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Lorely Burt: Does the hon. Gentleman agree that many of the difficulties that pubs face arise from very cheap alcohol being sold in supermarkets? Would he support the Government’s adopting a policy of minimum pricing?
Mr. Illsley: I am on record as supporting minimum pricing and attacking supermarkets. I entirely agree with the hon. Lady’s comments.
In reality, alcohol consumption among young people is falling. In 2008, alcohol consumption fell by 4 per cent. among males and 22 per cent. among females. It is argued that it is not just beer duty that is causing pubs to close, and there are a number of other reasons: high rents, difficulties with leases and the smoking ban have all contributed. However, the one area where the Government could have assisted the industry would have been by restricting the increase in alcohol duty. The profit to licensees in the pub trade, or pub owners, from the price of a pint of beer is one penny, while the Government take 39p.
In pubs, drinking is regulated and a code of practice is imposed by the pubcos and the brewers; outside the pub—at home, for example—drinking is unregulated and excessive quantities can be consumed because of the cheap alcohol that is sold by supermarkets, as the hon. Member for Solihull (Lorely Burt) said. It is no coincidence that on Budget day last year some well-known supermarkets reduced the price of a bottle of whisky by £5 while the Chancellor was still on his feet. That is an indication of how much the supermarket industry thinks of his decisions on alcohol duties: it is simply ignoring them. We must do something about supermarkets. Why cannot they be rated differently on the basis of the area that they give over to the sale of alcohol? Why do not the Government enforce VAT on supermarkets’ sales at below-cost prices? It has been well documented that many supermarkets are selling beers, wines and spirits at below the cost at which they obtained them. As a consequence, the Revenue is losing VAT payments, but nobody appears to want to look into that to try to redress the balance. I hope that the Treasury will reconsider the issue.
I want briefly to mention bingo duty and the double taxation of bingo; I think that we will return to that during debates on the Finance Bill. As many Members know, bingo is taxed on gross profits as well as on the pursuance of the game, through VAT. It is taxed at two levels, whereas forms of harder gambling are not. For example, there is no tax on a bookmaker for horse-race betting or on online betting, but the softest form of gambling in the country has been attacked again through the increase in bingo tax in the Budget. I hope that the Government will reconsider that during the passage of the Finance Bill.
6.55 pm
Mr. Alex Salmond (Banff and Buchan) (SNP): It is a great pleasure to follow the hon. Member for Barnsley, Central (Mr. Illsley), my old friend from the Select Committee on energy all those years ago. It does not surprise me in the slightest, given his close connections with his constituency, that he knows more about the iniquities of bingo tax than Government Front Benchers did a few minutes ago.
I have been in the House for 22 years, and I have seen many Budgets and many Chancellors. There have been good Budgets and bad ones, and they have happened at various times of the year—often, annoyingly, during the Cheltenham national hunt festival—but one thing is invariably true: all the Budgets that I can remember have had a good reception on the day and have then been gradually deconstructed, attacked and ripped to pieces over the succeeding days and weeks. This Budget was being deconstructed before the Chancellor sat down last Wednesday. Of course, he had little room for manoeuvre, but I suspect that he, and indeed the Prime Minister, would have hoped that a Budget strategically to address the questions facing this country in the greatest economic crisis in living memory might have lasted longer than the weekend before it was totally ripped to shreds and deconstructed, growth forecasts spending objectives and all.
When I served on the Select Committee with my friend from across the Chamber, that was the last time that a Government were projecting real-terms cuts in public spending. There was an air of total unreality about the Secretary of State’s introduction to the debate. I was trying to work out whether I had been reading a completely different Red Book as he outlined his vision of investment in public services with the new Labour party, as against cuts in public expenditure from the old Conservative party. The Red Book does not set out investment in public services—it sets out cuts that start next year and intensify, in an unprecedented way, through the forecast period that it lays out, climaxing in real-terms cuts in expenditure for each Department. The variable expenditure at the discretion of a Department of State, or a Government in Scotland or Wales, is undergoing real-terms cuts that, according to the Institute for Fiscal Studies, may reach 2 to 3 per cent. a year—greater than even at the high point of the Thatcher cuts of 1981-82. That is the reality of what is in the Red Book.
I want to argue against the Budget and make an appeal for a change of course, a change of heart or a change of direction—any change to the short-term response to the economic situation we face and to the strategic choices that will have to be made about what matters as regards public spending. On the fiscal stimulus, I try to give the Government as much credit as I possibly can; after all, this is a Government who are living on credit, in every sense of the word. This year, between the pre-Budget report and the announcements in the Budget, there is a substantial fiscal stimulus of some £21 billion. It is not as massive as the fiscal stimulus in the United States of America—Obama’s $787 billion—and nothing like the Chinese stimulus. China certainly has access to the necessary funds, while the United States has the convenience of a reserve currency and can therefore print money or sell bonds to finance its stimulus. None the less, a significant fiscal stimulus is taking place this year. We might quarrel about how it is being introduced, and I believe that it would have been far better to choose capital spending instead of a VAT cut, because that would have worked its way through the economy, created more jobs and left behind capital assets that the VAT cut will not, but there is undoubtedly a fiscal stimulus this year.
However, the situation will change totally next year, because the balance of the measures in the pre-Budget report and the Budget is to have not a stimulus in the
economy next year but a contraction of £4.675 million. We will have a reverse stimulus next year, and I cannot see for the life of me how it can be correct at this moment in our economic affairs to plan a cut next year instead of a continuing fiscal stimulus.
The position will be affected by the so-called efficiency savings of £5 billion across the Departments, which will have a £497 million effect on the Scottish budget. According to the Scottish Government’s input-output model, the impact will be the loss of 9,000 jobs, which will be hugely important and damaging in 2010. The various measures that we have been able to take in Scotland over the course of the current recession—the capital investment acceleration, the European budgets that we have also accelerated, the prioritisation of housing budgets—amount to the creation of about 20,000 jobs in Scotland. That is what we have been able to do by throwing every possible pound of expenditure at this recession. We have created 20,000 jobs, which is valuable. In a single afternoon last Wednesday, the Chancellor waved away 9,000 of those jobs with the projected cuts in public spending next year.
Let no one be in any doubt that we are talking about cuts. We have an efficiency savings project in Scotland, and those savings are reinvested in the Department or the local authority that makes them. That is the very process, incidentally, to which the Secretary of State for Innovation, Universities and Skills applied such approval when he talked about the science budget. However, these planned cuts are not efficiency savings; they are top-slicing from departmental or governmental budgets in Scotland, Wales and Northern Ireland.
As well as the impact of the cuts that are being projected for next year, I resent the way in which they are being described. The Chancellor said on Wednesday:
“Some have argued that we should cut public services immediately, rather than invest and grow our way out of the recession...that would be the wrong thing to do.”—[ Official Report, 22 April 2009; Vol. 491, c. 245.]
But that is precisely what the Chancellor is doing from 2010 onwards. That would be bad enough if we were confidently expecting an economic recovery from 2010.
Mr. Salmond: I have always wanted to say this: I give way to the chairman of Celtic football club.
John Reid: I have never before been nonplussed in response to the right hon. Gentleman. I take his point, but is he not conflating two time scales? The truth of the matter is that during the early stages of a recession, we have to expand and maintain expenditure, demand and investment through the public sector. He would be the first to accept that that requires a degree of borrowing, and that we also have to show the path back to equilibrium on that borrowing by cutting public expenditure and increasing taxation. Does he accept that there will be a stage—he might disagree about when—at which we should turn from an increase in public expenditure in the short term to a return to equilibrium in the medium term?
Mr. Salmond:
I am grateful to the chairman, because he helpfully outlines the very basis of my speech. I am outlining the economic argument and the timing. The Chancellor forecasts 1.25 per cent. growth next year,
although many independent forecasters are forecasting much more pessimistically. Even if there were 1.25 per cent. growth, it would be a faltering recovery next year and it would not be the time to undergo even the cuts envisaged in the Chancellor’s heroic forecast. The right hon. Gentleman’s second point is about exactly the subject of the second part of my speech, which is the long-term choices that will have to be made about the public spending profile.
As I said a few minutes ago, the Institute for Fiscal Studies, looking at the Red Book, forecasts that the discretionary elements of public spending will decline by 2 per cent. or more in real terms. There will real-terms cuts in discretionary spending the like of which we have not seen, except in one year during the period of high or low Thatcherism, depending on our point of view. Make no mistake; those cuts will have a direct impact on key public services. I have here the projection of the £5 billion of efficiency savings for next year. In the case of the UK Departments, £3 billion of those savings will have an impact on either health or education, so those are the budgets that we are talking about. I hope that we will not face a developing flu pandemic, as is currently feared, but even if we avoid that fate, there is an indication that health expenditure will come under serious pressure as we meet this or any other emergency that develops. Health and education budgets are the very last things that we want to be subjected to such pressure.
What other budgets would give us the public spending savings that are undoubtedly required? When the right hon. Member for North Tyneside (Mr. Byers) was climaxing his speech, he was about to make another attack on Government policy. I hope that I am not wrong in anticipating what it might have been. I was very interested to see him quoted this week in The Observer, which stated that he
“has long supported both identity cards and the nuclear deterrent but said he could not justify to vulnerable constituents the respective £5 billion and £70 billion bills when basic public services were threatened by the economic crisis.”
He was not content with the one attack on the Budget that he was able to make in his speech, and I applaud the other one he was about to make before he was so rudely interrupted by the chairman of Celtic.
Mr. Byers: In fact, I was about to launch a separate attack, not that particular one.
There is a serious point to be made about public spending. The thrust of the speech that I made on Saturday was that it is the responsibility of all political parties, before the upcoming general election, to be clear about where spending reductions will fall, and that it would be a fraud on the electorate to fail to do that. It was a challenge to the right hon. Gentleman’s party, the Conservatives and my own party to be clear about our spending priorities post-2010, when we know there will be considerable restraints on our spending.
Mr. Salmond: I am delighted to say that in the right hon. Gentleman’s hat-trick of attacks, there is at least one about which I thoroughly agree with him—the substantial savings to be made by coming to terms with reality on the Trident programme, ID cards and other prestige projects that, patently and obviously, this Government and this country can no longer afford.
David Taylor (North-West Leicestershire) (Lab/Co-op): Will the right hon. Gentleman give way?
Mr. Salmond: If the hon. Gentleman will forgive me, I will not; I have only three minutes left.
We are talking about serious money. I have with me an estimate from Public Finance magazine of 23 March 2007 of the total new system costs of Trident, which were between £60 billion and £86 billion, with total potential costs over the lifetime of Trident of £65 billion to £90 billion. Serious money and resources are being devoted to that programme, and in my estimation they would be far better devoted to key public services such as health and education, which will come under substantial strain in this economic recession.
There is a figment, an illusion, behind the Red Book figures. It is as though the only public spending budgets that will come under pressure are the social security, employment and automatic stabiliser budgets. The recession and the substantial increases in unemployment, never mind unforecastable events such as the health challenge that we might now be undergoing, will have an impact on education budgets as we try to keep people in training or education to prepare for the future. They will also have an impact on health budgets, and those great public services will come under huge pressure. It is therefore entirely legitimate for us to say that we would target Trident and ID cards and protect health and education budgets, for the betterment of the people of England as well as the people of Scotland, Wales and Northern Ireland.
In summary, we should not deflate in the teeth of recession. Even according to the Chancellor’s ambitious, optimistic and heroic forecast, the recovery will be, at best, faltering next year. The times are unprecedented, but there are, none the less, some analogies. We can understand—and know—that monetary policy by and of itself will not necessarily yield the results in a recessionary climate because of the lack of confidence to invest. We know that fiscal measures will have the desired effect if carefully chosen and applied. We should not deflate in the teeth of recession in 2010.
Secondly, we should choose health and education over Trident and ID cards. Those are the real, hard choices that have to be made.
Lastly, we are in unprecedented times facing unprecedented challenges, but some things that we know about our society, economy and the approach of the Government are intensely valuable. The Government should not go for the quick trick, the quick fix or an attempt to wrong-foot the Conservative party. The issues are more important than that. The priorities in which we believe—public investment and preparing for the recovery, which will come—should be much higher in the scheme of things than the Budget displayed last Wednesday.
7.11 pm
Mr. Parmjit Dhanda (Gloucester) (Lab):
May I say at the outset how much I enjoyed the speech of the right hon. and learned Member for Rushcliffe (Mr. Clarke)? It is a shame that he has left the Chamber. He gave a virtuoso performance, tottering from one Hush Puppy to the other, regaling us with some charming quotes. However, he made one interesting comment, which I
will remember. I paraphrase slightly, but he said that, if the Conservatives had won the election in 1997, everything would be okay in the economy. That is extraordinary.
Mr. Greg Hands (Hammersmith and Fulham) (Con): I think that my right hon. and learned Friend was making the specific point that he would not have allowed the Financial Services Authority to take over banking supervision from the Bank of England.
Mr. Dhanda: I think that Hansard will state otherwise, but we will leave that to the record.
The right hon. and learned Gentleman made other interesting comments. When challenged, he talked about his position on VAT. He said that, when he was on television or when he was quizzed, he always made it clear that he supported the reduction in VAT only with caveats. I can recall seeing him on television, supporting the VAT cut without caveats. Perhaps I am wrong—it is up to the commentators to decide. I dare say that Andrew Neil and many others around the world will look at their tapes, and I will let them be the judges.
The right hon. and learned Gentleman also mentioned the under-25s and expressed, rightly, fairly and understandably, his concern about the number of young people who face unemployment. I share that concern and one of the best aspects of the Budget is the measures to tackle unemployment for young people. We in the Labour party must not forget the measures in the past 12 years, which have made a huge difference—in my community in Gloucester, youth unemployment decreased by 75 per cent.
I also welcome additional support for those in danger of losing their homes, and there were other measures, which we now perhaps take for granted on Budget days: the increases in pension credit and in tax credits as well as widening the threshold for pension credit. Those are all welcome.
There are some things that I would have liked the Budget to contain, but it did not, and I will discuss them in the next few minutes. The Chancellor was right to talk about efficiencies and the need for them. I would have liked to hear more. I would have liked him to be more specific because I thought that it was a golden opportunity. Whether Departments take a closer look at what the efficiencies could be made and report back in the coming weeks or whether measures are announced in the Queen’s Speech, I hope that those on the Treasury Bench will consider some of the thoughts that I will outline.
After discussions with the Library, especially about local government, I was interested to realise how many two-tier authorities still exist in this country. I have always championed unitary local government. The Budget at this time afforded a great opportunity for the Chancellor or Departments to say that they would press ahead with that. Why should they do it? Is it worth doing? According to the Library, there are 24 two-tier local authorities in this country. The savings from authorities moving from two tier to unitary are between £15 million and £20 million a year. If the other 24 authorities, including mine in Gloucestershire, became unitary, the savings would be around £500 million a year, every year —£1,500 million in a comprehensive spending review period.
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