Housing Benefit (Under-occupancy Penalty)
Debate between Stewart Hosie and Jim McGovern(11 years, 9 months ago)
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Stewart Hosie
No, as I have only two and a half minutes left.
The other 2,804 households will lose 14% of their housing benefit. Tenants in two-bedroom council properties could lose benefit entitlement of approximately £9.93 a week, which is £516 a year. Those with two so-called spare rooms will lose an entitlement of £20.07 a week, which is more than £1,000 a year. Does the Minister understand what the loss of £1,000 a year means to families who are already struggling to make ends meet? Does he understand the consequence of that level of indebtedness? Legitimate lending companies will not lend to people in those circumstances, and credit unions can only do so much. This policy will drive people into the hands of loan sharks and illegal moneylenders, and the consequences of that will be picked up by social work departments, health services and the police, at a cost to the public purse for a policy that is unlikely to save this Government any money in the first place.
Jim McGovern
A couple of weeks ago, I attended a meeting with officers of Dundee city council who said that discretionary payments would be extremely limited because they have never had the funds for that. I asked whether they had smaller houses for people who were willing to move. They replied, “No.”
Stewart Hosie
The hon. Gentleman sums up the situation nicely. The discretionary pot is too small. I do not dislike discretion generally—I think it is quite helpful—but there are too many categories of people who should be fully exempt but who will be subjected to the tender mercies of discretionary decision making, which may go against them when it ought not to.
In short, this remains a very bad policy with too many of the wrong people suffering a very bad impact, and it must be reversed. It risks destabilising communities; it disproportionately hits disabled people; it puts the burden of paying the cost of this Government’s economic failure on the backs of some of the poorest in society. That, I think, tells us everything we need to know about the Tory-Liberal Government, many of whom—most of whom, I suspect, or perhaps even all—have not been poor and, more important, do not understand what it means to be poor in society today.
Scotland Bill
Debate between Stewart Hosie and Jim McGovern(13 years, 9 months ago)
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Stewart Hosie
The borrowing powers in the Bill are at the heart of devolution. On Second Reading, a number of serious questions were raised on both revenue and capital borrowing powers. I shall come to the detailed issues in the main part of my comments, but, fundamentally, I am seeking to put in place a code of practice for the Treasury and the Scottish Government to address limits, restrictions, thresholds, maximum amounts and the nature of borrowing, be it through bonds or direct loans from the consolidated fund. That is a sensible way to amend the Bill. To make such provisions otherwise would require draft orders to be tabled, but amendments to Bills cannot be made with draft orders. Much of the narrative on this matter is in the Command Paper, but it is likewise impossible to amend by amending the Bill.
The amendments are pretty self-explanatory but I would like to detail the reasons for them. The revenue-borrowing powers are fundamentally linked to the wider taxation proposals in the Bill. Both the Scottish National party and the Scottish Government have previously made clear their concerns about the tax proposals. If a full range of fiscal policy levers were available to the Scottish Government, it would have to include a borrowing regime with sufficient flexibility to allow public spending profiles to be managed across entire economic cycles, not simply four-year forecast periods. The UK Government’s proposals, however, fall far short of that, yet by exposing the Scottish Government and the Scottish Parliament to cyclical fluctuations in income tax they embed a high degree of volatility in Scotland’s public finances, which cannot be right when we are seeking to protect public services and find means to grow the economy.
The Bill proposes to allow for annual borrowing of up to £200 million in any one year, and for a maximum limit of £500 million to finance current expenditure where there are differences between forecasts and the outturns of Scottish tax revenue under the Bill’s income tax proposals. Loans must be made within four years of being taken out. I understand that these provisions are additional to the provisions of the Scotland Act 1998, which allows revenue borrowing for the purposes of providing cash balances and maintaining cash flow. The aggregate limit of the Act is also £500 million, so the additional purpose proposed in the Bill, plus the passage of the 13 years since the original limit was set, has apparently not been considered sufficient reason for lifting the limit. We do not believe that that is credible.
The Bill also lacks flexibility to deal not necessarily with forecast errors, but forecast falls identified in advance. I will return later to the reason that that is a problem. More crucially, the provisions in the Bill are insufficient to manage volatility in tax receipts that might reasonably be expected to occur. Importantly, over the past decade, UK Government income tax forecasts have, on average, been overly optimistic, and the annual cap of £200 million would have been insufficient to offset deviations in income tax receipts relative to forecasts in recent years.
Jim McGovern
The hon. Gentleman might have heard me earlier saying that these proceedings are televised. The general public would like to know what we are speaking about, so will he keep his remarks as understandable as possible?
Stewart Hosie
I thought that my remarks were always understandable. The problem is that we are dealing with the technical provisions—the fiscal and borrowing powers—of a Bill. It is necessarily technical. However, I shall try to summarise it in plain English, if possible, when I get towards the end of my remarks.
In 2010-11, the difference between the Treasury’s original forecast for UK income tax and the most recent estimate is about £35 billion. Under the Scotland Bill, an equivalent forecasting error would have reduced the Scottish Government’s budget by approximately £1 billion. The implication of that and the four-year payback period is that had the system been in place during the last spending review period, repayment of the loan would have had to be made within what are now pressurised budgets—a £1.3 billion cut to Scotland this year, and over £3 billion in the comprehensive spending review—between now and 2014.
In contrast, the UK Government can spread the repayment of cyclical borrowing over a significantly longer period to ensure that it does not adversely impact on the resources available for public services. That is important, because it is accepted in all parts of the House that in times of recession or downturn, tax revenue falls and borrowing goes up—that is an automatic stabiliser—but the same implicit provision has not been made in the Bill. That is a flaw that I know is now recognised by people in many parties.
The inadequacy of the borrowing powers for this purpose was highlighted in the written evidence to the Scottish Affairs Committee from Professor Andrew Hughes Hallett and Professor Drew Scott. They said:
“Over the decade before the current recession, 1997-2007, the UK governments track record for income tax receipts is one of forecast errors that range between +7% to -4%, with an average of +1.1%”
a year. They continued:
“Since borrowing will follow from overestimates”—
the real amount will be less than the forecast—
“this means the Scottish Government will need to cut spending or borrow every year on average and should expect to exhaust its borrowing limit several times in a decade.”
To have such a flaw built into a Bill from the outset is profoundly unhelpful to the efforts of the Scottish Government to protect public services and grow the economy. The proposals also lack any ability to smooth the effects of cyclical downturns.
Unlike the UK Government, the Scottish Government will have no opportunity to use borrowing to compensate for a forecast decline in income tax revenues in the event of, for example, an anticipated slowdown in the global economy. Scotland would have no option but to cut spending to match the reduction in revenue at precisely the time when we might want to invoke an economic stimulus—a policy of the previous Government that we supported. However, it would be impossible to do that, because cuts would be required to match a forecast fall in revenue.
The Bill misses the fundamental point about being able to respond effectively to the natural volatility of tax revenues in managing public expenditure. Paradoxically, the more accurate the Office for Budget Responsibility is at forecasting falls in future revenue, the greater the volatility in the budget, because borrowing is permitted not against a forecast fall but only against a discrepancy between the forecast and the actual level. That is a huge problem with the borrowing powers at the heart of the Bill. If the Exchequer Secretary or his Scotland Office colleague wants to indicate that they intend to table the necessary amendments on Report or later to rectify that, I would be happy for them to intervene at any point.
Jim McGovern
Most hon. Members will know that the hon. Gentleman is my constituency neighbour. He mentioned “Strengthening Scotland’s Future”. Does he actually believe that separating Scotland from the UK would strengthen Scotland’s future?
Stewart Hosie
I certainly think that improving the provisions of the Bill that relate to capital borrowing would strengthen the Scottish Government’s ability to do the right thing, whoever was in power. If we want to have a debate about the relative merits of independence versus the Union, I am happy to do that—[Hon. Members: “When?”] Not today, because we are dealing with the Bill.