Finance Bill

Rachel Reeves Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

I thank my hon. Friends the Members for Pontypridd (Owen Smith), for Newcastle upon Tyne North (Catherine McKinnell) and for Kilmarnock and Loudoun (Cathy Jamieson) and others for serving on the Public Bill Committee with me over the past several weeks. I also thank our able Chairs for supervising us during that process and the Commons Clerks for their advice and assistance throughout the process in Committee and in the House.

The Bill has been on quite a journey since it was first presented to the House just a few months ago. I fear that the Exchequer Secretary spoke too soon last December when he announced that

“the Government’s more open, predictable and simple approach to tax policy making is working well.”

He said that by publishing tax legislation in draft form first,

“we are giving greater certainty and stability to taxpayers and businesses”.

I do not think that taxpayers and businesses, or indeed Members of this House, realised that the Finance Bill itself was still only a draft when it was published in March. This Finance Bill has been through so many stages of crossing out and rewriting that it would have been easier for the Government to have scrapped it and started again, perhaps with some measures that would have supported jobs and growth.

As we have heard throughout the Committee and Report stages, the Budget has been a total and utter shambles. When we first saw this Bill back in March, it contained provisions to raise VAT on hot food, on static caravans and on improvements to listed buildings.

[Mr Reid]

What was in the Budget back in March was a consultation exercise on VAT on static caravans and so on. I am glad that after that exercise the Government listened and amended their proposals, but it was a consultation. This Government, unlike the previous one, listen to what people say in consultations.

[Rachel Reeves]

That is the first time I have heard a Finance Bill being called a consultation—I do not even know where to start.

The Budget in March also included a 3p rise in fuel duty in August and limits on charitable donations. All this was necessary, we were told, to deal with the deficit. Yet the Bill before us, as we reach Third Reading, contains none of those measures. We have had a series of abrupt reversals that, according to one estimate, will cost the Exchequer nearly £700 million.

Opposition Members argued that these measures were misconceived from the start, and that adding to the costs faced by families and small business at this time would make it even harder for our economy to climb out of the recession that this Government have dug us into. But it must be a matter of regret that so much uncertainty and confusion has been created for those affected, doing real damage to businesses, charities, pensioners and families, and that at a time of tight public finances the Government’s financial and fiscal planning seems to be in such disarray, with no one at all clear what the Government’s priorities actually are.

Despite the Government’s belated change of heart on those matters, the Bill remains a deeply flawed, unfair and utterly inadequate response to the problems facing our country today and that is why the Opposition will vote against it this evening. The Bill still offends against the most basic principles of fairness by giving priority to a reckless and irresponsible tax cut worth tens of thousands of pounds for a few thousand millionaires while at the same time asking millions of ordinary people who are already under pressure from rising prices, falling wages and cuts to tax credits and benefits to make further sacrifices and endure further hardship.

The Bill breaks a promise that the Chancellor made in the Budget last year to Britain’s pensioners that their age-related allowance would rise in line with inflation for the rest of this Parliament and instead imposes a stealth tax that will hit 4.5 million people over the age of 65, all of whom live on modest pension savings. The Bill is breaking the principle of universal child benefit and still means that one-earner families will lose thousands of pounds a year while a two-earner family on almost twice as much will keep all their benefit. It is a botched, half-baked measure dreamt up for a party conference speech but the measures are described by the Institute of Chartered Accountants in England and Wales as a “policy disaster” that are

“in danger of becoming a practical disaster when they come into effect”.

We have raised a number of other concerns about the Bill, such as the controlled foreign companies changes and the impact that they will have on developing countries. What is most wrong with the Bill, however, is that it represents a massive missed opportunity to end the recession and get our economy working for ordinary working families, pensioners, businesses and young people. It could have been a Bill that took the tough decisions necessary to ensure that those who could make a fair contribution to deficit reduction did so, so that those hit hardest by the current crisis were not put under even more pressure.

It could have been a Bill that cut VAT, giving immediate relief to hard-pressed families and giving our economy the stimulus it needs to get growth under way again and to make unemployment fall. It could have been a Bill that redirected money wasted on excessive bank bonuses and put those resources to better use, helping young people get back to work and constructing new affordable homes.

[Mr Edward Leigh (Gainsborough) (Con)]

Where would the money have come from?

[Rachel Reeves]

The Government are borrowing £150 billion more. That is the cost of the Government’s failed economic policies. The reality is that with more people out of work claiming benefits and fewer people in work paying taxes, Government borrowing is higher and not lower.

[Jacob Rees-Mogg (North East Somerset) (Con)]

I am grateful to the hon. Lady for giving way, but there is a little problem with her maths. She is accusing Her Majesty’s Government of spending £150 billion more and then wants to spend umpteen billions on top of that on a VAT cut. There is absolutely no sense in that.

[Rachel Reeves]

We have seen that this Government’s plan has failed, as unemployment remains far too high, with a million young people out of work. It has failed, and the economy is back in recession—we are one of only two countries in the G20 that are in recession—and the Government are borrowing more. In fact, in the first two quarters of this financial year, the Government are borrowing £4 billion more than they were last year. Their plan has failed and it is time to try an alternative that gets the economy moving again and that gets people back to work and paying taxes so that the economy can grow and the deficit can be brought down sustainably.

We have proposed a bank bonus tax because we think that it is right that those people with the broadest shoulders should pay a little more. On the day that Bob Diamond has resigned after taking £100 million of bonuses in just a few years, would it not have been far better tonight if we had supported the bank bonus tax and used that money to fund a programme of youth jobs to get our economy working again?

We could have used the Budget and the Government could have used the Finance Bill properly to accelerate infrastructure investment to help the struggling construction industry and to create much needed jobs in our economy. Instead, we have a Bill that will go down in history as a monument to this Government’s incompetence, complacency and inability to grasp that what the current economic situation demands is a Government who stand up for ordinary working people. The Bill fails on fairness and asks millions to pay more so that millionaires can pay less. It fails to address the real challenges that this country faces—a recession made in Downing street and a Government with no plan to get us out of it.