Amendment of the Law

Sammy Wilson Excerpts

Wednesday 21st March 2012 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

We all recognise that the Chancellor has been confronted with a difficult task in this Budget. He has had to walk a tightrope: if he goes too far one way, our financial credibility is immediately questioned so interest rates have to rise, yet if he goes too far in the other direction, we impair our ability to earn our way out of the recession.

My party does not have any political points to score against the Conservative party, as it is not represented in Northern Ireland, so we simply want the Chancellor and the Government to succeed. That is the basis on which I assess the Budget. Is this Budget likely to achieve the objectives we all want: restored growth and increasing employment?

Some of the Budget’s measures are very welcome. From a Northern Ireland perspective, we welcome the devolution of air passenger duty, which will be included in the Finance Bill. That will enable the Northern Ireland Executive to set its own rate for long-haul direct flights from Northern Ireland, which is essential to our investment strategy and to tourism. We also welcome the reduction in corporation tax as it brings our rate closer to the rate in the Irish Republic, which is our main competitor for foreign direct investment—although those rates are still far apart. We welcome, too, the film and high-end TV tax concessions. We have been seeking to promote that industry in Northern Ireland. The Executive have pushed for that. “Game of Thrones” is now filmed in Northern Ireland, and it has been a big revenue earner. We have also pushed for Belfast to be chosen as one of the broadband cities.

However, although there is clearly much to be welcomed, I am concerned about three aspects of the Budget. First, the Government could spend more money on infrastructure in the United Kingdom. That would enhance economic growth. Such pump-priming by the Government could enable us to draw upon some of the funds—£700 billion in cash—that private companies are currently hoarding.

After all, does the Chancellor believe his own rhetoric? He says that both the deficit and debt have fallen as a percentage of GDP, that the public sector net debt peak will not be as high as previously anticipated, and that we are on course for deficit reduction. He must therefore know that his credibility in the international money markets is sufficiently high for him to be able to invest in projects that offer a rate of return and that could help to promote economic growth, rather than merely pay unemployment benefits. Either he does not believe his own rhetoric, or else he is deliberately—perhaps for ideological reasons—holding back on what I believe could be an important means of investment.

Secondly, I am concerned about a choice that has been made. At a time when we are preaching austerity to people who are bleeding in that many of them cannot pay their heating bills or their rent or buy food, it is bizarre that the Government should choose to prioritise reducing the top rate of tax for the top 2% of earners in this country. That demonstrates a blatant disregard for the very difficult sacrifices that we are asking people to make.

Let us consider how the money could have been spent. There has been much argument today about whether or not the rich will pay more. The one thing we do know, however, is that it has been calculated that that reduction in the top rate of tax will immediately release £3,010 million to the top 2% of wage earners. The Government are relying on tax exiles flooding into the United Kingdom and beating on the door of Her Majesty’s Revenue and Customs to ask, “May I pay my tax in the United Kingdom now?” The Treasury hide behind the theory of “behavioural assumptions”, but we need only look at the literature to see that there are a lot of assumptions that may, or may not, be realised. The same situation applies for the money that could come from stamp duty and limits on the back claims.

The fact is that this money could have been used in a better way. For example, the Government could have used it to lower fuel duty, but despite the fact that fuel prices are going up, the Government are going to take £800 million more off motorists in the United Kingdom this year.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I am thoroughly enjoying the hon. Gentleman’s speech and would not wish to interrupt it for a second, but may I ask him what money he is referring to when he talks about a better way of spending that money? What we know from the Treasury is that our top rate raised very little incremental cash and that reducing it is likely to raise more money from the same people. So what money is he talking about?

[Sammy Wilson]

According to the Treasury, the direct impact—the direct static cost—is going to be £3,010 million. That is the figure that the Treasury has put out. Some of that money will be offset by behavioural change, but that is based on assumptions about tax income elasticity and what happens to income. So real money will go back to people who currently are top rate taxpayers. My argument is this: if the Government were going to release that kind of fund, would it not be far better to release it either to bring more low-income families out of tax or to release the hard-pressed motorist from the fuel duty that is going to be imposed on them?

[Ian Lucas]

The hon. Gentleman is making a compelling case. Is he aware that just 4,000 taxpayers in Northern Ireland earn more than £150,000 a year?

[Sammy Wilson]

That is so, and I wish to discuss another measure in this Budget that will affect hundreds of thousands of people.

[Mr Nigel Dodds (Belfast North) (DUP)]

The people of Northern Ireland are grateful to my hon. Friend for the work he does as Finance Minister in Northern Ireland to move its economy forward. Does he agree that people up and down the country are terribly disappointed that the Budget contains no additional measures to reduce the amount of fuel duty and VAT on petrol and diesel, which, in Northern Ireland, is the highest in the entire European Union?

[Sammy Wilson]

The continuation of the measures that the Government have in the Budget already will take a further £800 million out of motorists’ pockets over the next year.

The final point I wish to discuss is regional pay. Some people may regard what I am about to say as special pleading for Northern Ireland, but may I remind hon. Members that this will have an impact on those who represent constituencies outside London and the south-east of England? This measure will have an impact on all the rest of the United Kingdom. Some have the idea that, because there is currently a difference between private sector and public sector wages—it is important to make the point that the difference is current—wages should be frozen for people in the public sector, so as to stimulate the private sector. I do not quite understand the economics behind that, because freezing wages in the public sector will have a deflationary impact, especially outside the south-east of England, given the prominence of the public sector not only in Northern Ireland, but elsewhere. The areas of the United Kingdom that are currently falling behind, even given the slow rate of economic growth for the country as a whole, will be the parts that will be most punished. This is one of the most divisive measures that I have ever heard about and it does not even address a problem, because there is no evidence for it. We have 3 million people unemployed and we are not recruiting in the public sector, so how on earth are higher wages in the public sector going to prevent private sector employers from being able to find workers? This argument does not work. The impact of the measure will be very detrimental. I hope that we will have an opportunity to re-examine that in much more detail in this House, because I believe it is one of the most pernicious measures floated in this Budget.

There are things that the Government could have done but have not done. There is an unfairness in this Budget; it is an unfairness in respect of not only different income groups, but different regions of the United Kingdom. I am a Unionist and I believe in the value of the Union. I believe that it is important that, as part of the Union, we bear the burden when there is a problem. As my right hon. Friend the Member for Belfast North (Mr Dodds) mentioned, that is one of the reasons why, despite the unpopularity that this has probably led to in Northern Ireland, I have made the case that if there is an economic crisis facing the United Kingdom, we cannot ask to be exempt from the burden to be borne. However, it makes it far, far more difficult to say to public sector workers that their wages are going to be frozen, to say to the ordinary citizen that they should tighten their belt and to say to people who live in Northern Ireland that they have to go through these hard times when the Government are saying to those who can most afford it, “We are asking you to loosen your belts. We are going to fill your pockets.” That is exactly where the unfairness in this Budget lies.

For that reason, although I want the Government to succeed, I believe that they have not taken the opportunity to inject money into the economy. If they have credibility, they should use it in the financial markets and borrow to invest in infrastructure, rather than paying people to sit on the dole. If the Government want people to face up to the hard economic facts, they should do things fairly and not in a unjust and uneven way. If they want to be the Government for the United Kingdom, let us make sure that some parts of the United Kingdom do not have to bear a bigger burden than others.