Living Standards

Debate between Rachel Reeves and Greg Clark

Wednesday 4th September 2013 Commons Chamber

[Rachel Reeves]

It is interesting that the interventions from Opposition Members refer to the challenges their constituents face owing to falling living standards. It is a shame that hon. Members on the other side of the House want to talk about anything but that.

I would like to talk about a family I met this week. On my first day back from maternity leave, I visited a family in Thurrock who told me what they were up against. The father, once a partner in a thriving small business, lost his livelihood three years ago during the recession. Desperately trying to keep up their mortgage repayments, he has spent the past three years taking whatever work he could get through employment agencies, often on the minimum wage and often on zero-hours contracts. He recently found a permanent job as a driver which, topped up with evening shifts doing deliveries, gives the family a bit more security, but it falls far short of making full use of his talents and experience.

The wife abandoned her dream of training to be a primary school teacher so that she could hold on to her relatively secure but modestly paid job in retail. Their daughter is studying for university and should do well, but she worries about fees. All of them pointed to a gaping and growing disconnect between their rates of pay and the costs they face for travel, housing and other basic necessities. Under this Government, the situation is getting worse for such families—families who want to get on in life.

[The Financial Secretary to the Treasury (Greg Clark)]

It is possible that the hon. Lady has said something significant: that the Labour party has dropped its commitment to the temporary VAT cut. Given that as recently as June the shadow Chancellor said that he was committed to it, what has happened since then to cause it to be dropped?

[Rachel Reeves]

The shadow Chancellor said in his conference speech two years ago that VAT should be reduced from 20% to 17.5% as an emergency measure to stimulate the economy. The reality is that since then the economy has flatlined and we have continued to argue for that, but he has also said that as the economy slowly begins to move into recovery mode—we hope that the growth over the past two quarters will continue—the emphasis should move to infrastructure investment. Were we in government today, our priority would be the £10 billion of infrastructure investment that the International Monetary Fund has called for.

Infrastructure

Debate between Rachel Reeves and Greg Clark

Tuesday 12th February 2013 Commons Chamber

[The Financial Secretary to the Treasury (Greg Clark)]

I beg to move an amendment, to leave out from “House” to the end of the Question and add:

“notes that the previous administration’s final Budget planned to cut capital investment by 6 per cent more than this Government’s latest plans, in the period 2010 to 2014; further notes that this Government has increased capital plans by £20 billion at the Spending Review and at the last two Autumn Statements, by taking tough but necessary decisions to cut current spending, with a result that public investment as a share of GDP will be higher on average over this Parliament than it was under the previous administration; further notes that this Government announced £5.5 billion of extra infrastructure investment in the last Autumn Statement, including £1.5 billion for roads, £1 billion for new schools, £900 million for science and £1.8 billion for housing and local infrastructure; further notes that it has supported the largest investment in the railways since Victorian times under the High Level Output Specification; further notes that no national infrastructure plan existed under the previous administration whereas this Government has set out for the first time a multi-year long-term strategy for the UK’s infrastructure, with over 50 per cent of the Government’s top 40 projects and programmes due to be in construction, procurement or completed by the end of 2014-15; and believes that sweeping away red tape and developing new finance initiatives such as the UK Guarantees Scheme will also support up to £40 billion of extra important projects”.

I listened attentively to the hon. Member for Leeds West (Rachel Reeves), but there is little that can be said by Labour Members that should not start with an apology. Infrastructure, more than most issues, is an area of policy in which the present is haunted by the decisions of the past. By their very nature, major infrastructure projects must be planned years in advance, capital spending budgets must be allocated years in advance and private sector investment must be secured years in advance. All those things require a Government who can look ahead, anticipate the needs of the future, and make the necessary decisions in a timely fashion.

[Rachel Reeves]

Plans do need to be made for the future, so why did the Government cancel the building of 715 schools under the Building Schools for the Future scheme when they came to power?

[Greg Clark]

I should have thought that in two and a half years the hon. Lady would have learned the lesson from that. The deficit that Labour was running was greater than the deficit in any other G7 country. We needed to sort that out, and to create confidence in our economy. If Labour Members have not learned the lesson after two and a half years, what hope is there for the future?

The economic arguments advanced from the Opposition Benches sometimes purport to draw on the wisdom of John Maynard Keynes, but Keynes recommended that Governments should run a surplus in the good times, enabling spending, especially on infrastructure, to take place in the lean years.

Income Tax

Debate between Rachel Reeves and Greg Clark

Wednesday 28th November 2012 Commons Chamber

[The Financial Secretary to the Treasury (Greg Clark)]

It is a pleasure to respond to this debate, not least because of the maiden speech made with such distinction by the hon. Member for Cardiff South and Penarth (Stephen Doughty), whom I warmly welcome to the House. He spoke in a way that was assured and fluent and with a degree of geniality that I think will make him many friends throughout the House. I have one issue of contention with him. He outed himself as a fan of Cardiff City and, since they are locked in a promotion battle with my hometown club of Middlesbrough, that will be a point of disagreement between us during the weeks and months ahead.

Call me naive, but I had hoped that, during an Opposition day debate, we might have heard something—anything—about the Opposition’s policy, but sadly it was not to be. At the end of this debate, their economic policy is, if possible, even more obscure than it was at the beginning. There are four fundamental matters crucial to this debate that both shadow Ministers—the hon. Members for Leeds West (Rachel Reeves) and for Newcastle upon Tyne North (Catherine McKinnell)—failed to address.

The first could not be more basic. What do the Opposition believe to be the purpose of the 50p rate of income tax? Is it to raise revenue, to punish the rich, as the right hon. Member for Oldham West and Royton (Mr Meacher) has said, or to serve as a piece of rhetoric? We need to know, because if the Opposition are clear that its purpose is to raise money, will the hon. Member for Newcastle upon Tyne North say—she is welcome to intervene—whether they will drop their support for the 50p rate if the evidence continues to support our assessment and those of HMRC and the OBR that it raised very little indeed and would be likely to cost the public purse even more? Will she be clear—is the argument that the rate raises money the criterion for the Opposition’s support for it, or is it a price worth paying just to send a message that they want to soak the rich?

Secondly, do the Opposition accept, in the words of HMRC, that

“high tax rates in the UK make its tax system less competitive and make it a less attractive place to start, finance and grow a business”?

Do they accept HMRC’s assessment that high taxes are bad for the international standing of the country? I would be pleased to take an intervention from the hon. Lady. My hon. Friend the Member for The Wrekin (Mark Pritchard) asked the shadow Chief Secretary whether she subscribed to that view, and she could not answer. Is tax competitiveness important to the Opposition? We do not know. In their view, does it matter if the UK has the highest tax rate in the G20? Is that a concern or not? Does it make a difference to British competitiveness? The last time the hon. Member for Pontypridd (Owen Smith) was asked he said, “I don’t know.”

The third issue is whether the Opposition agree with the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who said that this measure should be only temporary. We have had no clarity on that from Opposition Front Benchers.

The fourth matter that the Opposition need to consider, given that they regard this tax as being so crucial—so totemic—that they wanted to call this debate about it, is whether they will send a clear message that they would restore it if they came to power. Again, we have silence. Let us bear in mind that we are now in the second half of the Parliament, and the time for posturing and procrastination is over. The time has come for the Opposition to tell the country what they would do in government—or do they simply not have the courage to face up to the need to be straight with the British people? I strongly suspect that this will be one of the last occasions when we debate the 50p tax rate as it gets shuffled off to the retirement home of meaningless gestures that the Opposition no longer have time and use for.

Labour is, to its core, the party of tax and spend, and, to be fair, it takes a very consistent view of both sides of the equation. With regard to spending, it is always a matter of “How much?” and not “To what end?”—of inputs, not outcomes; of the number in the headline on the press release, not what is achieved with the money. On taxation, too, for Labour it is all about the price tag—the headline rate, not the revenue actually raised, nor, indeed, the amount of tax that the wealthy actually pay. The top rate of tax paid by the rich in all but the last month of the previous Government was lower than what they pay now. The top 1% of earners now contribute over 27% of income tax revenue—far more than they did under Labour—and the effect of this year’s Budget is to take from the richest five times what they gave through the reduction of the 50% rate.

Of course, the tax system that we inherited from the previous Government was a mess—a typically socialist tangle of tripwires and loopholes which, as my hon. Friend the Exchequer Secretary made clear, we are taking action to close. Too much of the money made under the previous Government was in keeping with the ethos of the previous Government—short term, reckless and unsustainable; the boom before the bust. In future, if there is money to be made it will be done in the responsible way, through real enterprise and real innovation. As we seek to rebuild a productive economy on the ruins of Labour’s cardboard economy, this is the worst time to punish the producers, innovators and entrepreneurs on whom our future depends.

[Rachel Reeves]

If the Government are doing so well on the economy, why has it shrunk over the past year, and why is Government borrowing now rising, not falling?

[Greg Clark]

The hon. Lady will be aware that the record structural deficit in the G7 bequeathed by the previous Government has been paid down by a quarter.

As we seek to rebuild our productive economy, Labour Members know all about the power of the headline figure—that is why they have made such big play of the top rate of income tax. It is interesting that the shadow Minister was more familiar with the opinion polls than with the cost of this measure to the economy. If they think that it plays well to the gallery, then how do they think it plays to those who might or might not want to invest in this country, and who might create the new private sector jobs that a financially exhausted public sector can no longer pay for?

For our part, we want to create an economy in which those who prosper most are those who are best at creating wealth for all. That will require moderate tax rates, properly enforced, and the long, hard slog of tax reform and simplification. As in so much else, we have chosen the difficult path but the right one. Today’s debate provides further proof that Labour has made the opposite choice. As always, the politics are cheap but the consequences would cost our country dear.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.