The Economy

Stephen Williams Excerpts

Tuesday 11th December 2012 Commons Chamber

[Stephen Williams (Bristol West) (LD)]

It is a pleasure to follow the new hon. Member for Rotherham (Sarah Champion), who, as she said, is the first hon. Lady to represent that constituency. We all remember our maiden speeches for a long time—if we are honest, probably longer than anyone else remembers them—and we learned a great deal about Rotherham from the vivid and balanced picture that she painted of the challenges facing her constituency as well as some of the good things that have happened in recent years. Perhaps I can extrapolate that picture wider into today’s debate on the state of the economy. As we know, the economy still faces deep-seated challenges, but none the less good things are happening at the same time.

The economy fell into a very deep hole in the last couple of the years of the previous Government—it contracted by more than 6%. We must be honest that it is taking longer than any of us would have wanted to repair and recover from that deep economic damage, but, none the less, good things are happening. Some 1.2 million private sector jobs have been created since the first quarter of 2010. Unemployment has consistently fallen this year, and employment is at a new high. The rate of unemployment in the UK is marginally lower than the rate in the US—7.8% versus 7.9%—and considerably lower than the rate in the eurozone, which is 11.7%.

My hon. Friend the Member for Spelthorne (Kwasi Kwarteng)—my coalition colleague, who is no longer in the Chamber—spoke at length about the public finances and the state of Government borrowing. The OBR has said that borrowing will fall by £1.5 billion from fiscal years 2011-12 to 2012-13. Borrowing has fallen throughout this Parliament, and the deficit, as a proportion of our economy, has been reduced by a quarter in the first two years of the coalition Government. Reducing that deficit fully to the point at which we have balanced the nation’s books is taking longer than we would like, but the trajectory is clear.

We still have a higher rate of borrowing than most of our fellow EU member states, yet the Government can borrow at a lower rate than them. The UK Government can currently borrow on the international markets at a rate of 1.8%. Germany, practically the only nation that can borrow at a lower rate, borrows at 1.3%—France borrows at more than 2%, Spain at 5.24%, and Greece at an eye-watering 15.2%. The UK Government, despite having one of the largest deficits in the developed world, can borrow at those low rates because of international confidence that the country and our public finances are coming back on track.

However, hon. Members want more confidence at home. We want more confidence among our constituents, whether they are in Rotherham or Bristol West, that the Government are on their side and are doing what they can for them in these difficult times. Constituents want confidence that the Government are holding down the cost of living and giving them more money in their pockets.

For those reasons, I welcome the fact that the Government have again held down the cost of fuel by cancelling the 3p per litre rise in fuel prices that was due to take place on 1 January. Many of my Liberal Democrat rural colleagues welcome that initiative and campaigned for it, but it will also make a difference to the urban poor whom I represent in Bristol. However, the measure is enormously expensive—it will cost roughly £1.6 billion next year. At some point, politicians must face the fact that fuel prices are going in only one direction in our lifetimes, and that we need to find a new way of taxing movement—I believe road user pricing is the way forward. The fuel duty increase cancellation and previous measures taken by the Government save the average private motorist about £40 per annum, but they could save a road haulier—a small business person—up to £1,200 a year, which is a major advantage for many road haulage firms in the country.

The Government have frozen council tax and capped the increase in rail fares, but the biggest difference this Government have made is putting more money into people’s pockets by raising the income tax threshold—it will not surprise the House to hear me say that yet again. When the Government came to office, the income tax threshold was just under £6,500. As a result of the announcements in the autumn statement last week, the amount of tax-free pay that individuals can receive will increase to £9,440. That is an increase of £3,000 over the first three years of the coalition Government.

We will have taken 2.2 million people out of income tax altogether. Come next April, when our constituents look at their payslips, they will see that they have received an income tax cut of £600 since the Government came to office. That disproportionately helps people who work part-time, particularly women who work part-time, and will also help young people. Young people on the minimum wage, even at a full-time rate, will be raised out of income tax completely—they will no longer pay any income tax—while the income tax bill for an adult on the minimum wage will be halved from £1,020 when we came to office to £520 now. That makes a significant difference to people on low earnings.

Liberal Democrats also want fair taxes on the wealthy. The coalition Government have increased capital gains tax and stamp duty on expensive properties—[Hon. Members: “What about the mansion tax?”] I am coming to that. We have hauled more people into higher rate tax and clawed back pension tax relief—a person could put £250,000 into their pension under Labour, but that figure will be £40,000 under the coalition. The Liberal Democrats wanted a mansion tax, but we agreed not to proceed with it, in return for our Conservative coalition partners not pushing for punitive measures restricting benefits. That means that the loopy idea—in my opinion—of restricting housing benefit for under-25s is not Government policy.

We also need to do more, and the Government are doing more, to tackle tax avoidance and tax evasion. The Treasury has an affluence unit. We have a new treaty with Switzerland and we are tackling corporate tax avoidance—I am sure that Starbucks, Amazon and others will be shamed into doing the right thing. The Government are balancing the nation’s books, building a sustainable economy, restructuring the banks and introducing fair taxation. We have made much progress. We know the road is difficult, but now is not the time to be blown off course.

[Several hon. Members]

rose—