Finance Bill

Toby Perkins Excerpts

Tuesday 20th July 2010 Commons Chamber

[Mr Gauke]

That is our intention. The Chancellor has made it clear that we have no intention of reconsidering the zero ratings for food or children’s clothes. There are occasional border disputes regarding goods that are zero-rated and those that are fully rated, but on the fundamental question of zero-rating we have made it absolutely clear that we do not intend to revisit those areas. We are also increasing the personal allowance on income tax.

[Toby Perkins (Chesterfield) (Lab)]

May I drag the Minister back to his point about the VAT rise being part of a package of measures and about the poorest being protected by the Budget when it is taken in the whole rather than just looking at the VAT rise? Will he remind the House what safeguards there are for pensioners or unemployed people who do not have children? What benefits will they gain that will pay for the extra VAT that they are going to pay?

[Mr Gauke]

Again, I refer the hon. Gentleman to the distributional charts, particularly those that examine these matters on the basis of the expenditure decile, which academics increasingly believe provides a better examination of those who are suffering from material deprivation. That approach demonstrates that the measures are progressive, when taken as a whole, and that the wealthier sectors of society are paying more. The distributional analyses show that the single tax measure that had a regressive effect was the dumping of the 10p rate of income tax that was announced in 2007, which hurt the bottom five deciles and benefited the top five. That does not seem fair, and I am glad that we were not part of the Government who did that.

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[Mr Byrne]

I do not know what figures the hon. Gentleman is looking at, but in the March Budget the fiscal stimulus provided by automatic stabilisers was about 4.4% of GDP. The idea that a fiscal stimulus was not sustained into 2010 is fantasy.

[Toby Perkins]

I should like to bring my right hon. Friend back to what he was talking about—unemployment, housing, the impact on people and how the last Labour Government protected people on the ground. Is it not strange that there seems to be no acknowledgment from those on the Government Benches about how many extra people are in work and still have the homes for which they have worked so hard all their lives? There seems to be no acknowledgment from the Conservative party that that issue is worth worrying about. Perhaps that is because they were not the people who lost their jobs or were in danger of losing their homes.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I press hon. Members to make shorter interventions. The shadow Chief Secretary is being generous; may that continue.

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[Andrew George]

Perhaps the hon. Lady was not listening to my opening remarks when I said that on balance, because there are many measures that I approve of, even though I am disappointed by this particular measure, I will be supporting the Government. This is, of course, a Finance Bill and not the Budget as a whole.

I was reassured, but I seek further reassurance from Treasury Ministers, regarding the promise that the Government will not revisit the current list of zero-rated and 5%-limited VATable products and services and that they certainly have no intention of reducing those lists or in any way cutting the number of VAT-exempt, zero-rated or VAT-limited products and services such as those that we have been debating.

[Toby Perkins]

Will the hon. Gentleman give way?

[Andrew George]

I am just bringing my remarks to a close and I know that a lot of people wish to engage in the Backbench Business Committee debate later, so I hope that the hon. Gentleman will bear with me.

It has been a pleasure to take part in the debates throughout the proceedings of the Finance Bill. I put on record my disappointment regarding the VAT measure in particular and I hope that Treasury Ministers will reflect on the debate and come forward with an evaluation in the months and years ahead.

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[Toby Perkins (Chesterfield) (Lab)]

The hon. Member for Daventry (Chris Heaton-Harris) was true to his word. His speech was fairly brief, but it could have been a good deal briefer, because he completely failed to understand that the Bill is simply a return to the ideological and illogical Tory mistakes of the past. It reflects a Budget that spoke throughout of the Tory obsession with public sector cuts and the mistaken belief that public sector shrinkage automatically leads to private sector growth. In fact, the Tory belief seems to be that our economy is balanced on a see-saw—that as soon as the public sector goes down the private sector goes up, and vice versa. I speak as someone who for the past five years has run a small business, and who for seven years before that worked in the private sector for one of the fastest-growing companies in the UK.

As an internet-based sports retailer from 2004 to the general election, I relied on customers from all four corners of the country and every aspect of our diverse economy. I sold to businesses and to business people, for sure, but I sold also to schools, school teachers, universities, armed forces teams and individuals, such as doctors, council workers and police officers. The VAT rise in the Bill would have taken 2.5% straight off the bottom line of my business and would inevitably have led to higher prices; it would absolutely have had to. It means not just higher prices for pensioners, the disabled and people on benefits, those who are already likely to be struggling because of cuts to their housing benefits, but a double whammy—less money and higher prices.

So far we have heard a great deal from the Con-Dem Government about the private sector’s role in the recovery, but more revealing has been what we have not heard. We have not heard how the private sector will play a role in reducing the large number of people who claim sickness-related benefits when getting back to work; how cutting manufacturing allowances to fund a corporation tax cut that will help businesses only in January 2013 at the earliest is going to help our manufacturing industries and help us to grow our way out of recession; or how the retail sector will contribute to our growth when the Government’s policies will take money out of customers’ pockets.

I know the impact that those measures could have, because if the Government take money out of the pockets of people, particularly the poor and public sector workers, they take it out of the private sector, too. They take it out of the pockets of the shop owner who would have sold a teacher a new television; they take it out of the pocket of the plumber who would have fitted a new bathroom for a social worker who, now, does not have the confidence to make that purchase; and they take it out of the pocket of the double glazing firm that was about to install a new conservatory at a doctor’s house. The idea that the private sector will flourish because of this Bill is ludicrous.

The economy is not out of the woods. The Bill stifles growth, it is bad for business and it is bad for those who rely on the public services. The Government got the answer wrong not only by failing to understand the impact on the private sector of the cuts in public sector spending, but on every level with their decisions on taxation and investment. Tory Members have admitted that this is an ideological Budget, rooted in Thatcher’s economic catastrophes. The Budget means that huge global banks will pay less tax, while the very poorest people in our society—benefit recipients and pensioners—will be worse off. The Exchequer Secretary to the Treasury was unable to provide me with any way in which the Bill will compensate pensioners, the unemployed or those who do not have children for the fact that, under the VAT rise, they will pay hundreds of pounds more a year.

To hear the Conservative party propose such measures is no surprise. Conservatives have always set out to protect privilege and wealth, as anyone who has ever studied history will know. It is what they have always done, and that is why the hon. Member for Bermondsey and Old Southwark (Simon Hughes) said:

“I have always been concerned that Conservatives first look after their own and have presided over widening inequalities and not a more just society.”

That is what he has always said. Once I held out hope for the Liberal Democrats, but hearing them suddenly claim that VAT is a progressive tax, that we need dramatic cuts now and that we should not be too harsh on the bankers, it is as if the recent general election was so painful for them that they cannot bear to remember what they spent a month arguing.

The Tory cuts philosophy was the wrong decision at the wrong time, but even if we accepted that their cuts programme had to go faster and further than they had ever let on during the election, and even if we believed that Labour’s responsible deficit reduction programme for halving the deficit in four years was not enough, we would find that the decisions in the Bill still do not make sense.

The Exchequer Secretary argued that the Government had been left without a choice, but, as my hon. Friend the Member for Streatham (Mr Umunna) revealed, there were alternatives. The capital gains tax rise was less than half that promised in the Liberal Democrat manifesto, and corporation tax was already at its lowest point for a long time and 5% less than it was in 1996-97. If there are tough decisions to be taken, and ordinary people and so many good businesses are struggling so badly, why choose to make life even more prosperous for those businesses that are already flourishing and, in some cases, contributing very little to growth?.

The previous Labour Government were securing growth to protect hard-pressed people against losing their homes, and when we realise that in this recession about 30,000 fewer people lost their homes than did so in past Tory recessions, we see just how easily the Tories would have cut people adrift. When we see that 500,000 fewer people lost their jobs than would have done so if we had followed Tory advice, we know that throughout this country there are people who can walk into work with their heads held high, knowing that when the crisis struck they had a Government who said, “Yes, we care.”

The measures that the Labour Government took are working. The predictions that the current shadow Chancellor made in his last Budget were, if anything, pessimistic. The borrowing requirement is down by £8 billion and there was a Government underspend of £5 billion. That is why even right-wing analysts such as Fraser Nelson of The Spectator have been forced to admit that the Office for Budget Responsibility did not demonstrate that measures in the Budget were inevitable, and, as Tory Members have admitted before, that it is an ideological Bill which reflects the warped view of life held by so many Government Members who have never had to struggle for anything in their lives—many of them millionaires the day they were born. Their first reaction to a crisis made in the City is to put social workers, school teachers, special needs assistants and carers on the dole; to tell people to put on a thicker jumper and holiday in this country; to cut the value of the money in people’s pockets and introduce an arbitrary tax that will hit the poorest hardest; and to do nothing—absolutely nothing—to create the jobs that might help the poor to work their way out of poverty.

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[Margot James]

I thank my hon. Friend for giving me the benefit of some of the history of the House before I was a Member. Many of the opinions of the Secretary of State were indeed prescient. What my hon. Friend has added to the debate is truly shocking.

The public sector is clearly unaffordable. The restructuring has been inevitable; there has been no choice on our side as far as that is concerned. Yes, we will try to make a virtue of a necessity and seek to rebalance the public and private sectors, which this country has long needed irrespective of the conditions in which we now find ourselves.

[Toby Perkins]

The hon. Lady mentioned the prescience of the right hon. Member for Twickenham (Vince Cable) and has commented on the size of the debt and how we got into this position. Will she also acknowledge that right up until 2008, before she came to the House, her party was arguing not for less but for more public spending in a raft of areas?

[Margot James]

I am glad that the hon. Gentleman intervened because I cannot understand why that point keeps being made by Labour Members. I fought the 2005 general election and our party’s policy was clear: we would share the proceeds of growth. We were not advocating spending at the same rate as the Labour party did when in government; yes, we were arguing for increases, but at a significantly lower rate than was happening under the Labour party. I should like to put that on the record.

I return to my theme that this Budget does a great public service in restoring the private sector as the driver of the growth that will get the country out of the mess that has been left to us to sort out. I want to commend a few of the key features of the Bill. The reduction in corporation tax to 20% for small and medium-sized businesses and the longer-term reduction for larger businesses are key. There is also the Work programme, which is about making work pay. We need to make sure that those who can work have the opportunity to do so—indeed, they must.

There are 50,000 more apprenticeship places and the national insurance holiday for new companies, which do not have to pay any national insurance whatever for the first 10 employees. Furthermore, the Government have abandoned the Labour party’s dangerous plan to levy an additional rate of employers’ national insurance and there has been a £250 million increase in the enterprise growth fund, meaning that medium-sized companies in this country have access to more credit. Those measures will restore the private sector. Painful measures that we are obliged to place on the public sector—with the full support, I believe, of the public—will be more than made up for by the recovery of the private sector, because, according to the Office for Budget Responsibility’s projections, employment will rise year on year. I know that Labour Members are sceptical about that, but I believe in British industry and think that our private sector, including all the small companies in my constituency, is ready for the challenge. We have at last liberated it so that it can take up the challenge. I have every confidence that through the recovery of the private sector, the country will prosper once again.