed lamentably? If we look at Project Merlin, where they intervened with the banks on bonuses and on lending to small businesses, we can see the bonuses that are likely to be given this year and the fact that the Government have failed lamentably to deliver finance for small businesses in this country. They simply are not working.
Nic Dakin
I thank my hon. Friend for that observation. Project Merlin’s record is a sorry tale so far. We see a failure to deliver on bankers’ bonuses and a failure to reinvest the taxation from them in the economy. He is right that the record on lending to small and medium-sized enterprises is woeful. Small and medium-sized enterprises, as I think all Members recognise, are the lifeblood and the engine of our economy, and he is completely right to underline that point.
Stephen Pound
My hon. Friend refers to taxation arising from bankers’ bonuses flowing back into the economy. Would that that were so. Does he not agree that the ingenuity, skill and—I dare say—avarice of the average banker is best demonstrated by their ability to defer tax liability, so that the money, rather than coming back, tends to fructify in their pockets?
Nic Dakin
I thank my hon. Friend for his intervention. Clearly, the amendment aims to provoke a review of how we best ensure that bankers’ bonuses are taxed efficiently and effectively, rather than ineffectively, as the Government are currently, which is always a danger unless we are vigilant, as my hon. Friend suggests.
Helen Goodman
I shall of course vote for the amendment this evening, but it does raise the question of whether it ought to be the Chancellor who reviews the bank levy or, because of the serious problems in the way in which the Government have handled it, the Public Accounts Committee.
Nic Dakin
My hon. Friend makes an interesting and valid point, but amendment 9 proposes specifically that:
“The Chancellor shall review the bank levy and publish a report, before 31 December 2011, on—
(a) the Government’s analysis behind the rate and threshold chosen for the bank levy;
(b) the adequacy of the bank levy in the context of other reforms to the wider banking system; and
(c) the total tax revenues expected from banks across all categories of taxation in each year from 2011-12 to 2016-17.’.”
That is what we are debating today, although my hon. Friend makes a good point.
Mr David Ward (Bradford East) (LD)
On the hon. Gentleman’s point about the mandate, presumably if Labour had got 3% or 4% more in the vote and a majority of 60 or 70 seats on 35%, he would have considered that to be a mandate to do whatever Labour wanted to do?
The Temporary Chair (Mr James Gray)
Order. That has absolutely nothing to do with the amendment we are discussing.
Nic Dakin
Thank you, Mr Gray, although I think that the hon. Gentleman was reminding me of the part in my speech in which I referred to mandates, as it was important to reiterate that the Government have no mandate for the NHS reorganisation, for police cuts, for the VAT rise, for abolishing the future jobs fund or for trebling tuition fees, and they certainly have no mandate for cutting too fast and too deep. However, they do have a mandate for listening to the amendment we are considering today on the bank levy. There absolutely is a mandate for the bank levy.
Mr Ward
This point has occurred so many times, so can we pick this one off? The figure of £3.9 million is certainly bigger than £2.5 million, but £3.9 million for one year is surely smaller than £2.5 billion for four years. How on earth can this be a cut in the banking levy?
Nic Dakin
I thank the hon. Gentleman for his intervention. We are arguing that because of the fragility of the recovery, it is time to repeat the bank bonus tax. The Government should make their decisions now when they are not constrained. The decision now should be to repeat the bank bonus tax and increase the bank levy year on year, rather than leaving it static. That is what this review of the bank levy would allow us to establish, and that would produce an additional income, he will be pleased to hear, of at least £2 billion in each year of this Administration. That additional £2 billion could be used by the Government on behalf of the British people, the taxpayers and, indeed, the shareholders of these companies.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
Would my hon. Friend be surprised to hear that the hon. Member for Bradford East (Mr Ward) was in Westminster Hall this morning, alongside many other Members, seeking additional funding for ESOL—English for speakers of other languages—training? My hon. Friend is giving a solution that would allow the Government to provide that additional funding, which would produce growth in the economy, rather than the shrinkage we are seeing promoted by the coalition Government.
Nic Dakin
I thank my hon. Friend for his intervention. The review of the bank levy, which is at the heart of the amendment, would allow the Government to look at the sorts of things that that money could be spent on. It could be used for a youth jobs fund, for putting £25 million into new homes or for providing the regional growth fund with an additional £200 million. My hon. Friend the Member for Nottingham East (Chris Leslie) has already explored those issues in some detail.
Mr Love
Yes, the future jobs fund was the very vehicle to provide a job, training or relevant work experience so that our kids did not have to sit on the sidelines without a future, getting demoralised and not being in a position to take up the job opportunities that will be available when the economy turns round. It is a dereliction of duty on the part of the Government not to address that issue.
Nic Dakin
My hon. Friend is giving a cogent and coherent analysis of the amendment before us. Does he not agree that the review suggested in the amendment represents a real opportunity to find the money needed to invest in young people and their job opportunities? It is not too late for the Government to address this error.
Mr Love
Absolutely. The merit of the amendment is that it would give Parliament, and particularly the Government, the opportunity to review the operation of the levy, as well as providing the banking sector with other opportunities to make a contribution to sorting out some of the deep-seated economic problems in our country. I hope that the Liberal Democrat part of the coalition will be sympathetic to our arguments and speak up where it matters, to try to get the Government to recognise that there is an alternative that would be good for the economy and good for our society.
A second issue is house construction. In my local authority area we have the fourth worst housing stress in the country. Things are difficult, and they are going to get significantly worse. I mentioned earlier the Government’s incoherent construction policy, with its homes bonus that is not a bonus, and its planning system that is so riddled with inconsistency and lack of certainty that major construction is now off the agenda. It is a system that allows local considerations to dominate and outweigh much-needed construction in different parts of the country. I can see only a bleak future for public and private housing construction—but our proposal provides one small, modest way in which the Government could improve the situation.
Amendment of the Law
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Caroline Flint
They have already U-turned on the forests; let us see how much they respond to the elections in a month when the people of this country will make it loud and clear what they think of the past 10 months. The sad thing is that we have had to wait 10 months for a so-called plan for growth. In those 10 months, we have seen unemployment and borrowing rise and growth fall. That does not bode well for anybody in the country, be they those with families, those in the public or private sectors, those with a business trying to grow or those trying to start up a business.
Nic Dakin (Scunthorpe) (Lab)
Does my right hon. Friend not agree that what we need in order to promote growth is demand in the economy? However, with public spending being cut and people losing their jobs, which will cut private spending, where will the demand come from to fuel private sector growth?
Caroline Flint
My hon. Friend makes a very good point. I could not make it better myself.
The fact is that this is not a Budget for growth. We have the highest unemployment rate in nearly two decades, with nearly 1 million young people out of work and inflation spiralling out of control. Even Moody’s credit rating agency, which all of us have heard so much about from Government Members, are warning that our triple A credit rating could be at risk. What is the price of this failure? It will be another £43.4 billion in borrowing. Yet all the Government can come up with is more of the same: the same old excuses; the same failed policies; and the same old stories from the same old Tories.
No number of excuses can hide the fact that the Government have cut too far and too fast, hitting jobs and growth, and putting our recovery at risk. However, there is an alternative. We could get our country’s finances back on track by halving the deficit in four years; we could give families and businesses real help by scrapping the VAT increase on fuel; we could repeat last year’s tax on bankers’ bonuses, and invest the money in building 25,000 new homes and getting 90,000 young people into work; and we could boost the regional growth fund by £200 million.
With the Government’s first major elections just weeks away, this Budget sets out a very clear choice: between Labour, which will do everything it can to protect jobs and the services people rely on, and this Tory-led Government imposing cuts with barely disguised relish; between Labour, which knows that there are difficult decisions to be made, but will make them in a way that is fair and open, and the broken promises and underhand tactics of the Tories and the Liberal Democrats; between Labour, which will support people into work and get our economy back on track, and a Government who are taking a reckless gamble with the economy that is hurting but not working. In one month’s time, people up and down the country will have their chance to send the Government a very clear message—and their voices will be heard.
Nic Dakin (Scunthorpe) (Lab)
It is always a pleasure to follow the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw), and I will try to respond to his challenges.
The Budget statement treads water while this reckless Government cut too fast and too deep. While the Deputy Prime Minister confides that there will be nothing for him to disagree with the Prime Minister about in future television debates, the nation suffers. Indeed, the nation is bracing itself for worse to come. I was proud to join more than 250,000 honest Britons on the march for the alternative on Saturday. That was the big society in action, rising up to say no thank you to the Government, and I am happy to spell out what the alternative is. Strangely, it is the very alternative that the British people voted for last May. Let us be clear: no individual party won the 2010 election. The British people essentially said, “A plague on all your houses.” One thing is certain, however: they roundly rejected the Conservative argument that there was a need to clear the deficit in double-quick time over four years. That argument was well put by the Tory party and the Tory media, but the British people gave it a resounding no. Instead, more people voted for candidates who argued that the deficit needed to be reduced more carefully and more slowly.
As someone who has run an organisation employing more than 250 people, I well know the difference between making cuts of, say, 8% and 16%. Chief constables said that they could manage a cut of up to 12%, but that anything greater would harm front-line services. The front-loading of cuts in public expenditure will also make the situation far worse. There are many of us in the Chamber who have run real organisations in the real world, and we know that savings can be more intelligently and better made when they are properly planned and actioned over time. There is a massive difference between the quantum of the service reductions being recklessly driven forward by this Government and the approach that Labour has argued for.
Alongside cuts in spending and tax increases, there is a need for growth to address the deficit. The Government’s plan for growth is this vacuous document, and in its four-point plan, it is silent on how to stimulate the biggest driver for growth—demand. That is not surprising as the actions of this Government have been to machete demand. With consumer confidence in free-fall, unemployment rising exponentially and inflation fuelled by a VAT hike, living standards are being eroded and the economy is contracting. All this is before the cuts in public expenditure hit next month and we see record job losses in the public sector and the lowering of demand for goods and services in the private sector. It is not, I am afraid, a pretty picture.
Charlie Elphicke
I have been listening carefully to the hon. Gentleman’s argument. I am unable yet, however, to understand or hear what alternative he suggests. Will he tell us what his alternative is?
Nic Dakin
The alternative is to go much more slowly and much more carefully so that things can be managed out there in the real world. [Interruption.] I am sorry that Conservative Members just do not understand the difference between double and half. They simply do not understand it, but perhaps that will get through to them over time.
Nic Dakin
I am not giving way, as other Members want to speak.
Let me welcome the decision to defer the fuel duty rise in line with what Labour called for. It is disappointing, however, that the rise in VAT on fuel means that even allowing for a 1p reduction, people still have to pay 2p more a litre.
There is potential merit in the incentives for further charitable giving, but these are limited in their scope. I hope that the Government will examine carefully the proposals brought forward, with strong cross-party support, in my recent ten-minute rule Bill. It is designed to ensure that charities taking over the delivery of services from the NHS—for hospice care, for example—are treated in the same way as the NHS in respect of the application of VAT to non-business supplies.
The Budget’s proposals to increase support for technical innovation and research and development are movements in the right direction, as are the faltering steps forward for the green investment bank. However, I am disappointed not to see greater emphasis placed on ensuring that future investment in energy infrastructure will be carried out and supplied by UK-based companies. Such an approach would support the sort of renaissance that is needed in steel-based manufacturing supply chains.
I am further concerned about the introduction of the carbon floor pricing. It is not only steel manufacturers such as Tata in my Scunthorpe county constituency that are sceptical, but organisations like Greenpeace, which said:
“The carbon floor price will put up bills, deliver a windfall profit for existing nuclear power stations and yet it won’t drive investment into clean energy and improved efficiency. It’s not so much a green tax as a stealth tax and it’s exactly the kind of measure that gives green levies a bad name.”
The proposals on planning law are confusing when set alongside the direction outlined in the Localism Bill. At first glance, these are Janus-like policies, pointing in two directions. As the hon. Member for Mid Dorset and North Poole (Annette Brooke) pointed out, they present mixed messages to an already confused world.
Finally, there is nothing in this Budget to support getting young people into work and much to create greater worklessness. The investment in apprenticeships is to be welcomed, but the key issue around apprentices is not student demand—there is plenty of student demand out there—but employer supply. As the Federation of Small Businesses says, small businesses
“are willing to take on apprenticeships given the right incentives.”
This remains sadly unclear. There was also disappointment that the Government had chosen not to extend the graduate internship scheme.
To conclude, this is a Budget that disappoints rather than inspires. It leaves the UK economy charging pell-mell in the wrong direction. It is a helter-skelter ride of falling demand, rising joblessness and falling living standards. I hope the Government will listen to the people, take stock and pause—before it is too late.
Fuel Prices and the Cost of Living
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Nic Dakin (Scunthorpe) (Lab)
It is a pleasure to follow the hon. Member for Devizes (Claire Perry), who spoke with her usual panache, confidence and strength of purpose—rather like the Economic Secretary to the Treasury did in setting out the agenda from the Government’s point of view, which she set out very well. I do not agree with that agenda at all, but at least she was here to set it out, unlike the Chief Secretary to the Treasury. Like my hon. Friends who have made this point, I wonder where he is. I am rather reminded of a children’s book that was very popular with my children and I wonder, where’s Wally?
Mr Graham Stuart
It is admirable that Labour Members should be so disciplined in following the line they have been given, but does the hon. Gentleman agree that those on the Front Bench should spend as much time crafting their message so as not to table a motion that is illegal, impractical and careless? They should pay more attention to that rather than just drilling their Members to keep asking where’s Wally, which perhaps sums up the state of their politics today.
Nic Dakin
I think I was the first person to ask that in this debate. Of course, we have a clear economic message that runs counter to the posturing successfully used by the parties in government to suggest that there is a need to cut fast and deeply. Our message is that there is no need for such cuts. Three tools are at our disposal to manage our way out of the economic challenge: growth, taxes and service reductions. The Government are using only taxes and service reductions, at a heinous rate, when we should have a policy for growth. Their policy is for the opposite of growth.
Let me draw attention to the headlines sought by the Conservative party as long ago as 2008: “Tories vow to slash fuel duty”, from the Press Association on 6 July 2008; and “Tory tax cut to beat hike in fuel” from The Sun on 7 July 2008. In a sense, since 2008 the Conservative party has made promises to the British people on fuel duties that it has singularly failed to meet in government.
Lilian Greenwood (Nottingham South) (Lab)
Does my hon. Friend recall a promise being made before the election to increase VAT to 20%?
Nic Dakin
I recall one of the parties in government saying to the other party that it was telling an untruth when it said that it would not put up VAT. It turns out that both parties were planning to put up VAT all the while.
People face real difficulties because of the situation in the middle east, the fuel duty rises that the Government have already imposed and the burden of putting VAT up, totally unacceptably, to an all-time high. That favourite Tory tax is now at 20% and that is causing real difficulties for people—we need to listen to them.
Neil Carmichael (Stroud) (Con)
May I clarify that it was the Labour Government who introduced most of the VAT increases, which needs to be discussed? Does the hon. Gentleman agree that it is wise for the Chancellor to be considering a fuel stabilisation change?
Nic Dakin
When there were huge economic challenges caused by the great global banking crisis, the Labour Government reduced VAT on fuel and on everything else—they did not put it up and worsen the situation, which is the policy of the parties on the Government Benches.
Let us look at the impact of this tax on growth on people and businesses. Alongside the tax on growth, we have cuts in public services, rising prices, inflation wobbling out of control, cuts to the education maintenance allowance—given to the poorest of our young people so that they can continue and aspire in education—and tuition fees being set at record levels. Unemployment among young people is, on this Prime Minister’s watch, the highest it has been for almost 30 years. That is the Government’s disgraceful economic record.
People on fixed incomes—including pensioners and those on disability living allowance—are hugely worried about the mobility effect of the hike in fuel prices and the difficulties it will make to their lives. Only today, a witness appeared before the Select Committee on Education—David Lawrence, the principal of Easton college in Norfolk—who said, “Higher fuel costs are a disincentive to participation.” That is what is happening in the real world.
Let me quote one letter that I have received this week, which illustrates the sort of correspondence that we all receive from our constituents. It reads:
“I am thirty eight years old, married with a family of six running two small cars to keep the cost down on tax and running costs. The biggest cost that we are finding hard to cover is fuel, since the beginning of last year, average petrol pump prices have risen from just under 111p/litre to almost 128p/litre. Diesel now costs more than 132p/litre, compared to 112.5p a year ago. I would like to explain to you what impact this is having on my ability to drive and go about my everyday life. The price of fuel not only affects work but personally the cost of running my car has significantly increased so that I only can afford to travel to work, any family trips to visit other areas of the region/country I simply just can not afford.
I am employed as a Transport Manager for a local business that relies heavily on local haulage transport companies and also sub-contractors that travel to our region making deliveries. To keep cost down along with trying to keep our CO2 emissions down we use these sub-contractors as back hauliers as a reduced rate. Over the past few months we have seen transport companies we use either going to administration or just closing the business whilst they can pay back the creditors. This has a big impact on the business I work for as we can not be competitive in a tight margin industry we work in.”
That illustrates the difficulties caused in people’s private and working lives by fuel prices getting out of control and their impact on the economy.
In my area, as Government Members who represent Humberside constituencies know, we also have the spectre of the Humber bridge board threatening to put up the cost of Humber bridge tolls—an outrageous suggestion of yet another tax on local people and a tax on local businesses.
Let us look forward at what we can do. There are things we can do and messages about what we can look forward to. I agree with the hon. Member for Devizes that we should be careful not to engage in political posturing. We all, on both sides of the House, do that from time to time—I think she did a little bit, and I probably have, too—but there are practical things we can do. There is no need for the planned fuel duty increase. It should be postponed or stopped completely because of the circumstances that we are in. We can also consider what can be done about VAT. It did not need to go up on everything and there ought to be imagination and resolution in the EU to ensure that VAT is treated properly for people who drive vehicles in this country.
There are things we can do and it is time to do them. It is time to stop talking and time for action.
Royal Assent
Mr Deputy Speaker (Mr Nigel Evans)
I have to notify the House, in accordance with the Royal Assent Act 1967, that Her Majesty has signified her Royal Assent to the following Act:
Appropriation Act 2011.
Savings Accounts and Health in Pregnancy Grant Bill
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John Hemming
I agree entirely, but it is also the state’s responsibility to make sure that we do not spend £7 million to give people £2 million. Putting aside whether child trust funds bring a return over time, it is absolutely absurd to propose, as the Opposition do, spending £7 million to give children in care £2 million. There has to be a better way of doing things. Also, those children would not get the money until they were 18.
Nic Dakin (Scunthorpe) (Lab)
I think that the hon. Gentleman agrees that we should support looked-after children in some way, so can he suggest a better way? [Interruption.]
John Hemming
From a sedentary position, an hon. Member suggests that we ensure they have a job. That is true, but what we are talking about is a child trust fund that is made available at the age of 18.
Oral Answers to Questions
Nic Dakin Excerpts(13 years, 5 months ago)
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Justine Greening
My hon. Friend is right that alongside the domestic economic mess we inherited, we also inherited an EU budget deal that was completely out of touch with the situation faced by many European countries. The fall in our abatement is largely due to the give-away agreed by the previous Government in 2005, which will be fully phased in from 2011. It is expected to cost the UK about £2 billion per annum. That is £2 billion that was needlessly given away for absolutely nothing in return—yet another failing of the British people by the Labour party.
Nic Dakin (Scunthorpe) (Lab)
15. What mechanism he plans to use to ensure that households which include one or more higher rate taxpayer cease to receive child benefit payments.
The Exchequer Secretary to the Treasury (Mr David Gauke)
From January 2013 Her Majesty’s Revenue and Customs will withdraw child benefit from higher rate taxpayers using PAYE and self-assessment systems. The vast majority of claimants will continue to receive child benefit, and will not be affected by this change.
Nic Dakin
Earlier this year, the Prime Minister said he wanted this Government to be the most family-friendly Government we have ever had in this country. How does this proposal support a family where one partner stays at home to look after the children while the other partner earns over £45,000 a year?
Mr Gauke
It does families and everyone else in this country no good if we do not get to grips with the fiscal crisis. If the Opposition are saying households paying higher rate income tax should continue to receive child benefit while those who do not earn so much contribute towards that, it once again shows that they are not getting to grips with the scale of the crisis.