Income Tax (Charge)

Stephen Timms Excerpts

Thursday 28th October 2021 Commons Chamber

[Kwasi Kwarteng]

The hon. Lady makes a sensitive point. Nobody engaged in business wants to take on unsustainable levels of debt, but she will appreciate that the credit was offered in totally unusual circumstances; my right hon. Friend the Chancellor had to make decisions very quickly and we used the BBB to distribute that credit. No one is suggesting—not even anyone in the hon. Lady’s party—that the interventions and credit that was provided on good terms should not have been offered to many businesspeople. I am fully aware of the nature of the debt overhang and I am engaged with trying to think of ways of softening that, but the intervention was absolutely the right thing at the time. I must remind the House that many predictions of doom and catastrophe were mercifully avoided thanks to the timely and wise interventions of my right hon. Friend the Chancellor.

As well as supporting businesses, the Budget will protect the health, wealth and livelihoods of the British public. Under this Government, the proportion of people in low-paid work has fallen to its lowest level in 30 years. That is why I was so surprised to hear the hon. Member for Leeds West (Rachel Reeves) suggest that an increase in the national living wage was something to be regretted.

[Stephen Timms (East Ham) (Lab)]

Before the right hon. Gentleman leaves the business part of his speech, will he update the House on the latest provision of support for energy-intensive industries?

[Kwasi Kwarteng]

That is a very direct question and, as I have said, conversations are ongoing. I speak to the CEO of Ofgem on a daily basis and we are always looking at the situation in terms of gas and electricity prices and how we can mitigate those risks.

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

I am pleased to follow the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone). I attended the reception he hosted yesterday for young people working in the renewable energy sector. He mentioned the reception in a couple of his earlier interventions, and I agree with those points.

I congratulate the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), on her assured response to yesterday’s Budget statement. I am not sure how much notice she had, but I do not think it was very long—perhaps half an hour. She had to put up with some very ill-mannered barracking from two or three Conservative Members, but she seemed, if anything, to relish it and she set out a compelling case that the heart of the problem is the poor record on growth over the past 11 years. Her commitment to abolishing business rates has clearly rattled the Chancellor, and there is a compelling case for fundamental reform given the dramatic shift to online shopping, as a number of Conservative Members have said. Until the shadow Secretary of State for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Doncaster North (Edward Miliband), told us at the start of the debate, I did not realise that a promise to do that has been included in every Conservative manifesto since 2010. I do not know why, 11 years on, the Government are still nowhere near doing it.

The Secretary of State for Business, Energy and Industrial Strategy told us today that yesterday’s announcement about business rates meant that they would be “more responsive and agile, with more frequent revaluations”; I do not think there is anything very fundamental there. In making the case for fundamental reform, my hon. Friend the shadow Chancellor is absolutely right. That is the kind of bold change that is needed.

It is striking that Ministers currently do not seem to be taking much notice of UK businesses. They got into the habit of ignoring all businesses’ fears about Brexit, so they seem to feel they should continue to ignore their views now. From what I can tell, businesses are currently getting a hearing from the Labour Front-Bench team that they are not getting from Conservative Front Benchers. The argument made by my hon. Friend the shadow Chancellor—that the central problem has been weak economic growth since 2010—is very persuasive. We have a difficult winter ahead and the appetite for an approach different from the Government’s may well be rising rapidly next spring, with real wages due to fall again in the next year.

We all understand why the tax burden is high coming out of the pandemic, but there seems to have been no attempt to share that burden fairly. It is all being borne by working families, what with the national insurance increase—the jobs tax—and the Chancellor’s evident delight in cutting the duty on champagne then seemed to be rubbing salt in the wound.

I welcome yesterday’s announcement of the reduction in the universal credit taper and the increase in the work allowance. Those are significant changes that are large enough to be worth while, and they will help low-paid working families to get over the £20 a week cut and will increase work incentives—those are positive things—but they will do nothing at all for unemployed families and people who cannot work because of ill health, all of whom have suffered the £20 a week cut to the rate of universal credit.

Benefit support for unemployed families is now at its lowest level, in real terms, for more than 30 years. In those 30 years, GDP has increased by more than 50% in real terms, but support for unemployed families is no bigger at all than it was 30 years ago. It is now at the lowest level ever as a proportion of average earnings. In fact, according to the House of Commons Library, support for unemployed people is now at a lower level, as a proportion of average earnings, than it was when Lloyd George introduced unemployment benefit in 1911. These are historically low levels of support.

When the Minister responds to the debate, will she give us some explanation of why unemployment support has been cut so low? We have had no explanation at all. I have pressed Ministers on the issue at the Work and Pensions Committee but they cannot give any justification for why this has happened. Social security has a job to do; we cannot have successive Ministers simply dipping into it to fund other things. At its current level, particularly in some parts of the country, it has been cut below the level at which it can any longer do its basic job. People cannot focus on getting a job if they are worrying about whether they can pay for their children’s next meal.

We have just had 18 months in which people who were unable to work—unable to do their jobs—have had to live not on £75 a week but on 80% of their in-work earnings, up to a maximum of £30,000 per year. That is an approach to supporting people who are not in work that is very different from the one provided by social security in the UK. Perhaps we can learn lessons for the future from the success of that most recent approach. The Work and Pensions Committee is going to conduct an inquiry on this subject over the coming year, to look at what the level of support for unemployed people should be and to consider the approaches being taken elsewhere and the evidence on the effectiveness of those different approaches.

The analysis published yesterday by the Institute for Fiscal Studies shows that the running cost budget for the Department for Work and Pensions has been one of the most deeply reduced in Whitehall since 2010. That is no doubt one of the reasons for the serious problems in the state pension service at the moment. Very large numbers of people—well over 100,000 people now, according to the Department—have not received the correct amount of pension over a period of 30 years or more, with older women particularly hard hit. Just in the past few months, there have been very large numbers of people having to wait a long time to get their pension after applying for it. The reduction of the running cost budget for the DWP must be one of the reasons why those things have gone wrong.

I do hope that the very modest increase in the Department’s running-cost budget will allow some modernisation of the very old computer systems on which the state pension benefit and some other benefits are run. There has been a meeting this morning of the Public Accounts Committee with the permanent secretary, in which questions were asked about how things have gone so badly wrong with the state pension, particularly in these past few months.

By contrast, the universal credit system, which is modern, did a very good job during the pandemic in getting support to a large number of people efficiently and well in a short period of time, but too many of the Department’s other systems, such as the state pension system, need urgent investment.

I note from the Budget document that the Government are planning for the universal credit roll-out, which we were initially told would be complete by October 2017, but which we are now told will be complete by March 2025. The OBR has always and rightly been sceptical about the Department’s forecasts on this and expects it to take 18 months longer. I think that it is likely to be proved right.

I warmly welcome the case that the shadow Chancellor and her team have set out in response to the Budget. The heart of the problem has been this weak economic growth over the past 11 years. I hope that, between us, we can come forward with some compelling proposals for how that failure can be reversed in the years ahead.