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David Davis: I take the point. Glass-Steagall is not a solution by itself, but it simplifies one critical element of the system. It is critical no matter how big the banks are. I did a Harvard advanced management programme and, one day, our senior finance professor said something that shocked the entire class—that tax complexity was in our interest. We all asked what he was talking about. He replied that, every year, Wall street employs 300 people with master of business administration degrees from the top business schools—Wharton, Harvard, Stanford and so on—while the Internal Revenue Service employs one middle-ranking MBA from Penn Central. He asked whom we thought out of that group would win the arms race. He was talking about tax, but the same argument applies to regulation. We will always lose the battle over complex regulation, so one of the strategies that the Government should consider is simplifying regulation in those sectors that it is vital to control, whatever the size of the individual companies in it. After all, as somebody said earlier, 12,000 banks went down in America in the ’30s.
The other sector, however, has historically best been dealt with in America by anti-trust law—it is the “too big to fail, too big to bail” problem. There is a need for at least another international discussion, if not an agreement, about how big we let some of those financial institutions get. There is an argument for an anti-trust approach. The original anti-trust laws in America were a mixture of political and economic decisions to do with minimising the risk of having too big an individual player in the corporate sector, after the great robber barons who built the American railways and so on. If we understand our history properly, we have to think about what size of corporation we allow to have certain key plays within the system.
The other problem that we have here is one of transparency. The point about Lehmans is that I do not think that the American Government understood the linkages to Lehmans, through the credit default swap and collateralised debt obligation structures, and so on. My throwaway line earlier about instruments that were supposed to reduce risk ending up concealing it is quite relevant in this context, because that is what happened. There were individual risk reductions that did not apply to the whole system. I apologise to the House for going into terrible complexity in answering the Minister’s point, but that seems to me to be one component of dealing with the overall system. Another component is ensuring that the risk transmission mechanisms are transparent and also that no organisation is too big to bail.
I will draw my remarks to a conclusion on that point. Even given my political interests, I hope that the Budget is a success, because there are too many millions of people out there whose lives depend on it. I am pessimistic, because it seems that we are not addressing the fundamentals at the core of our problem. I say “we” because the political class in total has deluded itself about the vitality of the City and so on. We have allowed the problem to happen. It is the Government’s responsibility: it happened on their watch and they have to sort it. However, because of those collective delusions, they have not addressed the right issue. It is a sad day for Britain and I am afraid that the Government will fail.
5.7 pm
Jeff Ennis (Barnsley, East and Mexborough) (Lab): There is no doubt that this year’s Budget has proved to be the most difficult Budget for this Government since we came to power, primarily because of the global economic crisis that this country finds itself in, along with a lot of other westernised developed countries.
I for one welcome a lot of the measures in this year’s Budget. Indeed, I would like to emphasise one or two of them that I particularly support. They include the extension of the stamp duty holiday on properties sold for less than £175,000 until the end of the year. In contrast to what was said by the hon. Member for St. Albans (Anne Main), who is no longer in her place, that will affect the vast majority of property sales in my constituency and will have a good knock-on effect on future property sales. Likewise, I certainly support the increase of the higher rate of income tax to 50 per cent. for people with salaries of more than £150,000, which comes in next year. I also support the increase in funding for the digital industries, which have the potential to create many jobs, both directly and indirectly, particularly, I hope, in South Yorkshire.
Let me look at the social side of some of the policies contained in the Budget. I also welcome the increase in statutory redundancy pay from £350 a week to £385 a week, and the retention of the increase of the winter fuel allowance, which is worth £250 for pensioners over 60 and £400 for pensioners over 80, for another year.
That leads me to the first omission of something that I would have liked to have been included in this year’s Budget—something that I have been pushing for with both the Department for Work and Pensions and the Treasury—which is the abolition of the so-called 25p age addition for pensioners over 80. It is nonsense that pensioners get an increase to their state pension of 25p, which has remained at the same level since 1971, when the Heath Government introduced it. In 1971, someone could buy a dozen eggs or a pound of cheddar cheese with 25p; now they could not even buy a second-class stamp.
The Government have introduced some good initiatives for older pensioners, such as the winter fuel allowance. I would like the 25p age addition scrapped, and £25 or £50 to be put on the winter fuel allowance. This is primarily because a third of all pensioners over the age of 80 in this country now pay income tax, so they are effectively paying income tax on that 25p increase. If the increase were added to their winter fuel allowance, however, it would be a capital allowance and they would receive the full benefit of the increase. The net cost to the Treasury of making that change would be £15 million a year, which is peanuts. It costs £35 million to pay the 25p a week. To add £25 a year to the winter fuel allowance for people over 80 would cost £50 million, and that would be £50 million well spent. It would be well received by the pensioners of this country.
The next issue that I want to focus on was brought to my attention by a constituent of mine just before Christmas. It concerns the level of taxation on statutory redundancy payments. I should like to quote from the e-mail that I received from my constituent, Mr. Nicholas McIvor from Great Houghton, because it hits a number of buttons that have been touched on earlier in the debate. The e-mail is dated 12 November, and it states:
“Dear Jeff...I am writing to you as a ‘soon to be’ unemployed civil servant. I work at the Pension Centre in the Dearne Valley which will close just before Christmas. I will be receiving a Statutory Redundancy Payment but anything above £30,000 is liable to income tax at the highest rate. I understand this tax limit was raised from £5,000 to £10,000 in 1978, to £25,000 in 1981 and to £30,000 in 1988, but it has remained at that level for the past twenty years. I am hoping to use my payment to set up in business and if the Government is looking to stimulate the economy, would it not be better if the £30,000 limit was raised as it seems to be well overdue?”
The reason I say that that hits a number of buttons is that the right hon. Member for Wokingham (Mr. Redwood)—who, unfortunately, is no longer in his place—said that the private sector was bearing the brunt of the redundancies and job losses. That is not the case, and the sooner Conservative Members can get away from the notion of “private sector, good; public sector, bad”, the more it will be to their benefit. As far as I am concerned, the people who work in the private sector, the public sector and the third sector—the charitable sector—are all serving UK plc to the best of their ability. That is what we should be more concerned about. We need to continue to invest in jobs in the public sector in order to maintain that sector, because a lot of the small and medium-sized enterprises that are struggling to survive are dependent on their contracts with local councils, with the NHS and with quangos to sustain them. This idea of “private sector, good; public sector, bad” is a false notion that we need to get away from.
Incidentally, there is a good news story attached to that e-mail, because within weeks of being made redundant, that gentleman found alternative employment. That proves the success of what the Government are doing through Jobcentre Plus, through the regional Government offices—we have a very good chief officer in the Government office for Yorkshire and the Humber, Felicity Everiss—and through the regional development agency, Yorkshire Forward, whose chief executive is Tom Riordan. They are doing a fantastic job of finding alternative employment or job opportunities for people who are being made redundant, particularly in industries such as the financial sector in West Yorkshire.
Mr. Timms: I am listening to my hon. Friend with a great deal of interest. Earlier, he mentioned the announcements about Digital Britain. I wonder whether, in the context of Yorkshire Forward, he has noticed the reference on page 81 of the Red Book to the Government’s approval for the £100 million “Digital Region” project led by Yorkshire Forward.
Jeff Ennis: I thank the Minister for referring to that project. I specifically wanted to draw attention to it, because it will create a lot of jobs in potential unemployment black spots, including the former mining industry areas in South Yorkshire.
I would have liked the Budget to deal with another issue—cold weather payments—drawn to my attention by a local constituent, Mr. Stuart Warrior of Thurnscoe. The issue particularly affects former miners in my area who no longer have concessionary fuel and have only a small pit pension to supplement their state pension. They argue that while current cold weather payments are applicable only to pensioners in receipt of tax credits, former miners with a small work pension get cold just as quickly as the others do, so I believe that we should have given further consideration to that matter.
I have major problems with one proposal in the Budget—the 2p increase in alcohol duty—which I would like to draw to Ministers’ attention. It is not because I am a drunkard or anything like that, but we all get correspondence from constituents involved in the “Axe the Beer Tax” campaign, pointing out that many pubs and clubs are closing down because of losses resulting from the competition from supermarket chains selling drink. I am very concerned about that, and in my constituency I am just as concerned about clubs closing as I am about pubs closing. In my home village of Grimethorpe, for example, we have lost the miners welfare club; it provided extensive sports fields and other sports provision for the local community, but it closed just before Christmas.
Changing social patterns are also relevant, with people entertaining a lot more at home. I fully support consumer choice in that respect, but I think pubs and clubs provide a great deal of social cohesion, particularly in working-class communities. I would have supported an increase in alcohol taxation for supermarkets, if only we could have differentiated between those and licensed premises, and kept the tax off the licensed premises. I understand that this is a complicated issue, but I believe that in the circumstances, it would have been better to leave the 2p increase for another time.
I shall shortly draw my remarks to a close. Some Members have elaborated on their contributions, but I want to ensure that every Member who wants to speak in the debate can do so. I would, however, like to reiterate my main point, which some Conservative Members seem to ignore—that the Government’s current problems are not of their own making. They have been made by the global crisis created primarily by the sub-prime lending market in America, which has gradually snowballed and spread throughout the world. It has been recognised on all sides that there has been irresponsible lending by the banking sector. We must regulate not just in our own country but across the globe, so that confidence and trust in the banking sector can be rebuilt.
I recently spoke to a senior executive banking official in Yorkshire about how the banks could rebuild trust and confidence among their customers. In a sense, that is what the current crisis is all about: the banking customer has lost trust and confidence in the banking sector. I certainly agree with the right hon. Member for Penrith and The Border (David Maclean), who is no longer in his place, that some banks are actually milking their consumer and customer base, attempting to get more fees out of it than can fairly be tolerated, given current banking rates. I believe that it will take the banks a long time to rebuild customer trust. The successful banks of the future will be those that manage to achieve that in the shortest time. The banks are presently competing to try to regain trust from their customer base so that they can be successful again.
I congratulate the Chancellor on producing this Budget at this very difficult time. I hope it will succeed, because it is so important not just to this country, but to the rest of the world.
5.20 pm
Stewart Hosie (Dundee, East) (SNP):
The one thing the Budget statement demonstrates is that the Government intend to take absolutely no responsibility for any of
the mess we are in. If we heard a variation of it once, we heard it a hundred times: this is a global problem. It is a pity that the Chancellor could not say those four special words, “It started in America.” Perhaps the Government do not say that any more.
However, the Government’s prescription to cure the problem is interesting: more money for the jobcentre network to help get people who have lost their jobs back into the jobs that still exist is welcome, but they were forecasting the recovery based on quite extraordinary—almost unbelievable—growth figures in a few years’ time. The same applies to the actions that they are proposing for the businesses that will create the jobs we need and craft the recovery from the recession.
I suspect that the extension of tax relief for investments will be welcome, although the reaffirmation of a fuel duty escalator will not be welcome at all. I would have thought that with the barrel price sitting pretty stable at about $50 and the litre price at the pump sitting stable at about 95p, this was the time—the stable time—to put in the fuel duty regulator to deal with the spike when it happens next year, the year after that or the year after that. Instead, there seems to be simply another attempt to bring in more cash.
In the middle of it all, however, are the proposals for £15 billion of cuts. I think the Chancellor described that as fiscal tightening. Others have described it as efficiency. It is most certainly cuts, and we have had it confirmed today that next year alone, that means a £500 million cut in the Scottish budget. I want to make it clear that that means the loss of 9,000 jobs, as a consequence of the £500 million lost to the Scottish budget next year.
The Government are missing an opportunity. This is the time to cut other things—spending on ID cards, as many have said, and spending on Trident. That idea is gathering pace. Last night Tony Dolphin, from the Institute for Public Policy Research, said that
“you have to identify your priorities”,
“look very hard at projects like the Trident programme, like ID cards and some big projects are going to have to be cancelled because unless you do that you just won’t be able to make enough savings.”
If we are serious about making savings but protecting the investment so that we can get a recovery from the recession, let us look at the ID card system and the Trident programme as projects to be cut.
David Taylor: The hon. Gentleman is always extremely interesting to listen to on financial matters. I, too, have been a strong opponent of ID cards and Trident—but does he acknowledge that cutting investment in those projects would also reduce the number of jobs available in the Scottish economy and elsewhere? Specifically, the increases in expenditure, which he is criticising in relation to the Chancellor’s statement, will have a knock-on effect through the Barnett formula, which he adores and I detest.
Stewart Hosie:
I know that the hon. Gentleman always listens intently when I speak in the House; it worries me. I say to him that the Barnett formula cuts both ways, and the Treasury has confirmed that the departmental
expenditure limit will be reduced for 2010-11, so it is a bad time to be cutting investment in the recovery when there are alternative cuts that could be made.
The Budget also tells us how out of touch the Government were. They were frantically running around pretending that they were not complacent last year, when they said that we would come out of recession only a few weeks from now. Yet the Chancellor managed to say that he believed the economy would begin to recover this year. Given that the OECD and Ernst and Young are still forecasting negative growth for 2010, it seems almost unbelievable that the Government can forecast that we will come out of recession in 2009. I fear that when the pre-Budget report is delivered at the end of the year, the Government will give us another three or four-month target, and that may not be met either.
The full implications of the recession are clear—not least the fact that, at 2 million, unemployment is already hitting the target forecast for the end of 2009. The Government appear to have been dragged here kicking and screaming to come clean about the true size of the national debt, which they have left as a mortgage debt for our children. It is £1.6 trillion-ish. I am not sure whether that includes everything, but it is bound to include an awful lot. I am not sure what the figure per household is in the United Kingdom: £70,000, perhaps. There are people in the real world who cannot afford a mortgage for their houses, but they may well be left to pay for one in the form of their share of the debt that the Government have built up.
David T.C. Davies (Monmouth) (Con): I think that the current figure is about £22,000 per person.
Stewart Hosie: We shall have to do the sums later. I am trying to do the mental arithmetic: £1.6 trillion divided by 26 million households. May I ask the hon. Gentleman to intervene again in a few minutes once he has worked it out? That would be great.
The £1.6 trillion figure makes the time before the recession, when there was a national debt of nearly half a trillion, seem almost like a golden age of prudence. The problem is, however, that it was not. It was a housing boom built on a credit bubble. There was too much money in the system early in the cycle, and too much debt at the end of it.
We are responding today to a Budget statement from a Government who saw a million manufacturing jobs lost on their watch before the recession started, and 30,000 factory jobs lost every month since then. That makes it worse that the £500 million that they are trying to cut from the Scottish budget may undermine the vital efforts to save jobs and stimulate the economy in Scotland. Although unemployment there is lower than it is in the United Kingdom, and although employment is higher and economic inactivity rates lower, there has been a rise in unemployment as part of the rise to 2.1 million in the United Kingdom. There was a record rise of 138,000 in February, and 177,000 people became unemployed in the last quarter. That means that 2,000 people a day became unemployed under Labour in the last three months.
Those are frightening figures. We must not allow anything to happen that would undermine the ability to invest in a recovery, and in particular, to create jobs.
However, it is difficult to see how many of the proposals in the Budget would do anything to create the million or so jobs that we need. Even today’s measures to create green jobs, which I welcome, I am treating with some caution, particularly the announcement about carbon capture and storage, and some of the other green measures.
As the Minister will know, we have heard much of this before. In the 2005 Red Book, the then Chancellor, now the Prime Minister, said that the Government must examine
“how it might support the development of CCS in The Climate Change Programme Review”.
In his pre-Budget speech in the same year, he said:
“Carbon capture and storage protect the environment from carbon emissions by containing them at source”.—[ Official Report, 5 December 2005; Vol. 440, c. 612.]
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