Cost of Living
Debate between Stewart Hosie and David Rutley(11 years ago)
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Stewart Hosie
I will not give way, because we only get two minutes’ stoppage time, and I have had my two minutes.
This Government are also borrowing more and we are all paying the cost of failure. The Government’s main failure is on the fiscal rules they set themselves: that the structural current account deficit should be in balance in the final year of a future five-year programme—it will not be; and that debt should be falling as a share of GDP by the end of that period—it is not. Both objectives, were, and remain, highly dependent on GDP growth, which, as we have noted in previous Budgets, is massively dependent, at least according to the OBR, on extraordinary unmet and unmeetable levels of business investment. Let us remember that in 2010 the Government suggested, with a straight face, that business investment would have to grow between 8% and 11% a year between 2011 and 2015. By the time of the OBR fiscal outlook in November 2011, growth in business investment had turned negative again and the forecast had to be changed to show future projections of growth of up to 12%.
The Chancellor was at it again this year. Having failed to get the growth in business investment we needed, he is now suggesting growth in business investment of 8.6% in three out of the next four years. I hope that that happens, but based on the evidence we have seen so far and the inability of the banks to take their share in providing credit and liquidity to businesses, I fear that is a forlorn hope.
We have also been told—this point was mentioned earlier—that we will see the benefits to GDP growth of exports from the UK. In 2011, however, we had a deficit in trade in goods of £100 billion, which rose to £110 billion the following year. The deficit in trade in goods has been sitting at about £20 billion for every quarter of this year. The balance of goods and services was £23 billion in the red in 2011, and that figure worsened to £35 billion last year after four and a half years of depreciation in sterling. I would hope that at the very least the Government recognised that that part of the plan simply has not worked.
I hope that the Government will be less stubborn about recognising where they have failed and that their optimistic Budgets have simply collapsed into dust when faced with the stark reality of austerity economics, which strips consumption out of the economy in the way I have described.
Stewart Hosie
I will not.
The pain of all that, as always, is felt by ordinary people, because, as I said earlier, we know this much from the Red Book: the Government intend to take £155 billion a year out of the economy in discretionary consolidation by 2016-17. They will do that for that year and every year, the equivalent of stripping consumption worth about 7.5% of GDP from the economy. Given that they have increased the ratio of discretionary consolidation to four to one—four cuts for every one tax rise—we can see where the Government’s priorities lie: not with jobs, not with growth, not with recovery and not with lifting the burden of the cost of living crisis off the backs of ordinary people, but with balancing the books on the backs of ordinary people in this country. If nothing else, they should recognise that it is not working. The pain is intense for communities throughout the UK and they should think again when we get to the autumn statement.
Jobs and Growth
Debate between Stewart Hosie and David Rutley(13 years, 2 months ago)
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Stewart Hosie
That is absolutely right. I heard the Chancellor say this week that he has considered how the Government might fund business investment directly. There is merit in that. I am prepared to give this term of QE and the credit easing a chance to work, but I tell the Chancellor that if the £75 billion-plus of new electronic money goes to the banks or is used to buy back Government debt and does not hit the real economy, neither the banks nor the Government will be forgiven this time if it fails. Too many businesses are hurting due to a lack of business finance.
Stewart Hosie
No, I shall stick to the same adage as everyone else and give way twice.
The third thing that needs to be done is to restore consumer confidence and economic security. Fundamentally, that means keeping people in their jobs, and Government and their agencies remain responsible for plenty of jobs. That means that pay policy in the public sector should bring down the salaries of senior people, bonuses should be removed from senior public servants, there should be temporary pay freezes for those on average incomes, help should be provided for those earning under £21,000 and specialist systems and a working wage should be introduced for those earning least of all. However, it also means delivering a no-compulsory-redundancy policy for staff employed by Government, the NHS and the other public bodies when agreement can be reached. We know that this plan—a mix of direct capital investment, confidence, and improved business finance or taking some of the burden off businesses—can work. We have seen it in Scotland, where even with the unemployment figures published today, unemployment is lower, employment is higher and economic inactivity is lower.
We know that such a mix of activity can work and, of course, it is broadly in line with what Christine Lagarde called for in September, when she said that
“countries must act now—and act boldly—to steer their economies through this dangerous new phase of the recovery”.
It also mirrors her comment in August to the Financial Times when she said that
“short-term measures must be supportive of growth, yet economical in terms of the impact on fiscal sustainability, and can include policies supporting employment creation, advancing planned infrastructure and easing adjustment in housing markets.”
There is no reason, other than dogma, not to follow the ideas laid out by those on the Opposition Benches today to kick the economy out of its torpor. I urge the Chancellor to use his autumn statement to do just that. He can call it plan A-plus, he can call it plan B, but he must change, develop and deliver quickly.
Finance Bill
Debate between Stewart Hosie and David Rutley(14 years, 5 months ago)
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Stewart Hosie (Dundee East) (SNP)
I rise to speak to amendment 15 in my name and that of my friends. At face value, the increase in insurance premium tax in the Budget did not cause a huge stir, but as its consequences began to be felt, many representations were made by consumers and the industry. On balance, it is wise that we should have a report on the likely consequences of this tax rise on individuals, families, consumers and the sector. A number of concerns and predictions have been voiced. Eric Galbraith, the chief executive of the British Insurance Brokers Association, said that its research
“demonstrated that businesses and consumers were reducing insurance cover as a result of the recession”
and that
“we are concerned that increases to insurance premiums as a result of IPT could lead to even further underinsurance or even a lack of insurance protection. The last thing people need in a financial crisis is a higher insurance bill”.
That makes sense, given that taxes elsewhere, not least VAT, are going up. The insurance industry is worried that increased premiums may tempt people completely to stop insuring their homes, holidays or travel. Already, according to research by moneysupermarket.com, only one in five travellers always cover every trip they take here or abroad.
One consequence of underinsurance or non-insurance is that the number of illegal uninsured drivers is on the rise. According to the Motor Insurers Bureau, they already push up the average car premium for everybody else by £30 a year. If more people are underinsured or have no insurance at all, the premiums of those who pay the minimum third-party insurance will be pushed up even further. That is another burden that people really cannot do with in the middle of this recession, when times are tough. As the right hon. Member for East Yorkshire (Mr Knight) has made clear, in certain parts of the country, where the car is a necessity and people are honest, such premiums will be paid again and again. There will be a lot of hits to the honest insurer as a result of non-insurance elsewhere.
The Association of British Insurers has responded to the Budget by saying:
“Raising IPT is a direct tax increase for the vast majority of people who sensibly protect themselves and their families with insurance. This is regrettable and could have serious unintended consequences if it puts off consumers from protecting their homes, cars, holidays and everyday living.”
On uninsured trips, apparently some 2.9 million trips are made each year without adequate cover. Peter Hayman, the director of P J Hayman, expects that number to rise as more people opt to economise and use “free” cover as the cost of IPT increases. Perry Wilson, the founder of Insure and Go, has said:
“Our research suggests that the UK travel insurance industry receives over half a million claims for medical problems a year and nearly 400 000 for lost or stolen baggage. This tax rise will only act as a deterrent to those who sensibly want to insure themselves against these risks”.
Of course, the cost of not having insurance in certain circumstances can be extraordinarily expensive.
David Rutley (Macclesfield) (Con)
The hon. Gentleman makes an important point about underinsurance, as have other Members. Does he agree that this should not be just about the potential increase in IPT, but should also be about what we can do in terms of product design? Surely the onus should be on insurers to come up with products that help people, particularly younger drivers, to avoid this challenge. For example, they should look at opportunities for pay-as-you-go insurance and other possibilities. The argument is not just about IPT, but is about other product-related challenges and what can be put forward to mitigate the problems of underinsurance.
Stewart Hosie
I am a great supporter of innovative product design, marketing and pricing strategies, and I hope that all those things happen, but we are debating an amendment to the Finance Bill in which the Government are putting up IPT. I shall not strain the limits allowed by the Chair, but shall stick to the amendment and what is in the Bill, while supporting any innovation that the insurance sector, which is massively important in Scotland, might bring forward.
There is a deterrent effect on those who wish sensibly to insure themselves against many risks, and that effect will be enhanced as the cost of insurance rises. There are also specific consequences for individuals. Some 1.2 million people—about one in 20 motorists—regularly drive uninsured, and honest motorists pay the £30 premium I have mentioned, which is likely to go up. If someone is caught driving without insurance, the police are entitled to remove their vehicle from the road and charge them for the cost of transporting, storing or scrapping it. However, some cars may be worth less than the cost of insurance and there will be a burden on the public purse as a result of that removal, storage and scrapping of vehicles if people choose simply to abandon them.
People might also cut corners and opt for the “free” travel insurance offered by credit card companies, which might leave some travellers without the necessary levels of cover and might be costly in the long term. I do not intend to take up much of the Committee’s time on this issue, as this is a probing amendment, but this issue is more serious than I had initially imagined. I look forward to hearing the Minister’s comments on that last point in particular, because if people decide not to pay insurance premiums and instead settle for the “free” cover offered by their credit cards, they might be underinsured in certain circumstances. Also, business might be driven from the traditional, successful, good insurance companies, and I am conscious of what the net loss of jobs, revenue and profitability in that sector might be. So, putting up IPT will have consequences for the sector, for individuals and for jobs. All these points need to be answered properly and considerable comfort needs to be given that we are not going to turn into a nation that says, “We can’t afford insurance; we’ll do without it and let other people pick up the tab.” I shall listen very carefully to the Minister’s reply.