Finance Bill

Debate between Stewart Hosie and Andrew George

Tuesday 6th July 2010 Commons Chamber

[Stewart Hosie]

As my hon. Friend says, it will mean £26 million extra on the bill to the NHS in Scotland alone. We can easily add up the figures for all the public bodies and find out what the real cost of the VAT rise will be area by area, but we know that it adds up to £13 billion in total. It makes up more than a quarter of the additional £40 billion of fiscal tightening that the Government wish to see in 2014-15. That is £40 billion in that single year, on top of the cuts and tax increases inherited from the Labour party that they intend to keep. There is a huge problem with the VAT component of this Finance Bill.

[Andrew George (St Ives) (LD)]

By and large, I must commend the hon. Gentleman for a constructive contribution to the debate—we have not had many so far. Given the amendment that I tabled last Monday about impact assessments on VAT, what alternative would he recommend to fill the hole that would be left by not increasing VAT by 2.5%, or does he not recommend an alternative?

[Stewart Hosie]

I suffer from the advantage of tabling many new clauses and new schedules to the Fiscal Responsibility Bill to establish a medium-term fiscal consolidation precisely to avoid the slash-and-burn approach of a massive hike in the most regressive form of tax. Instead of the VAT increase, I would not tackle the deficit and debt over a fixed term—certainly not a short fixed term such as the Government propose—but do it in the medium term, not least to benefit from the £50 billion of medium-term savings from cancelling and not replacing Trident. The Liberals appeared to be in favour of that midway through the election campaign, but were not towards the end, when it looked as if their leader would be in a position of some influence and power. I will stop there because the Liberals have had a hard enough time, but I will return to the subject shortly.

It is not simply what is in the Bill that causes problems, but what is not in it, and the missed opportunities that that represents. The reasoned amendment outlines those. For example, the Bill could have taken its lead from the second and final report of the Holtham commission—the Independent Commission on Funding and Finance for Wales—which repeated its call for an immediate “Barnett floor” on departmental expenditure limit payments to Wales. My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) mentioned that earlier. That came a year after the commission’s first report recommended that such a floor, which would prevent further convergence between Wales and the England average, should be a multiple of 114% spending in Wales for every 100% in England. The Scottish National party and Plaid Cymru were delighted that the Chief Secretary confirmed earlier that there would be no further convergence in funding for Wales in the next few years at least. I am sure that my hon. Friends in Plaid Cymru will hold the Government to that.

The Bill also missed an opportunity to deliver real progress on intergovernmental relations with Scotland. The Government could have ensured the release of the fossil fuel levy—nearly £200 million sitting in a bank account—without a corresponding cut to the Scottish block. Such a move would have been welcomed, and have provided a much-needed boost to the Scottish Government’s attempts to secure economic recovery and kick-start jobs in the green economy. Better still, the Government could have moved to a position of full fiscal responsibility for Scotland, so that Scotland would make all its tax-and-spend decisions and find its own solutions to ensure that we did not enter another recession.

There was also an opportunity to deliver a fuel duty regulator—a fuel duty stabiliser—and fair play on fuel, not least for the haulage sector. Instead, the Chancellor plans to go ahead with Labour’s inflationary package of three fuel duty increases in the next year. The Road Haulage Association’s chief executive said that that

“will simply further widen the gap between UK diesel duty and that of our EU competitors.”

As my hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil) said several times, the Government have missed an opportunity for a fuel duty derogation now for remote and rural areas. I hope that that idea has not been kicked into the long grass, never to be seen again, and that the Liberals in the Government might find a little steel before they are ground down completely, and deliver something beneficial to remote and rural areas throughout the UK.