Finance Bill

Toby Perkins Excerpts

Tuesday 6th July 2010 Commons Chamber

[Mr Byrne]

I look forward to the hon. Gentleman telling us later how the increase in VAT is going to support the argument that he is trying to prosecute. I hope that he will also reflect on the cost of this Budget to jobs. The official figures for job cuts as a result of this Budget are bad enough, but the real figures are even worse. We have already watched the extraordinary spectacle of the Office for Budget Responsibility tell the Chancellor that employment will be 100,000 lower as a result of Budget measures, but then the real figures were published in The Guardian—not in this House, but in The Guardian—from which we learned that secret Treasury papers say that the Budget will cost 1.3 million jobs over the next five years. When the Chancellor stood at that Dispatch Box a couple of weeks ago, he told us that he would not hide things in the “small print” and that he would give it to us “straight”; he was so straight and so open that he kept the Treasury advice out of the Budget altogether. Yet even that picture might not reflect the entirety of the Budget’s impact.

[Toby Perkins (Chesterfield) (Lab)]

Does my right hon. Friend agree that the Liberal Democrats’ comments would have more credibility if they had not spent the six or eight weeks before the general election arguing very accurately and articulately against the very Budget they have just helped to deliver?

[Mr Byrne]

My hon. Friend is absolutely right. Some Front-Bench Labour Members believe in redemption, and we have not given up on the hon. Member for Bermondsey and Old Southwark (Simon Hughes). That is why we are looking forward so much to hearing his contribution later this evening. [Interruption.] I hope he is not going to dispel the image I have of his virtue and integrity.

--- Later in debate ---

[Clive Efford]

What we have heard in several debates is so much hand wringing that I have almost started to feel sorry for the Liberal Democrats. They must be in agony from all the crushed fingers they have from wringing their hands so tightly in trying to explain away the impact of the VAT increase.

[Toby Perkins]

Was my hon. Friend as surprised as I was that during the Budget debate the hon. Member for Bromsgrove (Sajid Javid) said:

“Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it”?—[Official Report, 24 June 2010; Vol. 512, c. 515.]

He was clear that it was a Thatcherite Tory Budget that he was proud of. The Liberal Democrats are being used as a sort of human shield to defend a Budget that in other circumstances would have appalled them.

[Lorely Burt]

That’s an old phrase!

--- Later in debate ---

[Rushanara Ali]

We all know that income inequality rises in periods of boom. It is not acceptable, and personally I would rather that we had been able to do much more. As under previous Governments, income inequality increased. However, social inequality decreased. Like many Opposition and Government Members I worked passionately to reduce poverty and we did reduce child poverty nationally. I regret that we did not manage to achieve comparable reductions in child poverty in London.

The Government’s cuts will be judged on the measure of progressivism, and it is a great shame that the Bill is not progressive enough. Using VAT to raise £13 billion is a regressive choice. Save the Children estimates that the poorest families in Britain will face VAT bills of about £1,600 a year. The Treasury’s own figures show that the poorest are affected three times as much as others by changes in VAT. Many have argued that that is offset by the exempted expenditure on food and children’s clothing, but it is quite the opposite. The poorest 10% of households already spend a higher proportion of their disposable incomes on VAT—about 14% compared with about 5% for the top 10%.

These changes, combined with announcements in the Budget such as those on housing benefit, disability living allowance and other kinds of fixed income, alongside the removal of some £3 billion of support to families, will devastate many of the vulnerable families in constituencies such as mine and many others. Ministers and Government Members have been quick to say that restoring the link between earnings and the basic state pension is an important achievement, but unfortunately some 10,000 pensioners in my constituency will suffer from the VAT rise alone.

The VAT increase will reduce consumption. It will hit small businesses, including almost 4,500 in my constituency, very hard. I do not accept the argument that it will be good for the economy. About 70% of those businesses in my constituency have fewer than four members of staff working for them, and there is no doubt that a reduction in consumption will affect them negatively.

The Conservatives have been out of power for 13 years, and the first thing they now do is raise VAT. What does that say about their idea of progressivism? Those of us who were brought up in modest income households, like many millions of people in this country, have not forgotten the pain and suffering inflicted on families through VAT hikes in the past, and I simply do not accept that this is the right path now. I appeal to Liberal Democrat friends and to true compassionate Conservatives —I hope there are still a few left—who know in their heart of hearts that this VAT increase is bad for the British economy, does nothing to create fairness and social justice and does nothing to protect the most vulnerable in our country to think again and to vote with us.

People on modest incomes in constituencies such as mine will have to make terrible choices between heating or feeding and clothing their families, or between new pairs of shoes for their children and taking the bus to work. Sadly, those are the kinds of choices that some people will be forced to make because they are already on low incomes, struggling to cope in this difficult economic climate. We know that in periods of recession people turn to loan sharks because they find it difficult to get other loans, and end up heavily indebted and trapped. We also know that despite efforts by the previous Government, many of the poorest people in this country still suffer from being in a poverty trap. Despite those efforts, child poverty still has not been reduced by as much as we would have liked. I believe that this Budget, particularly the VAT increase, will continue to damage vulnerable families. In Tower Hamlets, in constituencies such as mine, the Budget cuts have already amounted to about £9 million, and a further £55 million of cuts are proposed over the next three years.

Although I welcome the bankers levy, where is the justice and fairness in raising just £2 billion, with no provision being made to tax bonuses? We may contrast that with the £6 billion of bankers’ bonuses and with the billions of pounds of public service cuts for ordinary families and workers, and it just does not seem adequate. I am not saying that the public do not want to see the deficit cut, but where is the justice in such a comparatively small levy compared with what the public have to pay?

[Toby Perkins]

My hon. Friend is making a powerful case. Does she share my view that any Budget that is supposed to have us all in it together but leaves the bankers and the super-rich feeling tremendously relieved and the most deprived people in our communities horrified by what they are facing cannot possibly achieve any measure of fairness?

[Rushanara Ali]

I agree completely. My constituency is situated between the City and Canary Wharf, and although I and many people in my constituency are grateful for the contribution that responsible bankers make through local community work and so on, the reality is that a small but significant minority have brought the economy almost to a standstill. That is not acceptable, and bankers ought to be asked to make a bigger contribution than ordinary members of the public.

Over the past decade, constituencies such as mine have struggled to get to a position in which people can reach their aspirations, and unemployment was high even during the boom period, particularly among graduates. In the current climate the situation is ever more difficult. I do not believe that punishing ordinary families and people who are struggling to make ends meet is the way forward, or that it will help to create the big society that members of the Conservative party claim to want to create. It does not highlight compassionate conservatism. We heard a lot about that before the election, but I see no sign of it. I hope that some of our friends on the other side of the Chamber will reconsider the matter and think about how they can support families in this difficult climate.