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26 Mar 2007 : Column 1223

I have looked at the Red Book, and, to be fair, I must add that the Chancellor is also proposing to force the Ministry of Defence to sell off much of its spectrum. Perhaps that is what he was referring to. I tabled a named-day question that should have been answered before this debate began, seeking clarification from the Treasury. I have not received that clarification, and I must tell the Economic Secretary that while I realise that some of my speech has been knockabout in style, this is an extremely serious point. If the Chancellor plans to take too much money from the sale of spectrum by Ofcom, he may have a devastating effect on a whole sector of the economy that I know he does not actually wish to harm. I seek reassurance, and the answer that I should have had today.

Let me end with a plea for Worcestershire to receive a fairer share of education spending. The Budget claimed to put education at its heart, but—probably rightly—kept education spending increases in line with growth in gross domestic product. The hon. Member for Worcester (Mr. Foster) denied that in a radio interview in which I took part with him last week, but it is true: 2.5 per cent. is the figure. That means that the years when it would have been easy to reduce the growing gap have been wasted. I refer to the years in which everyone was receiving larger increases. Those were years when a slightly higher percentage for the least well-funded local education authorities, such as Worcestershire, could have been offset by slightly smaller increases for LEAs such as Birmingham. If that had been done, the gap would have been painlessly closed.

In fact, those years were worse than wasted. Because of the iron law of compound interest, places such as Birmingham became immeasurably richer, and shot ahead of Worcestershire in terms of per-pupil funding. Now that future increases in the overall budget will be so much more modest, it will be harder to close the gap without squeals of pain from people at the top of the league table of expenditure who have grown used to living on their high spending.

Hopeful signs are emerging from the Department for Education and Skills that there is at last some understanding that there is a real problem that needs to be addressed, and I am encouraged by some of the things I heard from the f40 conference at the weekend, but solving the problem at a time of relative financial stringency will be very much harder. For me, and for Worcestershire, these are the politics of a regrettably political Budget.

7.8 pm

Kelvin Hopkins (Luton, North) (Lab): I commend my hon. Friend the Member for Islington, South and Finsbury (Emily Thornberry) on the passionate section of her speech which dealt with housing. That is the big issue facing my constituents as well as hers, and I have many similar stories to the one that she related in such strong terms.

Thirty years ago, when I was vice-chair of housing in Luton, we had a housing waiting list half the size of the present one. We thought that a waiting list of 4,000 was outrageous, and we built houses to accommodate
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all on the list when the economy was supposedly weak. Now that we have a strong economy, somehow we cannot afford to house the poor. That is a disgrace, and we should reverse the position very quickly. It is the No.1 issue for my constituents.

I also commend my right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher). I think I agreed with almost everything he said in his speech, but as we generally agree on many things in politics, that is not particularly surprising.

I want to talk about the environment, and particularly about energy and renewable energy, as that is the headline subject of the debate. The Government have gone some way in the right direction in the Chancellor’s Budget, but we have not gone anywhere near far enough. My hon. Friend the Member for Nottingham, South (Alan Simpson) spoke last week, and he said that in Germany there are a hundred times more buildings with solar roof panels than there are in Britain. That highlights that something is fundamentally wrong. He also mentioned the renewable energy approach taken in Freiburg, where I understand that a third of people cycle to work. The Germans are far ahead of us, and our Government and Chancellor must go much further.

In terms of renewable energy, there are many other areas in which we could improve. We should be building barrages across the Thames and the Severn to generate electricity. They would also help in defending us against rising sea levels, which will occur as a result of global warming. If we do not do that on the Thames and do nothing about rising sea levels, we in this Chamber might find that we have wet feet. A barrage across the Thames—another barrage—with generators right across it would be beneficial in many respects.

There are many other forms and sources of renewable energy, such as geothermal energy and biofuels. If we were to invest heavily in them—including in wind, wave and tidal power, and in solar panels—we would not need nuclear and we would be become strategically much more independent. At present, we are heavily dependent on imported gas. That gas comes from countries that are currently sort of friendly, and it comes across countries that are sort of friendly. Even the Germans were recently made very pleased by the fact that gas is delivered to us through Germany; that gives them a certain political leverage, which might be useful in the future. We are aware of the situation that arose between Russia and Ukraine. Ukraine was beholden to Russia for its gas, and we do not want to be in that situation. The more independent we become by producing renewable energies, the better it will be for us in every sense, making us a genuinely independent democratic country and not at risk of having political difficulties in the future because we import much of our energy.

My right hon. Friend the Member for Oldham, West and Royton said much of what I wanted to say on pensions. He said that it would be difficult quickly to raise the basic state pension towards the level of 25 per cent. of earnings, which was its level before the earnings link was cut. However, I suggest to Members—including the Chancellor—that it is possible to achieve that, and that if we have the political will we can do such things. Six or seven years ago, we had the lowest level of basic state pension in
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Europe by a considerable margin, and I think that that is probably still the case. The next lowest level was £150 a week, which was the rate in Germany. We have a long way to go to catch up, and to set a target pension worth 25 per cent. of earnings would be thoroughly justifiable.

How would we pay for that? We would have to do many things, and I suggest that we should start by raising revenue, which would mean raising national insurance contributions. I recently tabled a written question on that, asking that we remove the upper earnings limit and have a standard percentage all the way up the income scale. That would bring in £6.6 billion, which could go straight into pensions. An hon. Friend has asked a question about the current surplus in the national insurance fund; it is about £73 billion, which is a considerable sum. I know that it is useful for the Treasury to be able to live off the income of that surplus, but we should use some of that surplus to boost pensions now.

We must also go further in order to raise income to finance a higher basic state pension, but it is not impossible to take the necessary measures. We could secure income from other areas. There is an entire chapter in the Institute for Fiscal Studies green Budget report of this year about VAT fraud, which currently amounts to about £1 billion a month. We should pursue that fraud more assiduously. If we could get back just half of that sum, that would give us an extra £6 billion a year. There is also a massive gap in other areas between the tax that should be paid and how much is actually paid. Some people suggest that the total tax gap is more than £100 billion a year. That sounds like a phenomenal figure, but even if it was half that and we got half of that amount, we would have £25 billion a year in extra income. Such is the sum that we would receive if we pursued that taxation rigorously and assiduously. The Chancellor should do that. Some years ago, I went to my local VAT office where I was told that for every extra VAT officer employed, five times the salary of that officer could be collected—apparently, that is true in other areas of revenue collection as well. I wrote to the Treasury suggesting that we employ many more VAT inspectors and thereby collect much more revenue.

Mr. Graham Stuart: Does the hon. Gentleman accept that one of the problems that might have caused the failure to collect tax is the over-complication of the tax system by the current Chancellor, and that if we had a simplified system that would cease to demoralise the honest—which is what currently happens—and to give opportunity to the dishonest, as is also currently the case?

Kelvin Hopkins: I agree with the broad principle of the hon. Gentleman’s point. The tax system should be much more simple. I would get rid of a lot of tax reliefs and tax allowances and I would build the system much more towards having a progressive income tax, rather than retaining the other taxes that I agree are more complicated.

I should remind Members that income taxes are currently substantially lower than they were in the 1970s. I acknowledge that there was a shift from income tax to VAT, but even if that is taken into
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account the level of income tax that is paid now is tiny, particularly at the top end, compared with the level in that period. I remember the figures well—I am of an age to do so. The top marginal rate when Jim Callaghan was in office—which I call the golden age of socialism—was 83p in the pound, and in addition there was a 15 per cent. unearned income surcharge. Therefore, some people—the genuine billionaires—were paying 98p in the pound on the top part of their income. I do not suggest that we should go quite that far, but I do suggest that a compromise position in respect of those people could be found that is between that 98 per cent. rate and a 40 per cent. rate.

I have looked at some figures, and I do not think that many people would object if we were to have a 50 per cent. income tax rate for those on £60,000 a year of taxable income, and if that were to increase to 60 per cent. for those on £80,000. Certainly, we in my constituency would throw our hats in the air, because we would know that we could pay off our hospital and health service debts immediately with the extra income.

Mr. Newmark: Some people might well throw their hats in the air, but I suspect that the people in the Treasury would be throwing up, because the reality is that most of such people can move, and they would leave the country and thereby leave the country with a tax shortfall.

Kelvin Hopkins: The odd pop singer or footballer might leave the country, but that would not seriously damage our economy. Let me draw attention to the Organisation for Economic Co-operation and Development statistics on top marginal personal income tax rates for employees in 2006. All the following countries have considerably higher top marginal rates than us: France, Japan, Italy, Sweden, Finland, Germany and Denmark. Denmark’s top rate is 62.9 per cent. and Germany’s is 60.5 per cent. and ours is down at 41 per cent. I suspect that floods of wealthy people have not left those countries, thereby damaging their economies.

Mr. Graham Stuart: Is the hon. Gentleman aware that 40 per cent. of the total receipts for income tax come from just 5 per cent. of income taxpayers, and that if even a small percentage of them were to go abroad there would be a massive hole in the public finances, and also that it would be the poorest and weakest in our society, and the public services that they depend on, that would be undermined?

Kelvin Hopkins: I just do not believe that. Some people whose income is at the top end of the tax system might even think that it is a good idea to pay a little more tax and to make a bigger contribution to society. Some years ago I had lunch in the City—I do not often go to the City—and I talked with people who had been watching television when Nigel Lawson announced his 1998 Budget in which he cut the top marginal rate from 60 per cent. to 40 per cent. They were all amazed; “But we do not need the money”, they said. They were City people, who are probably represented by Opposition Members. I suspect that not many people would leave the country if there was a higher rate of tax, and that that would certainly not change the way that most people voted. I might be being unkind in saying this,
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but I suspect that a lot of rich people vote for the Conservatives rather than Labour, but people who support the Labour party and who earn such levels of income would also certainly not change their vote if we were to become a little more socialist.

Mr. Hands: Will the hon. Gentleman consider the reverse flow? A lot of people are coming to the City of London and to my constituency from continental European countries, which have significantly higher income tax regimes. One reason why they come to work in the City is to escape those higher tax regimes. Does he not share my fear that if we equalled those regimes, all those people would go back again?

Kelvin Hopkins: I have no doubt that there would be some marginal effects, but I suspect that they would not be anything like as significant as the hon. Gentleman suggests, and I doubt whether they would damage our economy. I have looked at other successful economies—particularly in Scandinavia, where they have much higher tax rates—and people do not leave in droves. Those countries are doing very well; indeed, their growth rates in the past year or two have been higher than ours.

Mr. Hands: I thank the hon. Gentleman again for giving way again; he is being very generous. Is he aware that according to the latest figures for my constituency, some 11 per cent. of its residents come from other EU countries? The figure is even higher for Kensington and Chelsea.

Kelvin Hopkins: They are very welcome and I am happy to see them here; they are no doubt making money and repatriating some of it to their own countries. Such effects might prove marginal, but they would not have a fundamental impact on our economy. What would have such an impact is greater income, collected in a much fairer way, for spending on the poor and the needy, and on public services. We need to make a serious attempt at redistributing income that goes some way back toward the position in the 1970s—and, indeed, in the 1950s and 1960s, under Conservative as well as Labour Governments. The people of Britain would massively welcome our moving in that direction—toward the social democratic regimes of Scandinavia—and it would not be economically damaging. That is the direction in which I want to go, and I urge my hon. Friends on the Front Bench to give serious thought to such ideas.

I have probably said more than enough, but I shall mention just one or two minor—not for my constituents, but in terms of the national budget—and local points. The pressures on health spending this year have caused serious difficulties in my constituency. We have the poorest health in the region, the biggest health inequalities and serious problems with heart disease and other illnesses. However, we have suffered the biggest cuts as a proportion of our budget, because of the squeeze on health funding this year. The strategic health authority has just inflicted a blanket cut, top-slicing everyone, and it has savagely affected Luton. We have effectively had £1 million a month cut from our primary care trust, which has had serious effects on my constituents.

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The health service’s total debt this year is about £1 billion, which is what we lose to VAT fraud in one month. It is not a large sum of money in the overall scheme of things, and I urge my hon. Friends on the Front Bench not only to promise jam tomorrow—we know from the Budget that for the health service, there is jam tomorrow—but to lift the spending constraints now, so that we can immediately start putting back what has been cut this year. We have had some serious cuts in the health service locally, and my constituents are suffering. I have written at length on three occasions to my right hon. Friend the Secretary of State for Health to make those points in detail, and I have given figures, too.

Helen Goodman (Bishop Auckland) (Lab): Is my hon. Friend aware that next year, spending on the NHS will rise by 10 per cent?

Kelvin Hopkins: Indeed I am, and I am very pleased about it. However, it is unfortunate that instead of smoothing out spending, there is serious pressure this year, with much more money to spend next year. Cuts are affecting us now, and a bit of next year’s money ought to be brought forward now to relieve our health spending crisis immediately.

Finally, I have said many times that we ought to move quickly towards free funding for long-term care. A royal commission recommended that some years ago, and we have had early-day motions—I myself tabled two in two Parliaments—calling for free long-term care, which more than 100 Government Members have signed. This has been a big issue on the doorstep. I do not want working-class people who have bought for the first time in their family’s history a little terraced house, or even a council house—I do not approve of that principle, but it is understandable that they would wish to buy it because it is a bargain— to be forced to sell the little bit of equity that they have because granny then starts suffering from dementia and they have to pay for her care.

That situation is unacceptable, and it would be much better if we shared the payment for long-term care generally throughout the population—we could have a hypothecated tax, or perhaps a small capital gains tax on houses when people die, if one wanted to have a link to the housing market—to ensure that no one had to pay out of their own pockets for any component of care in the future. I urge my hon. Friends on the Front Bench to give serious thought to that idea, and to recognise the wisdom of the royal commission’s report all those years ago.

7.25 pm

Mr. Greg Hands (Hammersmith and Fulham) (Con): It is a great pleasure to follow the hon. Member for Luton, North (Kelvin Hopkins). He and I agree a great deal on things such as the European Union and other foreign policy matters, but regrettably we do not agree about much, if anything, on the economy and taxation.

The hon. Member for Islington, South and Finsbury (Emily Thornberry), who is a fellow inner-London MP and a member of the Select Committee on Communities and Local Government, did her cause a poor service by not giving way for interventions. She does not have exclusive knowledge of inner-London
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problems. She mentioned that her constituency is the sixth poorest in the country. At least until recently, the index of local deprivation said that my borough was the 18th poorest, although I represent some areas of wealth, too. That does not give me an exclusive right to talk about poverty and deprivation either.

It is certainly not for me to defend the Liberal Democrat council in Islington, but I noticed the hon. Lady’s opposition to choice-based lettings. It is worth noting that it is mainly Labour rather than Lib Dem councils in London that promote choice-based lettings, so I am intrigued by her opposition. It is of course always worth mentioning that this Government are building less social housing than the Conservatives built in the 1990s.

This has been an excellent Budget debate so far, and fascinating to follow from its beginning at 12.31 pm last Wednesday. The fascination has been not so much with the Budget itself, but with the way in which it has been assessed and reported. Every year under this Chancellor, the initial positive coverage has given way to a more considered assessment. This year was no different—only that the Budget unravelled even quicker than usual. We saw the initial cheering on the Labour Benches behind the Chancellor, but by the opening of today’s debate three Labour Back Benchers were present. At one point we were down to two; we went up to a maximum of five; and it looks like we are back down to four at the moment. It seems that the Chancellor gave his incomplete view of the tax changes merely to put the Leader of the Opposition on the wrong foot, and to gain a cheer from his own side. If so, that is an absurd way to run the finances of the world’s fourth largest economy.

The Chancellor's speech gave us only half the story, and the whole Budget took me back to my childhood in the 1970s when we had a black and white television of dubious quality with a grossly distorted picture. The distortions on the TV were amazing—people had elongated foreheads, and I remember thinking that the poor bald man who presented the cricket in those days looked like a cucumber. The most tragic thing for me was at 4:45 pm each Saturday, when “Final Score” came on, and the far right-hand side of what should have been on the screen was not visible at all. One could see the home team score and one could cheer if one’s team had scored three goals, but I had to wait until the next day’s newspapers to find out the complete score, and realise that one’s team had lost 3-4.

It was very much like this Budget. I shared with Government Members an initial cheer when I heard the 2p cut in the basic rate of income tax, but it turned to dismay when I learned that it was more than made up for by the abolition of the 10p rate and the increase in national insurance contributions. In fact, the cut in the basic rate cost £8 billion, but the other increases will raise about £8.4 billion.

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