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Mr. Love: I am not sure why the hon. Gentleman is pressing this. I accept that there are dramatic implications going forward, whether there are tax increases or cuts in public expenditure. Undoubtedly, we will need to address them. I am speaking about those who have had the
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temerity to raise some of the real issues. As I mentioned, much of the comment that there has been—for example, about publishing the incomes of the chief officers of quangos—does not address the problem that we face.

Mr. Newmark: The hon. Gentleman keeps criticising the Opposition for coming up with suggestions, but the billions allocated to ID cards, the NHS computer system and various quangos add up to a hell of a lot of billions. We are coming up with suggestions, but we still have not had a single one from the hon. Gentleman for addressing these structural problems.

Mr. Love: In the next few months, when the Opposition have had a chance to look carefully at all the implications of the Red Book and come forward with a series of proposals, people will take them and the criticisms that they make more seriously.

One of the issues raised by my right hon. Friend the Member for Birkenhead has been reflected in comments from the hon. Member for Twickenham (Dr. Cable) and has found favour in some parts of the Opposition. I refer to the question of whether action should be taken on public sector pensions and, by implication, on public sector pay. My suspicion is that nothing concrete will be forthcoming from either of the major Opposition parties, because they will not want that to be part of any election campaign that may come this year or next.

Comments were made earlier about how we fund the deficit. As I mentioned in an intervention, a number of members of the Treasury Committee visited the Debt Management Office today. From what we saw and from the discussion that we had with the senior officials there, it was clear that for various reasons there is an appetite out there in the marketplace for Government debt. Whether that is because there is a flight to safety in risk-free products such as gilts, or because of the need of the pension industry for long-dated gilts, there does not seem to be a single serious forecaster or economic commentator who suggests that although the demands of the Debt Management Office to raise money on behalf of the Government are substantial, there is not a willingness out there in the marketplace to deliver that.

Finally in relation to the public finances, we have heard repeatedly from the Opposition that we are building up a 79 or 80 per cent. ratio of debt to GDP. As the hon. Member for Mid-Worcestershire commented, that places us somewhere in the middle of international comparisons. Although that should be taken extremely seriously, we are not some outlier, as has been suggested by some Opposition parties. We are around the average of the economies that could be considered both our competitors and our comparators.

Mr. Newmark: I know the hon. Gentleman is not stupid. I sat with him on the Treasury Committee, and he knows full well that the device that the Prime Minister used when Chancellor was to put as much debt as he could off balance sheet. If one uses equity accounting or consolidation accounting with the banks alone that have been bought by the Government, that is an extra £2 trillion of debt that should be added to the Government accounts. That excludes the £1 trillion of public sector pension liabilities. Debt today could be as high as £4 trillion or more. The hon. Gentleman must acknowledge
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that there is a huge amount of money held off balance sheet, as well as on balance sheet, by the Government.

Mr. Love: I acknowledge the hon. Gentleman’s consistency, because that theme runs through his period as a Treasury Committee member and his questions on the Floor of the House. However, his argument is accepted neither by the Government nor, I suspect, by most independent economists, and I return to my earlier point that the Budget is honest in its presentation of our public expenditure problems.

I must move on, because I want to comment briefly on several specifics of the Budget. I cannot understand why people find the 50p tax rate so difficult to accept. It seems entirely reasonable and fair that those who have benefited most from the good times make some contribution during the difficulties that we now experience. As I understand it, that view is shared by the public, and the 50p tax rate reflects it. However, I, like others, have some concerns about the proposal in the Budget and, most of all, about the uncertainty surrounding the yield from the tax.

We were told on the Treasury Committee that only 31 to 32 per cent. of the potential yield will probably be realised. The Government have taken some steps, as was mentioned earlier, to do something about income being moved into pension schemes, and I recognise that that will increase the likely yield of the 50p rate. However, as the hon. Member for Twickenham has said extensively, there are still major opportunities for people to shift income into capital to reduce their tax burden, so one suspects and hopes that the Government will return to those measures to ensure that the people who can afford it, and who have done so well in the past, make a sensible contribution.

Mr. Stewart Jackson (Peterborough) (Con): I thank the hon. Gentleman for giving way. He has been very generous, and I know that, as a member of the Treasury Committee, he takes a great interest in these affairs. Surely, however, he will concede the argument of the right hon. Member for North Tyneside (Mr. Byers)—that the tax rise is essentially a political strategy, that it will not deliver fiscal rewards and that, if someone earns about £112,000 a year, they will effectively pay a marginal tax rate of 61.5 per cent., making it the third highest rate in Europe. In a recession, when we seek to bring in wealth creators, that cannot be good for the UK’s economy.

Mr. Love: I certainly share the concerns about increased complexity and, albeit in a different way, the likely yield of the change in taxation. However, I hope that, at the pre-Budget report later this year or, if there is another Budget, at the next Budget before the general election, the Government will consider carefully whether the 50p tax rate has raised the amounts that we would wish to see.

I shall make two other brief points before I finish. I was surprised that the hon. Member for Mid-Worcestershire the Chairman of the Select Committee on Business and Enterprise, did not mention the vehicle scrappage scheme.

Peter Luff: Technically, the scheme is not in the Finance Bill, so that is why I did not raise it. However, I am very interested to hear what the hon. Gentleman has to say about it.

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Mr. Love: I welcome the scheme, because there is a great feeling outside the House that the Government have done much for the financial sector, but that we have rather forgotten about manufacturing. It was therefore important to lay down a marker, demonstrating that we are helping manufacturing. We could have taken a narrow, nationalistic view, because it is already evident that the schemes that have been introduced in Germany, France and other European countries have benefited the British car industry, 85 per cent. of whose production is exported to Europe.

However, it was right and proper that we brought forward a scheme. There are some problems of dead-weight costs and there is the issue of whether British manufacturing will benefit. But if we look carefully at the benefit that the scheme will deliver to the retail and component parts of the motor industry, we see that the scheme is well worthy of support.

My biggest regret about the Budget relates to our commitment to halving child poverty by 2010 and eliminating it by 2020. That faced a setback in the Budget—and, it has to be said, in the pre-Budget report; in neither were there substantial measures to address the issue. I regret that, although one has to accept, realistically, that the financial circumstances have changed significantly. I hope that the Government will not forget about their child poverty commitments, which have great public support. Everyone recognises the need to assist the poorest and most vulnerable in our society. Recognising the legislation and maintaining the commitment will do more good and be presented more positively for the Government than almost any of the measures in the Budget.

5.36 pm

Mr. Tobias Ellwood (Bournemouth, East) (Con): It is a pleasure to follow the hon. Member for Edmonton (Mr. Love). I did not agree with everything that he said, but at least he attempted to justify the Government’s position.

Mr. Love: I am the only one stupid enough.

Mr. Ellwood: The hon. Gentleman is now on the record as having said that, and that plays into my argument. Where are the Labour Back Benchers? Where are the lieutenants and soldiers to defend this most important of Budgets? There are some veterans in the Chamber who have often spoken in debates on previous Finance Bills, but we could argue that this is one of the most important such Bills. Yet the style that the Chief Secretary to the Treasury chose to adopt in her speech was more that of an Opposition spokesman than that of somebody trying to defend the Government’s position in these difficult times.

That has been reflected not only in the debate today, but in the Government’s approach. They forget what they are trying to defend, and just attack the Opposition. I am grateful that the hon. Member for Taunton (Mr. Browne), the Liberal Democrat spokesman, is here; he made a farcical speech that focused almost entirely on Tory proposals. He was reprimanded for that four times; the Chair wanted him to refocus his arguments back to the subject of debate—the Finance Bill.

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I say to Labour Members that those watching in the Galleries and those who will read this debate in Hansard or see it on television will ask themselves what they have seen or read. All they get are these yah-boo politics. The Chief Secretary illustrated that by going back to yesteryear to talk about the time of Margaret Thatcher, rather than focusing on the difficult issues of today.

I clicked on to YouTube to see the Prime Minister’s latest performance; this time it was a party political broadcast about the European elections. I do not think that the word “Europe” was mentioned once in the broadcast—it was an attack on the Conservatives through and through. [Interruption.] I give way to the hon. Member for Taunton, who seems to be waving.

Mr. Jeremy Browne indicated dissent.

Mr. Ellwood: He is not waving, just grumbling—or sulking.

Mr. Browne: I am grateful to the hon. Gentleman for giving way. If I were inclined towards childishness, I would have raised a point of order. As far as I am aware, the Prime Minister’s speaking on YouTube about the European elections has nothing to do with the Finance Bill. Perhaps the hon. Gentleman should talk about the matter in hand.

Mr. Ellwood: I can tell from the look on your face, Mr. Deputy Speaker, that I am dangerously close to falling foul of exactly what I was complaining about. For this debate is about the Finance Bill, what the Government are offering, the challenges that we face and the solutions to make sure that we can get ourselves out of this financial mess.

The Government failed to comment on why more than half of all tax increases are hitting the poorest half of the nation, why national insurance increases will hit all citizens earning £20,000 or more, why the impact of the VAT reduction has now been deemed such a failure of strategy, and why the full impact of the Budget will not come to fruition until 2011, conveniently after the date of the next general election. This has been a discredited Budget. Within hours, the IMF announced that there was a huge hole in it to the tune of £23 billion. The Chancellor forecast growth for 2009 at minus 3.5 per cent., for the following year at 1.25 per cent.—already, apparently, we are moving into a new boom—and then, for 2011, at 3.5 per cent.

Mr. Stewart Jackson: Does my hon. Friend agree that it is fundamentally dishonest for a party to put in its election manifesto that it will not increase the top rate of tax to 50 per cent., and then do so; and to characterise a slight increase in public expenditure outlined in the Opposition party’s manifesto as a cut, and within four fiscal years to bring forward proposals for the largest cuts in public expenditure in the history of our country?

Mr. Ellwood: My hon. Friend raises two fundamental issues that will be at the forefront at the next general election, when the nation will judge this Government on what they said in their previous manifestos and what they actually did. Those are two great examples of how they told the nation one thing but did something else.

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Just two hours after the Chancellor sat down, the IMF ridiculed the figures, saying that the growth figure for 2009 would not be minus 3.5 per cent. but minus 4.1 per cent., and that next year it would not be 1.25 per cent. but minus 0.4 per cent. Things are getting much tougher. I wish that the Government would understand and own up to the fact that we are not going to come out of this recession in the optimistic way that they are projecting.

If that is reflected in anything, it is the astronomical scale of borrowing that we are about to approve: £175 billion this year, £141 billion next year, and £118 billion the year after. Figures on that on a scale that have never been seen in the history of this Parliament. As a result, every child, including those not yet even born, will be burdened with taxation round their neck to the tune of £22,000. If the Government’s figures of just six months ago have already been discredited, let us see, six months from now when the Chancellor gets up at the next pre-Budget statement, whether his forecasts were correct. Six months ago, he said that by June this year the recession would be over, so I am curious to see what will happen next year.

This Bill should be about measures of taxation or otherwise to help us to weather the economic downturn, so what has happened to some of the initiatives that the Government rolled out with such vigour? What has happened to the credit guarantee scheme, the internship scheme, the asset-backed securities scheme, the HomeBuy Direct scheme, or the homeowners mortgage support scheme? Those were all talk—we have had no confirmation that they are working. We hear from our constituents and businesses that the money is not getting through because the banks are not able to lend as the Government promised that they would. The recession is lasting much longer because they are not giving us the leadership that we expect.

The Government have failed to acknowledge the cuts to public services—they have been glossed over. In health, there is a cut of £2.3 million; in education, there is a total cut of about £1 billion. Today we had an interesting debate in Westminster Hall on funding for further education with the fiasco that is surrounding the Learning and Skills Council and the fact that there is now a shortfall of £2.7 billion.

The Government have made vague announcements that there will be money, but we know from speaking to our schools that they have not been given as much money as they were promised. The Minister for Schools and Learners, who turned up late to the Westminster Hall debate, eventually made it and acknowledged that letters from the Learning and Skills Council went out without his authority. His office knew about them, but the consequence is that schools in my constituency have been promised less funding than before. They will have more pupils coming through the gates in September, but they do not have the ability to pay for them.

Mr. Swire: My hon. Friend’s charge sheet against the Government is long and justified, but does he agree that the Prime Minister has a duty and an obligation to restore the public’s confidence in Parliament? He is a Prime Minister, formerly a Chancellor, who said that he would end boom and bust. Given what we see today, is it not time that he said, “I was wrong. I apologise”?

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Mr. Ellwood: My hon. Friend makes a very important point. The words “boom and bust” are not mentioned many times by Labour Members. In fact, we no longer hear the language of fiscal rules, golden rules and so forth. It would have meant much to the nation if the Prime Minister had said, “Yes, I apologise for my part in what has happened.” Instead, as my hon. Friend points out, blame has been put on the Americans and Fannie Mae and Freddie Mac, and it has been suggested that what happened over there spilled over here. But it was not the Americans who allowed mortgages of 125 per cent. in the UK, and it certainly was not the Americans who, when the Bank of England became independent, handed over responsibility for certain rules to the Financial Services Authority. The FSA then relaxed those rules, allowing banks to lend and get into debt on a scale that we are now beginning to regret.

I return to my intervention on the Chief Secretary about the cut in VAT from 17.5 per cent. to 15 per cent. I do not want to get into the whys and wherefores, and I have already stressed that it was an unwise move. My concern is about when it returns to 17.5 per cent. at midnight on 31 December. I do not know where Labour Front Benchers spend their new year’s eve, but if they spend it indoors, they will not be aware of the nightmare that the change will cause as every bar, pub, restaurant and so on across the country has to reconcile things when Big Ben strikes midnight. I plead with Ministers to consider that in Committee and ensure that the change back up to 17.5 per cent. is debated.

I have suggested Sunday 3 January as a possible date for the change, or 31 January, which would allow the sales to benefit. One consequence of an increase in VAT is a sudden rush to buy things before it goes up. I stress that the reason why the cut was unwise in the first place is that many small and medium-sized businesses, which could have benefited from more support from the Government, were already offering discounts of 10, 15 or 20 per cent., so a 2.5 per cent. drop was neither here nor there.

David Taylor (North-West Leicestershire) (Lab/Co-op): I did not agree with the hon. Gentleman’s earlier comments about this morning’s debate in Westminster Hall, which were a masterclass in theatrical overstatement and bogus outrage, but the point that he has just made is fair. Many accountancy bodies are making exactly that point. I urge him be a little more ambitious than 2 or 3 January—a more natural point at which to withdraw the arrangement would probably be 1 April.

Mr. Ellwood: I am grateful for that intervention and agree with the last part. It is not for me to decide that, and I am purely passing on the concerns of industries, particularly the tourism industry. The hon. Gentleman invites me to comment on this morning’s debate, and he was only there for a blink of an eye. He made a point of order and then wandered out. If I remember correctly, all 30 seats opposite us on the Labour Benches were completely empty other than the one that the Minister was sitting in, and he turned up five minutes late. The hon. Gentleman should not lecture us on how Westminster Hall debates—

Mr. Deputy Speaker: Order. The hon. Gentleman may have been led astray—that is a very unusual thing for a member of the Chairmen’s Panel to do to an honourable colleague—but we are getting well clear of the Finance Bill and I suggest that he come back to it.

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