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Mr. Stewart Jackson: My hon. Friend is being very generous. Would not even the most basic analysis by an A-level economics student have told the Chancellor that the cut in VAT was a waste of time, because in a recession people will seek to pay down debt? Even if they were spending on white goods or luxury goods, they would be spending on foreign goods, which are imported into this country, which would have little long-term impact. The Government could have spent the money on other things last November, such as the 9,000 empty housing association units, which could have helped people on the housing waiting list to get off it. Surely the money has been completely wasted by the Government.
Mr. Ellwood: My hon. Friend again makes a valid point. To benefit from the temporary change in VAT, people would have to buy products that were so expensive many of them may not even have been made in the UK. That is a lesson that the Government have learned, so it will be interesting to see what changes to VAT they propose next. I suspect that VAT may not stop at 17.5 per cent. but head a bit further north, considering the signs of the times.
I would like to talk about how the Bill affects the tourism industry, which is the portfolio that I follow. I make no apologies for raising the issue. Tourism is Britains fifth biggest industry and it is important to the UK. We are the sixth most visited place in the world. In an economic downturn, tourism is the one industry that is faring well and that could actually make more money. Unfortunately, it is doing well in spite of the Government, rather than because of them. In the lead-up to the Olympics, which is our one chance really to promote British tourism, the tourism budget is being cut, which is a scandal.
I would like to react on record to the comments made by Michael Savage, who is a DJ and political commentator in the United States. In reaction to being denied entry to this country, he told his audience of 10 million people not to visit the UK. That is an absolute scandal. Let me tell his listeners: ignore the DJ and come to the UK. Enjoy the holiday, enjoy our exchange rate and understand that he is talking out of his backside.
Tourism is called the hidden giant of the economyit is the fifth biggest industry, and it seems to be hidden from Parliament as well. For every £1 that we spend abroad, £25 is brought into our economy. I understand that the Minister hosted an event at the Treasury not too long ago, and if I can catch his eye [ Interruption . ] There we go. I hope that he will acknowledge the importance of tourism and the fact that Governments of all colours could do more.
I would like to underline several points about taxation in the Bill. The taxation of bingo is dealt with in clause 20. What input did the Department for Culture, Media and Sport have into the change in policy? VAT has gone, for which the industry has been calling for some time, as have we. There was a system of double taxation that was unique to bingo. The industry was hit by gross profits tax and VAT, but when the industry gets what it wants and VAT suddenly disappears, it is hit by
an increase in gross profits tax, from 15 to 22 per cent. The Government have given with one hand and taken away with the other.
The consequence of that is an increase in taxation of about 46 per cent. That may be a cunning way to make money, but the Government do not fully understand the consequences that it will have for our communities. Some 8.5 million people play bingo every year. Many of them are old ladies, and for many the bingo night is their one night out in the week. One third of all bingo companies locations are now under threat and many are closing every month. If we take bingo away from the community, we deny those people their ability to get out of the house, meet people and do something that they love doing. The consequence of raising money on the one hand is a detrimental impact on the community on the other.
Mr. Greg Knight (East Yorkshire) (Con): Is the effect not wider than that? Many bingo clubs feature live music as part of their entertainment. If clubs are hit by the new tax, musicians will have fewer venues in which to perform live.
Mr. Ellwood: My right hon. Friend makes a valid point. Bingo halls are more than just places where the numbers on balls are read outthey are pivotally important community attributes. There are 17,000 people employed in the bingo industry, and I fear that the proposals will lead to a net decrease in the amount of tax that the Government take. Moreover, there has been no consultation with the Department for Culture, Media and Sport, which should be advising on the best way to treat the bingo community.
I strongly recommend that members of the Government Front Bench do not visit any bingo halls in the near future. They will not be offered the prestigious job of reading out the numbers: instead, they will probably have the numbered balls thrown at them.
Just as bingo is important for our communities, so are the UKs traditional pubs. They have been ignored by the Government for some time, despite huge campaigns to save them. Ministers will be aware that about 40 pubs close every week, changing the fabric of our communities and of British life, which is very important from the perspective of tourism.
Angela Browning (Tiverton and Honiton) (Con): I share my hon. Friends concern about the closure of local pubs. In many parts of the country, they sell locally brewed ales and beers, and as a result small breweries are also under threat.
Mr. Ellwood: My hon. Friend makes an important point. We have heard nothing from the Government that will help our traditional pubs, even though the consequences of their closure are much greater than one might imagine. When a pub closes, people either go to our town centreswhere the vibrancy of what goes on already poses a challenge in many placesor they purchase their alcohol in supermarkets. When the Government first took office, a pint of beer in a pub cost just twice what it cost in the supermarket. It now costs seven times as much, thanks to the increase in duties imposed by the Government. That does not help our pub industry at all.
Mr. Stewart Jackson: My hon. Friend is making many compelling points in connection with his tourism portfolio, but does he share my concern that the number of violent incidents and admissions to hospital has increased significantly since the Licensing Act 2003 came into force? The emphasis is much more on vertical drinking establishments than on the traditional family pubs that have been penalised by the Governments tax policies more or less since 1997.
Mr. Ellwood: I could not agree with my hon. Friend more. Traditional pubs foster responsible drinking because they take pride in what they offer and the atmosphere that they create. We want more of that, but the fact that 40 pubs are closing every week means that people are changing their style of drinking. That is not good for society, and the Government have failed to address it.
My hon. Friend also mentioned duties. The Budget imposes a 2 per cent. flat-rate increase in the tax paid on all alcohols, on top of the 8 per cent. increase applied in December 2008. The Government are thereby penalising all drinkers, including those who drink responsibly. In contrast, we have suggested that the target should be people engaging in irresponsible and binge drinking.
David Taylor: I am treasurer of the all-party save the pub group. Although licensees could do without the proposed penny on a pint of beer, which is what we are really talking about, does the hon. Gentleman agree that the two key drivers in eroding pubs viability are the extraordinarily low prices charged for alcohol in supermarkets, and social change? We can do something about the former, but nothing about the latter.
Mr. Ellwood: The hon. Gentleman invites me to say something about the consequences for society of the changes in where people choose to drink. He also gives me licence to remark that the pubcos themselves could do more to provide the same deals as the supermarkets, because they are sold beer at the same discounts as the supermarkets. The supermarkets pass on those discountssometimes reducing the cost even further in the form of loss leadersbut the pubcos are not doing that, and many landlords are forced to sell beer at too high a price. Although there is much work for the Government to do on this, there is some work that the Conservatives would like to see the industry doing, too.
Mr. Greg Knight: There is another point in the argument about pub closures that my hon. Friend has not touched on: the closures have a disproportionate effect on rural areas such as the East Riding and parts of Dorset and Hampshire. Often, the pub is the only community centre in a village and, whereas a city could lose six pubs a day without noticing it, the closure of rural pubs has a devastating effect on many communities.
Again, I could not agree more with my right hon. Friend. I hope that the Government are listening to this, because the high-profile campaign on pub closures is falling on deaf ears at the moment. They need to wake up to this problem. Once a pub disappears and is sold and converted into flats or something else, it is gone for good. It is very difficult to get back that aspect of the community that is so important in bringing people together. Yes, there are challenges resulting from the way in which the distractions and attractions that
life offerstelevision, the internet and so ondiffer from those of 30 or 40 years ago, but the importance of the pub should not be underestimated. I do not believe that the Government are doing enough at the moment.
Mr. Dunne: I should like to encourage my hon. Friend in his exposition to the Government of the importance of pubs in our communities. I urge him not to forget that, following the post office closure programme, many rural areas, including some villages in Shropshire, have suffered, and the pub remains the last focus for community life in villages, other than perhaps the church. The pubs have now taken on the village store, and the post office that was in the village store, so it is not just the drinkers in the community who are affected by their closure; it is the community itself.
Mr. Ellwood: My hon. Friend puts his finger exactly on the bunker mentality involved in the Treasury introducing tax cuts and changes to our taxation regimes without understanding their impact on our communities. If we change taxation law relating to pubs, or if we change the policy relating to post offices and bingo clubs, we change the fabric of our communities. The Government are failing to recognise that. That is evident not only from the clauses that we are debating today but from the fact that other Departments have either not been consulted about these measures or have not been able to have any input into the Bill.
In just one year, we have gone from being one of the strongest economies in Europe to one of the weakest. We have been hit by the same global economic storm as everyone else, but Britain has fared so much worse than other countries, thanks to decisions taken by the Prime Minister over the 10 years that he was Chancellor. Most notable was the decision to remove key regulatory powers from the Bank of England when it became independent in 1997 that would have prevented the escalation of debt that allowed British banks to become so over-exposed during the economic downturn.
Instead of admitting fault, coming to the House and saying, Yes, we made some mistakes and we are now going to try to solve them, the Prime Minister has tried over and over again to blame the United States. The only time he stopped doing that was, conveniently, during the G20 summit, when we had some guests who would probably have been a little bit upset to hear that old, incorrect argument being used so often. He should come to the Dispatch Box, put his hands up and tell us what his role has been over the past 10 years. Instead, we limp on with a weak and feeble Government and a weak and feeble leader, support for whom is dwindling in the nation and in his own party. We must now wait until the general election when the country can finally be put out of its misery. Until then, we face a wasted year, and a wasted opportunity to move things forward on the scale that Britain expects.
The Bill was supposed to ignite the engines to restart the economy, but we cannot even see a spark. In reality, the Government are fumbling around with the jump-leads. No initiatives have been put forward that will rebuild Britains competitiveness, improve its productivity, infrastructure and skills base, or strengthen our society by investing in our employment and welfare system. Of course, it is thanks to a decade of Labour that there is so little in the Bill to match the urgency of the economic challenge we face.
I hope that this Government, who seem so short of ideas, will not be churlish about accepting amendments in Committee, but I will not hold my breath. If my advice based on the simple idea of changing the date on which VAT returns to its 17.5 per cent. rate is not even going to be considered, I do not hold out much hope that any other Opposition amendments will be accepted. We will await the pre-Budget report in November to see how this Government have fared; perhaps then the Government will put their hands up and acknowledge that we were right and they were wrong.
Mr. Philip Dunne (Ludlow) (Con): It is a great pleasure to follow that passionate speech by my hon. Friend the Member for Bournemouth, East (Mr. Ellwood). I would like to start my remarks by reflecting a little on the comments that he and other hon. Friends have made about the nature of the Chief Secretarys opening speech earlier today. I listened carefully to what she had to say, and I regret to say that I found it entirely characteristic of her approach to the House and her present role.
The Chief Secretarys speech was focused not really on her own proposals, but on a smokescreen. She sought to conjure up a smokescreen from thin air to camouflage the Governments disastrous conduct of the economy, while at the same time seeking to paint a fantasy picture of Conservative plans. Her speech betrayed the whole approach of this beleaguered Government: When you are lying at the bottom of a hole that you have dug for yourself, you bare your teeth, start gnashing and try to claw your way out of a dugout. In the way the right hon. Lady conducted herself, she was really the chief terrier of the Treasury rather than its Chief Secretary.
The Chief Secretarys approach belied her political antennae, which were clearly telling her that she should adopt attack as the best form of defence in any form of political debate. Her attack was intrinsically political and focused on attempts to wrongfoot her political opponents rather than to recognise the reality, acknowledge the scale of the problems that our economy has been driven into by the Government and seek to introduce measures to help address them. What that meant for me was the end of aspiration under new Labour. There were no signals that Britain is a competitive place in which to do business, that individuals find Britain an attractive place in which to build their careers or that the Government understand how this economy can compete.
This Finance Bill exposes the political truth of this Government under the present Prime Minister. We heard calls earlier today for him to reveal his vision for this country. Well, I have seen his visionin the Budget, in the Finance Bill and in his Chief Secretarys speech. It is not aspirational; it is not new Labour; it tears up the manifesto commitment not to raise income tax; and it
tears up the fiscal rules with nothing to replace them. It rips out the heart of new Labour. The vision is bleak: it is for a prolonged period of debt-burdened darkness. It is back to old Labour, lurching rudderless from crisis to crisis as dole queues lengthen.
Mr. Ben Wallace (Lancaster and Wyre) (Con): Does my hon. Friend agree that the retrograde step in the totem or red herring of the 50p tax rate was that the Government tried to pander to the audience in portraying all high earners as bankers, when the reality is that most high earners in the north-west, for example, work in industry, manufacturing and wealth-creating businesses? Does he agree that because the Government decided to pander to the gallery, what they did was punish success, thus announcing the end of new Labour?
Mr. Dunne: My hon. Friend makes an extremely important point. There is no evidence in what we have heard from Labour Members today or in the Budget debate that there is any longer any real understanding on the Labour Benches of what drives an economy, what makes it work or how much it relies, especially in a trading nation such as ours, on the entrepreneurial spirit. We must encourage business men to come to this country, given the increasingly global environment in which we live. We cannot simply assume that things will happen because we have a talented pool of people who have been educated here. Education is now an international business. Many people from this country can be educated in other countriesincreasingly they are being so in the United Statesif that is where they feel that their future lies.
Mr. Stewart Jackson: Does my hon. Friend agree that the 50p tax increase is emblematic of a party whose record shows that it was never really committed to the entrepreneurial spirit or to free enterprise? The whole edifice of new Labour was based on year-on-year increases in public expenditure irrespective of reform, a housing boom, and a Faustian pact with the City that there would be continuing tax revenues with light-touch regulation. Is it not the case that all three of those pillars have crumbled, and that as a result we are now in a disastrous fiscal position?
Mr. Dunne: I think that my hon. Friend is being a little unfair on the Labour party in opposition. I think that the Labour party, or at least its leadershipthe present Prime Minister and his predecessorrecognised that if it was to secure power, it would have to develop a broad consensus of opinion and establish a wide church of support. That included attracting the middle classesthe aspirational people, both those in work and those entering the work force. It was clear that they must be encouraged to vote Labour, which meant that a Labour Government must adopt a policy involving stability and certainty in tax rates, rather than a penal policy reverting to the old class wars of preceding decades.
The strength, passion and emotion of the hon. Gentlemans speech, allied to that of the intervention from the hon. Member for Peterborough (Mr. Jackson), is enough to bring tears to a glass eye. Cannot the distribution of the tax burden in the economy best be illustrated by the fact that those in the lowest income quartile pay a higher proportion of their income
in tax than those in the upper quartile? It is not as if the highly paid are seriously overtaxed by that measure, is it?
Mr. Dunne: What the hon. Gentleman needs to consider is what happens to the admittedly small number of people who are responsible for generating the jobs that employ those at the bottom end of the spectrum. If the tax rate in this country is perceived to be entering a period of prolonged excess by international standardswe have been led to believe that the new top marginal rate will place us third in a list of 83 of the most worlds most developed countriesthis country will not be perceived as an attractive place in which to generate business, which allows the employment of people living here and attracts other people. That is the fundamental issue which seems to be so absent from the debate conducted by Labour Members, and that is where I think the Government are making such a terrible mistake.
Mr. Jeremy Browne: I share many of the hon. Gentlemans reservations about marginal tax rates, but my difficulty is in understanding how it is possible to advance two arguments simultaneously: the argument that the 50p rate will drive entrepreneurs away and be bad for the economy, and the argument that it will raise little additional revenue. If the latter is the case, it would surely not be difficult to abolish the rate with immediate effect. If the former is the case, surely the need to abolish it is all the more urgent. In any event, I see no reason why, consistent with the case that the hon. Gentleman is making, any Government would not abolish the 50p rate on their first day in office.
Mr. Dunne: I think that timing comes into play. Such action cannot be taken overnight. If the present Government are re-elected, they will have an opportunity to reconsider the 50p rate in their next Finance Bill, at a time when the impact on the perception of entrepreneurs may well be clearer because it will be known whether people have left the country in droves. Timing is all-important in this context.
Let me say something about the forecasts on which the Bill is based, and the impact on the public finances to which it refers. The Chancellor claimed to the Treasury Committee that his forecasts were realistic; I think that that was the word that he used. Much of this debate has already been given over to discussion of how realistic these forecasts were, and I have to say that I find that claim truly astonishing given the Treasurys track record in forecasting both GDP and public borrowing.
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