Income Tax
Debate between Rachel Reeves and Graham Stuart(11 years, 12 months ago)
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Rachel Reeves (Leeds West) (Lab)
I beg to move,
That this House notes that HM Revenue and Customs figures show that 8,000 people earning over £1 million will gain an average of £107,500 from the Government’s decision to cut the top rate of income tax from April 2013; further notes that figures from the Institute for Fiscal Studies show that the Government’s changes to tax allowances for pensioners will mean that 4.4 million existing pensioners will lose an average of £83 from 2013-14, while thousands of people turning 65 will lose £323; and calls on the Government to announce in the Autumn Statement that it will not go ahead with its proposal to cut the top rate of tax for the richest earners at a time when the economy is flatlining, millions of pensioners on middle and low incomes are paying more, and when wider tax and benefit changes being implemented in 2012-13 will result in families with children losing an average of £511.
In March this year the Chancellor of the Exchequer stood in this House to deliver his Budget. It was a revealing moment. Having previously said that we are all in it together and insisted that those with the broadest shoulders should bear the greatest burden, the Chancellor announced a tax cut worth, on average, £107,000 for those earning more than £1 million a year. It was the moment that the Government’s façade of fairness disappeared for good. In these tough times, against the backdrop of the biggest squeeze in living standards for a generation, and with the economy flatlining, the Chancellor prioritised millionaires above millions of working people. That is why we have called this debate: to question the priorities of the Government, to stand up for pensioners and families who are being hit hardest—
Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Lady said that she wants to prioritise ordinary people over millionaires, so would the Labour party, if it were to come into government in 2015, reintroduce the 50p rate?
Rachel Reeves
We are hoping that Government Members will see sense and vote for the motion, and that the Chancellor will rethink his decision in next week’s autumn statement. It is not too late to reverse this change. I am not going to write the manifesto for 2015 now, but every single Labour MP will be voting against this tax change, which has not yet come into effect, so the Government can still think again.
Finance (No. 4) Bill
Debate between Rachel Reeves and Graham Stuart(12 years, 7 months ago)
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Rachel Reeves
This Government are borrowing an extra £150 billion because of the costs of their economic failure. The reality is that, with more people out of work and therefore claiming benefits, and with fewer businesses succeeding and paying taxes, this Government are ending up borrowing more, because their risky gamble with their economic policies has failed.
Instead of continuing on the downward path begun under the previous Government, total unemployment has mounted to new highs. It is now at the highest level since 1997. Some 2.67 million people are out of work. More than 1 million young people are out of work. We have the highest level of youth unemployment on record. That is a cruel fate to be inflicting on people leaving school, college and university. Instead of going on to get a job or training, they are being left to rot on the dole queue. The truth is that—just as we on this side of the House, along with numerous independent economists, warned—the Government’s attempts to cut too far and too fast have choked off the economic recovery, squeezing households and businesses and sending unemployment soaring, with the result that, as I said to the hon. Member for Dover (Charlie Elphicke), the Government are now forced to borrow £150 billion more than they had planned.
This lesson is being learned around the world, as over-ambitious austerity plans founder. Last year the OECD warned credit rating agencies which press for rapid fiscal consolidation but
“react negatively later, when consolidation leads to lower growth—which it often does.”
Sure enough, Standard & Poor’s decision earlier this year to downgrade nine of the eurozone’s 17 member states was accompanied by the warning that
“fiscal austerity alone risks becoming self-defeating.”
The International Monetary Fund’s sharp downward revisions of its global growth forecasts—including for the UK—for 2012 was accompanied by a call to “reconsider the pace” of fiscal consolidation. Indeed, the IMF’s chief economist has said:
“Substantial fiscal consolidation is needed, and debt levels must decrease. But it should be…a marathon rather than a sprint”
and cited the proverb
“slow and steady wins the race”.
Our economic performance did not have to be this way. We need only look across the Atlantic to see the benefits of a more balanced approach to deficit reduction, with the US now enjoying steady falls in unemployment and accelerating economic growth. Let me quote the opinion of Adam Posen of the Bank of England’s Monetary Policy Committee. His forensic comparison of the US and UK experiences concluded:
“Fiscal policy…played an important role as well. Cumulatively, the UK government tightened fiscal policy by 3% more than the US government did…and this had a material impact on consumption. This was particularly the case because a large chunk of the fiscal consolidation in 2010 and in 2011 took the form of a VAT increase, which has a high multiplier for households.”
In other words, by hitting households as hard as they did, sapping confidence and sucking demand out of the economy, the Chancellor and his ready accomplice, the Chief Secretary, have got the UK stuck in the slow lane while other key players in the global economy are overtaking us.
Mr Graham Stuart
On the subject of others overtaking us, the hon. Lady will be aware that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) became Finance Minister at roughly the same time as the Finance Minister in Australia, but whereas at a certain point the right hon. Gentleman lost the plot and spent money that this country could not afford, Australia paid down its national debt. Thus, when the financial credit crunch came, Australia was able to stimulate its economy, whereas this country had overspent in the good times and was not able to do so.
Rachel Reeves
Between 1997 and 2007 this country’s debt ratio fell from 42.5% to 36% of GDP, so the debt burden fell; in 2007, our debt-to-GDP ratio was lower than when we came to power in 1997.
What hope did the Chief Secretary and the Chancellor offer in this Budget for the future of our economy? The answer is precious little. The Government’s own Office for Budget Responsibility predicts another year of low growth ahead; it predicts just 0.8% growth in 2012, followed by 2% growth in 2013. That is well below what was promised when the Government took office. According to this morning’s forecasts from the Ernst and Young ITEM—Independent Treasury Economic Model—club, even those dire outlooks now seem optimistic. Ernst and Young predicts just 0.4% growth for 2012, followed by 1.5% growth the year after. Meanwhile, on any prediction, including the Government’s, we will still have at least 2 million unemployed people by the end of this Parliament.
Even those figures conceal deeper failures and more disturbing trends. Some may remember the Chancellor’s promise of a new economic model for Britain, based on lower levels of borrowing, and higher levels of saving and investment. In reality, the promised renaissance of business investment has been repeatedly postponed. An 8% increase in investment was promised for 2011, but investment actually fell by 2%. A further 10% increase was predicted for this year, but an increase of less than 1% is now forecast. The role of investment in driving growth for future years has been significantly revised down, too. Ernst and Young said this morning that business spending
“has picked up nicely in the US”
but that UK plcs remain “extremely reluctant” to invest. It continues:
“Consequently, the economy is bleeding cash into company coffers at an alarming rate…This haemorrhage is sapping the strength of the economy, keeping it on the critical list.”
They are not my words, but those of the Ernst and Young ITEM club.
Meanwhile, figures from the OBR reveal that the Government have increasingly become reliant on household consumption for their growth forecasts. That consumption is not being financed by growth in real disposable incomes, which, as I said, have stagnated and which the OBR confirms are set to stagnate for at least another two years. The household consumption growth is being funded by a fall in savings every year from now until 2016 and by a rise in total personal debt of almost 50% over the next few years; it will reach a staggering total of £2.12 trillion by the end of this Parliament.
Youth Unemployment and Bank Bonuses
Debate between Rachel Reeves and Graham Stuart(12 years, 10 months ago)
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Rachel Reeves
People are not getting jobs at the moment not because they do not have skills but because the jobs are not available. In all our constituencies, five or 10 people are chasing every job. That is why unemployment is rising. Until the Government take responsibility for that, the numbers will get worse, not better.
The price that families struggling with the consequences of redundancy and young people forced to abandon their career plans pay is incalculable. We cannot go on like that. Maybe some hon. Members—we have already heard from many of them—greet the prospect of rising unemployment with a degree of fatalism, perhaps resignation. They may feel that the punishment being inflicted on innocent families and young people is the sad but inevitable consequence of austerity and economic adjustment. Indeed, as I said earlier, there is a grim familiarity about the figures, which bear a depressing resemblance to the record of previous Conservative Governments.
Mr Graham Stuart (Beverley and Holderness) (Con)
The hon. Lady talks about a grim familiarity. Does she acknowledge that every Labour Government in history ended with higher unemployment than they started with? After a 40% rise in youth unemployment under the previous Government, some humility is required on both sides of the House, but not least on hers.
Rachel Reeves
Unemployment has reached 3 million twice, both times under Conservative Governments. At the last election, unemployment was falling; today, it is rising.
Rachel Reeves
In the 1980s and early 1990s, unemployment reached 3 million. Was that because Conservative Governments were clearing up a Labour mess? Really? I think it was because of the policies that Conservative Governments always pursue—policies that hurt young people and put more people out of work. That is the reality of Conservative Governments.
Labour Members are not complacent. We do not say that it is inevitable, that it has got to happen and that 3 million unemployed is a price worth paying. Labour Members are not prepared to give up on young people and we urge the Government not to give up on them, either.
In the coalition agreement, the Government said that a fundamental goal would be to
“sustain the recovery and to protect jobs.”
Before the election, the Prime Minister told voters that jobs would be his top priority. He said:
“I understand if you leave people unemployed, and short term unemployment becomes long term, then it becomes a lifetime of unemployment. It’s a waste of life. I must stop it happening.”
He was right then, but he does nothing now. The Deputy Prime Minister said earlier this month that
“supporting people into work is my priority for 2012”.
He is right, yet he does nothing.
We must—and we will—hold the Government to their promises because we cannot allow the next generation to be denied the chance of expanded opportunities that has always been the promise of Britain.