Oral Answers to Questions
Sheila Gilmore Excerpts(11 years, 6 months ago)
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The Economic Secretary to the Treasury (Sajid Javid)
My hon. Friend is right to point out that pensioners are facing pressure because of low interest rates and longevity. The Government Actuary’s Department makes recommendations to the Government and we must take them seriously—we keep the matter constantly under review.
Sheila Gilmore (Edinburgh East) (Lab)
The Government make a great deal of creating 1 million private sector jobs—[Hon. Members: “Hear, hear!”] Wait, wait. Half of those jobs, according to their statements, were in place after eight months of their coming to office, meaning that in the following 22 months only another half a million jobs were created. That suggests that the rate of growth has slowed substantially as a result of the Chancellor’s policies.
Danny Alexander
Once again, Labour Members are on the search for bad news, but the hon. Lady has picked the wrong subject. More than 1 million private sector jobs have been created since the election. The most recent figures show that tens of thousands more jobs have been created in the private sector and the largest ever number of people in employment in this country. That should be welcomed by everyone in the House, including her.
Public Service Pensions Bill
Sheila Gilmore Excerpts(11 years, 7 months ago)
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Andrea Leadsom
The hon. Gentleman will recall that the Government made great efforts to ensure that the cliff edge affecting certain women born in a certain couple of years disappeared. He will also be pleased to note that the pensions of those with less than 10 years until retirement will not be affected by this measure, which provides the ring-fencing for those with not long to go until retirement age. I would have thought that he would welcome that—again, on the basis of fairness between those workers and the taxpayer.
Of course, two thirds of private sector workers are not members of a pension scheme. We have heard hon. Members from all parts of the House say that we do not want a race to the bottom. We are proud of our public sector pension provision, and nobody would wish to see it brought down to the abysmal level of private sector pensions. However, it would be pleasing if Opposition Front Benchers were to concede their part in the destruction of private sector pensions, which has made a significant contribution to putting us into this pitiful position; private sector pensions have been decimated by the actions of the previous Prime Minister.
An important point of fairness is involved in the fact that the taxpayer contributes three times more to a civil service employee’s pension than the average private sector employer pays in. The employer contribution rate to the civil service pension scheme is 19%, whereas the average private sector employer contribution rate for a defined contribution pension scheme is only 6.4%. To get the same pension in the private sector, someone would have to contribute about a third of their salary.
Sheila Gilmore (Edinburgh East) (Lab)
There is something extraordinary in what the hon. Lady has just said, which several of her colleagues also said. They say, “We don’t want to compare with the private sector. We don’t want to have a race to the bottom.” They then say, “But” and come out with a long string of comparisons about employers not paying as much. If this has nothing to do with comparisons with the private sector, they should stop comparing.
Andrea Leadsom
The hon. Lady makes an extremely good point. I am not advocating that we reduce public sector pensions to the private sector level, but this does, of course, absolutely bear comparison. This Government are not reducing public sector pensions to the pitiful state the Labour Government left private sector pensions in when they left office. That is precisely the point I am trying to make. We are proud of the fact that our public sector pensions will remain among the best in the world. That is something to be very proud of, and the Opposition should be congratulating the Government on having achieved that at this extraordinarily difficult time.
Let me disabuse Members of one final myth. The Opposition like to say that private sector workers earn more, so private sector pensions make up for the shortfall in salaries. That is not the case. The Institute for Fiscal Studies calculates that on average hourly public sector wages are 7.5% higher than hourly private sector wages, even when we take into account an individual’s education, age and qualifications. That is a very important point. Public sector pensions do not subsidise lousy working rates—quite the opposite, in fact. Those in the public sector rightly have a good deal in their employment and in their pension. That is what we wanted to achieve and I commend those on the Front Bench for doing so.
The most important aspect is sustainability, because what we had was unsustainable. Over the past decade, public sector pension costs increased by a third in real terms. Between 1999-2000 and 2009-10, the amount of benefits paid from the five largest public service pension schemes increased by 32% in real terms. In five years’ time, we are set to spend £33 billion a year on public sector pensions—more than on police and transport combined and 1.8% of GDP.
Sheila Gilmore (Edinburgh East) (Lab)
I have a feeling that an instruction has gone out to those speaking in support of the Government, and it appears to have been, “Be nice to the public sector.” Speaker after speaker has taken great pains not only to praise the public sector and public sector workers, but to accuse the Opposition of daring to suggest that there might be another view.
I have sat in the Chamber over the past two and a half years, and I do not think I imagined the numerous occasions on which Government Members spoke of gold-plated pensions and the overall extra cost of pensions, or indeed imagined the whole way in which the public sector has been treated. We are clearly now meant to assume we imagined that, but public sector workers have had a pay freeze and are facing job losses in many parts of the country.
On top of that, the view expressed for two and a half years that the public sector is holding back the economy formed much of the justification for many of the policies that followed. We have been told time and again that if we cut back the public sector, the country’s economy will spring to life, and that the public sector is exercising a great drag on the economy. If we put those things together, it is perhaps not surprising that Opposition Members, and many workers in the public sector, have concluded that the coalition Government do not particularly like or support the public sector, however supportive they may be of individuals or people they have come across. That is the backdrop against which the whole debate has been set, and that is why people are still sceptical and concerned about some aspects of the Bill.
If contributions had not been made, quite separately, on the restructuring of the pension schemes, and if we were not working against the general backdrop of the Government’s view of the public sector, many people, including Opposition Members and public sector unions, would perhaps not be asking: where is the guarantee? It is not good enough to say that we want to put pensions on a firm and definite footing; we must ensure that that happens. When parts of the Bill suggest to any casual reader that that may not be the case, one can understand why people have doubts.
The Bill does not rule out further changes for any number of years, let alone 25 years; nor does it rule out the possibility that some public sector schemes in future might be defined contribution schemes. We have heard lots of praise for defined benefit schemes by hon. Members on both sides of the House, but the Bill opens up the possibility—this is what people have spotted when reading it—that we could see the introduction of a defined contribution scheme.
We must be clear, therefore, on whether we are giving long-term protection. Pensions are a long-term business. The problem for pension provision in this country—whether state, public sector employee or private sector pensions—is that taking the long-term view has proved to be difficult. I will not take lectures from Conservatives, who suggest that the only reason why the private sector moved away from defined benefit schemes, or indeed from providing pensions altogether, is due to a policy of the previous Labour Government, because the Tory Government under Mrs Thatcher destroyed the state earnings-related pension scheme. They did not reform it and say, “Over the longer term this may prove to be quite expensive and we might have to look, for example, at its accrual rates,” which were generous; they destroyed it, in the name of giving people the freedom to make their own choices. I remember exactly what happened. People said, “Oh well, if I don’t have to pay in to this, I won’t pay in to anything.” Twenty or so years later, those people are no doubt approaching retirement with very little pension. That was extremely destructive legislation. In its place, people did not at that stage get defined benefit schemes. Often, they were encouraged to go to insurance companies and other such organisations to take out pensions of a defined contribution type, but those schemes have not provided them with an adequate pension in their upcoming retirements. If we are to have a cross-party consensus—I do not know whether we will—security for the future must be built in to the Bill.
Hon. Members have said warm words about why some people will not be fit to work through to normal retirement age. However, if people are not fit to work, we need flexibility in the Bill—it cannot be left until later. Ministers have criticised previous legislation on a range of issues for being too inflexible, and have argued that that makes it difficult to make changes later. We need flexibility on the pension age. If we lock the normal retirement age for public sector pensioners to the state pension age in the Bill, it will be difficult to have flexibility, even if it proves to be needed on health or other grounds. We do not want people who do not work to that later age claiming benefits and losing a lot of their assets. Nowadays, many people who claim employment and support allowance can do so on a contribution basis for only a year. If they have other income, they will not get means-tested benefits. Many people who end up leaving work early on health grounds lose a great deal of money.
We are concerned about those in the private sector who are in that position. Even with the state pension age as it is, many people, particularly men in the 60 to 65 age group, are not working on health grounds. I therefore urge the Government to look again at that factor. If they are serious about their concern for people who might find it difficult to work in public sector jobs on health grounds, they need to make it possible to relax the rules in future.
Parts of the Bill require changing. It is important that we go ahead and make those changes, and that we do not say, as has been suggested by some Government Members, that the Bill is already perfect.
The Economic Secretary to the Treasury (Sajid Javid)
I thank Members for the lively debate that we have had this evening. In the short time that I have spent as Economic Secretary, I have been helping the Government to try to get three Bills through Parliament, this being the third. In each case, the Opposition have backed off from calling a Division. I am becoming a little concerned: I hope that that does not become a pattern of behaviour.
The Bill represents a milestone in the history of public service pension provision, and I am not surprised that some Members feel strongly about it. Legislation that affects the pension rights of more than 6 million public servants is worthy of serious consideration and scrutiny.
I think that we should bear in mind the economic backdrop to these reforms. During its last year in government, the Labour party burdened the UK with the largest budget deficit since the second world war and the largest in the developed world. It amounted to £159 billion. Labour was borrowing £5,000 a second, which means that it would have borrowed about £90 million between the moment we started today’s debate and now. [Interruption.] The hon. Member for Leeds West (Rachel Reeves) asks how much we are borrowing. That gives me a good opportunity to remind everyone that we have cut the deficit by a quarter. That is what has brought the country economic credibility, and that is what has kept interest rates low and given us the time in which to make serious long-term adjustments to public spending costs.
Sajid Javid
I will in a moment.
Because of their long-term nature, pension reforms will not save money quickly, but they make an essential long-term contribution to the health of public finances. We have heard that today from a number of Conservative Members, including my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Bromley and Chislehurst (Robert Neill), for Monmouth (David T. C. Davies), and for Thurrock (Jackie Doyle-Price). As the Chief Secretary has said, it has been forecast that the Bill will save UK taxpayers £65 billion over the next 50 years.
Sajid Javid
My hon. Friend raised the same issue in his speech. I think it fair to say that that would have involved an excessive fiscal cost, and would have been much more complex than the approach that we have taken. I hope my hon. Friend accepts that.
In preparing this policy, we have been careful to follow the recommendations set out by the former Labour pensions Minister Lord Hutton in his independent report. We have heard much about trade unions today. The head of the TUC, Brendan Barber, whom I met recently to discuss our reforms, has described the report as a “serious piece of work”. He has taken a very constructive approach to the problems that the Government are trying to address.
While we are on the subject of trade unions—
Sajid Javid
As I said, unions representing two thirds of union members have accepted our proposed schemes, and the vast majority of unions have taken a very constructive view.
Sheila Gilmore
I thank the Minister for giving way. I want to take him back to what he said previously. As usual, he chose to frame his comments in the context of the deficit. His Government came to power saying that they would eradicate the deficit within the term of this Parliament. Now, after two and a half years, he says that we should be grateful that he has reduced it by a quarter. His economic policies are not working.
Sajid Javid
I was expecting a lot more than that from the hon. Lady. I am proud that this Government have already cut the deficit her Government left behind by a quarter. That is a significant achievement. The shadow Chief Secretary, the hon. Member for Leeds West, said she was unable to commit to keeping the CPI change we have introduced to public sector pensions beyond the term of this Parliament. According to the Office for Budget Responsibility, that would leave a black hole in the public finances of up to £250 billion in current GDP terms over the next 50 years. I look forward to hearing how the Opposition plan to fill that black hole.
Professional Standards in the Banking Industry
Sheila Gilmore Excerpts(11 years, 11 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
I want to take the Chancellor back to his comments a few moments ago in which he quoted something that had been said by Mr Diamond before the Treasury Committee. Is not part of the problem that that format does not get to the bottom of these issues? Statements of a general nature were made about some discussion that took place with certain Ministers. Do we not need a judicial inquiry?
Mr Osborne
I am very grateful that I took that intervention, because right at the end, the hon. Lady said that there were allegations that Ministers had been involved. As I said, it is extraordinary that they are all blaming each other. The people who were in the Treasury are blaming the people who were in No. 10, and the people who were in No. 10 are blaming the people who were in the Treasury. Why do they not take responsibility collectively for the absolute mess that they made of regulating our banks, including the LIBOR market, during their time in government?
Mr Russell Brown (Dumfries and Galloway) (Lab)
I suspect that we are concentrating on how we can improve the system for businesses, rather than for the banks. I want to concentrate on some of the activity that has been drawn to my attention by my constituents. Small businesses are hurting at the moment, and some of them are reluctant to come forward because they are embarrassed at finding themselves in such a fiasco. Those people are running businesses that are in severe financial difficulties because of the activities of the banks.
To a certain extent, I agree with the Chair of the Select Committee, the hon. Member for Chichester (Mr Tyrie), and others who said that the vast majority of people who work in the finance and banking sector are decent, hard-working people. Many are not on particularly large incomes. Talk of the bonus culture tends to concentrate on the Bob Diamonds of this world, but many of those people on low incomes depend on their bonuses to get by. There is no doubt, however, that the business is full of wide boys and spivs.
I have seen e-mails spanning a period of time involving a company called Guardian Care Homes. That company has been successful in some of its prosecutions. For Bob Diamond to say that he did not really know what was going on in his organisation is complete and utter nonsense. For two months, The Daily Telegraph trailed the activities involving Guardian Care Homes.
I also want to mention an issue that was drawn to my attention some 18 months ago. I spoke to the Chairman of the Select Committee—I am sorry that he is no longer in his place—one evening after a Division, and expressed my serious concern to him about the sale of hedges and swaps. According to my inquiries, Barclays appears, a number of years ago, to have set up a specific section to target and home in on leisure facilities, caravan sites and the like. In July 2005, one of my constituents was approached by Barclays and asked whether he would go back to banking with it. He was offered a loan, as well as two swaps to protect him against fluctuations in interest rates. Over a short period of time, the value of his assets climbed. The bank then approached him and asked him to consider some of its hedges.
I want to thank the Financial Secretary to the Treasury, who is in his place, for providing some of the FSA’s findings on these matters over the past couple of days. The manner in which some of these banks have been operating is absolutely unbelievable. If I could not see it in writing myself or hear what constituents were saying, I would not have believed it, as there has been 100% hedging of some of the loans offered.
This time last week, I met another constituent who also operates in the leisure and caravan sector. He is a partner in two small businesses, running two caravan sites in my constituency and two in a neighbouring constituency. His bank—not Barclays bank, incidentally—pulled him in and encouraged him to have a look at another three caravan sites that were on the market. The guy was not that keen, but he went away and considered the proposal, and came back to the bank to say, “Yes, I might be interested in a loan.” He was offered the loan, but only on the basis that he took out more swaps.
That sort of activity has been going on, but I really do not know how many people out there have been caught up in it. It is interesting to note that the Financial Services Authority’s letter to Financial Secretary says:
“During the period 2001 to date, banks sold around 28,000 interest rate protection products to customers.”
What does that mean? How big is the scale of this? That is particularly important if compensation has to be paid. There is a serious concern that if compensation is paid, it could bring banks down. When it comes to protection, people are looking for answers.
Sheila Gilmore
Does my hon. Friend agree that it is not just businesses, but some individuals who have been led into over-borrowing and so forth? These people have been affected, and it appears from polls reported today that 55% of them think there should be an independent judicial inquiry to get to the bottom of these issues.
Mr Brown
Let me tackle that quickly. Yes, during the last couple of days, I have received more than 30 e-mails from constituents, saying that they want a proper inquiry. Here we are in this Chamber, but we all have to stand outwith it. What will people have witnessed here this afternoon? Partisanship. I understand that we can all get dragged into it, but I have to say that people have no faith in this place. On both sides of this House, we see ex-bankers and ex-financial advisers. Quite honestly, Madam Deputy Speaker, if you were to ask me, “Would you trust these people?”, my answer would have to be no. [Interruption.] If we seek a genuine answer, this problem needs to be tackled by being placed in the hands of someone else. [Interruption.] Conservative Members should calm down. I have listened to the hon. Member for Rochester and Strood (Mark Reckless), who used to be in the business, and to others. It could be due to my ignorance, but I have to say that financiers and bankers could be from another planet. They know the ins and outs, but as the FSA has said, when the issues are complex, it hides what is going on.
Finance Bill
Sheila Gilmore Excerpts(11 years, 11 months ago)
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Catherine McKinnell
The only point I can make is that the industry suffered the serious blow of having a 20% tax announced. That has been reduced to 5%, which it will obviously welcome, but we propose to remove the VAT changes altogether, because at this particular time the last thing that any industry needs, but particularly the holiday, static caravan and manufacturing industries, is a VAT hike. We need to invest in jobs and growth to get the economy moving, to get out of the double-dip recession that we are in and to get back into growth.
Sheila Gilmore (Edinburgh East) (Lab)
Does my hon. Friend share my astonishment at the previous intervention? If the proposal to impose that VAT rate had never been made, there would have been no need for consultation or listening—and it would have been far better to have consulted first. What happened to the notion of a proper pre-Budget report, where suggestions could have been made in general terms and then we could have had a consultation? We all sat here listening to a very strong defence of the original proposals only a few months ago.
Catherine McKinnell
My hon. Friend speaks a lot of sense and makes her point very forcefully. The Government seem to have tax-grabbed first and consulted later. They have sneaked through changes—the ones they have got away with, they have pocketed and the ones they have been seriously challenged on, particularly by their own Back Benchers, they have had to relent on. But that is no way to conduct tax policy or business.
Catherine McKinnell
The hon. Gentleman is getting ahead of himself, given that we are in a double-dip recession, that growth has stalled, that all the predictions of the Office for Budget Responsibility are being revised down day on day, and that borrowing is going up. Everybody agrees that we need demand in the economy. The way of generating demand in the economy is to put money back into people’s pockets. I remind hon. Members that before the increase in VAT, the economy was on a trajectory of growth. That was before this Government took over and brought in their disastrous austerity policies.
Sheila Gilmore
Does my hon. Friend agree that the Minister’s figures assume that when VAT rises or falls, it has no impact on people’s expenditure? The thrust of what we have been saying, not just in response to the Budget, but for several months, is that the rise in VAT has dampened demand. The tax-take in May, for example, was down by 7%. Far from a static amount of money being drawn in, a VAT reduction would increase demand and, ultimately, increase the tax-take.
Catherine McKinnell
I thank my hon. Friend for her characteristically rational contribution. I would add that the recent Institute for Fiscal Studies report estimated that the Government’s tax and benefit reforms will make a couple with children £511 worse off in this financial year and £1,250 a year worse off by 2015. It does not take an economic genius to work out what that does to demand in the economy.
The Prime Minister admits that a 2.5% increase in VAT hits the poorest hardest, so what happened to, “We’re all in this together”? I would like to hear an answer on that. As well as hitting poor people the hardest, higher VAT is hitting the economy at a time when we can least afford it. As we have discussed, the Chancellor unveiled a fuel duty cut last week, using mystery funding sources. Dropping VAT could have taken 3p a litre off petrol immediately. Across the board, a temporary cut in VAT would stimulate growth and get the economy moving again. Putting money back into people’s pockets is the only way to support businesses and create jobs—the very things that the Chancellor left out of his mangled Budget. That is why a temporary return to 17.5% is part of Labour’s five-point plan for jobs and growth.
Sarah Newton
My hon. Friend makes his point as passionately and persuasively as always, and he is absolutely right.
To return to pasties—one of my favourite subjects—when I listened to the Budget, it was clear to me that there was a problem with the proposals as they stood. Some of the architects of those proposals clearly did not understand how pasties are baked in Cornwall. Within hours I spoke to my hon. Friend the Exchequer Secretary, who clearly understood the problem that I described to him. He said the Government realised that there could be some complications and unforeseen consequences, hence the reason for their consultation. Colleagues from around the country responded positively to that consultation, and their concerns have now been met.
I am staggered by what the Opposition wish to inflict on our country by not supporting the Government tonight. In the nightmarish scenario that they won the Division, we would return to the situation in which the Treasury wastes hundreds of thousands of pounds of taxpayers’ money every year having to fight litigation cases against multi-million-pound companies that are trying to avoid paying VAT. The extremely complicated tax code that was developed under Labour over its 13 years was a lawyers charter. I have nothing against lawyers—I am married to a very good lawyer—but that ever-increasing and complicated tax code means that, not unreasonably, companies try to avoid paying tax. That causes Her Majesty’s Revenue and Customs to be tied up in court, spending hundreds of thousands of pounds on lawyers fees that it could be spending in a far better way.
It beggars belief, but what the Labour party is saying tonight is, “We are on the side of companies trying to avoid tax. We are on the side of lawyers who are constantly taking HMRC to court.” What a dreadful waste of taxpayers’ money. The Government are trying to have a fair and simple tax system that everybody in the country can understand, so that we are not caught out by those who avoid taxation.
Sheila Gilmore
I wonder whether the hon. Lady has noticed the size of the Bill. It is apparently one of the biggest Finance Bills ever, which suggests that the tax code is being added to all the time. Would it not have been easier for the Government never to have made their VAT proposal in the first place?
Sarah Newton
No. As I have said—very clearly, I hope—the Government’s change will bring about a lot of clarity and be beneficial. For example, new schedule 1 clarifies what constitutes takeaway food and hot food. I accept the point that my hon. Friend the Exchequer Secretary made that we can never be 100% certain that companies will not litigate to try to wriggle their way out of paying their taxes, but the added clarity will be welcome to pasty makers. They will understand the situation that applies to pasties that are made and consumed in the way that they are in Cornwall.
For the benefit of Opposition Members who do not seem to understand what master bakers do in pasty shops in Cornwall, I will explain that each day they get up very early to make high-quality bread, cakes and buns as well as pasties. They cook them on their premises so that they are beautiful and freshly made. Throughout the course of the day, anybody can buy freshly made bread, cakes, buns, scones or pasties. Thanks to the clarification in the new schedule, we can continue doing that in the certain knowledge that we will not pay VAT. Labour Members, however, who, feeling peckish on their way home tonight, decide to pop into the West Cornwall Pasty store, perhaps at the station, will, as in every other takeaway food outlet at the station, quite rightly pay VAT, because those pasties are deliberately kept warm all day long alongside other takeaway food. It is only right and proper, therefore, that they pay VAT.
Stephen Gilbert
I entirely agree with my hon. Friend. He will be pleased to know that new schedule 1 will deliver the level playing field to which he and my right hon. Friend the Prime Minister have referred, and on the subject of which I have received representations from fish and chip shops in my constituency.
If a product in a fish and chip shop is being kept artificially warm it is standard-rated, and new schedule 1 will ensure that the same applies in a pasty or pie shop. The simplicity for which the Government aimed has been delivered, as has the level playing field for suppliers of hot food. I hope that my hon. Friend will convey to the fish and chip shop proprietors in his constituency with some enthusiasm the message that, as a result of the constructive process of consultation and engagement undertaken by the Government, the special status of baked goods which are hot only as a product of their baking process has been recognised. The fact that a freshly baked hot pasty which is simply cooling down will remain VAT-free should be welcomed by one and all.
Sheila Gilmore
The hon. Member for St Austell and Newquay (Stephen Gilbert) seemed to think that he was living in a parallel universe, and, indeed, most of we Opposition Members thought that we were living in one as well. The process that has taken place is rather like the process that takes place when someone says “I want £10 from you”, and then, after a great deal of argument, says “I will make it just £2, so you should be happy”, and we find ourselves saying “Thank you so much for listening.”
Yes, it was good that the Government listened. I do not think that any Opposition Member has said otherwise, although we might have preferred them to listen from the outset. They had an opportunity to do so on Second Reading. One or two Conservative and Liberal Democrat Back Benchers voted against the Government even then in order to make their views known, but many others who had heard the Government say that the measures were necessary voted for them. Yes, it is good that the Government have listened, but it might have been better had they never embarked on this road. We must ask whether it was sensible for the Treasury—which, one assumes, is in charge of our economy to some extent—to spend the last four months dealing with matters which it had, after all, generated in the first place.
Roberta Blackman-Woods (City of Durham) (Lab)
Does my hon. Friend agree that the Government listened only partially, especially when it came to the imposition of VAT on listed buildings? Churches will still have to undergo a bureaucratic process in order to claim it back, and other listed buildings will still be subject to VAT for repairs. That could really affect the country’s heritage.
Sheila Gilmore
I shall say something about precisely that issue later.
The time and effort of officials and politicians was largely wasted by a process that, in some but not all instances, led us back to where we started at a time when the economy was tanking. Could not much of that energy have been expended on something far more worth while? It was said on Second Reading that this was not a Budget for jobs and growth but a Budget that tinkered at the edges of various issues, and the Government have themselves conceded that all that tinkering was probably a bad idea.
Diana Johnson
Does my hon. Friend agree that the VAT measures in the Budget had a major effect on business confidence in certain industries? For instance, when the caravan industry was threatened with the imposition of a 20% rate, some companies issued their work forces with 90-day potential redundancy notices.
Sheila Gilmore
Of course the stress and anxiety affected confidence and well-being. Indeed, it may have led to a further plunge in demand as people anticipated the impending redundancy which, thankfully, did not come about in many cases. That is an important consideration at a time when the economy is struggling so much.
I think that a great deal of time was wasted because the Government included measures in the Budget rather than dealing with the position earlier. If they believed that there were anomalies in the VAT system, why did they not consult? As I have suggested before, they could have said “We are minded to look at these things” at the time of the autumn statement, rather than at a time when they were putting together a Budget that, apparently, they wanted to balance. We heard a lot about that at the time.
Why did the Government not say “We want to look at these anomalies and review them in a general context”? One of our amendments proposes that that should happen in future. If there is to be consultation, it should be proper consultation. Saying, as the Chancellor did in March, “This is what we have to do and this is why we have to do it, but we will have a bit of consultation afterwards” is putting the cart before the horse. I hope that that lesson will be learned for the future.
Julie Hilling
One theory being put about is that the Chancellor was hijacked by civil servants whose pet projects had been turned down by the Labour Government, who had said “Don’t be silly”, and the Treasury was suckered into proposing a load of nonsensical changes.
Sheila Gilmore
That may indeed may be the case. I recall that in 2007 a new council took charge in Edinburgh—it was a Liberal Democrat-SNP coalition—and it announced that it was planning to close some 22 schools. There was a very interesting cartoon in the local paper. It showed officials coming out of a meeting with the new administration and turning to each other and saying, “We never expected them to accept all that. That was a starter for 10, and we thought we’d get beaten back.” The officials had put forward this proposal and the new and inexperienced administration had said, “Yeah, we’ll go for that.” It did them some reputational damage. They proposed closing 22 schools, but then had to roll back very substantially because of the public outcry. The officials had expected to be told, “Actually, that’s not what we want to do. That’s not sensible. Let’s see the proper workings before we ever go public on this.” Perhaps the suggestion that this Budget measure was a consequence of our having a very inexperienced Government and Chancellor was right, therefore.
Roberta Blackman-Woods
Does my hon. Friend not agree that that view is much too kind to the Chancellor and the Government parties, as they clearly dreamt up these mad ideas themselves?
Sheila Gilmore
I will resist the temptation to take up my hon. Friend’s invitation to agree with that view, because we have to be tolerant, to a degree, of inexperience. There is currently a strong cult of youth and inexperience in our politics, but that might change, and it might at some point in the future be acknowledged that there is merit in looking to those who have had experience of life and living before entering politics, rather than to those who become as exalted as the Chancellor of the Exchequer before they have lived and experienced a great deal of ordinary life.
I shall spare Members having to listen to me list all the listed buildings in my constituency that are not churches. Those who want to know what those buildings are can read the relevant Committee report in Hansard. There is an important point, however. It has been assumed that because the Government made a concession—albeit not a full one, perhaps—to churches, the problem has been solved. There are other listed buildings that are not churches, however, which will now face the 20% rate with no financial assistance or concession made to them. These buildings are equally important. Churches are extremely important as historical monuments, even if some of them are no longer used as churches. In Edinburgh, there are examples of churches that have been converted to other uses, but there are other buildings that are at risk, too, and imaginative alterations might be made to some of them in order to put them into community use. This extra cost will put some such community projects at risk, however, and will put some buildings at risk, too. If those buildings cannot be put into community use, it is likely that they will deteriorate and end up having to be demolished on safety grounds.
Roberta Blackman-Woods
Does my hon. Friend agree that it is thoroughly irresponsible to bring in the increase on repairs on listed buildings without conducting a proper impact assessment, and that the Government should review this policy?
Sheila Gilmore
I agree. The Government have pointed out that VAT falls on repairs but it did not previously fall on alterations, and they say we should equalise the situation. That misses the point. Alterations often enable buildings to have a different use from their previous one. They are made to be able to function again for business, residential or community-use purposes. Such alterations are generally bigger projects than simply repairing the roof and ensuring that the rain does not come in. The costs involved can be great, and this 20% addition to the cost will therefore be very considerable and will put many such projects at risk. Many people have made that point, and do not feel the Government concession in respect of churches goes nearly far enough. We must bear that in mind. We will find out in the future whether these concerns were right.
In respect of VAT at least, this Budget has been shambolic. It is not good enough for people to say, “Well, because there has been a change, the whole process is now a good one.” It has not been a good one reputationally for the Government—and perhaps we, as Opposition Members, should be pleased about that. We cannot be pleased, however, when we see the effects that a declining economy has on so many of our constituents, who feel they are faced with a Government who truly are not caring.
Let us think about the arguments made in defence of some of these changes. On listed buildings, we have heard all sorts of arguments, such as, “The previous situation allowed rich people to build swimming pools.” There was no particular evidence of that, but the Chancellor obviously thought it was a good argument to put up because he liked the idea of presenting himself as being on the side of the small person rather than the rich—despite the overall effect of his Budget policies.
Roberta Blackman-Woods
Does my hon. Friend agree that if the Government were indeed concerned that alterations were going to be made to create swimming pools, the measure could simply have exempted such alterations?
Sheila Gilmore
That is indeed the case. Conducting research and finding good evidence before making and changing policy is of paramount importance. We have seen that in respect of many aspects of this Budget. We saw it in the debate yesterday in respect of the 50p tax rate. There were a lot of hypotheticals—a lot of “maybes” and “perhapses”—but there was not a lot of solid evidence.
This has been a poor piece of policy making. I congratulate the Government on turning, but if they had thought things through first, they would never have had to turn.
Nigel Mills
It is a pleasure to follow the hon. Member for Edinburgh East (Sheila Gilmore). We have heard each other speak quite a lot over the last eight weeks or so. It is also a pleasure to have a chance to talk on VAT measures.
I will start by addressing the Opposition’s new clause 12. If we are talking about ill-thought-through measures that should not have been brought forward, this is a prime example. It would cost £12 billion if it were in place for a year, not that the Opposition know how much it would cost or how they would pay for it. It is intriguing to ponder how they can tick off the Government for announcing a U-turn that costs a few million pounds a year and accuse us of not having a balanced Budget because of it, while they have a proposal for a £12 billion hole in the Budget that would do untold damage to the public finances, probably completely wreck our country’s reputation for trying to sort out its deficit and lead us into a situation none of us would even want to dream about.
Mr Gauke
So when borrowing is higher than we plan it to be, it is a disaster, but when borrowing is higher because the Opposition would bring that about through a deliberate policy, that would be a fiscal stimulus. I am not entirely clear where they are trying to go with this. We know why the public finances are more difficult than we had anticipated. It is to do with the eurozone, the increase in commodity prices and the fact that the economy took a bigger hit than anyone had previously realised, but a discretionary fiscal loosening of £12 billion or £13 billion, which is what the Opposition are about to vote on, would be taking a huge risk with our credibility.
It is worth making the point that if we do that, we lose our fiscal credibility and we are likely to see long-term interest rates rise. That will result in our paying out more in debt interest. A one-point rise in interest rates would mean £7.5 billion in additional debt interest payments by 2016-17, and an increase for the average mortgage borrower of £1,000 per year. Is that what the Opposition want? Do they think that would help?
Sheila Gilmore
The Minister should accept that he has given a partial quotation from his own Office for Budget Responsibility. He is fond of saying that the recession has been deeper than previously thought. Yes, the OBR did say that, but it also said at exactly the same time that the climb out of that recession had been faster than had previously been thought. That was a result of the economic stimulus measures that the previous Government put in place.
Mr Gauke
The OBR was very clear about the reasons why the economy did not grow as quickly as it had predicted. That was not because of the measures that we had taken to clamp down on borrowing. It was because of the factors that it set out. Now, at a time when we see other countries without fiscal credibility facing enormous difficulties, the Opposition want a discretional fiscal loosening of £12 billion or £13 billion a year. That is not responsible opposition. That is not a responsible policy and it is not a policy that this Government will pursue. I urge the Opposition not to press new clause 10.
I note that the Opposition are also opposing the VAT measures in total. That would be an additional cost of £210 million. These are measures that will remove anomalies. We have listened to the concerns raised by hon. Members and others to improve what we initially set out.
Mr Gauke
We debated that in the Committee of the whole House. The purpose of the CFC rules is to protect the UK tax base, as has always been the case, but the Government have a proud record of supporting developing countries, and we have a firm commitment to meeting our international obligations on that front. This country also has a proud record of building capacity in developing countries and improving their ability to collect taxes. In many developing countries, the UK has already made a substantial contribution, and we will continue to do so.
Both the patent box and the CFC changes form part of the Government’s wider plans, which will help UK businesses to operate in an increasingly globalised world. I am sure all Members agree that those measures are essential to restore medium and long-term growth.
Despite the challenging economic backdrop that the Government inherited, we have made significant progress. We have already introduced a further cut in the rate of corporation tax that will give us the lowest rate in the G7, the fourth lowest rate in the G20, and the lowest rate that this country has ever known. By next year, the Government will have cut corporation tax by 6%, helping to make the UK the most competitive country in the G20. According to the OBR’s assessment of the Budget, the reduction will increase the level of business investment by about 1% by the end of the forecast period. That is equivalent to an increase in the total amount of business investment of £3.4 billion between now and 2016.
Many businesses have seen that we are, as promised, open for business. WPP and others have recently announced that they are considering returning to the UK, or that they wish to set up business here. I am delighted to say that Rowan and Lancashire have already come here, and once the CFC rules are in place in 2013, we shall be looking for more businesses to follow them. Following the Bill’s publication in March, one of the big four advisory firms announced that it was engaged in discussions with between 10 and 15 multinational companies that were considering locating substantial operations in Britain as a result of corporate tax reforms. The CBI has commented that these much-needed changes
“will help make the UK a more attractive place for companies to invest, do business and create jobs.”
The Government aim to create a tax system that is easy to understand and with which it is easy to comply, and the Bill contributes to that. It provides real help for families and business. It raises the personal allowance to £8,105—which, curiously, was not mentioned very frequently in Committee—and, combined with the further increase of £1,100 next year, will mean a tax cut for 24 million people and 2 million people being taken out of income tax altogether.
Sheila Gilmore
The Minister was waxing lyrical about simplification, and I was wondering whether he has reconsidered his view as to whether the proposed child benefit reform creates simplification or complication.
Mr Gauke
If we do not want people earning £20,000, £25,000 or £30,000 a year to be paying for benefits to go to much wealthier households, the alternative would be an extension of the tax credit system. That would have placed a much greater burden both on households and the Government. Of the available alternatives, we have gone for the simpler option.
We are deferring the 3p per litre duty increase that was planned for August to January next year. Action by this Government to reduce the deficit and rebuild the economy is already benefiting businesses and families and keeping mortgage rates low. As hon. Members know, this Government have also had to make difficult decisions so we can tackle the deficit left to us by the previous Administration. They include withdrawing child benefit from households earning more than £50,000. That is a fair way to make savings, so we can meet our targets to cut the deficit.
We are also taking steps to ensure that the wealthy pay their fair share too. The Budget package ensures that the wealthiest will pay five times more than the cost of reducing the additional rate of income tax. The introduction of a new higher rate of stamp duty land tax of 7% on properties sold for more than £2 million will raise over £1 billion in the next five years. At the same time, this Government are also tackling avoidance, as demonstrated in the Bill. The new SDLT enveloping entry charge rate of 15% will deter those seeking to put their high-value property into corporate structures to avoid tax. Also, debt buy-back measures will raise over £500 million from banks that try to avoid paying the tax due, and the introduction of the UK-Switzerland agreement will ensure we can address the tax loss from those who put their money into Swiss banks to evade tax.
There has been extensive scrutiny of this Bill, including about 44 hours in Public Bill Committee. From looking at some of the new clauses tabled for today, I am happy to see that the Opposition continue to stick to their same theme on this Bill, which is to ask for reports, rather than focusing on policies. We have seen 34 Opposition-requested reports over the last 10 weeks, but no real policy alternatives. Yesterday, we were discussing Groucho Marx, and I wonder if the Opposition ever needed to be reminded of the quote:
“The problem with doing nothing is that you never know when you are finished.”
In order to make progress with Government business in good time, we agreed with the Opposition, through the usual channels, to programme parts of this Bill.
It is a delight to see my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) once again in his usual place. As he rightly said yesterday, this legislation is the body, soul and guts of this Budget.
I thank all who participated in Committee and on Report.
Bill Esterson
If it were true that it helps the poorest people in our society, perhaps the hon. Gentleman would have a point, but it does not help many of the very poorest and it does not help those young people I was talking about who cannot find a job because the Government will not take action and because they cut the future jobs fund when they first came into office.
What we really needed from this Government was a Budget of fairness. Instead, we got that tax cut. What they should be doing is repeating Labour’s bankers’ bonus tax, which raised £3.5 billion—[Interruption.] Government Members do not have to take my word for it; they can take the word of the independent Office for Budget Responsibility, which they themselves set up. They are even questioning their own organisation’s figures. That £3.5 billion was nearly twice as much as the £1.8 billion raised by the bank levy. The bank levy is a start, but the Government could repeat the bank bonus tax and use the money to get young people back to work and the housing industry going. The temporary VAT cut would help small businesses that cannot get loans from the banks.
I know that people want to get home. [Hon. Members: “Hurrah!”] Always happy to oblige. We have had a Budget for the wealthiest in our society. The Bill gives help to the top 300,000 earners, but does nothing for young people or those out of work.
Sheila Gilmore
During the various debates on the Bill, there have been references to the 1980s and the 1970s. Does my hon. Friend agree that there were probably comments like the ones we heard tonight in the 1930s, when people in the south of England said that there was no depression?
Bill Esterson
I thank my hon. Friend for her comments —[Interruption.] If the right hon. Member for New Forest West (Mr Swayne) would like to make an intervention, I will happily take it.
My hon. Friend is absolutely right that we are seeing a repeat of what happened in the ’30s, and we have none of the policies necessary to get us out of this situation.
Finance Bill
Sheila Gilmore Excerpts(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Miss Smith
The hon. Gentleman has given me the perfect opportunity to note that, regrettably, the official Opposition’s Benches are astoundingly empty. The stance that they took last week showed astounding political opportunism, given that they had 13 years to support the motorists but did not, and that they left behind a depth charge of increases. I regret that I shall not be able to hear him put the case in his own words. Perhaps I may explain to him more of the actions that we are taking to support the motorist and businesses.
Businesses are seeing successive cuts in corporation tax, coupled with an extended business rates holiday for small businesses until April 2013. In passing, I should note that the high pump prices of recent years are causing real difficulties in ensuring that motoring remains affordable. However, pump prices have fallen by nearly 11p a litre since their peak in April. That said, at a time when money is tight, deferring the fuel duty increase from August to January will provide further support to motorists.
This is a Government who not only have a credible plan to support motorists, but are dealing with the debts created by the previous Government. A responsible Government are able to listen to, consider and respond to the concerns of motorists. Compared with the plans that we inherited, we have cut fuel duty, cancelled the previous Government’s escalator and introduced a fair fuel stabiliser.
I understand that we will also be discussing what the Opposition have planned for motorists, perhaps in some detail. I also look forward to hearing from my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) on biodiesels. I look forward to responding on those matters. This Government are on the side of motorists and our measures will support them when times are tight.
Sheila Gilmore (Edinburgh East) (Lab)
On Second Reading, we were given to understand that the fuel duty rise was essential to the Government’s proposals and a key piece of the jigsaw in resolving the deficit. For many weeks, that has been the clear message from the Government. I understand that Government Back Benchers were exhorted to write to their constituents to tell them why—regrettably, no doubt—the rise would have to happen and there was no alternative. It therefore comes as rather a surprise to hear that it is not quite so essential to the Government’s plans after all, but is a dispensable piece of the jigsaw.
This is probably the most expensive of the U-turns that have been performed over the past few weeks. It dwarfs many of the others in terms of revenue forgone. It is all very well for the Minister to tell us that it has happened because we have a listening Government, but they must also listen to what they have been saying. On that basis, they must explain how they have come to this position.
Lyn Brown (West Ham) (Lab)
Does my hon. Friend have any idea how much the U-turns have cost collectively so far?
Sheila Gilmore
I understand that it is in the region of £725 million. That is quite a large hole in what was presented in March—it seems a long time ago now—as a balanced Budget. That was one of the Chancellor’s key themes in his Budget speech. We now appear to be faced with something of an unbalanced Budget.
Sheila Gilmore
It is clear from the pattern of fuel duty rises under the last Government that such things were never set in stone and were not intended to be so. One has to look at the situation with which one is faced.
Miss Chloe Smith
The hon. Lady has a touching faith in the previous Government’s ability to stick to a course. Does she support Opposition new clause 11, which has a price tag of about three times as much as the new clause that she is attacking?
Sheila Gilmore
We have very different views about how to stimulate and boost the economy. The Government have run demand into the ground, for example by raising VAT to 20%, which has had an effect on fuel. Ministers are reluctant to talk about that in any detail. It has to be remembered that prior to the election, the Conservatives were going around telling us that there would be no increase in VAT, and their coalition partners liked to stand in front of huge billboards saying that they feared there would be a VAT bombshell but were completely against it.
Mr Jim Cunningham (Coventry South) (Lab)
Has my hon. Friend noticed that oil and petrol prices have dropped by 28% over the past three months? That is not reflected at the petrol pumps, and surely the Government should do something about that.
Sheila Gilmore
My hon. Friend makes an important point. When the raw product goes up in price, the pump price goes up very quickly, but a downward turn seems to take a great deal longer to reach the consumer. We have made similar arguments about other energy price rises.
The hon. Member for Argyll and Bute (Mr Reid) suggested that it was all right for the Government to make U-turns such as this, because they had found savings elsewhere. That is nice to know, but if such savings could be found so easily, maybe the Government could have avoided some of the other things they have done. After all, we spent a lot of time in the Budget debate and before talking about the plight of couples who were losing tax credits because they were deemed not to be working enough hours. That change affects a small number of people—from memory, I believe it is about 500,000. We were told that if it were not implemented, it would cost the Treasury £500 million. We were told that it was impossible to go back on that decision, because money was so tight.
Like all Governments, the current Government are making choices. In the past two years, they have said that certain things have to be done and are not choices. They have said that they have been forced into them. However, all Governments make choices—that is part of governing.
Julie Hilling
Does my hon. Friend recognise that the Government have chosen not to do a U-turn on the granny tax, which is aimed at the people who are least able to pay, but continue to reduce the top rate of tax?
Sheila Gilmore
Indeed, and a lot of people would be glad to see the Government make U-turns in other areas, and in fact in their entire economic policy. It has been misguided, and the Opposition were clear from the start that it was the wrong way to reduce the deficit.
Sheila Gilmore
That is a very important point. We had a semi-answer from the Government saying that savings had been found, but they seem to be somewhat mysterious savings. We had not heard about them before, and we still do not really know where they have been found.
Miss Chloe Smith
Has the hon. Lady not read the Office for Budget Responsibility’s forecasts or the reports identifying about £4 billion of underspend in each of the past four years?
Sheila Gilmore
If the Economic Secretary is so clear that there is money to be used, I once again have to press her on some of the choices that the Government have chosen not to make. From what she has just said, it seems to me that there may be scope for her to reconsider some other matters.
I have a constituent whose employer, a big national department store, recently told her that she had to go completely flexible with her working hours. That meant that her shifts could vary from day to day. When she said that that could be very difficult for her, because she had child care arrangements to make and could not simply change things at short notice, she was told that she could reduce her current 18-hour week to a 12-hour week. We are told that such people should easily be able to find more hours of work to get around the problem of having their tax credits removed. If there is so much underspend, perhaps the Government should think beyond their proposals on fuel duty. It does not give us a great deal of confidence when they are adamant that they are not going to change things, but then do so before thinking about where they are going to find the money.
Sheila Gilmore
It could, and there could also have been significant investment in the building of affordable housing, which is dear to my heart. That would not just give people houses but create jobs and apprenticeships and boost the local economy. The Government could have done that if they had really wanted a Budget for growth. Our criticism of the Budget was that however balanced it may have seemed—it now turns out not to have been quite so carefully balanced as we were told—it was not a Budget for growth. Very little was put into building up jobs and growth. Perhaps it was only a practice Budget, although I always thought that was what the autumn statement, which used to be called the pre-Budget report, was for.
David Rutley (Macclesfield) (Con)
Fiscal responsibility is clearly an overriding priority, but does the hon. Lady agree with President Hollande, who recently said that
“national debt is the enemy of the left and the enemy of France”?
It is also the enemy of the United Kingdom.
Sheila Gilmore
National debt is sometimes essential. After all, I seem to recall that it was very much higher at the end of the second world war than it has been at any time since. There were reasons for that, and I believe we finished paying it down only a few years ago. Sometimes, we have debt because we have made essential or useful investment, and of course it is not the same as deficit.
Mr McKenzie
My hon. Friend is making a very good point. We have heard one of the comments of the new President of France, but does she think the Government will agree with his opposition to the austerity measures that have been put in place across Europe?
Sheila Gilmore
I do not dissent from my hon. Friend’s view. The new President’s general intention is indeed to break away from the fixation with austerity measures. That is not the same as saying that we do not want to deal with the deficit. The question is how to do that successfully and ultimately reduce borrowing.
The last Government have been misrepresented as having constantly increased the national debt. That is simply wrong. It was substantially reduced under the Labour Government, but what caused that process to go into reverse—I am not going to say it did not—was the recession and the economic stimulus that was put in to get us out of it. Our view remains that had the policies that were in force between 2008 and 2010 been continued, rather than going into a double-dip recession we would have begun to climb out of the recession.
Julie Hilling
Does my hon. Friend agree that we had growth in the British economy at the time of the general election, but we now have a recession made totally in Downing street? If the Government have such a big underspend, why on earth do we face a double-dip recession, and why are ordinary people suffering so much at their hands?
Madam Deputy Speaker (Dawn Primarolo)
Order. In replying to that intervention, I hope the hon. Lady returns to the subject of the debate, which is fuel duties.
Sheila Gilmore
I do not want to dissociate those things—they are linked in lots of ways. Initially, we were told that there were constraints on the Budget, including not postponing the increase in fuel duty. What happens in a few months’ time? The measure is a deferral—we are not forgetting about it for ever—but what financial complexities will that create?
It is heartening that the Government’s motivation seems to be their recognition that people are suffering from a general reduction in their standard of living. As many commentators have pointed out, many working families are experiencing real reductions in disposable incomes such that they have not experienced for many years. That is part of the serious position in which people find themselves. It is good that the Government have understood that and want to act on it, but I would like them to act on some of the other issues that Opposition Members have constantly raised. I want them to understand that people are suffering not just from fuel prices, but from a number of other measures. The Opposition’s five-point plan would have reduced VAT and enabled investment in job creation. Perhaps it is not too late even now for the Government to U-turn on that.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I am happy to speak in the debate on new clause 1, which was moved by the Economic Secretary on behalf of the Government; on new clauses 9 and 11, which are in the name of the Labour Opposition team; and on new clause 8, which is in my name.
I support new clause 1. I am not against responsive government—indeed, there is a duty to be responsive in government. I therefore welcome the fact that the Chancellor announced that the Government had heard the concerns of ordinary people, families and businesses that cost of living pressures continue to be difficult on them. The cost of fuel at the pumps affects people in rural areas, but it also affects people in suburban and urban areas, and people running both small businesses and larger firms. For some people, there is an inescapable obligation to drive—they drive for their families and businesses, and in emergencies. Therefore, the price at the pump is a hugely important part of their weekly budget.
People made the case, and the Government, including Treasury Ministers from both parties, first agreed to delay the increase scheduled for earlier in the year until August, and last week announced a further delay until the end of the year. That is welcome. It is fair to say that the announcement came slightly out of the blue and yellow last week—it took a few people by surprise—but it clearly has not been met with opposition from those on the Opposition Benches, because a grand total of six Labour Members, including the Whip, have been present in the Chamber for this debate. There is clearly no great furore at this concession to the needs of the consumers.
Simon Hughes
No, I will not give way. The hon. Lady spoke for a very long time, as she often does, and I will not concede. This is a short debate—it goes on only until 7 o’clock—and I want to allow other colleagues to speak.
I want to make a specific plea on biodiesel. I should declare my interest: as some colleagues know, I sometimes drive a London taxi, which has often been powered by biodiesel bought from Uptown Oil, a firm in my constituency that collects used cooking oil from local firms—a chain of good environmental practice ends up in my cab and other vehicles in south London.
I have had discussions with the Economic Secretary and the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker), and I asked colleagues—my hon. Friends the Members for Bristol West (Stephen Williams) and for Redcar (Ian Swales)—to argue the case in Committee last week. We have so far not persuaded the Government to change policy, but I wanted to put the case as to why the industry needs continuing Government attention and to ask that they do not turn their back on the industry, even if they are not willing to concede to my requests now.
Cathy Jamieson
The amendment deals with an unfair situation that I mentioned earlier. People who are already earning considerable amounts, millionaires and others receiving the highest levels of pay, will benefit from the Government’s proposal to reduce their tax rate to 45%. We had a good debate on the subject on Second Reading, but were not able to discuss it in Committee. At that time we wanted the Government to reconsider, and not just because millionaires were set to receive something equivalent to a £40,000 per annum tax cut.
Sheila Gilmore
My hon. Friend may be interested to learn something that I myself learnt from a television programme that had no direct connection with economics. It was part of a series about London streets. A banker who was talking about his home in Portland road said that prices there had risen considerably since the taxpayer had bailed out the banks, and that far from suffering from the current financial situation, people seemed to be benefiting.
Madam Deputy Speaker (Dawn Primarolo)
Order. I must inform the hon. Member for Harlow (Robert Halfon) that only one Member should be standing on the Floor of the House at any one time. Welcome to the Opposition Benches, Mr Halfon.
Cathy Jamieson
I will answer that point in more detail later. I am a little disappointed, however, as I thought the hon. Gentleman was going to make a different point. He seems to be suggesting that only people with a connection to Labour had been avoiding or evading tax, which is, of course, absolutely not the case. I hope Members across the House will ensure that at every stage those who are due to pay their taxes should pay them and should do so willingly and properly.
Sheila Gilmore
What does my hon. Friend think about the fact that in Committee a Conservative MP, the hon. Member for North East Somerset (Jacob Rees-Mogg), said that in his opinion the actions of a certain Ken Livingstone were in fact very sensible?
Cathy Jamieson
I do not wish to return to the lengthy debate that took place in Committee, but we did at various times have discussions about people doing things that were perfectly legal—and which, if they were so advised, might make perfect sense—but the question then arises as to whether they are morally or ethically the right things to do.
Charlie Elphicke
It is a pleasure to follow the shadow Minister, who has set out such a partial view from the Labour party’s perspective on this Budget. I think there is a better approach: the more people we take out of tax, the better, as the administration cost is less and there is less hassle for people, particularly the least well-off. I want to see the personal allowance increased to £10,000 as soon as possible. Good progress was made in the last Budget, but the sooner we take the number to £10,000, by far and away the better. Nevertheless, I welcome the fact that most basic rate taxpayers will see an annual cash gain of £220, and I welcome the fact that this Budget takes 2 million people out of tax altogether. That is important, particularly given that we all remember the fiasco over the 10p tax rate. The more we can look after the least well-off and take them out of the tax system, by far and away the better.
I was fascinated by the whole discussion about the 50p rate. We can see from Treasury figures that we are talking about £100 million. That figure is rubbished by the Labour party, which thinks the figure is completely wrong and cites an IFS report. Let me quote the relevant passage from the IFS report, which is where I think the Labour party draws its approach from. The IFS states:
“The worry for the Chancellor is that the estimate that cutting the top rate to 45% will only cost £100 million is particularly uncertain. It assumes a ‘no behaviour change’ cost of £3 billion offset by a behavioural change of £2.9 billion. The first number we know reasonably accurately; the second number is estimated with great uncertainty. Even if we knew the effect of introducing the 50p rate—which we don’t with any precision—responses may not be symmetric. Those who have got a taste for avoiding the 50p rate may continue to avoid the 45p rate (even if they wouldn’t have done so had the 50p rate never existed). The experiment with the 50p rate does not appear to have gone well.”
My first conclusion is that the IFS is saying that making the rate 50p in the first place was a complete and utter disaster. The second issue raised is the uncertainty over behavioural change. On that, I say that we have empirical evidence on what happens when the rate is reduced. I do not know whether everyone recalls this, but we used to have an income tax rate of about 80%. When that was reduced, first to 60%, there were great cries from the Labour party that it would cause a collapse in the revenues, but instead the revenues rose. Why was that? It was because fewer people avoided tax. The Government of the day then reduced the rate to 40p. Again there were great cries from the Labour party that that would let the rich off the hook, but what happened? The revenues rose. Why was that? It was because fewer people were as interested in avoiding tax and they paid up a fair share.
Sheila Gilmore
There are other explanations for the increased tax take during the period in question. One was the general growth in the economy, which generated more income, whereas another was the greater degree of inequalities, which meant that although people were paying a lower rate of tax, the cash take was higher because their income had risen so much. People on very high incomes are still paying a relatively low rate of tax, however. If tax avoidance did not take place previously, why have there been so many examples of it?
Sheila Gilmore
I ask the hon. Gentleman to correct the impression he gave. The age-related tax allowance does not go to the very richest pensioners; it is the group in the middle who are being squeezed by the proposal.
Charlie Elphicke
The age-related tax allowances only kick in to benefit those pensioners who have a substantial income, or a more substantial income, in retirement. We are not talking about the very least well-off pensioners who are affected by grinding poverty, but about pensioners who are better off and who have savings and income. As I said, there are no cash losers and they have had a massive benefit from the pensions triple lock.
Barry Gardiner
The hon. Gentleman has already said once in the debate that he does not believe the Treasury’s figures. He has now reinforced that. The Treasury has made the calculations. He can choose to say, on a personal level, “I think the Red Book is a load of tosh,” but he cannot say that that is the Government’s position. The Government’s position is that the measure will cost £3 billion a year. [Hon. Members: “No, it is not.”] The Government cannot get out of this one. They say that it will cost money. That money will be taken away from some of the poorest people in our society to pay for it.
That is what people find so distasteful about the way the Government are behaving. They are taking away from some of the poorest in our society, yet feel that it is so important to send that signal out to some of the wealthiest. The people who are being excoriated in the public conversations around the country for what they have done and what they continue to do to our economy—those are the people who will benefit, and it is the poor in our constituencies who will suffer.
Sheila Gilmore
Did my hon. Friend spot the illogicality in the position of the hon. Member for Dover (Charlie Elphicke), who made an impassioned claim to be a scourge of tax avoiders, but is in effect endorsing tax avoidance by arguing that we have to reduce the rate of tax because so many people are trying to avoid it? Would it not be better to look at ways of preventing people from avoiding tax?
Barry Gardiner
My hon. Friend, yet again, makes an excellent point. There is an implicit acceptance that people will try to avoid tax, and that therefore it is better to reduce the level of taxation so that there is not the same level of avoidance.
Most of my constituents listening to this debate and to the debate that has been going on since the Budget think the Government do not understand what people are going through, what they are feeling and just how difficult it is for some of them to make ends meet. They do not understand that precisely because of the sort of signals the hon. Member for Dover just mentioned. The Government consider it more important to make those signals to the wealthy. They think it is more important to focus on what they understand about their involvement in society, and they do not give the same attention to getting those messages to the poor in society.
What the Government have done in the Budget is to say, “If you are poor, we know that the best thing for you is to cut your benefits to make sure that you work harder, and if you are rich, we know that the best thing for you is to cut your tax so that you work harder.” People look at that and say, “This doesn’t make sense. It’s one law for the rich and another law for the poor.”
Thomas Docherty
I often think that the Business Secretary would make an excellent contestant on “Strictly Come Dancing”, such is his fleetness of foot. In fact, I am sure that tomorrow morning there will be leaflets out in Brent and elsewhere condemning and disowning this Government policy, as if Liberal Democrat votes had not yet again carried the argument, leaving Ipswich Town footballers and others better off and our greatest generation worse off. This is a poverty of policy. It is the worst example of what happens when the quad sits up drinking and it will leave the country with a dreadful hangover.
Sheila Gilmore
The policy on the higher tax rate is, in effect, an endorsement of tax avoidance, which worries me greatly. Some of us sat through the Finance Bill Committee and heard Government Back-Bench Members say how much they disapproved of tax avoidance, but throughout this episode we have heard people argue that because some people have taken steps to avoid tax, we should reduce it. That is highly unsatisfactory to the many people who, on pay-as-you-earn, have little ability to avoid tax. They are gobsmacked by all this.
If part of the problem was due to people forestalling, which is the technical term, in the first year of the new tax, perhaps—and this is a thought for the future too—we should have introduced it with immediate effect, as happens with some other taxes. For example, tobacco duty is generally increased on the day of a Budget, so that people do not rush out to fill their shopping bags—or whatever they do. Perhaps that would have been a way around it. I know it is not traditionally done with increases in tax rates, but if that is how people respond to these things, perhaps we should treat higher earners like we treat people we think will fill their bags with cheap booze or cigarettes, and forestall them, rather than letting them forestall the rest of us—because that is what they are doing to the communities in which they live. Unfortunately, in a year’s time, we are likely to hear Government Members saying “We told you so” even more. The reduction has been postponed for a year, but it will still happen, and a lot of people will no doubt do the same thing in reverse when it does.
It has become something of a mantra to say that no money was ever raised from the 50p rate of tax, but that is not true: £1 billion was raised, even in the year in which people were apparently forestalling. If we had let it run for somewhat longer, the situation could have been even more different. However, as the Institute for Fiscal Studies pointed out, to rush to judgment on this matter so quickly, because that suited the way in which the Government wanted to go, was not justified. We are, in effect, saying to people that it is all right to avoid tax.
I started to tell a little story earlier, and I hope that it will be seen to be relevant. I am fascinated by history, and particularly by housing, and—unusually, for me—I watched a television programme last night. It was entitled “The Secret History of Our Streets”, and last night’s episode was about Portland road, in London. It had been made long before the current debate on the Budget. A young, brash banker got up and said that the value of the property on that street had gone up even further since the taxpayers had bailed out the banks. Did we really think, he asked, that the banks were going to start lending to small businesses? No, they were going to give people like him an increase in income so that they could pay even more for those houses. He might have been one of those boastful types, but that was nevertheless an insight into the mindset of the kind of people in our community who think that tax avoidance is absolutely legitimate. There is a great deal of wealth in this country, as that example showed, and many ordinary people find this whole debate offensive and difficult to swallow.
At the other end of the tax issue, we have the question of raising the tax-free allowances. The Government keep saying how kind they are being to people on low incomes, but we should remember that once those people have had their tax allowance raised, they will get no further advantage in subsequent years because they are already out of the income tax regime. Other people, however, have gained considerable advantages from the raising of the basic tax threshold. Many people on considerably higher earnings—although not necessarily paying higher rates of tax—have gained from the measure.
It has been easy—for the Liberal Democrats in particular, as this is one of their favourite lines—to say that raising the tax threshold is all about helping the very poorest. However, the very poorest were already outside the income tax regime, and people on considerably higher earnings—particularly two-earner families without children—have benefited substantially from the raising of the threshold. We must also take into account what people on the margins who have been taken out of tax have lost. When we look at the details, we see that as a result of the measure, they could lose tax credits and, in some cases, housing benefit. Their gain is therefore very much less than has been suggested.
Mr Kevan Jones (North Durham) (Lab)
A lot of the people my hon. Friend is describing are actually in work, and the Government seem to forget that a lot of low-paid workers get housing benefit and other benefits. Does she agree that it is those individuals who will be hit the hardest?
Sheila Gilmore
Indeed, people who are working and who are, or were, paying tax stand to lose considerable amounts, particularly in the light of the way in which the tax credit system has been eroded as part of this process.
There are those who say—again, this is one of those things that keeps getting repeated as if it were true—that the Labour Government were not bothered about getting people into work or making work pay, but the whole thrust of tax credits, including child care tax credits, was indeed to make work pay. What this Government have done, by reducing the amount that can be claimed for child care, by taking away tax credits and, most inappropriately in my opinion, by taking away tax credits from some of the lowest-paid couples because they are deemed not to be working enough hours, more than detracts from the gains made by raising the tax threshold. Being realistic, these poor people whom the Liberal Democrats think they are standing up for have, particularly if they have children, lost out because of the combined effect of the Government’s measures.
Sheila Gilmore
That may well be the case.
What we need to do is to find ways to invest in our economy that will genuinely benefit not just those who are unemployed, but those who are under-employed. The Government like to suggest that the rate of growth in the private sector has increased slightly in the last few months, but most of the jobs created over the last couple of years are part-time jobs. As a result of that, these very people are simultaneously losing tax credits and have to claim other benefits. The housing benefit bill has risen substantially in the last year, despite the Government’s changes, and that is because many people in part-time jobs are having to claim. What we saw in May, for example, was that the tax take had dropped and expenditure had risen, particularly on various kinds of welfare benefits.
Taken as a whole, this policy is simply not working. I would have greater respect for the Government if they were now saying, “We must look at why it is that some people are seeking to avoid the additional rate of tax. We must find ways—perhaps it is nudge, perhaps it is enforcement—to make them pay.” As others have said in this and previous debates, we seem to say to one group of people that if we take their benefits away they will work harder, while we say to another group of people that we have to give them more money through tax breaks so that they will work harder. It does not make a great deal of sense, and it is profoundly unfair.
Some of the differentials in our society now are huge. If the proportion—not necessarily the amount—of tax being paid by the top 1% of earners has risen, it might well be because their incomes have risen so much further than those of the rest of the community. The gap between the top earners and the rest has widened hugely over the last few years, which creates a profoundly unequal society.
Stephen Williams (Bristol West) (LD)
I have listened to a good deal of what the hon. Lady has said during our debates, and I have been trying to decide whether or not she supports the raising of the tax allowance. However, I want to ask her about the specific point that she made about the gap between the rich and the poor, which she said had widened over a “few years”. Surely she meant “over the last 13 years”.
Sheila Gilmore
As I think the hon. Gentleman knows fairly well, the increase in inequality began far earlier than that. The point in the history of the post-war United Kingdom when the equality gap was narrowest was 1979, which, interestingly, marked the end of a 20-year period during which Labour Governments had predominated. After 1979, the widening of the gap began and accelerated.
I would not suggest for a moment that the party of which I am a member did as much as I should have liked it to do when it was in government, but we did a great deal for pensioners and the least well-off workers in society by, for instance, getting single parents back to work and introducing the minimum wage. It is simply not true that we were not aware of the issues, or that we did nothing to tackle them. The hon. Gentleman may want to return to the heady days of 1979, and perhaps we should all want to do that. Now, however, inequality is breeding a society that poses many dangers, and we want to reduce that inequality, but I do not believe that the Budget does anything to reduce it. We know that the Budget will increase child poverty, and I believe that in three or four years the inequality gap will have widened even more.
Jacob Rees-Mogg
It is a real pleasure to follow the hon. Member for Edinburgh East (Sheila Gilmore), who made such an enormous contribution to the Public Bill Committee. She enlivened it regularly with her thoughts, with which I have almost invariably disagreed—and today is no exception.
We are now dealing with the best part of the Budget: the heart, soul and even the guts of it. We are doing some big and bold and important things, with which I shall deal in turn. One of them is tough and brave and noble. It is the proper aim of Government to take on difficult things which, although difficult, are right. But I shall start, instead—
Jacob Rees-Mogg
I am in entire agreement with my hon. Friend. We want to get people out of the tax and benefits system as much as possible so that they can stand on their own two feet. That is what people want.
Sheila Gilmore
The problem with the hon. Gentleman’s argument is that, even if the tax threshold is raised towards the median income, as he suggested, unless the minimum wage is raised substantially, many people’s earnings will be so low that they will still live in great poverty. That was why benefits such as tax credits were created. The other route might be to raise the minimum wage.
Jacob Rees-Mogg
Mr Deputy Speaker, you will rule me out of order if I argue that raising the minimum wage would be extremely unwise, so I would not dare to say it. However, on the point of benefits for the worst off, I am all in favour of those. It is a thoroughly good thing to help people who are just in the earning bracket, but not to give benefits to people earning £70,000 a year, paid for out of their extraordinarily high taxes.
Mr Gauke
No I cannot, but I know that, for example, the Arsenal manager remarked that the 50p rate put him at a disadvantage. Earlier, the hon. Gentleman mentioned Ipswich Town and whether its players deserved a tax cut or pensioners did, and I have to say that on last season’s performance one or two looked as if they could qualify for the age-related allowance, but that is not at the heart of my argument.
The point is that we have to be competitive, and we want to attract talent to the UK, but having a higher rate than France, Italy and Germany is not competitive.
Sheila Gilmore
Generally, when changes are made and we want to assess their impact, we carry out properly independent research. On the changes to housing benefit, for example, the university of Sheffield has been commissioned to produce reports, but what research into our short experience of the 50p tax rate was carried out that gives rise to the conclusions mentioned? Do we have some research that we can look at, or is there just speculation that people might have retired or might have gone to Switzerland?
Mr Gauke
The hon. Lady asks what research we have. I am holding it in my hand: the document produced by HMRC, which sets out a thorough analysis. I urge her to read it and to see that it is far from speculative; it is a thorough piece of work, which shows that as a result of the 50p rate total income fell by between £2.9 billion and £4.4 billion and GDP was between 0.2% and 0.3% lower. There has been not just a loss of tax revenue, but a loss to the whole economy through lower productivity and lower economic activity.
Oral Answers to Questions
Sheila Gilmore Excerpts(11 years, 11 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
One of my constituents was told by her department store employer that she either had to accept a 12-hour contract, which amounts to fewer hours than she works at the moment, or go fully flexible, which does not fit with her child care. Is it not time that the Chancellor decided to do another U-turn and to restore tax credits to those working couples who do not work up to 24 hours a week?
The Economic Secretary to the Treasury (Miss Chloe Smith)
We on the Treasury Bench have argued many times in the House that it is fair to ask couples to work under similar requirements as lone parents, and I urge the hon. Lady to consider that in this case.
Banking Reform
Sheila Gilmore Excerpts(11 years, 11 months ago)
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Mr Hoban
It is important that independent regulators exist and that their independence is credible. Going back to the FSA’s report on the RBS failure, it was interesting that the FSA clearly came under sustained pressure from the shadow Chancellor and the then Prime Minister to have a light-touch regulatory system, and we have seen the consequence of that. It is important that there are clear rules to ensure that regulators act independently and that their regulation is seen to be credible. The shadow Chancellor should recognise that he got it wrong when he called for light-touch regulation and championed it throughout the world.
Sheila Gilmore (Edinburgh East) (Lab)
Given the double-dip recession and the continuing fall in net lending to businesses, what exactly are the Minister’s reforms going to do to stimulate the economy? Is there not a risk that we are going for the stability of the graveyard?
Changes to the Budget
Sheila Gilmore Excerpts(11 years, 11 months ago)
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Mr Speaker
Order. I did not hear a question about changes, but the hon. Member has registered his view with force and alacrity, and it is on the record so his constituents will hear it.
Sheila Gilmore (Edinburgh East) (Lab)
The Minister started by saying that this was a Budget for families, so will he now consider another U-turn and restore the tax credits to working couples on low wages and low working hours?
Child Benefit
Sheila Gilmore Excerpts(12 years ago)
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Roberta Blackman-Woods
My hon. Friend makes an excellent point. The workability of the proposals will have to be reconsidered. We seem to be building into the system a number of problems for families. The Government could have learned from previous practice and not gone down this road.
We are left with a number of questions about the workability of the changes and the need for them, as well as questions about fairness. As late as 2009, the Chancellor was promising not to scrap child benefit. No doubt we will hear today that it has not been scrapped, but changed massively. More significantly, it has already been cut massively because of the lack of uprating with inflation. Therefore, child benefit and families with children have already been targeted for cuts, even without the cuts that have been made to tax credits.
Sheila Gilmore (Edinburgh East) (Lab)
Will my hon. Friend reflect on the fact that, in the run-up to the Budget, there was debate about child benefit and the coming changes to working tax credit, which affect some of the lowest-paid working couples in our society? The Government found enough time and energy to make some amendments on child benefit, but none to the proposals on tax credit.
Roberta Blackman-Woods
My hon. Friend makes an excellent point. She is right. The overriding question is, why have the Government chosen to target cuts in respect of families, particularly those with children? None of us have received a satisfactory answer; perhaps the Minister will provide us with one.
The second question is, why are women being targeted again by this Government? It is not only families with children that are being targeted, but women—mostly women who are single parents—and it is more likely to be women who are put under pressure not to claim by their partners, so that their partner’s tax does not change. Whether or not that happens in reality, the Government should not even countenance the possibility. Women will suffer in terms of pension credits if they do not claim. This is a real mess and is just one more aspect of the omnishambles Budget that needs to be changed.
It took more than 70 years from Eleanor Rathbone’s entry into politics to get universal child benefit paid to the mother for all children. I hope that it does not take another 70 years for these appalling changes to child benefit to be reversed.
Mr Chope
I have not seen those figures, but they obviously speak for themselves. Despite that, I am not receiving as many angry letters from constituents as when, for example, I was the junior Minister dealing with the community charge. Let us recall that in 1987 the Government were elected with a specific manifesto commitment to introduce the community charge on the back of its success in Scotland. The proposal on child benefit that we are discussing today was not even in our manifesto. Indeed, it was expressly ruled out by comments made by both the Prime Minister and the Chancellor of the Exchequer in their shadow positions before the general election.
Sheila Gilmore
As an aside, I am not so sure that, in 1987, the community charge was such a great success in Scotland. One thing that caused the eventual collapse of the community charge was not just its unfairness, but the sheer impracticality of collection, which had not properly been thought through. The operational issue was as important as anything else. It may be the same in this case.
Mr Chope
The hon. Lady makes a good point. There are two issues running in parallel. One difficulty for those of us proposing the community charge was to explain how it was fair that a duke and a dustman should pay the same amount. That difficulty ran through the public debate. At the same time, we went into great detail about exemptions for particular groups of people and an administratively burdensome system of rebates, which created a lot of fresh cliff edges, with people feeling that they had been treated unfairly. I fear that that is exactly what is happening with this ill-conceived proposal.
Sheila Gilmore (Edinburgh East) (Lab)
I do not intend to say very much in this debate. The reason why I did not seek to catch your eye before, Mr Streeter, was that I thought that I might have to leave. I will have to leave before I have the benefit of the Minister’s response and I apologise for that, but I am serving on the Finance Bill Committee.
I want, however, to say a little about the difficulties that can arise in relation to family structures and so on. As someone who was a family lawyer, I know how relationships can not only break up but re-form, and that may happen over a relatively short period. That is a practical aspect of this issue that I am not sure has been taken fully into account. As family lawyers, we used to joke that we achieved a higher rate of reconciliation than marriage guidance counsellors. People’s lives are not linear. They do not necessarily go straightforwardly through this process: “Oh, I’ve fallen out with my partner. Now we’re separating and that’s it.” It is very common for people to encounter a circumstance that leads to a break-up and then to reconcile. It may be a very serious situation. Even in cases of domestic violence, people reconcile. As a solicitor, I might sometimes have wished that they had not; nevertheless, they do so.
A relationship structure can change quite a lot, even in a single financial year. That is an additional layer of complication. It should not be assumed that just because people are paying higher rates of tax that relationship breakdowns do not happen, because that is far from the case. That is yet another practical issue that must be addressed.
The position could have been very different. Perhaps all Governments wonder how they arrived at certain decisions. If we look back at this one, it seemed to arise from what looked like a clever wheeze. It was announced at a party conference, which is never a good time to announce policy, because it is the headline of the day that is very much wanted. I suspect that the thinking was, “Ah! We can really get the Labour party here. We are going to take a benefit away from higher rate taxpayers and the Labour party won’t dare to oppose that, so we will have got them on the run.”
We said right from the beginning, as well as dealing with all the issues about fairness and the reason why child benefit and its predecessor, family allowance, were introduced in the first place, that there was a practical issue. Many of the practical criticisms were voiced at that time. This all dates back to October 2010. A year later, those practicalities had apparently not been thought through very carefully. Some amendments have now been brought into being—at the last gasp—but those changes produce yet more anomalies. They produce a marginal rate of tax for some families that is far higher than presumably anyone would think was desirable for people who are in the middle ranges of income. Some families will face marginal tax rates of 50% to 60% because of how the changes take place and particularly the tapering. That has been introduced to try to make things a bit better, but arguably may make things a whole lot worse, because it introduces a whole new level of complexity.
Hon. Members have mentioned not just the community charge but the ill-fated and, in my view, ill-thought-out 10p tax rate abolition proposal. I have said this before and I know that many of my colleagues have. I was not in this place at the time, but as party members and activists, we have a view on these things and we thought, “Oh no, this is not good.”
Roberta Blackman-Woods
Is not the point about the 10p tax rate debacle—I think we would all accept that that is what it was—that when the outcome of that policy was made obvious, the Labour Government of the day reversed most of the adverse consequences of the policy? We see no indication from the current Government that they will do the same.
Sheila Gilmore
I agree. The point that I was making was that, sometimes, what looks like a clever idea to start with quickly unravels into something that is much more difficult. The slight amendments that were made to the current proposal before it was introduced into the Budget, far from addressing the issues, are making the whole thing even more complicated. Not much time seems to have been given to work these things through. Some campaigners are suggesting to the Government that it is not too late. If they are still minded to implement this proposal in some way, shape or form—I hope that they will not want to—they should at the very least not go ahead with it starting from January of next year, given that it has been so poorly thought out and the implications and problems have not yet been fully resolved. To put a hold on it and perhaps come back if they think that they have solved those problems—ideally, they would not come back with it at all—would be sensible at this stage. I urge the Minister to give that very serious consideration.
Jobs and Growth
Sheila Gilmore Excerpts(12 years ago)
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Sheila Gilmore (Edinburgh East) (Lab)
In light of the earlier intervention, I thought my hon. Friend might be interested to hear figures, provided to the Work and Pensions Committee yesterday by the Department for Work and Pensions, on the issue of people who had apparently been off benefit. In March 2010, there were 18,000 young people who could have been put in that category, and there are now 4,000 in terms of training allowances. That is a difference of 14,000. As I think my hon. Friend would agree, that hardly explains the rise in youth unemployment.
Alison McGovern
I thank my hon. Friend for that helpful and informative intervention.
When the Chancellor talked about a growing economy, one of my hon. Friends shouted, from a sedentary position, “Not in the north-east.” We need to recognise that worklessness does not impact equally on all communities. That is why when we think about the growth we need, policy needs to be tailored properly to the economy in each and every part of the country, so that the GDP growth we all hope for represents the whole of the UK. I suppose it is entirely possible that the UK will recover, but leave behind heavily blighted areas of our country.
A study of unemployment reveals a key flaw in the Government’s thinking. They have talked about “expansionary fiscal contraction”—in other words, to achieve growth, the Government need to slash their budgets and investment will flow in from foreign shores. I do not believe that that is consistent with the Government’s other stated aim: to rebalance the economy. Finance for those parts of our economy that have strengths in manufacturing but need regeneration is necessarily long term. Government industrial strategy should shelter our industry from global headwinds, not leave us vulnerable.
Fiscal contraction at the pace we have seen has harmed blighted areas that had only recently started to recover from the impact of previous Conservative Governments’ attitude to industry. In my area, I see the impact of the withdrawal of central Government from regeneration and the stopping of regional growth via regional development agencies. The responses built into local government that were designed to target deprivation, which clusters in particular parts of our country, were stripped away in the financial settlement.
In the Budget, the Chancellor introduced measures that took money out of the pockets of people on low and middle incomes in those parts of the country where we want to rebalance. That will not help. Someone in the Treasury has to take responsibility for looking at the macro impact of all the measures that are affecting those places that stand to be the worst affected by this Government. We have had a botched Budget and then a next-to-nothing Queen’s Speech, I am sorry to say. The Government will be judged by the people in Wirral and Merseyside not merely on the GDP figures, but on the actual development we see in our city. We must take account of the differential impacts of Government measures on different parts of the country with different economies; we must not focus only on the national picture.
My question for the Government is: will they meet the test of real economic development? Only that will promote the widespread employment that people want. People will judge this Government on the basis of whether or not they see their friends and family in employment.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
I welcome the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) back from a potential sojourn in Birmingham as mayor—his announcement that he wanted to stand was so powerful that Birmingham, on the spot, rejected the whole idea of having a mayor. I have got to know him well over the past couple of years and he has been heavily involved in designing the policy framework for the Opposition. He talked about part-time work and, as a result of his leader’s decision, he will experience it himself. I am sorry about that, because I am sure that he would have done a very good job had he been allowed to continue—I certainly suspect that he would have done better than some of his colleagues.
Today is about the Queen’s Speech, and I want to welcome a number of Bills: the Crime and Courts Bill, the children and families Bill, the draft care and support Bill to modernise the care system, and, importantly, a pensions Bill to provide once and for all a decent single-tier state pension to reward those who save. Let me say a few words about that matter and in tribute to the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb). He and I have worked very hard together and I hope that when we publish the White Paper both the House and the country will see that we are proposing a genuine and serious reform that should improve the quality of retirement for everybody in the future. We will reform the state pension system, creating a fair, simple and sustainable foundation for private saving. The main benefits of the Bill will be that it will enable individuals to take responsibility for meeting their retirement aspirations in the context of increasing longevity and create an affordable and sustainable pension system for future generations.
Let me respond to a few of the comments made by hon. Members on both sides of the House. The right hon. Member for South Shields (David Miliband), who I see in his place, made an elegant speech, as ever, in which he referred to a number of different issues. In particular, he mentioned youth unemployment, and I want to ensure that we establish the baseline on that point. The trouble was that the previous Government gerrymandered the figures on youth unemployment. When somebody had been unemployed for six months, they put them on one of their programmes—the future jobs fund or whatever—and took them off the unemployment register. They were not put back on to the register until they fell out of that programme—[Interruption.] Members might want to hear this. If we add together the figures, we see that the total number of claimants aged 18 to 24 on jobseeker’s allowance or other forms of temporary support is lower this month than it was in May 2010. Under the previous Government, during a period of growth, youth unemployment rose every year from 2006.
Sheila Gilmore
The Secretary of State appears to be unaware of a briefing that his own Department gave to the Select Committee on Work and Pensions yesterday, which exposed the lack of rigidity in the figures. Apparently, the correct figure shows that in March 2010 the number of people who were taken off benefit on a training allowance was 18,000. It has come down to 4,000, but will he accept that that does not explain the rise in youth unemployment?
Mr Duncan Smith
Labour gerrymandered the figures, and that was a long suicide note about what they tried to do to change those figures. The hon. Lady can try as much as she likes but the truth is that the previous Government set in place every single mechanism to ensure that they did not count young unemployed people.