Finance (No. 2) Bill

Pamela Nash Excerpts

Monday 15th April 2013 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

May I start by making two observations? This ought to be the keynote debate on the Government’s annual flagship Finance Bill, but there are only five Government Members in the Chamber—two Ministers, a Whip, a Parliamentary Private Secretary and one solitary Liberal, who I suspect will leave at the earliest possible opportunity—none of whom is now standing to speak. It is a terrible indictment of the Government that even the normal cheerleaders are not here to back the Chancellor. That probably indicates that many Government Members consider the Budget to be as miserable as we do.

I was struck by the fact that the hon. Member for Redcar (Ian Swales) chose to defend the millionaire tax cut. One reason he gave rather explodes the “we’re all in it together” myth, which, as someone else has said, is rarely used by Government Members these days. Even if this year’s Red Book is right and the cost of the millionaires’ tax cut is only £500 million in the next five years, I think we would all argue that if £500 million is going spare it would be better to spend it on direct capital investment, capacity for the future, and job and GDP creation, rather than give it to people who are already wealthy.

The Finance Bill is a consequence of the March Budget. Apart from some measures I welcomed relating mainly to business tax, it was a pretty miserable Budget. It was miserable because, by and large, it merely continued with the Government’s failed policies. We know they have failed because the Chancellor told us that they have failed—they failed by every measure he set. The net borrowing requirement, which was due to fall to £92 billion, has gone up to £121 billion. The national debt, which was due to peak at 92.7% of GDP—£1.36 trillion—in 2014-15 on the treaty calculation, is now expected to peak, on the same calculation, at more than 100% of GDP. National debt on the treaty calculation is due to reach 100.8% of GDP, or £1.58 trillion, by 2016-17. Therefore, when we hear that the deficit is lower and debt will fall, it does not really bear any scrutiny, even by the Chancellor’s and the OBR’s own numbers. The Chancellor has failed to meet his own targets on his original time scale for his own fiscal rules: that the structural current deficit should be in balance in the final year of the five-year rolling programme, and that debt should fall as a share of GDP. Of course, according to the OBR those objectives were highly dependent on GDP growth, which, as we have seen in previous Red Books, was based on incredible, unbelievable, unmet and frankly unmeetable rates of business investment growth.

Let us remind ourselves that in 2010 the Government suggested that business investment had to grow by between 8.1% and 10.9% a year for five years. By the time we got to the OBR’s fiscal outlook the next year, growth in business investment had actually turned negative, which was extraordinary, and so it went on year after year after year. They were at it again this year, forecasting future business investment rates of between 6.4% to 10.2% from 2013 onwards. I suspect that nobody, even in Government, believes that those targets will be met. The Chancellor, or some other poor Minister, will be back at the Dispatch Box at some point in the near future explaining why this was all somebody else’s fault.

The Chancellor also failed because the Budget and the Bill continue down the path of deep cuts and tax rises. I am sorry that the hon. Member for Cities of London and Westminster (Mark Field) is no longer in his place. He gave a customary thoughtful speech, in which he suggested that perhaps we had all not been honest and that the cuts should be deeper. However, last year’s Red Book told us that the total cost of fiscal consolidation—discretionary consolidation; that is, tax rises and cuts—would be £155 billion a year from 2016-17 onwards. As I pointed out on Budget day, that 2016-17 figure of £155 billion of discretionary consolidation, tax rises and cuts had somehow been deleted from the Red Book, and there was no forecast for 2017-18.

It is fair to say that the Government have made a U-turn and that the fiscal tightening will continue to be the equivalent of approximately 7.5% to 8% of GDP stripped out of the economy in tax rises and cuts. It is extraordinary that they think they can cut their way to growth at the best of times, but that they think they can do so while pursuing a policy which, according to their own numbers, will see fiscal consolidation, discretionary tax rises and cuts of the equivalent of between 7.5% and 8% of GDP in demand stripped out of the economy. If they can cut their way to growth on the back of that, they should be given a Nobel prize. The problem is that none of us believes it will happen. Of course, the overall impact of 4:1 cuts to tax rises tells us exactly who will bear the brunt of these austerity measures.

I said at the beginning that I do not want to be wholly negative—there were some measures to be welcomed. Earlier, we discussed briefly one of the most potentially significant measures, which is the tenfold increase in the annual investment allowance to £250,000. That is for two years only, however, and the Government need to understand that even at this level investment decisions may take some time to be agreed before businesses are able to use the benefit. I therefore ask the Government to look again at the temporary nature of the increase. While we would certainly argue that it makes sense to have targeted tax allowances such as this—it makes sense for businesses to be allowed to keep more of their own money to invest, particularly when banks are still refusing to take the full share of the risk they should take—the real problem with the Budget, the Red Book and the Bill is that the Government continue to set themselves against direct capital investment when the economy needs it most, which is right now.

To understand just how damaging that is, let me give one example: the UK Government argue that they have given Scotland an additional £279 million in capital over the next two years. It is debateable whether that is true, as I will come to, but even if it is, it would still imply a 20% real-terms cut to the Scottish capital budget over the four-year spending review period. But it is not real capital expenditure: £266.5 million is classified as a financial transaction, meaning that it can be used only to fund loans or equity investments. That is a straitjacket. It is accompanied by £103.5 million cut in hard cash from the resource budget, half of which— £56 million—will be cut this year from already agreed budgets. This is not just daft; it is economically really, really silly. I despair that the Government think it makes sense to be putting administrations—public bodies of one sort or another—into a straitjacket, while removing hard cash and discretionary spending.

[Pamela Nash (Airdrie and Shotts) (Lab)]

Before the hon. Gentleman moves too far on from capital spending, will he say why his party in Scotland is imposing even more draconian cuts on local government than the parties in government here, cutting public sector construction projects in Scotland and contributing to the 40,000 construction jobs lost in Scotland since his party took power?

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[David Rutley]

According to the permanent secretary at the time, wishful thinking was prevalent across the Labour Government, and it led to the hyperbole that it was possible to bring about an end to boom and bust. Of course that did not come to pass; none of that Government’s work did. We are about sustainable growth and putting forward the positive action plan that was included in the Budget—[Interruption.] If the hon. Member for Airdrie and Shotts (Pamela Nash) wishes to intervene, she should please do so.

[Pamela Nash]

The hon. Gentleman says that my party is guilty of wishful thinking. At the moment, there is no growth in this country; we had 63 quarters of consecutive growth. How can he possibly compare the two?

[David Rutley]

If the hon. Lady had listened, she would know that I did not say that. The phrase about wishful thinking came from Lord Turnbull—one of Labour’s permanent secretaries, speaking for himself. The groupthink that pervaded the Treasury at the time led to the tragic results that we are having to clear up, and the Bill is taking steps to do that.

The Bill is a fitting tribute. It will promote competition and reduce barriers to entry for the ambitious and aspirational people of this country, who simply want the chance to work hard, compete and get on. The Chancellor’s Budget speech made it clear that the Bill will be followed by future measures that continue these efforts to free enterprise and remove the roadblocks to economic growth. That is a clear commitment from the Government.

It is worth reflecting on what enterprise actually means. It does not mean that people are on their own as some critics allege. As John Donne wrote:

“No man is an island, entire of itself.”

He could have written the same thing about enterprise, because free-market economics is not an atomistic pursuit, but recognition that we all advance by pooling our comparative advantages in a common free economy. We should remind ourselves of the common value and purpose of enterprise as we lay the foundations for future growth. It is not about state intervention, as Opposition Members suggest.

Business transactions must involve at least two parties—the supplier and the consumer—and the very word “enterprise” is derived from joint undertakings: enter from the French “entre”, meaning “between”, and “prise” from “prendre,” to take. It is suggested, perhaps rather dubiously, that President George Bush once said, “The problem with the French is that they have no word for entrepreneur.” Forgive my French, Mr Deputy Speaker, but although we do not have a word for entrepreneur, we on the Government Benches understand the meaning of enterprise, which is literally the joint seizure of opportunity for mutual advantage. The Bill sets out how the Government will encourage it.

Enterprise is voluntary, and therefore it carries for suppliers involved in business the element, and excitement, of risk that consumers for the service or product may not be found. Suppliers need to be flexible to survive and thrive in competitive markets where consumers, even usually loyal ones, are free at any time to say no. That is why the Government need to ensure that there is the freedom to be flexible and the confidence to be bold for enterprise to thrive and succeed.

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[Pamela Nash]

My hon. Friend may know that we had a similar problem in my area, north Lanarkshire, with our Tata Steel site and public sector projects, so the steel was bought from abroad.

[Andy Sawford]

My hon. Friend is absolutely right. The story of the decision to close the steelworks in Corby in 1980 has now come full circle and been shown to be short-sighted, given that the steel is now coming from Port Talbot. Some of Tata’s steel is now coming from abroad, because it is so difficult for it to compete in this country. I called for measures in the Budget—I spoke about this in a recent Adjournment debate—to support the steel industry in the UK in order to mitigate the impact of high energy prices around the world. The contrast between this country and others is stark and instructive of this Government’s approach. Germany, where the economy is growing—it now has more than 3% growth—has a £5 billion mitigation package for energy intensive companies, while this country has a £250 million mitigation package and we are not even clear about its details.

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[Andy Sawford]

If the hon. Gentleman is being honest, he knows that the figures that he is quoting reflect the impact of a huge global economic crash in 2008, which had a big impact on my constituency, not least because it is a manufacturing constituency. [Interruption.] The Economic Secretary is suggesting that because the figures go from 2005 to 2010, they reflect the Government’s record across the whole period. Government Members fail to say that the economy was growing for much of that time. We all acknowledge that a global crash happened in 2008 and that that caused unemployment. The critical thing is what we do about it.

[Pamela Nash]

Is the key point not that unemployment in this country is now higher than when the Government took office?

[Andy Sawford]

My hon. Friend is right. Of course, unemployment is also higher in Corby. My constituents will think that Government Members have a cheek to raise those figures in the way they have today.

My constituents will be appalled by the comments of the hon. Member for Macclesfield (David Rutley) and others, who have told them to stop whingeing and moaning. They are talking about people who are trying desperately to find work and whose situation has been made worse, not better, by this Government. The Tories do not understand the lives of those people. They do not understand the margins of the labour market or the margins that many of the poorest in our society live on. They understand the marginal impact of their millionaires’ tax cut, which is about £100,000—after all, many of them will get it—but they do not understand the marginal impact of their policies on people who have very little to live on. Fourteen pounds may be half a bottle of claret to the Chancellor, but for people in my constituency, it means choices about food, heating, fuel and new shoes for the kids.

The Government’s Budget was a chance to get back on track after three wasted years in which the UK went back into recession and lost its credit rating. The best that the Chancellor could do was to say that he hoped that we would not have another quarter of negative growth. He has his fingers crossed that he does not become the triple-dip Chancellor. Borrowing is going up not just this year, but next year and the year after. We are now told that there will be deeper cuts to services and the living standards of people in this country. While George and his friends get a tax cut, my constituents are told that things will get worse. Since the Chancellor’s spending review in 2010, the UK has been 18th out of the G20 countries in terms of growth. It is worse than the USA, Germany, France and Turkey, but the Government refuse to change course and recognise that we will get on track only if we get our economy growing.

I was incredibly disappointed that in the Finance Bill the Government rejected our proposals to use the 4G receipts to fund house building, for a proper tax on bankers’ bonuses to fund a jobs guarantee for young people and to bring forward infrastructure investment. Only 14% of the 576 projects in the Government’s national infrastructure plan have started.

In their first three years, the Government spent £12.8 billion less on infrastructure than the previous Government had planned to spend. The Chancellor has been told by the International Monetary Fund, the CBI, Sir John Armitt, some of his Back Benchers and Lord Heseltine that the Government should boost the economy with greater infrastructure spending. They make announcements such as that about the A14—part of which runs through my constituency—which is now not set to start until 2018. The electrification of east midlands trains to Corby was announced with great fanfare. What will fund it? It is the same amount of money in the next Parliament that the Government cut from what we would have spent on infrastructure in this Parliament to upgrade our railways.

In the previous Government’s plan for 2012-13, we were due to spend £48.4 billion this year on infrastructure. This Government say they will spend £41.7 billion on infrastructure. We were planning to halve the deficit during this Parliament, but this Government said that they wanted to go further and eliminate the structural deficit. What is the effect of that? They are spending £13 billion less on infrastructure—precisely what we need to get our economy growing—and £13 billion more on social security. It all sounds familiar to people in my constituency who remember that when Margaret Thatcher, the architect of this kind of trickle-down Reaganomics, came to office, 2 million people were on out-of-work benefits. When she left office, 6 million people were on out-of-work benefits and we see it all again. The rich are getting richer, the poor poorer, and many are paying the price of economic and social failure. Meanwhile, in countries such as America, which should be instructive to the Government if only they would raise their sights, the stimulus has been maintained and there has been growth of more than 4%.

What do I want now? If the Government will not listen to my hon. Friends as they present the way forward for our economy nationally, I want action locally. The south east midlands local enterprise partnership bid in my constituency is focused on housing, and at last money from the Government’s Get Britain Building fund has gone to meet some of the infrastructure gap, particularly as the council and others have had to renegotiate section 106 agreements, which became too expensive for developers to move forward. After three years, some of that money has just begun to trickle to my constituency. If the Government support the SEMLEP bid, there is a real opportunity to substantially reduce the gap in budgets for infrastructure, which we need now that we are renegotiating the section 106 agreements. We are not asking for additional money; we are asking for flexibility such as an increase in the borrowing cap.

I want help for local firms—I mentioned Tata Steel and I have invited the Minister to come and help—and I want targeted help for young unemployed people in my constituency. The City Minister, the right hon. Member for Tunbridge Wells (Greg Clark), for whom I have a great deal of time, has shown that, relative to his colleagues across Government, he is willing to take action and listen to local areas. He has taken action in cities around the UK to help fund social innovation. I would like the Government to talk to people in Corby about how we can help young people in the most difficult place in the country in which to get back to work.

I hope that the Government will listen and stop telling my constituents to stop whingeing. They must stop stigmatising those most affected by their wasted three years, and stop trying to divide people at a time when we need the country to come together with a Government who are backing our workers and businesses to get Britain growing again.