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28 Jun 2010 : Column 620

Where are the figures for the analysis of the impact of those proposals on homelessness? Where are the figures for their impact on families who will not be able to pay their rent? Does the right hon. Gentleman have any idea how expensive it is to keep a family in temporary accommodation? That is the problem. That proposal is just like the proposal on unemployment. If the Government do not provide the support up front, it will cost them more later on in terms of dealing with homelessness.

As for supporting families, not even in the worst of the Thatcher years did the Government ever introduce a Budget that hit children so hard. Of the £8 billion that this Budget raises from direct tax and benefit changes, however, £3 billion directly hits children: cutting the child trust fund and the value of child benefit, and overall cuts in child tax credit. That is even before we add the cuts that families face in housing benefit, free school meals, free swimming, the future jobs fund and university places. This is a savage Budget for children. The Government claim that it will be all right because there is not a measured increase in child poverty as a result of this Budget. Of course there is not, because the Treasury model will not measure the impact of changes to VAT or housing benefit, and it will not look ahead any further than 2012-13, before many of the cuts bite.

Look at the people the Secretary of State is hitting hardest-the very youngest children of all. Gone is the baby tax credit, so some mums will now find they cannot afford to stay at home for as long as they want with their little babies. Gone is our plan for a toddler tax credit, gone is the pregnancy grant, and cut is the Sure Start maternity allowance. Has he no idea at all that supporting a family and getting the children out of poverty when the babies are born can save money from the public purse for years to come? Instead, he wants to cut support from the babes in their mothers' arms. At least Margaret Thatcher had the grace to wait until the children were weaned before snatching their support.

Mrs Anne McGuire (Stirling) (Lab): Does my right hon. Friend recognise that the Child Poverty Action Group has said that this is a disappointing Budget in terms of child poverty and that it will make it very difficult to meet the targets for the eradication of child poverty already set by the previous Labour Government?

Yvette Cooper: My right hon. Friend is right. When one takes account of what the Government are doing to housing benefit and VAT, the real consequence of this Budget is that it will push people, including children, into poverty. We remember how the Conservatives did this before in the '80s: they cut jobs and cut the help for people to get into jobs, they cut the support for people who could not find jobs, they cut help for pensioners, and they cut support for families and ramped up the VAT bills for them to pay. We also remember how those cuts cost us more for generations to come. It cost more to deal with people on the dole, it cost more to help families who were made homeless, and it cost more to deal with the long-term effects on communities devastated by unemployment.

These unfair cuts are not driven by good budgeting. They will cost our economy and they will cost our public finances, too. This is an ideologically driven Budget by a party that simply wants to cut the size of
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the state, no matter who gets in the way. The truth is that the Conservatives have the youngest, the oldest, the poorest, the weakest and the most vulnerable in their sights. The nasty party is back-only this time they brought along their mates. Shame on them. Both parties have broken their promises; now they want to break Britain too, and we will fight them all the way.

Several hon. Members rose -

Mr Deputy Speaker (Mr Nigel Evans): Order. Considerable numbers of Members wish to take part in this debate, as I am sure you can all see. Therefore, the Speaker has imposed a limit of seven minutes during the debate.

6.32 pm

Mr Edward Leigh (Gainsborough) (Con): I welcome this Budget because I believe that it is an honest Budget. I have now sat through nearly 30 Budgets, and it is often a profoundly depressing experience, because there is great excitement during the Budget statement only for us to receive a let-down the next day when we actually start to read the Red Book. There is a lot of difficulty and pain in this Budget, but what you see is what you get. What we heard on Budget day was the essence of this Budget, which is the need to try to resolve the desperate financial crisis in which we find ourselves, with a potential debt of £20,000 on every man, woman and child, and £1 out of every £4 spent being borrowed.

I accept that there are many things in the Budget that many of us do not like. Does anybody in this Chamber like a VAT rate of 20%? We are in the desperate position of having to impose that rate on everything that we buy, apart from essentials-I am not sure why newspapers are zero-rated, considering all the rubbish that they put out, but it applies to some useful things like food-because we are faced with this financial crisis. However, contrary to what the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) said, the pain is shared. I agree that a VAT rise is regressive, and we did not want to do it, but we have increased personal allowances, and in doing so ensured that is not the rich who benefit.

I pay tribute to my right hon. Friend the Secretary of State. Who has done more than him to try to raise people out of the poverty and unemployment trap? Who has done more than he in setting up the Centre for Social Justice? Who has done more than he to visit all these areas and try to create a benefit and tax system that encourages people into self-reliance, self-help and self-belief, and does not trap them in sink estates without a job and without hope for the future? He has been working on this problem for more than a decade. Now, at last, he has a chance to put some of his ideas into action, and we welcome him to the Front Bench.

Mr Anderson: I understand the long and proud record that the Secretary of State has in this House. Does the hon. Gentleman understand, however, that some Labour Members have not just been there for 10 years, but have lived this? We lived this same experiment in the 1980s and we saw the devastating impact on the people we represent-the people who had to pay for the failure of the Government at that time, when unemployment was not a price worth paying in the areas where I and many other Labour Members come from.

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Mr Leigh: Nobody doubts the hon. Gentleman's commitment to relieving poverty, but does he think that the system that we have at the moment is perfect? Of course it is not. We are trying to create a fairer system in which there are real opportunities to create a society where people are given incentives to climb out of unemployment, despair and poverty. That is what this Budget is trying to do.

It is right to speak for the poor, but it is also right to speak for the many people who earn and who are creating jobs. Rightly, this will affect everybody earning more than £50,000-by the way, everybody in this Chamber will be £1,500 a year worse off-so it is not simply the case that only the poor are paying for this. Everybody, all the way up the income tax scale, is having to pay for our difficulties and helping us to climb out of this mess. Everybody in this nation is having to pay, and that is absolutely right. I also like the fact that this Budget is starting to create the conditions in which we can have a fairer tax system in which there is less churning of money and less of a deep unemployment and poverty trap. By all means let us raise personal allowances, and let us then try to move towards a flatter and fairer rate of taxation.

I will finish shortly, as each of us has very little time. First, let me make a point about much of the work that I was trying to do in the last Parliament to try to get efficiency in Government. We still have not got there. Does anybody think that we would have got into this mess if we had had a better Budget system? We need a triple lock. The Budget process that we have in this House is still not transparent enough. In the last Parliament, I tried to persuade the Liaison Committee that we should have a powerful Budget committee-a committee of this House-to which a Government Department should go when proposing to increase legislation. We should look at that and debate it in an open forum, not just have one minute per amendment, which is what we get with the Finance Bill. Does anybody think that our Budget process is, for example, as good or as powerful as the congressional one, whereby the President proposes and Congress disposes, and there are hundreds of hours of meetings?

We already have a good audit process-one of the best in the world-in the shape of the Public Accounts Committee, but we do not have the equivalent of the PAC inside Government. Frankly, the Treasury has not been strong enough in resisting waste, inefficiency and incompetence in Government spending. The Treasury has been overwhelmed, and the process is largely paper-based. We need a kind of star chamber-a PAC-so that when my right hon. Friend the Secretary of State or any other Minister come up with a proposal, they have to go before it, in private, to justify that proposal and to be hounded by senior Members saying, "Is this spending efficient? Is it properly piloted? Above all, are we reducing complexity in Government?"

Some of us think that complexity is so inherent in Government, with the civil service having this relentless itch always to try to control and regulate, that there is no way out of this, but I do not believe that. I believe that we can create a social security system which, although simpler, is fairer and provides more incentives. I believe that we can strip away whole areas of complexity. It will be a mighty task, but I believe, given all my right hon. Friend's experience and all the work he has done, that nobody is better placed to carry out that work over the next five years.

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6.39 pm

Malcolm Wicks (Croydon North) (Lab): I want to make a specific contribution about the assumptions that underlie Government policy on raising the pension age. Those assumptions relate to our increasing life expectancy, and therefore the number of years that we will spend receiving the state pension and the affordability of that. There is also a related assumption about our ability to work longer in the future.

Life expectancy is undoubtedly increasing in general, but I wish to give a social-class perspective on the matter. I sometimes think that we get so carried away with an analysis that we are all going to live into our 80s and 90s that we fail to examine how life expectancy varies between socio-economic groups. First, it is a clear fact that fewer individuals from lower social classes survive even to reach state pension age. It is estimated that almost one fifth-some 19%-of men from lower social classes who are currently 25 are likely to die before they are 65 years old, so they will never get a state pension. That contrasts with 7% of men from the highest social class. For women, the comparable figures for those dying before the age of 60 are 10% and 4%.

Secondly, the great majority of poorer people who do reach retirement age enjoy shorter pension lives, if I may call them that, than the better-off. At 65, professional men have a life expectancy of 18 years as a pensioner, while unskilled men have one of only 14 years. For women, taking the starting point as age 65, the respective contrasting figures are 22 years and 17 years. There are significant social-class differences, and the Government need to think through their implications.

What about the employment assumptions? Raising pension ages assumes that in future years, men and women will be able to work for an extra period. How reasonable is that assumption? Let us look at current employment trends. Some people, of course, continue to work past state pension age-I believe the figure is about 13%-but a far higher proportion are effectively out of the labour market before the formal state retirement age. We rather pretend that the state retirement age is 60 and 65, but the statistics show the myth behind that. The labour force survey data show that for the period of February to April this year, 24% of men aged 50 to 64 and 26% of women aged 50 to 59, in the period leading up to retirement, were classed as economically inactive. In other words, they were not in work.

When we look more specifically at those coming up to the state pension age, we see that very large numbers of them have effectively been retired long before the age of 65 for men and 60 for women. Some 43% of men aged 62, for example, are not working; by age 64, it is 53%. To take another example, 35% of women aged 58 are not working.

I am not making a particularly partisan point, but what conclusions do we need to draw? In general, it is not unreasonable to increase the age at which people become eligible for the state pension. I say that as a general proposition, but we need to be sensitive to social class. To be blunt, as many of us know from the people we meet in our constituencies, many people working in heavy industry or who have had tough lives in physically demanding jobs, such as in the mines, in steelworks, as cleaners or as care workers, cannot go on working for ever. There comes a point when they need a rest and need to retire.

28 Jun 2010 : Column 624

Significant changes will be needed to employment practice and attitudes to work if more jobs are to be available for those in their late 50s and 60s. The statistics that I have cited show that it is currently difficult for many people of that age to get work. I suggest that we need to build on policies that are already in place to promote flexibility in state pensions. At the moment there are choices to be made at state pension age. People can take their pension at that point, as most need to and do. However, they can defer it and receive a higher pension later, or they can take the deferred element of their pension as a lump sum. We need to ask whether we can do more to promote that type of choice for those able to work, so that we bring more flexibility. The number of people deferring is relatively low. I am bound to say, as a former Pensions Minister who had some responsibility for legislating in that area, that I am disappointed at how low it is. We need to consider whether we could do more to encourage choice. Could we consider, for example, making the lump sum tax-free?

Finally, what about the people whose case I have cited, those who are already out of work in their late 50s and early 60s? We know those people from our advice surgeries and constituency offices. They are in a difficult situation. Are we really saying that someone of 60 who is not in work will have to wait another year to get their state pension? Are they simply destined to be classed as unemployed or disabled, and somehow trapped in a no-man's land between grand assumptions about future retirement patterns and the grim reality of their lives? We need to think the matter through. I do not have the answers, but we have time to consider some of the issues.

6.46 pm

Andrew George (St Ives) (LD): I wish to approve the headline description of the emergency Budget and what it is intended to achieve, which, as my hon. Friend the Member for Bradford East (Mr Ward) has said during the Budget debate, is that the richest pay the most and the vulnerable are protected. We must test that claim as we proceed. The coalition Government face many challenges in achieving that, in circumstances in which the public finances are in a very serious state, which I do not need to describe again this evening.

I wish to give the Budget a fair wind at this stage, and of course as a Liberal Democrat I gather a degree of satisfaction from a number of measures that I and my colleagues have campaigned for, namely the increase in the tax allowance with a target of an allowance of up to £10,000, taking many thousands of people on low income out of tax altogether; the restoration of a meaningful annual increase in the basic state pension, for which pensioners have been crying out for decades; increases in the child care element of the child tax credit for the poorest; the closing of the gaping tax avoidance loophole created by the previous Government through changes to capital gains tax; the introduction of a banking levy; and the protection of lower-paid public servants. There are a number of measures that I applaud and welcome very much.

This is a coalition Government and a new arrangement altogether, with two distinct parties. Seeking consensus between those parties inevitably creates significant debate.

Mr Kevan Jones (North Durham) (Lab): The hon. Gentleman is showing by his demeanour that he is not very enthusiastic for his coalition. He says that he has
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campaigned for many things in the Budget. Can he tell the House when he and the Liberal Democrats campaigned for an increase in VAT?

Andrew George: As far as I recall, none of the three main parties ruled out the prospect of VAT increasing. It is only when one is in government that one can see the nature and state of the finances, and therefore fully understand the impact that it is likely to have.

Having said that, as all Members will know, there is an amendment about VAT on the Order Paper in my name and those of some of my hon. Friends. It asks, I think reasonably, that an impact assessment be undertaken, taking into account a number of factors including the impact that the VAT increase would have on businesses, charities and families and households across the income range and age groups. It is vital that, in order to advance a number of the challenging measures in the Budget, the Government should reasonably be expected to bring forward more information than they are able to at this emergency stage of the Budget, so that we can debate the impact of those changes.

Roger Williams (Brecon and Radnorshire) (LD): I thank my hon. Friend for giving way and I agree with the sentiments he is expressing. Does he agree that charities that are unable to reclaim VAT could be about £250 million worse off as an unintended consequence of the VAT measure?

Andrew George: I am very grateful to my hon. Friend for that comment. There is not just a new coalition Government, but a new Parliament, and in it we should be able to debate issues both across the Chamber and within the parties of the coalition Government. That is not unreasonable. The Chamber should enable greater transparency and discourse across and between parties. The purpose of our amendment is to probe issues that need and deserve to be probed.

Lyn Brown (West Ham) (Lab): Will the hon. Gentleman give way?

Andrew George: I shall not give way any more, I am afraid, because of the limit on time.

The motion refers to the Red Book, which, at page 67, in relation to chart A3, describes the VAT change as potentially "progressive". I think that the notion is based on the expectation that those who spend the least will be less affected. Of course, those who spend the least are inevitably those on lower incomes, who will, as the Red Book explains, pay less VAT in absolute terms. But not everyone agrees with that: the hon. Member for Gainsborough (Mr Leigh) has described VAT as regressive, as have Labour Front Benchers.

The Institute for Fiscal Studies is rather equivocal on this issue. It says that when contrasted with income, VAT does look more regressive as it hits those with high expenditures the hardest. It also says that those with the lowest incomes tend to have the highest expenditures relative to their incomes, so there is an issue that needs to be investigated a great deal more. I believe that the Government should reasonably bring forward an impact assessment of the type that I have described and that we should have an opportunity to debate it not just in the Finance Bill Committee but in the Chamber.

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I represent the poorest region in the country, so I am bound to be particularly sensitive to the impact of the Budget on the poor. However, I am not just concerned about low-income families; I am concerned about the impact of the VAT increase on rural travellers, who have a car out of necessity, not luxury, and on charities, as my hon. Friend described a moment ago. I am also concerned about the contrast between the effect on businesses that are engaged in the renovation of older buildings, for which VAT is applicable, and on those that build new buildings, for which VAT is not applicable.

The key themes underlying the emergency Budget turn on the challenges that any Government would have, such as ensuring that those who dropped us into the mess that we are in-due partly to the management of public finances by the Labour party and partly to those in the City who contributed a great deal-should be doing the most to help us out of it. As is made clear in the Budget, there is also an issue regarding wealthy people who have managed to pay less marginal tax than their cleaners. Those people should start paying their way. I hope that the Chief Secretary will consider very carefully our amendment and the reason behind it when he winds up. In this area of policy and policy making, we should have an impact assessment and an opportunity to debate this issue.

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