Economic Growth and Employment
Debate between Vince Cable and Lord Watts(13 years ago)
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Vince Cable
I can give a bit of substance in answer to that. The National Institute of Economic and Social Research, which has been critical of the Government in some respects, has done its own simulation. On the use of fiscal policy to support growth, which I think is what the Opposition plan B is all about, it says that in order to stimulate growth from 1% to 2% we would need to have a Government borrowing account of about 12% of GDP. Is that actually what the Opposition are proposing, because that is what their plan B—fiscal stimulus—means?
Mr Dave Watts (St Helens North) (Lab)
The Secretary of State is very good at talking about the support he gets for deficit reduction. When he is travelling around the UK, do people support his growth policies, because I have not met a business man who does?
Vince Cable
I have tried to explain that wherever I go, not just in the business community, there is an understanding that, given our inheritance, we have to pursue fiscal discipline. It is as simple as that. We will support that with economic growth measures that I will develop, responding to the comments of the hon. Member for Streatham, in a moment.
Amendment of the Law
Debate between Vince Cable and Lord Watts(13 years, 8 months ago)
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Vince Cable
For six of those 10 years, we were dealing with an artificial boom based on a property bubble, an overweight banking system and, as the shadow Chancellor has acknowledged, gross levels of personal debt. That was why there was rapid growth in the early part of that period. However, if we look at that period as a whole, including the last period of Labour Government, we see a decline in per capita income that was unprecedented even in 20th-century history. That is the record that we are dealing with.
Let me deal with the shadow Chancellor’s pessimism about employment. We are all rightly concerned about unemployment—we have to be—but let us remember that last year growth was 1.3%, which is lower than the projected growth for the coming year. In that time, there were 428,000 new private sector jobs—300,000 were in the second half of last year—which by a long way more than offset the 132,000 job losses in the public sector, many of which, incidentally, were a result of the cuts that the last Government were starting to introduce. Our responsibility—this was the purpose of the Budget—was to ensure that we have sufficient private sector confidence so that companies hire people and invest.
Vince Cable
We are sticking very firmly with plan A, because plan A is right. The hon. Gentleman will know that flexibility is built into economic management, primarily through monetary policy, and that is the mix that we will continue.
The shadow Chancellor is right. There is of course concern about a squeeze on people’s living standards, and we are concerned about that no less than he is. The Chancellor has tried to alleviate the problem through action on fuel duty and by lifting the income tax threshold. I would like to spend a few moments looking at the two proposals that the shadow Chancellor has made—he has repeated them today—to deal with the problem. The first proposal turned out to be illegal under European Union law. Like me, he is a good European—we would both like to observe European Union law—and to change that law would have taken roughly five years, which will not provide much relief.
After the fiasco of the shadow Chancellor’s “VAT relief on petrol” idea, his other big idea, which he elaborated on today, was to finance jobs through the tax on bank bonuses. I remind him that he and I have some form on this issue. When the last Government were in power, I was critical of the idea of taxing bank bonuses as I did not think it would work. It is to the credit of the former Chancellor that, through his ingenuity, he made it work. In the year in which the measure operated, he raised £2.5 billion—not the £3.5 billion that is often cited, because that takes no account of the offset in corporation tax. Because of his skill in making the bonus tax work, we have to listen to his advice when he says:
“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and…find all sorts of imaginative ways of avoiding it in…future”.
He has counselled very strongly against a repeat of the bonus tax. He was—to use the word—wise.
There is another reason why I am surprised that the shadow Chancellor has returned to the bonus tax issue. He may remember that back in 2006, when he was the City Minister, a big debate opened in the Labour party when Bob Diamond was having one of his early years of extremely generous bonuses. The deputy leader of the Labour party declared “war” on “fat City bonuses”. She was promptly slapped down by the then City Minister, who reminded us that such pay-outs were good for tax revenues and for job creation. In that particular Labour party debate, I was very much on the side of the deputy leader.
If the previous Government are serious about taxing banks, why did they allow a situation to arise in which only two of the 15 major banks had in place an agreement to stop large-scale tax avoidance? We have now stopped it. Every single bank is now covered by the HMRC code on tax avoidance. Additionally, we have put in place the levy on banks’ balance sheets, raising £10 billion, which is four times as much as the one-off bonus tax would have raised.
Department for Business, Innovation and Skills (Performance)
Debate between Vince Cable and Lord Watts(13 years, 9 months ago)
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Vince Cable
It is a pity that the hon. Lady was not here to hear my speeches on this subject for the five years running up to the crisis, but I shall make two simple points now. The first is that when the financial crisis occurred, I thought and said openly, as I shall repeat now, that the interventions made at that time by the then Chancellor were exactly right and deserved support. What the then Government did not do—this is what we are doing through the Banking Commission—is look at the fundamental issues of overly large banks, concentrations of retail and investment banking, and how to deal with the very complex problems of those two things being locked in the same institution. We are dealing with the fundamental issues behind the banking crash, rather than the superficial aspects of it.
Mr Watts
I am grateful to the Secretary of State for finally giving way. He seems keen on encouraging manufacturing investment, so may I suggest that he restore the grants for business, which actually brought in £3.9 billion of investment and created 70,000 jobs, before he scrapped them?
Vince Cable
No doubt the hon. Gentleman will tell us where that fits on the shopping list. On industrial support, I shall simply say that where the previous Government promoted good schemes, such as the manufacturing advisory service, we are building on them, because we are looking at them on their merits, not doctrinally. However, where schemes were failing and were not cost-efficient, we have reduced them and scrapped them.