Charter for Budget Responsibility

Steve McCabe Excerpts

Tuesday 13th January 2015 Commons Chamber

[Ed Balls]

We are going to put the top rate of tax back to 50% for people earning over £150,000, and if the hon. Gentleman wanted to win his seat, he would support it.

Instead this Chancellor is taking an increasingly unbalanced and extreme approach. Let us look at what he has failed to put in the charter. He has not included asking those with broader shoulders to make a greater contribution, as I just said. He has not said that we need to strengthen the underlying growth of our economy and improve living standards. Instead, he has made up for all that loss of tax revenue by imposing even bigger spending cuts in the autumn statement than he was planning.

Let me outline the facts to the House. More than 61% of planned departmental spending cuts are still to come in the next Parliament under this Chancellor. There is a further cut for unprotected Departments of 26.3% over the next four years, which is a third bigger than in the previous Parliament. There will be the biggest fall in day-to-day spending on public services in any four-year period since the second world war. That is what is in the Chancellor’s prospectus for his manifesto. We are talking about cuts that the Institute for Fiscal Studies has called “colossal” and that the OBR says will take spending on public services back to the level of the 1930s as a percentage of GDP. That is the Chancellor’s extreme and unbalanced plan, and that is what we are opposing.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

If Government Members are so dismissive of Labour’s plans, why will they not let the OBR independently audit our plans instead of using civil servants fraudulently to manufacture fictitious dossiers about Labour’s plans? Is it that they are scared?

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. Mr McCabe, you need to rephrase the presentation by civil servants from “fraudulent”. [Interruption.] I will deal with it, thank you. I do not need any help.

[Steve McCabe]

I will happily withdraw the term “fraudulent”, but I do think the Government are misusing civil servants.

[Ed Balls]

On the issue of the dossier, to which my hon. Friend just referred, the Conservative peer and former head of the Conservative party think-tank, Lord Finkelstein, described the figures in the Chancellor’s document as “ridiculous”. Mr d’Ancona, the commentator from the Evening Standard, said:

“Indeed, if the Tories are to win…they cannot afford schoolboy errors of the sort that wrecked their dossier this week”.

I will not say that they are fraudulent, but there was a whole series of untruths in that document, which the Chancellor should withdraw so that we can have a proper debate. He could go further than that and agree with the proposal from Labour, the Chair of the Treasury Committee and the Chief Secretary to the Treasury and not have the Chancellor—or supposedly the Treasury—costing Opposition policies based on political assumptions and special advisers. Why not ask the OBR to do that audit? He could have done that at any time in the past 18 months. Many have called for that to happen. [Hon. Members: “Why not?”] I will tell Members why not. It is because he has made £7 billion of unfunded and uncosted commitments to cut taxes, and he cannot say where the money will come from. Rather than having an honest debate, he wants to spread smears about Labour’s plans, which he knows will not stand up to independent scrutiny. That is the reason. He could have joined the cross-party consensus, and we could have been voting today in this new fiscal charter to allow the OBR to play that role. That is what should have happened. It is what we called for and what many others supported last year, but this Chancellor has ducked it because he does not have the courage to have an honest debate. That is the reality.

The Chancellor claims that his policy is working. There is nothing competent about borrowing £200 billion more than was planned. Our plan would cut the deficit every year and balance the books. His extreme plan will take public spending back to the level of the 1930s. This Chancellor should stop spending his time playing silly political games, which time and again backfire as they have backfired on him today. He should sort out the economy and spend a bit more time making his sums add up.

--- Later in debate ---

[Paul Uppal]

My hon. Friend makes a valuable point. In the current modern economy we need to encourage success. As Abraham Lincoln always said, no one is given a hand up by others being pushed down.

[Steve McCabe]

In the interests of coming clean, does the hon. Gentleman think that the Chancellor should come clean about VAT this time?

[Paul Uppal]

Everyone who is watching the debate today knows exactly where both parties stand on this. Come the May general election, most people will make a judgment on who has been clean about where we are on the country’s finances and where the future of its finances lie. That is the important thing.

We are starting to see the fruits of the UK’s low corporate tax economy. I read before Christmas that Ferrari is considering moving its headquarters to the UK to escape Italy’s high corporate taxes. Who would ever have envisaged the prancing horse fleeing Italy? That is a strong sign for the UK economy. I would rather companies locate to the UK, essentially importing tax, than threaten to leave, as we saw under the last Labour Government. Just to be clear, competitive taxes do not mean allowing or turning a blind eye to tax avoidance. The Government are tackling that with a target to raise at least £5 billion a year in the next Parliament from tax avoidance and evasion, with all the money used to help to reduce the deficit.

Focusing on corporation tax in this speech starkly illustrates the broader political chasm in the Chamber today and the short-sightedness of the Labour party. The top 100 companies in the UK employ nearly 10% of the UK’s work force and generate nearly a sixth of the tax take. By creating financial stability we have managed to achieve growth while still reining in Government spending, which the Leader of the Opposition said was impossible, then thought was possible, because it was happening in front of him, and apparently now thinks is impossible because we are months away from a general election.

Please do not take my word for it. Writing in The Times today, Paul Johnson, the director of the Institute for Fiscal Studies, says:

“If Labour is spending more—and if it doesn’t raise taxes—it will be borrowing more and, perhaps more important, presiding over a greater burden of debt.

The effect of this might be relatively modest in the short term, but borrowing as much as their rule would allow beyond 2020 would mean national debt about £170 billion higher (in today’s terms) by the end of the 2020s than would be achieved through a balanced budget.”

I would like to highlight one more important matter, and that is the impact that small businesses have on reducing the deficit and lowering the national debt. A competitive tax system does not just help large firms; it allows smaller companies to survive and grow. I am proud that more than a third of the country’s 1.2 million employers—around 450,000 firms—will no longer pay national insurance. This makes a huge difference to them, allowing them to take on more staff, lowering the unemployment rate and lowering welfare payments. I am proud that this has happened under this Government, and that exactly the same would happen again under a future Conservative Government.