Budget Resolutions and Economic Situation

Robert Smith Excerpts

Wednesday 18th March 2015 Commons Chamber

[Mr Tyrie]

I agree entirely, but I will not linger on the point, because I am sure that my hon. Friend will be making his own speech in his own way very shortly.

What has also happened is that many people have found ways of improving quality and value for money in the goods and services they provide, whether in the public or the private sector. That has generated a good deal of force for the recovery—something that is not fully captured in productivity statistics. Governments do not create wealth; they either get in the way of it or create the conditions for it.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

Will the hon. Gentleman give way on that point?

[Mr Tyrie]

If the hon. Gentleman will forgive me, I would like to make a bit of progress now.

This Government have helped to create those conditions for growth in at least three important ways. First, in the early part of the Parliament, they authorised £175 billion of extra quantitative easing. That was crucial. Secondly, they allowed the so-called automatic stabilisers to kick in—that is, allowing the deficit to widen as eurozone demand collapsed. It is important to recall that the Chancellor was faced, right at the start, with a weakening of demand for our exports in European markets. That caused a great deal of difficulty for British industry. Thirdly, in my view, the Chancellor showed a good deal of tenacity. The coalition has contributed a great deal to restoring confidence. Few predicted that it would last five years. To be frank, I did not think that the Liberal Democrats had it in them to stay the course, but to their credit they have stuck with it, and for that they deserve a good deal of praise.

[Sir Robert Smith]

I thank the hon. Gentleman for his recognition of the coalition, which the broadcasters have lost sight of in reporting what happens in the House. The Budget specifically talked about how Government can get in the way of business, but has it not shown how the Government can, with the right engagement, take positive action, as they have with the North sea oil and gas industry? Entering into dialogue and bringing in incentives will see the industry through the downturn and enable it to reach maturity so that we get a long-term benefit; without the industry, the oil would be left in the ground, and we would get no tax.

[Mr Tyrie]

I wonder where the hon. Gentleman represents.

Broadly speaking, the hon. Gentleman is right, although I wonder whether we needed quite as many changes to the North sea oil tax regime during this Parliament, particularly since we began it by announcing there would be stability for the medium term in the overall fiscal regime. It can be argued, however, that North sea oil is a special case, and not like the rest of the tax system. Frequent changes in the tax system nearly always have an economic cost in the bottom line for growth.

My colleagues on the Treasury Committee and I will collect as much evidence as possible on the Budget before Prorogation. We will hear from the Office for Budget Responsibility, the Institute for Fiscal Studies and the Chancellor. One measure that was effectively announced before the Budget is the extension of pension freedoms to those who already possess an annuity, and we will take evidence on that major change. Likewise, we will look at the savings measures that have just been announced, not least the savings allowance and the change to the structure of individual savings accounts. Both of those measures sound extremely significant, given that we must revive the savings culture. The Committee will ask about other measures that the Chancellor announced today, including making sure we can be confident that £3 billion will be made available by the tax avoidance measures, the North sea tax regime to which the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) referred, and of course the increase in the personal allowance. There is a great deal for the Committee to do in a short space of time before the election, and we will get on with it as best we can.

We will hear a lot more argument about who is better off. A key recommendation of the Committee in 2010 was that the Treasury and the Chancellor should be required to provide much more information about the distributional impact of tax and benefit changes—who wins and who loses—and, to their credit, they now provide much more detailed analysis at each Budget and autumn statement. For decades, successive Chancellors—my right hon. Friend’s predecessors—were very reluctant to provide that analysis, but they now do so. We will consider the published distributional analysis in the light of the debate, about which we have already heard, about who is better off and who is worse off. It is already clear from the data that almost everybody has borne some of the burden of austerity one way or another, but also that everybody has now almost certainly gained overall, and I will come on to that if I get the chance.