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Mr Jones: One of the economic drivers in Luton is the success story of Luton airport. Does my hon. Friend agree with me that the Budget's proposals to increase insurance premium tax from 17.5% to 20% is going to have a terrible effect on that success story, as Luton airport employs huge numbers of people in his constituency?
Gavin Shuker: I thank my hon. Friend for his characteristically timely intervention, rightly making the case that within these green pages tonight are a series of measures that will have a profound effect on each individual constituency. In Luton South, I could pick out the particular effect on the airport and I could talk more about our position within the UK. In each community and in each constituency, we will have to go back to our constituents and explain why we voted either for or against the measures in the Bill. I for one will vote against the Bill, and I would like to encourage Government Members from the east of England to do so as well. If they do, they can go back to their constituents with their heads held high and say that they stood up for their constituents and their region on a night like tonight.
"You see, Harry, it is not our abilities in life, but our choices that tell us who we really are."
When my right hon. Friend the Member for Edinburgh South West (Mr Darling) rose in this Chamber as Chancellor at 12.32 pm on Wednesday 24 March, he could look back on a year in which global recession had not turned into depression, in which unemployment, although too high, was less than had been predicated a year earlier when the recession began, and in which the United Kingdom was now infinitesimally but incrementally moving from recession to GDP growth. He faced tough choices: how to bring borrowing down without strangling growth, and how to reduce the deficit without crippling front-line public services and punishing the most vulnerable people in our country. Those choices were not easy, but they were necessary.
When the current Chancellor, the right hon. Member for Tatton (Mr Osborne), rose in this Chamber at 12.33 pm on Tuesday 22 June, he did so against the background of a further quarter of small but positive growth and a report from the Office for Budget Responsibility that predicated £30 billion less public sector borrowing. Despite that improved situation, however, he said that he did not face any choice. He said:
"This is the unavoidable Budget."-[ Official Report, 22 June 2010; Vol. 512, c. 166.]
No; this is the Budget of Tory masochistic fantasy. Right-wingers are delighted with what they see, in this Finance Bill, as the arms of the state being rolled back. They are delighted by the thought of 600,000 jobs being cut from the public sector. They are salivating at the thought of spending less on welfare at the very time
when they cast 600,000 more people into the welfare net. Where is the sense in that? Oh yes, this is a Finance Bill of choice for the Tories, and in life it is
"our choices that tell us who we really are."
Ann McKechin (Glasgow North) (Lab): Is it not ironic that one of the main beneficiaries of this particular Budget will be our banks, which are among the biggest payers of corporation tax in the country? The Government have chosen not to tax bankers' bonuses this year, despite clear public outrage at the level of bonuses that are still being paid.
Jim Fitzpatrick: If my hon. Friend is going to be so complimentary to those who intervene, how can I resist? Will he explain his perception that this is a Budget of choices? Is he going to refer to the analysis by the Institute for Fiscal Studies, according to which it is a Budget of choices and the Government made the wrong choices, or is this entirely his own analysis?
Should it be passed in the House of Commons, the Bill will be unavoidable in its own way. Consider the carer, middle-aged herself but looking after her ageing, frail parents. She will not be able to avoid seeing her carer's allowance cut by £90 a year over the next five years. Consider the family of five living in Brent, already struggling to find the difference between what the landlord insists is a fair market rent and their housing benefit payments each month. They will not be able to avoid eviction as the Finance Bill cuts housing benefit. Consider the severely disabled sufferer from Crohn's disease. She will not be able to avoid losing £300 a year as the Bill cuts support year on year.
Consider the young couple starting their life together, moving into and trying to furnish their flat. They will face the costs of conveyancing solicitors, new fridge, new washing machine, new carpets, new sofa, new telly. This is certainly the unavoidable Finance Bill for them, with an extra 2.5% on every item. It is the unavoidable Finance Bill for the poor, for the disabled, for those on housing benefit, and for carers. A clear choice has been made by the Conservatives to cut an extra £40 billion on top of the £78 billion announced already.
Dr Sarah Wollaston (Totnes) (Con): I would like to ask the hon. Gentleman whether he realises why all these very sad cases are unavoidable. It is because we have a national debt of £1 trillion. I was looking at what that means. If every pound were a second, that would be 31,546 years and we would all be sitting here for a very long time.
Order. Before the hon. Gentleman responds to that intervention and resumes his speech, I remind him that he is perfectly entitled to talk about vulnerability
if he so wishes, but he must relate it to the matters within the Bill and he has an extensive choice from which to select.
Barry Gardiner: Thank you, Mr Speaker. I am tempted to take up the length of time that the hon. Lady mentioned, but I fear that the House needs to come to a close. A clear choice has been made by the Conservatives to cut an extra £40 billion on top of the £78 billion announced in March. They have made a clear choice to cut £11 billion out of tax credits and benefits. A clear choice has been made by the Liberal Democrats not just to drop the VAT bombshell that they warned of, but to act as navigators and pathfinders for the Conservatives to deliver it perfectly targeted. That regressive tax does the most damage to the poorest. It is regressive, not progressive.
"We will not have to raise VAT to deliver our promises",
John Woodcock (Barrow and Furness) (Lab/Co-op): With regard to my hon. Friend's list of all the people who will not be able to avoid paying the increase in VAT, is he aware that many community halls in my constituency and across the country will also be forced to pay it as they are not able to claim exemption from VAT owing to the arrangements that they face?
"This is a disappointing budget for child poverty and increases the risk of the government failing to meet its 2020 goal of ending child poverty."
"The increase in VAT is a regressive measure which will impact hardest on poor families."
"It is said that power corrupts: what is more true is that power reveals."
With the Liberal Democrats, power has certainly revealed. No longer can anyone be excused for thinking that the Lib Dems are progressive and principled. They are regressive, ruthless and prepared to sell out any policy for a whiff of office.
In the course of debate over the past week, Government Members have repeatedly asked Labour Members what we would do. They have suggested that they have taken
the unavoidable and necessary action, whereas we would have taken none at all. So I refer them to the Red Book in March, where my right hon. Friend the shadow Chancellor set out the swiftest and most straightforward deficit reduction plan that then existed in the G7.
The plan proposed: £3.5 billion of savings by freezing public sector pay-but that of the better paid, rather than of the poorest public sector workers; £1 billion of savings from public sector pensions; £18 billion of savings to capital spending; £11 billion of savings from Whitehall reform; £19 billion in new tax rises; £14 billion of savings from reduced benefit payments as unemployment came down; and £5 billion of savings from programme cuts.
Mr Kevan Jones: The right hon. Member for Uxbridge and South Ruislip (Mr Randall) is chuntering from a sedentary position and trying to intervene on my hon. Friend. Does my hon. Friend agree that the people who are going to be affected by the VAT increase will be those in the retail trade, in which I understand the right hon. Gentleman has an interest?
Mr Speaker: Order. Before the hon. Gentleman continues, may I gently say to the right hon. Member for Uxbridge and South Ruislip (Mr Randall) that we do not need sedentary interventions from him and we do not want to get into a general debate about the merits or otherwise of Randalls as a department store, interesting though that may be?
Barry Gardiner: Mr Speaker, I will forgo that offer, tempting though it may be. However, I will try to respond to my hon. Friend the Member for North Durham (Mr Jones), who is entirely correct to say that retailers will also suffer from this measure. Large retail operations, such as supermarkets, will particularly suffer because they have huge costs to meet in changing their tills over to cope with the VAT changes.
We made our choices too. They were hard choices, but they were not regressive choices, and they protected the poorest and the vulnerable. We chose to raise duty on cider to the same level as that on other alcohol. The Liberal Democrats opposed that choice in March-in fact, it was the only choice that they opposed then. Their choice is to reverse that duty in this Finance Bill, to put 8% less duty on cider and to increase VAT by 2.5%; scrumpy today, child poverty tomorrow is the Liberal Democrats' great rallying cry for the 21st century. This is their tax priority for the new politics of collaboration. Albus Dumbledore was right: it is not our abilities in life but our choices that tell us who we really are. My choice is to oppose this pernicious Bill.
"A coalition of the heartless, the clueless and the confused".
Those are not my words-as a Member new to the House I would not be so bold-but those of the Nobel laureate economist, Paul Krugman, when describing
another right-wing cabal, in the US, and its attempt to slash welfare spending instead of increasing growth. His description might serve well to describe and characterise the callous collaborators on the Government Benches, and the war on welfare that they are launching tonight with the Finance Bill.
The coalition is heartless in its disregard for how VAT and the unprecedented spending cuts that we anticipate will hit the poorest in our society; it is clueless in the wrong-headed belief that we have heard repeated so often tonight that these savage public sector cuts will somehow liberate private sector surpluses, entrepreneurialism and growth in the economy; and it is confused. There is confusion at least on the part of the Liberal Democrats as to how they managed to enter the political fray at last, only to find themselves, as an old soldier in my constituency described it last week, on the side of the Axis powers. [Interruption.] I thought that it was pretty funny.
I do not, however, want to dwell on the heartlessness of the measures included in the Finance Bill, because so many people have done so with such eloquence this evening. I think that the public will be able to judge that heartlessness for themselves when they see the raising of VAT on essential goods for the poor, and Government Members cheering, as they did during the Budget speech, measures such as the decision to scrap the health in pregnancy grant designed to tackle malnourishment in pregnant mothers in the poorer sectors of our society. Opposition Members consider such provisions the hallmark of a civilised society, but Government Members clearly think they are a burden on economic efficiency.
I do not really want to talk about the heartlessness. I would rather talk about the cluelessness. [Hon. Members: " You already have.] Yes I have, and I am going to do it again in a minute. We have heard lots of cluelessness this evening, mostly inspired by the primer on Milton Friedman that Government Members have all obviously read recently, and we have heard reiterated by the hon. Member for Woking (Jonathan Lord) and various others. The idea is that if we cut the public sector, which allegedly squeezes out private sector entrepreneurialism and growth, we somehow stimulate the private sector, and that leads to a flourishing of entrepreneurialism.
Stephen Pound (Ealing North) (Lab): Does my hon. Friend agree that implicit within the Budget, the decapitation of Building Schools for the Future has resulted in the private sector not being able to mop up a pool of labour? That private sector has in fact been shot in the back of the head, driven out into the country and dumped in a lay-by.
Mr Speaker: Order. I would not want the hon. Member for Pontypridd (Owen Smith), who has made an auspicious start, to stray from the path of virtue. May I just say to him that it is a good rule of thumb to listen with great interest and enthusiasm to the hon. Member for Ealing North (Stephen Pound), but to recognise that sometimes his interventions have absolutely nothing to do with the matter under discussion?
In this instance, I beg to differ. My hon. Friend's intervention absolutely speaks to the case, because the philosophical underpinnings of what we hear from Government Members is that somehow we have a great
dichotomy in our economy. The public sector is bad, of course-non-jobs, as I heard one Local Government Minister describe them recently. Well, many people in my constituency and elsewhere across the country rely on such jobs to feed their families. Private sector is, of course, good, and the thing that we all want to encourage. The construction industry is a wonderful example of the symbiosis between the two parts of our economy. If you cut one the other will bleed, and we will see £50 billion cut from the construction industry. The construction industry accounts for 10% of GDP, and that £50 billion will have a big impact right across the economy. So I think that private and public are linked.
The theory that we are testing now is the one that we have allegedly seen work in Canada and Sweden, whereby the Government make cuts and the economy flourishes. In those countries we saw a long-term reduction in spending on public sector vital services.
The other key lesson from those other examples of deficit reductions is that the conditions need to be right. Investor and consumer confidence have to be growing, and there has to be evidence of underemployed private sector capital. Exporters must be ready to grow and foreign markets must be ready to buy. Get it wrong and cut too deep when the conditions are unfavourable, and we have on our hands not a success story, but depression and bankruptcy. The historical examples of such failed experiments form a long and ignoble list, and Government Members would do well to read the history books and learn from them.
Stephen Pound: On that exact point about the Canadian experiment, does my hon. Friend agree that the conditions that prevailed in Canada-a massively economically expanding neighbour, in the same free trade association, to the south-are not remotely met here. Any comparison between this country and Canada, or even the Swedish model, are specious and possibly even mendacious.
Mr Speaker: Order. I am trying to help the hon. Member for Pontypridd and other hon. Members. I feel sure that is only a matter of seconds before he says something about corporation tax, capital gains tax, value added tax, insurance premium tax, pensions, income tax or any of the five schedules to the Bill.
Owen Smith: I welcome your guidance, Mr Speaker. Many Labour Members have tried to say this key thing today, but I will try to encapsulate it. There are various items and taxation measures listed in the Bill.
Mr Kevan Jones:
Pontypridd is not dissimilar to North Durham, both being ex-mining communities with rural areas and, very importantly, a Labour MP. Does my hon. Friend agree that the changes to VAT in the Bill will have a disproportionate effect on many of his constituents who are on low incomes or benefits,
and that that is not fair, when some of the wealthier parts of the country, such as Uxbridge, have been let off and will not be affected?
Owen Smith: I thank my hon. Friend for that intervention. He is entirely correct that my Pontypridd constituency will be badly affected- [ Interruption. ] Sorry, I cannot make out the mumblings coming from those on the Government Benches. Equally, however, if the growth projections from the OBR and the Treasury leak were likely to offset the impact of those VAT increases, and if people were more likely to be in work in my constituency as a result of the measures in the Bill and the Budget more generally, I would be less concerned about the VAT rises.
Some specific comments have been made about the VAT rises and other measures in the Bill. Only this week, 125 chief finance officers of some of Britain's biggest companies reported that their confidence in growth was at a 12-month low, with two thirds of them warning explicitly that the measures in the Bill would damage their companies and risk a double dip recession-hardly creating the conditions for them to employ more people. In manufacturing, Deloitte's global manufacturing competitiveness index also anticipates decline, and in the service sector, the purchasing managers index-an established barometer of health in that sector, as the right hon. Member for Uxbridge and South Ruislip (Mr Randall) will know-reported last month the largest drop in business confidence in the last 14 years of its history.
Where are we going to grow, and how are we going to export? Government Members have cited other parts of the world where we should look for our examples. The US has sometimes been mentioned, and it was an engine of growth in the last century, but the statistics there offer us no comfort, with non-farm payroll reporting last week just 83,000 private sector jobs created. That is important because the Government expect us to believe that through the measures in the Finance Bill they will create 2.5 million jobs in the five-year period following the Budget. I have been researching that important and bold claim, and I received an answer from the House of Commons Library suggesting that only once in any five-year period since 1970 has the British economy created more than 2.5 million private sector jobs, the period in question being 1980-85. That was a statistical anomaly, however-the result of wholesale privatisation. Perhaps that points us to a secret or hidden agenda in the Government's plans-another major round of privatisations.
My suspicions about that may be shared by someone who was, until recently, one of the Government's allies- Sir Alan Budd, formerly of the Office for Budget Responsibility. I have no idea whether his hasty exit from the OBR is prompted by unhappiness about the new office perhaps having its integrity compromised, but I point Members to an interview that he gave a couple of years ago, which is of relevance to the Bill. He was asked whether he felt any discomfort when he was advising the Thatcher Government that perhaps some of the decisions he was making as an economist- [ Interruption. ]
Order. I am sorry to have to interrupt the hon. Gentleman. I know that the hour is relatively late-not exceptionally late, but relatively so-but far
too many private conversations are taking place in the Chamber, which is very discourteous to the Member addressing the House. If people do not want to listen to the speeches-I address this to all Members-they are under absolutely no obligation whatever to stay in the Chamber, and we will manage without them. But if they are going to stay in the Chamber, they will show some basic courtesy and respect.
Stephen Pound: On the exact point that my hon. Friend was so tellingly making, he will be aware that in clause 4 we see an increase in insurance premium tax from 5% to 6%. Does he agree, particularly as an MP from a constituency that has given so much to energise the nation and keep us warm over the years, that that could have an appalling effect on pensioners who have standard gas central heating contracts? Is there not, in clause 4, an extremely unpleasant sting in the tail of the Bill?
Owen Smith: I cannot but agree wholeheartedly. I am sure that that is an apposite intervention. Throughout the Bill and the wider Budget, there are measures about which all the most vulnerable people in our society should be concerned. My constituents are deeply worried about the measures affecting not just pensions, but, equally, housing benefit, the most pernicious effects of which we will not see until much later in this Parliament, and VAT. The VAT increase will not be introduced until next year, but when it is, it will bite on ordinary working people throughout my constituency and throughout the country.
Jim Fitzpatrick: I am very grateful to my hon. Friend for giving way. He is being most generous to Opposition colleagues-and perhaps some Government Members will want to engage in debate, too. Does he agree that the changes to housing benefit in constituencies such as mine-Poplar and Limehouse-will have a very damaging effect and could ultimately lead to poorer people being driven out of the centres of our great cities and banished to the suburbs? Surely that will not result in a cohesive society involving all parts of our community.
Owen Smith: Again, I wholeheartedly agree. I am not sure what is worse, that measure or the suggestion-the rehash that we heard only last week-that people should get on their bikes, get out of places such as Pontypridd and go to other parts of Britain where, allegedly, work will be created through the magical 2.5 million jobs that we are going to see each year.
I am about to finish, and I shall do so on a highly topical note, by returning to my quotation from Sir Alan Budd's interview for a documentary programme some 10 years ago. He was asked whether he was worried that economists such as himself were being used to cover the political motives of the previous Tory Administration, and in response he said:
"The nightmare I sometimes have, about this whole experience, runs as follows. I was involved in making a number of proposals which were partly at least adopted by the government"-
"and put in play by the government. Now my worry is...that there may have been people making the actual policy decisions...who never believed for a moment that this was the correct way to bring down inflation.
They did, however, see that it would be a very, very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes-if you like, that what was engineered there in Marxist terms was a crisis of capitalism which re-created a reserve army of labour and has allowed the capitalists to make profits ever since."
Chris Williamson (Derby North) (Lab): There has been a degree of hysteria from Members on the Con-Dem Benches this evening. It might be the lateness of the hour, or there might be another reason, but I have been disturbed by the amount of sneering and laughing by Government Members at the serious points that Opposition Members, who are concerned about the Bill's implications for their constituents throughout the length and breadth of this great nation, have made. A little humility from Government Members, and particularly from the Liberal Democrats, would not go amiss.
The Chancellor of the Exchequer, the Chief Secretary to the Treasury and all Government Members would benefit from some counselling from Gamblers Anonymous, because they are gambling massively with the British economy. Although history teaches us that their gamble is doomed to fail, they are ploughing on regardless-just like a wretched compulsive gambler betting on a course of action with incredibly long odds, in the vain hope that it will turn out all right in the end.
Crossing fingers and hoping for the best is not a credible economic prospectus. The Chancellor is pursuing the same old stale, worn out and inept Tory economic policies that have failed the country before and are set to fail it again. However, the Con-Dem coalition is not betting on a horse, but playing with the lives and livelihoods of the British people. Just like its Tory predecessors in the 1930s, the 1980s and the 1990s, this Con-Dem coalition is, yet again, making the wrong choice. It is risking the fragile recovery that the Labour Administration worked so hard to secure. [Laughter.] Yes, they like laughing-that is typical of the Con-Dem Benches.
The fact is that the Government's corporation tax proposals provide inadequate support for businesses. The Chancellor's very own Office for Budget Responsibility predicts that his Budget will result in lower growth not just this year, but next year as well. How will that help business? Are Government Members laughing at that? If growth declines, that will not help business at all. On top of that, the OBR says that unemployment will be caused. The OBR's predictions remind me of two notorious Tory maxims coined by a previous Chancellor of the Exchequer and a former Prime Minister. One said that
"unemployment...is a price worth paying"
"If it isn't hurting, it isn't working."
However, as the shadow Chief Secretary pointed out earlier, the situation is even worse than is indicated by the OBR's predictions. The number of people who will lose their jobs will be far higher than the figures that have surfaced so far.
The Chief Secretary to the Treasury says that Opposition Members are in denial. I put it to him and to other Government Members that they are in denial. It is their
policies-those failed policies-that led to interest rates that averaged 10% during the Tories' 18 years in power and that hit 15% on one occasion. I say to Government Members that they are in denial. Their failed policies, which they want to pursue again, resulted in record numbers of repossessions and millions of people ending up in negative equity. That, in turn, had a massive impact on the construction industry and the ancillary trades that rely on a buoyant housing market.
We all remember how the failed policies now being pursued again by Government Members resulted in unemployment that exceeded 3 million. Government Members are in denial about the fact that manufacturing was decimated by the policies that they are pursuing. They smashed the coal industry, nearly wiped out the steel industry, almost destroyed the British car industry and torpedoed British shipbuilding. They are in denial because they want to destroy the very instruments that will help the recovery, by undermining the regional development agencies and by taking away the loan to Sheffield Forgemasters, which would have had such a big impact in assisting the resurgence of the nuclear industry in this country.
Stephen Pound: My hon. Friend's constituency is rightly known and admired far and wide for the quality of its Rolls-Royce engines. Has he done any research into the possible effect on demand for aero engines of an increase in insurance premium tax from 17.5 to 20%? Does he share my fear that that will dampen demand for travel and, ultimately, for the wondrous engines produced in his constituency?
Chris Williamson: I am very proud to have Rolls-Royce in the constituency adjacent to mine, Derby South. Indeed, many of my constituents work at Rolls-Royce, a company renowned for its excellence. My hon. Friend is right: the insurance tax rise is bound to have an impact. The cancellation of the loan to Sheffield Forgemasters will also have a big impact, because Rolls-Royce is seeking to diversify into the nuclear industry-to expand its operations in that regard-and was hoping to purchase equipment from Sheffield Forgemasters, but it will now be forced to look abroad. That is a direct result of the policies of Con-Dem Members, who should hang their heads in shame.
John Woodcock: Does my hon. Friend agree that this is not just about the double whammy facing Rolls-Royce? I agree with him wholeheartedly about the potentially catastrophic effect on the civil nuclear supply chain of cancelling the loan to Sheffield Forgemasters, but there is also the restriction on capital allowances, which will hit Rolls-Royce as it will hit BAE Systems in my constituency and many other manufacturers across the north of England and the whole country who will be affected through the potential loss of jobs and loss of ability to export.
My hon. Friend is right. Conservative Members are reverting to type. We saw what they did-I have outlined some of the implications-when they
were last in power. The policies that they are pursuing now will have exactly the effect that he describes in undermining manufacturing, because they are the enemy of manufacturing industry in this country.
There is an alternative. Historical precedent proves that investing in the economy at a time of economic fragility is absolutely the right course of action. Government Members should look at their history books. We had a lecture from the hon. Member for North East Somerset (Jacob Rees-Mogg), who referred to the 1930s. I refer him and other Government Members to Roosevelt's new deal. Roosevelt demonstrated that by using the power and instruments of the state to invest in the economy, Government could get the economy moving again and put people back to work. Do not forget that when Roosevelt came to power, 25% of the American people were out of work, and his new deal put them back into work. By contrast, in this country we were pursuing a deflationary policy that resulted in millions of people losing their jobs and remaining unemployed for many years.
Mr Speaker: Order. May I gently say to the hon. Gentleman that we cannot have a general discourse on the merits of the policies of respective American presidents, however strongly he and others feel about those matters? I am sure that it is only a matter of seconds before he returns to the substance of the Bill.
Chris Williamson: Thank you, Mr Speaker. I merely wanted to make a brief reference to President Obama's letter. I think that Government Members are familiar with it. I referred to it in a previous speech, and I will therefore move on.
From the historical precedents to which I have referred, and indeed the precedent of the Attlee Government in 1945, it is clear that by investing in our economy and not taking the course of action that the Government are taking in relation to VAT, corporation tax and the insurance premium tax, we can secure greater opportunity for recovery. If we can put people back to work by investing in our economy, that will ensure that the tax take is increased.
Mr Kevan Jones: Does my hon. Friend agree that, in his constituency, the VAT increases in the Finance Bill will have a disproportionate effect on the poorest individuals? Will that not hamper not only the recovery but the personal circumstances of those individuals?
Chris Williamson: I am grateful to my hon. Friend. Certainly the increases will impoverish countless people living on modest incomes in my constituency. That is very clear. The point that I was trying to make, though, was that growth is the key to recovery, and by investing in our economy we can secure that growth.
Lilian Greenwood: Has the growth of the retail sector in Derby made a significant contribution to the city? I know that the Westfield centre there seems to have attracted many people. Does my hon. Friend share my concern that the increase in VAT will have- [Interruption.]
Lilian Greenwood: Does my hon. Friend share my concern about the impact that the VAT increase will have on the retail sector? I understand from a recent report that 77% of retailers felt that it would have a negative, quite negative or very negative impact on their sales, potentially leading to a 1.6% reduction in retail staff, 47,000 employees losing their jobs and more than 9,000 stores closing-
Chris Williamson: I agree with my hon. Friend. We have seen a retail-led regeneration of the city centre in Derby, and the increase in VAT will certainly have a negative impact. Already retailers are struggling in the difficult economic circumstances with which they are confronted, and clearly an increase in VAT is bound to have a negative impact.
What we wanted to achieve, and what we believe is the right way forward, is the creation of an economic virtuous cycle through investment in our economy. That would lead to more jobs, which would increase tax and national insurance income, which in turn would lead to the opportunity for more investment, and so on. The Government are pursuing a course of action that will lead to an economic vicious circle. The cuts in investment will result in more unemployment and a reduction in the tax take, resulting in more cuts and more unemployment, and so on. The VAT increase will clearly hit the poorest people in our community. The Treasury figures say that, as do the Institute for Fiscal Studies and the National Institute of Economic and Social Research.
"Our plans do not require a rise in VAT. The Tory plans do. Their tax promises on marriage and jobs may sound appealing. But they come with a secret VAT bombshell close behind."
It is little wonder that support for the Liberal Democrats in the latest YouGov opinion poll has slumped to 15%. Furthermore, another YouGov poll last month showed that 48% of Liberal Democrat voters were going to abandon the party as a direct result of its supporting the Tories on the issue. Even the Prime Minister said last year that VAT was regressive and hit the poorest hardest. He went on:
"It does, I absolutely promise you."
The Chancellor keeps telling us that we are all in it together, but there is a world of difference between the impact on privileged former Bullingdon club members, such as the Chancellor and the Prime Minister, and the families on modest incomes in my constituency who will have their tax credits cut- [Interruption.]
Order. A rather unseemly exchange is going on between the hon. Member for Nottingham East (Chris Leslie) and the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton
Deane (Mr Browne). I would not want to find that, as a result of excessive noise, I miss out on what I am sure is coming soon, namely the peroration of the hon. Member for Derby North (Chris Williamson).
Chris Williamson: There is an even bigger difference between those privileged former Bullingdon club members and the people whom they will throw on the dole-the tens of thousands, if not hundreds of thousands, and possibly millions of people who will be thrown out of work as a direct consequence of their policies.
David Morris (Morecambe and Lunesdale) (Con): A debate that goes on till 12 minutes past one is an oddity so early in the Parliament. Call me cynical, but will the hon. Gentleman concede that the debate has just cost the taxpayers more than £200,000 to keep the House open and Members of Parliament in here, who can claim a free hotel after 1 o'clock under Independent Parliamentary Standards Authority rules? Shame!
How is it fair to increase VAT when the Chief Secretary said that he would not do that? How is it fair to hit the poorest the hardest? How is it fair to cut tax credits from families on modest incomes or to scrap child trust funds, which give young people a nest egg? How is it fair to slash free school meals? How is it fair to short-change pensioners through the failure to operate tax allowances? How is it fair to blame public sector workers for the deficit and the national debt, when international bankers are at fault? Let us remember that Conservative Members resisted any additional regulation of those bankers, many of whom have more in common with Government Members than they have with Opposition Members. How is it fair to chop benefits, including the swingeing cuts to which my hon. Friends referred, for some of the poorest and most vulnerable people in the country? The shameful Finance Bill is the antithesis of fairness. That is why Labour Members will vote against Second Reading.
Ms Angela Eagle (Wallasey) (Lab): We have had an interesting debate. We just heard from the hon. Member for Morecambe and Lunesdale (David Morris) the most amazing reason why debate in the House should be curtailed that I think I have ever heard used in a democracy. I hope we are not going to hear more arguments that debate in the House should be curtailed because of the cost, as that seems rather odd.
I begin my response to a long and illuminating debate by adding my congratulations to those who made their maiden speeches. The hon. Member for North East Cambridgeshire (Stephen Barclay) gave an extremely entertaining speech about the history of his constituency. He told us that it was better known as the fens, which
sounds a lot more exciting than its current name, which if I may say, is rather boring. He then spoke of the history of drainage in the fens and many of the issues that he is confronting as a newly elected Member. I wish him a long and happy membership of the House. He certainly made a good impression with his maiden speech.
My hon. Friend the Member for Scunthorpe (Nic Dakin) also made an extremely accomplished maiden speech this evening, paying suitable tribute to both his predecessors, Elliot Morley and Ian Cawsey. He displayed a passion for the constituency that it is now his privilege to represent. He lives there and clearly loves it, and I am sure that we will hear many more such contributions from him.
The hon. Member for Ipswich (Ben Gummer)-a chip off the old block-made a characteristically good maiden speech, as did the hon. Member for Weaver Vale (Graham Evans). The latter paid a tribute to his predecessor that Labour Members appreciated. I congratulate all hon. Members who made their maiden speeches tonight. I am not sure how many more maiden speeches there are to get through, but I have always enjoyed listening to Members' first contributions to the House. After many years of listening to such speeches, I have not lost my enthusiasm for them.
The debate was initially joined enthusiastically and with a great deal of energy, but that energy petered out on the Government side of the House halfway through the evening. Instead of the usual to and fro of debate, there was no sign of anyone on the Government side willing to stand up to defend the Finance Bill. Government Members ran out of steam and stopped participating. As the Bill goes to Committee and Report in the next couple of weeks-unusually, that will take place completely on the Floor of the House-I hope they will show a little bit more stamina than they managed to show today, when the debate was somewhat one-sided.
The right hon. Member for Wokingham (Mr Redwood), whom I no longer see in his place, is one of life's optimists. He told us that we are all far too pessimistic about the state of the economy. To listen to him, one would not have thought that his right hon. and hon. Friends on the Treasury Bench had spent the past few weeks driving down confidence in the economy with the scaremongering tactics they have been using to justify the measures in the Budget.
We then heard from the hon. Member for Dundee East (Stewart Hosie) on behalf of the Scottish Nationalists, who is a long-standing and experienced contributor to Finance Bill debates. I have served on many Finance Bill Committees with him and, as always, he brought his astute experience and forcefully expressed opinions to the debate. He was especially exercised about the increase in VAT in the Bill which, he said-I have to say I agree with him-contradicts the fairness theme that is purported to run through the Budget. He described it as unforgivable and economically foolish.
We also heard from the hon. Member for North East Somerset (Jacob Rees-Mogg) who gave us something of a history lesson and, like so many of his colleagues, foolishly raised the spectre of Greece. They really will have to stop doing that if they are to be reasonable and responsible.
One of the more interesting speeches from those on the Government Benches came from the hon. Member for St Ives (Andrew George), whose words we listened
to with extreme care given his actions so far in tabling amendments to the Bill. Clearly, he is struggling with the VAT increase. It is worrying him. He said that he did not think the Red Book was accurate in its assessment of VAT as progressive and he raised the tantalising-for me, at any rate-possibility that he might consider amending the Budget in Committee or Report on the Floor of the House. We will certainly wait to see whether he does so, and we will look carefully at the issues that he wishes to raise.
We had a series of speeches from my side of the House, beginning with an extremely eloquent contribution from my hon. Friend the Member for Warrington North (Helen Jones), who talked about how regressive the VAT increase will be. She also said that the banks were being treated softly while industry was being treated relatively badly by the proposals in the Finance Bill.
We also heard from my hon. Friend the Member for North Durham (Mr Jones) and my right hon. Friend the Member for Oldham West and Royton (Mr Meacher), both of whom had pertinent critiques of the Budget judgment and the strategy implied by the Bill. We heard a tour de force from my hon. Friend the Member for Eltham (Clive Efford), who understandably had a go at the Liberal Democrats for their twisting and turning on VAT. He had some words to say about the Office for Budget Responsibility, which I will come back to.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. There are too many private conversations going on and it is difficult to hear. We are getting near the end and I am sure that hon. Members can wait a little longer.
Ms Eagle: Thank you, Mr Deputy Speaker. I was just mentioning the speech by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East-I cannot pronounce the name of his constituency very well, but it is definitely in Scotland. He made a superb speech about the political nature of economics and the attempts that have been made to hide what are basically political choices by describing them as economic imperatives that are somehow objective. He exposed what he called superstitions and myths around that whole area and demolished a lot of the arguments that the Government have been making to justify the Budget judgment in the Finance Bill. In particular, he talked with great wisdom about the paradox of Government thrift, which he pointed out is completely unlike budgeting for households. I look forward to many more such contributions from him as the Bill goes through its stages on the Floor of the House.
My hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) also made a good contribution, which I particularly welcome because I enjoyed canvassing with her during her election campaign. She is already well-loved, liked and respected in her constituency. She asked an important question that the House would do well to bear in mind as we consider the policies and legislation before us: where is the justice in the Budget measures, which will hit the poorest hardest? My hon. Friend the Member for Wansbeck (Ian Lavery) pointed
out the perverse glee he perceived among Liberal Democrat and Conservative Members over the pain that will be inflicted through the Budget and this Bill. His speech demonstrated the human face of public sector workers, many of whom have found their reputations decried in the newspapers, and the jobs and the contribution that public sector workers make to our society belittled.
My hon. Friend the Member for Bishop Auckland (Helen Goodman) observed that the Budget judgments are very optimistic on jobs and, in particular, growth prospects, and she highlighted the impact on work incentives of some of the policies and Budget changes in the Red Book.
Kelvin Hopkins: My hon. Friend talks about the judgments and forecasts. I remember, some 20 years ago, the Tories' favourite forecasting organisation was the London Business School, which The Sunday Times gave 0 out of 10 for its forecasts because they were always completely wrong. Does she think they are wrong on this occasion as well?
Ms Eagle: Time will tell, although there is not widespread acknowledgment in the economic profession that some of the Budget forecasts are right-there is controversy about them. This will play out, however, so we will be able to see who is right in due course.
My hon. Friend the Member for Luton South (Gavin Shuker) talked about the balance of risk in the Budget and the worries about problems with infrastructure investment, the fact that it is being cut in his constituency and the implications for employment incentives. My hon. Friend the Member for Brent North (Barry Gardiner), with his characteristic ingenuity, managed to bring Harry Potter into our Budget deliberations, pointing out that our choices define who we are. I thought there was going to be a fight between him and the right hon. Member for Uxbridge and South Ruislip (Mr Randall), who has, I suspect, enjoyed rather a liquid evening. He was dragged off before anything more untoward happened.
My hon. Friend the Member for Pontypridd (Owen Smith) pointed out the wrong-headedness of the crowding out of private sector investment theory that underlies some of the judgments encompassed in the Bill.
Today has been quite an interesting day because of what has been happening in the Office for Budget Responsibility as we have been debating the Finance Bill. As we were coming into this debate, it was suddenly announced that Sir Alan Budd, who has become the oracle in the past six weeks, had decided to retire and leave the OBR after a mere three months in charge. That startling piece of information was played down by the Treasury, as one would expect, but it did prevent the Chief Secretary to the Treasury from praying in aid at every verse-end the forecasts that the OBR has produced to justify some of the policy decisions in the Budget.
The official line is that it was all planned in advance-that Sir Alan was always going to be away after he had set up the OBR-and that, somehow, nothing untoward has happened. However, I would be interested to know whether the Minister responding to the debate tonight
can cast any further light-in the interests of transparency, of course-on what on earth has been happening with the OBR and, in particular, with Sir Alan Budd.
Chris Leslie: It would certainly be interesting if the Minister could cast some light on that, but would it not also jeopardise the so-called objectivity and independence of the OBR if the Chancellor simply chose Sir Alan Budd's successor by himself?
Ms Eagle: These are issues to which I am sure we will return when the Bill establishing the OBR on a statutory basis comes before the House. However, following the farrago that we have seen, it is important that this House should establish the principle pretty quickly that the head of the OBR should be appointed by this House and be answerable to it. When the Bill establishing the OBR is published, I certainly hope that it contains that provision.
Ms Eagle: My hon. Friend has certainly made an intriguing suggestion, but we have to establish that this House has the right to appoint the new head of the OBR before we can start speculating about who that might be.
Mr MacNeil: I am listening to the hon. Lady talking about transparency. In the spirit of transparency, will she honestly, openly and transparently tell the House whether she regrets allowing a rural fuel derogation to the islands of Scotland? Will she be transparent and honest on that simple point about her time in office?
Ms Eagle: I have-and had-a great deal of sympathy for the issues that the hon. Gentleman had raised, which are particularly relevant in the context of the islands that he represents. When one considers extending any potential fuel duty derogation for particular areas to the mainland-that is what was asked about in this case-there are other issues that arise and there are difficulties, as the Chief Secretary will know. We certainly look forward to seeing what he might come up with in his review.
However, I want to return briefly to the OBR and what on earth has been going on there. A great deal has been made of the independent forecasts that the Office for Budget Responsibility published before and after, and which appear in the Red Book. Today, the Treasury has been saying that Sir Alan was only ever going to stay for three months. However, at the event when he was appointed, the Chancellor said:
"Whether I thank him again in a couple of years' time is another matter".
The Chancellor clearly felt that Sir Alan was going to stick around for years, yet he is now running off and has resigned within three months. Why has he chosen to leave so quickly, right in the middle of our consideration of the Finance Bill, when so many of the judgments in the Bill are based on his forecasts? Even today, the Chief Secretary was making much of Sir Alan's forecasts to justify some of the Government decisions that appear in the Bill.
Ms Eagle: Mr Deputy Speaker, it looks like someone is applying for your job. Every clause in the Bill hinges on the forecasts made by the Office for Budget Responsibility that appear in the Red Book. In fact, those forecasts run through every part of this Budget debate like the words in a stick of Blackpool rock. So the hon. Gentleman cannot, in all honesty, however late the hour, try to claim that the points I am making have nothing to do with the Bill before us.
Could it be that Sir Alan has decided to sling his hook because he was forced to become a kind of extension of the Conservative party spin machine last week, when he brought forward that highly contentious explanation-coincidentally just an hour ahead of Prime Minister's Question Time-of the likely effects of the Budget on jobs? We can only speculate about whether that was the case, but I would be interested to hear whether the Exchequer Secretary is able to shed any light on this matter, in the interest of transparency, when he winds up the debate.
Steve McCabe (Birmingham, Selly Oak) (Lab): I appreciate my hon. Friend's point that we can only speculate on this matter, but it is none the less a worrying one. Given the ham-fisted effort that we have just seen to silence our debate, does she think that it might be better if the Treasury Select Committee agreed to conduct a short inquiry into the circumstances surrounding Sir Alan's departure?
Ms Eagle: I am sure that the newly elected Chair of the Treasury Select Committee will make up his own mind about that, but it would be interesting to see whether Sir Alan would actually appear before any such inquiry, whether or not he were still in his job.
We have seen a steady unravelling of the central claims contained in the Budget since it was first unveiled to the House just 15 days ago, on 22 June. It was billed as the unavoidable Budget, and this is the legislation that has come from it. The Budget strategy and judgments were presented by the Chancellor and his spin merchants as infallible. The choice that he made was to cut the deficit further and faster, and that was offered as the only possible option. That is why these measures are before us today in the Bill, particularly the VAT increase. The neo-liberal economic ideologues who have seized control of our economic policy are in the grip of their narrow-minded dogma, and they will contemplate no alternative.
In truth, a highly risky political gamble is encompassed in this Bill-and it is a gamble with our social and economic well-being. The Government have made a political choice to eliminate the entire structural deficit by 2014-15-hence the revenue-raising measures in this Bill. This goes further and faster than even the Tory party promised in its election manifesto, and it is certainly against the explicit judgment on the dangers of cutting spending too soon, which was a prominent part of the Labour and Liberal Democrat manifestos. This worry about the macro-economic risks of targeting the deficit above every other consideration by speeding up its
elimination is well represented in the mainstream economic debate, even if it has not featured at all in the Government's calculations.
The Budget judgment before us tonight is not just pre-Keynesian; it is actually Hooverite. It is not an economic, but a political and ideological, imperative being pursued in this Finance Bill. This is not an unavoidable Budget, but a huge and risky gamble with the recovery. According to the Chancellor, the overriding problem for our economy now is how the bond markets might react to insufficient austerity.
The fact that the deficit hawks have taken over in the European Union and in the G20 does not make their addiction to synchronised fiscal pain any more desirable than it was in the 1930s. It does make it fashionable, but it still may not work. The fact that these huge cuts in demand will be synchronised also increases the dangers of this policy from a macro-economic point of view. There is increasing evidence that the markets are now beginning to worry about the prospects for growth and the likelihood of a return to low or no growth, Japanese-style.
This was also billed as the emergency Budget. It had to take place immediately after the general election, according to our increasingly melodramatic Chancellor, to avoid catastrophic disruption in the bond markets, threatening the very future of our nation. Nothing matters, it seems, except the deficit. Jobs do not matter and unemployment is a price worth paying. The risk to our social fabric does not matter; it can be dismissed as long as the deficit is eliminated.
We all agree that the deficit has to be tackled, and we had set out a path to cut it by 68% by the end of this Parliament. This was prudent and was far less risky to the recovery than the hazardous path that Government parties have now chosen. How odd it is, then, that the result of all the hype about the economic emergency is a very tiny Bill. We have before us an 11-clause Finance Bill; it is just 26 pages long, and nine of them are superfluous because they are reprinted virtually word for word from the VAT section of the Finance Bill 2009.
Kelvin Hopkins: My hon. Friend is absolutely right to warn against the dangers of deflation, which are much more worrying than anything to do with inflation. Is it not even more worrying that the EU nations have collectively decided to cut their deficits, which will just make the problem even worse? Should we not follow the advice of President Obama, who suggested that we still need the fiscal stimulus?
Ms Eagle: There is certainly a respectable mainstream economic argument that synchronised austerity is worse for growth and could achieve the opposite of its intended effects on the deficit by increasing rather than decreasing it. My hon. Friend is exactly right.
Here we have this tiny Bill of 11 clauses. After all the hysteria surrounding its creation, why is it that size? I think there is only one plausible explanation. The Bill before us contains just those measures that the Chancellor must be worrying that the Liberal Democrats will wobble on over the summer recess. I would be the first to admit that size is not everything, but we might reasonably have expected that a more complete set of measures
would have been forthcoming if we really were in the emergency economic crisis about which the Chancellor has spent the last few weeks irresponsibly stoking up hysteria. Instead, we have a first instalment of the Finance Bill that has been especially designed to padlock the Liberal Democrats into the coalition so that they cannot get out and cause a mess over the summer. Looking at those on the Government Benches, I have to say that some of them seem to be more willing hostages than the others. The twitching has definitely begun somewhere over there, and we intend to encourage that as the Bill continues its passage through the House.
Other differences between the Government's rhetoric and the grim reality have become clearer in recent days. We were promised a fair Budget: the Chancellor insisted that we would all be in this together. The Budget, we were told, would be progressive, not regressive, with tax rises evenly distributed among income groups. There would be progressive cuts. The pain of spending cuts would somehow be fairly spread, with the rich bearing their fair share as we all marched together towards the establishment of a zero deficit. One by one, those loud assertions have proved to be utterly false.
"We are all in this together. I am not going to balance the budget on the backs of the poor".
Then, on Budget day, he made great play of calculations about the effects of his measures which purported to show that he had delivered on that promise. On closer inspection, however, those assurances dissolved into empty Budget spin. [Interruption.]
Stephen Pound: On a point of order, Mr Deputy Speaker. I would never presume to teach you your job, but some of us on this side of the Chamber are having great difficulty in hearing the priceless words that the shadow Minister is enunciating because of the well-refreshed ejaculations that are coming from those on the Benches opposite.
I was about to discuss the analysis by Howard Reed of Landman Economics and Tim Horton of the Fabian Society of the progressive or regressive nature of the Budget. They calculated the effect of the entire package, not just the tax changes. They included the distribution of the billions of pounds of extra spending cuts that had been announced, and then added an assumption of 25% cuts in departmental budgets. Their calculation showed that the combination of all the measures announced in the Budget that this Bill begins to enact will take £1,514 from the bottom 10% of households, which is fully 21.7% of their income. In sharp contrast, the richest 10% will experience an annual loss in income and services of £2,685, which is the equivalent of just 3.6% of their income. If there were 40% cuts in departmental budgets, as was briefed by the Chancellor and Chief Secretary at the weekend, the figures would be grimmer still.
My right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the Shadow Secretary of State for Work and Pensions, commissioned the House of Commons Library to conduct a gender audit of the plans. It revealed that women would bear a disproportionate amount of the pain in the Budget. Of the nearly £8 billion net revenue to be raised by the financial year 2014-15, £6 billion will come from women and just £2 billion from men, despite the fact that women have considerably lower levels of income and wealth than men. The analysis does not include the impact of the savage cuts in public expenditure that the Deputy Prime Minister believes are necessary, and that are now being planned and announced. As women make up more of the public sector work force and rely more on public services, they will be hit harder by the pay freeze, hit harder by the job losses, and hit harder by the decimation of public provision for the needy, especially in their role as carers.
The Chief Secretary purported to rebut that earlier today by reading out a suggestion that the figures were not accurate because they assumed that all the family support is paid to women. It is not true that that assumption was made by the House of Commons Library. However, there are a couple of measures where the House of Commons Library has assumed 100% female receipt of benefits. That is the health in pregnancy grant and the Sure Start maternity grant.
The Conservative party and the Liberal Democrats will have to learn that merely asserting as loudly as possible that the measures in the Bill are "progressive" does not make it true. Producing a distributional table on page 67 of the Red Book which appears to show that it is progressive does not make their assertion true either, especially when the Institute for Fiscal Studies demolishes it the next day by pointing out that it included all Labour's key progressive measures enacted before the election to safeguard lower-income groups, and that it conveniently stops in financial year 2012-13, just before all the cuts to family support announced in the Budget are due to be implemented. If the Conservatives and Liberal Democrats were so confident that these measures are indeed progressive, they would commit the Government to carry on publishing those tables- [Interruption.]
The huge hike in VAT is the regressive centrepiece of this regressive Budget and it features in the Bill. That is despite the fact that before the election the Prime Minister said on 23 April to Jeremy Paxman:
"We have absolutely no plans to raise VAT",
and the Deputy Prime Minister fronted a huge VAT tax bombshell poster campaign warning about the dangers of electing a Tory Government, which still featured on his website until 9 o'clock this evening: when alerted to its continued presence by my right hon. Friend the
shadow Chief Secretary, someone in the Deputy Prime Minister's constituency finally did the decent thing and took it down.
Some Liberal Democrat Cabinet Ministers are even now trying to argue that VAT is not as regressive as they thought it was before the election. It seems that there is no limit to the depths that they are prepared to sink to justify the betrayal of their pre-election promises. VAT is regressive. It hits pensioners and those who are too poor to pay any income tax the hardest. Why then have the Government chosen to raise the bulk of their new tax revenue, nearly £13 billion, by using that tax?
We were assured that the cuts would be fairly distributed in a progressive way, but our early experience of the decisions coming out of the Treasury has confirmed our worst fears. The poorest areas have been hardest hit by cuts to discretionary programmes, which were intentionally aimed at areas in the most need.
One of the first cuts that the Government made was to the future jobs fund. That is at a time when we know, thanks to a leaked Treasury document, that the Budget measures alone will destroy 1.3 million jobs in both the public and private sectors and there are 69 students chasing every job. The prediction by the OBR that 2 million private sector jobs will be created in a mere five years is highly suspect, as an analysis by Adam Lent has pointed out. It took seven years after the 1980s recession and nine and a half years after the 1990s recession to create 2 million jobs, and we are expected to believe that the 2 million mark will be surpassed in record quick time despite the global shock of the credit crunch.
What about the sneaky little move from the retail prices index to the much lower consumer prices index as the definition used for benefit indexation? That cuts £6 billion from the benefits bill at the expense of pensioners and the poorest, the most vulnerable in our society. The delay in implementing the VAT increase will ensure that the price inflation it causes-
"bill brought in upon a ways and means resolution"
Mr Deputy Speaker: The right hon. Member is quite entitled to move the closure motion. It is the decision of the Chair whether to accept it, so what I would say is, Angela Eagle, I am sure you must be very near the end of your speech now.
I was talking about the sneaky little move from the retail prices index to the much lower consumer prices index as the definition used for benefit indexes.
The delay in implementing the VAT increase will ensure that the price inflation it causes is not reflected in this year's indexation cost, which is another sneaky saving from the poorest that the Government hope no one will notice.
This Finance Bill is a risky ideological experiment that will inflict real pain and suffering on those who did not cause the credit crunch. The Bill is regressive not progressive, it is deeply unfair and it is taking a huge gamble with an economic recovery that is not yet assured-we intend to oppose it.
The Exchequer Secretary to the Treasury (Mr David Gauke): We have had nine and a half hours of debate, we have heard many speeches from Labour Members-to be precise, I should perhaps say that we have heard one speech many times-and we have heard not one word of apology. We debate this Bill in the context of a crisis in our public finances, yet we do not see the two right hon. Members most responsible for that here: the shadow Chancellor and the right honourable-and absent-Member for Kirkcaldy and Cowdenbeath (Mr Brown). Over the past few years, few contributions have been made by Labour Members on Finance Bills; usually we heard a contribution from the then Member for Wolverhampton South West, Rob Marris, who is a well-respected figure. We heard many speeches from Labour Members today, but I must say that although the quantity has increased, the quality has deteriorated. There was one exception: the hon. Member for Scunthorpe (Nic Dakin) made a fine maiden speech.
We also heard three other excellent maiden speeches. One was made by my hon. Friend the Member for Weaver Vale (Graham Evans), who pointed out that we do not help the poor by piling up debt. Another was made by my hon. Friend the Member for Ipswich (Ben Gummer). I was particularly delighted to hear that, because I grew up in that town and I remember that even in the days of substantial Conservative majorities it was a Labour-held seat. That goes to show what a fantastic effort he has put in there. I was also delighted to hear the maiden speech of my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay), whom I have known for nearly 20 years. I also wish to thank my right hon. Friend the Member for Wokingham (Mr Redwood), the hon. Members for Solihull (Lorely Burt) and for St Ives (Andrew George), and my hon. Friends the Members for North East Somerset (Jacob Rees-Mogg) and for Dover (Charlie Elphicke), for their contributions.
We debate this Finance Bill in the context of a need for a further fiscal tightening. This country is borrowing more than at any time in our peacetime history. We have seen real turmoil in the markets, with concerns about sovereign debt contagion and with Spain, Portugal and Greece having their credit ratings downgraded. We have seen the independent Office for Budget Responsibility downgrade our predecessors' less than independent growth forecasts and increase the estimate of the structural deficit.
May I respond to the point about Sir Alan Budd by saying that the hon. Member for Wallasey (Ms Eagle) may find that if she spoke to her colleague-or perhaps
former colleague-Lord Myners, she would find that in response to his freedom of information request we sent him a copy of Alan Budd's contract, which makes it clear that it was a three-month contract? It also has to be said that in providing credibility for the public finances, he achieved more in three months than the Labour party achieved in 13 years.
It was imperative that the new Government moved further and faster in reducing our deficit and putting the public finances on a firmer footing. What were the risks if we did not do that? At best we would have had a substantial structural deficit at the end of the Parliament, and we would have paid more than £70 billion a year in debt interest. At worst, we ran a risk of the UK being swept up in a sovereign debt crisis, of a downgrading in our credit rating, of a loss of confidence by international investors, of interest rates having to rise in response, and as a consequence, of any recovery being choked off as credit became more expensive and less available. This was a risk that the coalition Government were not prepared to run, even if others were. It was necessary and overdue that we had a Government who were willing to take decisive action, to get a grip of the situation, and to set out a clear and credible path out of this inherited mess. That is what we have done.
It is right that we should focus our attention on spending cuts. That is the best way of ensuring a successful fiscal consolidation; none the less, it was also necessary to raise taxes. Our challenge was to do so in a way that was fair and enhanced the competitiveness of the UK economy, so that we could encourage the necessary private sector growth.
We will open Britain up for business by creating a more competitive system of corporation tax. We will reduce the main rate from 28% today to just 24% over four years. Rather than putting the small profits rate up, as our predecessors planned to do, we will reduce it to 20%. That proposal has been widely welcomed by business groups such as the CBI, the British Chambers of Commerce and the Institute of Directors.
For the first time we have set out the distributional impact of all the Government's tax and benefit changes that will affect the public over the next two years. It is clear that we have ensured that every part of society will make a contribution to reducing the deficit while protecting the most vulnerable. Even with some tough decisions, we have ensured that child poverty will not increase in the next two years, through a significant above-inflation increase in child tax credit.
We have not heard proposals from the Opposition about how they would raise more tax. To be fair, one or two Opposition Members, even former members of the Government, said, "We should have raised more from the bank levy," somewhat forgetting that when the Labour party was in government it refused to introduce a bank levy.
I know that there is sincere concern on both sides of the House that those who are materially deprived may have to pay disproportionately more in tax as a consequence
of the change in VAT, but I urge all hon. Members to look at the academic debate on this matter. If they want to see a correlation between material deprivation and income, the best way of looking at it is to look at the expenditure basis. The fact is that income distribution will always reflect the fact that there are groups in society with volatile incomes who are not as materially deprived as others, but who will from time to time earn less and at other times earn more. As a consequence-
Mr Gauke: We are not going to take any lectures from the Opposition. Remember, theirs is the party that doubled the 10p tax rate. Of course, at that point the Government did not produce a distributional analysis. I have asked officials to look into this, and if we look at the distributional impacts of the changes in income tax announced in 2007, an interesting fact emerges: the bottom five deciles all lose and the top five deciles all win. That was the consequence of the policy of the right hon. and absent Member for Kirkcaldy and Cowdenbeath, and some of us remember Labour Members cheering when that policy was announced.
What a contrast with the coalition Government. Whereas the Labour Government raised income tax on the poorest, we have taken 880,000 people out of income tax. What a contrast on the deficit, as well. I do not believe that when the Labour Government came to power in 1997 they intended to leave the biggest budget deficit in our peacetime history, but the fact is that they did. We know it, the British people know it, and deep down, Labour Members must know it too, but the more we listen to them-in complete denial, opposing each and every measure to control the deficit, failing to engage in how we solve the problem-the more absurd and out of touch they look. That will not impress many people.
The British people know that this Government are sensibly and pragmatically clearing up a mess left by our predecessors. I say to Labour Members: accept that fact, engage constructively in what we do about it, but above all, apologise for it. It is clear, however, that we will not get any constructive engagement from Labour Members. Instead, we see Labour's age-old habit of failing to confront the hard truths: self-indulgent, short-sighted, with passion and resolution marching into the wilderness-irresponsible in government, irrelevant in opposition.
This country deserves better than that. The British people know that sorting out the mess will not be easy. Yes, sacrifices will have to be made, but in this Finance Bill we are making tough choices-choices that will restore our public finances, choices that enhance not
diminish our competitiveness, and choices that are fair to all sections of society. I commend the Bill to the House.
That, notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions, more than one stage of the Finance Bill may be taken at any sitting of the House.-( Jeremy Wright .)
That the draft National Assembly for Wales (Legislative Competence) (Housing and Local Government) Order 2010, which was laid before this House on 1 March 2010, in the previous Parliament, be approved.-( Jeremy Wright .)
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. This is a petition, and you are meant to speak to the petition. You may have your own views about tonight, but you cannot use them now; please address the petition that you are putting before the House.
The petition is about the proposed development north of Holt avenue in Adel. It is against the previous Labour Government's entirely bureaucratic, unnecessary,
centralised and over-ambitious targets for housing in the regional spatial strategies, which cause a legal loophole that can allow developments such as the one north of Holt avenue in Adel potentially to go ahead, against the wishes of local residents, local residents associations and Leeds city council. I am delighted to present this petition against that, and, of course, to welcome the coalition Government's commitment to abolishing these targets.
The Petitioners therefore request that the House of Commons urges the Secretary of State for Communities and Local Government to use all his powers to review the previous Government's targets for housing.
Declares that the petitioners have serious concern s about the previous Government' s overly ambitious targets for housing; and further declares that the petitioners believe that these targets will lead to unwanted developments - for example, the proposed development for the land north of Holt Avenue in Adel.
The Petitioners therefore request that the House of Commons urges the Secretary of State for Communities and Local Government to use all his powers to review the previous Government' s targets for housing.
Jonathan Evans (Cardiff North) (Con): This is the first occasion on which I have been able to address the House in debate for more than 13 years, following my decade of service as MEP for Wales in the European Parliament. Although this is not therefore a maiden speech as such, I want to begin by mentioning my predecessor, Julie Morgan. I paid full tribute to her service in the Welsh Grand Committee last week, so I will not go into detail again today, but I wish to introduce the debate by highlighting the cross-party agreement in Cardiff on the subject of Llanishen reservoir between me, my Labour predecessor and the hon. Member for Cardiff Central (Jenny Willott), who, because of an impending happy event, cannot be here this evening.
For the past 35 years, the Reservoirs Act 1975 has provided a robust procedure for maintaining the safety of British reservoirs. The law requires that A-class reservoirs must be inspected every 10 years by an independent engineer drawn from a panel compiled by the Secretary of State for Environment, Food and Rural Affairs. Independence means not being in the employment of the owner of the reservoir, who is free to select any DEFRA panel engineer. Once such an engineer proposes further action, those measures become mandatory. They are, to use the words of one of the panel engineers who plays a key part in this story, "set as tablets of stone". They cannot be altered without a new inspection, and a supervising engineer, again drawn from the DEFRA panel, must be appointed by the reservoir owner and given responsibility for carrying them out in accordance with the original recommendations.
If the inspecting engineer makes inappropriate safety recommendations, the reservoir owner can have the issue referred to a referee under section 19 of the 1975 Act. That process was devised to provide strong powers to maintain reservoir safety, with appropriate review powers for the reservoir owner. However, the legislation and its method of enforcement are actually being abused to undermine safety in the case of Llanishen reservoir in Cardiff, which threatens to bring about the destruction of the reservoir itself.
Llanishen reservoir was built between 1884 and 1886 to supply water to the city of Cardiff, but it has not been used for water supply for more than 30 years. For many years the local council has leased the reservoir for sailing training, and the area is widely popular for both walking and fishing. However, the current owners of the reservoir, Western Power Distribution, a subsidiary of a major US energy corporation, PPL-formerly Pennsylvania Power and Light-wants to redevelop the land for more than 300 houses and flats. For the past eight years, that US giant's subsidiary has put forward multiple planning applications. All have been refused, and PPL has challenged every refusal.
Additionally, the area has been granted multiple protections. It is a designated site of special scientific interest and site of importance for nature conservation, and the reservoir structure itself has been listed by the National Assembly as a structure of special architectural and historic importance, with the active approval and
recommendation of the Institution of Civil Engineers. PPL's subsidiary WPD unsuccessfully challenged each and every one of those designations. However, I want to make it clear that the debate is not about those planning powers, which have been devolved to the National Assembly. I mention the ambitions of PPL's subsidiary because they form an important background and context to the events that give rise to my debate.
A DEFRA panel engineer, Mr Earp, inspected the reservoir under the Reservoirs Act in 2004 and passed it as safe. That is the last we will hear of Mr Earp. The next statutory inspection was not due to take place until 2014. However, WPD brought forward the next inspection by six years, and decided to appoint a different engineer. In other words, the reservoir owner, having received a report declaring that the reservoir was safe, and not needing to do another for 10 years, decided to have an examination undertaken only four years later.
The engineer who was appointed, Dr Andrew Hughes, suggested that the owners made the decision not because of any risk to safety, but in anticipation of their being successful in any change in use of the reservoir. Dr Hughes was required by law to be independent of WPD. He is employed by a company called Atkins, the multinational civil engineering consultancy, which is active in many countries. He undertook his inspection in 2008 and, to the shock of many, including the local reservoir action group, recommended that a full examination of the pipework at the base of the reservoir be carried out in the interests of safety. Then Dr Hughes then left the scene. Having prepared his report, he has subsequently refused to engage in any debate with third parties about his conclusions, and he considers his role to be closed.
Under the Reservoirs Act, the next step is for a supervising engineer to be appointed by the reservoir owners to carry out Dr Hughes's recommendations. That engineer has been appointed. He is Mr Owens-again, a DEFRA panel engineer- whose services were apparently offered to the reservoir owners by Atkins, the company whose employee produced the original independent inspection. Mr Owens said:
"Atkins Limited offered Western Power Distribution Ltd my services as one of their Qualified Civil Engineers, to oversee the execution of the mandatory measures in the interests of safety recommended in Dr Hughes Inspection Report dated May 2008. WPD accepted Atkins offer and appointed me accordingly."
Mr Owens has declared that the reservoir must be fully drained. Given that the reservoir is filled solely by rainfall, if it is drained, it will take a decade to refill it, and major damage may be caused to the integrity of the whole structure in the meantime. The recommendations of the Atkins engineers, Dr Hughes and Mr Owens, have been closely examined and challenged by two other DEFRA panel engineers, Dr Binnie, who has been working for the local residents group, the reservoir action group, to which I pay tribute for all its work in the past eight years, and Mr Alan Warren of Halcrow-a very well known civil engineering company-who was commissioned to advise the Environment Agency.
After a freedom of information request, the Environment Agency recently provided a copy of Mr Warren's report. I have it here. It was produced in the past month and has come into my hands only in the past fortnight. In it, Mr Warren says:
"The overall objectives of the work are not clear to me and the QCE"-
"Mr Owens has not clarified the conditions under which he will provide certification.
The wording of the recommendations made by Dr Hughes is such that a complete emptying of the reservoir is not mandatory. The QCE Mr Owens has offered little evidence to support his approach of fully draining the reservoir in preference to others."
"It is apparent that the statutory measures are being addressed in a manner which will create new risks to reservoir safety".
Let me underline that. According to the Environment Agency's own adviser, a DEFRA-approved panel engineer, the works that Atkins intends to carry out at Llanishen reservoir create new risks to safety. When such a fundamental disagreement between professionals exists, there ought to be a mechanism for referring it to a professional body for adjudication, but under the legislation, the right to refer to a referee appears to be granted exclusively to the owners of the reservoir. WPD and its US owners unsurprisingly have no interest in such a process.
In the meantime, the Environment Agency, as the enforcement authority under the 1975 Act, is obliged to serve notice on the reservoir owners to insist on the works being undertaken, even though its own DEFRA panel engineer has warned that the works will compromise the safety of the reservoir. I understand from the Environment Agency that despite that, it has drawn the conflicting reports to the attention of DEFRA, which of course retains the power of appointing panel engineers under the Act.
The local newspaper, the South Wales Echo, has run a major campaign urging PPL to intervene. PPL's chairman, president and chief executive officer, Mr James Miller, is apparently proud of the environmental record of his company and boasts on his website that
"at PPL doing the right thing comes naturally".
"We have a clear expectation that everyone in the PPL family at all our operations around the world will live up to the company's expectations for integrity and ethical behaviour",
but I am afraid that Mr Miller has proved to be less of a Ralph Nader and rather more of a Montgomery Burns. He actually failed to respond to any of the letters of concern sent by local residents and others, and referred each and every one back to WPD in the UK.
In a curious irony, Mr Keith Clarke, the CEO of Atkins, is visiting Cardiff on the 15 July to receive recognition from Cardiff university of his contribution to civil engineering. Mr Clarke is fully aware of the role that his company has been playing in relation to the future of Llanishen reservoir. I challenge him to visit the reservoir, to meet the reservoir action group and locally elected representatives, and to see what is being done by his colleagues in his company's name.
Robust and valuable laws that have been used to maintain the safety of our reservoirs for a generation are being cynically abused in my city to bring about the opposite effect, and an important historic landmark, recognised as being of national importance, is about to be vandalised.
The Parliamentary Under-Secretary of State for Wales (Mr David Jones):
I congratulate my hon. Friend the Member for Cardiff North (Jonathan Evans) on securing
this debate, which is important both for his constituents and, because it concerns Government policy on reservoir safety, for the whole country.
As my hon. Friend will appreciate and as he identified, the case of the Llanishen reservoir is complex, and today is not the first occasion on which the matter has been ventilated on the Floor of the House-as recently as last February, it was referred to by his predecessor, Julie Morgan, in the St David's day debate. The case of Llanishen reservoir involves consideration not only of reservoir safety, but of protection of the environment, planning law and listed buildings consent. While matters relating to the safety of reservoirs in Wales are devolved, and I know that the Welsh Assembly Government Minister for Environment, Sustainability and Housing has been monitoring events closely, the Environment Agency is responsible for enforcing matters of reservoir safety in Wales.
The Reservoirs Act 1975, as amended, sets out the safety regime for reservoirs in England, Wales and Scotland. Llanishen reservoir is a large raised reservoir under the terms of the Act, that is to say one designed to hold or capable of holding more than 25,000 cubic metres of water above the natural level of the land. As such, it should-pursuant to section 10 of the Act-be inspected by a qualified inspecting engineer at least every 10 years.
As my hon. Friend said, Llanishen reservoir was last inspected in 2008 and the inspecting engineer made a number of recommendations relevant to its safety. He recommended that a survey of all valves and pipework in the reservoir should be carried out to check their layout and condition. Although he did not specifically require a drain-down of the reservoir, he pointed out that this would be necessary in order for its operator, Western Power, to implement his recommendations. Once such recommendations have been submitted by the engineer, there is a legal obligation on the operator to implement any necessary measures as soon as practicable. In the case of Llanishen, the inspection report specified that these should be done within 12 months.
Western Power did not complete these measures on time so the Environment Agency served an enforcement notice on the company. That notice required the company to complete the outstanding safety measures within an agreed timescale. Western Power elected to draw down the reservoir to carry out a visual inspection of the pipework. It began drawing down the water on 26 February 2010 by siphoning water over the reservoir embankment and into the Nant Fawr stream. The water level within the reservoir has been lowered by approximately 4 metres. The siphoning has now stopped.
Although the Environment Agency has no legal powers to prevent the draw-down from happening, it has written to the company to emphasise that in the agency's view the company does not necessarily need to drain down Llanishen reservoir in order to carry out the safety inspections identified by the inspecting engineer. However, should the company insist on completing the draw-down, the company needs an environmental permit or discharge consent from the agency to proceed. This document is issued under section 85 of the Water Resources Act 1991 and gives permission to discharge water that may contain silts or sediments-such as in reservoir water-
sewage or trade effluents directly into surface waters, rivers, streams, canals, groundwater or the sea. In fulfilling its obligations under this Act, the Environment Agency determines environmental permit applications to regulate the water being discharged in order to protect water quality, the environment and human health.
During its consultation on the application, which was advertised in the South Wales Echo, the agency received a number of comments from the local community, including some from the Llanishen reservoir action group. These comments are being considered as part of the agency's assessment of the application. If Western Power proves to the agency's satisfaction that the draw-down will not cause any detrimental effect on the Nant Fawr stream, its wildlife or the local environment, the agency is obliged to issue an environmental permit. However, if granted, the permit will place appropriate conditions on the company to minimise the risk of pollution or damage to the local environment.
The SSSI status conferred upon the Llanishen reservoir embankments by the Countryside Council for Wales in September 2005, which was confirmed in May 2006, will no doubt be an important factor in the agency's assessment. I understand that Western Power has consulted the Countryside Council on its plans for the reservoir. The listed building status of the dam attached to the reservoir by Cadw is also an important factor to be taken into account, but it is my understanding that no application for listed building consent has been submitted by the company in relation to the drain-down. In any case, consideration of any such application would be a matter for Cardiff city council as the appropriate authority. If at any time the Environment Agency comes to believe that the reservoir has become unsafe or detects any damage or pollution to the environment from the further draw-down proposed by Western Power, proportionate enforcement action will be taken against the company.
I recognise and share my hon. Friend's concerns over the many issues he has identified in relation to the reservoir at Llanishen. I hope also that I may reassure him of the importance I attach to the debate on matters that are not just of concern to local communities, but which might indeed have wider implications and which I intend to take steps to pursue. I therefore intend to write to the Welsh Assembly Government Minister with responsibility for the environment and sustainability, Jane Davidson, who has devolved responsibilities in this matter, to convey the concerns raised in the House this evening. I intend also to write in a similar vein to Robert Symons, the chief executive of Western Power, to urge that his company engages with interested parties in this matter.
As my hon. Friend has so eloquently pointed out, the Llanishen case has highlighted the fact that, whereas a reservoir operator has a means of challenging a determination by the Environment Agency, current legislation does not provide for reconsideration by an inspecting engineer of his report once it has been submitted to the operator, even if new information or a contrary view is provided from another source. That seems to be an issue that merits further reflection. I therefore intend also write to my hon. Friend the Member for Newbury (Richard Benyon), the Under-Secretary at the Department for Environment, Food and Rural Affairs with responsibility for the natural environment and fisheries, to ask him to consider the scope for addressing this apparent anomaly in the course of the Government's implementation of
section 4 of the Flood and Water Management Act 2010, which will introduce a risk-based approach to the assessment of reservoir safety, and on which the Government will consult in due course.
Jonathan Evans: The reservoir action group and local residents will be very pleased to hear my hon. Friend's statements from the Dispatch Box. Within his busy schedule, when he is in Cardiff on some convenient occasion, will he take the opportunity to visit the reservoir and meet the interested parties and locally elected representatives, as I challenged Mr Clarke to do during my earlier remarks? Bearing in mind what my hon. Friend has said, there will be people who will wish to take the opportunity to thank him for his interest.
I will place copies of all the letters to which I have referred in the Library of the House. I hope that the process that I have outlined will give my hon. Friend the assurance he needs that the safety and environmental impact of the operation of Llanishen reservoir, as well as the concerns of his constituents and the wider community in Cardiff, are being given the priority and attention the matter deserves.