Proposed Public Expenditure Cuts

John Bercow Excerpts

Monday 13th September 2010 Commons Chamber

[The Chancellor of the Exchequer (Mr George Osborne)]

I am grateful for the opportunity to update the House on the progress of the spending review, and to remind people of the context in which we make these difficult decisions.

The previous Government left Britain with the largest budget deficit of any major economy and no credible plan to deal with it. That was a major cause of instability and uncertainty that threatened any prospect of economic recovery. It was reflected in the substantially higher market interest rates that British families and businesses were being charged compared with those for families and businesses in countries that were regarded as less exposed to sovereign credit risk. The new Government had to take urgent steps to restore stability and allay fears about our country’s ability to pay its way in the world. In the words of the previous Labour Prime Minister,

“if we fail to offer a convincing path out of debt, that...will itself plunge us into stagnation”.

Those views were echoed in the comments this weekend from the International Monetary Fund, which said that

“fiscal consolidation remains essential for strong, sustained growth over the medium run”.

That is why in the Budget I announced decisive steps to get the deficit under control. I believe that that Budget has restored stability to the British economy and provided a sound basis for a sustainable recovery. It has helped keep down the market interest rates that Britain pays on its debts, which are today more than half a percentage point lower than at the general election. In other countries, such as Spain, Portugal or Ireland, these same rates have stayed broadly flat or gone up since then.

Because of the measures that we are taking, independent forecasters are increasingly confident about the British economy. Last week the OECD predicted that the UK would see the strongest growth in the G7 this quarter and the second strongest growth next quarter. I can also tell the House that today the EU predicted that the UK will see the strongest recovery in the second half of this year of any major European economy. These, of course, are just forecasts and all this hard-won stability would be put at risk if we did not now implement the components of our Budget plan.

Let me remind the House of the measures that we took at the emergency Budget and the steps that we now have to take. We are set to tighten the public finances by a total of £113 billion by 2014-15. Of this, £29 billion will come from tax measures, including the increase in VAT, higher capital gains tax and a new permanent levy on banks. A further £11 billion will come from the welfare reforms announced at the Budget. Another £10 billion will come as a consequence of paying lower interest charges on the national debt as a result of our plan—£10 billion that those who opposed the Budget plan would have to find to pay the holders of Government debt.

That leaves £61 billion that will come from reductions to departmental expenditure plans. It is worth reminding the House that £44 billion of that £61 billion was assumed in the figures left to us by the previous Government. In other words, for all the synthetic noise and fury that we hear, £3 of every £4 that we are having to cut were cuts that the Opposition were planning to make. Unfortunately, not a single one of those pounds was allocated to a specific programme.

Our job now is to allocate those departmental budgets. That is the purpose of the spending review that is under way, and I will announce the full results to the House of Commons on 20 October. The review is informed by the largest public consultation exercise ever undertaken on public expenditure. More than 100,000 substantive ideas have been received from members of the public. Teams at the Treasury have been sifting through these ideas over the past six weeks and some are already being implemented.

We have also created a mechanism for collective discussion of spending issues across the Cabinet, which is something of an innovation, so the Prime Minister—[Interruption.] Well, there was a Cabinet Committee on life chances, on talent and on democratic renewal under the previous Government, but no permanent committee on public expenditure. The Public Expenditure Committee of the Cabinet has already met twice this month and will meet again this week.

Of course, some decisions that shape the spending review have already been taken. We will protect the budget of the NHS with real increases, we will honour the commitments on international aid that we have made to the poorest in the world, and we will protect capital investment in our economic future. We have not reduced capital spending in future years beyond the plans that we inherited, and as we take further decisions, we will strive to ensure that those support economic growth, promote reform and local control, and are fair—fair between different sections of society and between different generations.

Let me say something about welfare spending—[Interruption.]

[Mr Speaker]

Order. May I tell the Chancellor that he has well exceeded his time? Allowance will have to be made for the Opposition Front Bench. That will happen today, but in future the time limits must be adhered to in this place.

[Mr Osborne]

I will heed your injunction, Mr Speaker, but the question was a very general one about an update on the public expenditure review.

I shall say something about welfare, if the Speaker will allow me. The welfare bill has risen by 45% in the past 10 years and almost £1 in £3 that the Government spend goes towards welfare. The current system is not protecting those who genuinely cannot work, nor is it helping those desperately looking for work to find a new job quickly. Close to 5 million people are on out-of-work benefits, more than half of whom have spent at least half of the past 10 years in this situation. Rather than rewarding work and supporting the vulnerable, we are wasting the lives of millions of people. That is why my right hon. Friend the Secretary of State for Work and Pensions is working with me and other Cabinet colleagues to see what we can do fundamentally to reform the welfare system so that it rewards work and supports aspiration, as well as saving the taxpayer on what someone once called the bills for social failure. When we have decisions to announce, we will bring them to the House and, of course, we will want to keep the House informed in other ways.

I have already given the Treasury Committee an unprecedented power to veto my preferred candidate to chair the independent Office for Budget Responsibility, Mr. Robert Chote, and I can tell the House today that I have asked my hon. Friends the Members for Gainsborough (Mr Leigh) and for Southport (Dr Pugh) to draw on their considerable expertise on the Public Accounts Committee in the last Parliament to advise the Government on how to improve the financial management systems that we have inherited, and in turn improve accountability to the House.

We have many difficult choices to make, but one thing is clear: one party created this mess; two parties are working hard to clear it up.

[Mr Osborne]

The position on welfare is exactly as I set out in my Budget speech at this Dispatch Box when I said that if we could find further savings on welfare, we would be able to reduce the pressure on other Departments. That was what we were planning to do over the coming months as part of the spending review, and that is exactly what I said in the television interview to which my hon. Friend refers.

Secondly, it would be impossible to conduct a spending review without looking at the welfare bill. Whether one is looking for £61 billion of savings or £44 billion, welfare spending accounts for a third of the entire Government budget, so one has to look at the welfare budget. That is what we are doing, but we are looking to do it in a way that reforms welfare, to help those millions of people who have been trapped for a decade or more on out-of-work benefits into work, to help those with aspirations to improve their income, to make sure that work is rewarded by the benefit system, and to do that while we are protecting those who cannot work and protecting the most vulnerable in our society. I would argue that the failure on welfare reform over the last decade was one of the greatest failures of the previous Government.

Despite the lurid headlines in some newspapers, the relationship and the co-operation between the Treasury and the DWP is strong. There is a perfectly natural—[Interruption.]

[Mr Speaker]

Order. The Chancellor must be heard. This sedentary chuntering needs to come to an end. I want to hear the Chancellor.

[Mr Osborne]

It is an improvement on the situation under the previous Government, where there was absolutely no contact between the Secretary of State for Work and Pensions and the Chancellor. The two Departments are working very well. Obviously the Treasury is interested in financial management and control: that is a proper part of our function. My right hon. Friend has inspirational plans that he has worked on to reform welfare and get people working, and the two of us are working together with colleagues in the Cabinet to make that happen.

Let me finally say something about the tax gap and people who do not pay their taxes. Later this week, figures will be produced—independent figures, not produced by me—which will show the latest situation on the tax gap that we have inherited: in other words, the gap between what should be collected in tax and what is collected in tax at the moment. Judging by previous figures I have seen, I think that the House will be pretty staggered by this number. [Interruption.] Labour Members seem to forget that their people were in power for 13 years. We have inherited this situation, and we will be taking steps to reduce tax avoidance, including tax avoidance by the richest people in our society, so that everyone makes a contribution.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

The shadow Chancellor and the shadow Chief Secretary are not in Westminster today, Mr Speaker, and you will be aware that I had asked a similar urgent question of the Secretary of State for Work and Pensions, so it is good that the Chancellor is replying, although very unfortunate that the Secretary of State for Work and Pensions has chosen not to come to respond.

On Thursday, the Chancellor told the BBC that the Government were cutting an additional £4 billion from out-of-work benefits. The BBC website says:

“The government is planning to reduce the annual welfare bill by a further £4bn, Chancellor George Osborne has told the BBC.”

Today, he has refused to tell the House what he told the BBC. Did the BBC correspondents just get it wrong? Did they mishear what he said? Will he now come clean and tell us what he has in fact got agreed and planned for the additional cuts that he wants to make to the welfare bills for the spending review? Will he tell us whether the Secretary of State for Work and Pensions has agreed to £4 billion of additional cuts? Will he admit that the timing of this interview had nothing to do with reaching agreement on the spending review with the Work and Pensions Secretary and everything to do with getting Andy Coulson off the BBC headlines for the day?

In June, the Chancellor wrote to the Secretary of State:

“I am pleased that you, the prime minister, and I have agreed to press ahead with reforms to the ESA as part of the spending review that deliver net savings of at least £2.5bn by 2014/15.”

His Chief Secretary said yesterday that this was not agreed; well, is it agreed or isn’t it?

The Chancellor is not being straight with the House—[Interruption.]

[Mr Speaker]

Order. The hon. Member for Wellingborough (Mr Bone) is normally a pretty equable fellow; he is getting a little over-excited. I must ask the right hon. Lady to withdraw that term. No Minister would be other than straight with the House. She will find another word, I feel sure.

[Yvette Cooper]

I certainly accept your point, Mr Speaker. I am sure that no Minister would want not to be straight with the House, and I am sure that the Chancellor will be. I withdraw any suggestion that he was not, because I am sure that he will be.

Will the Chancellor confirm, therefore, that saving an additional £4 billion from getting people into work will require new jobs for 800,000 people, at a time when his own Office for Budget Responsibility says that far from creating an extra 800,000 jobs, his Budget will cut 100,000 jobs from the economy in each and every year?

The Chancellor has also said that he plans to target the workshy and those who are fit for work. Will he confirm, however, that savings from getting those who are fit for work off sickness benefits are already built into the Treasury figures, and that cutting an extra £2.5 billion from employment support allowance would hit only those who have been through the new, tougher test and who even his Ministers agree are genuinely too sick or too disabled to work? Is it not the truth that he is planning to cut the level of support for some of the most vulnerable people in society? Will he confirm that someone who is on employment support allowance, and has been through the test, is already facing a £285 cut in the value of their ESA and an average £650 cut in their housing benefit as a result of his plans?

The Chancellor claims to support jobs and to be progressive, but he is doing the opposite. The truth is that his plans hit the poorest harder than the rich, women harder than men and children and pensioners worst of all. Now he has shown that he is targeting those who are most sick and disabled in society. Is it not the truth that he has decided to hit those who he knows will find it harder to fight back? This is not progressive; it is a nasty attack, and he should withdraw it now.

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[Sajid Javid (Bromsgrove) (Con)]

Does my right hon. Friend have a view on why Labour Members continue to treat the entire British public like children? They spend, spend, spend, bringing our country to the verge of bankruptcy—

[Mr Speaker]

Order. There is much pressure on time. I remind the hon. Gentleman that he must ask a Minister about the policy of the Government, not the attitude of the Opposition. We will leave it there; the Chancellor can respond briefly if he wants, but he is under no obligation.

[Mr Osborne]

My hon. Friend said some very good things about how the Opposition treat the rest of the country like children.

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[Liz Kendall (Leicester West) (Lab)]

The Chair of the Treasury Committee asked the Chancellor to publish new details of the distributional impact of the Budget, including the proposed cuts to housing benefit and disability living allowance. Is the Chancellor aware that the Institute for Fiscal Studies produced such an analysis last month? Is he aware that it says that

“the overall effect of the new reforms announced in the June 2010 Budget is regressive, whereas the tax and benefit reforms announced by the previous Government” —

for the same period—

“are progressive”?

In the light of that evidence, will he explain whether he still claims that his Budget and his Government are progressive?

[Mr Speaker]

Order. There were three questions there, but one answer will suffice.

[Mr Osborne]

I can do no better than repeat what the IFS said in the report to which the hon. Lady has referred. It said that in 2012,

“Considering all tax and benefit reforms… the richest tenth of households lose the most in both cash and percentage terms.”

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[Several hon. Members]

rose—

[Mr Speaker]

Order. In recognition of the level of interest, I have given this question a very good run but, due to pressure of time, some people will have to be disappointed. We must now move on.

PAYE Contributions

John Bercow Excerpts

Wednesday 8th September 2010 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the reported errors made by Her Majesty’s Revenue and Customs that appear to have led to millions of people underpaying or overpaying billions of pounds of pay-as-you-earn contributions.

[Mr Speaker]

Order. I should be grateful if hon. and right hon. Members who are leaving the Chamber would do so quickly and quietly so that the Minister, Mr. David Gauke, can respond to the urgent question.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

I am grateful for the opportunity to make a statement to the House about the action that HMRC is taking to rectify overpayments and underpayments in the PAYE system.

The PAYE reconciliation process occurs every year to reflect the changes in people’s earnings and employment status that happen over the course of a tax year. In previous years, HMRC employed a system of manually joining up separate pieces of information through PAYE. Each case of potential overpayment or underpayment had to be reviewed individually before reconciliation could be finalised. That was inefficient and clerically intensive work, and it resulted in a backlog of open cases. HMRC now employs a new computer system that matches records automatically to ensure that the correct amount of tax is paid.

The coalition Government have already started to look at how to reform PAYE further and make it more efficient. As part of the Government’s strategy to create the most competitive tax system in the G20, we are consulting on options to improve PAYE. The PAYE system was introduced at a time when people had one job—perhaps the same job for their whole career—and one source of income in retirement. However, that world has now gone and it is common for people to have earnings from multiple sources. That is well known, but it is something that the previous Government failed to address.

No reconciliation process was undertaken last year, so this year HMRC had to complete the reconciliation for two years instead of one. The preliminary assessment of this year’s reconciliation was first brought to my attention earlier in the summer, and while the majority of PAYE records are correct, we are acting promptly to put right the situation that we inherited, which has contributed to the number of individuals required to make payments and the size of payments owed. About 4.3 million taxpayers will receive repayments between now and Christmas, while 1.4 million will be sent letters specifying how any underpayment has been calculated and how such payments can be reviewed.

To begin the process of reconciliation, HMRC has sent out the first set of taxpayer notifications to individuals throughout the UK. Those individuals who have overpaid will receive a full refund. Those who have underpaid will make additional payments through the PAYE system, provided that the payment due is less than £2,000. If the payment due is more than £2,000, HMRC will contact the individual to discuss the issue. All payments will begin next year and no immediate one-off payment will be required. HMRC will review the responses to the first set of notifications and make any changes needed to operational plans before going ahead with the rest. Staggering the process between now and Christmas will help to ensure that HMRC can deal with all queries efficiently.

The Exchequer is owed a total of approximately £2 billion. The fact that we were left with the worst deficit in peacetime history means that we simply cannot afford to write off all the underpayments. To ensure that the tax system is fair for everyone and that everyone pays their fair share, we are taking action to recoup the funds as painlessly as possible. In cases of genuine hardship, HMRC will allow payments to be spread across a period of three years. As was already the case, it will not pursue cases when the amount owed is less than £300—that is an increase from the previous threshold of £50—which applies to 40% of all underpayments. Of course, in specific circumstances, HMRC will consider writing off underpayments where it can be shown that HMRC was provided with all the information necessary—although I have to tell the House, from historical experience, that that is unlikely to apply to many cases. We do not want to build up people’s hopes unrealistically.

This Government understand that there is an urgent need to reform our PAYE system. In opposition and from day one in government, we have sought ways to improve it. The system is outdated, inefficient and burdensome to the Exchequer and taxpayer alike. We need PAYE to reflect the employment issues that the 21st century presents, and that will be a focus of reforms that we take forward as part of our wider strategy for reform.

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[Mr Gauke]

I think we now know why Labour Members did not table an urgent question on this matter.

The right hon. Gentleman asked many questions—although there was not a word of apology for a tax system that is clearly encountering some difficulties—and I will endeavour to answer them all. First, there has been no change of plan. We have pursued the same proposal all along, namely to write to 45,000 to 50,000 taxpayers. We will use the information and the lessons learned from this relatively small sample to guide how correspondence will be undertaken with the remaining taxpayers affected. Let me reassure him that his fears about that are wrong. He also expressed concern about the public not being informed about the exercise, but we made great efforts to inform them over the weekend immediately after the decision was taken to proceed with writing those first letters to affected taxpayers.

The right hon. Gentleman referred to a concession that may be available, and he may recall that the A19 concession is available in circumstances where all the information has been provided to HMRC and it has had the opportunity to address it. We have looked into this. The A19 concession, which is well established—he will remember it from his time in the Treasury—does not apply that often in practice, and I do not want people to build up their hopes that it will offer some kind of panacea; that would be unfair on taxpayers.

The right hon. Gentleman questioned whether employers have made mistakes. In some circumstances, employers will have made the mistake that caused the overpayment or underpayment, but the principle remains the same—we have to collect the right amount of tax.

The right hon. Gentleman asked about means-tested benefits. In some cases, because net income was higher in a previous year, certain means-tested benefits would not have been available in that year, so sums are now having to be paid back. In those particular cases where tax underpayments are being recovered through the tax coding system, the corresponding fall in the net income for the taxpayer will increase the availability of means-tested benefits in that relevant year.

The right hon. Gentleman asked about the extension of tax credit renewals’ deadline, and I can confirm that it has been extended to provide additional time for claims. I have to point out to him, however, that the idea that call centres are under strain and that it is difficult to get through to HMRC is not entirely a new phenomenon: it is a long-standing problem. Let me take this opportunity to say to taxpayers who are understandably concerned about their position that they should wait until they receive a letter before contacting HMRC, as only then will it be able to deal effectively and efficiently with their concerns. Nevertheless, he raises a legitimate issue about call centres. We are providing additional staff—there is additional capacity now and there will be after the tax credit renewal process has been completed. We are taking steps to ensure that HMRC is able to deal effectively with those calling in with concerns.

[Mr Speaker]

Order. I understand that the Minister is trying to help the House with informative replies, but I am afraid they are rather prolix and they need to get shorter.

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

Does my hon. Friend agree that the previous Government ignored not only the crippling budget deficit but the serious problem with PAYE? That is evidence as to why the coalition’s setting up of the Office of Tax Simplification is so important.

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[Several hon. Members]

rose—

[Mr Speaker]

I call Matthew Elliott. [Interruption.] I mean Matthew Hancock. Tax was on my mind.

[Matthew Hancock (West Suffolk) (Con)]

The Minister said that one reason why some payments will have to be so big is that there has not been a reconciliation for two years. Can he explain why moneys were not required back from taxpayers up and down the country last year in the months running up to the general election?

[Mr Gauke]

My blood ran slightly cold for a moment when I thought that the TaxPayers Alliance had managed to get in here, but I know that my hon. Friend is a good representative for taxpayers. As for last year, it is fair to say that the introduction of the computer system was a relevant issue, but none the less the lack of a reconciliation has exacerbated the problem. The fact that nothing was done last year prior to the election has left us with a bigger problem this year. He can draw his own conclusions.

[Mr Speaker]

I apologise to the hon. Member for West Suffolk (Matthew Hancock); he is unmistakable.

[Mark Durkan (Foyle) (SDLP)]

May I ask the Minister whether these circumstances have given the Government any further thought about plans to cut the future capacity of the Revenue and Customs? If he is giving positive consideration to the very good suggestion that there be a helpline for MPs, may I suggest, since many of the people affected will not have accountants to hand or be able to go to them, that it be available also to citizens advice bureaux, which will get an awful lot of inquiries?

Equitable Life

John Bercow Excerpts

Thursday 22nd July 2010 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. This is a very important statement, and a lot of hon. and right hon. Members wish to take part in the exchanges on it, but there is also very important business to follow, so there are pressures on time. What is now required is brevity.

[Mr David Davis (Haltemprice and Howden) (Con)]

First, I congratulate my hon. Friend the Financial Secretary on achieving so much in two months. He said that he had done more in two months than Labour did in two years, but he underestimates it. He has done more in two months than they did in 10 years.

Nevertheless, there is a great deal left to be done, as my hon. Friend himself said. Halfway through next year is still a long time to wait for many of the more elderly policyholders. Can he give the House an undertaking that he will stick to that timetable so that those policyholders receive their compensation before they die, in many cases? He said that he was still considering Sir John Chadwick’s proposals. Will he ensure that not only he but the independent commission takes representations from EMAG, and do so quickly?

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[Hon. Members]

Where’s your tie?

[Mr Speaker]

Order. I apologise for interrupting the right hon. Gentleman. The question of his neckwear or lack of it is of no concern to the House. I just want to hear what he has to say.

[Mr MacShane]

Mr Speaker, I have just had extensive root canal treatment and cannot tighten anything around my neck—I am terribly sorry—but I can open my mouth. Does the Financial Secretary understand that Equitable Life policyholders will feel betrayed? When will the Government stop doing endless U-turns?

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[Nadhim Zahawi (Stratford-on-Avon) (Con)]

We have heard a non-apology from the shadow Chief Secretary for the previous Government’s obfuscation. Will the Minister write to the Independent Parliamentary Standards Authority to ask for a special communications allowance for Labour Members, so that they can write and apologise to the families of the 30,000 people who have died and the 1.5 million policyholders who have had to wait 10 years?

[Mr Speaker]

Order. That question may be amusing, but I am afraid that it is irrelevant to the Minister’s responsibilities, and he must not answer it.

[James Morris (Halesowen and Rowley Regis) (Con)]

May I welcome the Minister’s announcement and the speed with which he has come to the House to outline the next steps in the process? Further to an earlier question, will he clarify the time scale in which he wants to receive further representations from interested parties? He said that he wants to reflect on Sir John’s findings, but can he give us an indication of the time scale for receiving those representations?

Office of Tax Simplification

John Bercow Excerpts

Tuesday 20th July 2010 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. The opening contributions of the Minister and the shadow Chief Secretary were a little on the long side. Many people want to take part. What I require is brevity—a textbook example of which can now be provided by the Chairman of the Treasury Committee, Mr Andrew Tyrie.

[Mr Andrew Tyrie (Chichester) (Con)]

I am not so sure about that, Mr Speaker.

I warmly welcome anything that simplifies the tax system; I think we all do. The Chancellor described the new office as a

“a permanent force for a simpler tax system”,

but he has appointed it initially for only one Parliament. Can the Minister explain why? What is to be the annual budget of the office’s permanent staff, and will permanent appointments be subject to scrutiny by the Treasury Committee?

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[Mr Speaker]

Order. I know that the Minister will relate his answer to attempts to simplify the tax system.

[Mr Gauke]

I am grateful for your guidance, Mr. Speaker. All I would say is that if my hon. Friend is speaking, I am sure that the Chamber will be packed.

Oral Answers to Questions

John Bercow Excerpts

Tuesday 13th July 2010 Commons Chamber

[Mr Speaker]

Order. I am grateful to the right hon. Gentleman, but I do not think we need to dilate on the policies of the Opposition.

[Gordon Banks (Ochil and South Perthshire) (Lab)]

4. What recent assessment he has made of the effects of the change in the rate of capital gains tax on the number of business start-ups.

[Gordon Banks]

I thank the Financial Secretary for his response, but does he share my concern that the change in capital gains tax will mean a reduction in businesses in the private housing rental sector, and with it, as predicted by Rightmove, a growth in rents and a shrinkage in the number of houses for rent? If so, what is he going to do about it?

[Mr Speaker]

I call the Chief Secretary. No, the Minister.

[Mr Hoban]

I have not been promoted, Mr Speaker.

The changes to capital gains tax that we have introduced will ensure that the right tax regime is in place and that it is fair and responsible. The hon. Gentleman ought to remember, of course, that the capital gains tax rate for second homes prior to the Budget was 24%. It has now gone up to 28% for those paying higher rate taxes, but those on basic rate taxes will be paying only 18%.

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[Ms Angela Eagle (Wallasey) (Lab)]

Is the Chief Secretary aware that, as part of the growth drive, the Treasury has set up a spending challenge website asking for ideas and assistance for the future, and that it is currently featuring issues such as sterilising the poor; reopening the workhouses; asking single parents who cannot finance their children to terminate the pregnancy; benefit claimants to work in sweatshops; and immigrants to be moved out of cities? Is he happy that such racist and offensive drivel is being hosted by one of his websites, and will he give the House an undertaking that the site will be moderated and that this stuff will be removed immediately?

[Mr Speaker]

Order. I know that the right hon. Gentleman, in answering the question, will focus his remarks on the June 2010 Budget.

[Danny Alexander]

I am grateful for that, Mr Speaker.

Of course, I would not wish to promote such ideas, but I am surprised that the hon. Lady pours scorn on the consultation process we are undertaking. She will know that we have also set up such a process for public sector workers. We have had more than 66,000 ideas from people who work in the public sector and who are suggesting savings that they believe can be made in their own services. That is a valuable part of the spending review process. However, we have not had a single idea from the Labour party on how we can make the savings, let alone the apology warranted for the terrible mess it left the economy in.

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[Bill Esterson (Sefton Central) (Lab)]

rose—

[Mr Speaker]

Is the hon. Gentleman’s question specifically on the north-east? No? I know that he is from the north-west. Never mind. I wondered whether he wanted to say something about the north-east, but no.

[Mr James Gray (North Wiltshire) (Con)]

11. What steps he plans to take to support economic growth in the south-west.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

Can the Chief Secretary tell the House whether he thinks it is completely ethical for the definition of “unemployment” to be changed just before Prime Minister’s Question Time and for that be made public without telling the media that that was the case? Would he comment on the fact that the person who did this was seconded from a hedge fund and is therefore not independent? Will the Chief Secretary therefore confirm that that was the reason why this person had to resign and bring scorn—

[Mr Speaker]

Order. I must limit the hon. Gentleman to two questions—one answer will suffice.

[Danny Alexander]

The Office for Budget Responsibility is wholly independent. Decisions of the sort that the hon. Gentleman has described are a matter for the OBR to take on its own initiative—that is what having an independent body means.

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[Danny Alexander]

It is striking that the one party that had a plan to increase VAT before the election—to 18% or even 19%, according to the account in one book serialised today—did not say so at the election. I am not sure that it would be appropriate for us to publish documents that were worked up for the previous Chancellor—I am not sure that that would be in line with the conventions—but the hon. Gentleman has made his point very effectively.

[Mr Speaker]

Last but never least, I call Mr Dennis Skinner.

[Mr Dennis Skinner (Bolsover) (Lab)]

Has the Treasury done a calculation of the number of construction jobs that will be lost as a result of not building 700 schools? Does that not prove that public sector cuts equal private sector misery? Get that into your head.

Finance Bill

John Bercow Excerpts

Tuesday 6th July 2010 Commons Chamber

[Mr Jones]

Well, it is. In a constituency such as mine, driving is an essential tool for young people in getting to work and other places. My fear is that this will lead—

[Mr Speaker]

Order. I apologise for interrupting the hon. Gentleman, but a very large number of private conversations are taking place and there is a substantial hubbub in the Chamber. It is as though, after the first 53 minutes of his speech, the attention of the House has wandered a little. However, I know that a hushed atmosphere will be resumed and the House will want to hang upon his every word.

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[Mr John Denham (Southampton, Itchen) (Lab)]

On a point of order, Mr Speaker. At about 4pm today I was rung by a reporter from The Daily Telegraph, Mr Christopher Hope, and asked to comment on the reply to a written question that he said would be answered tomorrow. I assumed that the question had been answered and would be reported in Hansard tomorrow. However, when I checked with the Library, it confirmed that no answer had been received. I have also checked with the hon. Member for Perth and North Perthshire (Pete Wishart), who tabled the question. He had checked his pigeon hole at about 4pm, and at that time he had not received a reply. At 7pm, the Library told me that the question had still not been answered.

Is it in order for the Secretary of State for Communities and Local Government or his agents to give a parliamentary answer to the press before making it available to the hon. Member who asked the question or, indeed, to the whole House? What remedies can we have for those Ministers who have such low regard for this House and its Members?

[Mr Speaker]

I am grateful to the right hon. Gentleman for his point of order and for advance notice of it. It is, of course, essential that answers are given, first, to the Member concerned, although it sometimes happens that answers go innocently astray. Ministers on the Treasury Bench and the Government Whip have heard the point of order and will no doubt ensure that the Department discovers what took place. When that is ascertained, and it should not take long to do so, I would like to be informed. I am grateful to the right hon. Gentleman for putting a serious matter on the record.

Just before I call Mr Andrew George, I simply point out to the House that a very large number of Members are still seeking to catch my eye, and I know that Members will regard it as most helpful, with no reference to any particular speech that the House has heard, if I remind it that the Finance Bill is a relatively narrow Bill of, I think, 11 clauses and five schedules. It is approximately 30 pages, and the thrust of it depends upon, and is relevant to, I think, seven resolutions of the House. I thought that that might give it a bit of context and reference.

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[Glenda Jackson (Hampstead and Kilburn) (Lab)]

I am most grateful to the hon. Gentleman for giving way, and I admire his mea culpa—is it St Sebastian, the man who stands there with all the arrows? Certainly the hon. Gentleman has portrayed that for us this evening. However, with respect, the issue is not simply VAT. In his opening remarks he said he supported the Budget and the Finance Bill because we are all in this together, but we are not.

No one sitting in this Chamber or within the environs of this Chamber is in danger of losing their home because of the changes that his Government are bringing in with regard to housing benefit, but 303 of my constituents are in danger of losing precisely that. They are not alone in London or the country at large. The hon. Gentleman gave a very good mea culpa on VAT, but the complicity of his party with what the Conservatives are going to do to our country is not absolved, however long his sentence.

[Mr Speaker]

Order. May I just say to the hon. Lady that I could listen to her, almost without interruption, for some hours, but that shorter interventions would be helpful? It is always a pleasure to listen to her fantastic enunciation.

[Andrew George]

I think that we are all competing in sentence length—perhaps the hour is causing us to use sub-clauses. [Interruption.] I know that I am not the most articulate Member—I have a speech impediment; please bear with me.

The hon. Member for Hampstead and Kilburn (Glenda Jackson) made a decent point. If she listened carefully to my opening remarks, she would realise that my reference to the “we’re all in it together” theme was intended to criticise us all for being in it together by missing the point and making tribal remarks about the other side, but not being in it together with the country at large, which will suffer through some of the Budget measures. She made further points about my keeping narrowly to the subject of VAT. Interventions in my speech have been only about VAT, and I wished to make a brief contribution, which turned out to be much longer than I expected, on VAT. It is important, having commenced on that path, to continue on it and examine that provision in isolation. I know that it cannot be taken in isolation by the families, businesses and charities that it will affect. However, I still believe that it is important to consider it on its own.

The other issues, such as housing benefit, that the hon. Lady mentioned, are not in the Bill. I hope that the House will have a good opportunity to debate public sector spending and benefits, including disability benefit issues, which were announced in the Budget and clearly need to be debated later, with all the facts made available to us. We currently have a translucent position with regard to the evidence before us.

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[Several hon. Members]

rose—

[Mr Speaker]

Order. I think that I should say to the House that, although I cannot possibly predict such matters, it may well be that at some stage I shall be asked to grant a closure. One of the factors in the decision making of the occupant of the Chair faced with such a request is the extent to which contributions continue to be pithy and relate to the terms of the Bill. I say no more than that.

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[Gregg McClymont]

Indeed, they assent. My own view is that the political rhetoric is at odds with the economic reality, and I shall tell them why. Several colleagues have noted that the average maturity of British sovereign debt is 14 years—

[Mr Speaker]

Order. I am listening to the speech by the hon. Gentleman with the closest interest, and it certainly has the manner of an economic treatise, which is of some interest, but I am just trying to fathom to which part of the Bill his comments relate. I have not yet found it, but I have a feeling that he is about to demonstrate it to me.

[Gregg McClymont]

Thank you for that guidance, Mr Speaker. As I suggested at the outset, everything in the Finance Bill depends on a view about confidence in the economy, and I was suggesting that the Government’s confidence in their own prescription is misplaced. However, I shall try to follow your advice and move on.

Government debt is still at historically low levels. It is edging towards 70% of GDP, but for 60 of the past 100 years, Government debt was at that level or higher, and that undermines the claims for an historic level of debt. It is true that those debts were incurred fighting two world wars, but the recent and more modest expansion of the national debt also happened in exceptional circumstances. I hope that Government Members will not forget the scale of the crisis that the world economy recently suffered. In 2009, global GDP shrank by 2.4%, the first decline since world war two, and the Budget must be considered in that context of global depression.

The political obsession with debt is dangerous and has distorted the Government’s economic priorities as set out in the Bill. Our public deficit is just one of many causes for concern about our future economic performance, and that is why Labour had a plan to restrain public spending when the recovery was secured. Labour led Britain out of recession last year through stronger growth and lower unemployment, supported by an active industrial policy and global co-operation. This Government, by contrast, offer us nothing but scaremongering about the national debt and competitive deflation with our economic partners.

What of job creation? In oral questions last week, the Secretary of State for Energy and Climate Change compared the previous Government’s target of 1.2 million new green jobs to the sector targets that Gosplan set in the Soviet Union. The Opposition might have had plans and targets for job creation, but the Government have targets for the destruction of jobs. That is what we learned from the Treasury leak last week, and that is where an obsession with public debt leaves us.

I should like to address one final superstition—that austerity inspires confidence among the bond markets that finance our debts and the consumers who drive demand and growth. That belief suits the Chancellor’s purposes admirably, as he and his colleagues have done much to undermine confidence in our economy and public finances. They style themselves as the remedy for a moral panic of their own making but, as I have suggested, there is little hard evidence to support what they say. The hard-headed realists on the Government Benches want to sacrifice real services and real jobs here and now, on the basis of what they think the markets might desire of them later. We may yet find that those gods are as inscrutable as they are insatiable. There is a fine line between confidence based on reduced deficits and confidence based on growth. It suggests that markets that smile on austerity now may punish us for low growth later.

In my opinion, the coalition Government and their policies have had little discernible impact on international confidence in the British economy. More important has been the lack of confidence in the eurozone; relatively speaking, confidence in our economy has grown. But the scaremongering about the public finances has already had a clear negative impact on the confidence of ordinary men, women and businesses, on whom the country’s recovery rests.

To conclude, the Budget has little to do with progressive or necessary austerity; it is acutely political in intention. The long-term objective is to reduce the financial burden on those who tend to vote Conservative by reducing the size of the public sector. That is the context in which the Conservative claim that the public deficit is the biggest threat to recovery must be understood. The Budget is profoundly political and not unavoidable. It reflects the superstition, self-interest and party interest of the modern Conservative party. I, for one, will not be supporting it.

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[Ian Lavery (Wansbeck) (Lab)]

Thank you, Mr Speaker, for allowing me to participate in this debate on the Second Reading of the Finance Bill.

One thing that is certain is that all parties agree that the deficit exists; we disagree only about how we would seek to reduce it, and how quickly or otherwise. Having now seen the detail of the Budget, and having like other Members been drip-fed even more bad news on a daily basis, I feel that the Budget and the subsequent cuts represent a most draconian, vicious and bitter attack on the hard-working people of the UK.

This has been described as the worst Budget in living memory, and I must say that I agree with that sentiment. This unprecedented attack by the coalition—the Tories and the Liberal Democrats—seems to be relished by many on their Benches. There appears to be something of a perverse glee among many of them when they see this attack on the people of this country. Only the wealthy and the well-off seem to have escaped the far-reaching measures forced upon the nation by the slash-and-burn, patched-up coalition Government.

If I may, I wish to introduce a more human side to the debate on the Finance Bill and the Budget. Tonight we have heard a million and one different figures, and I am sure that most of them are accurate, but we have not heard too much about the human side and the impact that the figures in the Bill will have on ordinary working people. In my constituency, 53% of the people work in the public sector—the highest proportion in the country. We should not treat those people as social outcasts, yet that appears to be happening. We have people in integral employment in the public sector—doctors, nurses, firemen, policemen, paramedics, prison officers, teachers, lecturers, classroom assistants, council workers, refuse collectors, street cleaners, chief executives and administrators among many more. Those are all valued occupations—essential jobs for the economy, including that in my constituency.

Let us consider the police. Today, they have been on the front line, chasing an armed murderer only 10 miles from where I live. We should be proud of those police officers and not look to cut their numbers. Today, they are protecting the public; tomorrow, they could face unemployment because of the cuts. Let us consider the firemen. They are the only ones running towards an explosion, or towards a fire in which people are trapped, while the general public run away. We should be proud of them. They are on the front line today, but they face unemployment tomorrow.

We must stop treating people as mere statistics. They are real people, with real lives. They have real families and real mortgages and, like many of us, they have aims and ambitions. Most of them chose a career path when they left school of serving their communities in the public sector. Should they be punished for that through the Bill and the Budget? They should not. They never expected to be unreasonably attacked through Government policy.

Why on earth the Government have attempted to divide public and private sector workers, driving a wedge between them as if they are different sorts of people, in different classes, and creating some second-class citizens is beyond me, unless it is a case of divide and rule. They have not only imposed a two-year pay freeze, but attacked pensions. “Pay more while you work, get less when you retire” seems to be the policy.

Let us consider the figures from my constituency. An average public sector worker in the NHS in Wansbeck can expect a pension of some £6,000 per annum. A local authority worker can expect a pension of £4,000 per annum. That is frankly disgraceful and unacceptable. It is also unashamed vindictiveness towards hard-working people.

The attack on the hard-working people of the public and private sectors through an attempt to dilute safety and health legislation is also worrying. Some on the other side of the House claim that it is burdensome, yet we have some of the best safety and health legislation in the world. When Lord Young of Graffham is being asked to reform safety and health laws and clearly states—

[Mr Speaker]

Order. The hon. Gentleman is addressing the House with great force and eloquence. A few moments ago, I was waiting for a specific reference to the Bill and he made it, for which the House was indebted to him. However, he is now talking about health and safety and wider reviews, and there is the difficulty that those matters do not appertain to the Bill, to which I know he will now revert with his customary force and eloquence.

[Ian Lavery]

Thank you very much for that, Mr Speaker —I understand. Whether or not health and safety and other such issues are part of the Bill or the Budget, they are integral to the people whom we represent.

To top it all off, those hard-working people are expected to accept the reduction in their pensions and pay cuts without any voice. It is reported that the Government are looking to tighten what are already the worst anti-trade union laws in the western world, to prevent people from having the democratic right to oppose the cuts in the Bill and the Budget. With pay cuts, pension cuts, benefit cuts, employment rights eroded, and health and safety laws diluted, their futures are in tatters. Who says that we are in this together? I invite the Chancellor and the Prime Minister to visit my constituency, to explain to the people of Wansbeck, including the 53% who may lose their jobs, how on earth we are in this together. What about the young and the future jobs fund and university places? What about the lack of job opportunities and the abolition of the regional development agencies? With the cutting of benefits, what future do the young people have as a result of the Bill?

Disabled people will be affected. What about the tax on disabled benefits? In my constituency, benefits for disablement and incapacity, including disability living allowance, are extremely important, because Wansbeck is a heavily industrialised area. The child trust funds are to be abolished—

[Mr Speaker]

Order. I am genuinely trying to be helpful to individual Members and to the House. It is open to the hon. Gentleman, and to other hon. Members who speak, to say something about corporation tax, capital gains tax, value added tax, insurance premium tax, income tax, etc.

[Ian Lavery]

Thanks for that, Mr Speaker. Every Member who has sat in the Chamber for as long as I have today is probably as fed up as I am about VAT and everything else. I accept everything you say, Mr Speaker, but I must say that I am just trying to change things, because we are talking about the cuts and the impact they will have on ordinary people. That is the only thing I am trying to get across. I understand quite clearly that I am probably stretching the limits of the debate—

[Mr Speaker]

Order. I am extremely grateful to the hon. Gentleman and I know he is doing his best to heed my advice—not altogether successfully—but from his last sentence, I suggest that he could delete the word “probably”. He was not following my advice, but I know that he will now do so. There are other matters to address if he wishes to do so.

[Ian Lavery]

Once again, Mr Speaker, thank you very much for your indulgence. I conclude not by mentioning VAT or anything of that nature, but by suggesting once again that it is not fair to say that we are in this together, because we certainly are not.

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[Helen Goodman]

rose—

[Mr Speaker]

Order. May I gently say to the hon. Gentleman that I do not have a party? Some people have known that for some time.

[Helen Goodman]

In order to achieve that difference in the debt to GDP ratio four years hence, we will see cuts of 25% across most Departments, four times greater than those that Geoffrey Howe tried to impose on the country in the early 1980s. Even so, the tax burden will also rise by £33 billion. We have to question the judgment of a Government who are taking that amount of money out of the British economy.

Another issue is whether the Budget will promote growth. It is clear that in overall terms it will not do so. That is clear from the revisions to the forecasts made by the OBR, which show that growth is down and unemployment is up. Given the huge cuts proposed in the public sector—we heard about the first slice yesterday to the Building Schools for the Future programme—not only will the number of public sector jobs be reduced, but the knock-on effect will be significant increases in job losses in the private sector. The Government’s contention that 2 million private sector jobs can be created is just not credible. That is far more than was achieved in the 1990s when interest rates were cut aggressively and the pound depreciated by 25%. In those years, it took seven years for employment to grow by 1 million. Obviously, interest rates cannot be cut aggressively in the current situation, and it is highly unlikely we will see a depreciation of the pound against the euro, given that the European economies—our largest market—are in the state they are in. Under the Labour Government, 2.5 million jobs were created over 13 years, but that included extra jobs in the public sector, a housing boom and huge increases in financial services. The Government are now putting forward a prospectus that is simply not tenable. The argument that we have to attend to the level of the deficit because private sector investment is being crowded out by the public sector is also not credible, given that the economy has 4% spare capacity.

I turn to the measures in the Bill. On corporation tax, the coalition Government are cutting the rates—this is a long-standing pattern with the Tories—while cutting the allowances. What will that do for growth? How will that enable the economy to be rebalanced in the way the Secretary of State for Business, Innovation and Skills says is so important? Cutting allowances for investment is bad for manufacturing. The small and medium-sized firms in my constituency, where there is a lot of engineering and small manufacturing, provide several examples demonstrating what the problems are. Over the past month, I have visited two firms that make packaging, which means they supply the retail industry. Obviously, if shops are not doing very well, those firms are not doing very well. Clearly, they need a lot of big machinery to make the packaging, and if they are to continue to have the new, up-to-date machinery to do that, they need investment allowances.

Not so long ago, I visited a building and joinery firm that also has a lot of expensive machinery that it needs to keep up to date, and it also needs these investment allowances. Its contracts are largely dependent on the public sector and on schools and police stations being refurbished, so these cuts in the public sector will have huge knock-on effects in the private sector. Let us take a final example: a chemicals firm making sealant for aircraft. How will it fare with cuts to the defence budget, which is one of the budgets not being protected? Once again we have a complete picture that is totally incoherent. What the Government offer in practice and what they say they want to achieve are two completely different things.

Many hon. Members have commented on the unfairness of the low level of the bank levy and on the fact that the banks will gain more from the corporation tax cuts than they will lose from the increase in the bank levy. However, no one has asked why the bank levy is only being introduced from 1 January 2011. I would like Treasury Ministers to explain why there is a delay in the introduction of the bank levy. Surely that gives the banks a lot of time to move their assets around and avoid this tax, at which, as we all know, the financial services are particularly adept.

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[Several hon. Members]

rose—

[Mr Speaker]

Order. Before he continues, let me say to the hon. Gentleman that the issue of regional similarities—or, indeed, for that matter, disparities—is a matter of interest, but it is not relevant to the matters in the Bill. The hon. Gentleman is rightly passionate about his own area, but I know that he will want to relate his remarks to the Bill. He has a considerable choice between corporation tax, capital gains tax, value added tax, insurance premium tax, pensions, income tax and no fewer than five schedules, the second of which has five parts. I think that that will keep him happy.

--- Later in debate ---

[Barry Gardiner]

rose—

[Mr Speaker]

Order. Before the hon. Gentleman responds to that intervention and resumes his speech, I remind him that he is perfectly entitled to talk about vulnerability if he so wishes, but he must relate it to the matters within the Bill and he has an extensive choice from which to select.

[Barry Gardiner]

Thank you, Mr Speaker. I am tempted to take up the length of time that the hon. Lady mentioned, but I fear that the House needs to come to a close. A clear choice has been made by the Conservatives to cut an extra £40 billion on top of the £78 billion announced in March. They have made a clear choice to cut £11 billion out of tax credits and benefits. A clear choice has been made by the Liberal Democrats not just to drop the VAT bombshell that they warned of, but to act as navigators and pathfinders for the Conservatives to deliver it perfectly targeted. That regressive tax does the most damage to the poorest. It is regressive, not progressive.

“We will not have to raise VAT to deliver our promises”,

said the Deputy Prime Minister before the election. Indeed not—the Liberal Democrats will have to raise VAT to deliver the Tories’ promises. What an apology for a fig leaf.

--- Later in debate ---

[Barry Gardiner]

My hon. Friend is entirely correct. I believe that the point may have been made earlier. [Interruption.]

[Mr Speaker]

Order. Before the hon. Gentleman continues, may I gently say to the right hon. Member for Uxbridge and South Ruislip (Mr Randall) that we do not need sedentary interventions from him and we do not want to get into a general debate about the merits or otherwise of Randalls as a department store, interesting though that may be?

[Barry Gardiner]

Mr Speaker, I will forgo that offer, tempting though it may be. However, I will try to respond to my hon. Friend the Member for North Durham (Mr Jones), who is entirely correct to say that retailers will also suffer from this measure. Large retail operations, such as supermarkets, will particularly suffer because they have huge costs to meet in changing their tills over to cope with the VAT changes.

We made our choices too. They were hard choices, but they were not regressive choices, and they protected the poorest and the vulnerable. We chose to raise duty on cider to the same level as that on other alcohol. The Liberal Democrats opposed that choice in March—in fact, it was the only choice that they opposed then. Their choice is to reverse that duty in this Finance Bill, to put 8% less duty on cider and to increase VAT by 2.5%; scrumpy today, child poverty tomorrow is the Liberal Democrats’ great rallying cry for the 21st century. This is their tax priority for the new politics of collaboration. Albus Dumbledore was right: it is not our abilities in life but our choices that tell us who we really are. My choice is to oppose this pernicious Bill.

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[Stephen Pound (Ealing North) (Lab)]

Does my hon. Friend agree that implicit within the Budget, the decapitation of Building Schools for the Future has resulted in the private sector not being able to mop up a pool of labour? That private sector has in fact been shot in the back of the head, driven out into the country and dumped in a lay-by.

[Mr Speaker]

Order. I would not want the hon. Member for Pontypridd (Owen Smith), who has made an auspicious start, to stray from the path of virtue. May I just say to him that it is a good rule of thumb to listen with great interest and enthusiasm to the hon. Member for Ealing North (Stephen Pound), but to recognise that sometimes his interventions have absolutely nothing to do with the matter under discussion?

[Owen Smith]

In this instance, I beg to differ. My hon. Friend’s intervention absolutely speaks to the case, because the philosophical underpinnings of what we hear from Government Members is that somehow we have a great dichotomy in our economy. The public sector is bad, of course—non-jobs, as I heard one Local Government Minister describe them recently. Well, many people in my constituency and elsewhere across the country rely on such jobs to feed their families. Private sector is, of course, good, and the thing that we all want to encourage. The construction industry is a wonderful example of the symbiosis between the two parts of our economy. If you cut one the other will bleed, and we will see £50 billion cut from the construction industry. The construction industry accounts for 10% of GDP, and that £50 billion will have a big impact right across the economy. So I think that private and public are linked.

The theory that we are testing now is the one that we have allegedly seen work in Canada and Sweden, whereby the Government make cuts and the economy flourishes. In those countries we saw a long-term reduction in spending on public sector vital services.

The other key lesson from those other examples of deficit reductions is that the conditions need to be right. Investor and consumer confidence have to be growing, and there has to be evidence of underemployed private sector capital. Exporters must be ready to grow and foreign markets must be ready to buy. Get it wrong and cut too deep when the conditions are unfavourable, and we have on our hands not a success story, but depression and bankruptcy. The historical examples of such failed experiments form a long and ignoble list, and Government Members would do well to read the history books and learn from them.

[Stephen Pound]

On that exact point about the Canadian experiment, does my hon. Friend agree that the conditions that prevailed in Canada—a massively economically expanding neighbour, in the same free trade association, to the south—are not remotely met here. Any comparison between this country and Canada, or even the Swedish model, are specious and possibly even mendacious.

[Mr Speaker]

Order. I am trying to help the hon. Member for Pontypridd and other hon. Members. I feel sure that is only a matter of seconds before he says something about corporation tax, capital gains tax, value added tax, insurance premium tax, pensions, income tax or any of the five schedules to the Bill.

[Hon. Members]

He has nothing to say.

[Owen Smith]

I have plenty to say. [Interruption.]

[Mr Speaker]

Order. I have set the hon. Gentleman a bit of a test, and I want to hear him.

[Owen Smith]

I welcome your guidance, Mr Speaker. Many Labour Members have tried to say this key thing today, but I will try to encapsulate it. There are various items and taxation measures listed in the Bill.

[Owen Smith]

I thank my hon. Friend for that intervention. He is entirely correct that my Pontypridd constituency will be badly affected—[Interruption.] Sorry, I cannot make out the mumblings coming from those on the Government Benches. Equally, however, if the growth projections from the OBR and the Treasury leak were likely to offset the impact of those VAT increases, and if people were more likely to be in work in my constituency as a result of the measures in the Bill and the Budget more generally, I would be less concerned about the VAT rises.

Some specific comments have been made about the VAT rises and other measures in the Bill. Only this week, 125 chief finance officers of some of Britain’s biggest companies reported that their confidence in growth was at a 12-month low, with two thirds of them warning explicitly that the measures in the Bill would damage their companies and risk a double dip recession—hardly creating the conditions for them to employ more people. In manufacturing, Deloitte’s global manufacturing competitiveness index also anticipates decline, and in the service sector, the purchasing managers index—an established barometer of health in that sector, as the right hon. Member for Uxbridge and South Ruislip (Mr Randall) will know—reported last month the largest drop in business confidence in the last 14 years of its history.

Where are we going to grow, and how are we going to export? Government Members have cited other parts of the world where we should look for our examples. The US has sometimes been mentioned, and it was an engine of growth in the last century, but the statistics there offer us no comfort, with non-farm payroll reporting last week just 83,000 private sector jobs created. That is important because the Government expect us to believe that through the measures in the Finance Bill they will create 2.5 million jobs in the five-year period following the Budget. I have been researching that important and bold claim, and I received an answer from the House of Commons Library suggesting that only once in any five-year period since 1970 has the British economy created more than 2.5 million private sector jobs, the period in question being 1980-85. That was a statistical anomaly, however—the result of wholesale privatisation. Perhaps that points us to a secret or hidden agenda in the Government’s plans—another major round of privatisations.

My suspicions about that may be shared by someone who was, until recently, one of the Government’s allies— Sir Alan Budd, formerly of the Office for Budget Responsibility. I have no idea whether his hasty exit from the OBR is prompted by unhappiness about the new office perhaps having its integrity compromised, but I point Members to an interview that he gave a couple of years ago, which is of relevance to the Bill. He was asked whether he felt any discomfort when he was advising the Thatcher Government that perhaps some of the decisions he was making as an economist—[Interruption.]

[Mr Speaker]

Order. I am sorry to have to interrupt the hon. Gentleman. I know that the hour is relatively late—not exceptionally late, but relatively so—but far too many private conversations are taking place in the Chamber, which is very discourteous to the Member addressing the House. If people do not want to listen to the speeches—I address this to all Members—they are under absolutely no obligation whatever to stay in the Chamber, and we will manage without them. But if they are going to stay in the Chamber, they will show some basic courtesy and respect.

[Owen Smith]

Thank you, Mr Speaker.

--- Later in debate ---

[Chris Williamson]

My hon. Friend is right. Conservative Members are reverting to type. We saw what they did—I have outlined some of the implications—when they were last in power. The policies that they are pursuing now will have exactly the effect that he describes in undermining manufacturing, because they are the enemy of manufacturing industry in this country.

There is an alternative. Historical precedent proves that investing in the economy at a time of economic fragility is absolutely the right course of action. Government Members should look at their history books. We had a lecture from the hon. Member for North East Somerset (Jacob Rees-Mogg), who referred to the 1930s. I refer him and other Government Members to Roosevelt’s new deal. Roosevelt demonstrated that by using the power and instruments of the state to invest in the economy, Government could get the economy moving again and put people back to work. Do not forget that when Roosevelt came to power, 25% of the American people were out of work, and his new deal put them back into work. By contrast, in this country we were pursuing a deflationary policy that resulted in millions of people losing their jobs and remaining unemployed for many years.

Indeed, President Obama agrees. He wrote to all the G20 leaders—

[Mr Speaker]

Order. May I gently say to the hon. Gentleman that we cannot have a general discourse on the merits of the policies of respective American presidents, however strongly he and others feel about those matters? I am sure that it is only a matter of seconds before he returns to the substance of the Bill.

[Chris Williamson]

Thank you, Mr Speaker. I merely wanted to make a brief reference to President Obama’s letter. I think that Government Members are familiar with it. I referred to it in a previous speech, and I will therefore move on.

From the historical precedents to which I have referred, and indeed the precedent of the Attlee Government in 1945, it is clear that by investing in our economy and not taking the course of action that the Government are taking in relation to VAT, corporation tax and the insurance premium tax, we can secure greater opportunity for recovery. If we can put people back to work by investing in our economy, that will ensure that the tax take is increased.

--- Later in debate ---

[Mr Speaker]

Order. Members are not helping the hon. Lady. May I say to her that it is entirely understandable that she looks behind her, but that she must face the House?

[Lilian Greenwood]

Does my hon. Friend share my concern about the impact that the VAT increase will have on the retail sector? I understand from a recent report that 77% of retailers felt that it would have a negative, quite negative or very negative impact on their sales, potentially leading to a 1.6% reduction in retail staff, 47,000 employees losing their jobs and more than 9,000 stores closing—

[Mr Speaker]

Order.

[Chris Williamson]

I agree with my hon. Friend. We have seen a retail-led regeneration of the city centre in Derby, and the increase in VAT will certainly have a negative impact. Already retailers are struggling in the difficult economic circumstances with which they are confronted, and clearly an increase in VAT is bound to have a negative impact.

What we wanted to achieve, and what we believe is the right way forward, is the creation of an economic virtuous cycle through investment in our economy. That would lead to more jobs, which would increase tax and national insurance income, which in turn would lead to the opportunity for more investment, and so on. The Government are pursuing a course of action that will lead to an economic vicious circle. The cuts in investment will result in more unemployment and a reduction in the tax take, resulting in more cuts and more unemployment, and so on. The VAT increase will clearly hit the poorest people in our community. The Treasury figures say that, as do the Institute for Fiscal Studies and the National Institute of Economic and Social Research.

What I find astounding is the breathtaking hypocrisy of the Liberal Democrats. On 7 April the Deputy Prime Minister said:

“Our plans do not require a rise in VAT. The Tory plans do. Their tax promises on marriage and jobs may sound appealing. But they come with a secret VAT bombshell close behind.”

It is little wonder that support for the Liberal Democrats in the latest YouGov opinion poll has slumped to 15%. Furthermore, another YouGov poll last month showed that 48% of Liberal Democrat voters were going to abandon the party as a direct result of its supporting the Tories on the issue. Even the Prime Minister said last year that VAT was regressive and hit the poorest hardest. He went on:

“It does, I absolutely promise you.”

The Chancellor of the Exchequer told The Times on 10 April that the Tories had no plans to increase VAT this year.

The Chancellor keeps telling us that we are all in it together, but there is a world of difference between the impact on privileged former Bullingdon club members, such as the Chancellor and the Prime Minister, and the families on modest incomes in my constituency who will have their tax credits cut—[Interruption.]

[Mr Speaker]

Order. A rather unseemly exchange is going on between the hon. Member for Nottingham East (Chris Leslie) and the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne). I would not want to find that, as a result of excessive noise, I miss out on what I am sure is coming soon, namely the peroration of the hon. Member for Derby North (Chris Williamson).

[Chris Williamson]

There is an even bigger difference between those privileged former Bullingdon club members and the people whom they will throw on the dole—the tens of thousands, if not hundreds of thousands, and possibly millions of people who will be thrown out of work as a direct consequence of their policies.

The Chief Secretary concluded his remarks today by saying that the Budget was tough but fair.

[Chris Williamson]

I agree—[Interruption.]

[Mr Speaker]

Order. The fact that there is a generally convivial spirit is good, but the House must come to order because, as I said, we must shortly hear the hon. Gentleman’s peroration.

[Chris Williamson]

I agree with the hon. Gentleman that he is cynical.

How is it fair to increase VAT when the Chief Secretary said that he would not do that? How is it fair to hit the poorest the hardest? How is it fair to cut tax credits from families on modest incomes or to scrap child trust funds, which give young people a nest egg? How is it fair to slash free school meals? How is it fair to short-change pensioners through the failure to operate tax allowances? How is it fair to blame public sector workers for the deficit and the national debt, when international bankers are at fault? Let us remember that Conservative Members resisted any additional regulation of those bankers, many of whom have more in common with Government Members than they have with Opposition Members. How is it fair to chop benefits, including the swingeing cuts to which my hon. Friends referred, for some of the poorest and most vulnerable people in the country? The shameful Finance Bill is the antithesis of fairness. That is why Labour Members will vote against Second Reading.

Budget Resolutions and Economic Situation

John Bercow Excerpts

Thursday 24th June 2010 Commons Chamber

[Chris Bryant]

On a point of order, Mr Speaker. “Erskine May” makes it very clear that hon. Members should be able to explain themselves without requiring documents that they then want to present to the House. The right hon. Gentleman has just said that Members should look at some document that he is referring to, but we are not able to do so. Should we not get back to the facts?

[Mr Speaker]

It is true that the use of visual aids in the Chamber is disorderly. I am going to be charitable and generous, and interpret the Secretary of State as suggesting that these are matters that people might like to take forward at another time outside the Chamber, but they clearly do not aid the debate in the Chamber now.

[Several hon. Members]

rose—

[Mr Speaker]

I fear that we are going to have a flurry of points of order. [Interruption.] No, they are not points of order. I therefore call the Secretary of State.

[Chris Huhne]

Thank you, Mr Speaker. Let me merely assert, until the hon. Member for Rhondda (Chris Bryant) has had the opportunity to check this for himself, that the distributional analysis of changing the main VAT rate produced by the IFS today shows that there is not a regressive pattern to that when looked at by decile of expenditure.

I am very happy to defend this Budget, not least on the basis that, astonishingly, it is the first Budget in which we have a serious distributional analysis of the impact of its measures. We had 13 years of a Labour Government producing Budget after Budget, and on not one occasion in one Red Book was there a section devoted in this way to distributional analysis.

Capital Gains Tax (Rates)

John Bercow Excerpts

Wednesday 23rd June 2010 Commons Chamber

That provision may be made in relation to the rates at which capital gains tax is charged.

[Mr Speaker]

Before the shadow Chancellor rises, may I appeal to hon. Members who are leaving the Chamber to do so quickly and quietly so that we can hear him? I call Mr Alistair Darling.

--- Later in debate ---

[Heather Wheeler (South Derbyshire) (Con)]

My hon. Friend is absolutely right to draw attention to the fact that small and larger businesses have taken the hit. We hear so often from Labour Members that they are worried about what is happening in the public sector, but that sector needs to take a leaf out of the book of the private sector, in which people have taken 10% cuts and four-day weeks. That has not happened at all in the public sector. We are looking for an increase in productivity. A 25% reduction does not necessarily—

[Mr Speaker]

Order. I just very gently say to the hon. Lady that an intervention must be just that; it must not be a mini-speech.

[Alok Sharma]

Thank you, Mr Speaker.

On Government help for local businesses, during the height of the recession, I attended a meeting of more than 100 people from businesses in my constituency. That was when the then Business Secretary, Lord Mandelson, was parading all over the place to tell us about all the schemes he was introducing to help local businesses. When I asked those business people whether a single one of them had been able to access any of the funds that Lord Mandelson was talking about, two hands went up in a room of more than 100 people. Both those people had tried to access the funds, but found the process too complicated and gave up. The reality is that businesses were not helped by the previous Government. I am pleased that in the Budget the Government propose a lower corporation tax rate, simplifying the tax system, reducing red tape and getting credit flowing.

I am delighted that the main rate of corporation tax will be reduced from 28% to 24% over four years, which will end up being the lowest rate among the G7 countries. Local communities, businesses and business organisations in my constituency have told me that they are delighted that the small companies rate will go to 20% instead of the planned increase to 22%, as proposed by the previous Government. On the jobs tax, which was talked about during the election and which universally businesses were not happy about, I am delighted that under the Budget the negative effect of the employers’ rate rise in national insurance will largely be reversed by increasing the threshold for employer NI contributions by £21 a week above indexation. That means that the number of employees for whom employers will pay no national insurance will rise by 650,000.

We will see a simplification of the tax system. As the Budget Red Book makes clear, tax competitiveness is not just about rates and incidence of tax; predictability, stability and simplicity are also important. Like many Government Members, I look forward to the details of the proposed independent office of tax simplification. The key point is that local businesses want time to get on and do business, and not to get bogged down by red tape. I am delighted, therefore, that the Government have said that they understand that the volume and complexity of regulation can damage UK competitiveness. I am pleased, therefore, that we will have a one in, one out system for new regulations as well as the imposition of sunset clauses.

A number of small businesses in my constituency that I have talked to are keen to get a share of the Government’s pie when it comes to spending. Again, therefore, I am pleased that under the Budget the Government plan to promote small business procurement by publishing central Government tenders online from the end of the year. The final thing that many businesses want is credit to start flowing again, and I am pleased to see that recognised in the Chancellor’s speech and reflected in the Budget documentation. The Government recognise the need for banks to promote lending, especially to small and medium-sized enterprises. I am delighted that there is going to be an increase in the enterprise finance guarantee and the creation of the growth capital fund, which will help fast growing small and medium-sized businesses.

Several Members have also touched on the banking sector. It is important that the Government want to ensure that the banking system and the financial markets meet the longer-term needs of the economy, and I look forward, therefore, to the publication of the Green Paper on business finance before the summer recess. This is a tough but fair Budget. We have had to make so many difficult choices because of the legacy left to us by the previous Government. I am pleased that, as part of the Budget, the Chancellor has made every effort to protect the most vulnerable people, including pensioners. That is so important and the hallmark of a fair society. The Budget will focus on returning stability to our economy, on getting the country back on its feet and, over the coming years, on delivering strong growth to the economy.

--- Later in debate ---

[Mr Speaker]

Order. Debate to be resumed what day?

[The Lord Commissioner of Her Majesty's Treasury (Angela Watkinson)]

Monday next, Mr Speaker.

[Mr Speaker]

Monday next. We are grateful.

The debate stood adjourned (Standing Order No. 9(3)).

Ordered, That the debate be resumed tomorrow.

Budget Resolutions and Economic Situation

John Bercow Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Several hon. Members]

rose—

[Mr Speaker]

Order. As things stand, no fewer than six hon. Members are seeking to catch my eye. We have about an hour to go and hon. Members can do the arithmetic for themselves.

Oral Answers to Questions

John Bercow Excerpts

Tuesday 8th June 2010 Commons Chamber

[Danny Alexander]

My hon. Friend is right about waste and inefficiency, and consultancy is not the only example. I can give him two or three more. The Department for Business, Innovation and Skills spent £12,000 on branded golf balls over three years. The Ministry of Defence spent £232,000 on eight paintings in a single year. The Department for Communities and Local Government has spent £6,000 on deluxe espresso coffee machines for nine new, but empty, regional fire control rooms. He can rest assured that the actions that we take will ensure that that kind of waste and inefficiency will never happen again.

[Mr Speaker]

Order. I know that the Chief Secretary will want to stick to the narrow subject of external consultants.

[Mr Tom Watson (West Bromwich East) (Lab)]

Is Andy Coulson a consultant? How much are you paying him?

--- Later in debate ---

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

I congratulate the hon. Gentleman on his elevation to his post. I also take the opportunity to thank the Chancellor of the Exchequer for taking time out during the general election to come and support my re-election in Harrow West. The Opposition recognise that the new politics is not designed to help Labour Members, but I am grateful for the little bit of Tory love that came my way.

Can the hon. Gentleman tell the House who in the Government will have the final say on whether and which regional development agencies will survive? Will it be the Business Secretary—once a supporter of RDAs—or will it be the Chancellor? No one expects it to be the Chief Secretary. Is not the real truth that RDAs such as One NorthEast are playing, and could continue to play, a key role in helping to deliver new jobs in new industries crucial to Britain’s economic future, such as renewable energy and advanced engineering?

[Mr Speaker]

One answer will do.

[Mr Gauke]

I thank the hon. Gentleman for his kind words. I should congratulate him on being re-elected on this occasion, but I also note that my hon. Friend the Member for Harrow East (Bob Blackman) is here, which is a bit of a triumph for us. On the hon. Gentleman’s specific points, the decision will be made collectively. The Government will work in a cohesive manner in making those decisions.

--- Later in debate ---

[Mr Lindsay Hoyle (Chorley) (Lab)]

First, would the Minister care to share with the House the date that the cheques will arrive through the doors of those who are still waiting for payment? That is the key. My second question is, as people have, tragically, died while the process has gone on and on, will there be compensation for the families that have missed out as well?

[Mr Speaker]

Order. To ask a second question was very cheeky on the part of an experienced Member, but I know that the Minister will not be tempted to follow suit.

--- Later in debate ---

[Mr Osborne]

We will be making an announcement on the civil list in due course, but if the hon. Gentleman is looking for cost savings, perhaps early retirement is something that he could consider. [Interruption.]

[Mr Speaker]

Order.

[Mr James Clappison (Hertsmere) (Con)]

Does not part of the contribution to the EU budget result from the surrender of the UK rebate in 2005 by the previous Government, which will cost taxpayers in this country up to £9 billion over six years and was given in return for nothing? Should we not add that to the Chief Secretary’s list of waste by the previous Government?

--- Later in debate ---

[Mr Osborne]

Oh, go and take the pension, please. [Interruption.]

[Mr Speaker]

Order. Can I just remind right hon. and hon. Members of the basic principle of “Erskine May”: good temper and moderation in parliamentary exchanges at all times?

[Mr Osborne]

Mr Speaker, you are absolutely right.

I make this point to the hon. Member for Swansea West (Geraint Davies). The serious observation that he makes about investment in productive economic assets is one that is reflected in the document that the Treasury produced this afternoon.