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The second specific area that was much discussed when I shadowed the right hon. Member for Doncaster North (Edward Miliband) and my neighbour the right hon. Member for Lewisham, Deptford (Joan Ruddock) was how to ensure that households and individuals play their part. The Labour party started that process and I pay credit to the right hon. Lady and her right hon. Friend for beginning to ensure that we make households energy efficient, reduce bills, insulate homes properly, protect the vulnerable, and so on. But the scheme was never big enough; it was always a set of schemes that were confusing and lacking in coherence. The phrase "Green Deal" comes from the Conservative manifesto, but the idea comes from both manifestos. That we have a green deal for households must also be a central part of the Government's strategy. We need to ensure that the new housing that is built and the housing that needs to be renovated and improved give us the safe, warm and pleasant housing that we need. My right hon. Friend the Secretary of State knows as well as anybody else, because he was the architect of the policy in our party a mere three years ago for a carbon neutral Britain, that the crucial area here is to ensure that the poor and the vulnerable are protected first, and that the people who spend a huge amount of their money on fuel when they cannot afford it are given the help that they need. One of the criticisms that I must repeat of the Labour Government, which I made when they were in office, is that when it came to helping the fuel poor-those who pay more than 10p in the pound of their income on fuel-they sadly failed. They tried, and I do not doubt their integrity in trying, but they failed, and we have to do better than that. We have to ensure that single people on their own, who make up 40% of
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households, and those with families do not have the ridiculous, out-of-control bills that they had; that we save the fuel and reduce the energy that we need as a country; and that we reduce our climate change liability.

Dr Whitehead: Does the hon. Gentleman agree that, if a programme such as that which he envisages is to have any real traction, there is an absolute imperative to defend and increase the almost £200 million that was set aside for the insulation of hard-to-treat homes and social housing? Will he put that in his book as a red line on Government investment in the energy efficiency uprating of social housing? If that investment does not appear, will he publicly underline his opposition to energy efficiency improvement methods that are not underwritten properly by Government funding?

Simon Hughes: The hon. Gentleman has a good, honourable and knowledgeable track record on the issue, and, as he would expect, in this Parliament I have already met the Housing Minister, the Secretary of State for Communities and Local Government and my friend the Secretary of State for Business, Innovation and Skills to ensure that those points are made. We are just beginning the debate about where the spending cuts must be made, and a coalition of Members needs to put the case for retaining that expenditure which is necessary to pump-prime, drive and incentivise the housing stock change that we clearly need. The other central point, on which the Government have made a commitment, is to introduce the power of general competence to local councils, so that they have much more flexibility over how they address such issues.

Thirdly, on the green agenda, I note the comments that my right hon. Friend the Secretary of State for Energy and Climate Change made about the carbon price, and we await with interest the publication of the proposals to reform the climate change levy. However, I remind him that we ought to reconsider introducing the emissions performance standard, which both our parties were willing to do. Labour resisted it, but I hope that it gets back on the agenda as a way of ensuring that we make progress not just in our country, but throughout Europe.

Fourthly, and more controversially, there is nuclear power, to which the Budget referred not specifically, but indirectly in relation to Sheffield Forgemasters. I made my position clear about nuclear power before the election, and when the initial announcement was made about the Sheffield Forgemasters loan, and I have always believed that the nuclear industry will not have a viable future unless it receives public subsidy. I have never had a theological opposition to nuclear power. I believed that it was the wrong answer, contributing too little to emissions reduction and to the country's power needs, but in that context the Sheffield Forgemasters loan was inconsistent with a policy of not subsidising the nuclear power industry.

The announcement is difficult for Sheffield and for south Yorkshire, but we have to have a policy that applies from the beginning to the end, and we have to be tough on that. In reality, other countries such as Germany have now introduced a tax on nuclear power stations to make up for the fact that the industry benefits from a carbon price but does not pay for the clean-up of the legacy nuclear waste. There must be
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economic realism in the nuclear industry. That has been our position, and it has been accommodated in our parties' agreement.

There is another matter on which I have lobbied the Government but not yet seen anything emerge, and if it could be dealt with in the ministerial winding-up speech that would be helpful. It is about helping with biodiesel that is made from recycled vegetable oil. I declare two interests: I drive a vehicle that uses it; and there is a firm in my constituency from which I purchase it, and which in turn takes it from firms locally. It is a good and environmental product, but the financial incentives for biofuels do not yet encourage the industry to grow. It is an industry of small businesses, it ought to be incentivised but the Treasury loses out because of the wrong incentives as well as inadequate incentives for the sector. I hope that that issue will be looked at, and that we might introduce an amendment to the Finance Bill in order to pick up on that individual and ring-fenced item.

On the Budget as a whole, the right hon. Member for Doncaster North rightly said that I had always assumed that the more natural coalition, had it been achievable, would have been between the Labour party and ourselves. There is no secret about that, but in the end it proved undeliverable on two counts: first, the numbers did not add up, and this country needed a secure, majority Government; and, secondly, the Labour party was not willing to move on key issues. They included political and electoral reform and a fairer taxation system-in particular, taking people on low incomes out of tax.

The measures that commend the Budget are specifically items that were in the Liberal Democrat manifesto, on which I did fight the election. They include, first, linking pensions with earnings. The link was broken by Mrs Thatcher and never reintroduced by Labour, but its restoration next year was committed to in this Budget. Secondly, there is the measure on taking people who have an income of less than £10,000 out of tax gradually, the first wave of which was introduced in the Budget, and which matters not to the absolutely poorest who have no incomes, but specifically to pensioners and working people who have a small income. Thirdly, there is the measure on increasing capital gains tax, because we believe that it should be set at the same level as income tax. There has been a debate among Government Members on that issue, and there is a difference in view, but there has been a move in that direction, which I applaud and recognise.

Toby Perkins: I congratulate the hon. Gentleman on his appointment as the deputy leader of the Liberal Democrats, but I fear it strangely apposite that at the moment he sits all alone on the Liberal Democrat Benches. If he feels that this is a coalition Budget, will he explain how much worse it would have been for the poorest people without the influence of the Liberal Democrats?

Simon Hughes: I am, and always have been, very clear about that issue. When it was obvious that there was no possibility of a coalition with the Labour party, we had the option either of letting the Conservatives become a minority Government or of being in coalition with them. I am very clear that it was better for the country and for the issues that matter to me that we were part of the Government-that we were influencing matters and
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ensuring that there was a shared programme, not a Conservative programme. I say that completely honestly, and the hon. Gentleman, with a constituency that is in some ways not dissimilar to mine, would expect as much. I have made it my business to battle for the people whom I represent in order to ensure that we end up with a fairer Budget, and a fairer Britain as the outcome. The election, the Budget and the next exercise, the spending cuts, must all be judged on whether we end up with a fairer Britain.

Let me therefore address the remaining issues that follow from that. There has been some press speculation that, because certain items are expensive, they are unaffordable and should be dropped. They include items for the poor, such as the freedom pass and the winter fuel allowance. There is no issue between me and my friends on the Treasury Bench, but the coalition deal is a deal and what has been agreed must stand. There cannot be any unpicking of items in that deal, otherwise the whole thing risks falling apart. There is no suggestion of that from the Government; there is a suggestion from outside the Chamber of changes. However, the deal must be that we go down the committed road. We signed up and the Conservative party signed up, all compromising where appropriate, and that must stand. If there were any suggestion that it change, there would be trouble. I do not think that it will change, because I have heard nothing from colleagues in government suggesting that they want it to, but let us be clear from the beginning: it is a deal, and if it is stuck to, it will last the five years.

I turn to yesterday's Institute for Fiscal Studies report. The IFS is a respected organisation. It made clear that the Budget as a whole increases fairness, but that if it excluded the matters that were implemented by the Labour Government in the Budget earlier this year it would not be. However, the Budget does not exclude them; it has endorsed and continued them. The right hon. Member for Doncaster North and I know each other well, but the Government have continued with those elements that the previous Labour Chancellor introduced in the routine Budget earlier this year.

Helen Goodman (Bishop Auckland) (Lab): Are you taking credit for it?

Simon Hughes: No, we are not taking credit for it-we are just making sure that we look together at the measures that this country has as its tax regime in the coming days and months.

On that basis, this is a Budget that produces greater fairness. There is difficulty in reaching the people at the very bottom end of the income scale who are not in work, and there are other difficult areas. However, my right hon. Friend the Chief Secretary and my hon. Friend the Member for Thornbury and Yate (Steve Webb), the Pensions Minister, who come from a proud tradition of knowing these issues well and campaigning for the poor and the disadvantaged, would not have signed up to something that undermines all the sorts of campaigns that they have been fighting for.

There remains the issue of VAT. I did not want a Budget with a VAT increase, nor did the Conservative party, and nor did the Labour party. I have no idea what
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was the view of some people in the Tory party behind the scenes, but there was a rumour that they would think it was a good thing. That is why, during the election campaign, we said that we thought it was a bad thing and challenged them to agree with us. Nevertheless, none of us ruled it out. I wish it were not here, as it is clearly less progressive than other taxes where people pay on the basis of income, but it is a necessary measure given that we have to fill the huge debt that the Labour party has left us.

We will vote for the Budget next week. However, if there are measures in the Finance Bill whereby we can improve fairness and make for a fairer Britain, then we will table amendments to try to do that. That is where we can make the difference, as we will during the spending review that will follow in the months ahead.

1.41 pm

Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): I have seldom been so disappointed with a speech by the hon. Member for Bermondsey and Old Southwark (Simon Hughes) as with the one that we have just heard. I suspect that he will find life even more uncomfortable as time goes on. Having listened to the speech by the Secretary of State, and then heard the support offered by the hon. Gentleman, it seemed to me that many Liberal Democrat supporters will be thinking that this must be the biggest conversion since the Chinese general baptised a whole army with a hosepipe. We have had a whole election campaign in which many of the things commended today by Government Members were not only blatantly opposed by Liberal Democrats, but disowned.

I have had the privilege of serving for many years in the constituency in Lanarkshire that I represent, where my next-door neighbour was the late John Smith. More than once, he said to me, "You know, I judge a Budget on the impact I think it has on ordinary young men and young women, with all their aspirations, living in a council house in Lanarkshire." It is on that test that I make my views clear.

We have heard today a defence of a Budget that is thoroughly unfair and absolutely vindictive towards a large number of people in this country, region by region, not least those in my own constituency. I am not at all surprised that the Conservatives have supported what is a Tory Budget; it is the kind of Budget that they have always wanted to introduce, with or without a global crisis. However, I have to say that the apologies from the Liberal Democrats are profoundly unconvincing, as they have shown again today. As Jeremy Thorpe might have said, "Greater love than this no man has-that he laid down his principles to save his Mondeo and his red box."

I have to tell Government Members frankly that their claims for this already discredited Budget stand in stark contrast to the consequences for my constituents in Coatbridge, Chryston and Bellshill. For several years before the election, and then again during it, the Conservatives talked about "a broken Britain", but no Budget has done more to introduce a broken Britain than this one. The most vulnerable have been attacked, with housing benefit cut, child benefit frozen, the health in pregnancy grant scrapped, and the maternity grant slashed-and we are told that this is a fair Budget.

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Then we come to what I would regard as perhaps the most appalling aspect of this Budget-the increases in VAT, hugely painful because they are clearly regressive. A 2008 report by the Institute for Fiscal Studies demonstrated that cuts in VAT benefit the poorest 10% most, while increases hit them hardest. That is why during the election the Tories were particularly ambiguous on this specific issue, although I have no doubt that they had this policy in mind all the time. To be fair to the Liberal Democrats, they did warn us-for example, by unveiling a poster showing a "VAT bombshell", with their leader standing beside it. What we got on Tuesday was a Trojan horse with their leader and his friends standing inside it.

We are told that we are all in this together-that this Budget is indeed fair. I invite the House, then, to contemplate for a few moments what it means for a constituency like mine. In Coatbridge, Chryston and Bellshill, the average wage of those in work is £18,000. Unemployment stands at 7.4%-lower than in 1997, but clearly unacceptable. Let us look at Tatton, the Chancellor's constituency. The average wage is over £25,000, and unemployment stands at 2.9%. In Twickenham, the Business Secretary's constituency, the average wage is over £33,000, and unemployment stands at 2.5%. Yet this Budget is being applied to the whole nation.

Of course there is a crisis, as recognised most recently in the letter that President Obama sent to those involved in the G20. However, the words that he repeatedly used about investment, about real fairness-and, above all, about growth-were hardly reflected in the Budget that we are asked to approve. More sustainable ways to reduce the deficit clearly apply to the growth that President Obama has promoted and that, along with progressive taxation, Labour Members strongly support.

I can see that for the Tories this is a matter of ideology. They do not like the public sector: they have made no bones about that. The public sector provides education, excellent services from the police, and infrastructure for providing new jobs-and, my heavens, we will need them after this Budget. How can they possibly argue that this Budget will not lead to unemployment? We need to build more schools. We need to make more industrial parks available, hoping to invite inward investment, via the regional authorities, and making more money available so that the Government are creating the environment by which jobs can be provided.

Kwasi Kwarteng (Spelthorne) (Con): What does the right hon. Gentleman think about the remarks written down by his party's former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who said, I believe, "There is no more money"?

Mr Clarke: I had assumed that the hon. Gentleman had a better sense of humour. It was clear to the whole country that it was a joke, so I do not regard that as being a serious point.

The Government blame the public sector for the recession, but what about the banks? [Interruption.] We must ask that question. My right hon. Friend the Member for Doncaster North (Edward Miliband) dealt at some length with how we have approached that important matter. While the Government have been hammering away at the poorest people in the poorest
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parts of our country, they have treated the banks with a feather duster. They have hardly responded to the problems that the banks themselves created, and no Member on their Benches can defend that.

Rachel Reeves: Does my right hon. Friend agree that it does not seem fair that the welfare bill will be cut by £11 billion, but we are asking the banks to contribute only an extra £2.4 billion?

Mr Clarke: Absolutely-that is an excellent point. Indeed, I wish now to compare the Budget's response to local government, and to people applying for disability living allowance, with the way in which the Government have treated the banks. They have certainly not done so in a way of which my constituents, or the disability and local government organisations that I know of, would approve.

What the Government have done to local government is to cut, cut and cut again. They have offered the public a freeze in council tax but failed to explain that the services that they and the House have imposed upon local authorities cannot possibly be carried out without other services being slashed, including social services and social work for the most needy. That is clearly missing from the thoughts of coalition Members. I invite them to compare that with their approach to the banks, which I was heckled for mentioning.

What about those who seek to live on DLA? We are told that one by one, they are going to be recalled and re-examined. I was a Member of the House in the early 1980s when we had that version of Thatcherism, and I want never again to see men who have worked in the mining industry, and who have to be helped into my surgeries because they can hardly breathe, being cut off from benefit because they are told that they can walk 50 yards. If that is the type of policy that the so-called coalition Government are planning, which I believe it is, they can expect the utmost opposition.

At a time when there is a clear demand for housing, what the Government have done to housing support is simply disgraceful. I say that as somebody who was in local government before coming to the House. Even the Evening Standard had to point out last night that because of the Government's approach to housing benefit, more poor people would be made homeless. I predict that local councils faced with the financial challenges that that represents will build fewer and fewer social houses, which the Liberal Democrats told us before the election were one of the important issues for them.

Matthew Hancock: Will the right hon. Gentleman give way?

Mr Clarke: I will not, because I know others want to speak. I wish to conclude now for that very reason-many hon. Members wish to speak about the situation in their constituencies and the Budget's impact on ordinary people and communities. They want to do so partly because we have seen this situation before-not in this generation, but certainly in the 1930s and the '80s, and we do not want to see it again.

This is a regressive and dangerous Budget that will hit the poor hardest. Yesterday, my hon. Friend the Member for Derby North (Chris Williamson) referred to Orwell's "Animal Farm", and I wish to conclude by quoting some words from that work:

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-I look at the mixture of Liberal Democrats and Conservatives on the Government Benches-

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