Sheila Gilmore
Main Page: Sheila Gilmore (Labour - Edinburgh East)Department Debates - View all Sheila Gilmore's debates with the HM Treasury
Finance (No. 2) Bill
Sheila Gilmore Excerpts(10 years, 8 months ago)
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Danny Alexander
I am going to make some progress. I will give way again later.
The measures relating to the annual investment allowance will mean that 99.8% of firms—almost 5 million businesses —will receive 100% relief on their qualifying investments. The Bill also provides a much-needed boost for our manufacturing sector by placing a cap on the carbon price support rate. That measure will cut energy bills for businesses and deliver around £4 billion in savings by 2018-19 without undermining investment in renewables in any way.
However, if we want to build a resilient economy with a broad base of industries that is fit to withstand isolated shocks, we have to provide support across our sectors. That includes supporting those innovative small businesses that could be the big global brands of the future. That is why the Bill further increases the generosity of the R and D tax relief for small businesses. From today, the payable credit for loss-making SMEs will rise from 11% to 14.5%. The Bill will also support investment in the high-growth-potential companies that need it most. The seed enterprise investment scheme, which has already helped more than 1,600 companies to raise over £135 million of investment, will be made permanent. The capital gains tax reinvestment relief will also be made a permanent feature of the scheme.
Sheila Gilmore
Will the Chief Secretary to the Treasury explain why his Government and his Chancellor decided, on first coming into office, to cut investment allowances, saying that they were not a good way of encouraging investment?
Danny Alexander
It was because our first priority in business taxation was to bring down the very high, internationally uncompetitive headline rate of corporation tax. It was 28% when we came to office, and it will come down to 21% this year and 20% next year. We also chose to reverse the Labour Government’s planned increase in the small firms rate of corporation tax from 21% to 22%. Instead, we took it down to 20%. Those were the right priorities at the start of this Parliament, but given the present encouraging environment for investment, it is now important for the Government to put in place incentives to bring some of that investment forward.
Bridget Phillipson
We should not underestimate the scale of the challenge that companies such as Nissan face. It is incredibly productive and has a wonderful work force, and the Qashqai, which is produced on Wearside, was recently voted car of the year. There is so much good news in terms of Nissan and other big companies in the north-east. However, companies such as Nissan require long-term stability and the ability to make decisions about where investment will come from in the years ahead. The prospect of an in/out referendum hanging over our heads until 2017 and the constant discussion about it are simply not helpful when it comes to jobs and investment in the north-east.
The most recent unemployment figures reveal that the north-east still has the highest unemployment rate in the country, standing at 9.5%. It is clear that the recovery has yet to deliver fully for my area. The picture of youth unemployment is even more troubling. Across the three parliamentary constituencies covering Sunderland, nearly 2,500 young people aged 18 to 24 have been out of work for more than 12 months. In my constituency, that represents an increase of 1,650% in four years.
Our region has seen in the past the economic and social damage caused by long-term unemployment, destroying communities and draining hope from countless good people and their families. Ministers, however, appear to be complacent about the scale of the problem. They should act now and implement Labour’s plan for a jobs guarantee for all young people who have been out of work for more than a year, because it is clear that the Youth Contract and the Work programme are failing. This Bill is another missed opportunity to tackle the scourge of youth unemployment and long-term unemployment in constituencies such as mine.
I speak to many people in my constituency who are desperate to work and who are applying for job after job and getting nowhere. They do not even hear anything or get an interview—they make no progress. It is hard to underestimate the despair that that causes among young people who are without hope for the future and not sure where things will take them. One man who came to my constituency surgery last week told me that he faces the prospect of getting up and looking for work every day, but he has been doing it for too many years now. He is desperate to work and has a lot to offer, but it is a highly competitive jobs market in which lots of highly skilled people who have lost their jobs in the public sector are able to compete and are chasing too few jobs. The Government must address the matter urgently.
Sheila Gilmore
Does my hon. Friend recall, like I do, that when the Government introduced their Work programme, they said that it would be the best ever employment service and that it was meant to help long-term unemployed people? Does she agree that that group does not seem to have received the necessary help?
Bridget Phillipson
Like my hon. Friend, a lot of the correspondence I receive and what people who visit my surgery tell me is that the Work programme is not delivering. They are not getting the help they need from it and they are not getting back to work. In an area such as mine, where long-term unemployment and youth unemployment remain a major concern, it is simply scandalous that the Government are not taking the action necessary to get people back to work. These people are desperate to work and they want to work.
The situation is not a great deal better for those in work. They are struggling to make ends meet with the rising cost of child care, ever-increasing energy bills and falling wages. Parliamentary questions have revealed that, since 2010, men living and working in my area have suffered a 10% cut in real-terms pay—in other words, a cut of £49 a week. Women have seen a drop in their wages, too—they now receive £26 less a week.
I recently visited the Loaves and Fishes food and bank in Easington lane in my constituency. It opened last September and is one of many new food banks that have, unfortunately, opened in Sunderland. Of course, I pay tribute to the volunteers and local community who are coming together to take action. We have always been an area that comes together and responds to need. The compassion and drive of the volunteers is evident, but so too is their sadness—sadness that these food banks need to exist at all. I am proud of their dedicated service, but it is a source of immense regret that local people are increasingly being forced to turn to food banks to survive, including many people in work, as the volunteers told me.
One of the biggest barriers that parents—particularly mothers—face is accessing child care when returning to work. Affordable and accessible child care will support our economy to grow, allow parents to work and give many children the best start in life, particularly those from the most disadvantaged backgrounds. The Bill’s measures, however, will not even kick in until the next Parliament. They do nothing to help parents now. They also help fewer people than previously announced and come after £15 billion-worth of cuts to support for children and families.
When in government, we did much to address that problem. In fact, we were the first Government to accept that, rather than child care being a private family matter, the Government had a role to play in ensuring that places were available. We devoted particular attention to supporting single parents back to work, which was welcomed in my constituency and did much to encourage people back into work.
Just like then, we now also have clear plans to help parents with 25 hours a week free child care for working parents of three and four-year-olds. That will be of real help to parents, who need action now. It is disappointing that the Government measures offer no help to parents struggling to work and pay for child care.
In the north-east, we need a Government who work with us, recognising both the potential and the opportunities that exist, as well as the challenges we face. My constituents, like so many working people across the country, need a Government who are on their side, tackling the issues of falling wages, getting our young people back to work and taking action now to help parents struggling with child care costs.
Economic recovery must be sustained and balanced, benefiting all regions of the country with economic recovery for all, but this Bill simply does not do enough to address that.
Richard Harrington
If the hon. Gentleman will bear with me, I will make a bit of progress first.
The system means that people are effectively signing an employment contract when they sign on—I have seen such contracts, and the purpose is to get people looking for work. It is a programme of looking for work and taking up initiatives that have been derided by the Opposition, such as the work experience programme, the Work programme and other things. But I have seen the system work. It provides a lot of jobs in my constituency. However, the principle of what the hon. Gentleman says, which is that people should not be allowed to rot and do nothing while on jobseeker’s allowance, is right.
The hon. Member for Houghton and Sunderland South (Bridget Phillipson) made a good point that was pertinent to her constituency, and she has met people who have applied for hundreds of jobs and been unsuccessful. I accept that and have heard of similar cases. I cannot compare my constituency with that of my hon. Friend the Member for Cities of London and Westminster (Mark Field), or with Kensington and Chelsea, but in Watford—as the shadow Chief Secretary to the Treasury, who is not here, would know as he is a frequent visitor, for which I am grateful—jobs are available. I am not saying there are jobs everywhere, and it is difficult for anyone to get a job, but I accept that in the hon. Lady’s constituency things are completely different.
Sheila Gilmore
Is the hon. Gentleman concerned that the number of unemployed people remains relentlessly high, despite the talk about there being lots of jobs? Surely we must try to address that because 2.3 million people are still unemployed. That is a serious situation for all those people.
Richard Harrington
I agree with the hon. Lady, but in my constituency the number of those on jobseeker’s allowance has come down from about 3,600 to, I think, 1,700. I have met a lot of those 1,700 people and chatted to them.
Sheila Gilmore
Over the past couple of years in particular the number of people on jobseeker’s allowance has dropped, but the number of unemployed people has not. Only 58% of those who are unemployed are now in receipt of jobseeker’s allowance. The two figures are considerably out of synch.
Richard Harrington
I spend a lot of time at Jobcentre Plus—if the hon. Lady and her colleagues have their way, I am sure I will be spending a lot more time there after May next year—but I do that for a serious reason, which is to talk to people on jobseeker’s allowance. I have heard the Opposition speak about these matters, and one cannot argue with the Office for National Statistics and statistics such as that. However, I wanted to try to get to the bottom of the issue and—I am genuinely not trying to make a party-political point—that has not been my experience in my constituency.
Ian Swales
I will come on to some of those tax rises in a moment. I am just saying that working people are not £1,600 worse off, as the Labour amendment suggests. There is no expert who says that they are.
This Government’s tax cut has reduced inequality. It has been praised by the Living Wage Foundation as reducing the gap between the minimum wage and the living wage, and I am proud that my party has driven it through in this Parliament. It is also good that the Budget shows that there will be real growth in household disposable income from now on.
Sheila Gilmore
Would the hon. Gentleman admit that, for many low-paid workers, the increase in the tax threshold over the past few years has been more than cancelled out by the cuts in tax credits, the freezing of child benefit and other changes? In fact, the Government have given with one hand and taken away with the other.
Ian Swales
Everyone is in a different situation, but it is certainly not true to say that, for more people, the Government have given with one hand and taken away with the other. The hon. Lady should know that.
The Opposition’s reasoned amendment also mentions a “tax cut for millionaires”. This is from a party whose former Business Secretary said that he was
“intensely relaxed about people getting filthy rich”.
And it showed in what the Labour Government did for 13 years: the top rate of income tax was 5% lower than it is now until 6 April 2010, the very last day Labour Members sat on the Government Benches—until then they cut taxes for millionaires every year they were in power; capital gains tax was 10% lower, meaning that hedge fund managers in the City had a lower tax rate than those cleaning their offices; tax relief was available on pension contributions of £250,000 a year, whereas the current figure is £40,000—the difference is £100,000 in tax; and VAT was 2.5% lower, making a top Ferrari £5,000 cheaper—that is what was actually happening for millionaires.
Jacob Rees-Mogg (North East Somerset) (Con)
It is an enormous pleasure to follow the hon. Member for North Durham (Mr Jones), who always entertains the House with his eloquence. I am sorry that he has been relatively brief today. On previous Finance Bills, he has held forth for over an hour, and I was hoping for something similar.
The hon. Member for Glasgow North East (Mr Bain) started with a list of anniversaries, but he was remiss in not mentioning that today is the anniversary of the death of Eleanor of Aquitaine, which I happen to think is rather more interesting than the anniversaries he was able to provide us with.
It is a great pleasure to support the Government on this Finance Bill. It is worth looking at some of the figures that have been batted back and forth during the debate, some of which seem, to some degree, to have been invented by the Opposition. The real figures show that the Government can be proud of their record. Let me run through them, if I may. They are a mixture from the World Bank and the Red Book. GDP declined by 0.8% in 2008 and by 5.2% in 2009. I think that some people may have missed that downwards revision by the Office for National Statistics. GDP rose by 1.7% in 2010, by 1.1% in 2011, by 0.1% in 2012, and by 1.8% in 2013. The key to those figures is that since this Government have been in office, there has been no triple-dip or double-dip, as was predicted; in fact, the economy has grown because the Government have followed the right policies.
Sheila Gilmore
Did the hon. Gentleman feel that the predictions that the Chancellor gave to this House and the public in 2010 and 2011 were over-optimistic, or did he think they were okay? I seem to recall that the Chancellor was not predicting that level of growth.
Jacob Rees-Mogg
The hon. Lady is aiming at the wrong target. The Chancellor, in his considerable wisdom, decided to make these forecasts independent and therefore set up the Office for Budget Responsibility. That is how we know that we are competent. Indeed, Labour is desperate that the OBR should view its own figures. An independent body was set up to give these forecasts so that there was no legerdemain in what the Chancellor was doing.
Sheila Gilmore
If those were the forecasts of the OBR, based on the position as it saw it in 2010, does the hon. Gentleman agree that it must be the Government’s policies thereafter that have meant that those forecasts have not translated into reality?
Jacob Rees-Mogg
That does not follow. It is like looking at the weather forecast on the BBC and saying that it is the fault of the newsreader if the weather then turns out to be different. The two are not the same. The forecasts were made in good faith, based on what was known of the global economy at the time. But of course, things change and responses are different. The global economy continued to be relatively sluggish, but the figures that have been achieved by the Government are enormously respectable. There has been economic growth pretty much since 2010 and, most importantly, in the past couple of years. Everyone knows that economic policies have a long-term impact. If a Government come to office in May 2010, we cannot expect the figures in June 2010 to be the result of that Government’s policies—there is inevitably a lag. The effects, as we have seen, have been positive; the economy is now growing, and growing increasingly strongly.
The problem that the Government faced when they came to office was severe. The deficit in 2009-10 was 11.2% of GDP, falling to 10% of GDP in 2010-11. That is not the structural deficit but the actual real money deficit. I happen to think that is a much better figure than the structural deficit, which is to some extent speculative, as economists try to work out what is structural and what is not. If we deal with actual fact, the figure was minus 11.2% in the last year of the socialists, falling very slightly to minus 10% in the first year of the coalition.
The reason the deficit was so high was of course in part the global financial crisis, but it was also because Government spending was simply too high. It had reached 47.4% of GDP in 2009-10, when revenue was only 36.2% of GDP. That latter figure for tax revenue ought not to be any surprise. One of the most remarkable things about this series of figures, going right the way back to Harold Wilson’s prime ministership, is that Governments find it incredibly difficult to get much more than 37% of GDP in taxation. It is interesting that, since 2010, although the Government have increased taxation and the tax take has gone up from 36.2% to 37.4%, the amount has not risen as much as was anticipated. The reason is that it is actually very hard to tax much more than 37% from an economy.
Sheila Gilmore (Edinburgh East) (Lab)
I cannot help but feel that the speech by the hon. Member for North East Somerset (Jacob Rees-Mogg) was very much in the vein of Marie Antoinette—“Let them eat cake.” Many people find it positive that we redistribute money and help those who need assistance in our society, but the logic of his argument is that we should revert to a position in which it does not matter if some people cannot afford education or to have a decent roof over their head, because they are still looking after their own money, even if the amount is very limited. That might be because of their health, because of their disability or because the opportunities that they have grown up with are not as great as those of others. In his view, that is fine and we should go back to that kind of society. I, for one, do not want to do so.
We were told that this was a Budget for savers. The problem is that, for many people in this country, the figures that were talked about are fantasy. They will never be in a position to benefit. We have to care about that. A study by HSBC in October 2013 stated that 25% of households had no savings. That was up from 19% in a similar survey that it carried out 2012. It also stated that 10% of households had less than £250. That means that 8.8 million households—not individuals, but households—to all intents and purposes have no savings.
One of the first things that the Government did on coming to office was to abolish plans for the Saving Gateway, which had been put in place by the previous Government, and abolish child trust funds. One of the first Public Bill Committees that I served on took away those things, which were there to encourage and assist people who did not have a great deal of disposable income to save. Clearly, those savers are of no interest to the Government. The people who will benefit from the increase in tax-free saving through ISAs are in a minority in this country.
I listened to what the hon. Gentleman said about the tax threshold. There is an illogicality in taxing people who are on the minimum wage. The problem is that the increase in the tax threshold has not benefited people in that situation. It has gone right past many taxpayers and it has cost a great deal. We are lectured endlessly about there not being enough money and about tough choices having to be made, but £10 billion has been spent to date—not including the further increase in this Budget—on raising the tax threshold. That is tax that is forgone. Three quarters of the benefit has gone to people with above-average earnings, not those on low earnings.
The 17% of the population who are already beneath the tax threshold are gaining nothing. Government Members have said that everyone is gaining £700 from this Budget. Obviously, that does not include the 4.5 million people who make up that 17%. Clearly, those people do not count. Far from gaining from the Budget, those people will be losing.
There are alternatives to raising the tax threshold. If the Government’s aim is to help low-paid workers, which is what Government Members say, why did they decide to cut tax credits by so much? My hon. Friend the Member for Glasgow North East (Mr Bain) spoke about universal credit work allowances. It has been suggested that one way to help low-paid workers would be to increase the taper on the replacement for tax credits for people on universal credit who are in work. However, the Government decided when they first invented universal credit that the work allowances would be cut back. That means that people will lose their credits much more quickly than would otherwise have been the case. That will happen without the further changes to the universal credit rates and tapers that are clearly intended by the Government, who want to fund the extra help with child care for low-paid families from other low-paid people. We are told that that will be funded out of universal credit.
The problem with universal credit is that we are not sure that we will ever see it. We certainly will not see it for a considerable time. Universal credit, which was meant to make work pay for everyone and was the answer to so many problems, currently covers about 3,500 individuals in the whole country. It was supposed to roll out to all new applicants for all sorts of benefits in October last year, but the event horizon keeps moving away. Given that, perhaps the Government would like to rethink some of their thinking on credits. To say to low-paid parents that at some point 85% of their child care costs will be met “under universal credit”—those are the words that are always said—is not a great help if we do not know when it will come in. For those people it will certainly not be 2014, 2015 or 2016, and for many probably not even 2017. In the last timetable we were told that some people would not be included even by 2017, and given that no timetable from the DWP has come anywhere near being introduced, it is perhaps not surprising if I am somewhat sceptical. Perhaps help with 85% of child care costs for low-paid families could be introduced now, rather than wait for universal credit.
We hear a lot about jobs and how many more there are, but I wish to raise a point that I have made several times recently: despite those jobs, the level of unemployment remains stubbornly high in this country and it is time the Government did something about it. Some 2.3 million people are still unemployed, and in the Chancellor’s speech last week he said that 169,000 was the reduction over 2010. When I said, “Only 169,000?” there was a kind of outcry from the Conservative Benches: “Only? Isn’t that important?” Of course it is important, but it is not anywhere near the number of new jobs that we are constantly told have been created.
What exactly is going on? Are we not worried about the 2.3 million people who remain unemployed, many of whom do not appear to be on benefits? The argument that benefits are so comfortable and that is why people are not working does not appear to apply because 58% of those unemployed people are not on the JSA count. Every time some of us ask questions, Government Members—particularly Ministers—produce figures and say, “Unemployment in your constituency has gone down by this, that or the other”, but they are giving the claimant count not full unemployment figures. It is important to have policies in place to help with unemployment.
I am tired of things being thrown at the Labour party that are simply not true. One of the favourites is, “Unemployment always rises under a Labour Government.” It is not true. It was not true of the Labour Government between 1945 and 1951, and the extent of the increase during some of the other Labour Governments was very small indeed, and similar to that of Tory Governments. In only one of the three periods of Tory Government—1951 to 1964, 1970 to 1974, and 1979 to 1997—did unemployment stay the same. In both the others it went up. Between 1979 and 1997, unemployment rose. It was only 5.6% at the beginning, and more than 7% afterwards. In 13 of those 18 years, unemployment was more than 10%. It is not true that unemployment rises only under Labour Governments or that it has been higher at the end of every Labour Government than at the beginning. The record of a party that put the country through 18 years of government, in which unemployment was more than 10% in 13 of them, is not one to be proud of or boast about. Perhaps we could hear a little less of those soundbites that are not accurate before Members come to debate in this House.
For the low paid and people who are struggling in this economy, the Budget will not offer much help. On pensions, do we remember the 1980s or do we not? The 1980s pension reforms, which tore apart the state earnings-related pension scheme, were boasted about as freeing people up from the dead hand of the state to have personal pensions that they could make choices about, and it would be fine. It turned out that for many people it was an extremely bad choice. That has led to the decline in the level of pension saving. People did not build up pensions over those years. If the state earnings-related pension scheme had been left alone, an awful lot of people would have been much better off in their retirement, and perhaps the Labour Government, when we came to power in 1997, would not have needed to introduce pension credits to lift pensioners out of the high level of poverty many were then suffering.
Some of us are sceptical about a pensions policy that appears to have been written on the back of an envelope. The boast is that it will give freedom to everybody. That sounds good and it is very hard to argue against—people have the right to use their own money—but remember the result of the 1980s. We are still picking up the pieces from that. To change something as big as pension policy, we need to sit down and work it out first, not announce it in the Budget and then work it out. Within a week, the Government have had to announce tweaks to help people now. Suddenly, people were saying, “Have I got to buy an annuity now, when if I just wait till next year I will not have to?” Another change had to be put in to allow people within that period to draw down now, rather than buy an annuity. That suggests there was not much planning, because clearly nobody had thought that that would happen. That is not the way to make pension policy. It is not giving people a wonderful freedom if they find out some years later, as happened in the 1980s, that there will be catastrophic results. At least model it and work it out properly. It might have made headlines, but it may come back to bite later.