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Mr. Mark Hoban (Fareham) (Con): It is a pleasure to follow my hon. Friend the Member for Christchurch (Mr. Chope), who correctly said that I used to work for him when I was at the London School of Economics. The hon. Member for Ealing, North (Stephen Pound) was there at the same time, but for the avoidance of confusion I must point out that he was a mature student.
My hon. Friend also reminded me of my first outing on a Finance Bill, in 2002, and the first long debate on the Bill was about alcohol duty. I did not realise that alcopops were the flavour of the month at Christchurch Conservative club, and Britains high commissioner to South Africa, who was a Treasury Minister at the time, explained that the drink that we all knew as WKD was actually known by young people as wickedit was an educational process for us all.
The length of tonights debate has been helpful and has given Conservative Members the opportunity to contribute at some length. My right hon. Friend the Member for Wokingham (Mr. Redwood) and my hon. Friends the Members for Chichester (Mr. Tyrie), for Poole (Mr. Syms), for Mid-Worcestershire (Peter Luff), for Bournemouth, East (Mr. Ellwood), for Ludlow (Mr. Dunne), for Braintree (Mr. Newmark), for Beckenham (Mrs. Lait), for Stone (Mr. Cash) and for Christchurch all made excellent speeches. That is an impressive list of Back Benchers.
I wish I could say that Labour Members turned up in such numbers to support their own Finance Bill, but Labour Back Benchers made only three speeches. The speech made by the right hon. Member for Birkenhead (Mr. Field) was perhaps not welcome to his Front-Bench team, and even the hon. Member for Wolverhampton, South-West (Rob Marris) was slightly quizzical in his support of the Bill. By contrast, the hon. Member for Edmonton (Mr. Love) was a little ray of sunshine, being the only Member, other than those on the Treasury Bench, who believes that the Governments forecasts for economic growth will be met next year, despite
the views of a number of economic forecastersthe International Monetary Fund, the European Commission and a range of others. He was perhaps the only person, apart from the Chief Secretary and the Financial Secretary, who was wholehearted in his support of the Budget tonight.
One of the themes that recurred was kicked off by the right hon. Member for Birkenheadthe scale of public debt and the fact that the Chancellor announced in his Budget last month that borrowing for this year would be £175 billion and for next year would be £173 billion. It is right that in a Finance Bill debate, in which we debate measures relating to the national debt and public finances, we discuss the size of the national debt and what can be done to bring it under control. The right hon. Member for Birkenhead talked about the need for proper spending controls and the need to establish some control over Government spending. He referred to the lack of discipline in the Governments finances and remarked that the only discipline imposed on the Government is the gilt markets decision about whether to fund the Governments borrowing. Although the Government intend to borrow, in terms of national debt, £175 billion this year, their funding requirement is way in excess of £200 billion. It is worth remembering that today the Treasury Committee produced its report on the Budget and was critical of the Government and the lack of any fiscal discipline and rules in place. It said, in its recommendations:
We do not see how the Temporary Operating Rule acts as any kind of constraint at all on the current fiscal decisions made by the Chancellor, and we struggle to imagine any course of action he might have taken in this years Budget that would have been inconsistent with it...It is clear to us that the only real financial discipline that is currently imposed on the Chancellor is the opinion of the gilt market on the sustainability of the public finances.
Several hon. Members expressed concern about how the Governments funding requirement would be met. The hon. Member for Edmonton, who met the Debt Management Office this morning, was convinced that the funding requirement would be met, but we already know that the DMO has changed its method of placing Government debt to try to maximise the chance of success in funding the debt. My right hon. Friend the Member for Wokingham explained that, given the quantitative easing programme embarked on by the Bank of England and its appetite for buying up giltsand the reforms to the liquidity rules that the FSA has announced recentlythat will provide another source of demand for debt.
It is clear from the speeches in this debate, from both sides of the Houseincluding the hon. Members for Taunton (Mr. Browne) and for Dundee, East (Stewart Hosie) as well as Labour and Conservative Back Benchersthat the scale of debt and the time it will take to get it under control overshadows not only this Bill, but many Finance Bills to come. It will provide a real challenge to future Governments to get that level of debt under control.
Will my hon. Friend touch on the matters that my right hon. Friend the Member for Wokingham (Mr. Redwood), my hon. Friend the Member for Braintree (Mr. Newmark) and I raised about the scale of the debt and the disparity between what the Government are saying and the Treasury Committee is saying? Some of
us believe that the percentage of debt is infinitely greater, because the greater the debt, the greater the taxes, and the greater the reduction in public expenditure that will be needed. It is seminal to this debate, so could not my hon. Friend the Member for Fareham (Mr. Hoban) give at least a nod in our direction?
Mr. Hoban: I am grateful to my hon. Friend for reminding me of that very powerful point that he and others made during the debate. Clearly one of the areas in which there is huge uncertainty is the scale of the Government debt, both on and off balance sheet, and my hon. Friend the Member for Braintree has put together a paper to try to establish that. We have set out proposals for an office for budget responsibility, and one of its first tasks would be to quantify the true extent of Government indebtedness, so that we would know exactly where we would be starting from, were we to form the next Government. We would then know the scale of the problem and could educate people about the challenges that we will face in tackling that debt. My hon. Friend the Member for Stone can be reassured that his thoughts have not fallen on deaf ears on these Benches. They may well have done so on the Government Benches, as the Government have always sought to deny the scale of the problem, but we have heard his message loud and clear.
Two other themes emerged from the debate. The first is the failure of the Budget and the Bill to lay the foundations for the future. In a recession, a Budget should plot a clear path out of the economic crisis and prepare the economy for recovery. It should build the foundations for growth, a better climate for business and a better climate for savings and investment. That was the challenge that the Chancellor was set and the challenge that he failed last month. That failure in the Budget continues through into the Bill, which is a sign that the Government have run out of money, run out of ideas and run out of road. If we are to aid Britains recovery, we need to make Britain a better place to do business, to retain businesses that are already here and to make Britain a prime location for inward investment. If we are to aid Britains recovery, we need to tackle those problems so that the economy is built on sure foundations and not on shifting sands.
The Budget gave the Government the opportunity to do all that by rebuilding savings and investments. The question that businesses will ask is whether Britain is a better place to do business as a consequence of the Finance Bill. Let me give some examples of where I think the Bill lets down businesses. Although there has been a broad welcome of the introduction of the dividend exemption, there are concerns that the cap in worldwide interest is complex and costly to implement. I am afraid to say that even these reforms do not appear to be stopping the flow of companies moving their headquarters out of the UK to more competitive tax jurisdictions. Only last week, Informa, a UK-listed company, moved its tax domicile out of the UK to Switzerland because it believed that its taxes would go up as a consequence of the reforms announced in the Finance Bill. Clearly, there is more work to be done to build on those reforms if we are to ensure that we have a competitive economy for the 21st century.
Another attack on Britains competitive position is clause 92, which requires senior financial officers to sign off that they maintain appropriate accounting
systems. Many on the Labour Benches will see that as superficially attractive, but it has been sprung on business without any consultation and on what would appear to be a ministerial whim. It is a bit of red meat to satisfy Labours union paymasters, but there is a lesson from the States attached to it. We should pay heed in the aftermath of Enron to the changes that the US imposed on accounting systems and controls. They imposed huge new costs on business with few benefits, and as a consequence businesses left the US and came to Europe.
I believe that the provisions in the Finance Bill are yet another barrier to inward investmentthe knee-jerk reaction that puts businesses off being based in the UK. Although Labour MPs might cheer these provisions, it is sadly their constituents who will pay the price. Such moves undermine the attractiveness of the UK as a place to do business and create an impression of an unpredictable, uncertain tax regime where rules can change overnight on a ministerial whim. Being competitive is about more than just rates; it is about certainty and predictability.
The concerns that were expressed by my hon. Friend the shadow Chief Secretary about striking the right balance between the taxpayer and the tax collector impact on our competitiveness as businesses weigh up the benefits of different regime. Yes, the right regime of deterrents and penalties needs to be in place, but taxpayers need safeguards to ensure that those deterrents and penalties will not be used arbitrarily or unfairly.
What about the Governments attitude to small companiesthe vital engines for economic growth and the backbone of businesses in our constituencies? The Government increased the small companies rate of corporation tax from 0 per cent. to 19 per cent. and it is scheduled to rise to 22 per cent. In this Bill, the rate is held at 21 per cent. Businesses are asking whether it is still the Governments intention to increase the small companies rate to 22 per cent., and perhaps the Financial Secretary will answer that question when he winds up.
The message to businesses from the Budget and the Finance Bill is clear. The Government have done nothing to improve competitiveness, nothing to make their lives easier and nothing to encourage them to expand.
The Budget and the Finance Bill were also an opportunity for the Government to boost savings and savers. Radical reforms to the savings regime would help to build solid foundations for a sustainable economic recovery.
Sir Nicholas Winterton (Macclesfield) (Con): My hon. Friend has again referred to savings. What have the Government done for those millions of elderly people, many of whom are retired, who rely on their savings to lead a reasonable quality of life? Is it fair to have a bank rate of 0.5 per cent. for people who have been responsible and prudent, who have saved throughout their working life and who are making a contribution to the banks and other saving institutions to enable them to lend? Is it not time that this partyHer Majestys Oppositiondid something about it and announced what we are going to do?
I wish that my hon. Friend had taken part in the debate to make his point at greater length. This has been an opportunity for hon. Friends to make
their point about savings and a number of our hon. Friends have talked about the plight of savers. Of course, the Opposition have put forward practical measures to help savers. That is why my right hon. Friend the Member for Witney (Mr. Cameron) and the shadow Chancellor propose that there should be real help now for savers in this Budget. That is why we have proposed increasing the personal allowance for older people by £2,000 and scrapping the basic rate of tax on savings income for basic rate taxpayers. It would have helped those very people whom my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton) was referring to, who are struggling to make ends meet because of low returns on their savings. And it would do more; it would send a clear message to people thinking about saving that there is value in saving for their futurea message about taking responsibility and preparing their lives for economic uncertainty. It would help recreate a savings culture in the UK after a decade of neglect by this Government, who seemed to see the low savings rate as a badge of honour.
If the Government had welcomed our measures, it would have been a welcome boost for savings. But of course, unable to do the right thing, the Government resort to a gimmick. They have decided to increase the ISA limits for the over-50s this year to £10,200. That means that ISA providers will have to change their systems, introduce new procedures for checking peoples age and introduce special marketing materials and application forms for the over-50sall for one year only, because next year the Government will increase the ISA limit for everyone. Who on earth in Government came up with this hare-brained scheme to target the increase in ISAs on a small group of people, simply in search of a cheap headline on Budget day? That is one of the measures in the Budget that I think will actually put people off saving for their future.
The Government did understand at one point that a simple, straightforward and flexible regime for pensions would actually encourage people to save. That was in the reforms set out in the Finance Act 2004. It set clear limits on how much people could put into their pensions and gave increased flexibility; it reflected the reality of peoples lives. Every Finance Bill since 2006 has unpicked those reforms, making the regime for pensions more restrictive and complex. Every time a change is made, it sends a clear message to savers that they cannot rely on the certainty of the tax system when making plans for retirement. If people cannot trust the stability of the tax system, why should they lock up money for the long term?
I am tempted to go on, so great is the anger of my hon. Friends about this Finance Bill, about the Governments failure to tackle the problems that face this country, and about their failure to tackle the challenges that confront business and the challenges that are faced by our savers and our pensioners. But I think my hon. Friends want the opportunity to vote
against the Bill tonight, so I do not wish to detain them too much longer before we give them the opportunity to do so.
This Finance Bill is a Bill from a Government who are reaching the end of their life. They are retreating from the centre ground of politics back into the bunker. They are more interested in appeasing their core supporters than in building the foundations of a new economy by encouraging businesses. They lack the courage to do the right thing, so they resort to doing the easy thingsducking the hard choices, leaving those decisions until after the next general election. The Bill is another sign of the collapse of this Government. We need a change to get Britain moving, and only a change of Government will cause that to happen.
The Financial Secretary to the Treasury (Mr. Stephen Timms): We have had an interesting debate and I look forward very much to more lively debates with some of those who have contributed, in the House next week and upstairs in the coming weeks. But the backdrop, of course, to this years Finance Bill is the worst crisis in the world economy since the 1930s. The world economy is forecast to shrink this year for the first time since the second world war. But the economy in the UK has benefited from a great deal of support over recent monthsthe lowest interest rates we have ever had, additional support now from quantitative easing, and the stimulus introduced in the pre-Budget report, including the VAT cut, which, the evidence is now showing clearly, is having the effect that we hoped. [Interruption.] Of course I recognise that it is difficult for the Conservative party to eat humble pie and recognise that, as on so many things, they got their response on the VAT cut wrong, as they undoubtedly did. Speaking of humble pie, I just make the point that we have not heard much humility from the Conservative party in this debate. Nevertheless, evidence of the VAT reductions effectiveness in supporting the economy is becoming clear, and is accumulating steadily.
My right hon. Friend the Chief Secretary to the Treasury quoted from a Centre for Economics and Business Research report in her excellent speech opening the debate. I have the report with me; it was written by Doug McWilliams, who used to be described as an adviser to the Conservative party. I do not know whether he still is, or whether he has been sacked for expressing his views. His note is entitled Credit where credits duethe VAT cut is working. He looks at the evidence, such as the figures on retail sales, and makes a compelling case. [Interruption.] I accept that it is difficult for the Conservative party to recognise the evidence as it gathers, but that is fine; the evidence will continue to accumulate in the coming months, and perhaps in the end even Conservative Members will recognise that they were wrong about the support that we have provided to the economy, as they are about so many other things. The hon. Members for Mid-Worcestershire (Peter Luff), and for Bournemouth, East (Mr. Ellwood), asked
I will in just a moment. Let me first comment on the point about the date on which VAT will go back up to its original rate. We have heard Conservative Members start to ask, Couldnt we have this rate a bit longer? and I can understand that.
Implicitly, if not explicitly, that reflects the benefits of the VAT reduction. It is important that we increase the rate again, as we said that we would. It will go up again on 31 December, because the conversation that we have had with the British Retail Consortium and others has made it clear that certainty is the key. Given the very long period in which to prepare, a change on 31 December can indeed be delivered.
Rob Marris: I certainly agree that the VAT cut was a good idea and has worked. However, may I urge my right hon. Friend to look again at the ending date to which he referred, which has changed in the Bill from 1 December to 31 December? The Government may have talked to the British Retail Consortium, but if one talks to the pub industry, for example, which is very important in my constituency, one realises that many establishments in that industry will be open at midnight on new years eve. Will my right hon. Friend assure me that the Government will at least have another look at that date?
Mr. Timms: I say to my hon. Friend, however, that the key is certainty. Whenever the change were to happen, there would be some businesses that would be open overnight. Her Majestys Revenue and Customs will need to work with businesses and give advice about how to apportion revenue between the before and after periods. The key is certainty, and giving businesses ample time to prepare for the change.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the right hon. Gentleman. I must appeal to the House: we must end the debate in an orderly manner. The Financial Secretarys argument should be heard, and then we can bring the matter to a proper conclusion.
Mr. Timms: Thank you, Mr. Deputy Speaker. The Bill underpins our commitment to the short-term support that people and businesses need to help them through the current difficulties, while laying longer-term foundations, so that we can make the most of the new opportunities that will emerge when the upturn comes. The Bill is about fairness, opportunity, and supporting businesses so that we can invest and grow our way out of the recession.
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