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It is unclear whether the 50p rate is to be a permanent part of our tax system, or whether it is a short-term measure to meet the particular needs of the recession. I have to say that Ministers have sent out mixed messages about that. The Chancellor, when being interviewed after the Budget, seemed to indicate that it was a short-term measure to raise revenue to meet the immediate needs of the economy. When the Leader of the House was asked about the matter this morning, she seemed to indicate that the rate would be a permanent part of our tax regime. It is vital that we get clarity on the issue, because it goes to the heart of the future political direction of the Labour party and this Government.
John Reid (Airdrie and Shotts) (Lab): My right hon. Friend is making a very interesting case. Is it not the truth that the key questions about the tax are: first, whether in the present circumstances it is to be regarded as a desirable policy objective on its own, or an economic imperative, particularly given the fairness issue; and secondly, whether it is to be regarded as indicative of a general strategic direction on taxation matters? Under those circumstances, and with regard to those questions, has not the Chancellor made it plain that it is an economic imperative, and a temporary expedient, rather than an indicator of general direction?
Mr. Byers: I hope that my right hon. Friend is right. That is why I am raising my concerns about the fact that there have been mixed messages from the Government. The Chancellor is clear that for him, the 50p rate is a short-term measure, not a permanent fixture of the tax regime. Other members of the Cabinet are saying other things. We members of the Labour party need clarity about the direction in which we are going. We need clarity from senior Cabinet Ministers, addressing exactly the issues that my right hon. Friend has addressed. We need that before this Budget debate concludes, because this Budget sets the framework for the general election campaign to come.
Stephen Williams (Bristol, West) (LD): We are having this Budget resolutions debate in truly extraordinary times. I first took an interest in politics as a teenager in the mid-1980s, at a time when unemployment was at an all-time high of 3 million. I hoped at that time that we would not see unemployment return to those levels again, yet that is now being predicted.
The year 1983 was when the Labour party was rejected emphatically by the electorate for its policies, especially its policy of full-scale nationalisation. Little could I have imagined that there would be a broad consensus now that some of the banks should be nationalised. I would have been staggered to be told that the public sector borrowing requirement, which was £12 billion in the mid-1980s and £50 billion when the right hon. and learned Member for Rushcliffe (Mr. Clarke) was Chancellor, would now be £170 billion.
The recession may well be global in its manifestation, as the Secretary of State for Innovation, Universities and Skills was keen to emphasise, but some of the origins of the recession being visited upon this country have their origins in the UK, and we are led by a Prime
Minister who, as Chancellor, repeatedly ignored many of the warnings. We are in a national emergency that requires swift and meaningful Government action. What has been swift is the welter of announcements from the Government. The Government spin machine has been in overdrive, recycling many initiatives and promising money, some of which is deferred until well into the future.
The debate today is being led by the Departments for Business, Enterprise and Regulatory Reform and for Innovation, Universities and Skills. As the Conservative spokesman, the right hon. and learned Member for Rushcliffe said, Lord Mandelson was wheeled out last Monday to promote a document that I, too, thought was full of waffle about new industry and new jobs, to which was added a press release from the Secretary of State for Innovation, Universities and Skills. The press release and the document were full of hyperbolefor instance, that we should all look forward to the day when
the worlds economy . . . is set to double in size creating major new opportunities for British business.
As the right hon. and learned Member for Rushcliffe said, there is little in the way of tangible policies in the document or the press release accompanying it. One of the few specific pledges was to make the Technology Strategy Board, an estimable organisation with an important purpose, into a world leader, but in the Budget last Wednesday, what does the TSB get? Just an extra £50 million.
The document is certainly right in identifying a major problem in the British economythe shortage of venture capital and long-term finance for innovation. As I know from my own meetings with the biotech industries in this country and with many university spin-out companies in Bristol and elsewhere, that shortage holds back British innovation. We will have to see whether the strategic investment fund announced in the Budget will make a long-term difference.
smarter, more joined-up Government that understands the importance of creating wealth.
The Government have been in office for 12 years. It shows what a parlous state they are in when, after 12 years, the Secretary of State for Business, Enterprise and Regulatory Reform, who had to be brought back from Brussels to rescue the Prime Minister, says that the Government need to be smarter and more joined up. Humility, at last, perhaps, but we did not see much of that humility reflected in the Chancellors Budget speech.
We are in a tough business environment. Jobs have been lost in retail in all our constituencies. Whatever the differences about the VAT cut, it is not at all clear whether that has saved any retail jobs. Jobs have been shed also in the financial services industry. Last week Royal Sun Alliance announced the closure of its office in my constituency, Bristol, West, with the loss of 500 jobs. There is much uncertainty in Bristol about our financial services industry, and I hope that closure is not a warning of things to come.
We are in a tight professional jobs market. It will probably be the worse jobs market for graduates for over a decade, and I would not want to be a school or
college leaver at present. For many young people, it will be their first experience of a recession. What has the Governments response been? In the Budget, they announced a precise sum, £260 million, for the youth guarantee for skills and employment for 18 to 24-year-olds, but only if they have been unemployed already for at least 12 months.
It is not clear what that £260 million is intended to fund. People up to the age of 25 are already entitled to have their level 3 training costs funded in full. It appears to rely on a subsidy for charities or local authorities to take on young people. Again, despite the fact that it is a precise sum, the outcome seems rather meaningless. It would have been much better to remove the remaining fees charged for further education college courses that apply to those over the age of 25, or to fund fully the off-the-job training costs of young apprentices.
All those skills are delivered in the further education sector, and the fiasco of the FE capital expenditure budgets has already been mentioned. College building programmes are at a standstill around the country, together with the standstill in the housing market and the commercial property market. There are cranes all over the city centre of Bristol that have been idle for months, and people in the property market have been laid off.
Lorely Burt (Solihull) (LD): Does my hon. Friend agree that the industries involved in construction and those that hold properties that are currently empty are suffering badly? The Governments failure to enhance the empty property rate relief has been unfortunate. In my constituency of Solihull, people pay rates of £15,000 on a broom cupboard. That is one measure through which the Government could have made a substantial improvement for very little cost.
Stephen Williams: I thank my hon. Friend for making that important point. Not only does the relief that is currently available need to be better promoted, but it is a relatively modest sum, which could perhaps be extended in order to make a difference.
In the construction industry, redundancies have increased fourfold over the past 12 months, and there has been a 5 per cent. contraction in its sectoral GDP, yet in the Budget the Government announced only an extra £300 million for the college building programmenowhere near enough to meet the pent-up demand. That sum appears to have been raided from the budget allocation for next year, 2010-11, and in the Secretary of States letter to the sector, there is an assumption of extra money for 2011-12 onwards, but nothing concrete for the future. Colleges deserve better, and the construction industry could certainly do with a boost.
In higher education we saw last week, with the release of the latest statistics from UCAS, that there has been a large rise across all age groups in applications to universities. In England, for the traditional age group of under-20-year-olds, there has been a 6.5 per cent. increase in applications to study at English universities. For those over the age of 25, there has been a 17 per cent. increase in applications. There is obviously a developing pattern of young people choosingrightly, perhapsto go into higher education in order to shelter from the recession. When people are offered places, or later in the summer when they get their A-level results, there will not be sufficient supply to meet the demand.
A year ago the Secretary of State promised 15,000 extra places for higher education. Then there was the fiasco of the overspend on the grants budget, and that pledge had to be cut back from 15,000 to an extra 10,000 places, despite the fact that the Government raided £100 million from the equivalent or lower qualifications budget, supposedly to fund new opportunities for first-time study. It is clear that thousands of young people will lose out on a university place this summer. Clearing, for many years a feature of university applications, will probably not occur this year. Will the Secretary of State give a commitment that the Government will fund those places for all the young people who achieve their entry standard offers?
For those who have graduated, the only initiative that we have heard about from the Government was more than six months ago, on the interns programme. We had to wait until this week before we finally got the detail of how that will work. All it seems to amount to is that if a graduate has been unemployed for six months, they can continue to receive their jobseekers allowance without any deduction, if they enter an internship scheme. That is a paltry response to a dire situation faced by some of the best educated people in our country.
The Budget is a balance between fiscal stimulus and the rescue of the public finances, and the right hon. Member for North Tyneside (Mr. Byers), in a remarkably candid Blairite blast, rightly described the 50p tax rate as a political manoeuvre, a sentiment shared by the Liberal Democrats. As the Institute for Fiscal Studies said, the measure will achieve very little revenue raising to bridge the bulging gap in the public finances. It would be much better to return to a situation in which the taxes charged on income and on capital gains were aligned as they were in Nigel, now Lord, Lawsons 1988 Budget, and to close the loopholes that enable the very rich to escape such taxes. If we raised the threshold on income tax to at least £10,000, we could lift 4 million people out of taxation all together.
The Budgets other fiscal stimulus was the VAT cut, which, in terms of debt repayment, will cost us all £12 billion. That money could have been much better spent now on capital projects to fund a green road to recovery. It could have funded local rail schemes, of which there are many around my constituency in Bristol, more home insulation and social housing. It could have ensured that the colleges and universities building programme was fully funded, and it could have given an immediate boost to the construction industry and to those who need their jobs to be secure.
I hope that there will be many more green jobs in the future, but, if we are to achieve that target and our 2020 climate change targets, we will need many more young people who are technically skilled in science, technology, engineering and mathematics subjects, and who leave our universities with degrees in such subjects; otherwise, we simply will not be able to build the solar, wind and wave power projects that will deliver our 2020 targets. If Lord Mandelson really wants joined-up government, the Government must join up our energy targets with our educational failings, otherwise we simply will not succeed.
We are in an emergency, but Budget measures and Government announcements do not offer any real help now. Graduates will have to wait six months before they can continue to receive their jobseekers allowance while
on an internship, and the young and unemployed will have to wait 12 months before they can get a training packageand it is not immediately clear what that will comprise. Capital expenditure is needed now, but the Government instead prefer to spend £12 billion on small-scale price reductions in our shops.
In the long run, we need to re-think our business model. We need not only a green and sustainable future, but a more ethical dimension in business and a bigger presence for social enterprises. Those long-term changes to our business model are a subject for another day, but, today, Britain needs a Government who understand the current crisis and how to respond. Those who are currently in office have failed to understand the crisis and failed to apologise for their role in getting us into it. The sooner they go, the better.
In his opening remarks, the right hon. and learned Member for Rushcliffe (Mr. Clarke) made an interesting point about what I think he called a sea of debt, and about the origins of the financial crisis being partly in the sub-prime mortgage market in the USA and this countrys mortgage problems. When he was challenged by Government Members about how far back the origins of the crisis go, he did not reflect on this countrys obsession with home ownership, which started when his Government encouraged people to purchase council houses, and led to this country being far more concerned with home ownership than other countries that he mentioned, such as Germany, Japan and so on, where rental sectors still exist. Perhaps this countrys obsession with home ownership and, to some extent, profiting from home ownership through buying and selling has led to that sea of debt and the encouragement of the ridiculous 125 per cent. mortgages to which he referred. In the weeks to come, perhaps we will debate that point further.
My right hon. Friend the Chancellor of the Exchequer has had a difficult time in producing a Budget in the current financial climate, and the Budget deficit, being so high, has constricted him. It has also overshadowed some issues that we would normally debate after the Budget and during the Finance Billparticularly excise duties and so on, which I hope to mention in a few moments.
I have been concerned, particularly over the past few weeks, about the Building Colleges for the Future programme. It is well documented that my constituency has suffered greatly from the programmes funding squeeze and the Learning and Skills Councils obvious mismanagement. Barnsley college has a four-phase redevelopment programme: two phases are already complete, and the third is under way. The buildings have been demolished in anticipation of new build, but the funding has stopped, so, in the centre of Barnsley, we are looking at a big white fence surrounding a demolition site, and there is no guarantee that funding will be reinstated to complete the project. The fourth phase relates to sixth-form provision, which looks pretty uncertain
unless funding is guaranteed. However, the phase is still at the planning stage, so, if it is considered as a newer application, there will be considerable doubt about whether it will go ahead.
I know that my right hon. Friend the Secretary of State for Innovation, Universities and Skills has written to Members, explaining that, following Andrew Fosters report, a committee will be put in place to decide which projects go ahead, but I urge Ministers to accelerate the decision-making process. I met the head of the learning and skills council for Yorkshire and Humber a few weeks ago, and he anticipated that, by the end of April, the decisions would have been made, yet, we are looking to May for the establishment of a committee to begin to consider which projects go forward.
My right hon. Friend the Chancellor mentioned allowing companies leeway in paying their tax liabilities, and in difficult times many companies have benefited from being able to defer taxation payments. In my constituency, however, two companies, DTS Environmental and Martello Piling, paid their taxes, albeit, unfortunately, a few days late. DTS Environmentals tax instalments were paid a few days late on five occasions, and as a result it has lost its gross payment status, meaning that Revenue and Customs will deduct tax in advance. Before that, when it had gross payment status, it kept the money. The matter relates to other contractors, and to tax liabilities that are owed to HMRC.
The condition of keeping gross payment status is, as I understand it, that payments are made on time, but, for the sake of a few days, this status has been lost and a huge financial burden has been imposed on companies in my constituency. They, unlike companies that are being helped, do not owe any taxation; their tax payments were all paid and up to date. Yet, they have been penalised to the point where HMRC commissioners pursued them to commissioners hearings, which upheld the decisions. The Revenue gave the companies no leeway in relation to gross payment status. I hope to be able to pursue this through correspondence with Ministers over the next few days and weeks, because I am told that it has a substantial effect on the future progress of such companies.
Another industry that will suffer as a consequence of the Budgetthis was flagged up for many weeks by a great number of Membersis the pubs and clubs industry, with the increase in alcohol duty, which is now subject to a 2 per cent. escalator over and above the rate of inflation. Last year, duty on alcohol was increased by 9 per cent.; in November, it was increased by a further 8 per cent. in the light of the reduction in the VAT rate. Those substantial increases were imposed at a time when the economy was not in such a bad position as it is now; it was performing much better, as was the leisure industry. I understand perfectly well that the Government want to target the consumption of alcohol and eradicate irresponsible drinking, binge drinking, or whatever one wishes to call it, but ultimately the mature or responsible drinker is being attacked at the same time as the irresponsible drinker. Rural pubs and pubs on the edge of town centres are closing at the incredible rate of 40 a week.
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