Amendment of the Law

Nick Smith Excerpts

Thursday 24th March 2011 Commons Chamber

[Vince Cable]

I am not going to take any more interventions.

I return to the issue of fairness. When we first came into office, the major attack from the Opposition was that we were going to hit the poorest hardest. When it became clear that we were producing policies to protect the state pension, increase child tax credits, give preferential treatment to low-paid workers in the public sector and lift low-paid workers out of tax, attention shifted to the so-called “squeezed middle”, which has been variously defined to encompass 90% of the population.

The truth of the situation is that as a result of the financial crash and the recession that followed, Britain is a significantly poorer country than we were several years ago, so living standards have been squeezed. As the Governor of the Bank of England said,

“the real consequences of this crisis are only now beginning to be felt.”

What we have done in the Budget is take concrete action on fuel duty and on lifting the thresholds at which low earners pay tax. I shall dwell on that point a little—

[Nick Smith (Blaenau Gwent) (Lab)]

rose—

[Vince Cable]

Let me finish this point. One genuine philosophical difference we have with the Opposition is on how best to help those on low and modest pay. The Opposition believe in using targeted means-tested benefits. By contrast, we believe that the best way of doing this is by lifting low earners out of tax—880,000 on 1 April and 260,000 more next year. In this way, we not only lift them out of tax but reinforce the incentive to work and to save alongside the welfare reforms. Other taxpayers received £200 in cash last year and will get £126 more next year. We believe that in tough times, we should let taxpayers—especially the low-paid—keep more of their own money, rather than taking it off them and giving some back through complex means-tested benefits.

The test of the Budget will not be the response of the political world or this debate. It will be the response of the business community, which has to invest for recovery. It is worth reviewing what the business community has said about the Budget as it has often been critical of Budgets in the past. The British Chamber of Commerce said:

“Despite tight fiscal conditions we are encouraged that the Chancellor has prioritised business growth and private sector expansion alongside deficit reduction”.

The Engineering Employers Federation—the manufacturers —commented:

“The Growth Review has now started to deliver tangible progress in removing the barriers to growth investment and job creation in the UK”.

And the CBI concluded:

“This budget will help businesses grow and create jobs”.

The Government recognise that the road back to balanced, sustainable recovery will be painful and difficult, but we are on the right track. As the head of the OECD put it, we must “stick with it”.