Amendment of the Law

Stephen Hammond Excerpts

Thursday 22nd March 2012 Commons Chamber

[Ed Balls]

The same old Tories who thought in 1988 that it was right to cut the top rate of tax for the richest people in our country and who now think that having a second Lawsonian Budget is a good idea. It is important to remember that after hubris comes nemesis. It did not take long for Nigel Lawson to find out the error of his ways.

We set two tests for this Budget. First, does it kick-start the recovery and boost growth and jobs? Secondly, is it fair? The Chancellor has failed them decisively. On growth and jobs, I remind the House what the Chancellor said a year ago in his Budget speech:

“we will create jobs and support families. We have put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]

Since then, our economy has ground to a halt and thousands of people have lost their jobs.

I remind the Chancellor of what he said in August, when Parliament was recalled:

“Those who spent the whole of the past year telling us to follow the American example…need to answer this simple question: why has the US economy grown more slowly than the UK economy”?—[Official Report, 11 August 2011; Vol. 531, c. 1108.]

What has happened since? Spurred on by the Obama stimulus, the US economy has been growing and unemployment falling. Here in Britain, our economy has flatlined and unemployment has been rising month after month. It does not look much of a safe haven to me.

What did we get in the Budget? We got a gaping hole when we so badly needed action to kick-start the recovery—Labour’s five-point plan for jobs and growth. We will not get the deficit down unless we have a plan for jobs and growth to get our economy moving and get people off the dole. When we needed a vision for the future, a modern industrial policy, what did we get? Roads privatisation and a credit-easing scheme that even the Office for Budget Responsibility says is not large enough to have any material impact.

Just look at the verdict from the OBR. The Chancellor claims it was a Budget for growth. But the OBR has downgraded its forecast for growth next year. What did it say about the ragbag of measures he announced? It said:

“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”

It will have no impact as a growth plan.

The Chancellor claimed that it was a Budget for jobs, but not only does the OBR expect to see unemployment rising, it has increased its forecast for unemployment compared to November by 100,000—100,000 more people out of work at the end of the forecast period. As for the budget deficit, the OBR forecast confirms that the Chancellor is now set to borrow £150 billion more in this Parliament compared to his forecast at the time of the spending review. So much for “expansionary fiscal contraction”. To put it politely, that is oxymoronic. In plain language, it is just moronic.

On fairness, the Chancellor has failed too. Twenty-four hours after the Chancellor rose in the House, the full reality of the Budget is sinking in. At a time when fuel and food bills are going up for families on middle and low incomes, the Chancellor has added to them all. Whatever he says about the personal tax allowance, a family with children earning £20,000 will lose £253 a year from April. Nearly 4.5 million pensioners—[Interruption.] I am sorry for the stammer. Nearly 4.5 million pensioners who pay income tax will lose an average of £83 next April, and people turning 65 next year will lose up to £322.

At the very same time, the Budget gave a tax cut to the richest people in our country. The money could have been used to cut fuel duty or reverse perverse cuts to tax credits. It could have been used to put police officers on the beat. Instead, the Chancellor chose to cut taxes for the 300,000 top rate taxpayers.

[Stephen Hammond (Wimbledon) (Con)]

I must have missed it, but for the sake of clarity does the shadow Chancellor intend to put the top rate of tax back up to 50%?

[Ed Balls]

I am just coming to the issue of the top rate of tax. The Chancellor tries to claim that the top rate of tax does not raise any money, and that he is raising in stamp duty and tax avoidance five times the cost of cutting the top rate of tax. But his own HMRC report makes the true position clear, in table A2 on page 51. It says that next year he will give £3.01 billion in tax cuts to existing and legitimate top rate taxpayers, paid more than £150,000. That is a fact. That is six times more in tax cuts to the richest than he is raising in the stamp duty and tax avoidance measures. He is gambling that this will then bring in £2.9 billion in new tax revenues from people currently not paying tax, without any hard evidence to justify that claim—an estimate that the OBR says in the Budget documentation is “highly uncertain” and could lead to a much higher cost.

The head of the OBR said last night:

“This is a judgement based on not even a full year’s data based in terms of how people have responded to the 50p rate, in particular in terms of those self assessment tax-payers.

The costing of these sorts of changes is by no means unarguable”.

Just a few weeks ago, the Institute for Fiscal Studies said:

“If the future of the 50p rate is to be determined on the basis of evidence...then Budget 2012 will be too soon to form a robust judgement.”

Another expert has said on these matters:

“Some believe that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this—all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt-hole will rush back to pay more tax but at a lower rate. Pull the other one.”

That was the Business Secretary speaking to the Liberal Democrat conference last September. Pull the other one indeed. A £3 billion tax cut giving £10,000 each to 300,000 taxpayers and we are supposed to believe that all these people in tax havens are suddenly going to say, “I want to pay more tax.” Let me say to the Chancellor, “Pull the other one, it’s got bells on.”