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The hon. Member for Luton, North (Kelvin Hopkins)—another Member not in his place—echoed the sentiments of the right hon. Member for Oldham, West and Royton. While the right hon. Member for Oldham, West and Royton came out with a list of spending commitments for the Government he aspires to lead, the hon. Member for Luton, North had a comprehensive list of tax increases that he wanted to levy upon us. He said that he was harking back to a golden age of socialism, when Jim Callaghan was Prime Minister and the highest rate of tax was 98p in the pound. He looked back to those days fondly and wistfully. But, like many hon. Members, particularly on the Opposition Benches—although, as my hon. Friend the Member for West Chelmsford indicated in his speech, a number of Members of Her Majesty’s
Government have also accepted this—he also admitted the impact of cuts affecting health spending in his constituency.
My hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) referred to that theme in his speech. He talked about the tragedy of boom and bust in the NHS. Ravenscourt Park hospital was opened just four years ago, but was closed this year as a consequence of the taps on spending being turned off. He also eloquently identified the concerns of his constituents who wish to move to a new house, or to buy for the first time, and the barriers to social and labour mobility that stamp duty creates.
Peter Luff: My hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) rightly highlighted the fact that people in the NHS in his area were being made redundant. However, the effect on NHS employees of the cuts in NHS trusts throughout the country where redundancies are not being announced, but job cuts are being made, is just as serious for overall morale in the NHS. In my trust, 700-odd jobs have been lost; mercifully, there have been only about 12 compulsory redundancies. However, the net effect of that on the NHS is just as devastating for nurses, doctors, laboratory technicians and the rest, who have fewer job opportunities as a result of the Government’s boom-and-bust policies on the NHS.
Mr. Hoban: My hon. Friend is absolutely right. It is interesting that while the Secretary of State for Health will focus on the number of redundancies that are being made, she will not talk about the number of posts that are being lost as a consequence of the changes in spending.
The hon. Member for Cheltenham (Martin Horwood) accepted, as we do, that the Budget was a tax con, not a tax cut. He pointed out some of the weaknesses in the argument that the effects of scrapping the 10p starting rate of tax would be offset by tax credits.
The hon. Member for Bishop Auckland (Helen Goodman), who is in the Chamber, spoke about child poverty. I was brought up in Durham, so I know her constituency, and I understand why she speaks passionately about her concerns. However, she must remember that the proportion of young people who are not in employment, education or training has risen since 1997, so the Government have problems in this area. We need to ensure that we focus on tackling both the causes and the symptoms of child poverty throughout the country.
My hon. Friend the Member for Broxbourne (Mr. Walker) made a contribution to the debate about the alleviation of child poverty and talked about the way in which the tax credit system draws people in. He also cited the bureaucracy and problems of the system. I will take his comments about increasing personal allowances as an early submission for our 2009 Budget.
My hon. Friend the Member for Braintree (Mr. Newmark) referred to the Chancellor’s failings and his failure to produce a full picture of the Budget. He rightly highlighted the fact that green taxes have fallen as a proportion of tax revenue. He spoke about the proud record of Braintree district council on providing incentives for people who wish to improve
the insulation of their houses. It was timely that he talked about the off-budget accounting of private finance initiative projects on the day when the Financial Reporting Advisory Board suggested a change to accounting policy to bring more of those projects on to the Government’s balance sheet. The challenge for the Government will be whether they apply that policy retrospectively, as well as to future projects.
My hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb) launched a debate about the future of coal in a way that he might not have anticipated at the start of his speech. It was important that we had such a debate because it allowed us to hear a range of views about the future role that coal can play. I heard the Economic Secretary say from a sedentary position that the Conservatives had closed the pits, but as the Secretary of State for Environment, Food and Rural Affairs will know from his constituency experience, a Labour Government closed three out of the four pits in South Shields—that fact was pointed out to me when I fought the seat in 1997. As the grandson of a miner and the son of a former colliery electrician, I understand the important role that coal has played in the history of energy generation in this country. I hope that we will find ways to allow it to play a role in the future, too.
My hon. Friend the Member for West Chelmsford spoke with eloquence and passion about the Budget and the Chancellor’s failure to tackle the situation in the NHS. One of the recurrent themes in today’s debate has been the question of where the money has gone. As the Government have said time and time again, there has been unprecedented investment in our public services. However, people in our constituencies often see a litany of lost posts, closed hospitals and school standards that are not rising as quickly as they should do, given the amount that has been spent. That fundamental point weaved through the speeches of many of my hon. Friends.
The clunking fist has hit hardest people on low incomes and the small businesses that are the backbone of the economy. When I was growing up in the Labour heartland of the north-east, I was always told that the Labour party was the workers’ party, and that it stood up for those on low wages. On Wednesday, the clunking fist dealt a blow to that reputation. By doubling the tax paid on low incomes from 10p to 20p, the Chancellor made 3.5 million households worse off. A Labour party that boasts about the minimum wage has doubled the tax paid by the people who earn it. Is that what Labour Back Benchers were cheering last Wednesday—a hammer blow to people on low wages? Where are those Back Benchers now to defend the Budget? One thing is certain: I would not like to be a Labour MP defending the Budget on the doorsteps in the run-up to May’s elections. How would I justify doubling tax for people on low incomes?
Many Labour Back Benchers may not have twigged what has happened, but my constituent, Jenny Whiffen, certainly has. She e-mailed me last week, and the Economic Secretary to the Treasury should listen to what she said, because there are many people like Jenny across the country. She said:
“As a retired person of 61 I am only entitled to a single person’s tax allowance and will not be able to claim age related allowances for another 4 years.
My total gross income for the next year will be £8300. By removing the 10 per cent. tax band I will be paying an additional £200 a year tax.”
“I have seen my standard of living fall as we struggle to pay ever increasing bills for council tax, water rates, rising energy costs...I have also had to start paying for private dental treatment which was something I had never anticipated I would have to do. So much for the promise of National Health dentists being available to all!”
Mrs. Whiffen has been hit by a double whammy of higher taxes and a higher cost of living. Just last week, it was announced that the retail prices index was at its highest level in 15 years. No wonder Mrs. Whiffen struggles to pay for private dental treatment. I bet the Chancellor did not have to think twice about how he would pay for his.
People on low incomes have been hit by the Chancellor’s clunking fist, and so, too, have small businesses. The increase in the corporation tax rate for small companies hit the backbone of the economy. Small businesses are the lifeblood of constituencies such as mine. It is hard to understand the Government’s strategy; they introduced the zero per cent. corporation tax rate to stimulate enterprise as recently as 2002 and then scrapped it just last year. Now they want to increase, in stages, the small companies rate to 22p, costing small businesses £1.2 billion over three years. Surely hard-working small business men and women deserve a break from the Chancellor’s constant tinkering with the tax system.
The Treasury says that it will recycle the proceeds of the tax hike through higher capital allowances and research and development tax credits, but that does nothing for the small companies in the service sector that do not need to buy many assets—the caterers, the builders, the hairdressers. Even small manufacturing companies will feel the pinch under the Government’s tax hike. The Chancellor did the right thing for large businesses by cutting the headline corporation tax rate, but he has hit small businesses hard. It is difficult to escape the conclusion that for businesses, last week’s Budget was all about good headlines, not proper, well thought through tax reforms to benefit businesses regardless of size.
There is no clear direction in the Budget. It increases corporation tax for small businesses but cuts it for large businesses, and cuts capital gains tax for large businesses but increases capital allowances for small businesses. There is simply no logic in the Budget for business. It is no wonder that it has been greeted with scepticism by a number of people from across the business community. The Institute of Chartered Accountants describes the Budget as
“a piecemeal budget which tinkers with the system rather than starting the comprehensive reform which is so overdue.”
The clunking fist has landed blows on small businesses and people on low incomes, but they are the innocent victims of the Budget. The Budget’s purpose was clear: its real audience was not hard-working families struggling to keep pace with the rising cost of living, or people running small businesses, but the Chancellor’s own Back Benchers, who were worried about how badly Labour will do under his leadership.
The Chancellor has used the Budget to discourage serious challengers from coming forward to make a real fight of the leadership election. It was a Budget for the Chancellor’s future, not the nation’s. The Budget could have marked an end to spin, an end to hiding the bad news in the small print, and an end to the cavalier treatment of the public and of the Chancellor’s colleagues, but it was none of those things—there was no change. The Economic Secretary understood the impact when he wrote that book five years ago. Let me quote from it again.
Mr. Hoban: The Economic Secretary should listen, because he will learn a lesson. He said:
“You can only fool people once. But once you have—the public and markets expect it again. And again.”
For the 11th and final time, the Chancellor has tried to fool the people, but they expected it. Yet again, they have seen through it. They have seen through him as Chancellor and they will see through him as Prime Minister.
9.40 pm
The Economic Secretary to the Treasury (Ed Balls): This has been an interesting debate, characterised by speeches which, particularly in the early stages, were expert and, in the later stages, a little more passionate than expert. I should like to take the opportunity to respond to a number of them, including the speech by the hon. Member for Fareham (Mr. Hoban) who, I think, failed to mention the environment once, even though we debated it today.
I shall start with the environment, following the example of the opening Front-Bench speeches. As Sir Nicholas Stern said in his path-breaking report last autumn, unless the world takes urgent action to tackle climate change not only will the environment suffer but the global economy and the planet’s poorest people will face catastrophe too. He is right. The global challenge that we face in dealing with climate change has never been starker; the case for action has never been so overwhelming; and the costs of doing nothing have never been so high. It is right to say that we all have responsibilities. Every section of society—individuals, businesses and Government—has a role to play. However—and this important point was stressed at the outset by my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs—the Budget has no truck with the false choice between action on climate change on the one hand and lower growth and greater unfairness and poverty on the other, whether in Britain or the developing world. The Stern report concludes that
“the world does not need to choose between averting climate change and promoting growth and development.”
Those who argue that protecting the environment means that economic growth cannot continue or that open trade should be curtailed are seriously misguided. If we put in place the right global incentives to cut carbon and emissions, we can be both pro-growth and pro-green, and meet our international responsibilities to developing countries.
That is exactly what we have been doing over the past 10 years with action to shift the tax burden from “goods” to “bads”, and with the work that we have done to support and, indeed, to pioneer international emissions control and trading. In the Budget, we have set out further actions to advance the environment agenda, including a renewed commitment to the EU emissions trading scheme; a new £800 million international window for the environmental transformation fund; a competition for Britain’s first full-scale carbon capture and storage; the extension of the biofuels incentive; a time-limited stamp duty exemption for zero carbon homes; a fuel duty increase of more than inflation; and a change to vehicle excise duty to sharpen the environmental signals that it sends, alongside a higher landfill tax escalator and an increase in the aggregates levy. The environment package in the Budget demonstrates the Government’s commitment to tackling climate change and other environmental challenges while taking account of wider economic and social objectives.
Mr. Graham Stuart: I am extremely grateful to the Minister for giving way.
Peter Luff: It gives him a chance to pause for breath.
Mr. Stuart: It is almost a pleasure to hear a pause in the House. If I were trying to defend a Budget that is bad for the low-paid and that has perpetuated the failure to provide properly for the environment I, too, would want to speak in an uninterrupted flow. Does the Minister accept that far from doing what the Government promised to do on coming to power—they said that they would move taxation from “goods” such as employment to things such as environmental “bads”—the percentage of tax on environmental “bads” has gone down under the Government, not up, and that that environmental failure is down to his boss?
Ed Balls: The Budget represents a net tax cut for families of about £2.5 billion on personal income tax, which is paid for, in part, by rises in environmental taxes on fuel duty and also in the other taxes that I set out. I was keen to describe the environmental measures in the Budget, before responding to the detail of the debate. I shall respond to the 12 or 13 speeches that we heard and to the hon. Member for Fareham.
The hon. Member for East Surrey (Mr. Ainsworth) made an interesting speech. We waited minute by minute for any new policy. The only new policy seemed to be a commitment to higher vehicle excise duty on the most polluting cars, on the basis that the vehicle excise duty rates that we introduced in the Budget were insufficiently tough. The proposal did not go down too well with other Conservative Members, but we look forward to clarification of that intention in due course.
The hon. Member for Eastleigh (Chris Huhne) started by welcoming the Budget and the Congo basin initiative, which I was pleased to hear. He asked what the overall effect of the Budget was on the environment. I refer him to the Chancellor’s speech, in which he made it clear that many millions of tonnes of pollutants are being reduced as a result of the Budget.
My right hon. Friend the Member for Oldham, West and Royton (Mr. Meacher) is not in his place. I fear he may be on the campaign trail this evening and is
therefore unable to be with us. He made an important call for us to sharpen up the European emissions trading scheme. I agree. His commitment to tackling poverty and inequality is genuine, even though I would not agree with the measures that he advocated. Unfortunately, I will not be one of the 44 Members signing his nomination form, but I wish him well. [Interruption.] Mine will not be one of the 44 signatures that he needs in order to stand in the leadership election. [Interruption.] He might or he might not; I have no idea.
My hon. Friend the Member for Islington, South and Finsbury (Emily Thornberry) made a powerful speech in which she called on us to act in the spending review to tackle the issues facing disabled children in our society, and particularly to increase the investment in language therapy in her constituency. She made a strong case that this is a progressive Budget which takes 200,000 children out of poverty, in addition to the 700,000 children who have been taken out of poverty since 1997, following the doubling of child poverty that occurred in the preceding 18 years. She argued forcefully that we would take no lectures from the Opposition on the subject of social justice.
The hon. Member for Mid-Worcestershire (Peter Luff) made an interesting speech. He started off by claiming that the Budget had two objectives—to secure the leadership and to embarrass the Tory leadership. I have no idea whether my right hon. Friend the Chancellor succeeded in the first. He undoubtedly succeeded in the second. It seems that the shadow Chancellor spotted my right hon. Friend’s clear commitment to switching the 10p rate to the basic rate, but the fact that he failed to tell the Leader of the Opposition in advance of his speech is probably revealing.
The hon. Member for Mid-Worcestershire went on to say that the Chancellor was a lucky Chancellor. He clearly has not noticed that since 2000 France, Germany, Japan and America have all had recessions, and that Britain has bucked the international trend. He also called for a smaller public spending share of GDP and a halving of our corporate tax rates. I look forward to hearing from the Opposition Front Bench how that is to be paid for. There was an interesting contribution on renewables and a call for more action on stamp duty.
Mr. Hands: I read in the Evening Standard recently that the hon. Gentleman has been taking elocution classes. Can he answer this question clearly: why have stamp duty thresholds failed to keep pace with house price inflation or general inflation?
Ed Balls: Half of all first-time buyers pay no stamp duty at all, because in last year’s Budget we almost doubled the stamp duty threshold. The idea that it has not kept pace with inflation since 1997 is nonsense.
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