“increase in the level of GDP of 0.1 per cent by the end of the forecast period.”

So in the whole Budget there is just one measure that will have any impact on growth whatever, and that is an impact of 0.1% in around five years’ time. Beyond that, the OBR says in its policy costings document:

“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”

When it comes down to it, the measures in the Bill will do nothing to change the gloomy growth forecasts, nothing to ease the squeeze on living standards and family budgets, nothing to get businesses investing at the rate required to regain our place in the global economy, and nothing to create the new job opportunities that are so desperately needed by today’s younger generation. No, instead of taking serious steps that might help to make up the ground our economy is

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losing, the Chancellor and his Chief Secretary have turned from their failed experiment in expansionary fiscal contraction and resorted to the notorious Laffer curve as their latest excuse for an economic policy which hits hard-working families and rewards those who are already very wealthy. It is the last refuge of a Government who have lost any sense of purpose beyond the protection of privilege.

Those who are unfamiliar with the obscure corner of esoteric economic theory that is the Laffer curve might like to take a lesson from the Business Secretary who recently explained it. He said it was

“an all purpose, but weak, rationale for cutting the taxes of rich people”

which has

“been correctly dubbed ‘voodoo economics’.”

Indeed, he told his party conference—perhaps some hon. Members on the Government Benches remember this—that some people believe

“that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this: all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt hole will rush back to pay more tax but at a lower rate.”

As he said to his conference, “Pull the other one!”

Perhaps we should instead take a lesson from the Secretary of State for Energy and Climate Change, who warned:

“We should remember that in 1981, President Reagan based most of his policies on the drawing of the Laffer curve done on a serviette…President Reagan used that as the basis for his policy of slashing taxes, and the United States Treasury went into huge deficit…The evidence to support the Laffer curve is weak.”—[Official Report, Standing Committee B, 4 May 1999; c. 66.]

I agree, but those lessons are now being forgotten and we have the same old Tories dusting down the same old trickle-down economic theories. It did not work in the 1980s and it will not work today either. People will see it for what it is: out of touch and the same old Tories.

Christopher Pincher (Tamworth) (Con): The hon. Lady talks about the protection of privilege but this Government are increasing stamp duty on homes worth more than £2 million. Does she support that change or would she repeal it?

Rachel Reeves: I support cracking down on tax avoidance, but let us stick with the policy of cutting the 50p rate. The Office for Budget Responsibility shows that 300,000 people who are currently paying the 50p tax rate will get, on average, a tax cut next year of £10,000. For 14,000 millionaires, there will be an average tax cut next year of £40,000. That much we know. What we do not know is whether people putting their money in Monaco or a Caribbean bolt hole, as the Business Secretary described, will indeed rush back to the British Isles to pay the 45p rate of tax. If they do, perhaps some money will come in, but if they do not, we will lose out to the tune of £3 billion. The reality is that the stamp duty changes will affect only the people who are moving home, so the vast majority of millionaires who are happy in their mansions will not be affected by the changes. In fact, numbers published by the Treasury this morning show that tax avoidance measures will bring in around £300,000, but the changes to the top rate of tax will cost £3 billion. That is not fair; it is not

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the right priority to give millionaires a tax cut while asking millions of ordinary hard-pressed working families to pay more.

Once upon a time, some people argued that the Prime Minister needed a clause IV moment to fully detoxify the tainted Tory brand, but the Government have gone one step further; they have got themselves a clause 1 moment. Clause 1 of the Bill confirms once and for all that the Tory party will never be for the many, but always for the few. Nothing could more clearly demonstrate the Government’s perverse priorities than the fact that when ordinary families are going through the toughest times in living memory, part 1, chapter 1, clause 1 of the Finance Bill gives a £3 billion tax cut to the richest 1% of the population, and the rest of the Bill is peppered with dubious means for making other far less fortunate people in our society pay for it.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The House has already divided on the 50p rate and the Labour party abstained. Was that a deliberate abstention?

Rachel Reeves: The Labour party voted against the entire Finance Bill, including the cut in the 50p rate. On Wednesday and Thursday, we will have an opportunity to vote on the tax cut for the wealthiest 1%, and I hope that Members on both sides of the House will join us in the Lobby to vote against a tax cut for the very wealthiest in society at a time when ordinary families are being asked to pay more.

Simon Hughes rose

Rachel Reeves: I look forward to hearing how the right hon. Gentleman will be voting later this week.

Simon Hughes: The hon. Lady was not a Member in the last Parliament, and she used a phrase that I find a bit rich. The Labour Government regularly failed to close the loopholes to deal with tax evasion and tax avoidance, and only in their last weeks in office put income tax rates up to 50p in the pound, yet the hon. Lady now comes to the House saying that she would prefer not to change the top rate of tax even though it might be far less effective than a range of measures that would make the wealthy pay five times more. Does she want the wealthy to pay more? If so, is she willing to support measures that would deliver that?

Rachel Reeves: I want the wealthy to pay their fair share in the deficit reduction, which is why I shall be voting this week against a cut in the taxes for 14,000 millionaires. Figures from the Institute for Fiscal Studies show that in Budget 2002—a Labour Budget—anti-avoidance measures were worth £1.7 billion. In Budget 2003—a Labour Budget—there were £1.7 billion of tax avoidance measures, and in Budget 2004, £1.7 billion-worth of tax avoidance measures—I could go on. The point is that in the Budget this year—a Conservative Budget, with a little bit of help from the Liberal Democrats—tax avoidance measures are worth £0.8 billion, lower than in all but two of the last 10 years. The idea that it is a tax avoidance Budget just does not stand up in the statistics. The Institute for Fiscal Studies knows it, so perhaps Members on the Government Benches should look at those numbers. Of course we should cut down on tax avoidance, but we should not

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then compensate the rich by giving them a tax cut worth £3 billion. If the right hon. Gentleman really wants to cut down on tax avoidance and ensure that the wealthy pay more, I hope he will join us in the Lobby to vote against a tax cut for the richest in society.

The Exchequer Secretary to the Treasury (Mr David Gauke): The hon. Lady will be aware that in last year’s Budget, there was a measure to tackle tax avoidance through disguised remuneration. She will also be aware that her party voted against the measure in a Finance Bill last year. Does she regret that?

Rachel Reeves: In Budget 2011, there was £1.1 billion-worth of tax avoidance measures, which is less than half the amount spent on such measures in Labour Budgets. We want more wealthy people to pay their fair share, but nothing in the Budget ensures that. The Government need to tackle tax avoidance, but they should not compensate for that by giving a tax cut to the wealthiest in society.

The Chief Secretary to the Treasury said about the 50p rate:

“The idea that we are going to shift our focus to the wealthiest in the country at a time when everyone is under pressure is just in cloud cuckoo land”,

but it turns out that the Liberal Democrats have joined their Conservative coalition partners in cloud cuckoo land. I hope that the Chief Secretary is enjoying himself there, but I am sure he had hoped to cover his humiliating climbdown by pointing to the benefits to lower and middle-income earners from the increase in the personal allowance. However, as I said in my intervention on him, the Institute for Fiscal Studies has made it clear that the gains from the policy are cancelled out many times over by the losses suffered by ordinary families as a result of the Government’s tax hikes, benefit cuts and tax credit changes. The Government are giving with one hand and taking much, much, more from ordinary families, pensioners and young people with the other.

The cover story that the wealthy will pay more in other ways is unravelling day by day. We have already seen that in the House this afternoon. The cost of the cut to the top rate of income tax is 10 times higher than the amount of money raised by the cap on tax reliefs. I hope we all agree that more must be done to reduce genuine tax avoidance, but that should be a standard feature of every Budget and every Finance Bill. I direct the Chief Secretary to slide 9 of the assessment that the Institute for Fiscal Studies has made of the Budget. It shows that between 2002 and 2009, the Labour Government reduced tax avoidance by over £12 billion, while this Budget reduces tax avoidance by a mere £800 million—less than Labour’s annual average, and less than all but two other Budgets in the past decade. That is before one takes into account the fact that included in the Government’s definition of tax avoidance is tax relief for donations to charities including UNICEF, Macmillan Cancer Support, the Royal National Lifeboat Institution, Oxfam and many others. The fact that the Government cannot tell the difference between that and real tax avoidance shows how incompetent and out of touch they are.

Mrs McGuire: Does my hon. Friend agree that it might have been more appropriate for the Chancellor to discuss with the charity commissioners whether bogus charities were taking part in tax evasion schemes than to have come up with an ill-considered tax proposal?

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Rachel Reeves: I thank my right hon. Friend for that intervention. She is absolutely right: instead of the Government making up policy as they go along, without bothering to talk to anybody who is affected by it, they should have consulted the Charity Commission and the charities affected. The Press Association reports that the Government are doing a U-turn; perhaps we will get clarification on that from the Chief Secretary to the Treasury, if he is bothering to listen to anything that is being said this afternoon. Will he confirm what the PA says—that there is a U-turn on charities tax relief? The fact is that nobody knows: the Government and the Prime Minister do not seem to know what is happening with their own policy, and we have had no clarification in the House this afternoon.

Charlie Elphicke rose

Rachel Reeves: Perhaps the hon. Gentleman has a clue what is going on with the Government’s policy on charities tax relief.

Charlie Elphicke: It is clear that we should crack down on tax avoidance, but I want to know whether the hon. Lady is serious about doing so. Will she condemn the tax avoidance of people such as Ken Livingstone, or is this just more crocodile tears from the Labour party?

Rachel Reeves: We are serious about cracking down on tax avoidance, but tax avoidance is not the same as giving donations to UNICEF, Macmillan nurses, the Red Cross, the National Trust and thousands of charities in this country that rely on the money they get to do their important work, often supporting some of the most vulnerable people in society. If the Government cannot tell the difference between tax avoidance and doing the right thing and supporting valuable charity work, it shows the extent to which they have lost their grip on reality.

Mr Ben Wallace (Wyre and Preston North) (Con): Does the hon. Lady agree that before people give money to charity, they must also fund their obligation to society? They must do that first, before they start funding charity.

Rachel Reeves: If the hon. Gentleman extended that logic, there would be no tax relief for giving to charities. I am not sure if that is what the Government are proposing. People who give money to charities should be supported. We have heard a lot from the Prime Minister about the big society, but all those words about philanthropy and giving seem to have gone out of the window. It would be interesting to know whether the Chief Secretary thinks he has performed a U-turn this afternoon in the Chamber, as is being reported.

As the British Red Cross said, “Not only is such a measure at odds with the Government’s own announced agenda of increasing and facilitating philanthropy, it would reduce our ability to achieve our charitable objectives and reduce our help to people in a crisis.” Is that really what the Government intended when they announced these changes to tax relief in the Budget? Indeed, after the performance of the Exchequer Secretary to the Treasury on the radio this morning, it seems that, along

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with “expansionary fiscal contraction” and “we’re all in this together”, the latest casualty from the Conservative lexicon is the big society.

Christopher Pincher: Earlier the hon. Lady was extolling the virtues of the United States. She will know that even the US, which is possibly the most philanthropic society in the world, has a cap in place on philanthropic donations, so is she opposed to the principle of what the Government are doing, or does she accept that there is a role for a cap?

Rachel Reeves: In the US there is much more generous tax relief for legacies, for example, so it is a very different tax system. In many ways it is more generous than the system in this country. What I would like to see is policy being made in the proper way, which is by consulting the people who will be affected by it—consulting the charities, which stand to lose tens and perhaps hundreds of millions of pounds and which do such good work. Like the Red Cross, they say that their ability to do their work will be hampered by the changes in tax relief. That consultation should have happened before, rather than after, the Government’s policies were announced and the financial changes to Treasury revenues were introduced.

Calling people who give to charities tax dodgers, as this Government imply, and referring to charities as dodgy, when those charities include Macmillan, Red Cross, UNICEF and Oxfam, is unhelpful. If the Government truly want to increase giving, the language should be tempered and people who try to do the right thing and support worthwhile causes should be encouraged, not insulted, for what they do.

Because the Government have been so keen to gloss over the real revenue-raising measures in the Bill, it is right that we take time this week to examine and evaluate them. This week Labour will give Members an opportunity to debate and vote on specific aspects of the Budget. We will give Members an opportunity to explore the effects of extending VAT, as has been mentioned by hon. Members this afternoon, and putting VAT up to 20% on the price of haircuts, hot snacks, and caravan holidays, although not on the price of ski lifts. VAT has been increased on the regular purchases of millions of ordinary families and is a heavy blow to many small businesses, manufacturers, retail employers and churches caught out by these changes.

Diana Johnson (Kingston upon Hull North) (Lab): My hon. Friend mentioned the lack of consultation with business. Businesses want to plan and are trying to grow, but the sudden imposition of VAT on the caravan manufacturing industry is causing real problems and potentially the loss of thousands of jobs.

Rachel Reeves: My hon. Friend speaks from her knowledge of her constituency in Hull and of the East Riding of Yorkshire, which will be particularly affected by changes to the caravan tax.

I was in Leicester on Thursday last week with my hon. Friend the Member for Leicester South (Jonathan Ashworth), speaking to small businesses which will be affected by the changes to VAT on hot snacks. Many businesses are worried, about both the additional tax they will have to pay and the additional bureaucracy of

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form-filling. As hon. Members said, it is not at all clear at which point VAT will stop being charged. What temperature does the food have to be, or by how much must it have cooled down before the tax rate goes to 0% from 20%?

We will also have a chance this week to debate and vote on important tax simplification measures. Given the generous decision of the Chancellor to simplify the tax arrangements of 4.4 million pensioners, I am surprised that they are not more grateful. That tax simplification will cost pensioners £83 a year on average and will cost hundreds of thousands of people who are coming up for retirement next year up to £322 a year.

The Chief Secretary referred to the Office of Tax Simplification. Its tax director has registered his concern about the changes to the tax allowance for pensioners and has said that the Government’s claim that they were only following its recommendations

“was not 100 per cent accurate”.

Meanwhile, Age UK was moved to write to the Chancellor about the change to tax allowances for pensioners. It stated:

“Age UK supports the OTS review of pensioner taxation and was very pleased to have been invited to be represented on the consultative committee. However given the OTS was set up with the aim of providing”

the Chancellor

“with independent expert advice on simplification we are very surprised and disappointed that”

he has

“announced a change to simplify the system without waiting for that advice.”

Contrary to coalition spin, this tax simplification will hit not those with big pension pots, but people with personal or occupational pensions that pay around £5,000 a year. It will hit people who worked in ordinary jobs for modest salaries, and who made sacrifices during their working lives to put away just enough to give themselves a small pension, which means that they do not need to depend on means-tested benefits in retirement. It is simply not true that they have been insulated from the effects of the current economic climate and other changes to taxation. Pensioners have been hit hard by VAT, quantitative easing, cuts to services that they rely on—not least the national health service—and massive increases in the heating and electricity bills for their homes. Older people deserve better than this mean-minded, penny-pinching measure. If Government Members agree, they will have a chance to vote down the granny tax later this week.

It tells people all they need to know about this Government’s priorities and the balance of power in the coalition that when the Deputy Prime Minister said that he would agree to cut the 50p rate if it was paid for by a mansion tax and the Opposition said that we would support a mansion tax if it was used to relieve the pressure on ordinary hard-working families, the Chancellor forgot the mansion tax, cut the 50p rate anyway and paid for it with a raid on pensioners’ incomes and a raid on charities.

Finally, we will offer the Chancellor a last chance to make good the great omission of the Bill—its failure to offer a shred of hope to the 1 million young people who are desperate to find work and its failure to do anything about the fact that long-term youth unemployment has

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more than doubled in the past year. Our amendment will open the way for the funding of a guaranteed job for every young person who is out of work for more than a year—a job that they would have to take up. That is the kind of measure that our country is crying out for. It would change the lives of thousands of young people and transform the prospects for our economy. It could easily be funded by raising new resources from the banking sector, which still squanders billions on bonuses while doing little to support British businesses and families. We will therefore offer Members a chance to vote for the reinstatement of the tax on bank bonuses to fund the creation of 100,000 new jobs for young people and the construction of 25,000 new affordable homes.

Mr Edward Leigh (Gainsborough) (Con): If the 50p tax rate was such a painless revenue raiser, why did the Labour Government take 13 years to implement it?

Rachel Reeves: As the Chancellor once said, we are all in it together, and if we have a deficit to reduce it is right that those with the broadest shoulders bear a little more of the burden. That was why the former Chancellor increased the top rate of tax to 50p. This Government have reduced it and are instead asking millions of ordinary families and pensioners to pay more so that millionaires can pay less. That is their priority; the Opposition’s priorities are very different.

Mr David Ward (Bradford East) (LD): Is it not true, though, that the Labour Government were running a deficit before the recession? Why could the tax rate not have been raised then, to contribute to reducing it?

Rachel Reeves: The hon. Gentleman was not in the House earlier when it was mentioned that between 1997 and 2007, the debt-to-GDP ratio fell from 42.5% to 36%. The debt burden fell in the first 10 years of the Labour Government. I was not in the House in the last Parliament, but I wonder whether any Members can remember the Liberal Democrats asking for lower Government spending then. I do not remember it, but perhaps the hon. Gentleman could enlighten me about when he opposed Labour’s spending on schools and hospitals in Bradford and elsewhere.

Mr Russell Brown: My hon. Friend has hit the nail on the head. Government Members talk about the Labour Government’s overspending, but I cannot recall a single occasion in the time I have been in the House when any of them talked about not wanting a hospital or school built in their constituency. They were four-square behind us.

Rachel Reeves: My understanding is that the Government parties matched us on spending and often called for additional spending, but the Liberal Democrats have changed their mind so often that it is sometimes difficult to keep up.

The fiscal challenges that this country faces are real, and we need to deal with the deficit and get our debt on a downward path, but the choice before us is how to do that and on whose backs. The Opposition’s priorities are to get unemployment down, to get our economy growing and businesses investing so that we can reduce

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the welfare bill and bring in more tax revenue, and to ensure that the biggest burdens of deficit reduction are borne by those with the broadest shoulders.

Seema Malhotra (Feltham and Heston) (Lab/Co-op): I thank my hon. Friend for referring to Labour’s idea of increasing jobs for the young through a tax on bankers’ bonuses. Does she agree that that would make a huge difference to young people such as those in my constituency, where long-term youth unemployment has risen by more than 200% in the past year, and send a message to all young people that Westminster and politicians across the country were on their side in these tough times?

Rachel Reeves: My hon. Friend speaks on behalf of the thousands of young people in Feltham and Heston who have been hit hard by the Government’s policies. The Opposition think it would be much fairer to tax bank bonuses at 50% and use that money to create jobs and opportunities for young people, but the priority of the Chancellor and his friend the Chief Secretary is a tax cut for the richest 1%, paid for by ordinary families, hard-pressed pensioners, struggling small businesses, charities and young people. All that pain is not even getting the deficit down. The Government are borrowing £150 billion more than planned—the cost of their failed economic experiment.

Members of all parties have an opportunity tonight to dissociate themselves from this disgrace of a Finance Bill. We have given the Government a chance, and we have also given them a choice. If the Bill goes through unamended, it will go down as one of the most flawed and unfair Finance Bills in history—one that makes millions pay more so that millionaires can pay less, based on a Budget that gives a £40,000 tax cut to 14,000 millionaires while ordinary households fall further into debt and our economy falls further behind. It was not the Budget that Britain needed, and this Finance Bill should be sent back to the drawing board. The Opposition will vote against it, and I urge those with a proper sense of our country’s priorities to join us in the Lobby tonight and vote down the Bill.

5.4 pm

Mark Field (Cities of London and Westminster) (Con): I want to make a brief contribution to this important debate. The phrase that comes to mind is “something will turn up”. It is one of the classic stratagems of last resort in politics and perhaps life in general. I suspect that the Treasury’s handling of the UK’s economy owes rather more than it might be willing to admit to the Mr Micawber principle. After all, time often alleviates and sometimes even eliminates what seem like intractably difficult problems. In stark contrast to the first Thatcher Government, who front-loaded much of the economic pain, the modern-day Treasury, while espousing a tough austerity message, has adopted a more pragmatic, steady-as-she-goes path.

Despite the protestations of the hon. Member for Leeds West (Rachel Reeves), we must get one thing straight: there is zero veracity in Labour’s contention that the Government are cutting too far, too fast. In the past 12 months, the UK Government’s current spending has totalled some £613.5 billion—the highest figure in

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history. The Government are still borrowing, even this year, £1 in every £5 that they spend. However, more than half the deficit reduction was predicated on annual compound growth through the Parliament of 2.7% to 2.9%, and it is clear that, for the first half of the Parliament, we shall struggle to achieve growth of even one third of that figure.

Rather than respond to that deteriorating situation by imposing more savings, we have taken the path of ever more debt, courtesy of the Bank of England’s quantitative easing programme. In my view, the real purpose and impact of the UK’s central bank intervention has not been to ease the path of investment borrowing for small business, which is perhaps what it should be. Instead, it has mopped up the substantial proportion of gilts that are being issued. That is where the Mr Micawber principle particularly comes into play. The Bank of England’s actions will not be sustainable in the longer term without a very real risk of inflation. I suspect that global conditions in the years ahead may make it much more difficult to finance our current levels of deficit. That is one reason why we need to get the deficit down as quickly as we can.

Before the Budget, I firmly believed that our focus should rest on some radical supply-side reform to ensure that we get the growth that we need. That would apply partly to the tax system, but also to employment legislation, with forensic attention paid to the impact of high marginal rates of income tax and the disincentives that have crept into the system as a result of both the poverty trap for the low paid and the removal of reliefs for higher rate payers.

I was pleased that a small part of my desire was realised: some progress has obviously been made on taking people out of tax entirely through the increase in the threshold for the basic rate of income tax and the reduction in the top rate tax from 50% to 45%, which is particularly important for entrepreneurs.

I was also personally delighted that, after three years of campaigning alongside the local animation industry in my constituency, the Chancellor announced the Government’s intention to introduce a tax credit for televised animation and video games. I congratulate him and my right hon. Friend the Secretary of State for Culture, Olympics, Media and Sport on securing a bright future in the UK for Peppa Pig, Olive the Ostrich and their animated brethren. Finally, we have the level playing field that our creative industries deserve, and the tax credit will help raise the quality of children’s television and retain valuable intellectual property in this country. That is the key reason why I agreed to lead the parliamentary charge on the matter. It is also fantastic news for the vibrant sector in my central London constituency and beyond.

However, rather less progress has been made on arguably the more urgent and important supply-side reform: legislation on employment rights. Once more, the glad, confident morning of June 2010’s Budget has given way to starker reality. It is worth recalling that, at that point, the increasingly discredited Office for Budget Responsibility predicted that unemployment would peak in 2010-11. We now know that it is likely to rise further in the next two years and remain stubbornly high for the foreseeable future. Yet the UK continues to gold-plate

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continental employment legislation and grant ever more generous paternity and maternity rights. Little wonder that employers are so reluctant to take on more staff.

I disagree with the analysis of the hon. Member for Leeds West about the position in the US. It is instructive to witness how the US has shown signs of turning the economic corner. In simple terms, it is easier to hire, but also to fire staff there. That allows flexibility and supports a rapid readjustment economically.

Julian Smith: Does my hon. Friend agree that that does not just apply to the US? Recently, Italy and Germany have exempted their small and medium-sized firms from many of the burdens of employment law.

Mark Field: My hon. Friend is absolutely right, particularly in respect of the German model for the micro-sized businesses that are in the growth phase. There is no doubt in my mind that our recovery phase will commence only when we are able to have that sort of readjustment.

Katy Clark (North Ayrshire and Arran) (Lab): We heard those arguments in the 1980s and they have been looked at many times. Does the hon. Gentleman not know that there is no connection whatever between economic growth, and the economic competence of a country, and employment protection?

Mark Field: I am making a comparison over the limited phase of the past two or three years. Why have we seen the recovery in the USA, to which I referred, and recovery and economic stability in Germany? Given the fiscal stimulus, there is not all that much between the countries, but those employment rights measures have the impact of allowing recovery among small and medium-sized enterprises.

Katy Clark: Is the hon. Gentleman not aware that the USA has pursued different economic policies from the UK? It has not pursued the policies of austerity that the Government and other countries in Europe have pursued. There is no connection between attempts to restrict trade union and employment rights and growth.

Mark Field: The important thing that the hon. Lady needs to recognise is that there is a distinction, as I said in the early part of my speech, between the rhetoric and the reality of austerity. We have not really had much in the way of fiscal tightening in this country. We are still borrowing and living miles beyond our means—this is a lesson, I am afraid, for the entire political class—and we will face a huge problem. We continue to pass that burden on to our children and grandchildren, not in any meaningful way for investment, but for today’s consumption, which is not sustainable.

Ed Balls (Morley and Outwood) (Lab/Co-op): I think I agree with hon. Gentleman on that point. As I understand it, he is saying that he agrees with the point made earlier in the year by—I believe—Standard & Poor’s, which said that austerity by itself does not work and can become self-defeating if it leads to higher unemployment, slower growth, and therefore to higher spending, fewer taxes, and therefore higher deficits. Is that his point?

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Mark Field: My point was along these lines. One difficulty occurs if all our trading nations are going through austerity; austerity can be done only by one country in such a group. We need to focus attention on growth. Indeed, the last words of a speech I made in the House almost two years ago, after the June 2010 Budget, were that we have talked about and made the right case for austerity, but we needed attention on growth—I fear that there has been too little.

I agree with the hon. Member for Leeds West in her analysis and on trying to assist small and medium-sized enterprises by allowing them to take on extra employees over the next two tax years without paying further national insurance. Better still, we could extend a national insurance holiday to all employees under the age of 25. That opportunity was missed both in the Budget and in the Bill.

I wish to touch on three specific concerns that I strongly hope will be dealt with in Committee in the weeks ahead. I confess that I am a little uneasy at the prospect of the general anti-avoidance provisions and powers that are heralded in the Bill and to which the Chief Secretary referred. Senior coalition Ministers interchange the terms “avoidance” and “evasion” in a rather casual way, which should be of concern to more than merely the tax advisory community. Individuals and businesses in a free society are, and should be, entitled to organise their affairs in such a way as to minimise their tax liability. I have no problem with that.

Although I sympathise with the Treasury, which is forced virtually continuously to update its rules and regulations, any general powers on avoidance should keep retrospection to an absolute minimum, and should be used only in extreme cases of what is regarded as so-called aggressive anti-avoidance. Moreover, it is surely incumbent on the Treasury, if it moves in that direction, to ensure a comprehensive pre-clearance regime to allow companies and their advisers to road-test their proposed taxation schemes with senior HMRC officials.

I appreciate that banks have few friends—I represent the City of London and am perhaps one of the few left—but the treatment meted out by the Treasury to Barclays bank in February set a very unfortunate precedent, not least because in recent weeks the Treasury has sought to lecture the Indian Government on the undesirability of retrospective tax. Barclays bank had sought and obtained clearance for its £500 million tax minimisation scheme. It was overturned in a blaze of publicity. If we are to raise the substantial levels of taxation that UK Governments of all stripes need, given the electorate’s addiction to public spending, we should be wary of anti-business rhetoric, which will give further encouragement to globally mobile institutions wishing to leave these shores. Being open for business depends on certainty in commercial practice, not simply verbal assurances.

Julian Smith: Will my hon. Friend update the House on what contribution the financial sector makes to the tax take of UK plc?

Mark Field: I am not sure I can, to be honest, but suffice it to say it is a significant amount. I can appreciate, though, that in these difficult times it is hard to make the case for the huge bonuses in the banking sector, other than to say that it is a globally competitive industry.

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Financial services will be a big industry going forward. Growth in Asia is adding 20 million or 25 million people a year to the ranks of the global middle class in India, China and South Korea. These will be the customers and consumers, not least because of the cultural reasons for saving, of the financial services industry in the future. That is one reason, in the midst of trying to rebalance our economy, as the Chief Secretary mentioned, we should not lose sight of our global competitive advantage. In the financial services industry, in particular, our global advantage is looked upon jealously in France, Germany and other European countries. They often feel that some of the anti-banking rhetoric coming through will be entirely self-defeating.

Mrs McGuire: Will the hon. Gentleman give way?

Mark Field: If the right hon. Lady will forgive me, I would like to make some progress because others want to get in.

The provisions in clause 8 on the high-income child benefit change to income tax will doubtless be the subject of extensive controversy. In spite of the misgivings I have expressed since the scheme was proposed in October 2010—in particular, that it seems to act as a penalty on aspiration and families in which one parent stays at home to rear children—I accept the overriding need to reduce the vast fiscal deficit. However, the tapering of the change to income tax for those earning between £50,000 and £60,000 a year will result in marginal tax rates of 65% for families with three or more children. Conservatives such as me believe in promoting incentives, but it is difficult to reconcile the proposition that those earning more than £150,000 are deemed to require a highest marginal rate of 45%—a proposition that, I hasten to add, I fully support—with the proposal that earners with several children at the level affected by clause 8 must apparently settle for paying marginal rates of up to 20 percentage points higher. I fear that the controversy in middle Britain about these child benefit changes will continue to resonate strongly in the months ahead.

Mr Christopher Chope (Christchurch) (Con): I think that my hon. Friend and I share similar views on this. Does he accept that if, for example, we were to take all people earning more than £60,000, regardless of whether they have children, and charge them £1,000 a year, the yield would be £2 billion in 2013-14—far more than the yield from this complicated tax targeted at those with children rather than those without them?

Mark Field: I worry that too much of this tinkering will be counter-productive in any event and that the tapering of the child benefit system will be hugely expensive. Many people do not know whether they will earn between £50,000 and £60,000. They might work on a consultancy basis or spend a few months a year unemployed or travelling. Trying to unravel all that will be incredibly difficult.

I wish to make a few provisional passing comments on clauses 211 to 213 and 224 relating to the Chancellor’s decision to impose a 15% stamp duty land tax on acquisitions of £2 million and residential properties by

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non-natural persons—in other words, companies. Although I support the essence of the proposal, it might have the unintended consequence of stalling development, particularly in central London. I appreciate that high-end property developers might not necessarily be seen as deserving of particular Government acknowledgement, but there is no doubt that the property development industry in and around central London generates significant tax revenues and creates jobs. Not only are the profits taxable here but significant amounts of irrecoverable VAT are often incurred on redevelopment projects. Developers will generate SDLT revenue by buying and reselling redeveloped properties.

In the Budget press release, it was noted that the 15% SDLT charge would not apply to developers because they tended to use companies for limited liability rather than tax avoidance reasons, but when the draft legislation was published, the relief for developers was limited to bona fide developers who had been carrying on a residential property development business for at least two years. The two-year requirement may seem eminently sensible as a means of ensuring that short-life development companies are not established by individuals who ultimately wish simply to use the property in question. Nevertheless, I fear that the qualifying period will discriminate against new property development businesses, which cannot show the requisite track record. Indeed, all new entrants into the market are likely to be priced out because their acquisition costs have suddenly become 8% higher than those of their competitors. We therefore risk creating an uneven market—indeed, a market against newcomers.

The 15% charge is also likely to be an issue for experienced developers. The scarcity of bank finance for development properties at the moment means that much of the finance for high-end residential property development is coming from equity investors, who are bridging the significant funding gap that now exists. The requirements of equity investors will often mean that stand-alone special purpose vehicles are established for individual projects, so once again, the statutory test will not be met. If HMRC wants to consider an alternative policing arrangement and seeks to avoid creating a dual market, it might consider imposing a second charge—either another 7% or the balance of the 15%—if the property is used before being sold on by a developer with SDLT. Alternatively, there could be a time-based charge, so that if the property has not been sold after, say, three years, the second charge comes into play.

It is perhaps understandable that this afternoon I have dwelt on some of my concerns about the Bill. Nevertheless, I appreciate the acutely troubled state of the public finances. The Chief Secretary was absolutely right when he said that it was important that we should not pass on the costs of this generation’s excessive consumption to our children and grandchildren. I therefore reiterate my support for the deficit reduction plan that the coalition set out almost two years ago. I trust that the Bill will progress swiftly and smoothly to the statute book.

5.21 pm

Mr George Howarth (Knowsley) (Lab): It regularly seems to be my lot to follow the hon. Member for Cities of London and Westminster (Mark Field). Perhaps that is appropriate in some respects, as he represents a constituency at the other end of the spectrum from

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mine. He made a typically thoughtful speech, although he set out a couple of priorities that I would not share, and that he would not expect me to share—namely, supporting the banking industry, for example through the tax system.

However, one thing that I take issue with is the hon. Gentleman’s assertion about the rights of people in employment in this country compared with those elsewhere. When I speak to employers, as I am sure we all do in our constituencies, one of the questions I often ask is: “To what extent do employment laws have on impact on you? Do you feel they put you at a disadvantage?” Sometimes they will say, “Yes, they do,” but at the margin, if at all. If I ask employers to list their hierarchy of concerns, they put employment rights very low down, while concerns about our macro-economic direction and the way the economy is being run are very much at the top.

Nia Griffith (Llanelli) (Lab): Does my right hon. Friend agree that what employers dislike is duplication of the various forms they have to fill in? The vast majority of employers are supportive of clear employment law, which helps both employees and employers.

Mr Howarth: My hon. Friend is precisely right. I worked in industry on the shop floor prior to the introduction of health and safety legislation. On another occasion—this is not the appropriate time—I might, if I get the opportunity, describe the conditions in which people worked in a lot of factories in those times. Often they were almost Dickensian.

Mark Field: No one is suggesting that we should try to encourage some sort of sweatshop regime; but equally, during these difficult economic times, there is a tendency for businesses—particularly small and medium-sized enterprises—to batten down the hatches. We want to encourage them to take the risk—“Yes, let’s take on an extra employee. Maybe some more business is coming through”; “Okay, but will we be able to expand in three or six months’ time?”; “Let’s try and take employees on.” The difficulty for small and medium-sized enterprises is not the idea of employment rights, but that the difficulties and costs of taking on new employees—particularly young employees—become so overwhelming that there is a massive disincentive so to do.

Mr Howarth: I am grateful to the hon. Gentleman for having rebalanced his view slightly, but I still think that he is wrong. When I talk to employers about the difficulties they have in recruiting, they tell me that they have two priorities, particularly in regard to young people. The first is that the young people should have the right skill set and should be capable of doing the job without needing too much training from the employer. The second, which is harder to pin down, is about attitude. Employers are looking for people who are disciplined enough to turn up at the right time and not to take days off on a whim. Such considerations come ahead of the concerns that the hon. Gentleman has described.

I want to talk briefly about the cumulative effect that the measures in the Budget will have on the people in Knowsley whom I represent. I also want to cover the proposals for minimum unit pricing for alcohol, as one

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of the major employers in my constituency will be affected by them. I have also received quite a lot of correspondence from individual constituents on that matter.

I am concerned about the impact that the working tax credit changes will have on my constituents, in conjunction with the other changes to the benefit system that are already taking place. To qualify for working tax credit, couples with children will now have to work at least 24 hours a week between them, instead of 16, with one of the couple working at least 16 hours a week. There are exceptions for people with a disability or incapacity. There is also an issue with the backdating of the entitlement to tax credit. It will now be one month, instead of three months. A further concern is that the main elements of the tax credit have been frozen for 2012-13.

I am unable to give the House any statistics to show how those changes will directly affect my constituents, but it is clear that changes to tax credits impact most heavily—indeed, entirely—on those on low incomes. That is another contrast between the situation experienced by the hon. Member for Cities of London and Westminster and me. It is estimated that, nationally, 212,000 working couples with children who earn less than £17,000 a year will lose all their working tax credit. Unless those people are able to find someone who will employ them for an extra eight hours a week, that could equate to a loss of £3,870 a year. That will be a substantial loss for the many families in my constituency who will be affected by the change. We must also take into account other things that have been going on. Low-income families are already disproportionately affected by rising fuel costs and rising food bills, for example, and these changes will only add to those pressures.

Child benefit has been frozen for another two years, until April 2014. Before the Budget, there was a lot of negative publicity about the plans to withdraw child benefit from families with a higher-rate taxpayer in the household. The hon. Member for Cities of London and Westminster referred to that in his speech. In the Budget, however, the Chancellor backtracked a little. From January 2013 there will be no loss of child benefit until at least one parent earns £50,000, after which the benefit will be gradually reclaimed through increasing the take up to £60,000. Beyond that, people stop getting the benefit at all. That will be a very complex system to administer, and my major concern is how it will affect people in my constituency. If the benefit had been raised in line with inflation, a couple with one child would have received £88 a year more in child benefit or £145 a year for two children in 2012-13, but now they will simply not get that.

The latest Department for Work and Pensions figures show that in Knowsley 21,185 families were in receipt of child benefit, with 35,725 children between them. That is a substantial number of people who will be adversely affected by these changes in my constituency alone. It is inevitable that I should comment on that, as it is totally unacceptable for those families. I fear that one consequence will be—perversely perhaps, or even unintentionally—that some families that manage to convince the Jobcentre Plus people that they are genuinely unemployed, might decide that they will be better off if they are not working.

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Mr Chope: Does the right hon. Gentleman realise that something like £100 million will be spent on administering the new child benefit arrangements—a figure very similar to the total amount that the Treasury thinks could be saved by putting a cap on charitable donations tax relief?

Mr Howarth: The hon. Gentleman makes a useful point. I said that the system would be complex to administer, and complex things cost more, so the hon. Gentleman is right to say that. I had not intended to cover the point, but he is also right to express concerns, as did my Front-Bench colleague, my hon. Friend the Member for Leeds West (Rachel Reeves), about the effect of these changes on charities. I happily endorse the sentiment behind the hon. Gentleman’s comments..

I mentioned the maximum pension credit, which is being cut by £1.98 a week for single pensioners and £3.36 a week for couples. The threshold at which people qualify for pension credit has increased by 8.4% to £111.80 for single pensioners and £178.35 for couples. That means that 27,500 pensioners in Knowsley could be affected by these changes. One important characteristic of the previous Government—I do not think it is open to dispute—is that the lot of pensioners steadily increased during the period in which they were in office. What we seem to be confronted with here is the potential for pensioners to get poorer and poorer, as happened under previous Conservative Governments. That is a real concern in my constituency. These changes, taken in conjunction with other changes to the benefit system, will mean real hardship in my constituency, which is one of the poorest in the country.

Let me say a few words about minimum unit pricing for alcoholic beverages. I shall quote a constituent who wrote to me. I shall not name them, as I do not have permission to do so. My constituent wrote:

“The reality is that minimum pricing will affect those less well-off and have little impact on those with a poor relationship with alcohol. It will enrich retailers without creating jobs, reduce investment and damage producers leading to the loss of jobs. The treasury will recover less duty and tax from the sector as a whole.”

I will give my view in a few minutes, but I think that when people write to Members of Parliament expressing such concerns, it is important for us to raise and address the issues.

I have also received some briefing from a company in my constituency, Halewood International. It employs 500 people in the north-west of England, most of whom are in my constituency. It produces some products of which Members may have heard—one is Crabbie’s Ginger Beer, which is a very popular drink; another is Red Square Vodka—and, as well as producing some important brands, it distributes brands for a large number of other companies.

Halewood has made a number of points, to which I hope Ministers will consider responding. First, it says:

“Alcohol consumption has declined since 2004 and more people are drinking responsibly.”

I think that there is evidence to support that assertion. Secondly, it says:

“There is no evidence that minimum pricing will reduce alcohol misuse. It will affect all consumers and punish the majority who drink responsibly.”

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That is clearly true: it will affect everyone. The company adds:

“It will hit people on the lowest incomes hardest.”

That, too, is clearly true.

Thirdly, Halewood says:

“Minimum unit pricing is likely to be illegal under European Law. It is inconsistent with the operation of the free market for the state to intervene on price.”

The company is not alone in that view. The Economic Secretary to the Treasury has said:

“the Scottish Government have recently introduced a Bill that seeks to bring in a 45p per unit minimum price… we believe that it could be incompatible with article 34 of the treaty of the functioning of the European Union… That is the position.”—[Official Report, 14 December 2011; Vol. 537, c. 341WH.]

So it is not just companies with an interest in the matter that believe that minimum pricing is likely to be problematic in terms of European law. In December last year, the Government thought the same.

Fourthly, Halewood says:

“The UK alcohol industry already pays some of the highest rates of alcohol tax in Europe. The Budget delivered a 5% increase in duty.”

Finally, it says:

“The drinks industry is committed to helping to tackle alcohol misuse. It is delivering a range of initiatives to encourage responsible drinking, such as through the Public Health Responsibility Deal.”

That is the case being put by the industry, and by some of my constituents. Personally, I have an open mind on the introduction of minimum unit pricing. I recognise that problematic drinking exists throughout the country—not just in urban areas, but in every constituency—and that there is a growing problem of young people drinking too much, too often, and ending up with serious health problems as a result. If I could be convinced that these measures would address that adequately, I could be persuaded to support them, but I do need to be convinced.

Lorely Burt (Solihull) (LD): I cannot agree with the right hon. Gentleman about minimum pricing, because I think there is a lot of evidence to suggest that the most responsible drinking goes on in our public houses. Although the alcohol manufacturers may have some reservations about minimum pricing, does the right hon. Gentleman agree that low charging by supermarkets, whereby our young people buy alcohol in them and get tanked up before going out, is detrimental both to our society in general and to our pub industry, which I am sure all Members cherish and are keen to see survive?

Mr Howarth: The hon. Lady makes an effective point. I am tempted to enter into a debate about what has happened to the pub industry over the last decade, but I doubt whether that would be in order. I will say, however, that people’s habits have changed, including in respect of the places they go to for entertainment. That is particularly the case for young people. Many of them no longer go to pubs for entertainment. Some of the new places they go to serve alcohol, but others do not. More is going on here than the hon. Lady suggests, therefore. She is right, however, that some young people buy alcohol from supermarkets and drink it at home, so that they are already half-filled up, as it were, when they later go out to a nightclub. One of the reasons they do

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so is that the drink prices in nightclubs are so expensive. I hasten to add, however, that I am not an expert on young people’s drinking habits.

Diana Johnson: Will my right hon. Friend give way?

Mr Howarth: I fear that I am at risk of straying into a separate debate, but I shall give way.

Diana Johnson: Minimum alcohol pricing alone is not a magic bullet. A range of other policies must be pursued, too, including making personal, social, health and economic education mandatory in schools so that young people learn about what happens to them if they drink too much.

Mr Howarth: I am sure my hon. Friend is right, and, as I have said, I have an open mind on the subject.

I fear, however, that if the alcohol products that young people take home to drink before going to a nightclub—or wherever—are no longer available to buy in supermarkets or other licensed retail establishments, there will be an increase in the sale of illegal products on the streets, and that is also a fear that I have in respect of minimum unit pricing. We have already seen this happening to some extent in respect of tobacco products. Also, such products that are illegally imported and then sold on the streets are not subject to quality controls.

If we do not get the education messages mentioned by my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) right, young people will drink anyway, but they will not be able to afford the products on offer in supermarkets and other licensed retail establishments. Instead, they will buy products off the back of a white van outside the park on a Friday night. That is a big fear of mine, and I have yet to hear a satisfactory response to it.

I fear that the overall impact of this Bill will be far worse on the people of Knowsley than on the people of the Cities of London and Westminster. I hope the Government give more thought to the effect these measures will have on poorer pensioners, people on low incomes and those struggling to bring up children on a relatively low income. They are important members of our society. If we do not offer them the right level of support, I fear for the future.

5.44 pm

Mr Christopher Chope (Christchurch) (Con): It is a pleasure to follow the right hon. Member for Knowsley (Mr Howarth). So far, this has been a low-key debate, but I suspect that when the people directly affected by the Bill receive their tax demands, they will write to us in large numbers.

I will concentrate my remarks on clause 8 and schedule 1, which relate to the higher rate child benefit charge. I raised this issue in an Adjournment debate. I am grateful to the Exchequer Secretary, whom I am pleased to see in his place, as the Government have given some ground and have responded to some of the concerns expressed in that debate and more widely, but I remain concerned that we will find ourselves with a lot of aggrieved constituents who will not be persuaded that the proposals in the Bill are fair and equitable.

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For example, a single parent earning £60,000 a year will lose all their child benefit, whereas next door there may be two people each earning £40,000 and they will retain their child benefit. Constituents say to me—perhaps this happens to you, too, Madam Deputy Speaker—that they resent the fact that the house next door is almost identical to theirs and yet is in a different band for community charge or, as it is now called—[Interruption.] It is not the poll tax; it is the council tax. If they resent a difference of £100 or £200 in their council tax compared with that of their next-door neighbour, how resentful will they be when they find that they are losing child benefit, which could run into thousands of pounds per annum, as a result of being a single-income family earning more than £60,000, whereas the people next door, who are earning a lot more, are retaining their child benefit? Obviously, such people would not have the same costs associated with earning their income as a single parent family, who would normally have to rely on child care to enable them to make their income high enough to pay the full amount—more than £60,000. So I do not see how this new system will ever be fair or be seen to be fair by the people who will be affected by it.

Today the Government are launching their consultation paper on plain packaging for tobacco products. Some wags are saying that that is promoted by the Treasury, because it will give the Treasury more room on the back of the fag packet to write down its latest policy announcements. I do not know whether or not that is correct, but the proposals in clause 8 and schedule 1 smack of policies conceived if not on the back of a fag packet, certainly on the back of an envelope. We know now that the proposal to take child benefit away from higher-rate tax payers was made at the Conservative party conference in 2010, at very short notice. It was then decided by the Chancellor that it would not be possible to take child benefit away from those with children aged between 16 and 18.

Jacob Rees-Mogg: Does my hon. Friend agree that, in principle, it is right that we should not tax people highly then to give them back universal benefits? Does he agree that we want to get away from a system where everyone gets benefits and then has to pay more tax just to get them?

Mr Chope: I agree with my hon. Friend that there is a lot to be said for simplification and stopping the churning effect. The late Lord Joseph was a great campaigner on these issues, and other Conservatives in the past have campaigned to simplify the tax system, which is the avowed intent of this Government. I also think it right to recognise in the tax system that when people have equivalent incomes, those with children have higher costs than those without children. If we are to recognise families in the tax system, one way is to have what used to be a child allowance, which is now incorporated into the child benefit.

If parents have higher costs, why should they start to pay tax at the same level of income as somebody who is not a parent and does not have those higher costs? That is where I disagree with the Government on this policy, which I do not think is fair or consistent. When it has been justified by the Prime Minister, the Chancellor of the Exchequer and the Exchequer Secretary, they have argued that it is wrong that people who earn £20,000 or £30,000 a year pay for the child benefit of people like

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my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). The answer to that is that neither my hon. Friend nor other people are being subsidised in that way by other taxpayers, because, as the Exchequer Secretary confirmed in a written answer to me just before the recess, somebody would have to have 10 children and be on the threshold of higher-rate tax before they started to receive more child benefit than they were paying out in tax. The Government deploy a specious argument when they say that someone on £20,000 or £30,000 a year is paying for my hon. Friend’s child benefit.

Mark Field: I think my hon. Friend and I agree that one of the most important tasks for any Government is to get the huge deficit down. One of the single biggest costs is the cost of welfare, which this year, for the very first time, will go through an aggregate £200 billion mark. Does he not accept that reconsidering the universality of certain benefits would be a sensible way to get the deficit down? Although I do not disagree with elements of what he has said about the workings of clause 8, consideration of removing universality from relatively well-off people, not just for this benefit but for others, would be a desirable way forward.

Mr Chope: My hon. Friend makes a good point. As I said at a press conference organised by the Child Poverty Action Group, there is a strong intellectual case for saying that we should revisit universal benefits. What is happening here, however, is that one particular universal benefit—child benefit—is under attack whereas others are not. Will we say next that if somebody with wealthy parents presents themselves at a hospital, their parents should have to pay a charge? Are we going to start saying that free dental treatment for children should not be available to the children of better-off families? Are we going to remove a whole load of other universal benefits? If we are thinking of going down that route, we should have a big public discussion and a public debate. We should put all the universal benefits into the melting pot and decide whether we think there would be a big benefit if the number of universal benefits were reduced or eliminated and whether, as a result, the overall levels of tax could be reduced.

Mark Field: I know that my hon. Friend is a very brave man and I recall that Christchurch is the constituency with the largest number of pensioners. Does he think that the universal benefits of the television licence allowance and the winter fuel allowance should not necessarily go to the wealthiest of his pensioner constituents?

Mr Chope: My hon. Friend gives me the opportunity to hide behind the manifesto commitments made by the Conservative party and the Prime Minister. I was going to refer later to some of the background, but, prompted by that intervention, I will perhaps say the following. When the Prime Minister was Leader of the Opposition, he said:

“I want the next Government to be the most family friendly Government we’ve ever had in this country”.

On 5 March 2010, he told a public meeting in Bolton that he would not change child benefit. On 6 October 2009, six months or so earlier, the then shadow Chancellor, now the Chancellor of the Exchequer, told the Conservative party conference:

“We will preserve child benefit”.

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I certainly went into the general election thinking that we would preserve child benefit as part of the universal benefit system in the same way as we would preserve the universal benefits that are applicable to so many of my constituents, as my hon. Friend points out.

My belief was reinforced on 22 June 2010, when the Chancellor said in his Budget speech in this House that

“we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.”—[Official Report, 22 June 2010; Vol. 512, c. 173.]

At that stage, everybody thought that that was the end of it. We would retain child benefit, but freeze it for three years, The yield to the Exchequer of freezing child benefit in 2013-14 is no less than £1 billion. Looking back, I think that that was also the point at which the Chancellor should have said that he was going to freeze the age-related allowances. If that had been presented in the same context, with those in receipt of child benefit having their benefit frozen at the same time as those in receipt of age-related allowances had theirs frozen, I do not think that there would have been a row about it as there has been this time.

That is the background, so how were we able to end up with the Government effectively launching an attack on hard-working families with children? The Government have got themselves into a mess because they have not complied with their own policy of properly discussing the issues in advance of introducing measures. An interesting document, “Tax policy making: a new approach”, was produced immediately after the election. It was issued by the Treasury in June 2010 and in the preface, my hon. Friend the Exchequer Secretary said:

“I want a new approach to tax policy making; a more considered approach. Consultation on”


“design and scrutiny of draft legislative proposals should be the cornerstones of this approach.”

Mr Ward: Does the hon. Gentleman agree that his call for a wider debate is necessary because universal benefits are often not universally claimed? That adds another complication to the issues that he raises. I know of two schools in areas of equal deprivation. The percentage of free school meals at one is 25% whereas at the other it is 53%, yet the levels of deprivation are equal in both areas. The issue is very complicated.

Mr Chope: It is complicated, particularly as free school meals are obviously not a universal benefit. Child benefit has a 96% or 97% take-up rate, and the Government’s proposals in the Finance Bill are designed to reduce that take-up rate. A number of people might opt out of receiving child benefit, so it will no longer be a universal benefit. As the hon. Gentleman says, if we want a debate about universal benefits, let us have one, but let us do so in the context of a Green Paper, some draft legislative proposals and so on.

In December 2010, in response to the consultation on the issue of a new approach to tax policy making, my hon. Friend the Exchequer Secretary said:

“This new approach is vital to the Government’s aim of restoring the UK tax system’s reputation for predictability, stability and simplicity.”

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There it is: simplicity. We are now talking about employing, on my estimate, between 500 and 1,000 extra staff in order to claw back child benefit to the extent of £1.5 billion from 1.2 million households. How complicated and complex is that? One has only to look at the detailed figures produced by the Treasury in connection with the Budget and to read the report of the Institute for Fiscal Studies to realise that it is incredibly complicated. That is why my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) said in the media not long ago that when he was a Treasury Minister, he was asked to consider this issue on a number of occasions by Treasury officials and he always reached the conclusion that one could do something with child benefit but not in a way that was fair and equitable. The Government have come up with a proposal that is not fair and equitable.

We know that the Government are relying on getting £1.5 billion in income from the measure and I realise that it is very difficult at this stage, when the Budget and the sums have been done, to move amendments that are in order to try to show how an equivalent sum could be raised in an alternative way. If the money was not all being raised from the people being targeted at the moment and there was a proposal to increase the contributions of some other people, such an amendment would be calling for an increase in tax and so could not be tabled by a humble Back Bencher under the Standing Orders of the House. Notwithstanding that, however, I hope to refer briefly to another way in which an equivalent amount of money could be raised by the Exchequer, which would be much fairer and simpler and which might find favour with a surprisingly large number of people if put out to consultation.

Let me conclude my comments on the lack of advance consultation on the child benefit measures. I think that some draft clauses should have been published and discussed. The Government had been thinking about the measures since October 2010 and, contrary to what they had said they would do, they did not produce any draft clauses for consultation, so we are effectively left to scrutinise a Bill that was published during the recess. We have had two weekends to look at it and this Thursday we will have to decide on all the amendments on child benefit in what will probably be, at most, a three-hour debate, under the timetable motion that the Government seek to impose on the House.

I urge my right hon. Friend the Chancellor, when he considers next year’s Budget, to revisit his proposals for having a better system with a lot more consultation. With such a consultation, I do not think we would be in our present difficulties with the VAT on static caravans, the removal of the pensioner age-related allowance, the capping of tax relief on charity donations and so on. The Chancellor and his Treasury team must be pretty concerned about the adverse publicity that has followed the Budget, but all those difficulties could have been avoided if the team had been a bit more trusting of their fellow parliamentarians and had shared information on these measures before the final decisions were made.

The consequence of the proposals on child benefit is that 1.2 million of the 7.9 million families receiving child benefit will lose out. Some 70% of those families will lose the full amount whereas others in the band between £50,000 and £60,000 will lose some if not all of their child benefit. Why do the Government want taxpayers

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with children to make a greater contribution towards deficit reduction than those on equivalent earnings without children? I have asked that question a number of times in the House but I have never had a satisfactory answer.

I want to put forward an alternative proposal in this public forum. There are about 2 million people earning more than £60,000 a year in this country. I have here some figures from a response to a parliamentary question that was asked on 27 February 2012, column 63W, which gave the number of taxpayers in 2010-11 in detailed income bands. The figures suggest that there were about 1.85 million taxpayers with incomes of more than £60,000 in 2011. The Library note that I have says that the information in HMRC table 2.5 and on the rate at which people’s incomes are increasing suggests that there will be around 2 million taxpayers with incomes over £60,000 in 2011-12. Those are the people I thought the Prime Minister and the Chancellor of the Exchequer had in mind when they said that those on higher incomes should make a larger contribution to deficit reduction.

All those people—the best part of 2 million taxpayers—could each be charged £1,000. That would generate £2 billion and at a stroke we would be free of interfering with the universal child benefit and would be free of being accused of picking on people with children rather than people without children. It would remove at a stroke the need to employ all the extra civil servants needed to administer a system that will be very complex, particularly in relation to those earning between £50,000 and £60,000 a year. It would also remove the administrative burden of having to introduce into the tax system definitions of couples living together—that is already a nightmare in the benefit system, so why introduce it into the tax system? I do not think the measures have been thought through, but rather than being negative about them, I am saying to my hon. Friend the Minister that I hope the Government will reconsider this issue between now and Report and perhaps consult on the possibility of asking, “Why don’t all those people earning over £60,000 a year make a contribution of £1,000 and thereby collectively generate £2 billion in income for the Treasury in the next financial year?” Incidentally, that would also remove the need to interfere with age-related allowances because the yield would be slightly larger.

I do not have any personal interest in this issue now because my two children are past the age at which they enabled their parents to qualify for child benefit, but if we were to bring this down to Members of the House, I ask why a colleague of mine with one, two, three or four children on a parliamentary salary should be forced to forfeit child benefit or have a child benefit charge, which may run to several thousand pounds a year, placed upon them while I, who no longer have the responsibility of having children in school, do not make a contribution. It just does not seem fair to me. There is a fairer way to do this.

When I originally raised my idea with the Chancellor of the Exchequer he said, “Who wants to start increasing the higher rate of tax?” but we do not need to do that because, fortunately, the Treasury has come forward with a form of introducing an arbitrary extra charge—a fixed sum, which is effectively a tax—that comes into play as soon as somebody’s income passes a particular threshold, which would be £60,000 in this case. That would enable us to avoid a situation in which 670,000 households

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with a family income of more than £60,000 will retain some or all of their child benefit while single-parent households on £60,000 will lose everything. I do not have the figures to hand but there are tens of thousands of single-parent households.

Given the additional disincentives that will result from the introduction of the measure, I hope that Treasury Ministers will think again about the wisdom of what they plan to do. There could be perverse consequences as people try to avoid the charges. There could be all sorts of hard luck stories. A person earning £60,000 or £70,000 might take pity on a widow with several children and go to live in her house. They would then find that they had to pay the charge, because they were earning more than £60,000 and living with someone who was in receipt of child benefit. Is that really the sort of message the Government want to send? I do not think it is. We want to keep the tax system simple. We want to promote the importance of families with children and recognise their extra responsibilities, not penalise them in the tax system.

6.10 pm

Mr Russell Brown (Dumfries and Galloway) (Lab): I want to look at what the Bill does for the economy, the country and the people of our nations. What does it mean in terms of jobs, growth and fairness?

After the global recession, there needed to be tough decisions on tax and spending and how best we pay the deficit down. As was indicated earlier, much has been said about the previous Government spending in an excessive manner, but when my party was in government, those who now find themselves on the Government Benches said nothing at all about programmes for new schools and hospitals. That was not excessive spending; it was all needed after years of lack of investment, and it was welcomed with open arms. Members now on the Government Benches went to official openings, and applauded what was happening in their back yards, yet suddenly it has become “excessive spending” by the Government who were in power at the time.

The 50p top tax rate on the richest was introduced by the previous Government, and it is why we set out the difficult cuts that would be required to police, education and welfare budgets. However, by raising taxes and cutting spending too far and too fast, this Tory-led Government have choked off the country’s economic recovery and put hundreds of thousands more people out of work.

As I have said on many occasions in the House, my constituency is a rural one. The two biggest employers are the national health service and local government, so in the private sector my constituency depends on small and medium-sized enterprises. This afternoon, we have heard what SMEs are looking for. Yes, they want to be able to employ an extra pair of hands—if the work is there—and people have said that should be made easier for them. I am not about making life difficult for SMEs, but I can tell Members who are still in the Chamber that SMEs are looking for a bit of optimism. They want to see the optimism that, when the national minimum wage was introduced, allowed them to invest and employ additional hands; it was a sign of growth or green shoots—call it what we may.

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America had the same deficit problem as Britain after the worldwide slump, but President Obama stuck to the plan that we were pursuing when we were in government: supporting the economy until recovery was secure. The US is growing, as we can all see, and unemployment is falling—the opposite of what is happening here. As we have no growth and so many more people are out of work—on the dole rather than paying taxes—the Chancellor’s deficit reduction plan is not working. In fact, as has been recognised on both sides of the House, the Government are set to borrow an extra £150 billion to pay for that economic failure.

The sole Scottish National party Member who was in the Chamber has left his place for the time being. Much was said in the ’80s and ’90s about the abundant revenues that were accumulated in this country from North sea oil and gas, but it was clear even in those heady days that they were being used up in economic failure. We are seeing a repeat of the mistakes of the late ’80s and the early ’90s; we are paying a heavy price for economic failure. That is why to a certain extent it is difficult to oppose some public sector pay restraint when others are losing their jobs, but in tough times, it is even more important to do things fairly. We should freeze wages for top-paid public sector workers to fund bigger pay rises for those on the lowest incomes, because if they have more money in their pocket, they will spend it in our high streets, which will give a glimmer of hope to SMEs.

Ministers simply have not listened, but that is no surprise. Only last week, the right hon. Member for Haltemprice and Howden (Mr Davis) wrote that with every passing day the Government seem more and more out of touch with people on modest and middle incomes. They are not just out of touch; they are already showing signs of increasing incompetence. Over the last couple of weeks, we have seen half-hearted attempts at U-turns—going back and wishing to consult and reconsider. The next few days will really test this Government and this Chancellor and his Treasury team.

We all witnessed the Government’s incompetence when we read in our newspapers, heard on our radios and saw on our televisions that they had caused panic at filling stations the length and breadth of the country. The Government’s economic policies are failing. Working families are paying the price, and it is a heavy price. We all live in hope of a change of heart. Unless there is one, next year pensioners will be hit hard, as millions are asked to pay more so that millionaires can pay less.

The Budget does nothing to give Britain the jobs and growth we desperately need now, and nothing to support families and pensioners on modest and middle incomes. Instead, it will do the opposite. This month, families are starting to find out what the Government’s decisions will mean for their budgets. As my Front-Bench colleagues have pointed out, according to independent experts the changes coming into effect this month will leave a family with children worse off by an average of £511 a year. To many of us in this place, £10 a week may not seem a lot, but it is to a family merely getting by.

Nick de Bois (Enfield North) (Con): The hon. Gentleman would do well to reflect on one thing that would really hurt families: it would be far more devastating if the Government did not stick to their policies, and there was an increase of 1% or more to the interest rate, and to mortgage rates. Does he agree?

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Mr Brown: Only in certain respects. The hon. Gentleman talks about mortgage interest rates; I am sure that he does not need me to remind him that not every household has a mortgage. Some families are finding it difficult to pay their rent, let alone a mortgage. That is why I make the point that £10 a week would make a real difference to many families.

Sheila Gilmore: Does my hon. Friend agree that many families are experiencing increases in mortgage rates? Increases have recently been announced, despite what the hon. Member for Enfield North (Nick de Bois) says. People are feeling the pain.

Mr Brown: I thank my hon. Friend for her intervention. There is no doubt that there are myriad different experiences out there in our communities, towns, cities and villages. To keep their jobs, people are deciding to take pay cuts or to work fewer hours, and that is tragic, because when that happens, household income is affected. That will have a greater impact on some families than on others.

A point was made about the working tax credit. I have spoken to welfare rights services in my constituency, and to Citizens Advice, and only now—since the end of last week, and in the two or three weeks ahead—are we all beginning to see the impact. It had not really dawned on people how much of an impact there would be. I will undoubtedly see some of the 400 families in my constituency who will lose all their tax credits. They do not have a hope of moving from 16 hours’ work per week, for a couple, to 24 hours’ work a week. I just mentioned that some families are working fewer hours to keep their job. The work is not there. For those families, the loss is potentially in excess of £70 per week. In many cases—this has been mentioned to me by two constituents whom I have met—people feel that they would be better off quitting work and living off benefits. That is not to say that benefits are excessive in this country—anything but. People are struggling to make ends meet. How does that square with the idea, which I hope all of us in this House agree on, that work pays? Some families are saying, “It’s a waste of time working; I would be better off on benefits, because I am about to lose my tax credits.”

There are key Budget decisions that it is not too late to stop. The £3 billion tax rises for pensioners—the so-called granny tax that the Chancellor announced last month—does not kick in until next year. That is why I say to Government Members that, to a certain extent, I live in hope that there will be a change of heart over the next few days. Then there is the £3 billion handout that the Chancellor announced for people earning more than £150,000, when he cut the 50p top rate of income tax. That is a tax cut of more than £40,000 for 14,000 millionaires, all on the back of pensioners and working families. How out of touch are the Prime Minister and the Chancellor if they think that millions of pensioners who have worked hard all their life should have to pay more tax next year, so that millionaires can pay less? It does not square. Ministers boast that the state pension is increasing, but when we look at it in more detail, we see that it is only keeping up with inflation.

What is happening in the Budget is not fair or right. That is why, as my hon. Friend the Member for Leeds West (Rachel Reeves) said, Labour will hold a vote in the House on Thursday to try to defeat the granny tax.

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We will ask MPs from other parties to join us. We will also vote to stop the £3 billion tax cut for the richest. We will call for a tax on bank bonuses to fund a guaranteed job for every young person who is out of work for more than 12 months—a job that they should have to take up, and that they will relish the challenge of taking up, given the opportunity.

I shall soon conclude, because my points about VAT have already been made, but I did mention, in the three or four-day debate that followed the Budget towards the end of March, the issue of VAT on caravans. I said that I did not know how many caravan parks I had in my constituency, but I guessed that in no part of my constituency would a person be more than 8, 10 or 12 miles from a caravan park. There are 58 sites in my constituency. The VAT will have an impact on those businesses, and a considerable number of them have contacted me already. It is my intention to meet them to discuss how much of an impact the measure is having.

We have talked about hard-working families; the plea to families is that they should enjoy a staycation this summer—in other words, they should holiday here in the United Kingdom. That is the right thing to do. After October, unless there is a change of heart, there will be an increase in the cost of holidays for hard-working families on many of the sites that I am talking about. It is not just my constituency that is affected; I know from my discussions with Government Members that it is a serious issue for the tourism sector the length and breadth of the UK.

Let me say for the third and perhaps final time that I hope that there will be a change of heart, because we are heading in the wrong direction. There is far too much pain in the country at the moment. There is more to come—I recognise that—but it is not being shared fairly.

6.27 pm

David Rutley (Macclesfield) (Con): It is good to follow the hon. Member for Dumfries and Galloway (Mr Brown), who makes an important point about staycations. I recommend coming to Macclesfield for a staycation. Nestled beneath the Peak district, and enjoying tremendous views over the Cheshire plain, it is a great place to be. It even beats Retford; the hon. Member for Bassetlaw (John Mann) will know that.

John Mann (Bassetlaw) (Lab): But Macclesfield is about to be relegated.

David Rutley: Let’s keep football out of this. Coming back to the Finance (No. 4) Bill, it is tremendous to have the opportunity to speak in this important debate. Now that we are nearly halfway through this Parliament, it is important to think about our direction of travel. It is clear that under this Government, Britain has returned to economic credibility, and is laying the foundation for private sector and business-led recovery. Despite views to the contrary among those on the Opposition Benches, my right hon. Friend the Chancellor of the Exchequer has been proved right to chart the course that he did at the beginning of the Parliament. He was right not just to tackle the deficit head on, but to put the private sector at the heart of the growth agenda, where it needs to be. It is a consistent theme that came through loud and clear in the emergency Budget and the 2011 Budget.

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Now, in the 2012 Finance (No. 4) Bill, it continues to be pivotal, and at the centre of what the Government are trying to achieve.

There are a number of important proposed tax changes, which we have heard discussed by hon. Members, but I want to focus on the measures that have been designed to support British businesses, which are critical to economic recovery. First and foremost, I welcome the Government’s move to accelerate the commitment to having the lowest corporation tax in the G7. It is strange that no Opposition Members took any time to mention that, because that is where we will create new jobs. Having corporation tax at 22% by 2014 will give us real competitive advantage in attracting the investment that we need for sustainable economic growth. This Government’s plans are bold and ambitious, bringing the effective rate of corporation tax to a level below that of developed countries such as France, where it is currently 36.1%, Germany, where the rate is 30% to 33% and Canada, where the rate is 25% to 31%. I understand that even the Republican party in the United States proposes an effective rate of 25%. The measures set out in clause 5 will help us to increase business investment and will help us on our trajectory. I understand that the forecast by the Treasury suggests £3.4 billion of extra investment by British businesses, which is vital for the country.

Through the Finance Bill the Government have recognised the vital roles that innovation will play in helping to strengthen the economy. That is clearly demonstrated by the Government’s corporate tax road map, which came out in November 2010, with the introduction of the patent box, which features in clause 19 and schedule 2, and by the above the line research and development tax credit, both of which will come into effect in April 2012. Such tax measures complement the work that the Government are doing to support vital innovative businesses and industries, such as pharmaceuticals. The recently launched life science strategy will also help industry in the UK to tackle global challenges that are being faced in the pharmaceutical sector and will help us to keep this important skilled work force in the UK, just as I am working with AstraZeneca to do in Macclesfield.

The Budget sets out important steps to help the small and medium-sized enterprise sector. The SMEs will be the vital engines for growth in the sector, as many of us on the Government Benches are aware. The Budget’s £20 billion national loan guarantee scheme will help to reduce the cost of credit for SMEs, which 60% of small firms believe is unaffordable, and will provide an opportunity for small firms to motor ahead. Both the Federation of Small Businesses and the British Chambers of Commerce have welcomed this important and ambitious scheme.

The reforms of corporation tax and of corporate tax more generally have been welcomed by business. The forecasts suggest that they will save business £6 billion a year by 2015. That is money that will be better invested by businesses in new initiatives, enabling them to get on with the job of creating the work that many of us on both sides of the House are keen to see come to fruition. That is why the Budget has been welcomed by so many business groups and by the business community.

The CBI says that

“by seizing the opportunity to make sure our corporate tax system is more internationally competitive, he”—

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the Chancellor—

“has sent a powerful signal to companies to invest, do business and create jobs in the UK.”

The IOD goes further and says:

“The reduction of Corporation Tax faster than planned is a positive step in the right direction”.

These are important signals and key messages from the business community showing support for what the Government are doing in this important area.

Although the debate today is rightly focused primarily on the tax-related aspects of the Budget, I shall spend a few minutes considering the supply-side reforms which will also have important impacts on the economy. That is why it is right to acknowledge the work that is being done by the Government in reducing the regulatory burdens faced by our businesses. As Ronald Reagan once said:

“It’s hard when you’re up to your armpits in alligators to remember you came here to drain the swamp”,

but this Government have not forgotten, and are taking action to drain that swamp.

The UK has more than 21,000 regulations on its books, and the Institute of Directors has calculated that the cost of those regulations is approaching £112 billion a year. These figures clearly demonstrate that we will benefit from an approach to deregulation that is every bit as ambitious as the Government’s deficit reduction initiatives and their tax reform strategies that will create the optimal conditions for growth. That is far better and more constructive than the demands from the Opposition for yet more Government spending.

The size of the prize is huge. Cutting the regulatory burden on businesses by just 10% would save British businesses about £11 billion a year. That is the equivalent of cutting corporation tax and the small profit rate by a staggering eight percentage points. Even by the standards of the benefits provided by the Bill, that is a hugely positive contribution to business. That is why the Government are pressing ahead with their deregulatory agenda. The one-in, one-out rule has helped to stem the flow of new regulations, and the red tape challenge is tackling the stock of old regulations. Reforms of health and safety regulations will help to free British businesses from a culture that is damaging the well-being of our economy.

Churchill once said:

“If you have ten thousand regulations you destroy all respect for the law” ,

and, just as relevant today, destroy a nation’s competitiveness. Working together, the Government and the private sector should continue to seize the opportunity and put the deregulatory agenda in a higher gear. This approach will be critical to complement the important work set out for businesses in the Bill.

Representing the Ribble Valley, Mr Deputy Speaker, you will be aware that many of the pro-business policies in the Bill will help to rebalance the economy in the country and across the regions, including the north-west. We have become too dependent on the public sector to create jobs, and we must change that, as we are doing. Despite much grumbling from the Opposition, there is evidence of success. We see important progress at Jaguar Land Rover, where 1,000 jobs are being created at Halewood by a 24-hour production line, one of the few

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24-hour facilities in Europe. BAE Systems has been named a key contractor for the F-35 joint strike fighter, which will bring about £30 billion to the UK economy and safeguard 25,000 jobs, many of which are based in the north-west, near Mr Deputy Speaker’s constituency.

We have seen other positive news in recent weeks. In Crewe, near Macclesfield, thanks to a £3 million regional growth fund investment, Bentley has announced that it will create 500 extra new jobs. All these steps show that private sector jobs are being created. As a result, more employers in the north-west are feeling more optimistic about job creation opportunities. According to a March 2012 Manpower survey, 6% more employers in the north-west say that they intend to hire this quarter than in the last quarter, which is welcome news for the region.

We have heard much from the Opposition about job creation. My concern as I look at their policies is that, yet again, they are calling for more jobs to be created by the public sector, which are not sustainable. The jobs that the Government seek to create are sustainable. They are based on a private sector-led recovery. As I listen to the arguments from the Opposition, it is ever more clear to me that the previous Government were overspent, overdrawn and over-awed by the challenge that they had helped to create. It has been left to this Government to clear up that mess.

As we approach the halfway point in this Parliament, we can take stock of the progress that is being made to back business. Important strides have been taken to tackle the deficit, to address supply-side constraints and in this, as in previous Finance Bills, to create a truly competitive corporate tax environment. Such changes are much needed. That is why I add my support to the Bill today.

6.38 pm

Sir Stuart Bell (Middlesbrough) (Lab): It is a pleasure to follow the hon. Member for Macclesfield (David Rutley), who made a number of important points. The first of those was that the recovery being sought by the Government is a private sector-led recovery. We would all say amen to that, but what concerns us on the Opposition Benches is the imbalance being created between a private sector-led recovery and the social model that we have espoused and continue to espouse. The Government are somewhat unbalanced when they attack the welfare state while at the same time seeking the recovery.

The hon. Gentleman said that Opposition Members have not referred to corporation tax. Actually, I referred to it when the Chief Secretary to the Treasury wound up the Budget debate, because he omitted to say that the reduction in corporation tax to 22% would not come into effect until 2014. He amended that today and stated that that is the case. The Opposition welcome that, but we wonder whether the benefit of the corporation tax reduction will go into shareholder dividends rather than into growth. Although growth is a major topic in this debate, the Government have yet to say how a measure that will come into effect in 2014, which by my reckoning is two years off, will help growth.

We have heard a lot about growth and, in particular, about national insurance holidays, which were mentioned by my hon. Friend the Member for Leeds West

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(RachelReeves). I will come back to that later. The hon. Member for Macclesfield mentioned business investment, which is important. The £20 billion scheme introduced by the Government is very welcome. I will also come to that later.

The hon. Gentleman also mentioned Ronald Reagan. That was the second mention of him today. The hon. Gentleman talked about him in relation to alligators and cleaning the swamp. Earlier, my hon. Friend the Member for Leeds West referred to the Laffer curve, which was written on a napkin. It suggests that if one reduces taxation, one will get growth. It was pointed out on the Floor of the House that that does not really happen. Nevertheless, it is one of those myths that are in the system and that will stay there.

The hon. Gentleman mentioned cutting the regulatory burden. I agree with that. When I was in opposition before, a Minister came to a meeting and showed us the regulations that the former Government had introduced and those that the Conservative Government of the time had introduced. The second pile was twice as high. A great amount of what the Government do increases red tape and the regulatory burden. We are therefore happy that there is an attack on red tape.

The hon. Gentleman also mentioned Winston Churchill. This has been a day of famous names being thrown around the House. I will entertain the hon. Gentleman by telling him something that I imagine he does not know. The allowance that the Government are abolishing with their granny tax was brought in by Winston Churchill in 1925. That fact is little known, but my mind is full of useless and irrelevant information that I wish to share with the House. When Churchill made his Budget speech on that day, he used a whisky flask to replenish himself and, as he pointed out, to replenish the Treasury. The hon. Gentleman is therefore in good company in discussing these matters.

The hon. Member for Christchurch (Mr Chope), who is still in the Chamber and following the debate with great interest, made a number of important and significant points. He contradicted the hon. Member for Cities of London and Westminster (Mark Field) on the issue of child benefit. The hon. Member for North East Somerset (Jacob Rees-Mogg) also spoke about universal benefits. The hon. Member for Christchurch, who describes himself as a humble Back Bencher, although we would not necessarily agree with that term, said that there is a debate to be had about universal benefits. He mentioned fairness and asked where the fairness is in the system. People who have children receive child benefit and those who do not have children do not. The word “fairness” is in vogue; it is the great word. It is used by Opposition Members and by Government Members. However, unless fairness is linked to values, we have no idea what it means and what it should come to. There is no great appetite among Opposition Members for attacking universal benefits.

I congratulate the hon. Member for Christchurch because for a short while he was Chancellor of the Exchequer—not for a day, not for a week, but for the few minutes in which he made his speech and gave his own proposals. I predict that over the years, universal benefits will be whittled away. We are already seeing it. They will become lower and lower. As I tell taxi drivers when I talk to them about child benefit, free television licences for the over-75s and the winter fuel payment,

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in the years to come people will look at us in amazement and say, “Did you really have those benefits in the past?” That is the way things are going.

My hon. Friend the Member for Leeds West talked about VAT and my hon. Friend the Member for Dumfries and Galloway (Mr Brown) talked about the VAT on caravans. I would like to talk about the sad event of the 5% VAT rate on church repairs ending. The Chancellor called it an anomaly. When I was the Second Church Estates Commissioner, the Church of England worked long and hard to persuade the then Chancellor, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), on this matter. The former Archbishop of Canterbury took him across to Lambeth palace and offered him a cup of tea or coffee—not the celebrated whisky of Winston Churchill. On the back of that, the then Chancellor understood the importance of the heritage and fabric of our churches, and agreed effectively to reduce the rate of VAT to 5% for three years. When he became Prime Minister, he made the change for the duration of his Government. It is a matter of regret to the Church that the rate has now been called an anomaly and will no longer exist. That is a great pity for the Church and will create problems in maintaining its fabric.

My hon. Friend the Member for Leeds West made a very fine speech. When she was taking interventions, which she handled with great capacity and knowledge, there was confusion among Conservative Members about tax avoidance and tax evasion. Tax avoidance is legal, whereas tax evasion is not. I had the feeling that there was obfuscation among Conservative Members about the taxation regime for contributions to charity. The clear view is developing that the Chancellor will consider that matter again, which we respect and welcome. I will give my age away when I say that in the first Finance Bill on which I sat, which was in 1983, there was a measure that would have liquidated the co-operative insurance company. It would have wiped it out. We took the matter to Lord Lawson, who considered it and removed the measure from the Bill. We welcome the fact that the Government are looking at this issue and I am sure that they will take into account, among other representations, the statement made by the Archbishop of Canterbury.

My hon. Friend the Member for Leeds West talked about the Ernst and Young ITEM Club and mentioned a number of facts from its report today. My hon. Friend the Member for Dumfries and Galloway and the hon. Members for Cities of London and Westminster and for Macclesfield also mentioned it. Its spring forecast makes it clear that this year we can expect 0.4% growth:

“ITEM says that what the economy needs now is for UK companies to invest their substantial cash reserves. The strong recovery in the UK is partly due to buoyant business spending, whereas in the UK investment has fallen to 12% below its 2008 level”.

That is important and serious. There is a lack of investment and companies prefer to hold their money under the bed because of the Bank of England’s concepts of moral hazard and too big to fail, and because of the Basel accords, which have a higher capital requirement. The banks are therefore reluctant to lend and, of course, companies are reluctant to borrow. That is an important and significant fact that we have to deal with.

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Ernst and Young also states:

“Ernst & Young’s Eurozone Forecast, Spring edition suggests after a fall of 0.4% in 2012, Eurozone GDP is expected to grow by about 1% in 2013 and some 2% a year in 2015-16. This year, economic conditions will test policy-makers’ commitment and ability to preserve the Eurozone in its current form, with large amounts of public and private sector debt to be re-financed, tighter credit conditions, job losses and further fiscal austerity.”

In these debates, we have been spared an attack on the eurozone and a declaration that the eurozone is responsible for our low growth. The eurozone sorted itself out in December.

Mr Gauke indicated dissent.

Sir Stuart Bell: The Minister shakes his head, but Italy and Spain were able to raise finance on the markets at a reasonable rate. Since then, a firewall of something like £720 billion has been put in place. Does the Minister really want the eurozone and the euro economies to fail, given that 60% of our trade is with Europe? He is still shaking his head, so I invite him to intervene.

Mr Gauke: I do not want the eurozone to fail, but this is not the week for us to be complacent.

Sir Stuart Bell: I was able to drink my glass of water during that intervention, so it was appropriately timed.

I presume that the Minister is referring to Spain, where the yields have reached 6% on the open market. That is not the yield that investors are asking for on new issues, so he should settle down a bit—there is no crisis in the eurozone and the euro this week.

A lot has been said about growth in the small and medium-sized enterprise community. My hon. Friend the Member for Leeds West, the hon. Member for Cities of London and Westminster, my hon. Friend the Member for Dumfries and Galloway and the hon. Member for Macclesfield all referred to it. We, and the SME community, welcome the credit easing scheme that the Chancellor has introduced, which will enable the Government to help the banks lend it a further £20 million at 1% less interest than usual bank loans.

I note that although the hon. Member for Chichester (Mr Tyrie) welcomed that credit easing in his contribution to the Budget debate, he feared that the money would not go beyond the banks’ balance sheets. My concern is that it will not go up to the Tees valley and other local economies. It has always been a matter of regret to those of us in the north-east that when the Government came into office, they chose to treat all regions equally, failing to understand the vast discrepancy between the south-east and the old industrial heartlands of the north-east.

The hon. Member for Macclesfield referred to the investment in Jaguar. I congratulate the Prime Minister on announcing when he was in Tokyo that a new Nissan model would be manufactured in Sunderland, which followed a similar announcement about another model. Yesterday, we saw the unique event of a blast furnace that had closed two years ago, which everybody said could not be reignited, being reignited under the auspices of a new Thai investor who put £4 billion into buying the plant and £2 billion into getting the furnace going. What does it tell us about the global economy that a Thai investor can come over and invest that money in

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the north-east, and that steel slabs will be put on ships and sent right across the world to Thailand? We ought to remember that when we criticise the global economy and its impact on our own economy.

As a consequence of the Budget, the local enterprise partnerships in the north-east will receive £10 million of additional funding for the Growing Places fund, to unblock local projects. The hon. Member for Cities of London and Westminster mentioned that investment. We in the north-east, and certainly on Teesside, also welcome the manner in which our local enterprise zone has developed and is succeeding, which is a great tribute to our local community’s belief that there is a future for us.

I have no interest in being negative about the north-east and manufacturing, but as the Business Secretary has said, manufacturing has dropped from 18% to 10% as a share of our economy. He has also declared that he is a social democrat, and we welcome him to the fold. He must be disappointed, as we are, that the Budget does not go far enough or fast enough to increase jobs and growth and offset the pace of the Chancellor’s deficit reduction. The hon. Member for Cities of London and Westminster made that point ably.

I turn to the essence of the debate and of the Government’s proposals, which my hon. Friend the Member for Dumfries and Galloway and the hon. Member for Cities of London and Westminster touched upon—how to achieve growth at a time of steep deficit reduction. The Government could not even carry through their own deficit reduction programme for 2015, and they have had to extend it to 2017. My hon. Friend the Member for Leeds West made the point, which the hon. Member for Cities of London and Westminster took up, that public expenditure is still rising. That cannot be gainsaid.

The hon. Member for Cities of London and Westminster said that we could not live beyond our means. That reminded me of Oscar Wilde, who said when he was in Paris:

“I am dying beyond my means.”

Let us hope that the Budget will prove to be more on the upturn than the Oscar Wilde downturn.

The Opposition welcome any measure that helps manufacturing, reduces red tape and gives our people optimism and confidence. That word was used in an intervention earlier, and we want confidence, but we are not entirely convinced that this Budget will give it.

6.55 pm

Julian Sturdy (York Outer) (Con): It is a real privilege to be called in such an important Second Reading debate and to follow the hon. Member for Middlesbrough (Sir Stuart Bell).

As the coalition made clear upon its formation back in 2010, the overriding priority of the Government and the House must be the economy. We have heard many comments this afternoon about the difficult financial legacy inherited from the previous Administration, but as we consider this wide-ranging Finance Bill, the focus of my contribution will be on not the past but the future.

In such turbulent and difficult times, we must govern not only for today but, perhaps more crucially, for future generations. Failure to ensure economic recovery,

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encourage new technological industries and reduce the deficit while simultaneously promoting growth will consign not just one generation but multiple generations to long-term economic hardship and its consequences. The international economic waters make steering such a delicate course difficult, and we should appreciate that everything that the Government do, including in the Bill, is hugely shaped and constrained by international factors. A quick glance at Greece and the eurozone provides a daunting reminder of the long-term economic troubles awaiting our continent.

The general thrust of the Government’s financial policy to date has been entirely sensible—to reduce the deficit while promoting and freeing the private sector. Sadly, that careful approach has pleased few. For some, the idea of any reduction in public spending is completely unacceptable, while for others the Government have failed to front-load the cuts enough or cut deeply enough. Indeed, following the Budget a few weeks ago, a number of media outlets have portrayed their concern, frustration and anger. The focus has largely been on the Government’s proposals to reform child benefit and personal allowances, including those of pensioners, and on the politically questionable crackdown on Cornish pasties.

Lost in the wave of negative press cuttings were some of the positive steps that the Chancellor outlined, which should be highlighted and celebrated, particularly by pro-business Government Members. I truly believe that cutting the main rate of corporation tax to 24% from 1 April 2012, as outlined in clause 5, and then to 22% over the next three years, sends out a clear signal that Britain is open for business once again.

Throughout the new Labour years, Britain’s lead on corporation tax was sadly lost. In 1997, we had the 10th lowest main rate among the 27 EU nations. By the 2010 election, we had the 20th lowest. The Government’s corporation tax reforms and other measures will give us the most competitive tax system in the G20.

I will be completely honest: I have always been happy to nail my colours to the mast and declare, as I do again, that I passionately believe in a low tax economy. Low tax economies are attractive places in which to set up, relocate and expand a business. A competitive and vibrant private sector is essential for job creation, economic growth and, by extension, delivering a higher tax take. Ensuring that Britain can offer such incentives to businesses around the world will mean that we remain the No. 1 place in which to do business, and the Chancellor should receive a great deal of credit for putting us on such a pathway, despite the wider constraints of the budget deficit.

Thus far, I have focused on the wider economy and the creation of a private sector-led recovery through providing incentives and tax reliefs. However, I would also like to consider individual households, as the same principle can and should be applied to them. As several hon. Members have said, times are incredibly tough and households face real pressures. I confess that I would have liked some news in the Budget about fuel duty, particularly given the importance of fuel prices in rural areas such as my constituency of York Outer and across north Yorkshire. Yet I recognise that fuel duty will have been frozen for 16 months, thanks to the Government’s actions in the 2011 Budget and autumn statement, and that they also introduced the fuel stabiliser. We must be realistic. Under the current financial conditions,

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the Government can do only so much in each area. Altogether, we have done more in two years on fuel than the previous Government did in 13.

John Mann: Does the hon. Gentleman know that when the Government came in, unleaded petrol was 119p a litre? How much is it now and how much will it be after the next increase in October?

Julian Sturdy: I was going on to say that we must be realistic. However, if we had continued over the two years with the rises that the previous Government introduced, fuel would have cost between 9p and 11p a litre more than it does today. Having said that, I still hope that the 3p rise planned in August will be kept under review because we must not forget the impact of high fuel prices on rural areas and the wider rural economies.

John Mann: Some of my family originate from Copmanthorpe in the hon. Gentleman’s constituency, and petrol is sold there. Today, petrol in his constituency, mine and Mr Deputy Speaker’s is around 143p or 144p a litre, and it is going up. So, 119p and 143p or 144p—how much more is petrol since the Chancellor took office?

Julian Sturdy: I hope that some of the hon. Gentleman’s friends might support me in Copmanthorpe—you never know. He is right that many rural garages in my constituency and throughout north Yorkshire are struggling. Independent forecourts are struggling even more than the supermarket chains. Fuel prices have gone up, but that is due to the higher oil prices, which have escalated dramatically over the past two years. As I said, if we had not stopped the previous Government’s tax increases on fuel in the past 18 months, fuel prices would have been 9p to 11p higher than they are. The impact on rural areas and hard-working families across the country would have been huge.

Nia Griffith: Has the hon. Gentleman asked the Chief Secretary why a rebate seems to be available in some parts of the highlands and islands of Scotland, but not in Yorkshire or Wales?

Julian Sturdy: Obviously, as a north Yorkshire MP who represents a rural constituency, I understand the impact of fuel prices on rural areas and economies, and the Government must consider that. However, as I said, the Government have to consider the wider impact when they make such decisions. They would like to do many things, and I would like them to do a lot of things—I would like the 3p rise not to come in in August, and I hope that it will be kept under review if oil prices continue to rise—but they have to take a balanced view.

David Rutley: Is my hon. Friend aware that every penny reduction in the fuel duty allowance costs half a billion pounds? I wonder whether the hon. Member for Bassetlaw (John Mann) and other Opposition Members can tell us how they would fund such changes in fuel duty.

Julian Sturdy: My hon. Friend is right that any cut in fuel duty or reduction in potential rises that are coming down the line has a huge impact on the Treasury’s finances, and the money always has to be found elsewhere. However, I go back to my original point, which will

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have some resonance across the House: rural areas are particularly affected by high fuel prices and that has an impact on the rural economies. I ask the Exchequer Secretary to keep the matter constantly under consideration whenever he looks at increasing fuel prices.

Neil Parish (Tiverton and Honiton) (Con): My hon. Friend makes a good case for reducing fuel duty, especially in rural areas. However, I also recognise that the Chancellor has only so much money and that taking people who earn up to £9,000 out of tax will help many lower-paid workers in many rural areas. That will help. We must concentrate our finance on where we can put it to best use.

Julian Sturdy: I agree. Raising tax thresholds will be hugely helpful, and I will speak about that later. My hon. Friend is right that the number of people we will take out of tax has sadly been a little lost in the press and media coverage of the Budget. We must champion and emphasise that policy.

I want to consider another controversial issue at a household level, which several hon. Members have already mentioned: the child benefit reforms in clause 8. In the early consultation on the proposals, I wrote to Her Majesty’s Treasury, asking for them to be reviewed. The amendments in the Budget are clearly positive developments, which brought some fairness back to the policy. My concern now is about how it will be implemented and whether the costs of administering the reduction in child benefit will be worth the benefits. I hope that more light will be shed on that in due course. I would also like to put on record again my support for transferable tax allowances as a way of increasing fairness in the system. I believe that Ministers are still examining that, and I hope that it will get due consideration.

My hon. Friend the Member for Tiverton and Honiton (Neil Parish) briefly raised the personal tax allowance changes that the Government have made. Again, I commend the Government for raising personal tax allowances faster to ensure that more of the lowest paid are lifted out of paying tax altogether. That is an excellent policy and a very Conservative principle.

The controversy about the so-called granny tax in clause 4 is understandable. I have great sympathy with those who are unhappy about the changes, but I must make a couple of points. We live in extreme times. The largest budget deficit since the second world war requires a strong Government to make decisions that they would not choose to take in other circumstances. Opposition Members can attempt to make political hay out of such decisions, but they were not charged with the responsibility of cleaning up the current mess. With an increasing state pension, the triple-lock guarantee and the protection of key benefits such as free eye tests, prescriptions, TV licences and bus travel, pensioners remain at the top of the priority list when it comes to protecting individuals from the full impact of the economic crisis.

In summary, the Bill contains a great deal of positive, forward-thinking and private sector-encouraging policies. It deals with the difficult but necessary financial decisions and judgments, which will be truly appreciated and tested only in the fullness of time, and yet the message is almost more powerful than the contents. The Bill is unashamedly proactive in building a more competitive international economy. For that reason alone, I hope hon. Members give it full backing tonight.

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7.10 pm

Stewart Hosie (Dundee East) (SNP): Before I begin my remarks on the Bill, may I make one small comment on the contribution of the hon. Member for Leeds West (Rachel Reeves), who was a little critical in her speech of the VAT change to ski tolls? Will the hon. Member for Pontypridd (Owen Smith) gently remind her that the systems in Glenshee, Glencoe, the Lecht, Aonach Mor and Cairngorm are important parts of the Scottish winter economy? I am sure she did not intend in any way, shape or form to be critical of the many jobs they provide for young people, or of the tens of thousands of working-class Scots who loyally use their local ski systems every winter.

Owen Smith: Of course my hon. Friend the Member for Leeds West (Rachel Reeves) was not in any way challenging the importance of those jobs. She was juxtaposing the Chancellor’s decision to introduce a tax break in that industry and a tax increase in the caravan park industry, in which there is another important set of jobs.

Stewart Hosie: Indeed—the caravan sector has my sympathy and support in attempting to change that decision.

There are many other reasons for opposing the Bill, and I shall highlight a number of them. One key reason is the introduction of the plans to reduce the 50p tax rate to 45p for those earning more than £150,000 a year—some of us have already managed to vote against the measure, but I shall say no more about that tonight. According to the Government’s numbers in the 2012 Budget book, the measure will mean that the Government forgo £360 million over the forecast period. It is quite something when a Government are prepared to sanction the loss of revenue yield when the deficit, debt and borrowing forecasts are worse than the forecasts in the previous Budget.

The changes to age-related allowances for older people—the granny tax—will impact on about 40% of pensioners, which is another a reason to oppose the Bill. The measure will affect those who are above the basic state pension and pension credit level, but below the £30,000 a year level—people on that level will not benefit anyway. That will leave some 4.41 million people worse off than they would otherwise have been.

The Budget and the Bill are full of wrong-headed decisions, not least the Government’s determination to increase air passenger duty. Let us look at what they have done. In the Budget, the Chancellor announced that APD will rise by 8%, or double the rate of inflation and confirmed that it will rise again in April 2013 in line with inflation, ignoring the fact that Scottish, Welsh and English people, who live on an island, already pay the highest aviation duty in any country in Europe.

It is therefore no wonder that Scottish airport bosses united prior to the Budget in calling for the Chancellor to rethink the planned hike in APD and give the Scottish operators what they called “a fighting chance” to compete against European rivals. Their joint statement says:

“At a time when the Government talks about creating jobs and growth, its blinkered insistence on further increases in APD achieves precisely the opposite.”

It goes on to say:

“Youth unemployment is at record levels”,

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which should concern us all, and that “inbound tourism” and importing

“is a major employer of young people, but international visitors are being turned off the UK because of the exorbitant level of APD…which is by far the highest air travel tax in the world.”

We are not all in it together, and so much for Britain being open for business, as the hon. Member for York Outer (Julian Sturdy) claimed.

Let us analyse what the Government are planning for APD. The £2.2 billion the Treasury collected last year is almost twice as much as every other European country combined. A family of four travelling to Spain will pay a total of £52 in tax. If they travel to Florida, they pay £260, and if they fly to Australia, they pay £368. That is why the Airport Operators Association chief executive said that his organisation will be campaigning against the rise as the Bill progresses through the Commons. The Scottish National party intends to move amendments to cancel the rises and, more importantly, to devolve air passenger duty to Scotland and Wales.

Air connectivity is crucial to the economy. The increase in APD is unhelpful and unwelcome, and will hit the tourism industry and needlessly jeopardise the recovery of the economy as a whole, but the key problem in the Bill is the complete failure, as the hon. Member for York Outer said, to tackle the rising price of fuel. Let us be under no illusion about the significance of that. The Forum of Private Business has said that more than one third of its members cited transport costs—predominantly the price of fuel—as their main cost pressure. When they were asked what would help to improve the business climate in the UK, they said that their main priority was not regulation, but reducing the cost of fuel duty. They were incredibly blunt in their reaction to the Budget upon which this Finance Bill is based, saying:

“Businesses and consumers just can’t afford to keep paying out more and more for their fuel. There is a serious risk that economic recovery in the UK is strangled at birth if the Government doesn’t act, and act fast.”

We hope the Government listen to the Forum of Private Business, because the economic plan they are following simply is not working. They are following a path that is failing. Much as I like the hon. Member for Macclesfield (David Rutley), who is not in his place, I do not recognise the positive progress he said he had seen in the economy. We can see that the Government’s plan is failing because, in the 2011 Budget, the deficit was forecast to be £90 billion for 2011-12 and it is now £98 billion. The 2011 Budget forecast for 2011-12 was that the net borrowing requirement would be £122 billion, but it is now £126 billion. National debt, on the treaty calculation, was due to peak at 87.2% of gross domestic product, or £1.25 trillion, in 2013-14, but on the same calculation, it is now expected to peak at 92.7% of GDP, or £1.365 trillion, in 2014-15.

That means that even the Chancellor’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under pressure, because both objectives are highly dependent on GDP growth, which, according to the OBR, is dependent on incredible rates of business investment, as other hon. Members have said. In 2010, the Government suggested that business investment had to grow by between 6.7% and 10.6% a year every year from 2011, but by the time of the OBR November 2011 outlook, growth in business investment had turned

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negative for 2011 and the forecasts had been changed to suggest business investment growth from 2012 to 2016 of between 7.7% and 12.6% a year. The Government have now changed that again—they expect business growth at heroic levels of between 6.4% and 10.1% a year between 2013 and 2016.

Nobody wants growth in business investment more than I do. If we can power the economy in that way, it will be fantastic, but there is precisely no evidence that it is happening. Indeed, the downgrade of a previous high estimate tells us that it is unlikely. That should be a concern to all hon. Members, because it makes a negative rate of central Government consumption at the same time more dangerous. There is nothing to offset the lack of growth in the whole economy as a result of lower-than-expected business investment, but that is precisely the risk that the Chancellor has put into his plans.

The Chancellor’s 2011 Budget showed that between 2012 and 2015 there would be a fall in Government consumption and expenditure of 1.2%, 1.8%, 2.4% and 1.8% a year. This Budget’s figures and the Finance Bill that delivers it are no better. They show falls of between 1.3% and 2.6% from 2013 through 2016. At a time when there is no guarantee of growth in business investment, it strikes us as particularly foolish to continue down the path of reductions in central Government consumption and expenditure. The key point is that any Chancellor getting his sums wrong on growth will deliver an economy that has a serious impact on real people, on public expenditure for the services that communities rely upon and on the Government’s ability to grow the economy out of its current stagnation.

In those three areas, because the UK Government’s policy is wrong and is not working, real people are paying the price. But that should come as no surprise. The Government inherited £73 billion of cuts and tax rises every year from 2014 to 2015 onwards. That was a balance of £52 billion in cuts and £21 billion in tax rises. That increased to £113 billion of cuts and tax rises every year from 2014 to 2015 in the 2010 Budget, and went further with cuts and tax rises of £128 billion every year from 2015 to 2016. As the Red Book made clear, this Finance Bill now sets us on a path of fiscal consolidation—cuts and tax rises—of £155 billion every year from 2015 to 2016. And of course the proportion of cuts to tax rises is no longer 3:2 but 4:1. Yet despite brutally cutting so much money from the public services on which people depend, they have still managed to deliver a tax cut for millionaires. In essence, that makes this a Tory Budget, a shameful Budget and one, of course, that we must resist by opposing the Bill.

But the Government have been honest. The 2011 Budget told us that every single population quintile would see a reduction in its net income. So they are at least clear about the impact of their polices. This year’s Budget Book and Finance Bill have delivered no help. Indeed, the Budget Book told us again that every single population quintile would still be worse off.