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“Analysts believe the Chancellor has about £5 billion more than he thought. It is perfectly possible to cut the fuel tax this year without any impact on Government spending or public services. Everyone knows that Gordon Brown has a war chest.”
That was the Conservatives’ position in 2001. Essentially, they were telling the Government to do the precise opposite of fixing the roof while the sun was shining.
Madam Deputy Speaker (Sylvia Heal): Order. I think that the hon. Gentleman has been reminded on one or two occasions already this afternoon of the importance of concentrating his remarks on the Bill.
Mr. Browne: Thank you, Madam Deputy Speaker. My point is that we cannot afford to live beyond our means indefinitely. There is a fundamental structural deficit as well as a cyclical deficit. Neither the Labour nor the Conservative party has addressed it, but we must do so because, if we do not, the consequences for public sector spending will be very grave, as will be the impact on people’s quality of life and on what they have become accustomed to.
That is why, with the right hon. Member for Birkenhead, my party has tabled our amendment today, and why we have started a national debate on our national priorities. We want to talk about what can be scrapped and what we can no longer afford in the medium term. There has to be greater discipline, because we cannot afford to live way beyond our means. I shall go through some of the cuts that we will have to make—
Mr. Philip Hammond: Will the hon. Gentleman give way?
Mr. Browne: No, because I keep being told that I am meant to be talking about the Bill.
I do not think that we should go ahead with identity cards. The Labour party is committed to them, and the Conservatives were committed to them although they now say that they are not. I do not believe that we should be committed to them. I think that they are unaffordable. That was the first item.
We should also scrap the baby bond. There are people who will not like that message. They will say—
Mr. Hammond: On a point of order, Madam Deputy Speaker. One of the weaknesses of our scrutiny of taxation and expenditure is that we do not have any effective say on Government spending. This Bill is about taxation and tax raising. It has nothing to do with the distribution of Government spending.
Madam Deputy Speaker: I hope that it will be helpful if I say to the hon. Member for Taunton (Mr. Browne) that this debate is clearly not a general debate on public expenditure, and that it is about taxation. Perhaps his remarks will therefore follow in that vein.
Rob Marris: On a point of order, Madam Deputy Speaker. Will you clarify whether the official Opposition’s amendment on the Order Paper has to be selected in order for us to debate it?
Madam Deputy Speaker: Mr. Speaker did not select the Opposition’s amendment for debate.
Mr. Browne: I am grateful to you, Madam Deputy Speaker. As I understand it, the Government have introduced the new tax measures—the 50p top rate of income tax, the abolition of pension relief for high earners and a whole raft of other measures—because of the catastrophic borrowing figures. I have been asked by MPs of all parties what we can do to make those figures less catastrophic. I do not wish to challenge anyone’s authority, but that seems to me to be entirely central to the Bill. The right hon. Member for Birkenhead made a speech all about debt, rather than about the specific tax proposals, but these matters are obviously interrelated.
From memory, I think that the baby bond costs about £500 million a year, and we need to ask some hard questions about that. Can we afford such measures? I sat on the recent Statutory Instrument Committee in which Labour and Conservative Members supported it, but I do not think that it is affordable. Can we afford to continue paying tax credits to people earning far higher than average wages? The Government obviously think that we can, otherwise that policy would change. My understanding is that the Conservative party does not dissent from that view. I say to the other two parties that we cannot carry on spending that amount.
We also need to review our military commitments. Some people in the Conservative party think that we should scrap Trident; some think that the fleet should be scaled down from four to three. That is the debate that we should be having. Can 50 per cent. of young people in this country go to university? There are many more questions, but I will move on.
The Labour Government wanted the state to do more with more, but that is in the past. We are not even in a position now to try to do more with less. We are now in an era in which this and subsequent Governments will have to try to do less with less. At the same time,
our tax system needs to incorporate greater fairness and greater incentives to work. Labour’s recession cannot be used as an excuse to avoid helping low and middle-income earners to make work pay. One of the worst features of the Budget and the Finance Bill is the impact they will have on people on relatively modest incomes. That is why the starting threshold of about £6,000 for income tax is too low—it should be £10,000 a year. We need to come up with ways of rebalancing the tax system that are more ambitious than those in the Budget, in order to give people on low and middle incomes greater opportunities to keep a higher proportion of their household income, and greater incentives to work.
Stewart Hosie: If the starting point for the basic rate of tax went up to £10,000, what would the net cost and revenue be? Can we look forward to an amendment on this next week, or in Committee?
Mr. Browne: Of course there would be costs attached to that measure, but my party has identified how it would pay for it— [ Interruption. ] Members are being critical, and I hear the Conservative spokesman saying that he does not approve of this suggestion. It has broad support, however. I have here a letter addressed to “The Rt Hon N Clegg MP”. It says:
“I was interested to hear what you were saying on Radio 4 today...concerning proposals that should be in the Chancellor’s Budget on Wednesday. I was delighted that you proposed a doubling of the annual tax threshold to £10,000. I have been advocating a similar proposal...Until now I have felt a very lonely voice...I am glad that at least one Party is now in agreement!”
That letter was from Norman Tebbit. The point that I am trying to make is that the idea— [ Interruption. ] No, he is not a spokesman for his own party; of course he is not. The idea that this is some sort of fanciful left-wing idea being suggested by the Liberal Democrats and that the Conservatives could not conceivably countenance it simply is not true. They just lack the boldness and ambition—
Mr. Browne: I will not give way, because the hon. Gentleman spoke for over an hour. He keeps leaping up to try to stop me making all kinds of constructive points, and I am tired of what he has to say. If he cannot get what he has to say into over an hour, perhaps he needs to rewrite his speech.
Mr. Browne: No, I have already given way to the hon. Gentleman several times as well. Shall we all move on? [Hon. Members: “Yes!”] Okay.
The Finance Bill is the postscript to Labour’s 12 years of missed opportunity. For me, the conclusion is that there will be a legacy long after Labour has left office. People expect the general election to be next year, but they will be paying back this debt for years afterwards. The Labour party will be greatly damaged as a result. The proposals in the Bill do not address the scale of the debt, the scale of the income disparities in our society or the disincentives for people on low and middle incomes to work and be rewarded for their work.
The Labour Government have presided over a disastrous unbalancing of the budget, and the legacy will be deep cuts for those whom they purport to represent. At the moment, people say to me, “It’s very difficult in the private sector, but the public sector is insulated from the full consequences of this recession.” I am afraid that, given another 18 months to two years, the private sector might well be seeing the benefits of the economy returning to growth—albeit at lower figures than the Government estimate—but there will have to be deep cuts in the public sector to make the books balance. That will be the Labour Government’s legacy for many years after they have left office. The consequence will be that progressive politics in this country will come to an end unless my party can seize the mantle and resurrect the voice of progressive politics that was brought into disrepute by a Labour Government who ultimately ran out of money.
3.18 pm
Rob Marris (Wolverhampton, South-West) (Lab): I am not sure that we would get progressive politics from a Liberal Democrat party that seems intent on massively shrinking the state. Nevertheless, it is important to debate the size of the state, as we did in the Budget debate and as we are doing on the Second Reading of the Finance Bill, and the kind of things that it provides using taxpayers’ money, and that it does not provide, and how it pays for those things.
Let me draw on my own past by way of illustration. In my early 20s, I spent several years as a truck driver and a bus driver. Thanks to a strong trade union, the Amalgamated Transit Union, in which I was actively involved when I lived in Canada—I continue to be a member of the Transport and General Workers Union and now Unite—we were the second highest-paid bus drivers in the world. In the early 1980s, I was taking home £10,000 a year. I saved a lot of that money, and I went to the Birmingham polytechnic, as it was then called, to study law. I had two years’ study at the polytechnic, followed by two years as what was then called an articled clerk. After I qualified, I was a moderately low-paid solicitor before working my way up into partnership. So it probably took me over 10 years to get back to the economic position that I would have been in had I continued as a bus driver throughout that time. But I did get ahead, so that is an anecdote about investing for the future. I think that that is what we and this Government are faced with. Frankly, if the Conservatives were to win the next general election, they would also be faced with the issue of what the state does for the people who live within its borders: first to invest for their futures, and secondly to assist individual residents in investing for their own futures.
When the Prime Minister was Chancellor of the Exchequer, he talked about abolishing boom and bust. I think we have to be careful about the way in which we use and interpret that phrase. I have to say that I never understood or interpreted the Prime Minister, as he now is, to be saying that through the economic policies of a Labour Government in one country among hundreds, we could abolish the cyclical nature of capitalism. Whether or not one accepts Kondratiev’s theory long waves of about 40 years or alternative models, it is clear that capitalism for the last 250 years, in its fairly modern incarnation, we might say, has always been cyclical.
My interpretation of the abolition of boom and bust was that it was more about lessening the troughs and lowering the peaks, if I may put it in that rather graphic—I use the word in its true sense—way. I think that this Government did a pretty good job of that. We did not have a boom and we avoided the two recessions in the early part of the previous century that were evident, for example, in the USA. We were not booming in the way China or India have been, with 10 per cent. growth. Superficially attractive as that sounds, if we had had 10 per cent. growth, it would have created big strains on our economy and society.
In this financial year, we are looking at economic contraction of up to 5 per cent. That is absolutely devastating for people who are losing their jobs, for businesses that are closing and for some people’s standards of living, but it does mean that 95 per cent. of those in the work force are carrying on working. In terms of where we are as an advanced western industrial capitalist country, we need to bear in mind how deep the trough of this bust is. [Interruption.]
I hear a sedentary, almost sotto voce, comment from the hon. Member for Taunton (Mr. Browne) about what all this has to do with the Second Reading debate of the Finance Bill. Well, we are facing difficult times and there are very worrying figures in the Budget about the massive amount of borrowing that is going on, as the hon. Gentleman himself graphically put it when he mentioned £480 million a day and £175 billion of borrowing for this year and almost the same figure next year.
In examining a proposition, way forward or proposed course of action, however, I was brought up to examine alternative courses of action to test whether the proposed course—whether it was suggested by a parent, a teacher or whoever—was suitable. It is always a question of looking at the alternatives as well as at the proposed course of action.
When it comes to alternatives, what do we find advocated by the hon. Member for Runnymede and Weybridge (Mr. Hammond), the shadow Chief Secretary to the Treasury? I have to tell him that he put forward a platitudinous position—transparency and certainty in taxation, simplification, a competitive tax regime, efficiency savings, the shibboleth of “tax neutrality” and so forth. They all sound wonderful, but one needs some flesh on the bones. I did not see much flesh being given straightforwardly, but I did see a “drip, drip, drip” in the hon. Gentleman’s speech in respect of tax cuts. That is an understandable proposition to advance when faced with our economic situation. I do not think that it is a very good way forward, however; it may be coherent, but I think it is wrong.
I do not want to be accused of being superficial or platitudinous, so let me mention fuel duty, bingo, corporation tax, inheritance tax for the very wealthy, state aid for venture capital trusts—okay, that is not a tax cut, but a spending commitment—cutting taxes on savers, cutting alcohol duty, not accepting pensions tax relief proposals at the higher rate and not accepting the 50 per cent. top rate of tax, which I agree is not a tax cut; it is a rejection of a tax rise.
Mr. Jeremy Browne: The hon. Gentleman is making an entirely legitimate point. Public borrowing is £175 billion this year, so what would it be if the Conservative party got its way and all those measures were rejected in the Bill?
Rob Marris: I am a Labour Member of Parliament. I am not in a position to estimate the size of what I believe are broadly tax cuts proposed by the Conservative party today. I cannot say what the figures are. We were not told the figures, notwithstanding what the hon. Gentleman implied. I can say, however, that if the proposals were implemented they would reduce Government revenues further. Unless Government spending were cut massively, a deficit that I think we all agree is huge and worrying would be even greater.
There are contradictions in what the Conservatives say we should be doing about taxation and spending. There are the tax cuts to which I have adverted, and there is also the clear implication that the Conservatives would maintain public services. They cannot do that by means of efficiency savings, which is another of the terms that we like to bandy around. I was astounded when the hon. Member for Runnymede and Weybridge belaboured my right hon. Friend the Chief Secretary with the question “Why do you not bring the efficiency savings forward to this year?” That is like saying “Instead of buying a new car next year, why do you not buy one this year?”
Efficiency savings are not like that, particularly in large organisations. I should have thought that the Conservatives would understand that, given that they are constantly trying to impress on the House how much they know about running organisations. They overlook the fact that some Labour Members have also had significant experience in the private sector and in large organisations. Efficiency savings almost always mean changing the ways in which in which individual human beings work, whether it involves different equipment, different work-flow patterns or anything else. Those things take time. It is not possible to say “We will do them tomorrow, because it is convenient and we will save money.” Life is not like that.
I have described one of the contradictions in the views of those on the Conservative Front Bench: the tax cuts and rejection of certain revenue-raising measures in the Finance Bill along with the implication that services will be maintained. Another contradiction—of course, we also see it in the other parties; I learned years ago that all of us, as human beings, have a great capacity to live with huge contradictions in our personal lives and political beliefs—is that Conservative Back Benchers are standing up and asking for measures that would cost a Government money. Dealing with child poverty and increasing spending on international development are laudable activities, but they cost money.
While Tory Back Benchers are, in a sense, asking the House and their own Front Benchers for further spending commitments, the Front Benchers, in contradistinction, are at best going for stasis and at worst going for cuts. I think that that is a huge contradiction, which needs to be resolved in the Conservative party before it is fit to run the country.
Mr. Browne: The situation is even worse than that. Where the Conservatives are in opposition at council level, they also come up with all kinds of uncosted items requiring additional spending. Conservative spokesmen from the House support their local campaigns for extra public spending that is completely unmatched by any extra revenue.
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