No-deal Brexit: Short Positions against the Pound

Vince Cable Excerpts

Monday 30th September 2019 Commons Chamber

[Mr Clarke]

The pound would need a good head for heights in that scenario. My hon. Friend is absolutely right. The City of London is, of course, one of the great assets of this country and something we should celebrate rather than castigate. It is a source of enormous tax revenue, which underpins our vital public services, and there is no doubt that it is one of the key cards in our hand when it comes to the Brexit negotiations and securing a good deal. So I absolutely agree with him. We sometimes need to do more to talk it up, rather than talking it down.

[Sir Vince Cable (Twickenham) (LD)]

Is not the implication of the Minister’s first answer that the authorities would allow the currency to fall indefinitely, without intervention, if that is where the market leads?

[Mr Clarke]

The Government’s position is that we do not adopt a fixed target for sterling, as clearly we believe that it is sensible for the currency to find its own level in various circumstances. Obviously that freedom for the currency to float is important. Look, all of us in this House believe that the country will succeed in a whole variety of different scenarios. I believe that sterling will find an appropriate level in any scenario, and clearly there are aspects of a fall in sterling that would make it easier to export, so it is not a zero-sum game. We have to trust the market to find its own level.

Oral Answers to Questions

Vince Cable Excerpts

Tuesday 9th April 2019 Commons Chamber

[Robert Jenrick]

The Treasury and other Departments have advanced plans to support the manufacturing sector should that be required in the event of a no-deal exit. The evidence we see shows that, if we can secure a negotiated exit, there is a great deal of business investment waiting to go back into the economy. This year could turn out to be a strong one for the British economy, if only we can secure the deal.

[Sir Vince Cable (Twickenham) (LD)]

Does the Treasury acknowledge the wisdom in the letter that the Engineering Employers’ Federation, which represents 20,000 companies and 1 million workers, sent to the Prime Minister yesterday? It spoke of the renaissance of manufacturing in the earlier part of the decade, but is now expressing despair and is asking simply for the revocation of article 50.

[Robert Jenrick]

If the right hon. Gentleman wants to support this country’s manufacturing sector, he and his colleagues should support a deal so we can leave the European Union in an orderly fashion. We are taking a number of important steps to support manufacturing, including increasing the annual investment allowance from £200,000 a year to £1 million, making research and development tax credits more generous, and backing schemes such as “Make Smarter”, which help the manufacturing sector to embrace automation and digital technology and move forward with confidence.

Spring Statement

Vince Cable Excerpts

Wednesday 13th March 2019 Commons Chamber

[Mr Hammond]

As my right hon. Friend knows, we are not able, under the current regime, to discriminate between cars made in British factories and cars made elsewhere, but we do keep all fiscal policy under review, and I am acutely conscious of the pressures that the car industry is facing at the moment.

[Sir Vince Cable (Twickenham) (LD)]

I am trying to find something positive to say about a rather less than earth-shattering event, but I do welcome the support for industrial strategy and innovation. I also welcome the Furman report. However, does it not rather give the game away that global monopoly abuse is being referred to the British competition authorities at a time when we are walking away from the much more powerful European Commission, which could really deal with the problem?

On growth, is it not the case that while we are escaping recession, which is very welcome, that is primarily due to continued extraordinary monetary policy and low or negative real interest rates, which cannot continue? It may have been useful after the financial crisis, but it is an addictive drug.

Finally, how on earth does the Chancellor expect this proposed surge of business investment to occur when, even under the Government’s Brexit plans, there is going to be a cliff edge in two years’ time that any business will naturally seek to avoid?

[Mr Hammond]

I do not know why the right hon. Gentleman would want to break the habit of a lifetime in finding something positive to say in response to a statement, but I will take him at face value. On the Furman report, I do think it is quite important that we ensure that the UK’s regulatory environment is at the cutting edge of the changes that are going on in the 21st-century economy. Regulation is one of our competitive advantages. We have excellent regulators, and there are plenty of examples of the UK being ahead of the global curve in setting regulations that can both protect the public and encourage investment.

I cannot comment on monetary policy, as the right hon. Gentleman knows—that is a matter entirely for the Bank of England—but as for a future cliff edge, it will be my fervent intention to give business the maximum confidence and clarity that we can about our future relationship with the European Union, as soon as I can.

Oral Answers to Questions

Vince Cable Excerpts

Tuesday 5th March 2019 Commons Chamber

[John Glen]

I always take my right hon. Friend’s words very seriously, and I am sure that he must be right.

[Sir Vince Cable (Twickenham) (LD)]

Britain is now a world leader in financial transparency and dealing with money laundering owing to the public register of beneficial ownership. What action do the Government propose to take to stop those standards being undermined by Crown dependencies, which rely on the British passport and British defence protection, but operate in a much more opaque manner?

[John Glen]

We are committed to introducing those registers by 2023. Since 2017, we have worked closely with law enforcement agencies through the mechanism of the exchange of notes with the overseas territories, and that has led us to unexplained wealth orders and the forfeiture of bank accounts.

Leaving the EU: Economic Impact of Proposed Deal

Vince Cable Excerpts

Wednesday 20th February 2019 Commons Chamber

[Mel Stride]

Tariff policy in the event of no deal is clearly something that we are heavily engaged with. My right hon. Friend rightly identifies the aspects or elements of tariffs that relate to protecting domestic producers, and that of course will be a very important part of the considerations that we are undertaking at the moment. We will come to the House in due course with the details of those tariffs.

[Sir Vince Cable (Twickenham) (LD)]

Brexit uncertainty is one of several factors contributing to the crisis in the car industry, which previous Governments—Conservative, Labour and coalition—did so much to promote. What assurances have the Government had from Toyota, BMW and Vauxhall that they are not going to follow the pattern of disinvestment that we are now seeing?

[Mel Stride]

I think the right hon. Gentleman’s question would be most appropriately directed to the Department for Business, Energy and Industrial Strategy as to the specifics of the companies that he listed. Honda, a company that has already been mentioned in this respect, has made it clear that its decision to leave the United Kingdom is not a consequence of Brexit; it is more to do with international changes around cars and the position of diesel, and of course the deal that Japan has struck on zero tariffs in a few years’ time for exports from Japan to the European Union.

Oral Answers to Questions

Vince Cable Excerpts

Tuesday 29th January 2019 Commons Chamber

[Mr Hammond]

Let me put it this way: since 2016 I have made more than £4.2 billion available for EU exit planning, and funding for the 2019-20 financial year has now been allocated to Departments. That is funding to prepare the Government for leaving the EU in any scenario. In addition, I have made arrangements to ensure that Departments and the devolved Administrations can fund measures to address urgent civil contingencies in a no-deal scenario.

[Sir Vince Cable (Twickenham) (LD)]

The Chancellor has rightly made very clear his determination to avoid a no-deal Brexit. How in practice does the Treasury distinguish between those no-deal preparations that have enduring value for money and those that will have been wasted in the event that he is successful?

[Mr Hammond]

Some of the expenditure being undertaken by Departments will be required in any case for our post-EU future, whether we leave with a deal or no deal, but I have made no bones about the fact that some of the expenditure is of a precautionary nature. The expenditure will be nugatory if the deal is agreed and we leave with a smooth trajectory. Every responsible Government, across all areas of activity, undertake expenditure to deal with potential contingencies, to ensure that the country is prepared for eventualities that may arise. It is proper that we should do so.

Finance (No. 3) Bill

Vince Cable Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Robert Jenrick]

Clause 89 would give the Government the ability to provide certainty to taxpayers now. That is what we want to ensure. We do not want to inhibit the ability of HMRC and the Government to provide that critical certainty. Who would want to do that? Who would want to diminish certainty for taxpayers at this time? The right hon. Lady listed a number of businesses. Those businesses want certainty, and by supporting her amendment, we would diminish that certainty and our preparedness—admittedly only modestly—for a no-deal scenario.

We will not be deterred from making sensible preparations—the public expect us to do so—and using the Finance Bill to prevent or frustrate preparation for any eventuality is unwise and irresponsible. I therefore urge the House to reject all the amendments and new clauses tabled against clauses 89 and 90 so that we give our constituents and taxpayers across the country the degree of certainty they deserve.

[Sir Vince Cable (Twickenham) (LD)]

rose—

[Mr Speaker]

Order. If the right hon. Gentleman feels able and willing to express his views in a minute, I will be delighted to hear him—I hope he will not be offended—but otherwise I will call the Opposition Front-Bench spokesperson.

--- Later in debate ---

[Sir Vince Cable]

Thank you for your indulgence, Mr Speaker. I just want to say a few words in support of amendments 7 and 8. They are Brexit-neutral, in the sense that they require the House to approve any change, but of course they relate primarily to no deal. The fiscal issues, as the right hon. Member for West Dorset (Sir Oliver Letwin) explained them, were arcane and rather gentle. I tabled a more brutal amendment that was not called.

In the 30 seconds left, I want to relate an incident from this morning, when I went to the ferry port at Portsmouth. It is very clear that the Government are totally and utterly unprepared for the chaotic impact that there will be on the road system, including access to the naval base, if a no-deal Brexit occurs. Despite repeated requests from the council and others, the Department for Transport and the Ministry of Defence are refusing to co-operate, and the police now say that the M3 motorway will have to be closed from Winchester to Basingstoke in order to provide a lorry park. Repeated efforts to get Ministers to respond have not been heeded. A meeting was held for 19 regional MPs last week, but only one attended, so I am taking on the job of representing a no-deal Brexit. It is a task I undertake with all the enthusiasm of an arsonist trying to put out a bushfire, but I will do it.

[Jonathan Reynolds]

This has been a significant and important debate. In fact, it is clear that the House desires a longer and broader debate—that point was well made by the Chair of the Treasury Committee. No deal is some people’s preferred outcome, and they are the same people who told us that doing a deal would be the easiest thing in history. They were wrong then and they are wrong now. I feel that the case against the unilateral use of these no-deal powers has been comprehensively made, and I urge all Members to vote for our amendments, because that is best for jobs, prosperity and the national interest.

Leaving the EU: Economic Analysis

Vince Cable Excerpts

Wednesday 28th November 2018 Commons Chamber

[Mel Stride]

I suspect that in the history of highly detailed, complicated economic forecasts with myriad variables, there is probably not one in the entire history of the planet that has been entirely right in every respect. However, that is not an argument that my right hon. Friend can deploy not to go out and do an honest, sensible appraisal of what the likely outcomes are going to mean, both fiscally and in terms of GDP, as we go forward.

[Sir Vince Cable (Twickenham) (LD)]

The Government have confirmed this morning what the independent National Institute for Economic and Social Research set out yesterday: relative to continued membership of the European Union, the country will be substantially poorer, with no Brexit dividend for the budget relative to the position now. Is it not also the case that the Government’s relatively optimistic forecasts are based on the assumption of a smooth and rapid transition to a trade deal, or an indefinite period in a transitional arrangement, and that the likely outcomes and scenarios are potentially a great deal worse?

[Mel Stride]

No. The right hon. Gentleman raised specifically the issue of a Brexit dividend, and the Chancellor has rightly always been very clear on that. There is uncertainty in the economy at the moment and this is one of the key reasons why, if we can agree a deal, get that deal to stick and get rid of that uncertainty, a huge level of investment will come to our shores and this will be a huge shot in the arm to the British economy.

Finance (No. 3) Bill

Vince Cable Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Richard Graham]

The hon. Gentleman is kind to mention that, but the fact is that we on the Government side of the House believe strongly in incentivising the entrepreneurs. They are the ones producing the technologies of the future—Fintech, Edtech, every sort of tech—and the reason why this country has seen more investment in technology in London alone in the last year than Germany, Spain, Ireland, the Netherlands and France put together. These incentives to businesses are what generate the additional tax revenue I highlighted earlier.

The changes to gambling tax are among the most significant measures proposed. These are fundamentally about what is morally right, and I am delighted that the Government have found a way to do the right thing, not just by reducing the maximum stake for fixed odds betting terminals from £100 to £2, but by introducing it rapidly and by raising the remote gambling duty from 15% to 21%. If I could make one request of the excellent Minister, it would be that he consider other ways to reduce the amount of online gambling advertising and to raise more tax revenue from it.

This is an important discussion. Some of the facts offered earlier by the Opposition were completely astray from reality, and I strongly support what the Government are doing to incentive business, encourage more people into work and, above all, benefit the lowest earners. It is worth finishing with one last statistic from the OECD: the proportion of jobs that are low-paid is at its lowest level in this country for at least 20 years. That is a significant achievement on which we can hope to build yet further in the future.

[Sir Vince Cable (Twickenham) (LD)]

I wish to say a few words about amendment 18, which would remove clause 5. I spoke on this at length on Second Reading, so I do not need to say a great deal.

The difficulty with clause 5 is that it combines two very different measures, the first being to lift the low earners threshold. As the hon. Member for Solihull (Julian Knight) reminded us a few minutes ago, this was a policy that I and my colleagues pursued in government, and it is not something I at all disagree with. The second, however, is a much more substantial measure to lift the tax threshold for middle earners. I do not pretend for a moment that people at the higher rate threshold are rich people—at the bottom end, they are paid less than Members of Parliament—but we need to get beyond the headlines and look at the actual numbers.

The lower threshold is to be lifted by £650, and 20% of that is £130, so the people solely on standard rate tax will get £130 in their pocket as a result of this measure. Of course, that is welcome. It is about a 2% increase, which is roughly in line with inflation, and is unquestionably a good thing. For the high earners threshold, however, we are talking about much bigger sums of money—a £3,650 increase in the threshold. Multiplied by 20%, and we are talking about £730, but of course high earners also benefit from the standard rate threshold increase. Add the two together and we have got £860. This measure, which is badged as a measure to help low earners, helps low earners to take home £130 a year and high earners £860 a year. On no conceivable measure could that be described as some enlightened policy for helping the low paid.

Having said that, I should add that there are things that the Government could have done as part of the policy of reducing fiscal drag. I fully understand the need at the margin to stop people being dragged into higher tax rates, and something could have been done to offset that. The Chancellor himself has acknowledged that there are extremely expensive and lavish tax reliefs on pension contributions for upper earners, which cost the country about £25 billion a year. I think that if he had chosen to offset the upper-rate threshold measure by some reduction in pension tax relief for the high paid, such that it neutralised it, many of us would have thought that that was quite a reasonable way of making progress, but he did not, despite the urgent need for revenue.

In an ideal world we would be looking at tax cuts for everyone, but we are not in an ideal world. There are issues of priorities. As several Conservative Members have reminded us—former Chancellors, among others—we are living in a world of severe fiscal restrictions, despite the proclamation of the end of austerity. There are other purposes for which the money could have been better used. We are talking about £2.8 billion in the first year, tapering to about £1.7 billion a year, of which roughly half is for the upper rate threshold. We can all think of many, many ways of spending that money, but for me the priority would have been fully restoring the cuts in universal credit that were made two years ago. The Government have partly done that, but with the additional sum of £1.3 billion, the Chancellor could have returned universal credit to the levels at which it was placed two years ago, in the Osborne Budget. The money could also have been used to end the benefits freeze a year early. The continuation of that freeze means that the poorest 30% in the population are being dragged down as a result of the Budget, but ending the freeze a year early could have offset that. Obviously there are many other purposes for which the money could have been used, but those would have been my priorities.

This measure, politically, was obviously intended to enable the Chancellor to proclaim that the end of austerity is not just about public spending, but about cutting taxes. There is nothing wrong with that general proposition, but the problem is that it is dishonest: that is not what is actually happening. The revenue line in the Red Book shows clearly that as a result of revenue measures, council tax will rise by £6 billion over the next five years—that it will rise by considerably more than income tax is being cut. What, essentially, is happening is that as a result of the reduction, or the freezing, of spending on support for local councils, the councils are making up their revenue through council tax increases to the maximum extent allowed. The Government, according to their own numbers, believe that council tax revenue will rise by £6 billion to about £40 billion. That, as I have said, more than cancels out the income tax cuts, most of which in any case accrue to higher-rate earners. So this is not a tax-cutting Budget at all. It is, indirectly, a tax-raising Budget, and I hope that that will be pointed out to members of the Government when they use such rhetoric in future.

I simply wish to move my amendment, and we will seek to oppose clause 5 stand part.

[Leo Docherty]

It is an honourto follow the right hon. Member for Twickenham (Sir Vince Cable).

I welcome the Bill. As we consider the amendments, we are faced with a stark choice that faces all politicians and members of the public when they consider the basic question of how we manage our economy and how we manage tax and spending. It is the stark choice between responsibility and recklessness. If we cast our eyes back over the last eight years, we see the benefits of the responsible, balanced approach of the Conservatives. Since 2010 the deficit has decreased by 80%, and the economy has grown for eight consecutive years, by a total of 17%. Unemployment is at its lowest rate since 1975—the year before I was born—and the Government are managing to boost public spending while simultaneously cutting tax. I am particularly pleased about the almost doubling of basic-rate tax relief: those on the basic rate are paying £1,205 less every year than they were paying in 2010, which is a tremendous step forward.

Finance (No. 3) Bill

Vince Cable Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

[Sir Vince Cable (Twickenham) (LD)]

I wish to say a few words in support of the amendment in my name, about the economic context and specifically on some of the tax measures. Everything we are talking about, whether on the tax side or the spending side, depends on the overall performance of the economy and economic growth. This year, we have had fluctuations from one quarter to another, but the assumption is that growth is about 1.5%. According to the independent OBR, it will continue at about that rate for the next five years. As the hon. Member for Aberdeen North (Kirsty Blackman) reminded us, that not terribly optimistic picture is based on optimistic assumptions about the outturn of the Brexit negotiations that may of course not be realised.

There are two underlying reasons why the British economy is growing at just over what it was for the whole of the post-war period up to the financial crisis. One is the serious problem of productivity—a problem that has existed since the financial crisis. A paper was published this morning by analysts from Stanford and Nottingham who looked at why productivity performance is so poor at the moment. After an exhaustive survey, they found that the problem was that high-performing companies in the UK, in productivity terms, had fallen back very badly. The main reason is that those high-performing companies do a lot of a trade, in particular with the single market, and uncertainty has caused their performance to deteriorate. That is reinforced by the second element in the slowing of growth, which is poor business investment—less than half of 1% in terms of fixed business investment last year, and that is clearly a function of the uncertainty that is hanging over the economy because of the Brexit exercise.

I suspect that quite a lot of Members thought that the Finance Bill would be some light relief from the Brexit debate, but unfortunately it hangs over everything. It is the elephant in the room and it explains the economic problems that we face. There was an interesting debate between Conservative Members that, because of the adversarial way we discuss things, was rather glossed over. The hon. Member for Gainsborough (Sir Edward Leigh) and, in the Budget debate, the right hon. and learned Member for Rushcliffe (Mr Clarke) expressed the strong view that the Chancellor was taking too many risks and the Budget should have been a good deal tighter than it was. Today we heard the exact opposite argument from the right hon. Member for Wokingham (John Redwood)—that it was far too tight and should have been more relaxed. It was an important debate, and it would be interesting to know how Ministers will combat the arguments from those formidable people.

I will highlight one particular aspect of that debate. This is not a party political point—it happened in the coalition—but the Government continue to refer to the deficit as if it is the same as Government borrowing. Well, of course it is not. The Government borrow for different reasons. They borrow to cover the current deficit and they borrow for investment. Just as companies borrow to invest, the Government sensibly do so. The problem with the current trajectory, as I understand from the Red Book, is that we are potentially heading for yet another squeeze in capital spending. Perhaps the Paymaster General can correct this, but my understanding is that CDEL, which is awful Treasury speak for capital spending, is due to fall next year, 2019-20, as a consequence of the attempt to maintain borrowing at moderate levels while at the same time expanding the current Budget. Perhaps he will enlighten us, because if it is true we are doing potentially serious damage to infrastructure that has been starved of capital for many years, as well as to public sector housing and much else.

I would also like clarification on the overall tax burden of the economy. There is a sleight of hand in this Budget. On the one hand, the Government have given tax cuts, but on the other hand—as a consequence of the squeeze on local government spending, which continues unabated and is having a severe impact on local services—council tax will almost certainly have to rise because councils are severely stretched and are providing inadequate services. In some cases, they are approaching bankruptcy and cannot meet their legal obligations. It is not restricted to any one party but, by and large, Conservative county councils are in this position.

Council tax will have to rise, and, in some cases, it probably should have risen earlier. There is nothing in the Red Book that tells us how much revenue local authorities actually get from council tax. That is rather an important figure, and it is important that we see a future projection, which would give us a much clearer picture of what is happening to taxation. On the one hand, the Government are offering direct tax cuts, and on the other they are offering increases in council tax, which at least in income terms is one of the most regressive taxes of all.

The Government have provided substantial additional funding for the national health service for several years ahead, and rightly so, but there is no such guarantee for personal care beyond next year. That matters, because the shortfall in care will fall on the NHS.

Several Conservative Members have been bobbing up and down to ask why we do not take a cross-party approach to this problem. Of course we should—this is a long-term problem—but memories are short, or maybe they are recent Conservative Members, because there have been repeated attempts at cross-party agreement on personal care financing. There was an attempt before 2010, which the then Conservative spokesman, Andrew Lansley, pulled out of on the grounds that it constituted a death tax. We then had another attempt in the coalition, when Andrew Dilnot did an authoritative piece of work for us. We reached a consensus and both sides of the coalition agreed to it, and then, come 2015, the key implementation measures were not introduced, so we are back where we were before. Ten years later, and after several attempts at cross-party consultation, there has been no progress, which is why care funding is in such terrible difficulty.

[Chris Philp]

I have been looking at the Red Book while the right hon. Gentleman has been speaking. He asked two questions. First, he asked about council tax receipts, which will be £34 billion this year and are forecast to rise to £40 billion in 2023-24. Secondly, he asked about CDEL, which is £50.2 billion in the current financial year and is forecast to rise to £65.5 billion by 2020-21.

[Sir Vince Cable]

I think there are separate sets of figures, but I thank the hon. Gentleman for his clarification. His first point is particularly interesting, and I thank him for his rapid desktop research. His figures suggest there is potentially a very big tax increase in the pipeline, which is one of the assumptions in the Budget that was not spelled out on Budget day.

[Kirsty Blackman]

Last year’s Red Book explicitly mentioned the impact of immigration and population change on public sector borrowing, and it said that, as the population increased with net migration increasing, public sector net debt would fall. Does the right hon. Gentleman share my concerns about the likely impact of a future immigration Bill on the public finances?

[Sir Vince Cable]

Yes. All the evidence we have shows that net migration has had a positive effect not only on the economy, in per capita terms, but on Government revenue because, by and large, these are young people who work and pay tax revenue to the Government. I totally share the hon. Lady’s concerns about future immigration legislation.

[Kevin Hollinrake]

The right hon. Gentleman spoke earlier about cross-party consensus on social care. Is he aware of the joint report of the Health and Social Care Committee and the Housing, Communities and Local Government Committee? One of its recommendations was for a social care premium—social insurance of the type used in Germany—to solve this problem. There are no Liberal Democrats on those Committees but will his party nevertheless support such a cross-party approach?

[Sir Vince Cable]

That was at the heart of the Dilnot proposals that Lib Dem Ministers sponsored and supported in government. If that is the idea, we do not have any problem.

On the income tax changes, and particularly the lifting of the higher-rate threshold at a cost of about £1.3 billion, I certainly do not regard people on £50,000 a year as rich—they have a lower income than we do, among other things—and, in an ideal world in which there was plenty of tax revenue and the economy was booming, lifting the threshold would be perfectly reasonable, but given other priorities it is a bad choice. As it happens, that £1.3 billion is equal to the shortfall between the amount of money the previous Chancellor took from universal credit two years ago and the amount that was reinstated this year. Filling that shortfall would be a much better use of the funding.

[Julian Knight]

Has the right hon. Gentleman thought about the effect of fiscal drag on productivity? The fact is that, as more people get into the higher-rate tax bracket, the less productive they may become, which lowers tax receipts and lowers productivity in the economy.

[Sir Vince Cable]

It is a good policy, in general, to eliminate fiscal drag, and the Government should do that. But it is a question of priorities, and the disparity between standard-rate taxpayers, who stand to gain £130 a year from this measure, and upper-rate taxpayers, who stand to get £800 a year, reflects the Government’s priorities, which are completely wrong.

It would be less bad if the Chancellor had been willing to tackle something that he acknowledges is a problem, which is the expense of the reliefs given to higher-rate taxpayers through the pension system. He described the pension tax relief, which costs the Treasury £25 billion a year, as “eye-wateringly expensive”. We started to approach it in coalition, and, in a difficult fiscal situation, this is something that the Government should be addressing here, but they are not. However fair-minded we want to be to all groups of taxpayers, it is very clear that this is a political gesture. The social priorities are completely wrong.

It is very welcome that there has been a big relief for shopkeepers and others through the business rates system, but it does not address the underlying problem that business rates are a bad tax—they tax improvement in property. The Liberal Democrats and some of the think-tanks have been associated with another proposal, and it would not be difficult to replace the business rates system with a tax on commercial landowners. That would be a much simpler system, as there are far fewer landowners than there are people who pay commercial rates. It would be much more equitable, and it would not discourage business improvement. Currently if a factory installs machinery, it makes itself eligible for higher commercial rates. This is a thoroughly bad system, and extreme Treasury conservatism is why the problem is not being addressed.

One thing the Government have done, which is positive, is attempt to deal with the digital sector, but I reinforce the point made by the hon. Member for Dundee East (Stewart Hosie) that the magnitudes involved are very small. We are talking about £5 million next year, rising to £440 million, in a context where the National Audit Office, not a political body, has estimated that the retail sector in the UK had lost £9 billion of revenue as a result of competition from internet platform companies—in essence, we are talking about eBay and Amazon. The disproportion is enormous and the measure, although welcome, is very weak.

To conclude, there are a lot of small, sensible things in this Budget—I do not want to be grudging about them—but the big picture is dire, and the big Budget judgment, which is about giving priority to reducing income tax, is fundamentally wrong.