Amendment of the Law

Tom Clarke Excerpts

Thursday 22nd March 2012 Commons Chamber

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

May I follow up the very important point that my hon. Friend made about the reduction of £12 billion in welfare? Does he recall that last week when we had the debate on women’s rights in Westminster Hall a number of our friends from Northern Ireland outlined just how serious that problem was? Does he think they will be in receipt of cuts as well?

[Mark Durkan]

Absolutely; that is the fear that we must have. The Chancellor has put forth the signal that such cuts would be needed and would have to be factored into the next spending review. Although this House has discharged its duties on the Welfare Reform Bill, we must ask what the changes will be. Contrary to what the Chancellor has said about support for families, the Government's direction of travel in everything they do is putting more of a squeeze on families—both low-income families on benefits and middle-income families given the pressures that they are facing.

The Chancellor also used the Budget to frame questions about moving towards regional pay in the public sector. Speaking from the Opposition Benches, I want to say straightforwardly that I know that he is not the first Chancellor to toy with the idea of regional pay and tinkering with the framework. I have heard that from previous Chancellors and Prime Ministers, so I am not in denial. I was as opposed to it then as I am now. I was intrigued to hear the Chancellor say that he had submitted evidence to the independent pay review body, so I went to the Library to see what that evidence was and I have the “Dear pay review body chair” letter from the Chancellor. Some 11 pages of evidence were submitted. I am not saying that it is dodgy dossier stuff, but in the material that it sources it really is dubious dossier stuff. It shorthands academic studies, possibly doing a disservice to the academics who completed them, in saying that the evidence suggests that the quality of public services would directly benefit if public sector pay became more responsive to local labour markets. It claims that one study

“found that over one quarter of hospital targets were negatively associated with the public/private wage differential.”

It said that another study

“found that a 10 per cent increase in wages outside of the nursing sector was associated with a 7.4 percent increase in mortality rates from heart attacks.”

When that is the quality of evidence that the Government are submitting to the pay review body, we need to examine it further.

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[Mr Russell Brown (Dumfries and Galloway) (Lab)]

The Chancellor’s Budget statement yesterday was for the entire country, but for so many individuals, households and communities, it will result in many different outcomes. I want to concentrate on the impact that it will have on my constituency and the Dumfries and Galloway region as a whole. Yesterday, local people were looking for indications of potential growth in the economy and potential creation of jobs.

In the past 20 months unemployment in my constituency has risen month after month. It is a sad reflection that youth unemployment is at its highest level since 1996. Dumfries and Galloway is a rural constituency, which means that the two largest employers are the national health service and the local council. The shedding of jobs in those two specific areas has now been going on for four years, and for those who think that everything north of the border is fine under a Scottish National party Government, let me tell them that that is four years of cuts in the public sector. Yet the block grant that we all talk about—that Barnett formula, the Barnett consequentials—has been reduced only in the financial year that is about to come to an end. So there has been a lot of pain in Scotland that sometimes people do not read about in the wider UK press. The pain of loss of income spreads into the local economy. It spreads on to the high street. I regret to say that some of the pressure on households in my constituency is down to the fact that it is very much a low wage economy.

So the Budget statement cannot be taken in isolation, although that is what we are here to discuss today. We need to look at what has happened and what is about to happen. My hon. Friend the Member for Foyle (Mark Durkan) said that the welfare cuts would have an impact. That is happening at the moment. Let no one be under any illusion that only the current coalition Government have introduced welfare cuts and reforms. Our Government did on three occasions. They were trying to make those adjustments that said to people, “Work does pay. There is an opportunity there, despite any disability that you have. There is help and support to get you back into the workplace, perhaps not doing what you did in the past but it is there if you wish to seize the opportunity.” The big challenge will be in the next two weeks when so many households lose working tax credits. With the reductions in service provision through the voluntary sector that my local area has experienced, with welfare rights budgets being cut and with Citizens Advice services being cut, I am finding that more and more constituents are coming to my office for help and support.

Let me give the entire House a warning: colleagues had better batten down the hatches, because they are about to be inundated with households that are about to lose their working tax credit. The increase in tax allowance announced yesterday, which will mean £2 or £3 a week, will make not one iota of difference to households that will potentially lose £50, £60 or £70 a week. In no way whatsoever can the increase compensate for that.

The other point is that people will need to move from working 16 hours a week to 24 hours in order to avoid losing their tax credit. How on earth will that happen when people have voluntarily reduced their working hours over the past couple of years just to hold on to their jobs? Unfortunately, many of those people will be unable to keep a hold of their tax credit.

The granny tax grab, as it has been described today in the press, the changes to the age-related personal allowance, which when introduced took 680,000 pensioners out of tax altogether, is being done at the wrong time, if indeed it has to be done at all, with low interest rates and maturing annuities not delivering what people had expected.

In a rural locality fuel prices are vital, so I want to ask the Minister what has happened to the fair fuel stabiliser. FairFuelUK expected more from the coalition Government, who need to be honest about what has gone wrong. We were all inundated with e-mails from constituents about the report commissioned by FairFuelUK. I asked the Economic Secretary last week—she did not leak anything to me—what she and her officials thought of the report, but she said that she could not speak to me about it because the Budget was just a few days away. I would like to hear what Treasury Ministers and officials make of the report, because I have doubts about a 2.5p reduction in fuel duty creating 175,000 jobs; it verges on some sort of economic fantasy.

I would have loved to have seen, as I am sure would most of my constituents, an announcement yesterday of a temporary reversal in the VAT rise, because £450 extra for families would have been of real benefit to them and it would also have helped motorists. I am, and always have been, totally opposed to any kind of regional variations in these matters. I sat on the Committee that introduced the national minimum wage back in 1998 and—the Secretary of State for Business, Innovation and Skills is no longer in the Chamber—even then there were Liberal Democrat Members who wanted regional variations in the national minimum wage. It is not acceptable.

[Mr Tom Clarke]

Does my hon. Friend recall that the hospitality and tourism industries, which I know are very important in his constituency, were warned that the national minimum wage would cost them jobs, and does he agree that the opposite was the case?

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[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

The hon. Member for East Surrey (Mr Gyimah) might be persuaded that plan A is working but I can tell him that, even if it is working in his constituency and the rest of Surrey, it certainly is not working in Scotland. I hope to demonstrate that in my remarks. The truth of the matter is that we appear to be living, even in this Chamber, in two different worlds. Let us ignore the fact that, despite all the efforts of the Government and all the leaks that we debated earlier, we face a Budget that represents the reality of what the coalition means. This Government and this Budget will be remembered for cutting the top rate of tax for the rich while putting the boot into pensioners. I have already spoken to a number of my constituents and I have absolutely no doubt that that is their view.

It might seem odd for me to refer to a Foreign Secretary during a Budget speech, but some hon. Members might recall that some years ago a young representative at the Conservative party conference—a 16-year-old by the name of William Hague—addressed the conference, saying:

“Half of you won’t be here in 30 or 40 years”.

That may well be true, but what are we seeing in the Budget for the half who are left? While £30,000 a year is freely given to millionaires, the Chancellor is seeking to end age-related tax allowances, despite the evidence from HMRC, which says that 4.4 million pensioners will be £83 a year worse off in the long term. How can anyone defend that and give us the kind of nonsense we have heard about the so-called class war?

Let me address the real economy in our constituencies, which I believe the Chancellor had a wonderful opportunity to address but missed. Unemployment is by far the biggest problem we are now facing, certainly in constituencies such as mine where there has been a 54% rise in long- term unemployment and an 80% increase in youth unemployment. A league table of every constituency in Britain was produced last week, relating alcohol abuse to mortality, and it is with great regret that I have to say that my constituency came out as No. 1. Almost every professional who was consulted on those figures made the point that we cannot ignore poverty and its implications; we cannot ignore unemployment and what it means; we cannot say to young people that there are no jobs for them, whatever educational qualifications they might have attained, and not expect the kind of reaction that I have just described. Nearly a quarter of 16 to 24-year-olds in the UK are unemployed. That is a wholly unacceptable statistic and I make the point that we are talking not just about statistics but about people.

We can see from the unemployment figures that are available that in the UK there was a 22,000 increase in unemployment among women in the last quarter alone. I am seeing that in my constituency. Women are the bedrock of our society, as we are rightly told. They are at the heart of our families, whom the Government in earlier days told us were one of their priorities. Well, there is little evidence for that.

We need to restore the future jobs fund—initiative after initiative has been annulled by this Government—and we need to look at new opportunities in fresh sunrise industries, which I am happy to say exist in my constituency, particularly in solar energy. I welcomed what my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) said a few moments ago, but I did not welcome the Government’s change to feed-in tariffs, which is frankly too deep and too fast. Home owners who seek to go along with developments in this sector now face soaring energy costs, and burgeoning industries such as AVC Sky in my constituency face enormous difficulties, which is bad for home owners, bad for jobs and bad for growth. The Government’s rhetoric is simply not matched by their actions, especially when the Government tell us that they are the greenest Government ever.

Mr Deputy Speaker—I beg your pardon, Mr Speaker; I welcome you to the Chair. We saw at points during the Budget speech yesterday Liberal Democrat Members waving their Order Papers. Were they waving them at the kind of measures that I describe?

[Lorely Burt]

We were waving our Order Papers with delight at the fact that our coalition Government are bringing the tax threshold towards our £10,000 target faster than we could ever have hoped.

[Mr Clarke]

They were waving their Order Papers at some of the most miserable measures that I have heard in the House. They reminded me of Jim Callaghan’s comment when he found that the Scottish National party—which is not even represented here today—was working with Mrs Thatcher to bring down his Government. He referred to SNP Members as “Turkeys voting for an early Christmas”, and deservedly in their case.

I wrote to the Prime Minister recently to draw his attention to the fact that Korean shipbuilders are given preferred bidder status for Royal Navy tankers, with almost £500 million involved. It simply cannot be right that, as we defend our country, as we should, defence orders exclude British and especially Scottish firms that are willing, able and skilled enough to respond to the task. I want to ensure that highly skilled workers are kept working for our nation’s security and for our people’s safety.

I finish with a reference to the Chancellor’s announcement of a £12 billion cut in welfare—a shameful figure that the Liberal Democrats were also cheering. That is added to the Remploy closures, which have never been fully explained. Hundreds of disabled people will be thrown straight on the dole. Two thirds of Remploy factories will close. We are seeing on top of that changes in benefits that are very much to the disadvantage of people with disabilities and their carers and families. We are seeing disadvantages even to disabled children and their families. It is not fair, not acceptable, and the Government deserve to be rejected and hounded by the British people.

[Several hon. Members]

rose—

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[Kate Green]

My hon. Friend does indeed anticipate my first point. Although there is of course an attraction in lifting more people at the bottom of the wage spectrum out of tax, it makes little sense to introduce a measure that still favours more men than women when women have already lost out under previous Budgets and spending announcements.

[Mr Tom Clarke]

On that point, which I dealt with briefly in my speech, is it not a great worry that female unemployment has risen by 22,000 in the past year, adding to the problems that were already there?

[Kate Green]

It is of deep concern to me, as I am sure it is to you, Madam Deputy Speaker, that female unemployment is now the highest it has been in a quarter of a century and that it was female unemployment that rose most rapidly in the last quarter, considerably outstripping what is happening to men.

I find it difficult to understand the fairness or logic of introducing a higher tax threshold that lifts some low-paid workers out of tax while at the same time disincentivising many other low-paid workers who are seeing their tax credits frozen or lost altogether if they cannot reach sufficient hours, to the extent that work will become hardly worthwhile for them at all. I cannot see the logic of the Government telling pensioners that on the one hand they will give to them through the triple lock, which I welcome, but with the other hand they will take away from them by raising the threshold and bringing 230,000 of them into tax, while at the same time trying to take people in low-paid work out of tax.

I am struggling to understand how a Government who said that they wanted to be fair and to operate a system that was simple can have arrived at the decision they reached on child benefit, according to which a couple with an income just short of £100,000 will be able to keep all their child benefit but another couple where only one member of the household has an income, but it is in excess of £50,000, will not. How can that be fair? How can a system be simple when it starts to claw back at the rate of 1% for every £100? How will people know where they stand in relation to their child benefit entitlement, and where is the incentive to work more and earn more in such a context?

I am struggling to understand why a Government who want to be progressive, who say that that is their reason for moving away from universal child benefit, which I hugely regret—I want to put on record that I absolutely stand by universal child benefit—and who say that they think there needs to be more progressivity, as they see it, in the way they administer child benefit, then introduce less progressivity in income tax by cutting the top rate from 50p to 45p when, as the OBR has said, there is considerable uncertainty that such a measure will deliver the tax receipts that the Government seem to believe will be brought into the Exchequer. With respect, I think that the Chancellor was a little over-optimistic in his analysis of the OBR’s comments on the likely efficacy of that measure, and it is also unclear to business commentators that the measure will be good for our economy.

Let us be clear that our corporation tax, even before this Government took office, was by no means among the highest in the developed world. I am interested in how a Government who make great play of seeing small businesses as the future of increasing employment, who want to reduce corporation tax, who are on a downward trajectory in relation to it and who want to enable small businesses to employ more workers have failed to notice that the very smallest businesses are completely unaffected by the cut in corporation tax because they already have a tax rate of only 20%. What are the Government doing to support those businesses when what they would really like is effective measures on employers’ national insurance contributions, something that again the Government have managed to address only in a most limited way?

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[Sheila Gilmore]

It definitely does.

Of course, that may not have been what people were cheering. They may have been cheering in relief at not having to do tiresome tax avoidance planning all the time. If the HMRC’s calculations are correct, high-paid employees are a bit like highway robbers who are holding a musket up to the rest of us and saying, “If you tax us, we are going to take our ball away and not play any more.”

[Mr Tom Clarke]

Is my hon. Friend as concerned as I am that the Government seem to pay little attention to HMRC’s informed views?

[Sheila Gilmore]

Clearly, the Government see tax planning as a perfectly rational and sensible reaction to tax changes. However, if a working couple who are about to lose £3,000 in tax credits make a sensible and rational decision to stop work because that will make them better off, will they be seen as merely making a sensible and rational decision, or will they be seen as lazy, as scroungers, and as people who prefer to watch daytime television than hold down a job? If they make that decision, which is rational for them, the outcome will be wholly irrational for the Government, because it will cost the Government more if that family stop work.

I have still not had a satisfactory response from the Government to a question I asked in an earlier intervention. I also asked it of the Deputy Prime Minister earlier this week, because he is fond of telling us that Government can do two things at once. Why can we not retain the 50p tax rate and deal with tax avoidance? Apparently, in the previous year, when people were expecting more tax, they brought their income forward, so presumably this year, knowing that the measure has only a year to run, they will be able to put their income back to the following year so that they do not have to pay more. If we know that such things are happening, why are we unable to find a means of stopping it? Perhaps people’s incomes should be looked at over two or three years to ensure that they cannot engage in these blatant tax avoidance games, which many people on lower incomes cannot do.

When we had the discussions some months ago about bankers’ bonuses and executive pay, the Secretary of State for Business, Innovation and Skills told us, “Well, these people are paying 50% tax.” Either they are paying it or they are not. One moment we are told that we do not need to bother doing more about bonuses and high pay because the tax rate is dealing with it and the next we are told, “It’s not bringing anything in, so we shouldn’t bother.” There is a lot of smoke and mirrors.

It is clear from the Red Book and it is even clear from the Daily Mail—I am hardly a friend of that paper—that the Exchequer plans to forgo £3 billion in making this change to the tax rate. It hopes to get that back through people willingly paying more tax in various ways and through the relatively small amount that is expected from the changes in stamp duty.

Since May 2010, we have been told regularly by the Government that the way to achieve economic growth is to cut the public sector, which has been stifling the private sector, and then the private sector will spring to life and replace the jobs that are lost. Two years on, we are still asking where those jobs are. Yesterday at Prime Minister’s questions, the Prime Minister told us yet again how good it is that so many private sector jobs have been created. The figure that he used was 600,000, which was repeated a few minutes ago by the hon. Member for Mid Norfolk (George Freeman).

More than a year ago, we were told that 500,000 jobs had been created since the election. Many commentators have made it clear that most of those jobs were created in the first six months of the financial year that started in 2010, and that the likeliest cause for their creation was the previous Government’s economic stimulus. The Government cannot keep recycling the figures. The number of times that the Prime Minister has talked about those 500,000 jobs is incredible. I accept that it has gone up slightly and he is now talking about 600,000 jobs. He should get a prize for recycling, even if he does not get a prize for job creation. If those jobs were created as a result of the economic stimulus, the Government should look again at whether they should continue to rule out such a stimulus.

Do we even know that those private sector jobs are completely new jobs? In my city, there has been a lot of outsourcing and people have moved positions through tendering processes. For example, 2,000 care workers in Edinburgh will now be in the private sector because of the decisions that the council has taken. No doubt those jobs will move from the public sector side of the equation to the private sector side, but they are not new jobs that are driving economic growth. Once again, this is smoke and mirrors and there is no economic growth. That is the important point. If we do not get jobs and growth, we will not get out of the recession.