Oral Answers to Questions

Sheila Gilmore Excerpts

Tuesday 14th May 2013 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

Is the Minister familiar with the universal jobmatch website created by one of his colleagues in the Department for Work and Pensions? If he has looked at the nature of the jobs being advertised there, he will have seen that in my area, 57 out of 76 advertised shop vacancies were for one company, operating all over the east of Scotland, which wanted people to work on a self-employed basis, distributing catalogues and selling things from them—

[Mr Speaker]

Order. I do apologise to the hon. Lady, but we must press on. There is a lot to get through. We need short questions and brief answers.

Finance (No. 2) Bill

Sheila Gilmore Excerpts

Thursday 18th April 2013 Commons Chamber

[Fiona O'Donnell (East Lothian) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Ms Primarolo—[Interruption]. We have just made it into the afternoon. It is also a pleasure to follow my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell), who made such a strong case for the Opposition’s amendment to clause 1. It is to clause 1 in the main that I wish to address my remarks.

This week and in the days leading up to the funeral of Baroness Thatcher, Government Members have been proud to proclaim themselves as Thatcherites—no more talk of one nation Conservatives or how “We’re all in it together”. I was pleased that my hon. Friend spoke about the impact of this Government’s choices. That is what we are talking about today: their choices and priorities. Proportionately, they are hitting women so much harder than men, while the benefits they are seeking to give—reducing the 50p tax rate to 45p—will disproportionately benefit men.

That was certainly my experience as a woman at home caring for my children through the Thatcher years. I find it almost incomprehensible when I hear people talk about how much she did for women, because that was not my experience, as I genuinely struggled to put food on the table for my children and keep a roof over their heads. For me, the difference we saw in 1997, with the birth of a new Labour Government—new in every way—was predominantly in the increase in child benefit. That is what changed my ability as a mother to care for my children—to provide for them and give them a better life than I had had. This Government have chosen to freeze child benefit, while at the same time giving a tax break to 13,000 millionaires and 267,000 people earning more than £150,000. I would be interested to hear from the Minister—or from other Government Members, if it is not just the Minister who is going to speak on this issue—how many people earning more than £150,000 have come to his surgery or contacted his office to say that times are so tough that they need a tax break. How many people have contacted the Treasury to say that?

[Sheila Gilmore (Edinburgh East) (Lab)]

During this week, from Second Reading onwards, we have seen a dearth of speakers from the Government Benches, yet we have also seen a rise in unemployment figures and clear signs that on average people are facing real cuts in their earnings. Is it not extraordinary that Government Back Benchers seem not to want to speak?

[Fiona O'Donnell]

As ever, my hon. Friend makes a reasonable and forceful contribution to the debate. This is shocking complacency from Government Members—their constituents and mine will be watching them—as unemployment rises and as families face an average cut of £17 a week as a result of all the changes they have made since 2010.

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[Sheila Gilmore]

I welcome the hon. Gentleman to the debate, as we have been lacking a challenge up to now and it is always good to be challenged. He makes an argument about the Laffer curve. I am sure he would agree that if tax rates are zero, you do not get anything, and that if tax rates are 100%, you would probably not get anything either. However, the question of where it is right to draw the line in between, in any given economic situation, is surely a matter for debate. You cannot simply say, “Oh, the Laffer curve says we can’t put tax rates up.”

[The Second Deputy Chairman of Ways and Means (Dawn Primarolo)]

Order. I remind the Committee that the guidance on conventions and courtesies is quite clear on the language to be used in the Chamber. Hon. Members will know that “you” refers to the Chair as all remarks are made through the Chair. I would therefore be grateful if hon. Members would refer to each other by their constituency names, or as “the hon. Member”, “my hon. Friend” or “the Minister”. They should desist from saying “you”; otherwise, I might feel the need to answer the debate as well, and then we would have disorder. We do not want that, do we, Mr Rees-Mogg?

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[Jacob Rees-Mogg]

However much we tackle tax avoidance, if we set tax rates at so high a level that people decide not to work, no legislation can force them to work to earn more. Unless we want to be like the Russia of the 1980s, we cannot pass a law to prevent people from leaving the country to work elsewhere if the taxes are too high here.

[Sheila Gilmore]

The point is constantly made that the top 1% pay a very high proportion of income tax and that that makes this measure okay, but presumably they pay that because their income is high. The gap in this country between low-income people and high-income people has widened considerably. That happened under the Government of the late Baroness Thatcher, but, admittedly, not enough was done to address it under the subsequent Labour Government. The point, however, is that if people are paying so much, it is because they have the income to do so.

[Jacob Rees-Mogg]

The hon. Lady almost makes my argument for me. In 1979, that hallowed year in which the great lady to whom she referred came to office, the highest rate of income tax was 98%, and the proportion of income tax revenues paid by the top 1% was about 10%. When the rate fell, the proportion paid by the top 1% went up, so more money came from the richest in society when rates were lower. Lower rates of taxation therefore resulted in the advantage of an increase in revenue for the Government and the ability to spend more on the services deemed necessary.

This argument was proved in 1979 when the rate went down from 98% to about 60% and again in 1988 when it went down from 60% to 40%. On both occasions, the amount of tax revenue increased because people were willing to work harder and people were attracted to work in this country—so the burden was, indeed, put on to the shoulders of those best able to bear it.

An argument is made about fairness. We say it is fairer to have a high rate of tax. We say that that is symbolically right—that we should have it so that people know they are doing something difficult and we are all in this together—but what is the symbolism of saying to people we will take less tax from them, and what is the symbolism of having lower revenue for the Government?

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[Jacob Rees-Mogg]

The hon. Lady—my near neighbour, as she represents a Bristol constituency—is very wise and does, I am sure, understand this point. The answer is that the question being asked differs between benefits and earnings, although the argument is essentially the same. Inevitably, where there is a level of benefits that discourages people from working, if that increases more slowly, it encourages people to work. It is an identical argument to the one that says people keep more of the money they earn if taxes are set lower.

[Sheila Gilmore]

The problem for many people at present is that the jobs simply are not out there. In my speech on Monday I explained that I had used the Government’s new universal job match. When I put in “shop assistant” on behalf of a constituent of mine, I discovered there were 76 entries, which sounds good, but 57 of them were for vacancies all over the region, not just in my city, and involved going around delivering catalogues and trying to sell things to people. Those are the kinds of so-called “jobs” that are out there, and that explains why people cannot find work.

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[Sheila Gilmore]

Would the hon. Gentleman like to comment on the numerous observations and reports suggesting that, in fact, capital is available? Many businesses have capital available; the reason it is not being used to invest is that there is low demand in our economy.

[Mr Jackson]

The hon. Lady anticipates my next point. By any respectable indicators over the past few years, the cash reserves that British business has for investment are enormous. The issue is business confidence. To develop that point, parts of the economy are doing significantly better than others and have not been affected by this cyclical change, which has lasted since the onset of the Northern Rock crisis of 2007-08 and the wider banking crisis.

I am a Conservative, so of course I am in favour of tax cuts. Would that we were in a position to have a tax cut by virtue of the Opposition’s new clause 2, but let us make no bones about it: it is an unfunded tax cut—if it walks like a duck and swims like a duck, it is a duck. I always thought that Labour’s credo in recent times was not to support unfunded tax cuts. With all due respect to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), who is a very competent, proficient performer at the Dispatch Box, she failed to answer the points raised by me and the hon. Member for Dundee East (Stewart Hosie) and say where the money would come from. We are talking about £100 billion of indicative funding, which has to be found from somewhere. It is all very well saying, “We’re going to have a progress report at the end of this Parliament to see how things are going,” but once we put in place that tax cut, we would cut off that income stream. We would then have to find other ways to fund core expenditure.

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[Mr Walker]

I will certainly urge my party to adopt a similar position. Raising the threshold to £11,500 or £12,000 in future Budgets would help millions more people and provide further stimulus. That, along with other policies that my party supports, and which the Liberal Democrats do not always support, such as keeping a freeze on council tax, could make a real difference. Raising the threshold would extend the legacy of that valuable change and do even more to make work pay. I urge Ministers to consider it for the future and commend them on the difficult job that they are doing well.

[Sheila Gilmore]

The hon. Member for Worcester (Mr Walker) has perpetuated some of the myths about some of the last Government’s policies. For example, he suggested that it would be better to put money into early intervention—presumably, that would involve paying things such as tax credits. Of course, it was not an either/or.

Anyone looking at the setting up of Sure Start and all the reports that were done on the importance of early intervention would see that we did not think, as is sometimes suggested, that the only solution to deprivation, child poverty and so on was simply to put money in. Money is part of the issue, but we certainly did not see things in terms of either/or. All the people up and down the country who have seen reductions in Sure Start services, for example, see that now it is not only not either/or—in many cases, it is neither/nor.

It is all very well for the Government to say, “We’re leaving you your own money so that is fine,” but the bottom line is that people have less money in their pockets. What has been suggested is a give-away in income tax is more than balanced, for many low-paid workers, by the reduction in tax credits and other provision. What matters to those people is how much they have to spend. Saying, “Oh, it’s wonderful that you’re getting to keep your own money” is no use. They cannot necessarily buy the things that they need.

The situation with child care is similar. The hon. Member for Worcester was right to say that the Government measure on that is not coming in right now; moreover, many people have already seen a cut in help. Child care tax credits were cut by the Government for many low-paid working families, so it has already happened.

The tax credits system was particularly beneficial for single parents, over 350,000 of whom went into employment as a direct result. There are serious concerns about universal credit as the answer to all this, particularly for single parents. Gingerbread and other organisations representing single parents have pointed out that their position could be worse under universal credit.

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[Mr Gauke]

Clause 3 sets the basic rate limit for income tax for the 2013-14 tax year. Let me make it clear at the outset, as I did in the previous debate, that we understand the financial pressures faced by households. As a Government, we have taken action to reward employment and to support hard-working families. That is why we have increased the personal allowance. I endorse the remarks made by my hon. Friend the Member for Worcester (Mr Walker) in support of the policy we have pursued. Budget 2013 announced that we will go further, with the personal allowance increasing by a further £560 to reach £10,000 in 2014-15, meeting the Government’s commitment a whole year early. These changes will benefit 25 million individuals and will take 2.7 million people out of income tax altogether by April 2014.

Clause 3 reduces the basic rate limit by £2,360 to £32,010 in 2013-14. When combined with the £1,335 increase in the personal allowance provided for by clause 2, the higher rate tax threshold for 2013-14 will be reduced to £41,450. This allowance increase will benefit all taxpayers with incomes below £116,000 by £200 a year on average in real terms. About 30% of the gains from the personal allowance increase for 2013-14 will be shared with most higher-rate taxpayers. The national insurance upper earnings and profits limits remain aligned with the higher rate tax threshold.

It might be helpful if I set out the reasons for this change. I have explained that this coalition Government are committed to creating a fairer tax system that rewards work, with real-terms progress every year towards increasing the personal allowance to £10,000. We are meeting that target one year ahead of schedule and the final step towards it will be legislated on in next year’s Finance Bill. For now, the £1,335 increase in the personal allowance, introduced by clause 2, represents a major milestone on the journey to £10,000. The changes that we are making for the 2013-14 tax year will lift an additional 1.1 million individuals out of income tax altogether and give 24 million taxpayers an average real-terms gain of more than £200 a year. For the typical basic rate taxpayer, that will mean an extra £267 of cash in their pocket for 2013-14, which is an extra £5 a week since the start of the new tax year.

On the specific issue of gains for higher rate taxpayers, when increasing the personal allowance by £10,000 in 2011-12 we also had to make sure it was consistent with bringing the public finances under control. Therefore, higher rate taxpayers did not benefit from that increase. However, we decided that the benefits of later increases should be shared with higher rate taxpayers. This supports growth by increasing the rewards to work for a wide range of individuals.

The £1,335 increase from April 2013 was announced in two parts. For the increase of £1,100 announced at Budget 2012, rather than pass on the full benefit of the personal allowance to higher rate taxpayers, an equivalent amount of funding was provided to assist in the fair implementation of the child benefit reforms. However, gains from the additional £235 increase announced at autumn statement 2012 have been passed on equally.

At that time the Government also decided that the higher rate tax threshold—the point above which the higher rate tax starts to be paid—will increase by 1% in both 2014-15 and 2015-16. These will be cash increases, the first in this Parliament, and they will ensure that higher rate taxpayers will gain equally from future increases to the personal allowance. The Government recognise that these are below-inflation increases, so they also raise about £1 billion in revenue to support our efforts to deal with the large deficit we inherited from the Labour party. We make no attempts to conceal that and have been very open and up front about it.

Opposition amendment 10 calls for a report on the cost of living for basic rate taxpayers. As I have said, we recognise the pressures that households face and we are taking action to support them with the cost of living. Indeed, in our debate earlier this afternoon I set out some of the policies. I have touched in this speech on the personal allowance and one could also point to our policies on fuel duty and beer duty, which were announced in the recent Budget, and on council tax, which are all intended to relive households from some of the pressures they face.

The Government have taken unprecedented steps to publish a distributional analysis alongside each Budget and autumn statement document. Such analysis shows the impact of all the Government’s policies on household incomes and separates the impact of tax measures from their other policies. It is important to consider all the Government’s policies, not just their taxation measures. The distributional analysis published at the Budget shows that the top 20% of households continue to make the greatest contribution towards reducing the deficit, both as a percentage of their income and in cash terms. We believe that producing a further report to supplement that would be unnecessary and a waste of money.

We have debated the wider point of the cost of living in two debates this afternoon, although admittedly this second debate has been short. As I made clear, the Government recognise the considerable pressures, consequent on rising commodity, food and fuel prices, that our constituents have felt strongly in recent years. The Government have taken difficult decisions to try to reduce the deficit, and undeniably that has had an impact on people, but we ought to be straight with the British public: whoever is in government will have to take measures to reduce the deficit. Anyone in a position of responsibility has to recognise that we cannot continue borrowing 11% or 12% of our economy. [Hon. Members: “But you are!”] While in office, we have reduced the deficit by a third.

Having listened to Opposition speeches this afternoon, I do not for one moment doubt their sincerity, but there has been the temptation to ignore the fact that there is a very large deficit that has to be dealt with by raising taxes, cutting spending or a combination of the two, and to pretend otherwise is to not be straight with the British public. Some of this afternoon’s speeches have given every indication that Labour is content with being a repository for people’s anger. To use even stronger language, Labour often gives every indication of being simple fellow-travellers in sympathy, but not leaders. That is Labour’s approach.

[Sheila Gilmore]

Would the Minister not rather be understanding of people’s very real anger than just ignore it? [Interruption.]

[Mr Gauke]

As the Financial Secretary to the Treasury points out, people should be angry about the state of the public finances left to us by the Labour party. I described Labour as the “repository for people’s anger” and as a “simply fellow-traveller in sympathy”, not leaders, because those were the words of the last successful leader of the Labour party, Tony Blair. I am afraid that Labour is too often in its comfort zone. We know that there are pressures on living standards, but ignoring the deficit is no way to deal with them. The Government are prepared to take those difficult decisions, while Labour is failing to address them.

Finance (No. 2) Bill

Sheila Gilmore Excerpts

Wednesday 17th April 2013 Commons Chamber

The scheme is certainly a candidate for “Grand Designs”. Although the Opposition support in principle the notion of assistance for those who are looking to purchase a new home, we have questions about the operation of the design. After all, as hon. Members are often more fortunate than many of our constituents, we should probably all declare an interest as participants in the housing market and the mortgage market. It would also be wrong for us to imply that we do not encourage home ownership or that we are always against the notion of second home ownership, given that many of us have two residences, one near Westminster and one in our constituency. Notwithstanding the unusual circumstances of Members of Parliament, it is important that public policy and taxpayer support are focused first and foremost on assisting those without a home to acquire one and on ensuring that we minimise the diversion of taxpayer funds into an unintended subsidy for second homes when helping people with their first homes must be the priority.

[Sheila Gilmore (Edinburgh East) (Lab)]

In many parts of the country, although perhaps not in London, the property value being suggested is extremely high. Instead of concentrating on people in the lower income bracket looking for property of lower value, the scheme will be open to people who arguably do not need help to get on to the housing ladder.

[Chris Leslie]

It comes down to whether the Government have designed the scheme adequately. Is it best to have a broad-brush approach, or should we be targeting help at those who need it most? The Opposition favour the latter.

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[Alison Seabeck]

No, indeed. Someone looking at the issue from the outside, rather than from the Government Benches, could cynically suggest that the Government are seeking to build houses and support house building in the south-east rather than in the rest of the country. The figure has far more resonance in terms of trying to get people into the market in the south-east. The issue is not clear.

[Sheila Gilmore]

The figure might be more consistent with house prices in the south-east, but even there someone still has to have a very substantial income to afford a mortgage, even if it is discounted by a shared equity or mortgage guarantee scheme.

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[Stephen McPartland (Stevenage) (Con)]

I appreciate the opportunity to speak in this debate, Mr Hoyle, and I shall make my speech very short as I appreciate that two Opposition Members wish to speak. I will speak for about three minutes tops and will rattle off my points as fast as I can.

The first issue I want to raise on new clause 5 is the fact that it refers to property and does not distinguish between residential property and business property. That concerned me greatly when I first looked at the new clause, as it would create huge concerns in the business community. In my constituency of Stevenage, we have some large business interests. GlaxoSmithKline has a huge operation employing 4,000 scientists in Stevenage—[Interruption.] Although the new clause mentions the “mansion tax”, it just states that it would be on “property”.

How would that property be valued? There seem to be two values in property at the moment: the value one thinks one’s property is worth and the value at which someone would buy it. There is always a big disparity between those values. Such a change would lead to a large revaluation exercise across the UK and my concern is that once we have that revaluation exercise, council tax revaluation will be a real problem across the country. A huge number of people will be very concerned about council tax increases if all their properties have been revalued. Council tax more than doubled under the previous Government and I am pleased to say that under this Government it has been frozen for the past three years—[Interruption.] I see the annunciator has just changed to show my name, although I will sit down in about one minute.

My other point is that the new clause also refers to a tax cut for low-income and middle-income earners, and I am proud that this Government have introduced a tax cut that will be worth more than £700 next year for those low earners on up to £10,000. I am sure that the Opposition would agree with the Government that the best way to introduce a tax cut is to have a tax rate of zero rather than the 10p tax rate on which my colleague the hon. Member for Bristol West (Stephen Williams) had a very robust exchange with Opposition Members.

I shall now sit down as you are gesturing for me to do so, Mr Hoyle.

[Sheila Gilmore]

The test of what is happening is whether the economy will be stimulated. That is the real test that we should keep under review. If we want collectively to stimulate the economy, the most direct way of doing that would be to fund socially rented houses. That would get people into jobs, who would then help to stimulate the rest of the local economy. I do not know whether an ideological aversion to that has brought about the proposals we have before us; perhaps it has, because all the affordable housing the Government seem to want to fund directly is not even affordable.

In this very week, when we are remembering the 1980s and the Prime Minister of that time, we are in grave danger of repeating what happened then. The Government chose to allow housing benefit to take the strain rather than investing directly in housing, which resulted in the problem that we now have a large housing benefit bill. The way this Government are going about even the affordable housing they say they will build, which will not of course truly be affordable, again runs the risk of increasing the housing benefit bill.

We are looking to stimulate the economy with something for which there will probably be no take-up, judging from experience, and it will not benefit the people we should really help. If we do not review this policy quickly, we could be going down a very dangerous road.

[Mark Lazarowicz]

As time is limited, I take this opportunity to pursue with the Minister some of the issues raised earlier by colleagues on the Opposition Benches about how the schemes will operate in Scotland and Wales—outside England. I hope the Minister can answer these questions.

Will the Minister confirm that the mortgage guarantee scheme will apply to Scotland, Wales and Northern Ireland as well as to England? If that is the case, will he indicate which Department will operate it for Scotland and the other devolved areas? If it is to be the Department for Communities and Local Government, I suggest that it would be more appropriate for the scheme to be operated by the Scottish Government or the relevant devolved Administrations.

Would it be possible for the Scottish Government and the other devolved Administrations to amend the scheme to take account of the objections raised, which will no doubt be shared by all of them, that it would benefit the buyers of second homes and people on relatively high incomes? In most parts of Scotland, Wales and Northern Ireland, prices of £600,000 are very much at the higher end of the housing market.

If someone in one of the devolved areas defaulted under the mortgage guarantee, would the cost be borne by the Treasury or the devolved Administration? I appreciate that these are technical questions but I am sure that, as the Minister has thought through the policy in great detail, he will be able to answer them.

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[Nigel Mills]

Am I right in thinking that the second sign of madness is to keep doing the same thing and expecting a different result? I think that that applies to introducing more and more complexity and assuming that the outcome will eventually be different.

[Sheila Gilmore]

Surely the problem with this line of argument is that it does not establish what is cause and what is effect. The assumption seems to be that the fault lies with the fact that tax is too complicated and that there is too much of it, which somehow encourages people to avoid it. Perhaps a complicated tax system, and many of the regulations that exist, have been made necessary by the very fact that people try to avoid tax.

[Nigel Mills]

The hon. Lady is right. I have not sought to defend those who peddle tax avoidance schemes. It is probably human nature for us all to try to minimise our liabilities. I personally think that we should try to adjust our tax regimes so that they get much closer to taxing the real profit that is declared, rather than allowing a collection of reliefs, allowances, incentives and so forth to provide scope for manipulation of the various circumstances in which people find themselves. However, I accept that people would still try to get round the simplest tax code in the world, and that we would need provisions to stop them.

My amendments are designed to ensure that, if the Revenue uses this power, it uses it to deal with the largest, most outrageous schemes. We do not want it to go around threatening all the small taxpayers who are simply trying to go about their way of life. I was not convinced that the wording of the Bill, and certainly not the wording proposed by the right hon. Member for Oldham West and Royton, would meet those concerns. I tried to provide a de minimis: the tax at stake would have to be above a certain amount before the rules could be applied. That would provide certainty, ensuring that the vast majority of taxpayers would not be subject to some retrospective, random rewriting of the law.

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[Andrew Stunell]

Indeed, it is. There are many propositions made here that are highly desirable, and I would not be at all disappointed if the Front-Bench team agreed to accept amendment 7 and a number of others. The point I am making is that what we need across all political parties in the House, and beyond, is strong consensus in favour of not only continuing our achievement of the aid target, but ensuring that we assist developing nations by getting our tax affairs straight and helping them to do likewise.

[Sheila Gilmore]

The right hon. Gentleman correctly says that we need to keep up our efforts on aid, but if the controlled foreign company rules have potentially lost £1 billion to developing countries, as Government Front Benchers appear to accept, that affects our ability to give aid. Would it not make sense to review whether that is correct, because it might ever be more?

[Andrew Stunell]

Indeed, and I will move on to that shortly. Based on all that has gone before, I think that the Minister will say that the Government have every intention of ensuring that those things happen and that the work being promoted by the IF campaign becomes mainstream in this House and the outcome we all wish to see. I support that campaign and its objectives and am keen for the Government to adopt them and be supportive as well. Indeed, my hon. Friend the Under-Secretary of State for International Development is sitting just in front of me on the Front Bench, and I know that she works very hard on those matters as well.

I do not think that the trinket presented to us in amendment 6 is the core of what we need. I challenge the Government to give an undertaking that the proposals in the Finance Bill will be moved on so that multinationals are required to reveal the tax avoidance schemes they are using in the developing world and developing countries are helped to collect more of the tax they are owed. I pay tribute to the work, which I think was initially promoted by the International Development Committee in the previous Parliament, and which I know this Government have taken up with some enthusiasm, of supporting developing countries to create effective tax systems of their own. I know that the work that has been done in Zambia is seen as a template for other countries around the world. I encourage the Government to move forward in that direction.

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[Kelvin Hopkins]

My hon. Friend is absolutely right. Of course, people are now losing their jobs in all areas of the public services. The public services are suffering great stress and the people working in them are being demoralised, and I think that goes even for the senior civil service—I know that certain people at the end of the Chamber would possibly agree with me in that respect.

I must say that the Treasury’s attitude over some decades has been so lax that one has to suspect that it really believes that allowing all the corporates and millionaires to have their money will somehow trickle down and help the economy. That is the sort of economic nonsense that has got us into the mess we are in at the moment. What we should be doing is collecting the taxes and spending in the areas where it is needed.

[Sheila Gilmore]

It has also been argued that despite the harm done to developing countries by the controlled foreign company rules, their application would bring more companies into this country and the wealth would trickle down to the rest of us.

[Kelvin Hopkins]

Those are feeble arguments put by people who might have vested interests.

It was interesting to hear the hon. Member for Redcar (Ian Swales), who seems to know a lot about these matters, saying the other day, “What about a few prison sentences for people who fiddle their taxes?” That would concentrate a few minds, and I think that is what we should do, as I think it is criminal for people to rip off the public purse as they do to the detriment of us all. The great majority of my constituents, of course, are working-class people who have to pay their taxes through PAYE—they cannot escape, avoid or evade—so I feel angry on their behalf as well.

It is a matter of political will. If we had the will, we could do these things. We would not need to invent schemes that seem designed to fail. If they were not designed to fail, I am sure the Minister would not be frightened of the amendment proposed by my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) to have a review in two years’ time. If the scheme were to be successful, the review would show its success; if we collected half of what had been evaded through the Government’s proposed scheme—£16.5 billion or whatever, amounting to 4p on the standard rate of income tax—the review would approve of what the Government had done. If the Government refuse to accept the amendment, they are obviously nervous that their scheme will not be a success. I suspect that they have brought something up that is designed to fail and will help the wealthy and the corporates to continue to avoid and evade taxes.

I do not believe that the Government are genuinely concerned about these matters. If they were, they would take effective action, ensure that it happened through stronger laws and possibly prison sentences for those who break these laws, and collect billions more in taxes. The sort of figures described by Richard Murphy and others are enormous—equivalent to each year’s deficit, about which the Government say they are so concerned. They are cutting spending to solve their deficit problems, but the real problem is not spending—it is that their revenue is too low because they are failing to collect all the due taxes. If the Government were successful in enforcing tax laws so that all due taxes were paid, there would not even be a deficit. They would have enough money to cover it. Let us see the Government take effective action: only then will I take them seriously. Until that time, I shall continue to say what I have said this evening.

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[Sheila Gilmore]

Let me touch on a couple of points, partly arising from last year’s debate on the Finance Bill—particularly about the controlled foreign companies regulations and what happened to them. We are often accused of tabling similar amendments to those tabled before, and we did indeed table amendments asking for a review of the impact of those regulations, particularly on developing countries. We were told that the amendments were not needed because the Government would, of course, constantly review these matters. We were told that asking for a specific review would somehow put extra onus on civil servants and that we should simply have trust in what would happen.

On that basis, I ask the Minister—perhaps in his reply now or at some later time—to tell us whether that review has indeed been carried out and what information is already available to assure us that the reassurances given previously have been brought into play. Otherwise, we are simply being told that we are asking for unnecessary reviews and that all will be done. Let us see if it is done, as many organisations were very concerned about what the impact of those changes would be.

It would also be helpful—we asked about this last year—to know whether many companies have returned to this country and made their headquarters here, as we were promised. We were told that that would produce more income for our Government. We need to know not just what the impact has been on developing countries, but how many companies have relocated, how much tax they have paid, and how many jobs they have created.

I see that you are looking at the clock and at me, Mr Crausby, so, on that note, I shall sit down.

Finance (No. 2) Bill

Sheila Gilmore Excerpts

Monday 15th April 2013 Commons Chamber

[Mr Gauke]

One has to look at the tax system as a whole, including capital gains tax, and I am not sure that I necessarily agree with my right hon. Friend’s interpretation of the period as a whole in relation to CGT revenues. In the year in question, there was certainly a reduction in deals done and transactions completed after the increase in the rate of CGT, but subsequent CGT revenues have picked up. We also have to bear in mind the relationship between CGT and income tax. I agree strongly with my right hon. Friend that it is important to have a competitive tax system that encourages enterprise and growth—indeed, I will turn to that now.

One of the most important questions facing the country is this: at a time when much of the world is still coming to terms with the consequences of the financial crash, when many of our export markets face significant difficulties, and when international competition is becoming greater, and, because of the recklessness of the previous Government, we cannot afford to borrow more, how do we put in place the conditions for growth? In the specific context of the Bill, how do we ensure that we have a tax system that helps us to achieve growth and encourages businesses to locate and invest in the United Kingdom? As the Chancellor has made clear, our objective is to have the most competitive tax system in the G20.

[Sheila Gilmore (Edinburgh East) (Lab)]

How can the Minister square the statement he has just made with the fact that all his predictions for borrowing are on the way up? Three years ago, we were assured that the Government’s policies would resolve this problem. If we are borrowing, would it not be better to borrow to invest, rather than to deal with failed economic policy?

[Mr Gauke]

Borrowing is down by a third from the position it was in when we came into office—that is the reality of the situation. We have to remember that if we had the policies advocated by the previous Government, borrowing in this Parliament would be £200 billion higher than it is going to be.

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[Mr Gauke]

I do not recognise those numbers. We have taken steps to try to get the country out of a significant fiscal hole. We have taken steps to reduce the amount of tax that millions of households will pay as a consequence of the increase in personal allowance. We have reduced income tax for 25 million people. That is something we are proud of, and something that we did not see when the Opposition were in power.

[Sheila Gilmore]

What the Minister fails to appreciate, in saying that he does not recognise those figures, is the fact that the increase in the tax threshold has been wiped out for many families, particularly those with children, by the changes in tax credits. At the same time, the cost of increasing the tax threshold is £9 billion, so it is not the best way of targeting help on the low paid.

[Mr Gauke]

I am grateful to the hon. Lady for putting on the record her opposition to the increase in the personal allowance. I am sure that is something that will be read with interest by her constituents.

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[Mark Field]

The hon. Gentleman makes a good case, I suppose, but we all know that the reality was that the short-term boost of VAT reduction and the early batches of QE was unsustainable. They were a pre-election boomlet, but, as I have said, the entire political class became rather complacent and thought, somehow, that the worst was behind us after the crash of 2008. We now know that that simply was not the case.

In 2010 the entire political class should have looked the electorate in the eye and been clear about the magnitude of the task that lay and, I am afraid, still lies ahead to rectify the public finances, but we are where we are. I personally take the view that talk of radical tax cuts from some on the Government Benches is perhaps unrealistic. I fear, for a start, that confidence is so low that until it is restored almost any tax give-aways are more likely to be squirreled away by individuals and companies than pumped back into the economy.

I also think we would run the serious risk of the markets losing faith if we were to play even faster and looser with public borrowing. In spite of the recent loss of our triple A rating from Moody’s, the Chancellor’s great achievement—it should not be underestimated—is that we are still able to borrow in international markets at such low interest rates. The lesson of both 1931 and 1976 is that once the markets turn, all is lost.

My main hope for the Budget and this Bill was that the coalition would take some of the longer-term decisions that the British economy requires. I am pleased that resource is being set aside for key, shovel-ready infrastructure projects. I had hoped that cash would be accompanied by decisions and leadership on aviation and energy infrastructure. We cannot let these sensitive political footballs be kicked once again into the next Parliament. I think that the UK, as a trading nation, requires certainty on those issues, not an endless parade of commissions and reviews.

I am pleased, however, that the Treasury has helped out small business. The march towards ever lower rates of corporation tax, as the Exchequer Secretary has pointed out, is highly welcome, as are assurances that small firms will be given a chance to bid for Government contracts under the small business research initiative.

The extent of capital gains tax relief to attract start-up capital for new limited companies is also very good news. Best of all, however, is the knocking off of the first £2,000 of employer national insurance contributions for small and micro-sized businesses. That will, I hope, begin to chip away at the worryingly high levels of youth unemployment by lifting some of the obvious disincentives to taking on new staff.

I am afraid that I am a little less sanguine about the Chancellor’s flagship Help to Buy plan. I appreciate its raw politics, underpinned as it is by a desire to help struggling younger people on to the housing ladder, many of whom are paying much more in rent than they would as part of a mortgage, if only they had a deposit. Nevertheless, I ask the Treasury to give considerable thought in the consultation period to what we are trying to achieve. Let us look carefully at supply rather than just finance, since I suspect that the latter will simply help keep prices out of the reach of the very people whom we wish to serve, as the hon. Member for Edmonton (Mr Love) has said. I do not wish the taxpayer to be on the hook for the consequences of a reinflated property bubble. Let us not forget the US experience that lay at the heart of the financial crisis.

I, like many other Members, am also disappointed that the Office for Budget Responsibility’s predictions for our economy as recently as the autumn statement on 10 December 2012 were proved, only 14 weeks later in the March Budget, to have been so considerably off beam. Few doubt that economic forecasting is an especially dismal science. However, the OBR’s intervention in December proved essential in buying the Chancellor crucial breathing space at a time when many commentators had assumed that we were about to flunk our plan to reduce the deficit year on year. To that extent I accept what the hon. Member for Nottingham East has said. Many even-handed people will regard that as a sleight of hand, but, more importantly, the scene was set for cynicism and deep disappointment when aggregate borrowing for the next four years was projected at some £49 billion higher only 14 weeks after the autumn statement.

It is worth saying, however, that that is part of a tradition during all my 12 years in this House. Every single Budget between 2001 and 2007 forecast that public finances would move back into surplus in about three or four years’ time. Instead, as the hon. Gentleman will remember, debt and the annual deficit rose inexorably while the Treasury conjured the illusion of fiscal stability. Similarly, at every autumn statement since June 2010, the OBR has, I fear, been forced to downgrade growth out-turns while continuing to hold somewhat optimistically to the notion that the public finances will be transformed by robust growth in two years’ time.

The establishment of the OBR was meant to herald a fresh era of forecasting credibility, but it now seems all too reminiscent of the previous Administration’s discredited financial projection. I think that observers are beginning to wonder whether we should have any regard for the OBR’s latest set of predictions or, indeed, take with anything more than a pinch of salt assurances that recovery is only around the corner.

[Sheila Gilmore]

Will the hon. Gentleman clarify his position? Is he suggesting that the OBR—which was hailed as a great independent organisation that would keep us right—has somehow gone wrong, rather than that it is his Government’s policies that have lead the OBR constantly to downgrade its predictions?

[Mark Field]

I am expressing the concern that the OBR was somehow seen as a panacea of independence in a lot of its projections when it has got things uniformly wrong almost every time. As I have said, that is partly because of international events that one cannot exclude. We live in a global economy and are a great global trading nation. The problem is that we have not been able to get the export-led growth that we all want and as a result there has been constant downgrading.

There was some good news in the Budget, as the Exchequer Secretary has said, about the co-operation between the Treasury and our Crown dependencies of Jersey, Guernsey and the Isle of Man on new financial disclosure agreements. As an adviser to the law firm Cains, I am pleased that our Crown dependencies have led the way with the FATCA—Foreign Account Tax Compliance Act—arrangements. That is to the Treasury’s credit. We saw at ECOFIN only last weekend that we are also looking to bring on board the Cayman Islands and the British Virgin Islands to ensure that there is more transparency. It is very easy to berate a lot of the international financial centres—many of which have long-standing historical links with not just the City of London, but the UK—but the importance of the liquidity that they bring into play should not be underestimated. It made a big difference in the immediate aftermath of the crash of September 2008 and might yet do so at some point in the future.

I am a little more concerned that the Treasury is not making entirely clear what is considered abuse and avoidance when it comes to tax arrangements. The earlier exchange between the hon. Member for Burnley and the Exchequer Secretary brought that to mind. [Interruption.] I apologise: it was the hon. Member for Redcar (Ian Swales)—my view of the hon. Gentleman means that it was an all too easy mistake to make. Without clarity about what amounts to avoidance as opposed to abuse, we risk throwing a veil of uncertainty over the UK’s business environment.

I speak to firms large and small in my own constituency. I say to those on the Treasury Bench that, suddenly, for the first time ever, global corporations are beginning to consider the almost unthinkable prospect of a certain amount of political risk being attached to the UK. Foreign direct investors would be right to feel aggrieved if legitimate tax-planning activities suddenly were deemed by Her Majesty’s Revenue and Customs to be aggressive tax avoidance, with punitive fines and damaging public relations to follow.

On that note, I should like to raise a specific instance of retrospection that is causing financial hardship among some of my constituents. Section 58 of the Finance Act 2008, brought in by the previous Government, was designed to close down certain tax-planning arrangements with retrospective effect. I am afraid that it has left some residents in my constituency with demands for huge amounts of back tax, which in some extreme cases is leading to threats of bankruptcy.

The Exchequer Secretary is aware of those concerns, because he has responded to my correspondence on them. Unfortunately, however, some of those affected by section 58 are not convinced that he is properly listening to the argument. One constituent advised:

“The tax arrangements I used were not only legitimate and openly declared, but expressly considered, debated and approved by parliament back in 1987. This means that according to the HMRC’s declaration, I was not engaged in aggressive and abusive tax avoidance but simple, legitimate tax planning.”

Although I accept that HMRC wants to bring more money in and to close down aggressive tax avoidance schemes, if it has known that arrangements or schemes have been in place for 25 years and has made no move to close them down, it cannot be right for retrospective activity to take place. My constituents therefore request the repeal of section 58.

I would be grateful if the Treasury gave serious consideration not only to the arguments of the campaigners, but to the message that retrospective legislation sends to business people who are trying to act in a lawful and transparent way in planning their taxes. The Exchequer Secretary rightly pointed out that we should be proud of being a country that is open for business, but we must ensure that what we do and what we say in that regard coincide.

To conclude, if I have one message for the Treasury as we consider the Finance Bill in the days ahead, it is to forget about the pressure for quick fixes and transient boosts, and instead to focus relentlessly on delivery and longer-term measures to make the UK an ever more tempting prospect as a place in which to do business. If the UK economy is not to get substantial growth before the 2015 election, let the coalition at least get some credibility for doing the right thing for the nation and giving our people a genuine sense of hope for the future.

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[David Rutley]

In 2014. [Interruption.] We have to take a stepped approach to rectify the changes Labour put through. The allowance is important and will be welcomed, and the other measures we are taking on the supply side, such as the reduction in corporation tax, will all help to create a platform for economic growth.

[Sheila Gilmore]

Is the hon. Gentleman aware that the enterprise allowance will be partly funded by the substantial increase in national insurance contributions that employers and employees will pay as a result of the flat-rate pension? That has been brought forward by a year—even though the Select Committee was told that it would be logistically difficult—to produce that extra income. In fact, the Government are just moving things around and a lot of people will find themselves a lot worse off when those higher national insurance contributions kick in.

[David Rutley]

It is sad to see such gloomy faces on the Opposition side of the Chamber. I accused the shadow Minister of being a bit Eeyore-like and I think it is catching on the Opposition Benches. Labour Members should cheer up a little and look at the reaction to the Budget. The Federation of Small Businesses says that it

“asked for a budget for small businesses and this is what has been delivered. This Budget opens the door for small firms to grow and create jobs.”

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[Sheila Gilmore (Edinburgh East) (Lab)]

The hon. Member for Macclesfield (David Rutley), who is no longer in his place, will be rather disappointed, because I cannot share his view that we have the best of all possible worlds. Perhaps his name is really Dr Pangloss. I hear an awful lot of Panglossian politics in Scotland, where it takes the form of, “If we were only independent and we waved our magic independence wand, everything would be wonderful,” but to get it here is astonishing.

The other surreal aspect of today’s debate, which would astonish anyone listening who cannot see the Chamber, is that we have heard from a grand total of three Government Back Benchers prepared to speak up for their own Government’s Budget. They were not so shy about coming forward last week to recall what were to them the glory days of Lady Thatcher’s Government. They were all very keen to come down here especially to talk about it. Many of my constituents thought we should have talked about that today, and perhaps we should have, since Government Back Benchers clearly did not think it worth debating the Finance Bill. Much effort and money could probably have been saved.

I was not one of those who came last week, because I spent most of the recess talking to my constituents. If this were the Government’s first Budget, not their fourth, we would be better placed to believe the words they keep using. We were told in 2010 that this would work—that we had a terrible financial crisis and that we all had to tighten our belts and get through it together, but that it would be worth it. Just how long do we have to wait? These Budgets and these Budget debates and debates on the Finance Bill are turning into groundhog day. The Government say all the same things and, I have to admit, they will no doubt say that Opposition Members all say the same things, but that is because the debate has not moved on. On this, the Government’s fourth Budget, we are indeed saying the same things. Perhaps that is why Government Back Benchers did not feel it worth coming—because they know perfectly well that there is no point in saying the same things because the Government’s approach is not working.

The Government’s answer to many of the criticisms of their policies—particularly their policies to reduce tax credits and benefits—is that people can get around those cuts by working more hours. In fact, they even defend a lot of their measures by saying that they will put a rod into people’s backs and get them out there working those extra hours. The assumption seems to be not just that unemployment is, as they allege, a lifestyle choice, but that under-employment is apparently a lifestyle choice too and that, really, people have to get up and go out there, and everything will be fine.

My constituent Joe—one of the many people I talked to in the recent recess—is affected by the bedroom tax because he was housed by the council in a two-bedroom house. It was not his choice; that is where he was given a house. He went to his supermarket employer to ask whether it would increase the 15 hours a week he works in his job to help to pay the extra amount. His employer said no. That might have been partly because, at 15 hours a week at the minimum wage, he is nicely underneath the threshold for paying national insurance. Doubtless his employer prefers to have another part-time employee at that level. However, even if his employer offered him more hours, at whose expense would that be? Would it mean that another employee got fewer hours or, if Joe was given full-time work, that somebody else would not have a job at all? Unless the supermarket wants to employ people to stand around doing nothing, one has to presume that it has calibrated its work force according to the work that needs to be done. It is not a charity. His employer is not there to give him a few extra hours so that he can pay his bedroom tax. It needs only the workers it needs. It is therefore a myth to assume that people such as Joe just have to get out there and everything will be fine. That sums up exactly what is wrong with this Government’s economic policy. Austerity reduces demand. Indeed, it has reduced demand all over Europe, which is one reason why we are not coming out of this recession through exports—one of the promises made to us in 2010—because everybody is in the same boat.

As Joe’s current employer will not give him the extra hours, he could, I suppose, find out whether there is another job out there. Perhaps he should see who else is hiring for his type of work in the city. I would stress that, compared with many other areas—such as that represented by my hon. Friend the Member for Glasgow North East (Mr Bain)—Edinburgh does not have high unemployment. In fact, the unemployment rate in my constituency is only 4.8%, which in a lot of people’s terms would be very low. I thought, “I’ll look at the Government’s great new innovation,” which is a website called Universal Jobmatch. I do not know whether any Member present has looked at Universal Jobmatch—I have, on several occasions—but I put in “shop assistant, Edinburgh area” to see what would come out the other end. If I had been Joe, things would have looked quite hopeful at first, because there appeared to be four pages of jobs. There were 25 on each page—I counted—so I thought, “Well that’s 100 jobs. That’s not bad.”

In fact, there turned out to be 76 job entries, because the last page had only one entry, so things were not quite as healthy as I thought, but when I looked, I saw that 57 of those 76 entries were for a firm offering jobs taking out catalogues and trying to sell things door to door—the archetypal job that people often have to take during a recession. In fact, we can read all about that from the 1930s, which is where we are again—it is not the 1980s; in fact, it is the 1930s. Most of those 57 entries were not even for jobs in Edinburgh, and in my view they were not proper jobs. Maybe Joe should see whether he can make the extra hours by selling whatever it is he would have to sell. It is absolutely extraordinary, however, that 57 of the 76 job vacancies advertised in the Edinburgh area—which, by the way, stretches to Fife and to Falkirk—were what most of us would probably describe as non-jobs. Of the others, only six were actually in the city. If Joe were to apply for a job just outside the city, he would have to take on board the fact that it would cost him money to get there, and that that might negate all or part of any extra income he might earn. So there were six jobs in retail in Edinburgh, a city in which, we are told, unemployment is really not too bad and we should not worry too much about the state of the economy. That is not a growing economy. It is not a healthy economy. It is, however, the reality for Joe and many others like him.

I also spoke yesterday to a constituent who clearly understood how economics should work. She told me that she and her husband had already lost £85 a month in tax credits; their income had gone down. Her husband is a self-employed taxi driver, and she told me that because people were pulling in their horns, spending less and having fewer nights out, he was getting less business. His earnings were dropping. He was out driving on Monday and Tuesday nights last week, for five or six hours each night, yet he took in only £55 a night, from which he would have to take off his costs. She reckoned that people were not spending because they did not have sufficient income, either because they had lost their jobs or because they were on shorter hours. That is what low demand means. It has a ripple effect through a local economy, and people like that taxi driver who are working and who want to earn more cannot do so. He cannot make people take his taxi if they do not want to.

[Ben Gummer (Ipswich) (Con)]

Will the hon. Lady give way?

[Sheila Gilmore]

I will not give way to the hon. Gentleman, because he has not been here through all these hours or taken part in this important debate.

We have heard a lot about extra jobs being created in the economy. The Economic Secretary, who I understand is going to respond to the debate, tweeted during the recess that job creation in the three years of this Government was running higher than during 10 years of the Labour Government by a factor of 2:1. Those figures just are not true. They seem to have been plucked from a work of fiction. People are being told over and over again that that is what is happening, yet their own personal experience is very different. Joe cannot get extra hours in his job, and if he looked on Universal Jobmatch, which is where people are told to go to find jobs, he would find only six jobs in his field in his city. The numbers simply do not add up.

We know that some of the so-called jobs are unpaid jobs, and that some are jobs that have been translated from the public sector to the private sector. The real world is one of no growth. All the commentators have clearly stated that this Budget will not create more growth, as has the Office for Budget Responsibility, the organisation that we were told would be totally independent and correct. A Conservative Member even said earlier that he no longer believed in it. Actually, it is telling the truth.

amendment of the law

Sheila Gilmore Excerpts

Monday 25th March 2013 Commons Chamber

[Danny Alexander]

Sit down; I am going to press on. The help to buy scheme, in its several manifestations, is designed to provide support.

We heard no apology whatsoever from Opposition Front Benchers for the mess they got this country into when in government. That is what we were looking for from the shadow Secretary of State for Local Government and the shadow Financial Secretary.

There were contributions from a number of distinguished members of the—

[Sheila Gilmore (Edinburgh East) (Lab)]

What does the Chief Secretary have to say about the Financial Times editorial which said that the Budget offered too little to boost growth now?

[Danny Alexander]

I disagree with it, for reasons that I will come to. I will now make some progress.

The right hon. Member for Edinburgh South West (Mr Darling) made a characteristically thoughtful contribution to the debate. He has made it clear, not least through his leadership of the Better Together campaign but also in response to an intervention, that the Scottish National party is not being open about the scale of the problems that an independent Scotland would face.

It was not the presence on the Opposition Front Bench of members of the former Government that was most noticed last week. Many Members will have sensed a presence in the Chamber, and looking up they would have seen Lord Mandelson, a former member of the previous Government, looking down. Afterwards, he gave his views on the Budget. He said in a speech the following night:

“I can't quite remember which member of the government it was who claimed to have abolished boom and bust. Well, we abolished boom…The whole argument about whether we’re cutting too far and too fast, it’s in the past. It is rather predictable party political stuff from over the despatch box, and it is a bit tiring to the public.”

The shadow Chancellor would do well to take note. Lord Mandelson then said the following, which is particularly significant in the context of an earlier intervention:

“I don’t think you can really take a chance, I think the markets, whose confidence in us to pay back what we borrow—that confidence is the determining factor. If that was seriously damaged by a lurch in policy I think that would be quite a risk which I would not blame the chancellor for refusing to take.”

That is sage advice from a former member of the previous Government, which Opposition Front Benchers would do well to take.

Last week’s Budget sent a message to hard-working families in each and every constituency up and down the country: if people want to get on in life, this Government will support them. If, in the short term, people want more money back in their pockets, we are taking measures to help them. They will pay less to fill up their car; they will pay less for a pint of beer; and, most importantly, if they earn less than £10,000 they will soon pay absolutely nothing in income tax.

If, in the near future, Mr Speaker, a constituent of yours wants to own their own home, this Government are making that a very real possibility through low-deposit mortgages, through mortgage guarantees and through doubling the affordable homes guarantee programme. For those who, in the distant future, do not want their children or grandchildren to still be paying off this generation’s debts, we are taking the steps to ensure that they will not. We are reducing the structural deficit, creating a tax landscape for economic growth and building an infrastructure for the UK to compete in the global race.

This evening, I want to talk about the steps this Government have taken to build a stronger economy and a fairer society. We are putting our faith in the private sector to help us build that stronger economy. We believe that the best way to do that is to create the most competitive tax regime in the G20. Further reducing the rate of corporation tax, which we announced in this Budget, will not only send a clear message that Britain is open for business, but will increase the return on those businesses’ investments and incentivise economic growth. Meanwhile, our £2,000 employment allowance, welcomed on both sides of the House, will be a real help for small and medium-sized businesses that want to expand and to employ more staff.

The Government know that if we want to see growth we cannot, as our predecessors did so catastrophically, look to one industry or one city. Several Opposition Members mentioned the importance of manufacturing industry, but when in government Labour became over-dependent on one square mile, thanks to the shadow Chancellor’s prawn cocktail offensive. We know that for a stronger, more balanced economy, we need growth across different sectors, and we need growth up and down the country. That is why we are taking forward the measures from the Heseltine review; it is why my right hon. Friends the Business Secretary and the Deputy Prime Minister unveiled our aerospace investment in Bristol before the Budget; it is why we are supporting the asset management sector, which is so important, particularly to the Scottish economy and to Edinburgh; and it is why, as well as supporting renewables, we are developing proposals so that communities can benefit from any shale gas discovered in their area. It is right that local communities see the benefits of natural resources in their locality.

We also need to make sure that our industrial base is broad, as we have seen only too clearly the dangers of over-reliance on one specific sector. That is why my right hon. Friend the Business Secretary is overseeing £1.8 billion of funding to support strategies in 11 key sectors, working to ensure that our economy makes the most of its potential in life sciences, construction and many other areas. While we build this stronger economy, we are also making sure that we build a fairer society. The Labour party likes to portray itself as the party of taking from the rich and giving to the poor, but everyone who was paying income tax at the l0p rate and was then paying income tax at double that rate will soon, thanks to this Government, be paying no income tax at all. That policy comes straight from the Liberal Democrat manifesto to the pockets of millions of hard-working families up and down the country, thanks to this coalition Government.

Of course we recognise that, despite these actions, times are still difficult for many families up and down the country. For that reason, we have taken the decision to cancel this September’s fuel duty increase, which was baked into the public finances by the Labour party. That cancellation has been welcomed across the House, but especially by Members with more rural constituencies such as mine.

I must also congratulate my hon. Friend the Member for Leeds North West (Greg Mulholland) on his tireless and passionate campaigning on beer duty. I know that he has some wonderful pubs and a very good beer shop in his constituency, I know how many excellent breweries we have up and down the country, and I know that our scrapping of the beer duty escalator will be a real boon both for the pub trade and for the brewing industry.

Budget Resolutions and Economic Situation

Sheila Gilmore Excerpts

Thursday 21st March 2013 Commons Chamber

[Vince Cable]

These are proper jobs, as defined by the Office for National Statistics. I honestly do not know why Opposition Members are trying to deny a genuine piece of good news that affects their constituents.

[Sheila Gilmore (Edinburgh East) (Lab)]

I thought that perhaps the Secretary of State would like to hear the answer to the question, which is actually in the report by the Office for Budget Responsibility. Of jobs described as jobs created over the past year, 14% are unpaid work experience or work placements.

[Vince Cable]

I do not understand why the Opposition should be hostile to work experience. All our evidence suggests that people who enjoy work experience go on to stable employment. It is an extraordinary state of denial when we have a successful process of job creation that the Opposition do not want to acknowledge exists.

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[Vince Cable]

My hon. Friend is right, and the details of the Treasury’s proposals on that point are emerging quickly. For the first time in a lifetime, we are now getting serious challenger banks in the UK, such as Aldermore, Metro, Shawbrook and others, which are an important addition. I hope that the Co-op, the Nationwide and other mutuals that are trying to get into this market will also contribute.

[Sheila Gilmore]

Is not the real problem the collapse in demand in the economy, partly caused by the stripping out of the public sector, why people are not borrowing, why banks are not lending and why companies are sitting on big assets that they are not spending?

[Vince Cable]

There is a demand in the economy. When the Government come forward with proposals to stimulate demand, as they did in the housing sector, the Opposition jump up and criticise them.

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[John Howell (Henley) (Con)]

One is tempted to start with the unemployment figure in one’s constituency—it is down by 25% since April 2010—but I wish to speak about housing. It is appropriate to raise that issue today because our reforms are as much about the supply of housing as about the demand for it and about the importance of that sector and of the construction sector as a whole.

The Localism Act 2011 turned us into a nation of planners. Neighbourhood plans are steaming ahead, and the reform of the planning system has ended one of the biggest blocks to development and taken away a large amount of red tape. I understand that the proportion of planning applications approved is at a 10-year high. As for local plans, 70% of councils now have something on paper. However, there is still much more to do to turn this nation of planners into a nation of builders. I was interested to read paragraph 1.115 in the Red Book, which said that yet more reforms to the planning system were proposed. We are to have reduced planning guidance, which will come forward in line with Lord Taylor’s recommendations, and

“pro-growth planning policies and delivery arrangements”

for local areas as part of local growth deals.

The importance of the supply side can be seen in a number of areas. The first such area is affordable housing, which is an important element for this Government and always has been. We have recently issued a prospectus to support affordable homes delivered through the guarantee programme, so I was pleased that an additional £225 million had been put into the Budget to support a further 15,000 affordable homes, which will be built by 2015.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[John Howell]

No, I am not giving way. Those 15,000 homes will be new build homes. As for the build-to-rent sector, the Budget provides £1 billion to support the development of more homes—that is an awful lot of homes to be built. We also need certainty on social rents, which is left to the spending round in the Budget book. On the right to buy, a great Conservative measure, we are increasing the London cap to £100,000 and reducing the qualifying period to three years. Overall, this Budget introduces billions of pounds of financial support to tackle both the long-term housing market problems—the problems with the sector—and the problems faced by people wanting to get on to the housing ladder.

The Chancellor mentioned two schemes in that latter regard, the first of which is the “help to buy: equity loan” scheme. It applies to new builds only, and someone will need a minimum 5% deposit to qualify. The scheme will expand the existing FirstBuy scheme and is available to everyone; the Government will lend up to 20% of the value of the property through an equity loan. That provides extremely important assistance to first-time buyers and to those wanting to acquire a new build as part of their development. The second scheme is the mortgage guarantee scheme, under the same arrangement, where the intention is clearly not to provide a subsidy for second homes—the intention is to have a consultation to ensure that it precisely does not give subsidies to second homes.

All these measures illustrate the main point: the Government have understood that the link between the supply of mortgages and the supply of houses is an intimate one, and that these things cannot be tackled separately. They need to be looked at in the round and together.

We hope that by tackling the problem of access to mortgages we will help to stimulate the economy. That is certainly what the Federation of Small Businesses has suggested. It has said:

“The Help to Buy scheme is a bold move from the Chancellor to boost the industry and to get people onto the housing ladder.”

It continued:

“In addition the measure to build 15,000 new homes will give the sector a welcome boost.”

The Home Builders Federation has said:

“Building the homes the country desperately needs can be a key driver of economic activity. Government must be praised for its attempts to stimulate activity”.

I agree absolutely with that. A very bold attempt is being made to stimulate activity, both on the development of housing and on access to that housing.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

This Budget comes at an unprecedented moment in our economic history, when families and businesses are looking to the Government for a change of direction and bold action to kick-start our flatlining economy. It is a time for urgency, as after three years of this Chancellor the economy is still 3% smaller than it was five years ago. However, all we got was more of the same. Unemployment in Feltham and Heston has risen by nearly l0% in the past six months; the number of young people out of work is at its highest level since March last year. During the Budget debate last year, I spoke of how there were six people chasing every job in Feltham and Heston. A year later, I am deeply concerned and saddened that I am saying the same thing again. There has been no change from this Government. This is the third successive year of less than 1% growth and the Budget is a gamble, not a plan.

Some measures are welcome. Local businesses will welcome the fuel duty freeze as well as measures to help them take on extra workers, for which Labour has been calling for some time. This is a jam tomorrow Budget, however, not one that takes action now. As John Longworth, director general of the British Chambers of Commerce commented yesterday, many of the Chancellor’s measures might come too late. Britain needs urgency, scale and delivery today. In the last quarter, net lending to businesses fell by £4.5 billion, and in the past two years, under this Chancellor, it has fallen by £28.1 billion. The reality behind those figures is that thousands of entrepreneurs and small businesses—our country’s wealth creators—are unable to access the finance they need to grow and to take on new employees. The Budget shows no signs of changing that. As the female entrepreneur Laura Tenison said on “Newsnight” last night, “I am trying to create jobs, but the Government isn’t helping.”

One nation Labour is the party for small business and enterprise. We had a regional development agenda and a legacy of which we could be proud which was dismantled by this Government and replaced with confusion. The Chancellor said yesterday that the Budget confronts our problems head on. The problem is that his judgment is the problem. A Treasury team of five men and no women has produced a Budget that did not even mention women and business. Research shows that if we had the same levels of female entrepreneurship as the US, £42 billion would be added to the economy. With more than 1 million women out of work across the UK, the Budget missed an opportunity to support female entrepreneurship. I should not have held my breath. The Government’s previous three Budgets have shown policies that have hit women the hardest. Women are paying three times as much to bring the deficit down—decisions that were made by a Cabinet with three times more men than women.

Hundreds of families in Hounslow have recently called on the Government to help mums, not millionaires. The Chancellor has ignored those calls and will go ahead with a £180 tax on new mums on the same day as millionaires will get a £100,000 tax cut. The House of Commons Library has also shown that low-paid new mums are set to lose £1,300 by the end of the first year of a child’s life, through the cuts to pregnancy support and tax credits and real-term cuts to maternity pay.

The record on housing is no better. Affordable home statistics in London have fallen off a cliff. Figures published by the Greater London authority show that 425 affordable homes were started in the first six months of the current financial year, compared with 4,659 in the previous year and more than 18,000 in 2010-11.

[Sheila Gilmore]

Does my hon. Friend agree—this is the point that I would have made to the hon. Member for Henley (John Howell), by the way—that it is a misnomer to call such homes affordable when the rents will be up to 80% of market rent? The subsidy on each of the 15,000 houses that were referred to will be £15,000, which is why the rents have to be so high. The houses will not be affordable and, what is more, they will put up the housing benefit bill.

[Seema Malhotra]

My hon. Friend makes her point extremely well. The £225 million proposed in the Budget to support “affordable” homes building is a fraction of the £4 billion that Labour would have invested.

The Government proposed change but this is more of the same. The policies of this Government have failed on jobs, on growth, on the deficit and in the lives of ordinary people. The Budget will do nothing for the 13,000 on the waiting list for a home in my constituency.

--- Later in debate ---

[Barbara Keeley (Worsley and Eccles South) (Lab)]

People in my constituency must have hoped that the Budget could provide some light at the end of the tunnel created by austerity and cuts, but they will have been disappointed. Thousands of them are being hit this year by the coalition Government’s fiscal and welfare reform measures, to be implemented after 1 April. After so many Government U-turns there could have been action in the Budget to soften the blow of these changes. The Chancellor could have done that, instead of the tax cut for millionaires he is going ahead with.

Manchester and Salford are cities hardest hit by the bedroom tax. More than 2,600 families in my constituency will be hit by that policy, and many will have to pay between £500 and £900 extra to continue to rent their homes. If they cannot pay, they are expected to move, but the catch is that there are very few smaller properties available for those trying to move. City West housing trust told me that some 460 families have asked to downsize. However, it expects to have re-housed only 43 families by April, and 260 more in 2013-14. The trust believes that some 80 households might find a mutual exchange. So, the total number of households that can be helped to move is less than 400, leaving more than 2,000 to find between £500 and £900 extra in rent. It is estimated that the bedroom tax will cost our local economy £1.9 million in my constituency and almost twice that in Salford, because tenants will have so much less to spend.

This year, pensioners in my constituency lost more than £80 because the personal allowance was frozen, and people who turn 65 this year will lose much more—£320—owing to the change in age-related allowances. Parents in my constituency have lost out on child benefit. Constituents who lost this previously universal benefit felt deep resentment at that. A survey carried out by the Child Poverty Action Group found that child benefit is overwhelmingly spent on clothes, books, education and food—so that is a further loss to our local economy. The hon. Member for Mid Norfolk (George Freeman) spoke about serious commentators. The Child Poverty Action Group did not welcome yesterday’s Budget, for obvious reasons.

Unemployment rose yesterday in my constituency— 3,477 people are now unemployed, an increase on the previous month’s figure. As a result of the Government’s failure on growth and jobs, borrowing is set to be billions higher. To pay for this failure, the Chancellor is taking billions from working-age benefits and tax credits by uprating them, as we know, by only 1% over the next three years, a real-terms cut.

[Sheila Gilmore]

One thing that has not been discussed much is that, on top of that 1% cut, the Government appear to want to cap the type of expenditure that has always been demand-led. That will presumably require further cuts to benefits; otherwise, it will not happen.

[Barbara Keeley]

It is frightening both in extent and in scale. In Worsley and Eccles South, 7,500 people are in work and receiving tax credits. They are the ones who will lose out over the next three years. Most of the savings the Government are making are not from out-of-work benefits, as we have discussed in previous debates, but from tax credits, maternity allowance, maternity pay, sick pay and housing benefit, all of which are claimed by working people—the strivers whom David Cameron promised to stand up for and who are now being hit by Government cuts.

As my right hon. Friend the shadow Chancellor said earlier, the 1% benefits uprating, along with all the other changes that keep being trumpeted, such as the tax allowances, will mean that a one-earner family on £20,000 with two children will lose £380 a year. A family on that level of income is also likely to be hit further by the bedroom tax and the cut to council tax benefit. Indeed, 20,000 households in Salford will be affected by the 10% cut to council tax benefits that the Government are leaving it to the city council to implement.

On new announcements, it is disappointing for families with children that the Government are pledging to help with child care costs in a scheme due to start in autumn 2015. Families on middle and low incomes have already lost up to £1,500 through earlier Government cuts to child care support. They need help now, not in two and a half years’ time.

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

Last Thursday when I was going home on the train I read in the Evening Standard an article pointing out that our debates on this Budget, the previous Budget and the ones before that are not just a reprise of each other, but a reprise of the 1930s. The argument that the way to cure the country’s economic problems is to cut, cut, cut, took place in the 1930s and was proved wrong, yet here we are again. If MPs from that time were in the Chamber today as ghosts, they would think that they were still alive and taking part in the debate.

That has not all happened by accident, and the Government are following an ideological path. They told us that the public sector is a drag on the economy and that if we did not cut it back the private sector would never spring into growth. In fact, the public sector is a huge customer of the private sector, both institutionally, from the construction works it undertakes right down to the stationery it buys, and individually, because a public sector worker is a private sector consumer. Individual workers contribute to their local economies by buying and furnishing their homes, buying new bikes and cars and spending on all sorts of other consumer durables. Cutting all that directly affects the private sector, which is exactly what we have seen for the past three years.

[Andrew Gwynne]

Is it not an absolute truth that in 2010 all the economic indicators, including consumer confidence, were heading in the right direction, yet almost immediately at the point that the Government turned off the taps and brought in their austerity Budget, consumer confidence plummeted?

[Sheila Gilmore]

As a result of the stimulus provided by the previous Government, all those measurements were turning in the right direction at that time—[Interruption.] Perhaps the Minister who is laughing ought to look, as I did last weekend, at the OBR report on the June 2010 pre-Budget report. He might not be laughing quite so hard then. The Government fail to analyse the problem correctly, so it is not surprising that they do not arrive at the right decision.

On jobs, it is not surprising that the Chancellor did not want to dwell on unemployment and this week’s increase. All we hear about is the increased number in employment. For once, I will not dwell on the statistics—others have done so, and I mentioned them in an intervention, but I want to highlight what the jobs situation means in the real world.

Last Saturday, I was out knocking on doors in my constituency. Within half an hour, I had met two people who were good examples of what the jobs situation means for them. One man had a 15-hour a week job in a local supermarket. No doubt these flexible short-term jobs are quite useful for the employer in meeting peak demand, and, of course, a person working 15 hours for the minimum wage will be below the national insurance threshold, which is another advantage for the employer. He had asked for more hours because he will be hit by the bedroom tax, but he was told that extra hours were not available.

Even if the hours were available, whom would they be taken from? My constituent might be given more hours, but unless there is a need for extra hours to be done in that job, another employee will get fewer hours, or another person would not get a job. Counting low-hour part-time jobs—we should remember that some so-called full-time jobs involve low hours—and saying, “Aren’t they wonderful?” is to forget that we are talking about real people. What effect does that have on them? The man is working and wants to work. More work in future would be good for his well-being, but he remains in poverty, like so many others.

[Barbara Keeley]

My hon. Friend makes some excellent points. Does she agree that, although people want those jobs, taking them often means they are denied the chance of further training and other opportunities? They would rather stick in the jobs they have than take the risk of going for those opportunities.

[Sheila Gilmore]

I know from work by single parent organisations that that is a problem for single parents who want to re-skill so that they can get jobs that will help them to bring up their children.

In the situation I have described, the individual stays poor, and the economy stagnates. That is the reality of the so-called jobs miracle. It is time the Government got real about what is happening.

On the housing measures, if the Government want to help the housing crisis and stimulate the economy, the best way would be through direct investment, which could be done very quickly. There are lots of sites with planning permission that could be used to build affordable homes. To say that 15,000 additional so-called affordable homes will be built as a result of the Budget is so far away from helping the problem that I do not know where to begin. As I said in an intervention, those are not really affordable homes—homes at 80% of market value are not affordable to most people. If they become affordable for people on low incomes, the housing benefit bill will be ratcheted up, when the Government have told us for so long that they are trying to reduce it. One part of the Government is ensuring that many of my constituents suffer a substantial cut in their income from the bedroom tax to cut the housing benefit bill, but another part is busily putting the housing benefit bill up. The policy does not make sense. Last year, we were told that 100,000 people will benefit from the Help to Buy scheme. The reality is that only 1,5000 have benefited. It is not enough to talk about all those plans and say how wonderful they will be when none of them results in anything.

Frankly, an athlete who became slower after their trainer told them they had only to diet to get faster would sack the trainer. That is what we need to do.

Oral Answers to Questions

Sheila Gilmore Excerpts

Tuesday 12th March 2013 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

Is it not the truth that demand has been so sucked out of the economy by the Government’s policies that there just is not the growth? Telling us how competitive we are is living in cloud cuckoo land, given that even the Office for Budget Responsibility says that growth is going to be very slow, even in the coming year.

[Mr Osborne]

To get a lecture from the Labour party on demand! The economy shrank by 6% when the shadow Chancellor was in the Cabinet, and we are picking up the pieces of the mess he and his party left behind. One of those pieces was the deeply uncompetitive business tax system which meant that companies were moving their headquarters out of the United Kingdom. Companies are now moving into the UK because of the changes we have made.

Tax Fairness

Sheila Gilmore Excerpts

Tuesday 12th March 2013 Commons Chamber

[Mr Gauke]

I noticed that that very point was one that the hon. Member for Nottingham East seemed to struggling with. He seemed to suggest that there were ways in which the Opposition would address that. I am not sure whether that was included in the costings they have produced. There is an issue for the asset-rich, cash-poor which would need to be addressed in the design and would obviously have an impact on the costing.

[Sheila Gilmore (Edinburgh East) (Lab)]

Would the Minister suggest to people in those circumstances that they might want to take a lodger, just as it has been suggested to my 60-year-old constituent that the answer to the bedroom tax is to take a lodger?

[Mr Gauke]

I am not going to debate at length the spare-room subsidy, which is an area of public spending constraint that we need to engage in. There is a genuine issue in respect of the asset-rich, cash-poor that the hon. Member for Nottingham East appeared to recognise and which would have to be addressed.

The mansion tax would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected. We would have concerns that in Labour’s hands, the starting level for such a tax would not stay at £2 million for very long. What began as a mansion tax would soon become a homes tax. To coin a phrase, it would become a tax for the many, not for the few.

--- Later in debate ---

[Sheila Gilmore (Edinburgh East) (Lab)]

I am pleased to follow the hon. Member for Rochester and Strood (Mark Reckless) because much of this debate seems to have been spent in an argument between the two coalition partners about how they would define certain types of taxation, and the problem with the amendment is that it has to look two ways at once. The Liberal Democrats have been prepared to break rank on other issues, but this matter is clearly not one of those. Interestingly, it is often on crucial financial or welfare issues that they do not break ranks but keep voting with the Tory-dominated Government, which is regrettable.

These are issues of fairness. We have heard a lot from those on the Government Front Bench and the Liberal Democrats about the increase in the tax threshold, which they suggest is much better than anything else that could have happened—it is better than the 10p tax rate, so we should be satisfied with it. We must remember, however, that for many people that tax threshold was bought at the expense of big losses in things such as tax credits.

For many families, the net effect of such measures means not that they are better off but that they are worse off, and the Liberal Democrats in particular must face up to that. In order to get the tax threshold through —that was clearly part of the coalition agreement—the Liberal Democrats have had to accept some pretty unpalatable things that go with it and, on balance, a lot of low-income households are not particularly grateful for that. The increase in the threshold also has other consequences. It is an expensive way to help the low paid because of the way it goes to everyone, not just the low paid.

[Barry Gardiner (Brent North) (Lab)]

I am following my hon. Friend closely and she makes a powerful case. Does she agree that many of our constituents feel that the Liberal Democrats are not so much ameliorating the Conservative Government as facilitating it?

[Sheila Gilmore]

Indeed, and back in the beginning the decision to go into coalition with the Conservatives—rather than, for example, entering into a looser agreement —was to facilitate many of these measures. In crucial votes of the kind I have mentioned, the Liberal Democrats have not broken rank at all. We have heard a lot of warm words, particularly from the Deputy Prime Minister, about things such as the mansion tax, but when we get down to it, they turn out to be only warm words and not something that Liberal Democrat Members are prepared to stand up for in this House and within the coalition.

Fairness is a large part of what we must all be about. Over the past three years, the very poorest people, those on low earnings or those who, for example, are unable to work because of illness and disability, are bearing substantial contributions that we are told cannot be alleviated because our economic recovery will be put at risk. Over the past few weeks we have had heated debates about the bedroom tax. The issue has been raised on numerous occasions and we have been told time and again that it is essential to make those savings to reduce the deficit.

[Mel Stride]

Given the under-occupancy subsidy—after all, a tax is where one earns money and the state comes and takes it away, but that is not what we are dealing with—does the hon. Lady have no sympathy for the quarter of a million people living in overcrowded accommodation and the 2 million families on the housing waiting list who are desperate for bedrooms that can be freed up through this measure?

[Sheila Gilmore]

I have great sympathy for people who are overcrowded and for those on the housing waiting list. The majority of people waiting for housing in my city are looking for small houses, so that could also cause certain problems.

Fundamentally, however, this is not a housing issue. If we want to make the issue about housing, we should deal with it as a housing issue and look at ways of encouraging and facilitating moves for people who want them. That is not necessarily happening. People have asked me, “Well, if I did move who would help me pay for this move? Who will reimburse me for the fact that I put my own kitchen into this house? My landlord did not quite get around to it, so when I was working a few years ago I put in that new kitchen. Is somebody now going to reimburse me for that? Are they going to help me with the cost of moving my things? Are they going to help me with the cost of setting up in a new place? I don’t think so.” If a local authority—some do—decided that it wanted to encourage people to move once they had outgrown their homes, it could do so. It might have a cost, but it would have a benefit.

If every single person suffering from the bedroom tax was able to move—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Is this a bedroom tax on mansions? This is an Opposition day motion. I think the hon. Lady is actually holding it in her hands. Has she read it, and, if she has, could she perhaps stick to it?

[Sheila Gilmore]

The point I was going to make in relation to the matter that was, after all, raised in an intervention is that if everybody moved successfully and reshuffled, there would be no saving, and that is odd because a saving is wanted. It is in that context that people are saying, “What sort of fairness is it that imposes such a great burden of trying to effect economic recovery on those who are least well off? Could we look at other measures to show that we really are all in this together?” That is where the mansion tax comes in.

The mansion tax enables us, in part, to really feel—as a community and as a country—that people are bearing a fair share of the burden. We have heard a lot about tax avoidance and tax evasion. It worries me greatly that the justification given for removing the 50p rate of tax is that people are not paying it. Instead of looking at why people are not paying it, and whether anything could be done to ensure that it was paid, we again hear, “Actually, we’ll just take it away because they aren’t paying it.” That is not a good message to put out.

We have also had reference—in relation to the mansion tax, Mr Deputy Speaker—to not wanting to have such a competitive tax regime that we risk people fleeing our shores. Reference was made to the PricewaterhouseCoopers report about competitive tax rates. There is an interesting coda to that report from some of those who were surveyed. The question then becomes: will the increased competitiveness lead to increased investment in this country, because that is what is really important? Many of the tax people thought it was crucial to turn improved tax relief on capital expenditure into investment in this country, and that it should be the No. 1 priority for the UK. In 2010, the Chancellor abolished capital allowances for investment in his first year in office. Perhaps he would like to look at the whole report, and not just the parts that suit him.

An argument has been made—as it always is with regard to rates and council tax—about people who are asset-rich and income-poor. It is usually raised as a reason for not putting up council tax banding, for example. In the old days, it was used as a reason for not making changes to the rating system. Yes, we can all come up with examples of people who are in that position. Usually, the example is a widow who cannot afford to pay. However, we cannot design our entire system of taxation around that, and there are ways it can be mitigated, as there are with council tax. If someone is genuinely as income poor as has been suggested, they would—at least until the Government decided to change the rules on council tax benefit—have been eligible for assistance with their council tax. There are always ways to help such people.

Earlier, I made what to some people might have seemed an unfair comparison. We were being asked to think about the widow who might struggle with a mansion tax. The 60-year-old widow I referred to is being asked to pay £13 per week out of an income of £71 a week, and the answer is that she should take in a lodger. If we want to be fair to both groups, we have to treat them with equal compassion.

[Mr Charles Walker]

As the hon. Lady will know, property values vary across the United Kingdom. A £2 million house in London may be the equivalent of a £500,000 or £750,000 house in Edinburgh. For the sake of fairness, does she think that there should be an additional tax on properties worth more than £750,000, so that people really do feel that we are all in it together and that this proposed tax will not just be borne by London and the south-east?

[Sheila Gilmore]

I am not convinced by that argument. If we were to enter into that, we would have do so in ways that I suspect the hon. Gentleman would not find particularly palatable.

There is nothing inherently wrong in levying a mansion tax. All the arguments made about the 50p tax do not apply to the same extent, because buildings do not disappear and cannot be shuffled around. It is a way of generating income and bringing in more tax revenue so that we can do all the things we want with public services, or, as we suggest, enable low-paid earners to have a 10p tax rate. Just because a mistake was made previously does not mean that we should not again consider a 10p tax.

--- Later in debate ---

[Nic Dakin]

The hon. Gentleman might not have noticed, but this debate is focused on fair taxes. He is right to draw attention to other things, but you would bring me to order, Mr Deputy Speaker, if I were lured down that route.

[Sheila Gilmore]

Let me say quickly that changes to demographic factors such as age are important in this respect, and 42% of the welfare budget goes on older people and pensions.

[Nic Dakin]

I am afraid my hon. Friend is also luring me down a route that I would rather not go down, because I would not like to face your ire, Mr Deputy Speaker.

--- Later in debate ---

[Kelvin Hopkins (Luton North) (Lab)]

First, I apologise for arriving late for the debate. I had another commitment that was inescapable, but I want to make a contribution to this important discussion. I also congratulate the hon. Member for Eastleigh (Mike Thornton) on his election victory. I heard his maiden speech yesterday, and a very fine speech it was, too. Unfortunately, he left the Chamber—no doubt for a celebratory drink—before I had a chance to congratulate him, as it was my turn to speak. I remember that, on the day of the election, I was knocking on doors for the Labour party, as he would expect. We were delivering leaflets that said that it was a two-horse race. Sadly, Labour was not one of the two horses, but I was slightly comforted by the fact that the Conservative party was not one of them either.

Tax fairness is the subject of this debate, and I very much welcome the moves that our leadership is making in that direction. The decisions on the mansion tax and the 10p rate are important. They might be straws in the wind, but the wind is blowing in the right direction. The mansion tax is perhaps something of a slogan—an eye-catching, or thought-catching, idea—but I believe that property taxes are appropriate in a civilised society. Property has the advantage that it does not move, so we can always find it. As long as we can also find the owner, we can collect the taxes.

Property taxes, as with all taxes, have to be carefully designed. As the hon. Member for Broxbourne (Mr Walker) said, we have to be careful to ensure that such taxes are equitable. If there is inequity between regions, that should be looked at. The taxes have to be carefully designed to ensure that equity. Personally, I would like to go further and talk about a wealth tax. My party used to talk about that some years ago, and I would like to see a more general tax on wealth in order to do something about the grotesque inequalities in our society. Those inequalities have grown enormously during the time I have been active in politics. Had I been told when I was first active in my party in the late ’50s and early ’60s that we would be in this position now, I would not have believed it. We have moved in this direction, however, and it has been a retrograde step.

No doubt some hon. Members will have read a book entitled “The Spirit Level”, which identifies a strong correlation between income inequality and a whole range of social ills. I want to see a society that is much more equal in income terms, in order to reduce those social ills and because it is right in principle. It is interesting to note that that correlation applies in all societies, whatever the income levels. It does not just apply in rich societies or poor ones. In any society, income inequality correlates with greater social ills. I hope that when my party gets into office at the next election—that is when, not if—we will seriously address that question and try to make Britain a much more equal society again.

Tax has to be progressive. We have to tax the better-off, and we should tax the less well-off either very little or not at all. I have to say that I was disappointed in the previous Government. I was one of a small number of Labour Members—I think there were six of us—who voted against the abolition of the 10p rate, and I am delighted that our leadership has now chosen to reverse that decision and to put us back onside when it comes to looking after the less well-off. That decision is very welcome indeed.

Income tax is the most progressive form of tax. It is adjustable and, in the case of most people, it is collectable. Most of us are on PAYE, so there is no problem with collection. There is a problem, however, with collecting taxes from those who try to evade or avoid paying what is rightly due from them. We have heard from the tax justice movement, and from Richard Murphy in particular, an assessment that the tax gap is something like £120 billion. Some suggest that it could be even more than that. Even the Government accept that the figure is in the tens of billions. Small advances have been made in collecting that tax, but if were really to make inroads in that area, we would not need to look at changes in the tax rate because there would be so much more income to enable us to solve our problems.

[Sheila Gilmore]

We have heard a lot of the language around dealing with tax avoidance and with high-income earners. Does my hon. Friend not find it disappointing that, at almost the first opportunity to take action, the Chancellor went to Europe to argue against a cap on bonuses?

--- Later in debate ---

[Kelvin Hopkins]

He did indeed go to the IMF, but I think it has now been recognised that that was unnecessary. We did not need to kowtow to the IMF or to impose those strictures. In fact, remarkably, the economy survived quite well during that time, although a mistake was made at the end. I shall not go into that now, Mr Deputy Speaker, because you would call me to order if I did, but it was the reason why things went wrong in 1979. Nevertheless, we survived the 1970s, although the oil price rose by five times in a very short period, which affected the whole world including Britain.

At that time, I was working for the Trades Union Congress and then in the trade union movement. I was an economist, and was lobbying the Government. I was at the TUC General Council when the £6 pay policy was agreed to. That was an historic moment. I thought it amazing that the trade unions had agreed to a cap on pay increases for everyone, but the reason they agreed to it was that it was fair. Everyone would receive a £6 pay rise. For someone with a low income that was a big rise, while for someone with a high income it was not very much, but it was fair, and was seen to be fair across the board.

Other Members are too young to remember this, but in those days the top rate of tax was 83p in the pound, and there was also a 15% surcharge on unearned income. Some of those whose income was entirely unearned, perhaps in property, were paying a 98% rate on the top part of their income. I thought that was pretty fair, but of course we cannot go back to those days.

[Sheila Gilmore]

My hon. Friend has been revisiting the 1970s. A remarkable statistic is that in 1979, the inequality gap in this country was at its narrowest since the second world war. Perhaps, if we think that reducing inequality is a good thing, something was right at that time.

[Kelvin Hopkins]

Absolutely. I remember writing papers about the massive increase in inequality that occurred subsequently, during the 1980s, when there were big tax cuts for the rich along with rapidly rising unemployment. That resulted in the inequality for which we have not really been compensated since.

--- Later in debate ---

[Mr Foster]

As I said, this is the first time in three years that we have had any positive proposal from the Opposition in the Chamber. If the hon. Gentleman comes forward with further proposals to help deal with the economic mess that his Government left us, we will seriously consider them.

[Sheila Gilmore]

rose—

[Mr Foster]

No, I will not give way to the hon. Lady.

It is worth reminding ourselves that although we as Liberal Democrats accept that a mansion tax would be a further step in creating greater fairness, by being part of the coalition with our Conservative colleagues we have made huge strides towards building a fairer society and a stronger economy. I agree with the hon. Members for Edinburgh East (Sheila Gilmore) and for Scunthorpe (Nic Dakin), who said that creating fairness is vital. Our achievements in doing so are in marked contrast to those of the Labour Government.

Economic Policy

Sheila Gilmore Excerpts

Monday 25th February 2013 Commons Chamber

[Mr Osborne]

I have made it very clear that although the credit rating is an important benchmark, it is one of a number of benchmarks. We are tested every day out there in the market, and what we have not heard from the shadow Chancellor is any alternative. It is all very well criticising the current Government’s economic policy, but what is the Opposition’s alternative? They have to have a policy to attack a policy.

[Sheila Gilmore (Edinburgh East) (Lab)]

This time two years ago the Chancellor was telling us that he had already created half a million new jobs, most of which were probably the result of the previous Government’s economic stimulus—[Laughter.] Unless, of course, people think this was an instant response in six months. Perhaps it was, but that still leaves us with a much slower rate of growth of new jobs since that date. He may not be aware that the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban) admitted at the last Department for Work and Pensions questions that free jobs—where people were working without wages—were included in his totals. Is it not time he re-examined the reality of these so-called “employment figures”?

[Mr Osborne]

Frankly, the numbers the hon. Lady quotes are nonsense. The employment creation rate last year—perhaps we should give her some credit for saying last year—was the highest since 1989.

Infrastructure

Sheila Gilmore Excerpts

Tuesday 12th February 2013 Commons Chamber

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the right hon. Gentleman concede that during much of the Labour Government’s period in office a good deal of debt was repaid? That was one of the things that was done, and in my constituency people can point to new schools and new buildings, so there is something to be seen. Is that not the case in his constituency?

[Greg Clark]

The hon. Lady seems to be unaware of the fact that under the last Labour Government the national debt almost trebled. That is the legacy that they left and with which this Government are dealing. Over 13 years, they borrowed so much they left us with a deficit that was as big as that of Greece, and bigger than that of Spain, Portugal or Italy.

We would think that there would be something to show for all that money spent. We would think our roads, railways and power stations would be at least as good as those of Spain, Portugal and Italy. That, at least, would be a consolation prize: modern, up-to-date national infrastructure available to support British business and help us to generate the billions of pounds we need to pay off the deficit and reduce our debts.

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[Greg Clark]

There is a Government of the Welsh Assembly led by the hon. Gentleman’s party. I commend the example that we have put forward in this country. Our close working with each of the leaders of the eight cities has achieved very encouraging results to date. I dare say the hon. Gentleman can go back to Wales and commend that to his colleagues.

The way that investments can be financed has also been transformed for the better. Labour saddled future generations with PFI debts of £279 billion, of which less than £40 billion has been paid off, and which cost at least five times and often more than the original project cost of the underlying investment.

[Sheila Gilmore]

Will the Minister give way?

[Greg Clark]

I have given way to the hon. Lady.

Our programme of infrastructure guarantees has made available £40 billion to underpin important projects, of which £10 billion of investments have already been pre-qualified only months after the initiative was begun. This will unlock vital investment, such as the £1 billion extension to the Northern line in Battersea. On energy policy, our reforms are driving investment in new capacity, not only in generation, but in energy efficiency and extraction. Our energy industry is now alive again—a new start after years of neglect under Labour.

All Governments are stewards of the country that elects them. The test of their stewardship is whether they leave their country better equipped and better prepared to prosper in the future through having taken the long-term decisions on which major infrastructure investment depends. In two short years, Britain’s reputation for infrastructure has been transformed. Having plummeted down the international league table of countries rated by their infrastructure, we are now climbing it again. The rest of the world has seen this country shaking off the torpor of the past. After more than a decade of inaction, we are once more laying the foundations of the future.

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[Sheila Gilmore (Edinburgh East) (Lab)]

It is very important to realise that investment in infrastructure works in boosting the economy. I want to give an example from Scotland that is about investment in housing, and I will start, but not necessarily finish, by praising something that the current Scottish Government did. At the beginning of the UK Government’s term of office, they took a decision to bring forward capital spending in order to boost the economy. They put some of that spending into housing, particularly affordable housing. As a result, for a brief period, they were able to increase the proportion of spending on affordable housing.

[John Healey (Wentworth and Dearne) (Lab)]

In the spirit of generosity to other parties, will my hon. Friend also commend the coalition Government for introducing the borrowing guarantees and earmarking £10 billion for housing, classifying it categorically as infrastructure for the first time? To make her point, I should say that every £1 million of public money that goes into house building generates 11 jobs.

[Sheila Gilmore]

My right hon. Friend makes an important point. The spending in Scotland enabled the Scottish Government to announce that unemployment was not rising as fast as in the rest of the UK, and they took great pleasure in that. Sadly, the situation has not been maintained, and we are hearing less of how wonderful the Scottish Government are at dealing with unemployment; at present, the opposite is happening. I would argue that one of the reasons is that the investment in infrastructure, particularly in housing, has not been sustained. The figures are stark. In Scotland, there were 7,915 new affordable housing starts in 2009-10; in 2010-11, the figure fell slightly to 6,460; and in 2011-12, it fell to 3,405—a halving in less than two years.

There is a consequence for the construction industry, its employees and unemployment in Scotland. The Scottish Government showed that such investment worked, but they have not been able to sustain it. They would probably argue that that is solely because of what has been happening at the UK level—investment in housing and in capital has been falling. They would be right to some extent, although I would add that they are not particularly interested in showing that the situation can be overcome. I suggest two ways in which they could overcome it.

First, the Scottish Government could use the tax-raising powers given in 1999 as part of devolution. They have not chosen to use those, although I think people in Scotland would be prepared for them to be used if they thought that the money could be invested as it was previously. They have also put a stranglehold on local government by having a five-year council tax freeze, which has meant that local government cannot make the choice to say to its local population, “We desperately need more housing. We will put up council tax so that we can borrow”—that is perfectly possible—“and build that much-needed housing.”

So there are ways in which the Scottish Government could continue with policies that for a brief period showed that investment in infrastructure boosts the economy and employment. I urge them to go back to doing that, rather than allowing things to deteriorate so that they can always blame London; that, I am afraid, is what they tend to do.

Some of the discussion is fascinating. If someone had fallen asleep in 1997 and woken up watching this debate, they would have wondered which party was talking. Government Members want to argue, “The last Government didn’t do anything on infrastructure and when they did, it was all this horrible PFI.” I seem to recall that PFI was not a Labour Government invention, but was enthusiastically put forward by the preceding Conservative Government. I am interested to know when that conversion happened. We can get that sort of investment better, but my city is a lot better for some of the public-private partnerships that we put in place—the schools that were built and the investment that was taking place.

A lot of things seem to happen in Scotland first these days, which are then followed, not always for the better, here. In 2007 a Scottish Government of a nationalist persuasion took over, and in my city a Lib Dem-Scottish National party council took over. They both decided that they did not like public-private partnerships and so would instead come up with some magic way of creating these investments. As a result, not one new school was started in the five years of that Lib Dem-SNP administration—not one. Several were finished, and councillors were very pleased to go and open them and have their name put on the opening plaque, but those schools had been planned and funded through PPPs. We seem to have undergone a miraculous conversion at some point—I am not quite sure when—but we have not come up with anything that really works in its place.

I call in support of this argument none other than the Mayor of London, who is quoted in tonight’s edition of The Evening Standard as calling for a £1.3 billion investment in housing in London. Perhaps the Government would like to listen to a mayor of their own political persuasion.

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[The Economic Secretary to the Treasury (Sajid Javid)]

I am grateful for the opportunity to conclude this debate.

I have listened with great interest to the 11 Back-Bench contributions in the Chamber this afternoon. This is clearly an issue about which many Members feel strongly. It is also an issue that Members on both sides of the House seem to agree on in many ways. Both sides want to see a UK with world-class infrastructure and both sides recognise the importance of improved infrastructure for the nation’s economic future.

However, only one party ruined the UK economy after 13 years in government, hugely damaging the UK’s ability to invest in the very infrastructure that we all care about. It was the party that tabled the motion. That same party left the UK with the largest budget deficit in the G20. [Interruption.] Labour Members say that we should look forward. It is no surprise that they want the country to look forward, because they do not want us to remember their legacy, but the country must remember. They left a budget deficit higher than 11% of GDP. They borrowed £159 billion in their last year in government—£5,000 in each and every second of that final year.

Had the previous Government not messed up the regulation of the financial sector, they would not have had to carry out the biggest banking bail-out the world has ever seen, with £65 billion being put into RBS and Lloyds alone. Imagine how much new infrastructure that money could have been invested in. As if that was not bad enough, let us not forget the decision to sell off the nation’s gold reserves at record low prices. Had they not done that, the country would have been £10 billion richer. One thing that we did not hear from a single Labour Member this afternoon was an apology for the damage that they did to this country.

Despite that toxic legacy, this Government have restored economic confidence. We have slashed the record budget deficit by a quarter. We have restored economic credibility and opened Britain up for business again. That credibility has led to record low interest rates, with the Government’s 10-year funding costs having halved since 2010. Each of those steps has been crucial to creating an economic environment in which the Government can invest in infrastructure, and one in which investors feel their funds are secure.

[Sheila Gilmore]

Will the Minister explain to the House and the country why the OBR predictions at the time of the so-called emergency Budget and the comprehensive spending review have not happened, why growth has not happened, and why the deficit has not been reduced at the rate the Government originally promised?