Financial Services Bill
Stewart Hosie Excerpts(12 years ago)
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Stewart Hosie (Dundee East) (SNP)
Is the hon. Gentleman concerned that, if the amendment is passed, financial institutions might stop providing the hedge products against interest rate changes or forex changes that SMEs might need and from which they might benefit? Is there not a slight risk of those products no longer being available, adding to the risk for SMEs over a period of time during which interest rates and foreign exchange rates might change?
Chris Leslie
I am grateful to the hon. Gentleman, but no, I do not think that is a risk. Amendment 73 does not propose to outlaw interest rate swap products; indeed, it is not specifically related to those particular products. It is really about the powers of small firms to complain and to take proceedings if they feel that they have been mis-sold a particular product.
On the particular issue in the news about interest-rate swap products, there are some serious questions that the Financial Services Authority and the Minister need to answer. Were those interest-rate hedge products a requirement of loan agreements, or were they optional? Were the minimum and maximum parameters fair and balanced, or was the downside risk always likely to hit the consumer more than the banks? How frequently was there a mismatch between the term of the loan agreement and the term of the hedge product obligation? Sometimes the term of the hedge product obligation continued even though the loan term had concluded. Were there asymmetrical rights to cancel? In other words, could the banks cancel the arrangement for a particular product, with which the consumer or small firm had to continue? Those are some of the key questions.
Business and the Economy
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Stewart Hosie (Dundee East) (SNP)
The Queen’s Speech contained precisely nothing to help growth in the economy. It set out a feeble programme. The Government talk about growth but are doing precious little to achieve it. We have all noticed the change in rhetoric over the past few weeks; growth is now important. It is not enough to hope for growth or will it and then fail entirely to introduce in the Queen’s Speech the policies that would deliver it.
We are now in the absurd situation where we have gone from the Chancellor upgrading his growth forecasts in the Budget in March to the announcement of a double-dip recession in April and warnings today from Marian Bell and Howard Davies, formerly of the Bank of England, that the Government might have to slow their deficit reduction plan before they effectively squeeze the life out of the recovery entirely. Howard Davies said that even
“the markets recognise that if the economy turns out to be weaker than expected and you try to compensate for that by tightening even further, then that way madness lies.”
One could paraphrase that by saying, “Trying to stimulate economic growth by cutting consumption is very foolish,” and I would agree entirely, but that is precisely what the Government are attempting to do.
So there is nothing in the Queen’s Speech to compensate for the shrinking demand in the economy that the Government’s own policies are creating; nothing to compensate for the £73 billion of fiscal consolidation that they inherited; nothing to compensate for the £113 billion of cuts and tax rises planned for 2014-15; and precisely nothing to compensate for the £155 billion that will leave the economy every year from 2016-17. Indeed, they are exacerbating the problem with cuts to Government consumption and expenditure of between 1.3% and 2.6% a year from 2013 to 2016.
Lorely Burt
The Institute for Fiscal Studies confirmed that Labour’s plan would necessitate borrowing £201 billion more. What effect would that have on the market, on investment and on growth?
Stewart Hosie
I think that the words of Howard Davies this morning were very interesting. I shall find the quotation if the hon. Lady wants it, but it was about the credibility of the plan, not the speed of the cuts.
There is, of course, one other thing: trying to cut one’s way out of recession and to generate growth by spending less money, putting in place a series of measures that militate against the business investment growth on which the entire strategy is dependent, is not a very clever way to proceed. But that is precisely what this Government have planned.
I said that the Government have done nothing to stimulate a shrinking economy—unless one thinks that the Foreign Secretary’s berating of businesses for not working hard enough counts as an economic strategy. Of course it does not, but his intervention shows just how out of touch the Government are. I am sure that the Liberal Democrats have a little speech to say that they are not really in the same Government as the Foreign Secretary, but that will not wash either.
The Government could have taken action in the Finance Bill or through measures in the Queen’s Speech to ease the price of fuel, which members of the Forum of Private Business say is the main cost pressure on their businesses, but they did not. They could have taken action to bring forward direct capital investment, the most effective thing that any Government could do to stimulate economic growth, but they did not—and that was a particularly short-sighted piece of inaction, given that the fall back into recession, the double-dip recession, was led by a large fall in construction output. One would have thought that even the Chief Secretary to the Treasury, the Chancellor or the other Treasury Ministers had read the economic indicators.
Indeed, the Government had such a programme in their election manifestos, and they could have brought forward the legislation on high-speed rail. It would have given the signal that a large capital investment programme was coming, and it could have stimulated economic growth throughout the UK, but the political imperative of one or two shire Tories in the south seems to have overtaken the rather sensible measures that High Speed 2 would have delivered.
So what are the Government doing? They are introducing a banking reform Bill to ring-fence narrow retail banking activities. I welcome that measure, which is fine so far as it goes, but, as the Scottish Chambers of Commerce said, it
“does not go far enough in terms of providing a direct boost to business lending”
to small and medium-sized enterprises—a vital part of any recovery.
The Government are introducing an enterprise and regulatory reform Bill, and we will look very carefully at each measure that they intend to introduce, but, in general terms, if one is trying to rebuild an economy and to grow out of recession, one needs confidence. I can understand why keeping people in their jobs would help confidence, but I am at a loss to understand why the Government believe that making it easier to sack people will bring any confidence into the economy, particularly the consumer spending sector.
There are no measures on direct capital investment, which is the most effective thing that any Government could do—not even proposed legislation on HS2. There is no action on SME lending and no action to build confidence; indeed, the Government are making it worse by making it easier to sack people when keeping them in their jobs would help to rebuild confidence. That lack of action explains why we are in recession, why unemployment is high, why net debt is going up, why net borrowing is higher for 2011-12 than was forecast a year ago, and why the deficit is planned to be higher for 2011-12 than was reported in the Budget a year ago.
At their heart, this Government have a problem. They are sticking ideologically to a rigid, fixed-term deficit consolidation plan that offers no flexibility whatsoever. The one Bill that they should have had would have put in place a new fiscal responsibility plan so that instead of a rigid, ideological slashing of costs, we could have a flexible, medium-term, credible deficit consolidation plan that allowed growth in the economy.
Oral Answers to Questions
Stewart Hosie Excerpts(12 years ago)
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Mr Hoban
My hon. Friend makes an important point. At a time when Governments across Europe are making difficult decisions to curb spending, it is completely unacceptable for the Commission to propose an inflation-busting increase in its budget and the medium-term financial framework. The Government will work with their allies to tackle those issues.
Stewart Hosie (Dundee East) (SNP)
In normal times, the mortgage standard variable rate rises or falls as the base rate goes up or down, but we are aware that some banks—not all—are increasing their standard variable rates now, while the Bank base rate remains near the zero-bound. Will the Chancellor take this opportunity to fire a warning shot across the bows of some of those banks not to increase their standard variable rates and so put more pain on to people likely to have had pay cuts and wage freezes over the past two or three years?
Mr Hoban
It is important that we stick to the fiscal course to ensure that UK interest rates remain low for as long as possible. However, many banks face increased funding costs, partly because of the turbulence in the eurozone and partly because there is more competition for savings on the high street, and that works its way through to mortgage rates. It is important that banks provide the help they can to their customers to ensure they have the support necessary to deal with higher mortgage interest rates.
Section 5 of the European Communities (Amendment) Act 1993
Stewart Hosie Excerpts(12 years ago)
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Mr Hoban
I remind the hon. Gentleman that as a consequence of the actions taken in the Budget one of the rating agencies, Standard & Poor’s, reaffirmed the UK’s triple A rating—[Interruption.] If the hon. Member for Nottingham East paid attention and read the newspapers—he accused me of not doing so—he would have seen that post-Budget one of the big rating agencies reaffirmed our credit rating with a stable outlook. Actions have been taken to stabilise the UK economy, and that is important.
This is not a debate about the future of the eurozone and whether individual members should be in or out, because that is a matter for the national Governments of those member states, not for us. What we cannot ignore is that the stability of the European economy is a vital factor in determining the level of economic growth in the UK. As I said, 40% of our trade is with Europe. We still export significant amounts to places such as Ireland and, historically, we have exported more to Ireland than we have to Brazil, Russia, India or China combined. It is important to recognise that jobs in all our constituencies are dependent on trade with the European Union and the strength of European economies.
Stewart Hosie (Dundee East) (SNP)
I agree entirely with what the Minister has said about the need for stability, not least for UK recovery. I also welcome what he said about the fiscal compact and the other measures being taken. Does he agree that if there is a legitimate debate in any country about growth versus austerity, it is not—as some more excitable colleagues suggest—any indication of political instability in the eurozone, but merely a debate about the direction of travel that a country’s economy might take?
Chris Leslie
I obviously disagree with the hon. Gentleman’s assessment, but he made an important point earlier about the plight of those who are suffering as a result of the austerity approach being applied in southern European countries in particular. I worry greatly about that; it is a matter of concern. It is also a concern, however, for our constituents here in the UK. We take a different approach on principle about the right ways to repair our economy. We believe that a stronger emphasis on growth is necessary to generate revenues; it is not just about public expenditure cuts, which do not provide the way out of the situation. I also disagree that the motion is a general debate about the state of the European economies. We are debating whether the Red Book provides a right, accurate, fair and good assessment of the state of the British economy such that we can submit it, as we are required to do by the treaties, to the European Commission. I am simply following the strictures placed on us by the Maastricht treaty.
Stewart Hosie
That is the key point. The hon. Gentleman quoted from the 1993 Act—a Tory Act, of course—about the need to submit information to the European Commission, including information on industrial investment. We have seen forecasts of 6.7% business investment growth ending up being a negative 0.8% out-turn. He is thus absolutely right that the Red Book is not credible in terms of the objective set out in the 1993 Act.
Chris Leslie
It is that lack of credibility that makes me want to oppose the motion. The hon. Gentleman picked up on the point about business investment. I encourage hon. Members to turn to page 16 of the Red Book, which says:
“business investment will pick up and make an increasingly strong contribution to growth in each year of the forecast as confidence builds and credit conditions ease”.
Just yesterday, the trends in lending data came out from the Bank of England. Year on year, net lending to all businesses—small and medium-sized enterprises in particular—has fallen in every single month since the Government took office. That is despite Project Merlin and all the attempts at credit easing, which have still not come into effect and will do nothing to help credit availability. Last year, they said in their document that
“Credit conditions have shown signs of stabilisation.”
That has not come to pass, so I have no confidence that their current propositions will come to pass either.
On borrowing, page 12 of the Red Book claims that we are heading for
“£11 billion lower over the forecast period than was projected at Autumn Statement 2011”,
which is sophistry because we know that in the spending review figures from October 2010, the Government projected a set of borrowing statistics that have had to be ripped up, because we are on a trend that takes us into £150 billion of further borrowing over the lifetime of this Parliament. The new borrowing figures out this morning confirm that particular trend. That is where things are going.
The Chancellor keeps restating that the UK is “a safe haven”, although he slipped a little bit today in saying that it was “a safer haven”. There he was in Washington this weekend, saying that the UK has “solved our problems”. That is our Chancellor’s assessment of our economy. Such dangerous complacency beggars belief, and I think that it is a sign of arrogance.
Stewart Hosie
The hon. Gentleman picks up on our Chancellor’s reference to “a safer haven”. Does he think that could be because the debt figures on the treaty calculation are no longer expected to peak at 87% of gross domestic product as was forecast a year ago, but at 93% of GDP—a catastrophically high figure?
Chris Leslie
Of course, that is because of the Government’s record of high unemployment, with statistics showing not much improvement, an increase in welfare costs and so forth. All those things are a drag on public expenditure; they are making things no better. That is the result of the Government’s misguided strategy. On the wider issue of employment and unemployment, I challenge hon. Members to find much in the Red Book that provides an assessment of what is going to happen to them. We know that we have the highest unemployment in 17 years, with 2.67 million people on the dole. We know the story that long-term unemployment doubled in the last year and that youth unemployment is at a record high. My hon. Friends do not need me to repeat these figures.
On inflation, the Red Book says that
“inflationary pressures, which the OBR considers to have been the main drag on UK growth over the past 18 months, have started to abate, easing the pressures on household incomes and improving the outlook for consumers.”
Well, consumer prices index inflation rose, I think, in the last month. We are at around 3.25%. We should not forget that the Chancellor’s target for the Governor of the Bank of England is 2% inflation. Indeed, Paul Tucker, the deputy governor of the Bank of England, warned this week that inflation is likely to stay above 3% for much of 2012. Again, even on inflation, the Government’s assessment of the economy is just not correct. There is no mention of consumer confidence in the analysis. Although there is a section on “Investment and confidence” on page 14, it does not mention consumer confidence at all. The consumer confidence indices have been down and are worsening at minus 31%.
Mr Redwood
As I shall make clear shortly, our policies are rather different. For one thing, the coalition Government decided to increase current public spending, which is running at £64 billion a year more this year than in the last year of Labour government. The Red Book shows that real current public spending has risen in each of the two years of the coalition Government, although not by very much. The Government are clearly not trying to deflate the economy by introducing massive current spending cuts, given that overall current spending has been rising.
Stewart Hosie
The right hon. Gentleman, who knows the Red Book inside out, will recall that it makes it clear that the Government’s projected discretionary consolidation by 2016-17 amounts to £155 billion a year, of which 81% will be delivered by cuts in services and the remainder by tax increases. The hon. Member for Preston (Mark Hendrick) was right: the Government are embarking on precisely the policies for which the right hon. Gentleman is criticising others.
Mr Redwood
I am afraid that the hon. Gentleman has not read the Red Book intelligently. The 80:20 statistic on which Members seem to rely relates to changes compared with much bigger growth in public spending that was in inherited programmes. It is not the reality. The reality of the Government’s strategy is a massive increase in taxes over the planned five years of the present Parliament to pay for rather modest increases in current public spending over the life of the Parliament, and to get the deficit down. The 2010 strategy suggested that tax revenues would be £171 billion a year more in year 5 than they had been in the last Labour year. The Government have now had to reduce that figure a bit because—as other Members have pointed out—the expected growth has not been forthcoming, for a variety of reasons.
We need to promote growth vigorously and actively, which is common ground between the Government, coalition Back Benchers and many Opposition Members. The argument, surely, concerns what measures are most likely to bring that about. It appears that over the last four years both Governments have operated policies involving actively increasing public spending, with the exception of capital spend—certainly overall spending has risen—and actively promoting massive borrowing, while at the same time the economy has bombed very badly. I am not suggesting that that is causal, but it should lead Opposition Members to ask why that fiscal injection—massive borrowing and an increase in current public spending—has not done the job. There seems to be some disconnection between the remedy that they recommend and the reality of what is happening.
When we look at the way in which other countries have pulled out of crises of this kind, and, indeed, the way in which Britain has pulled out of similar but, perhaps, less aggressively damaging crises than the one that we inherited, we see that there is nearly always a period during which public spending must be reduced or controlled quite strongly to make room for a private sector recovery, and that a series of measures to promote that recovery will then be necessary. As I have explained at length in the past, banking reform and competitive banking are crucial. The Government’s theory favours a tight fiscal policy and a loose monetary policy. They want to allow more money to circulate through the private sector through credit and through the banking system, and they want to lower the deficit gradually in the public sector so that the fiscal policy becomes a bit tighter.
IMF
Stewart Hosie Excerpts(12 years, 1 month ago)
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Mr Osborne
I thank my hon. Friend for his support, which is very welcome. As the representative in this Parliament of Europe’s largest financial centre, he completely understands our huge national interest in a stable world economy and in institutions that can try to bring stability to that world. I will give thought to his suggestion of a statement on the broader eurozone problems and will come back to him.
Stewart Hosie (Dundee East) (SNP)
I thank the Chancellor for his statement and for allowing me early sight of it, and I agree with his welcome for the European Central Bank’s commencement of the long-term liquidity operation. There are concerns about the size of the firewall and, still, about the scale of support being offered by the ECB, but notwithstanding that and irrespective of the final balance of support to the euro from the ECB and to individual countries from the IMF, will he continue to agree that the best hope we all have for an export-led recovery is a strong, stable and growing eurozone economy with no threat to that currency?
Mr Osborne
I find myself in agreement with the hon. Gentleman who speaks for the Scottish National party. One of the consequences of what has happened over the past year or two in the eurozone is that countries that want to join the eurozone now need to ante-up a huge sum of money into the bail-out fund. No doubt that is something he will be explaining to Scottish voters as we discuss whether Scotland should ditch the pound and join the euro.
Financial Services Bill
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Chris Leslie
It was the Chancellor of the Exchequer himself who warned against the stability of the graveyard. We have to have joined-up Government and co-ordinated economic policy—I hope hon. Members accept at least that much. It should not be impossible to ask the Bank of England simply to have regard to Her Majesty’s Government’s strategy—not the Opposition’s; obviously, ours would be different—and objectives on growth and jobs. That is all we are saying. We are not saying that that should overrule the broader stability objective of the FPC. It is a simple bit of wiring to make sure that we have joined-up Government and that all the branches of Government talk to one another.
Stewart Hosie (Dundee East) (SNP)
I support the amendment in principle, but surely it should have referred to a range of impacts, in the sense of a fan chart? It is not just macro-prudential tools, of course, but the impact of those with monetary policy, which may change —it may tighten or loosen—and fiscal policy, which may also have the impact of tightening or loosening monetary policy.
Chris Leslie
I accept that. It gets to the nub of the issue. There is no single variable that has an impact like pulling a lever and an economic outcome comes along down the track. A number of factors combine to create an economic outcome. That is why people say it is sometimes more of an art than a science, but in so far as there is an ability to make projections or to measure, that assessment is needed. I hope it could be as sophisticated an assessment as the hon. Gentleman suggests.
Chris Leslie
Absolutely. That is right. We are not saying that these powers might not be necessary. However, let us say, for example, the Government and the Bank consider it necessary to lean against a consumer credit bubble. They want to change the minimum repayments that our constituents make on their credit cards from 2% a month to 5% or 10%. That will have a big effect on our constituents. Imagine us going back to those constituents when they complain to their Member of Parliament, as they undoubtedly would, and ask, “Whose decision was that?” We would say, “It was the Bank of England’s decision. We voted on this in theory a couple of years ago, but now the Bank has pulled the lever and pressed the button, and this has happened.” There would be great anger. The public would expect us, at the very least, to have had the opportunity to debate and discuss that in more thorough and substantive detail, albeit in a Committee. That is all we are suggesting in the amendment.
Stewart Hosie
The hon. Gentleman is absolutely right that there would be anger, but there would also be economic consequences. If one of the macro-prudential tools invoked was a change in sectoral capital ratios, which impacted to ration mortgages, and there was a 60-day consultation period, the impact in the market, either with deals being rushed through or deals being abandoned, might be as bad. Has he considered the downside of putting such information into the public domain for such a prolonged period?
Chris Leslie
I did indeed consider the downside of having parliamentary scrutiny that might in some way impact adversely in an emergency scenario. We have not sought to amend the provision that would allow the Treasury to bring forward those orders in an emergency situation. It could do that. We could have retrospective scrutiny of that order once it had come into place. These are for ordinary, normal times scenarios. The amendment may be imperfect. I would have liked a proper way to deal with the issues, but there has been significant resistance along the way for such measures.
Finance (No. 4) Bill
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Karl MᶜCartney
Not on purpose.
We were told during the dying days of the previous Labour Government that the 50p tax rate was always intended to be a temporary measure. That remark came from very near the top level, as it was made by the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling). Many of us suspect, however, that at the top of that economically discredited Labour Government, the then Prime Minister, who is now much missed in his absence, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had a more political plan, perhaps with three prongs. First, the 50p tax rate was a bone to throw to the Opposition’s political masters who run the unions. It said, “Look how we are clobbering those who earn—or should I say ‘are paid’—slightly more than you.” Secondly, it was part of the Labour party's scorched-earth policy, a desperate act up there with the protectionist decision of the right hon. Member for Kirkcaldy and Cowdenbeath further to increase the indebtedness of our armed forces’ budgets by ensuring the most watertight contract, despite the fact that Whitehall lawyers are not renowned for their prowess in closing legal loopholes, for two new aircraft carriers, which funnily enough were not to be built in English or Conservative Members’ constituencies.
Karl MᶜCartney
Not at this stage.
Thirdly, the 50p tax rate was designed to be something that any new Government would have to address at some time early in the next Parliament and to reduce to an acceptable level to ensure the competitiveness of our nation in the international marketplace.
Karl MᶜCartney
In a minute.
One hopes that the Labour party knows and realises that the 50p tax rate it introduced for spurious reasons made our country economically uncompetitive, but it has never let the truth get in the way of a good soundbite, has it? It is not fair to say that the reduction in the 50p tax rate and other measures announced in the Budget are a tax break for the wealthiest because, in total, the measures announced will see the wealthiest paying many times more.
Alun Cairns
It was quite obviously an economic judgment, but we cannot ignore the politics, which is what international investors interpret when they are considering placing their money and creating jobs in the hon. Gentleman’s constituency or mine. They consider how much they, their senior management, their greatest innovators and their scientists will have to pay under the top rate of tax. The politics cannot be ignored, but the economics, as demonstrated by the Chancellor and the Treasury team, is sound according to figures from the OBR, the IFS and HMRC. I absolutely accept them.
Stewart Hosie
We back amendment 1. As the hon. Member for Pontypridd (Owen Smith) said, it is the only way in which we can score out the cutting of the 50p rate of tax. Government Members have made some obscurantist points, as he described them, about why the amendment may not do precisely what is intended, but we would expect the table showing the 2013-14 rates to appear in the 2013 Finance Bill, as the equivalent table does in the Finance Bill every year, whether the amendment succeeds or not.
We believe it is wrong to remove at this point the temporary 50p rate for those earning more than £150,000 a year. I want to say a little about the context in which that extraordinary tax giveaway is happening. The Government say that we are all in it together and point in their various documents to the fact that every decile in society will be worse off and take some share of the burden. However, they then tell us that, almost uniquely, the personal tax-raising measure of the 50p rate is now deemed ineffective in bringing in much-needed revenue to tackle the deficit and debt, which is their primary objective, and in bringing down their borrowing requirements, which they see as an essential part of their plan.
The Revenue has produced an assessment of the impact of the change, which I am certain the Exchequer Secretary will pray in aid to justify the Government’s case. I will come back to that assessment, but first I shall explain why the removal of the temporary 50p tax rate proves that we are not all in it together, and why that single tax cut amplifies the unfairness of the Government’s plans. I hope to expand on the points that the hon. Member for East Antrim (Sammy Wilson) made in his very good speech.
For those on low and fixed incomes, pay cuts, wage freezes and now a shock rise in inflation have meant the erosion of their living standards over some time. They will see no benefit from a tax cut for millionaires. For families in receipt of working tax credit, the new rules mean that their household income will fall by up to £3,800-odd a year if they are unable to find an extra eight hours of work a week. We know from our constituencies that such work often simply does not exist. They will see no benefit or fairness in cutting the 50p tax rate.
Of course, the families who face a fall in working tax credits are those who tend to earn only about £17,000 a year in total. They will see no benefit from a tax cut for millionaires. Indeed, real middle-class families earning £40,000, £50,000 or £60,000 a year—not somewhere over £250,000 a year, as I suspect the Government assume middle-class families earn—are about to have their child benefit removed, even with the taper changes to be proposed.
Before a Liberal gets up to tell me that there have been moves to increase the basic personal allowance from £6,475 in 2010 to £9,205 by 2013, an increase of £3,000 leading to a saving of some £600, I point out that the threshold above which one pays the 40p rate will go down from £37,400 to £32,245 in the same time frame. That is a fall of £5,000, so the fall in the threshold at the top end is larger than the increase in the allowance at the bottom. The net impact is that by 2013, the percentage of people paying the 40p rate will go up to 15% of all taxpayers, or some 5 million people earning more than £41,500. We have never had such a percentage of our taxpayers paying that rate before, and they will see no benefit from a tax cut for millionaires.
That is before we even consider the tax changes for older people. The changes to age-related allowances—the so-called granny tax—will have an impact on some 40% of pensioners. Those above the basic tax and pension credit threshold but below the £30,000 level at which they would not benefit anyway, or some 4.41 million older people, will be worse off. They will be singing in the streets of Raith, as they say, at the millionaires getting a tax cut that they are paying for.
The Government are providing a tax cut for millionaires that is being paid for by those on fixed incomes hit by inflation, poor working families whose tax credits are being cut or removed and middle-class families earning just over the ever-reducing 40p tax threshold. It is hardly fair, it is not right, and we are definitely not all in it together.
How precisely do the Government justify that? It is an inevitable consequence of a financial plan that is seeing the Government fetishise debt and deficit levels to the extent that they plan to take £155 billion a year out of the economy by 2016-17 for fiscal consolidation, through cuts and tax rises. To understand the Tory priorities, we need to understand how the proportion of spending cuts to tax rises is changing, which is very instructive. I hope some Tories will find it instructive, because their constituents will soon be knocking on their doors asking why it is happening.
In 2011-12, spending cuts were planned to be 56% of the total consolidation, the rest of which would be tax rises, which is a pretty reasonable balance. However, the Government are increasing the proportion of the consolidation that is cuts through the next few years to 62%, 69%, 74% and 79%, and up to a whopping 81%—only 19% of the consolidation will be tax increases by 2016-17.
Alison McGovern
In addition to those comments, does the hon. Gentleman agree that there is a geographical dimension? Those likely to benefit from the tax cut are clustered in certain locations in our country, and those who lose money, as he has described—they will also suffer from public spending cuts—cluster in other areas.
Stewart Hosie
That is absolutely right, but I want to be careful in answering. It is not good enough to say that people in the north or Wales or Northern Ireland or Scotland will lose, because unemployment and poverty in London is enormous. The geographical areas are not the ones traditionally described in lazy journalism—it is not that the north is poor and the south is rich—because pockets of poverty and of wealth exist in every single constituency in the country. The hon. Lady is right, however, that there are such pockets.
Even with all the pain and austerity, and the social and economic problems that the Government’s plans will cause, the Chancellor has been able to find a tax cut for millionaires. How does he justify it? Whatever his justification, the measure does not make sense economically, to answer the points made by the hon. Member for Vale of Glamorgan (Alun Cairns), who seemed to think that the measure is economically robust.
The Government’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under enormous pressure. The problem—this is the evidence we ought to look at—is that the deficit in this Budget was forecast in the 2011 Red Book for 2011-12 to be £90 billion, but it is now forecast to be £98 billion. That is £8 billion worse than planned. The net borrowing requirement in the 2011 Red Book was forecast for 2011-12 to be £122 billion; it is now £126 billion. That is £4 billion worse than planned. The national debt or the treaty ratio that was due to peak at 87.2% of GDP—£1.25 trillion—in 2013-14 is now expected to rise, on the same count, to 92.7% of GDP in 2014-15. That is up again; it is worse than the Government’s forecasts. Everything is going in the wrong direction, so this is the wrong time to forgo revenue yield.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
The hon. Gentleman has set out the figures for the overarching macro-economic situation very well, but is it not clear from the OBR that the effect on business investment will be minus 6.8%? The Budget incentivises no one in terms of the real growth that we require.
Stewart Hosie
The points on business investment are incredibly well made. The Government’s targets were based on heroic rates of growth over four and five-year periods, but the 2011 Budget forecast for 2011 business investment growth was 6.7%. By the time of the 2012 Red Book, the forecast was 0.2%. The 2011 Budget forecast for 2012 was 8.9%, but as the hon. Gentleman says, that has been marked down to only 0.7%. Of course, that makes it even more extraordinary that there is a net fall year on year of central Government consumption and investment, which in normal circumstances in normal countries would be called an automatic stabiliser and would compensate. Of course, this country does not have that.
That means that for the Government to stay on their course, they almost certainly need the revenue yield that the 50p rate would have delivered. There is a debate on precisely how much that yield is. It could be the £360 million over four years forecast in the Red Book, or it could be the higher £3 billion a year static forecast we have heard cited. Whatever the actual figure, given that all those other metrics are going in the wrong direction, it is extraordinary that the Chancellor is prepared to forgo any revenue yields, whether they are in the hundreds of millions of the £1 billion range.
Finance (No. 4) Bill
Stewart Hosie Excerpts(12 years, 1 month ago)
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Danny Alexander
No, I want to make some progress. The hon. Lady has intervened twice on this subject, and her colleagues intervened once, and they have not said anything new.
Danny Alexander
I will give way to the representative of the Scottish National party who might have new light to shed on this question.
Stewart Hosie
As a result of the 5p tax cut, the next four years will see a loss of revenue yield amounting to £350 million. About 10 minutes ago, the Chief Secretary himself said that the sustainability of the public finances was a major ongoing issue. Why are the Government prepared to forgo £350 million over the next four years in order to deliver a millionaires’ tax cut?
Danny Alexander
Very simply, for the reason that I have given several times today. We are raising five times more from the same group of people, which helps us to deliver the policy which we firmly believe is the best way to support working people on low and middle incomes and help them to keep more of what they earn.
Stewart Hosie (Dundee East) (SNP)
Before I begin my remarks on the Bill, may I make one small comment on the contribution of the hon. Member for Leeds West (Rachel Reeves), who was a little critical in her speech of the VAT change to ski tolls? Will the hon. Member for Pontypridd (Owen Smith) gently remind her that the systems in Glenshee, Glencoe, the Lecht, Aonach Mor and Cairngorm are important parts of the Scottish winter economy? I am sure she did not intend in any way, shape or form to be critical of the many jobs they provide for young people, or of the tens of thousands of working-class Scots who loyally use their local ski systems every winter.
Owen Smith
Of course my hon. Friend the Member for Leeds West (Rachel Reeves) was not in any way challenging the importance of those jobs. She was juxtaposing the Chancellor’s decision to introduce a tax break in that industry and a tax increase in the caravan park industry, in which there is another important set of jobs.
Stewart Hosie
Indeed—the caravan sector has my sympathy and support in attempting to change that decision.
There are many other reasons for opposing the Bill, and I shall highlight a number of them. One key reason is the introduction of the plans to reduce the 50p tax rate to 45p for those earning more than £150,000 a year—some of us have already managed to vote against the measure, but I shall say no more about that tonight. According to the Government’s numbers in the 2012 Budget book, the measure will mean that the Government forgo £360 million over the forecast period. It is quite something when a Government are prepared to sanction the loss of revenue yield when the deficit, debt and borrowing forecasts are worse than the forecasts in the previous Budget.
The changes to age-related allowances for older people—the granny tax—will impact on about 40% of pensioners, which is another a reason to oppose the Bill. The measure will affect those who are above the basic state pension and pension credit level, but below the £30,000 a year level—people on that level will not benefit anyway. That will leave some 4.41 million people worse off than they would otherwise have been.
The Budget and the Bill are full of wrong-headed decisions, not least the Government’s determination to increase air passenger duty. Let us look at what they have done. In the Budget, the Chancellor announced that APD will rise by 8%, or double the rate of inflation and confirmed that it will rise again in April 2013 in line with inflation, ignoring the fact that Scottish, Welsh and English people, who live on an island, already pay the highest aviation duty in any country in Europe.
It is therefore no wonder that Scottish airport bosses united prior to the Budget in calling for the Chancellor to rethink the planned hike in APD and give the Scottish operators what they called “a fighting chance” to compete against European rivals. Their joint statement says:
“At a time when the Government talks about creating jobs and growth, its blinkered insistence on further increases in APD achieves precisely the opposite.”
It goes on to say:
“Youth unemployment is at record levels”,
which should concern us all, and that “inbound tourism” and importing
“is a major employer of young people, but international visitors are being turned off the UK because of the exorbitant level of APD…which is by far the highest air travel tax in the world.”
We are not all in it together, and so much for Britain being open for business, as the hon. Member for York Outer (Julian Sturdy) claimed.
Let us analyse what the Government are planning for APD. The £2.2 billion the Treasury collected last year is almost twice as much as every other European country combined. A family of four travelling to Spain will pay a total of £52 in tax. If they travel to Florida, they pay £260, and if they fly to Australia, they pay £368. That is why the Airport Operators Association chief executive said that his organisation will be campaigning against the rise as the Bill progresses through the Commons. The Scottish National party intends to move amendments to cancel the rises and, more importantly, to devolve air passenger duty to Scotland and Wales.
Air connectivity is crucial to the economy. The increase in APD is unhelpful and unwelcome, and will hit the tourism industry and needlessly jeopardise the recovery of the economy as a whole, but the key problem in the Bill is the complete failure, as the hon. Member for York Outer said, to tackle the rising price of fuel. Let us be under no illusion about the significance of that. The Forum of Private Business has said that more than one third of its members cited transport costs—predominantly the price of fuel—as their main cost pressure. When they were asked what would help to improve the business climate in the UK, they said that their main priority was not regulation, but reducing the cost of fuel duty. They were incredibly blunt in their reaction to the Budget upon which this Finance Bill is based, saying:
“Businesses and consumers just can’t afford to keep paying out more and more for their fuel. There is a serious risk that economic recovery in the UK is strangled at birth if the Government doesn’t act, and act fast.”
We hope the Government listen to the Forum of Private Business, because the economic plan they are following simply is not working. They are following a path that is failing. Much as I like the hon. Member for Macclesfield (David Rutley), who is not in his place, I do not recognise the positive progress he said he had seen in the economy. We can see that the Government’s plan is failing because, in the 2011 Budget, the deficit was forecast to be £90 billion for 2011-12 and it is now £98 billion. The 2011 Budget forecast for 2011-12 was that the net borrowing requirement would be £122 billion, but it is now £126 billion. National debt, on the treaty calculation, was due to peak at 87.2% of gross domestic product, or £1.25 trillion, in 2013-14, but on the same calculation, it is now expected to peak at 92.7% of GDP, or £1.365 trillion, in 2014-15.
That means that even the Chancellor’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under pressure, because both objectives are highly dependent on GDP growth, which, according to the OBR, is dependent on incredible rates of business investment, as other hon. Members have said. In 2010, the Government suggested that business investment had to grow by between 6.7% and 10.6% a year every year from 2011, but by the time of the OBR November 2011 outlook, growth in business investment had turned negative for 2011 and the forecasts had been changed to suggest business investment growth from 2012 to 2016 of between 7.7% and 12.6% a year. The Government have now changed that again—they expect business growth at heroic levels of between 6.4% and 10.1% a year between 2013 and 2016.
Nobody wants growth in business investment more than I do. If we can power the economy in that way, it will be fantastic, but there is precisely no evidence that it is happening. Indeed, the downgrade of a previous high estimate tells us that it is unlikely. That should be a concern to all hon. Members, because it makes a negative rate of central Government consumption at the same time more dangerous. There is nothing to offset the lack of growth in the whole economy as a result of lower-than-expected business investment, but that is precisely the risk that the Chancellor has put into his plans.
The Chancellor’s 2011 Budget showed that between 2012 and 2015 there would be a fall in Government consumption and expenditure of 1.2%, 1.8%, 2.4% and 1.8% a year. This Budget’s figures and the Finance Bill that delivers it are no better. They show falls of between 1.3% and 2.6% from 2013 through 2016. At a time when there is no guarantee of growth in business investment, it strikes us as particularly foolish to continue down the path of reductions in central Government consumption and expenditure. The key point is that any Chancellor getting his sums wrong on growth will deliver an economy that has a serious impact on real people, on public expenditure for the services that communities rely upon and on the Government’s ability to grow the economy out of its current stagnation.
In those three areas, because the UK Government’s policy is wrong and is not working, real people are paying the price. But that should come as no surprise. The Government inherited £73 billion of cuts and tax rises every year from 2014 to 2015 onwards. That was a balance of £52 billion in cuts and £21 billion in tax rises. That increased to £113 billion of cuts and tax rises every year from 2014 to 2015 in the 2010 Budget, and went further with cuts and tax rises of £128 billion every year from 2015 to 2016. As the Red Book made clear, this Finance Bill now sets us on a path of fiscal consolidation—cuts and tax rises—of £155 billion every year from 2015 to 2016. And of course the proportion of cuts to tax rises is no longer 3:2 but 4:1. Yet despite brutally cutting so much money from the public services on which people depend, they have still managed to deliver a tax cut for millionaires. In essence, that makes this a Tory Budget, a shameful Budget and one, of course, that we must resist by opposing the Bill.
But the Government have been honest. The 2011 Budget told us that every single population quintile would see a reduction in its net income. So they are at least clear about the impact of their polices. This year’s Budget Book and Finance Bill have delivered no help. Indeed, the Budget Book told us again that every single population quintile would still be worse off.
As I said earlier, however, of everything that ought to have been done but was not, the failure to act on fuel was the most disgraceful. My criticisms of the previous Government are well known. I criticised the fuel duty escalator and their refusal to act on and outright opposition to measures to introduce a regulator. But this Government are no better. Their plan for a stabiliser is no such thing: it will see fuel costs rise by inflation when the oil price is high and by inflation plus—an escalator—when the price is low. A real fuel duty stabiliser would see the rate of duty fall when the price rises, precisely because the UK Government are already getting VAT on the North sea windfall to pay for it.
No doubt the failure properly to address this issue is why the Federation of Small Businesses has expressed its disappointment that the Chancellor
“did not announce a cut in the level of Fuel Duty”.
It is why the Licensed Taxi Drivers Federation has said:
“rising fuel costs are creating detrimental factors”
and leading to businesses being unable
“to invest in businesses as they’d like to.”
It is why bodies as diverse as the Scottish Grocers Federation, the National Farmers Union of Scotland and the Road Haulage Association, among many others, all recognise that rising fuel prices are inhibiting economic growth and are calling for Government action to deal with it.
The costs are being borne across business and society. The NFUS has told me that it is
“very concerned about the rising cost of fuel and its effect on rural businesses and communities. This is being felt most acutely in the Highlands and Islands of Scotland, where public transport is severely limited and fuel prices are among the highest in the UK.”
I say to the hon. Member for Bassetlaw (John Mann) that if unleaded or diesel was only £1.45 a litre in some of these communities, the constituents there would be absolutely delighted.
The NFUS accepts, as we all do,
“that the global price of oil is beyond the Government’s control, however MPs could help to address this critical problem through introducing a fuel duty regulator to cushion the blow of soaring oil prices. Such a mechanism would benefit not only the farming community, but also Scotland’s rural economy as a whole. Transport is at the core of the rural economy, where there is far less scope to use public transport than in urban areas.”
The NFUS makes a key point:
“The cost of transporting the inputs of feed, fertiliser and fuel is so high, as is the cost of delivering produce to the market, that it is putting Scotland’s already fragile rural communities at a competitive disadvantage with other EU producers. Rural businesses could play a vital role in…economic recovery and high fuel duty is holding them back”.
I would have thought that if the Government recognised anything, they would recognise the drag on growth and recovery that all these trade bodies and others recognise in their day-to-day lives. So we need to take action, and we need to take it now. As the NFUS has said, we cannot mitigate all price rises because they occur for a variety of reasons, but we need to militate against the worse rises, particularly when they are driven by the barrel price of oil.
That was the same fundamental point made by the Scottish Grocers Federation, which also appreciated
“that the rising cost of fuel cannot indefinitely be reduced”,
but which would
“support any measure which would provide more stability and predictability in fuel prices.”
It continued:
“The rising cost of fuel, along with other significant increases in overheads including energy prices”—
again, the fuel dependents—
“continue to erode the viability of many small and medium sized retailers in Scotland… Government should be doing everything it can to support small and medium sized businesses which are fundamental to economic growth and employment. And that is why we are certain that the Government should introduce a proper Fuel Duty Regulator - to smooth out spikes - provide certainty - allow for investment - And most importantly remove this drag on recovery.”
The FSB spoke for everybody when it said it was
“disappointed that the Chancellor has not announced a cut in the level of fuel duty and that the rise deferred to August is still to go ahead. This will still hit small businesses and households hard and so we need to see a long term solution to address high and volatile fuel prices. We remain concerned that the Government’s Fair Fuel Stabiliser will not trigger an actual reduction in the price paid at the pumps.”
Nor will it because it was never designed to do so. That is why businesses such as those in the taxi trade, which are not in control of their own prices—they cannot set their own fees or fares because they are set by local authorities—have to take this hit on the chin. As the taxi industry said, that is leading to many detrimental factors: profit margins cut, people unable to invest in their businesses in the way they would like to, drivers having to put in extra hours and take-home pay for families reduced.
The taxi industry supports our position on the introduction of a fuel duty regulator, but the Government argue that this cannot be done and that there is no yield to fund a cut in fuel duty. They have made that case several times. But how much worse is it without a regulator in place and businesses of all sorts being forced to take these hits—hits that are a drag on economic recovery? The Forum of Private Business has said:
“The pips are squeaking, and everybody is feeling the pain.”
And by goodness they are. Yet action could have been taken. Businesses and consumers cannot afford to keep paying out more and more for their fuel. There is a serious risk that economic recovery in the UK will be strangled at birth if the Government do not act and act fast.
With those remarks on fuel and the absence of certain measures in the Bill, plus my other remarks, I hope that I have put our opposition on the record. We hope to return, with appropriate amendments at the appropriate stages, to issues such as the 50p tax cut, changes to age-related tax allowances, APD and, most importantly, the failure to deal with the fuel issue.
Amendment of the Law
Stewart Hosie Excerpts(12 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen Williams
The right hon. Lady will hear as I make progress through my speech that working families up and down the country, with or without children, will benefit significantly from the tax changes that the Government are making.
In the current tax year, we have raised the allowance from £6,475 to £7,475, lifting 800,000 people out of the income tax net altogether and providing a £200 tax cut for every basic rate taxpayer.
Stewart Hosie (Dundee East) (SNP)
Before the hon. Gentleman continues with his party political broadcast, may I ask him to look at his own Government’s Budget? Every single quintile will still be worse off after the Budget. It is in the Red Book. He is wrong.
Stephen Williams
These are extraordinarily difficult times, and none of us has ever shied away from the fact that we are in a tight fiscal squeeze or that there is a tight squeeze on family budgets. That is why it is important that we put more of people’s own money back into their pockets through the tax changes that we are introducing.
When the next tax year starts in two weeks’ time, the personal allowance will rise again, to £8,105, lifting 1.1 million people out of taxation altogether and providing a tax cut of £330. Also in two weeks’ time, as well as those tax changes, the largest pension increase for a century will have been delivered by this coalition Government.
Stewart Hosie (Dundee East) (SNP)
I will start by welcoming a couple of the measures announced today. The Chancellor spoke about backing the creative media sector, which has the potential to be very helpful for the games industry in Dundee. It is just a pity that the old scheme was scrapped and we had to have a hiatus until this one was introduced. We will of course look at the fine print to find out precisely what it does. I also welcome the doubling of council tax relief for serving service personnel, which some of my hon. Friends have campaigned on for many years, and the Chancellor’s comment that he expects to see exports doubled. I hope that when that work is under way the UK Government will work with Scottish Development International, which is already working with nearly 10,000 businesses to internationalise their work.
At face value, the changes to the decommissioning scheme and the new field allowance for the North sea are very welcome. Of course, that is a huge humiliation for the Chief Secretary to the Treasury, whose bright idea it was to increase North sea taxation last year without consulting the industry. However, I have to point out that from 2013-14 onward the decommissioning scheme will actually bring in an additional £1.2 billion to the Exchequer and from 2014-15 onward the new field allowance will bring in £130 million. That might be behavioural change; we will have to see precisely what it means. I also point out, in a gentle aside to the Liberals who have talked about how marvellous the Budget is, that in relation to the squeezed middle the threshold at which people pay the 40p rate of tax will decrease next year to just over £32,000—they have been not so much squeezed as almost halved by the actions of the Government.
The Chancellor, unsurprisingly, sought to take credit for his stewardship of the economy, but before he and his friends get carried away let us look at what he actually did. The deficit on the current budget for 2011 was meant to be £104.8 billion, and it was forecast to be £90 billion for 2011-12. Today the forecast for 2011-12 was increased to £98 billion. The net borrowing requirement was forecast to be £145.9 billion for 2010-11 and £122 billion for 2011-12. Today the forecast for 2011-12 was increased to £126 billion. The national debt, on the treaty calculation, was due to peak at 87.2% of GDP, or £1.2 trillion, in 2013-14, but today it is now expected to peak at 92.7% of GDP in 2013-14, which is £1.36 trillion.
Therefore, there was not a great deal for the Chancellor to be pleased about. That will, of course, allow him to claim that he is on track to meet his fiscal rules—that the structural current deficit should be in balance in the final year of a rolling five-year programme and that debt is falling as a share of GDP by the end of that period—but both those objectives are highly dependent on GDP growth, which, as we have noted in previous Budgets, is massively dependent, according to the OBR, on quite incredible, unbelievable and unmet rates of business investment.
In 2010 the Government suggested that business investment had to grow between 6.7% and 10.6% a year. By the time we got to the OBR’s fiscal outlook in November 2011 growth in business investment had turned negative for 2011 and the forecasts had been changed to deliver business investment growth from 2012 to 2016 of 7.7% to 12.6% a year. What we expect now, the Government having failed on all their measures so far, is business investment growth of between 6.4% and 10.1% from 2013 onward. I am certain that when we get to the autumn statement and are looking at weaker numbers and next year’s Budget the Chancellor will simply fiddle and make more aggressive the business growth investment figures for future years to pretend he is on target to meet his own rules.
That is why the OBR told us last autumn that the contribution of general Government consumption to UK GDP growth would be negative throughout the spending review period, and according to today’s Budget it still will be. It is also why this coalition’s cuts are hugely damaging not least in Scotland, and the changes over the spending review period that delivered an 11.3% real terms cut to Scotland and a 31.7% cut to the capital budget are barely altered by today’s announcements.
Never letting the facts get in the way of a good attack line, the Chancellor made the point that the UK Government are able to borrow quite cheaply at the moment. What he did not mention, and this was genuinely surprising, was the triple A rating that he normally uses in that argument. I suspect that it is because he has worked out that, although the UK had its triple A rating put under threat in February, it was paying an amount of money in yield on its five-year, 10-year and 30-year bonds, while Japan, which had a net debt twice that of the UK and two double A negative ratings, was paying a fraction of the yield on its bonds.
So, although I am very pleased that the UK is able to borrow at reasonably god terms, I am pleased also that the Chancellor has abandoned his boasts about the triple A rating, stopped fetishising it and is concentrating on what really matters, which is the yield that the UK pays.
Jesse Norman
The hon. Gentleman is slightly understating the case, is he not? The fact is that we are borrowing at extraordinarily low—historically low—nominal yields, and, given the level of inflation, at even lower real yields. That is a result of the deficit reduction strategy that has been followed, and one reason why we should not fret about double or treble A ratings is that the United States itself has been downgraded, as have one or two other countries, and their borrowing costs have not necessarily been affected. That is just a rational reaction to events in the capital markets.
Stewart Hosie
One might also make the case that the United States, with a fiscal stimulus programme, is borrowing money at negative real terms percentages. It has engaged in fiscal stimulus, not in the cut-and-burn approach of the UK Government, and, as the right hon. Member for Doncaster North (Edward Miliband) says, the US has succeeded where the UK is failing.
Andrea Leadsom
Surely the hon. Gentleman agrees that the US economy is not the same as the British economy. The US benefits enormously from being a foreign reserve currency, for example, so the situation is very different, and we cannot simply equate what happened in the US with what happened in the UK.
Stewart Hosie
The hon. Lady is obviously right that we cannot draw a direct comparison, and that is why I would not draw a direct comparison with the yield rates paid in Japan, but the point I was making is that it is wrong for any politician, particularly the Chancellor, to imply that a credit rating agency’s score is in any way related, or correlates directly, to the real yield that a Government pay.
Of all the things that the Chancellor could have done in the Budget but did not, the failure to act on the rising price of fuel was the most disgraceful. The previous Government were awful on fuel. They introduced the fuel duty escalator and opposed the introduction of a fair fuel regulator at every turn, but this Government, notwithstanding the rhetoric before the election, are little better.
Let us understand what this Government’s fair fuel stabiliser actually does. Fuel continues to rise by inflation and will, as confirmed today, when the price of oil is high, rise by inflation-plus—an escalator—when the price is low. A real fuel duty stabiliser would see the duty rate fall when the price rose, precisely because the UK Government already receive a VAT windfall at the pump or a North sea windfall at source in order to pay for it. Given the scale of the North sea windfall in particular, with £70 billion forecast over six years in last year’s Budget, which was £17 billion more than was identified the previous November, the failure to tackle properly the rising cost of fuel genuinely is a disgrace.
This year the forecast revenue for the six years from 2011 onwards is almost £50 billion, but that is based on a price for this year and the next two years of $111, $118 and $112 a barrel. The spot price today is $124.7, so we can safely conclude that, as usual, the UK Government’s assessment of North sea revenues will be understated. There is more than enough money to tackle the rising price of fuel properly, and not as this Government have done.
It has been described as pernicious already today; it is a pernicious measure to be cemented, I think, in future policy—I am talking about the unfairness of the proposal for regional pay. It will be extraordinary if the same person doing the same job in the same office with the same clients is paid differently in different parts of the country. I am very pleased indeed that the measure will not apply to Scottish Government civil servants, although I suspect that there will be huge resistance to the proposal from UK civil servants working outwith London.
Jake Berry
The hon. Gentleman is being extremely generous in giving way. Before I came to this place, I worked in a law firm. We had three offices—one in Manchester, one in Liverpool and one in London. We all did the same job, but we were all paid different salaries. Does the hon. Gentleman think that that was wrong?
Stewart Hosie
That was in the private sector. I am sure that the hon. Gentleman would say that he would negotiate his own wages or join others in a union to negotiate wages. We are talking about public service. If the hon. Gentleman’s attitude is the same as that of his party’s Front Benchers, he will seem to be saying that a public servant in Dundee or Dudley is not worth the same as a public servant doing the same job in Dartmouth. That would be worrying.
The real actions needed to kick-start the economy were almost wholly absent from today’s statement. The limited action on bank lending was announced yesterday and we have heard many of the promises before. I hope that the national loan guarantee scheme works, but to ensure that it does can we have transparency? Can we disaggregate the numbers so that no sector and no part of the UK is sold short in respect of that additional covered lending?
There was no specific action to get people to work or keep them in their jobs. Nowhere is that issue more important than with young people. The introduction of a national insurance break to help employers take on youngsters who do not meet the criteria for the Work programme would have been very welcome, but that was missing.
Shamefully, there was no action on direct capital investment, the most important thing that any Government can do. I am surprised that those on the Treasury Bench did not listen when the OBR said in 2010 that the impact multiplier for direct investment was 1:1, that for tax cuts it was 1:0.3 and that direct capital investment was three times more important and three times more beneficial at creating GDP growth than tax cuts. The Government even kept the squeeze on the very businesses that we need to create the growth. There was no change to the miserly annual investment allowances and that was a shame.
The Chancellor said that the Budget was fiscally neutral. To pay for his tax cut for the rich, he is squeezing the cash for services for those who need them most. When one considers that the total cost of the fiscal consolidation by 2015-16 will be £155 billion, that year and every year after that, and given a ratio of 4:1 spending cuts over tax increases, we can see where the priorities of the Government lie—not with people, not with jobs and not with growth.
Oral Answers to Questions
Stewart Hosie Excerpts(12 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Hoban
My hon. Friend makes an important point. We need to see a more competitive banking system. At the moment we are seeing, for example, the acquisition by Santander of businesses from RBS, which will create a challenger. We have also seen the outline decision by the Co-op to buy branches from Lloyds bank. Those measures, together with the sale of Northern Rock to Virgin Money, point towards a more competitive landscape for banking and will lead to better outcomes for consumers and businesses.
Stewart Hosie (Dundee East) (SNP)
It is not only the cost and availability of bank lending that is the problem; it is what the nationalised banks are doing with that debt. They are selling it to private equity firms for discounts of 40% to 50%, which reflects a net loss to the taxpayer-shareholder and fundamentally changes the relationship between the business and the bank. Let me ask the Minister, first, whether he is aware of that; and, more importantly, whether he has any information that would tell him that equity funds have had access to bank records on individual companies that would allow them to cherry-pick the assets they are buying.