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House of Commons

Wednesday 18 April 2012

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Secretary of State was asked—

Scotland Bill

1. Mrs Anne McGuire (Stirling) (Lab): What recent representations he has received on the provisions of the Scotland Bill. [102886]

The Secretary of State for Scotland (Michael Moore): On 21 March, I tabled a written ministerial statement to confirm that agreement had been reached with the Scottish Government on the Scotland Bill. The Scottish Government have tabled a legislative consent memorandum recommending that the Scottish Parliament support the Bill, and Members of the Scottish Parliament will vote later today.

Mrs McGuire: The new Scotland Bill will pass significant powers to the Scottish Parliament, including those relating to tax. Among the representations that the Secretary of State has received, has there been a request from the First Minister to work jointly with him to highlight and promote those new powers, to show that we can maximise devolution while maintaining the integrity and strength of the partnership of the United Kingdom?

Michael Moore: The right hon. Lady will not be surprised to hear that I have not received a representation on that particular subject. I agree with her that the Scotland Bill is a significant piece of legislation; it represents the most significant transfer of financial powers from London to Edinburgh since 1707. After the agreement on the legislative consent memorandum and, I hope, their lordships’ approval of the Bill’s Third Reading, we must quickly get on with its implementation in the right way, to show that devolution works, and works well for Scotland.

Angus Robertson (Moray) (SNP): The Scottish Government and the majority of Members of the Scottish Parliament believe that the Scotland Bill could have been significantly improved, through the inclusion of job-creating powers among others, but that has not happened. Will the Secretary of State take this opportunity to confirm that the UK Government have agreed to

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safeguards ensuring that the Scottish Parliament will need to be satisfied that funding arrangements will not be detrimental?

Michael Moore: I have a very different view of the future of Scotland from that of the right hon. Gentleman; I want to see Scotland continue to be a strong part of the United Kingdom. On his specific question, I am pleased that the Scottish Government have now accepted the Scotland Bill. We have worked carefully together to ensure that we have the right measures in place to implement it carefully for all the people of Scotland.

Angus Robertson: Will the Secretary of State acknowledge that, in the wake of the historic Scottish National party victory last year, every single political party is now miraculously in favour of more powers being devolved than are currently contained in the Scotland Bill? Which further powers does he want to see being exercised in Scotland?

Michael Moore: Once again, we are seeing fantastic diversionary tactics from the right hon. Gentleman. He never talks about independence. Why not? Because his party cannot answer the fundamental questions about it. I am delighted that he wants to work with us, and I can tell him that devolution has always worked on the basis that we promote ideas, reach consensus and implement them. The debate on devolution will continue, but we must resolve the issue of independence. Why does he not want to get on with that debate?

Budget (Ministerial Meetings)

2. John Robertson (Glasgow North West) (Lab): How many meetings he had with the Chancellor of the Exchequer in the two weeks preceding his financial statement of 21 March 2012 on the effect of the Budget on Scotland. [102887]

The Secretary of State for Scotland (Michael Moore): I have regular meetings with senior Cabinet Ministers, including my right hon. Friend the Chancellor of the Exchequer, in which a wide range of issues are discussed. This includes the period in the run-up to Budget 2012.

John Robertson: I thank the Secretary of State for his answer, although I have my doubts about whether he did have any such meetings. Anyway, there are more families losing their tax credits and more pensioners set to be affected by the granny tax in Glasgow than there are millionaires who will be affected by the mansion tax in the whole of Great Britain. Is that what he calls the Liberal Democrats speaking up for Scotland?

Michael Moore: The hon. Gentleman just cannot get the Labour party off the hook of the mess that it left the economy in at the end of the last Parliament. We are having to sort out the biggest deficit in peacetime history and get ourselves on the path to sustainable growth. We have had to take some tough decisions, but I am proud of the fact that, because of the measures in the Budget, more Scots will be taken out of income tax altogether and pensioners will receive the biggest cash increase in their pensions that they have ever had, in contrast to the insult of the Labour party’s 75p increase.

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Iain Stewart (Milton Keynes South) (Con): Did my right hon. Friend or the Chancellor receive any Budget representations from the Scottish Government about the financial consequences of Scotland separating from NATO?

Michael Moore: Funnily enough, we did not.

Stewart Hosie (Dundee East) (SNP): In the discussions that the Scottish Secretary had in the run-up to the Budget, did he make a case for re-profiling capital investment for funding shovel-ready projects, which would be the most effective thing we could do to build gross domestic product growth, or did he simply roll over, have his tummy tickled and accept the tax cut for millionaires?

Michael Moore: The hon. Gentleman should reflect carefully on the case he is trying to make. Perhaps, in a rare moment of generosity, he would welcome the fact that since the spending review, we have announced £1 billion of further spending allocations to the Scottish Government. We are continuing to create the conditions for sustainable growth to support businesses, and in Dundee there are now enterprise zones that get 100% capital allowances. I had hoped that the hon. Gentleman would welcome that.

Mr Alan Reid (Argyll and Bute) (LD): In Argyll and Bute the high price of fuel is doing damage to businesses and people’s incomes, because of the long distances people by necessity have to travel. Will the Secretary of State please have a word with the Chancellor and encourage him to cancel, if the price of fuel remains high, the August fuel duty increase?

Michael Moore: My hon. Friend is a consistent campaigner on this issue, and I am always happy to have discussions with him about it. I hope that he, like me, would recognise that as a result of the measures we have taken, we have provided a cut of 10p on fuel relative to what Labour was proposing, and provided support to remote rural communities in Scotland as well.

Mr Ian Davidson (Glasgow South West) (Lab/Co-op): Will the Secretary of State tell us the last time he ate a hot bridie? Did he discuss with the Chancellor the impact of taxation on hot bridies, and does he recognise that his Front-Bench colleague looks as if he has eaten a lot of hot bridies recently?

Michael Moore: I would have thought that the hon. Gentleman was above such personal attacks. My own preference is for fish and chips. He will know that there are plenty of places in Galashiels and elsewhere where a fine fish supper can be had. We have had to take tough decisions, but have made sure that everything is fair on that particular front.

Jo Swinson (East Dunbartonshire) (LD): Does my right hon. Friend agree that in difficult economic times it is vital for the Government to help people on low incomes by cutting their taxes and taking the lowest paid out of tax, which is in stark contrast to the last Labour Government, who doubled the 10p tax rate, hitting the lowest paid the hardest?

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Michael Moore: My hon. Friend is entirely right. Our priority in difficult times must be to give help to people on low and middle incomes—the earners who need the most support. Because of that, more than 160,000 Scots will be out of income tax altogether, and millions more will pay less tax. That is the right way to approach this.

Margaret Curran (Glasgow East) (Lab): May I begin with a quote?

“The simple equation is that we think the priority is to help those on the lowest incomes. Clearly that is going to have to be paid for and we think it is fair that those who have the broadest shoulders should be the ones to contribute to that.”

Can the Secretary of State tell us which Cabinet member said that about the recent Budget?

Michael Moore: The important point is that in the very difficult economic circumstances that we inherited from the hon. Lady’s Government, we must fix the deficit, get the economy on the right track and in doing so make decisions that help the lowest paid and middle-income earners. That is what we are doing by taking people out of tax altogether and by ensuring that we reduce the tax burden on others.

Margaret Curran: I am surprised that the Secretary of State did not even recognise a quote from himself. He should know that the Resolution Foundation has confirmed that cuts to tax credits will dwarf any gains from an increase in personal tax allowances—so he needs to stop using that argument. Will he tell us why he has changed his position since he last spoke to the Evening Standard,when more than 400,000 Scottish pensioners are going to be hit by the granny tax and more than 84,000 families in Scotland will have lost all their tax credits, while at the same time his Budget has given 16,000 of the richest Scots a massive tax cut? Will the Secretary of State finally admit that this Budget has hit Scotland hard and has done more for millionaires than for hard-working families? When will he stop being a Tory front man and stand up for working people in Scotland?

Michael Moore: The last Labour Secretary of State, who has now joined the hon. Lady on the Front Bench, said that Labour had to be credible on the economy and on the financial regime, but it is not being credible in the proposals it is making. I stand by my comments. My intention and that of my colleagues with this Budget is to ensure that we provide support to the lowest and middle-income earners and that those on the highest earnings pay their way. Through the abolition of tax reliefs, we will ensure that they do.

Funding Formula

3. David Mowat (Warrington South) (Con): What discussions he has had with the Chancellor of the Exchequer on the funding formula for Scotland. [102888]

The Parliamentary Under-Secretary of State for Scotland (David Mundell): The Government are aware of the concerns that have been expressed about the current system of devolution funding, whereby changes to the block grant are calculated according to the Barnett formula. Owing to the unprecedented deficit that we

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inherited, our immediate priority is to reduce the deficit, and we have no plans to change the present arrangements before the public finances have been stabilised.

David Mowat: Given that the Government have no plans to replace the current formula with a formula based on need, and given the requirement for clarity so that the people of Scotland know what proportion of the national debt they will inherit before they vote, does my hon. Friend agree that the Barnett multiplier would provide a good solution?

David Mundell: I believe that we need to move on from the discussion of issues of process relating to the referendum, and engage in a substantive debate on the issues that would affect Scotland if it became independent. Having, it would appear, campaigned relentlessly for independence, the SNP now seems to want to delay the question and the issues for as long as possible.

Mr Brian H. Donohoe (Central Ayrshire) (Lab): Does the Minister agree that the high price of fuel is creating major problems in Scotland, and that, at a stroke, cutting VAT, which is perhaps the unfairest tax in the country, would help Scottish families, who are suffering greatly as a result of the Budget.

David Mundell rose—

Mr Speaker: Order. I hope that the answer will refer to the funding formula for Scotland, as the question should have done.

David Mundell: The funding formula for Scotland is calculated on the basis of a basket of taxes raised by the United Kingdom Government. Scots would be much worse off if fuel duty were 10p higher, as it would have been if Labour were in power.

Mr David Evennett (Bexleyheath and Crayford) (Con): Does my hon. Friend agree that it is vital to maintain the Union in the interests of both England and Scotland, but that the funding formula should be fair to both countries?

David Mundell: I agree absolutely with my hon. Friend’s sentiments, but as he and many other Members are aware, this Government inherited the worst deficit in peacetime history from the Labour Government, and stabilising our nation’s finances must be the focus of their efforts.

Gordon Banks (Ochil and South Perthshire) (Lab): My question relates directly to the question from the hon. Member for Bexleyheath and Crayford (Mr Evennett) and the Minister’s answer to it. Does the Minister agree that the Scotland Bill will increase the amount of revenue gathered in Scotland to about a third of its spend, and will thus decrease dependency on a block grant?

David Mundell: I agree that the Scotland Bill represents a radical, historic and significant change to Scotland’s financing. More than a third of spending by the Scottish Parliament will result from funding from taxes that it determines and raises. That is a major step forward in terms of devolution and accountability, and should be welcomed by all Members.

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Referendum Consultation

4. Alun Cairns (Vale of Glamorgan) (Con): What assessment his Department has made of the responses to its consultation on the proposed referendum on independence for Scotland. [102889]

8. Amber Rudd (Hastings and Rye) (Con): What assessment his Department has made of the responses to its consultation on the proposed referendum on independence for Scotland. [102893]

The Secretary of State for Scotland (Michael Moore): The Government published their response on 4 April. The responses to the consultation gave strong endorsement to a referendum involving a single, clear question on independence, overseen by the Electoral Commission, using the same franchise as that used to elect the Members of the Scottish Parliament, and held sooner rather than later.

Alun Cairns: Does my right hon. Friend agree with the consensus established by the responses to the consultation, which is that people do not want to wait 1,000 days to exercise their votes in a referendum?

Michael Moore: This is a fundamentally important decision, the most important that we as Scots will make in our lifetimes, and the longer it is delayed, the greater the uncertainty will be. The sooner we can get on with resolving the process and the question, the better.

Amber Rudd: Do the responses of the consultation reflect my view that there should be a simple “yes or no” question in any referendum if we are to secure a decisive outcome for Scotland?

Michael Moore: My hon. Friend is entirely right. We must not muddle the issue of independence with a separate debate on the future of devolution. Today we mark another important milestone in the development of the Scotland Bill. What we want after its enactment—assuming that we receive their lordships’ support—is a clear decision on the future of our country, and for it to stay in the United Kingdom.

Pete Wishart (Perth and North Perthshire) (SNP): Does the Secretary of State wish to take this opportunity to thank the Labour party for providing his meagre consultation with more than a quarter of the responses? I suppose that that adds a new meaning to the term “Labour block vote”. Can he tell us how many other responses he received from the Labour website with a slightly amended text, and why the Labour party is doing all the groundwork for his Tory-led Government’s consultation?

Michael Moore: It should hardly be a surprise to the hon. Gentleman that political parties want to take part in consultations. This is an intensely political process. Even this morning, there was a pre-prepared script on the Scottish National party website inviting people to respond to the SNP’s consultation, so SNP Members should be a wee bit careful about the argument they are trying to make.

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Pamela Nash (Airdrie and Shotts) (Lab): Some 70% of respondents to the UK consultation felt that 2014 was too long to wait to decide Scotland’s constitutional future. Businesses and financial institutions in my constituency have made it clear that this state of limbo is damaging the economy in Scotland. Has the Secretary of State received similar representations from businesses elsewhere in Scotland?

Michael Moore: The hon. Lady is entirely right to draw this issue to the attention of the House and to highlight that across Scotland and the UK, businesses, like individuals, want answers. We need to resolve this hugely important issue sooner rather than later, so we do not lose out on investment in jobs and we understand our future within the UK.

Age-related Personal Allowances

5. Michael Connarty (Linlithgow and East Falkirk) (Lab): How many people in Scotland will be affected by the Chancellor of the Exchequer’s proposal to withdraw the additional personal allowance for people over 65 years of age. [102890]

9. Lindsay Roy (Glenrothes) (Lab): How many pensioners in Scotland will be affected by the Chancellor of the Exchequer’s decision on age-related personal allowances. [102894]

10. Sandra Osborne (Ayr, Carrick and Cumnock) (Lab): How many pensioners in Scotland will be affected by the Chancellor of the Exchequer’s decision on age-related personal allowances. [102895]

13. Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): How many pensioners in Scotland will be affected by the Chancellor of the Exchequer’s decision on age-related personal allowances. [102898]

The Parliamentary Under-Secretary of State for Scotland (David Mundell): Three hundred and sixty-seven thousand.

Michael Connarty: Will the Government not admit that the figures do not reveal the fact that this is an attack on people who have put away money for their retirement? The amount involved is up to £30,000 a year. This is an attack on middle-class people. There is also an attack on single people, who will lose income through being hit by the bedroom tax. People cannot be elderly and they cannot be single—and it would appear they cannot be hungry either, as there is a tax on fish and chips.

David Mundell: It will not surprise the hon. Gentleman that I do not accept his analysis. He and others who scaremonger on this issue fail to point out that more than half of those in Scotland aged over 65 will not pay any tax at all.

Lindsay Roy: Is the Minister not ashamed of his Government’s decision to reduce tax for the wealthiest Scots while at the same time penalising pensioners with a tax grab, whereby they will lose up to £322 per annum?

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David Mundell: I know that the hon. Gentleman was not a Member of this Parliament for most of the 13 years of the last Labour Government, but most of his colleagues from Scotland were, and I did not hear them calling at that time for an increase in the higher rate of income tax. He is wrong to say that there will be losers in relation to the age-related allowances; there will be no cash losers.

Sandra Osborne: If, as the Government say, this measure is about fairness and simplification, why did they not wait until the full £10,000 personal allowance was in place before imposing this stealth tax on pensioners?

David Mundell: I acknowledge that the hon. Lady is well known for speaking up both for the low-paid and for those on the minimum wage. That is why I would have thought that she would have welcomed the fact that the Government are raising the personal allowance to £10,000 during this course of this Parliament. [Interruption.]

Mr Speaker: Order. There are a lot of noisy private conversations taking place in the Chamber. I would like to hear the questions and the answers.

Gregg McClymont: What does it say about the priorities of this Government that they impose a granny tax on 367,000 Scots while giving a tax cut to the wealthiest 14,000 Scots?

David Mundell: What the hon. Gentleman and his colleagues fail to acknowledge is that this Government have delivered the largest pension rise in the last 30 years, whereas the last Government, which his party led, introduced a pension rise of 75p, so we are not going to take any lectures from Labour on the treatment of pensioners in Scotland.

Mr William Bain (Glasgow North East) (Lab): Just how out of touch are this Government if they think that it is right or fair that almost 400,000 Scottish pensioners should pay on average £83 a year more in tax from next April just so that 16,000 top-rate taxpayers receive a tax cut of £10,000 a year on average? People retiring next April will face an annual tax hike of £322 a year because of the granny tax and the ending of the savings credit in 2017, on top of higher VAT and cuts in winter fuel allowance introduced by this Chancellor. With a record in government like that, surely it is no surprise to the Minister that Tory election strategists are gloomy about winning any seats at all in Scotland at the next general election.

David Mundell: What I think is fair is that half of pensioners over 65 in Scotland will not pay any tax at all; that those earning less than £10,000 will, by the end of this Parliament, be subject to a personal allowance of £10,000; and that this Government have delivered the largest increase in the pension—£270 compared with the 75p offered by the previous Government.

Dr Eilidh Whiteford (Banff and Buchan) (SNP): Those pension increases will, of course, be wiped out by this tax grab. People living on modest pension incomes have already paid a very high price for the financial crisis. They have lost the value of their savings and investments,

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and they are having to face inflation and extremely low interest rates. How can the Minister justify this tax grab on pensioners while taxes are being cut for millionaires?

David Mundell: I am afraid that I am not going to accept any lectures on economics from the hon. Lady. She is offering pensioners in Scotland the prospect of breaking up the United Kingdom, with no certainty as to where pension funding would come from.

Independence (Currency)

6. Julian Smith (Skipton and Ripon) (Con): What assessment his Department has made of the implications for the currency used in Scotland of a vote in favour of independence for Scotland. [102891]

The Secretary of State for Scotland (Michael Moore): We are confident that people in Scotland will continue to support the United Kingdom in any referendum. It is the Scottish Government who are proposing independence and they must answer for the implications of their proposals, including on currency matters.

Julian Smith: Is it not the case that the weight of legal opinion suggests that an independent Scotland would become an European Union accession state and would therefore be obliged to join the euro?

Michael Moore: The Scottish National party is changing its position on what currency it wishes to adopt and how it would go about this. There is no doubt that the SNP needs to answer some hard questions on this matter and resolve, for us all, what an independent Scotland would look like. I think that Scotland is better off in the UK.

Anas Sarwar (Glasgow Central) (Lab): The Secretary of State will be aware that a separate Scotland would have to create its own currency, join a weaker euro or make its biggest business partner its biggest business competitor, with the Bank of England setting its interest rates, its spending limits and its borrowing limits. Does this not show the incoherence of the SNP’s economic policies?

Michael Moore: The hon. Gentleman is entirely right to point out that even in its best moments, when it tries to offer us some detail, the SNP does not resolve what a monetary union with the rest of the UK might look like, how it would deal with the fiscal rules and the regulatory environment or whether the Bank of England would be the lender of last resort. I think that Scotland deserves some answers on those points.

Malcolm Bruce (Gordon) (LD): Does the Secretary of State acknowledge that if an independent Scotland were to use the pound sterling, that would require conditions that cannot be known now? Indeed, that is one of a growing number of issues that are unknown and unknowable, and it shows how uncertain Scotland’s future would be if it left the United Kingdom.

Michael Moore: My right hon. Friend is entirely right that when given the opportunity, the SNP ducks giving the answers to all these hard questions, because it does not have those answers.

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Fuel Poverty

7. Guy Opperman (Hexham) (Con): What steps are being taken by the Government and the Office of Fair Trading to tackle fuel poverty in Scotland. [102892]

The Parliamentary Under-Secretary of State for Scotland (David Mundell): The Secretary of State chaired the first ever annual summit in Scotland on fuel poverty, bringing together the heads of the big six energy companies and Scottish consumer groups. That led to suppliers providing information to improve the application of key policies in Scotland, such as the warm home discount scheme. I am convening a follow-up meeting soon to review progress.

Guy Opperman: Does the Minister agree that the problem of a lack of competition in the availability and provision of heating oil in the Scottish border region needs addressing urgently?

David Mundell: I represent a large rural constituency in the Scottish borders, so I certainly share my hon. Friend’s concerns, although I understand that in his constituency there are some innovative initiatives whereby communities are coming together to purchase heating oil and are therefore able to negotiate better prices with suppliers.

Mr Mike Weir (Angus) (SNP): As well as pressing the Office of Fair Trading, will the Minister press his own Cabinet colleagues to look at providing practical help, for example by bringing forward the pensioners’ winter fuel allowance for off-grid consumers to allow them to fill up their tanks before winter hits, when prices tend to be lower?

David Mundell: The off-grid issue is of concern in rural Scotland, as elsewhere, and I would be happy to meet the hon. Gentleman to discuss his concerns.


11. Mr Graham Allen (Nottingham North) (Lab): What powers would be devolved to Scotland under devo-max. [102896]

The Secretary of State for Scotland (Michael Moore): Devo-max is a term used by the Scottish Government with no clear definition. This Government are focused on delivering the Scotland Bill, which will represent the largest transfer of fiscal powers to Scotland since the Act of Union in 1707.

Mr Allen: Does the Secretary of State agree that devo-max is a wonderful idea for Scotland and will he therefore discuss with some of his Cabinet colleagues extending that wonderful idea to the regions and localities of England?

Michael Moore: It is always dangerous for a Scot to enter into the constitutional debate in England but there is a lively debate to be had. The important thing today is that we acknowledge the important next steps we are taking in Scotland through the real proposals in the Scotland Bill which are due to get the consent of the

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Scottish Parliament and, I hope, their lordships next week. That will put us on track for the biggest development in devolution since 1998.

Prime Minister

The Prime Minister was asked—


1. [102685] Naomi Long (Belfast East) (Alliance): If he will list his official engagements for Wednesday 18 April.

The Prime Minister (Mr David Cameron): I am sure the whole House will wish to join me in paying tribute to those servicemen who have fallen since we last met for Prime Minister’s Question Time—Captain Rupert Bowers from 2nd Battalion the Mercian Regiment, Sergeant Luke Taylor from the Royal Marines, Lance Corporal Michael Foley from the Adjutant General’s Corps, and Corporal Jack Stanley from the Queen’s Royal Hussars who died on Sunday 8 April from wounds sustained in Afghanistan in February. We are indebted to their courage and their selfless service and at this difficult time we send our heartfelt condolences to the families, friends and colleagues of these men, who have made the ultimate sacrifice for our country. They will not be forgotten.

This morning I had meetings with ministerial colleagues and others, and in addition to my duties in this House I shall have further such meetings later today.

Naomi Long: I, too, would want to offer my condolences to the families of those who have lost their lives in conflict in recent days.

In Northern Ireland, party political donations are not subject to the same publication rules as those in the rest of the UK. However, my party has delivered on our commitment to publish the relevant information on a voluntary basis. Will the Prime Minister commit to bringing the Northern Ireland publication rules into line with the rest of the UK, and further will he demonstrate his commitment to openness and transparency by following our lead and publishing voluntarily lists of donors to the Conservative party in Northern Ireland?

The Prime Minister: I am very happy—we publish those donor lists and quite rightly so. As the hon. Lady knows, the previous Government passed legislation with specific treatment for Northern Ireland for reasons that I think are quite well known to the House. As far as possible, we want Northern Ireland political parties to show the same approach as in the rest of the UK. If parties choose to publish that information on a voluntary basis, that is very welcome, so I very much welcome what her party has done, leading by example.

Stephen Barclay (North East Cambridgeshire) (Con): Following the unlawful killing of my constituent David Gray as a result of his out-of-hours GP’s inability to speak English, I welcome today’s announcement of a consultation on strengthening the controls on foreign doctors. Does my right hon. Friend agree that GPs working in England should be able to speak English

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and that the legitimate desire for freedom of movement within the EU is not an excuse for compromising patient safety?

The Prime Minister: My hon. Friend is entirely right, and today’s announcement makes it clear that doctors should not be operating in the NHS in our country unless they can speak English. Under the proposals, senior doctors will need to assess whether doctors have the necessary language skills to be able to communicate effectively with patients. If they cannot do that, they cannot practise.

Edward Miliband (Doncaster North) (Lab): Let me join the Prime Minister in paying tribute to Captain Rupert Bowers from 2nd Battalion the Mercian Regiment, Sergeant Luke Taylor from the Royal Marines, Lance Corporal Michael Foley from the Adjutant General’s Corps and Corporal Jack Stanley from the Queen’s Royal Hussars. I join him in saying that they showed the most enormous courage and bravery and that all of our thoughts are with their family and friends.

Will the Prime Minister confirm that the cut in the 50p tax rate on which we will be voting tonight will be worth at least £40,000 a year to Britain’s millionaires?

The Prime Minister: The cut in the 50p tax rate is going to be paid five times over by the richest people in our country. I notice that the right hon. Gentleman does not ask about unemployment. Every month when unemployment has risen he has leapt to the Dispatch Box to leap on the bad news, but today we see unemployment fall by 35,000 and employment go up by 53,000 but no welcome from him. Does that not show all his priorities? Will he now welcome the increase in people employed in our country?

Edward Miliband: Only this Prime Minister could think it was a cause for celebration that more than 1 million young people in this country are still out of work. It is no wonder people think he is out of touch. The House will have noted that he could not deny that Britain’s 14,000 millionaires are getting a £40,000 cut in their income tax. As for the figures produced for the Budget, today even the Treasury Committee says they are bogus. Millionaires are winners from this Budget, but what about everyone else? Will he confirm that by freezing the personal tax allowance year on year on year, 4.4 million pensioners will lose as much as £320 a year?

The Prime Minister: The Budget is about cutting taxes for 24 million working people, taking 2 million people out of tax, freezing council tax and cutting corporation tax so that we are competitive with the rest of the world. For pensioners, this month we have increased the basic state pension by £5.30 a week, far more than Labour ever would have done. If the right hon. Gentleman is concerned about the 45p top rate of tax, perhaps he could explain why the amendment he will be asking everyone to vote for at 4 o’clock this afternoon would get rid of the 45p top rate of tax and leave us with a 40p top rate? He has not had much to do over the last month—some of us have been quite busy. He has had almost nothing to do, but even what he has to do he is completely incompetent at.

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Edward Miliband: The Prime Minister is talking rubbish as always. He points to the increase in the basic state pension. Only this Prime Minister could try to con Britain’s pensioners by taking the credit for high inflation. Everybody will have noticed that he did not deny that Britain’s pensioners are seeing a tax increase year on year. It is not just pensioners he is trying to con; it is families with children. Will he confirm that, according to the Institute for Fiscal Studies, as a result of all his tax changes from this April families with children will be more than £500 a year worse off?

The Prime Minister: I notice the right hon. Gentleman has moved off the top rate of tax because he does not want to talk about it. He has to withdraw his amendment, because if he is successful he will give us a 40p tax rate. The other reason he does not want to talk about the top rate of tax is that he cannot convince Labour’s candidate for Mayor of London to pay his taxes.

When it comes to pensioners, what we have done is increase the basic state pension; we have kept all the pensioner benefits, and the freeze in age-related allowances means there will be no cash losses. Compare that with Labour’s pathetic 75p increase proposals. We remember what Labour’s Budgets did. Will he stand up and condemn Labour’s candidate for Mayor of London who will not pay his taxes?

Edward Miliband: The Prime Minister is very excited today. In case he has forgotten, it is Prime Minister’s questions. The clue is in the name. I ask the questions and he is supposed to answer them.

No answer on pensioners, no answer on families—what about charities? The Prime Minister’s big idea was the big society, but since the Budget—[ Interruption. ] I do not know why he is taking advice from the part-time Chancellor sitting next to him—I wonder which job he is doing today. Since the Budget, the Government have managed to insult people who give to charity and he has insulted the charities themselves by implying that they are bogus. The Prime Minister claimed that he worked on the Budget line by line. Did he know that when he signed off the Budget it represented a hit of as much as £500 million on Britain’s charities?

The Prime Minister: Those figures are completely wrong. First, we heard absolutely no defence of Ken Livingstone—not a word. This is all about making sure that the richest people in our country pay their taxes. Last year there were over 300 people earning over £1 million who paid a rate of tax of 10%. I do not think that is good enough, and we have a Labour candidate for Mayor of London who is paying less tax on his earnings than the person who cleans his office. I think that is disgraceful. Why will the right hon. Gentleman not condemn it?

Edward Miliband: This is—[Interruption.]

Mr Speaker: Order. The usual level of orchestration from the usual suspects on the Government Back Benches. Be quiet, Mr Burns. It will be better for your health. You are the Minister for Health. Get better.

Edward Miliband: What a desperate Prime Minister, who cannot even justify his own Budget. If he wants to talk about the Mayor of London, we have a candidate for Mayor of London who will cut tube fares, who will

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make rents fairer, who will bring back the education maintenance allowance. What has the Prime Minister got? A candidate for Mayor of London who is out of touch and was arguing for the cut in the 50p tax rate.

On charities, the reality is that the Prime Minister is not making the rich worse off. He is making charities worse off. Over the past month we have seen the charity tax shambles, the churches tax shambles, the caravan tax shambles and the pasty tax shambles, so we are all keen to hear the Prime Minister’s view on why he thinks, four weeks on from the Budget, even people within Downing street are calling it an omnishambles Budget.

The Prime Minister: We have a Mayor of London who pays his taxes. Nothing from the right hon. Gentleman about unemployment, nothing about the rich needing to pay their taxes, nothing about Ken Livingstone’s responsibilities. The right hon. Gentleman asks about the Budget. This Budget cut taxes for 24 million people. This Budget cut corporation tax. This Budget made Britain competitive. He talks about my last month—I accept that it was a tough month. Let us have a look at his last month. He lost the Bradford West by-election. That was a great success! He has given one person a job opportunity—George Galloway. The right hon. Gentleman lost the Bradford West by-election, he showed complete weakness when it came to the Unite trade union and the fuel strike, and he has a candidate for Mayor of London who will not pay his taxes. That is his last month—as ever, completely hopeless.

Edward Miliband: The Prime Minister talks about the fuel strike. I will not take any lectures on industrial relations from a Government and a Prime Minister who caused panic at the pumps. That is the reality. When he gets to his feet, let him apologise for the gross irresponsibility, for the Cabinet Minister who caused that panic at the pumps, and for himself. [Interruption.] The Prime Minister should calm down. This Budget comprehensively fails the test of fairness and it spectacularly fails the test of competence. We have a Prime Minister who is unfair, out of touch and incompetent. Never mind “We’re all in it together”; when will he get a grip on his Government?

The Prime Minister: The right hon. Gentleman will not take any lectures on the fuel strike because he is in the pockets of the people who called the fuel strike. That’s right. They vote for his policies, they sponsor his Members of Parliament, they got him elected. Absolutely irresponsible—that is what we have heard once again from the right hon. Gentleman. Not good enough to run the Opposition, not good enough to run the country.

Karl McCartney (Lincoln) (Con): Has my right hon. Friend noted that Standard & Poor’s, the rating agency that downgraded both the US and France, affirmed a stable outlook on the UK’s triple A rating on Friday and said:

“We could lower the ratings if we came to the conclusion that the pace and extent of fiscal consolidation was slowing beyond what we currently expect”—

in other words, if the discredited policies of the Opposition were adopted?

Mr Speaker: That was far too long. I call the Prime Minister.

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The Prime Minister: My hon. Friend makes the important point that in this week of all weeks we are getting yet more reminders from other countries in Europe of the importance of getting on top of deficits and debts and of having a proper plan to deliver that. That is what needs to happen. What Standard & Poor’s has done is welcome, and we also need to keep our interest rates low to ensure that we deliver the growth our economy needs. It is absolutely extraordinary that the shadow Leader of the House of Commons has gone on television today calling for higher interest rates. I do not think the Leader of the Opposition focused on that—he had better go and look at the transcript.

2. [102686] Dr William McCrea (South Antrim) (DUP): In January, the First Minister of Northern Ireland requested that the Prime Minister meet the families of 10 innocent workmen murdered in the Kingsmills massacre of 1976. I know that the Prime Minister has met other families and that he desires to be balanced in his approach. Will he assure me that he will meet the families of those innocent victims?

The Prime Minister: The Kingsmills massacre was an appalling event in Northern Ireland’s history. I am well aware of that and my sympathies are with the families. I will arrange for the families a meeting with the Northern Ireland Secretary and, if it is possible for me to attend, of course I will do that as well.

Stephen Gilbert (St Austell and Newquay) (LD): The Prime Minister will be aware that no VAT is chargeable on caviar, yet the Government propose to charge VAT on the Cornish pasty. Can he tell me why that is fair?

The Prime Minister: I understand that feelings in Cornwall run high on this matter, but let me explain that what I think is unfair is that the same products that are subject to VAT when sold in a fish and chip shop can be sold in supermarkets without being subject to VAT. I do not think that that is fair and that is why it is right for us to redraw the boundaries.

3. [102687] Kerry McCarthy (Bristol East) (Lab): While the Prime Minister entertains millionaire party donors with cosy kitchen suppers at his Downing street flat, thousands of ordinary people are queuing at food banks because they cannot afford to feed their families. What do those people who are worst hit by the Government’s cuts and the biggest rise in food prices since August 2010 have to do to get a quiet word in the Prime Minister’s ear? Is there any chance he could invite some of them round for supper?

The Prime Minister: What this Government have done is introduce the biggest increase in the child tax credits that go to the poorest families in our country. In April 2011, there was a £255 increase—the largest ever—and there is a further increase this year of £135. Added to that, we have taken 2 million of the poorest people out of income tax altogether, and one of the things that would hit families hardest is an increase in interest rates, which is now the official policy of the official Opposition.

Mr Richard Bacon (South Norfolk) (Con): Given that 1,200 jobs at Group Lotus in south Norfolk might be at risk following the company’s recent change of

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ownership, will the Prime Minister put all possible pressure on the Malaysian Government to ensure that DRB-HICOM permits the sale of the business only to buyers who wish to see it continue as a going concern in Norfolk?

The Prime Minister: I raised this issue with the Malaysian Prime Minister and with the new Malaysian owners of Lotus’s parent company. Lotus makes a key contribution to the UK automotive sector. The sector is doing well and I want to see Lotus succeed and to have a secure future. We are in contact with the company, monitoring the situation very closely and ensuring that it knows about the regional growth fund money that is available.

4. [102688] Teresa Pearce (Erith and Thamesmead) (Lab): This flawed Budget makes 230,000 additional pensioners pay tax and will bring 500,000 extra parents into the self-assessment regime because of tax on their child benefit, yet this week we have heard that 10,000 members of staff will be cut from HMRC. Is not the Chancellor so incompetent that he will not have the staff to deliver his own budget plans?

The Prime Minister: We have increased staffing at HMRC to ensure that we crack down on the sort of tax avoidance that is shown, to put it frankly, by the hon. Lady’s candidate for the Mayor of London. That is what it has come to and those are the measures we are taking.

5. [102689] George Freeman (Mid Norfolk) (Con): I am sure that I speak for many across the House in expressing support for entrepreneurship and the creation of new businesses. Does my right hon. Friend agree that service companies set up by Labour politicians to disguise their hypocrisy on tax are a disgraceful betrayal of real entrepreneurs up and down the country?

The Prime Minister: My hon. Friend makes a good point. The Opposition do not want to hear it, but the fact is that the man whom they are putting forward to be Mayor of London has set up a company to funnel all this money into and is potentially paying a lower tax rate than the people who would work for him at the Greater London Assembly. It is completely disgraceful and even at this late stage I call on the Labour leader to get the Labour candidate to publish all the information so that we can see the tax that he is paying.

Mr Andrew Smith (Oxford East) (Lab): Does the Prime Minister agree that the specialist ACE Centre in Oxford, currently facing closure, does outstanding work unlocking the isolation of children with acute communication difficulties? Given the pressure charities are under, will he step in and pull together some bridging finance so that this outstanding centre can continue helping the children and young people who need it so much?

The Prime Minister: As the right hon. Gentleman probably knows, I do know that centre. I have visited it in the past, and I am very happy to look with him, as a fellow Oxfordshire MP, at what can be done to help the centre and the very good that it does, particularly for disabled children.

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6. [102690] Andrew Selous (South West Bedfordshire) (Con): The Prime Minister rightly wants to crack down on tax avoidance, so what does he think about Ken Livingstone, who said that

“I get loads of money, all from different sources, and I give it to an accountant and they manage it”?

Is that modern socialism for you—




The Prime Minister: They don’t like to hear it. I thought the Labour party wanted rich people to pay their taxes properly. That is what we have ensured through the Budget and through the extra resources for the Revenue, so why the deafening silence from the Opposition? Why not a condemnation of that appalling behaviour?

Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab): Does the Prime Minister share my concern at the actions of the Northern Ireland Attorney-General in using an outdated and discredited law, of disrespecting the court, to invoke contempt proceedings against the former Northern Ireland Secretary, my right hon. Friend the Member for Neath (Mr Hain), for comments in his memoirs? Should not respect for the independence of the judiciary be balanced with the rights of individuals to fair comment on that judiciary?

The Prime Minister: I do have a great deal of sympathy with what the right hon. Gentleman says. Parliamentary privilege, obviously and quite rightly, allows hon. Members to express their views in Parliament. In terms of what is said outside Parliament, let me just say this: there are occasions, as we all know, when judges make critical remarks about politicians; and there are occasions when politicians make critical remarks about judges. To me, that is part of life in a modern democracy, and we ought to keep these things, as far as possible, out of the courtroom.

7. [102691] Stephen Mosley (City of Chester) (Con): I, like the Prime Minister, welcome the strides towards democracy being made in Burma, and I welcome also his efforts to achieve a controlled suspension of sanctions. With a decision on his proposals due next week, will he ensure that measures to monitor human rights in Burma are included in the discussion?

The Prime Minister: My hon. Friend is entirely right. While it is clear that the Burmese regime is making some steps towards greater freedom and democracy, we should be extremely cautious and extremely careful. We want to see the further release of political prisoners, we want to see the resolution of ethnic conflicts and we want to see that democratisation process continue. That is why we are pushing across Europe for the suspension of sanctions, excluding the arms embargo, which should stay, rather than for the lifting of sanctions. We now have support for that position from most other leading European countries, and I hope that we can deliver it. That would be the right thing in demonstrating to the regime that we want to back progress, and it would also strongly support what Aung San Suu Kyi has said is the right approach.

8. [102692] Ian Murray (Edinburgh South) (Lab): My constituents are angry that the Prime Minister’s priority in the Budget was to give a £40,000 tax cut to millionaires. Will he tell the House how much collectively, as a result of the reduction in the top rate of income tax, his Cabinet will be better off?

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The Prime Minister: Let me just make this point about the top rate of tax—[Hon. Members: “Answer.”] Let me just make this point. The Labour party had 13 years to introduce a 50p top rate of tax. It did so one month before a general election that it knew it was going to lose. That top rate of tax has not raised any money, and the 45p rate that we have is higher than what Labour had for 12 of its 13 years in government.

9. [102693] Paul Uppal (Wolverhampton South West) (Con): Earlier this week the journalist Mary Ann Sieghart wrote an article in The Independent about the many young south Asian women who feel that traditionally their votes have been hijacked through abuse of the postal vote system. Will my right hon. Friend please look at revisiting the issue of postal votes on demand not only to strengthen our democracy and trust in it, but to ensure that all voters have a vote and, particularly in the case of south Asian young voters, their votes are not stolen?

The Prime Minister: My hon. Friend makes a very important point. I am happy to look at the issue of postal voting, but first we need to sort out individual voter registration. This is vital to make sure that we do not have a system that allows lots of people to be logged on to a housing register when actually nobody is living there at all. There is growing evidence of abuse and concern, and it is right that we are acting on it.

10. [102694] Kelvin Hopkins (Luton North) (Lab): Two years ago, in his pensioner pledge, the Prime Minister said:

“it is fundamental to me that people who have worked hard all their lives, and are now drawing their pension, deserve to be treated with respect.”

Does he really think that trying to sell his granny tax as a “simplification” is treating pensioners with respect?

The Prime Minister: Let me explain what we are doing for pensioners. We are increasing the basic state pension by £5.30 a week this April; that is not an increase that Labour would have made. At the same time, we are saving the winter fuel payments, the cold weather payments, the free television licence, the free bus pass, and the other pensioner benefits. That is what this Government are doing. At the same time, we are examining the case for a single-tier pension of around £140 each. I would have thought that Members in all parts of the House welcomed that, because it would be a well-paid basic state pension that encouraged people to save before they became pensioners, and a thoroughly welcome reform.

Caroline Dinenage (Gosport) (Con): Over 30 years ago, a British toddler, Katrice Lee, went missing in Germany, and, partly due to the chronic mishandling of this case by the British military police, her parents still have no idea what happened to their little girl. Will the Prime Minister agree to meet the family to hear their calls for an independent inquiry into the bungling of this investigation and give them the closure that they so desperately need and deserve?

The Prime Minister: I will certainly look at the case that my hon. Friend mentions and see what more we can do. These cases of missing people are completely

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tragic, and the family do not get closure, as this case and, sadly, other tragic cases show. I am very happy to look at the case and to get back to her.

11. [102695] Mr Gordon Marsden (Blackpool South) (Lab): Churches and places of worship, including many in Blackpool, do immensely valuable work in adapting their buildings for community and voluntary sector use. Why, then, is the Prime Minister backing a 20% VAT raid in the Budget on alterations to listed buildings, which will cost many of those churches and places of worship millions of pounds—in the case of the Church of England, an estimated £10 million—thereby infuriating them and the charities concerned and shooting his own big society in the foot?

The Prime Minister: Let me try to explain to the hon. Gentleman the basic unfairness in the current system. Repairs to churches are already subject to VAT, whereas alterations to listed buildings are not subject to VAT. That means that if you repair a church, you do pay VAT, but if you put a great big swimming pool in a listed Tudor house, you do not pay VAT, so it makes sense to redraw the boundaries. But this is the crucial point: we will be putting money aside to make sure that churches that are undertaking repairs and alterations get the moneys that they need.

Mr Douglas Carswell (Clacton) (Con): A few weeks—[ Interruption. ]

Mr Speaker: Order. Let us have some order in the House. I want to hear Mr Douglas Carswell.

Mr Carswell: A few weeks ago in this House, I asked the Prime Minister to what extent he believed that the Whitehall machine—the Sir Humphrey factor—was frustrating reform. He assured us that it was not. According to the Financial Times, in Malaysia last week the PM said:

“I can tell you, as Prime Minister, it”—

“Yes Minister”—

“is true to life.”

Can he tell us what has happened to make him change his mind?

The Prime Minister: There are a few occasions when I think that my hon. Friend does need a bit of a sense of humour.

12. [102696] Alex Cunningham (Stockton North) (Lab): The Prime Minister’s official spokesman argued last week that rich individuals were avoiding tax by giving to charities which

“don’t, in all cases, do a great deal of charitable work”.

Can the Prime Minister name any of these charities?

The Prime Minister: The figures I gave earlier show that last year 300 people earning over £1 million in our country got their rate of tax down to 10%. Of course we must protect charities and encourage philanthropic giving, but we need to make sure that rich people are paying their fair share of taxes. I would have thought that that principle had some attraction in all parts of the House.

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Q13. [102697] Mr James Clappison (Hertsmere) (Con): Does my right hon. Friend agree that universities should be free to admit students on the basis of merit?

The Prime Minister: My hon. Friend is entirely right. It is welcome that a greater proportion of 18-year-olds are applying to university than at any time in the past 13 years. No one pays up-front for their tuition or other fees, which is also welcome. He is absolutely right that university entry is about academic merit.

Q14. [102698] Anas Sarwar (Glasgow Central) (Lab): The Deputy Prime Minister said recently:

“We have succeeded to pull the economy back from the brink”.

With record youth unemployment, growth lower than forecast and inflation up, does that not show that the Deputy Prime Minister is the Prime Minister’s broken arrow—he does not work, but the Prime Minister cannot fire him?

The Prime Minister: I notice that there was absolutely no welcome of the fact that today unemployment has fallen, employment has gone up and youth unemployment has come down. Of course, unemployment is much too high and far more needs to be done. Let me bring the House up to date with one scheme, the work experience scheme, on which the evidence is growing. Fifty per cent. of the young people going into the scheme come off benefits within six months. That means that it is 20 times more cost-effective than the future jobs fund. That scheme is part of the youth contract that the Deputy Prime Minister has been spearheading, and he has been doing an extremely good job.

Claire Perry (Devizes) (Con): Today, a group of MPs—[ Interruption. ]

Mr Speaker: Order. Hon. Members should not be yelling at the hon. Lady. It is very discourteous. I want to hear what she has to say.

Claire Perry: Perhaps Members should listen before yelling. Today, a cross-party group of MPs from across the political spectrum published a report into a matter that is incredibly important to many of us: how we can keep our children safe online. We think that internet service providers should do more and that the Government should deliver a strong lead on this issue. Will the Prime Minister undertake to at least read the summary of the report—I know that he is busy—and perhaps to meet us to discuss our recommendations?

The Prime Minister: I am very grateful to my hon. Friend, who dropped off a full copy of the report to my office this morning. She raises an important subject. As a parent and as a politician, I am keen that we should help to protect people from such material. I have got together some of the technology and telephony companies to look at offering a choice of blocking all adult and age-restricted content on their home internet. If we start to work with the companies to deliver such changes, I think that we can protect more young people.

Q15. [102699] Kate Green (Stretford and Urmston) (Lab): The Government have said that they want to simplify the tax system, so why are they introducing changes to child benefit that the Treasury Committee today said will create further uncertainty?

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The Prime Minister: I say to the hon. Lady, who did very good work as head of the Child Poverty Action Group, that we have to make difficult decisions to deal with the debt and the deficit. I do not think that it is defensible to ask people who earn £20,000 or £30,000 to pay their taxes so that people sitting in this House can get child benefit. I do not think that that is fair. I know that Opposition Members will walk through the Lobby tomorrow for something that they will benefit from financially, but I think that it is profoundly wrong. [ Interruption. ]

Mr Speaker: Order. I want to accommodate Back Benchers.

Andrew Percy (Brigg and Goole) (Con): The caravan industry employs thousands of people across the country, and nowhere more so than in east Yorkshire, where the vast majority of such manufacturing is located. Will the Prime Minister listen to my pleas and those of other local MPs, including my hon. Friend the Member for Beverley and Holderness (Mr Stuart) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), and think again about this tax, which will cripple an already suffering industry?

The Prime Minister: Obviously, I have listened carefully to the points that my hon. Friend has made, and the Chancellor has met other Yorkshire MPs. Again, this is an issue about drawing the VAT boundaries fairly. I do not think that it is fair that VAT is payable on a mobile caravan, but not on a stationary one. No one is talking

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about putting VAT on park homes, which are people’s permanent homes. This is about a fair drawing of the boundaries to ensure that there is a fair approach in our country.

George Galloway (Bradford West) (Respect): As I was saying, Mr Speaker, there is an iron-clad consensus across the Front Benches of the three main parties about what they call a mission, but which, given the amount of blood on the ground and the rapidly deteriorating military situation, most of us call a war in Afghanistan. In the wake of Ms Gillard’s decision to accelerate the withdrawal of Australian forces from that war, and in the wake of the Bradford West by-election, will the Prime Minister reconsider his planning on our withdrawal from the bloody maw of Afghanistan?

The Prime Minister: First, I congratulate the hon. Gentleman on his stunning by-election victory and his return to the House of Commons. I know that he always speaks with great power and great force, but on this issue I have to say I profoundly disagree with him. Our troops are in Afghanistan not fighting a war against Islam but at the invitation of an Islamic Government and under a UN resolution, to try to help that country have a peaceful, prosperous and stable future. He knows the dangers in the past of walking away from Afghanistan and leaving that country to become the terrorist-supporting haven that it did under the Taliban. We must not make that mistake again, and I urge him not to play to the gallery on this issue but to speak up for the work that our forces are doing to make Afghanistan a safer country.

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Points of Order

12.35 pm

Ed Balls (Morley and Outwood) (Lab/Co-op): On a point of order, Mr Speaker. Before the Prime Minister leaves, I point out that he has just told the House in Prime Minister’s questions that the 50p rate did not raise any money, a claim that is flatly contradicted by both the documents published on Budget day and the Treasury’s own figures published on Monday. Could the Prime Minister correct the record before he leaves the House? [Interruption.]

Mr Speaker: Order. These matters will be the subject of debate later today. If I did not know the right hon. Member for Morley and Outwood (Ed Balls) as well as I do, I would think that he was trying to use the device of a contrived point of order to continue the debate, but because I know him as well as I do, he can take it from me that I know he would not be guilty of such unworthy conduct.

Paul Flynn (Newport West) (Lab): On a point of order, Mr Speaker. May I ask you to consider the situation that exists because the Backbench Business Committee has only one slot to allocate and had nine applications? One of those applications was for a motion asking Parliament to follow the example of the decisions in Australia, Canada and the Netherlands to withdraw troops from Afghanistan independently. Is it not a shame that procedure is preventing this Parliament from taking the decision to act independently to withdraw our troops from a conflict that very few people now believe in?

Mr Speaker: The hon. Gentleman is a wily and mature bird of a very distinct pedigree, and he has penned a book, recently updated and republished, on how to be an MP and how to operate as a Back Bencher. It is a much-thumbed tome, and he uses every device to get his concerns across. That is what he has done. I say to him, though, that all sorts of things are a shame, a pity or regrettable, but sadly they are not matters for the Chair. I think he would like them to be, but unfortunately they are not. We will have to leave it there for today.

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Diabetes Prevention (Soft Drinks)

Motion for leave to bring in a Bill (Standing Order No. 23)

12.38 pm

Keith Vaz (Leicester East) (Lab): I beg to move,

That leave be given to bring in a Bill to establish a programme of research into diabetes prevention; to require manufacturers of soft drinks to reduce the sugar content of soft drinks by 4 per cent; to make provision for a mechanism through which manufacturers of soft drinks are required through reinvestment of part of their profits to support the research programme from 2012; and for connected purposes.

At the very outset, I need to declare my interest: I am a type 2 diabetic. My chance diagnosis made me aware for the first time of the devastating costs of diabetes to the United Kingdom, both human and financial, yet we are not powerless in the face of type 2 diabetes. We know how it is caused and how to prevent it. The link between obesity and type 2 diabetes is firmly established, and we can prevent it with the right diet and exercise. With decisive action, we can stop the problem increasing at such an alarming rate.

There are 2.8 million people with diabetes in the United Kingdom. It has complications that include amputations, blindness, heart problems and strokes. The number of obese adults is forecast to rise by 73% in the UK over the next 20 years, by which time more than 10% of the population will have diabetes. Last year, 24,000 people with diabetes died early from causes that could have been prevented.

Diabetes costs the NHS £9 billion per year, which is £1 million an hour. It accounts for 10% of spending for the entire NHS budget. The NHS is expected to make savings of £20 billion by 2015; diabetes patient numbers are set to double by as early as 2015; and 80% of type 2 diabetes is preventable with the right diet and exercise. Therefore, with successful lifestyle changes, the NHS could save up to £720,000 per hour.

Academic research tells us that 90% of weight loss is achieved by cutting calories. Researchers at Glasgow university, led by Naveed Sattar, the professor of metabolic medicine, only yesterday revealed that nearly a quarter of those they questioned did not take into consideration their liquid sugar or calorie intake when controlling their diet. The average person in the UK consumes 450 calories per day through non-alcoholic liquid intake. That is the equivalent of nearly a quarter of recommended daily calories for a woman and a fifth for a man.

A can of Coca-Cola contains eight teaspoons of sugar, which is 39% of a person’s recommended daily allowance. Certain brands of pomegranate juice contain as much as 22 teaspoonfuls of sugar. Consumption of soft drinks is increasing substantially every year: it was up by 5.8% in 2010, when 14.5 billion litres of soft drinks were consumed in the UK.

Most concerning is that consumption is increasing fastest among the young, paving the way for our future generations of diabetics. Advertising for sugary drinks is explicitly targeted at young people. YouTube has 21 channels run by fizzy drinks companies. The Children’s Food Trust found that 72% of parents had bought fast food or other unhealthy products as a result of hard lobbying—some may say pestering—by their children. We all know how persuasive our children can be, but

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31% of UK children are now classified as overweight. To save them from the diabetes epidemic, we must act now on obesity.

The irony is that while a patient with diabetes complications lies dying in a hospital bed, just outside the ward their relatives go to vending machines for fizzy pop and junk food. It is a national scandal that schools and hospitals, which should promote healthy lifestyles, have high-sugar drinks for sale. I urge colleagues to go back to their constituencies this weekend and ask their local schools what types of drinks are stocked in their vending machines. Every school and hospital in the country should declare itself an unhealthy food and drink free zone.

Perhaps we should follow suit in Parliament. Even here, in the Tea Room, such drinks are readily available, along with crisps and all manner of fattening snacks. When hon. Members go to the counter to pay, they must wade through baskets laden with chocolates for sale.

The Government should go further and they need to legislate. We have seen that the voluntary targets set by the Food Standards Agency to reduce sugar content by 2012 have not been met. Although I welcome the commitment of a number of companies to the Government’s voluntary food and responsibility deal, I believe that we need firmer action. This weekend, the Academy of Medical Royal Colleges described the Government’s approach as “inherently flawed” in trusting the industry to cut calories voluntarily. These voluntary deals fail to recognise that we are dealing with a health emergency. Diabetes and obesity are at crisis levels.

We need to ensure not only that action takes place but that it takes place fast. Over the past decade, the Government have spent £2 billion tackling obesity levels, but levels have failed to fall. If current trends continue, 60% of men and 50% of women in our country will be clinically obese by 2050. Many of them will then develop diabetes, but the NHS simply cannot afford that, which is why we should put in place a statutory duty on drinks companies to reduce their products’ sugar content.

Government action on Government terms, not the industry’s, would send a strong and unequivocal signal about the need to moderate sugar and fat consumption.

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Government measures to reduce smoking have shown that intervention on public health issues works. Heart attack deaths have fallen by 50% in eight years. It is estimated that diet-related diseases are responsible for 35 million deaths worldwide, dwarfing the 5 million to 8 million smoking-related deaths. There is therefore a compelling case for action.

Intervention is not unprecedented. In October last year, Denmark, which is hosting the first EU diabetes conference next week—I am glad that the Minister with responsibility for diabetes, the hon. Member for Sutton and Cheam (Paul Burstow), will be attending the conference and speaking on behalf of the Government—introduced a “fat tax”, and in December France’s Constitutional Council approved a “soda tax”. Hungary has taken similar action. These measures make people think twice before they reach for the litre of coke or bucket of fries.

Research into prevention can dramatically cut the costs. Last year, Newcastle university found that, with the right type of diet, type 2 diabetes can be reversed. The revenue of some food and drink companies is bigger than the gross domestic product of more than 100 countries. PepsiCo made about £10 billion in 2011. So the companies can afford to make this change.

The Bill would help to save millions of lives and billions of pounds. It is only a first step in the action we need to take to tackle the twin epidemics of obesity and diabetes. But it is an important one. We cannot afford to wait until it is convenient for the industry to effect change. We need to show the people of Britain that Parliament is willing to tackle the problem head on. I commend the Bill to the House.

Question put and agreed to.


That Keith Vaz, Mr Aidan Burley, Jonathan Edwards, Derek Twigg, Ian Paisley, John Hemming, Jim Shannon, Rosie Cooper, Phil Wilson, Mr Mike Hancock and David Morris present the Bill.

Keith Vaz accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 27 April, and to be printed (Bill 329).

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Finance (No. 4) Bill

(Clauses 1, 4, 8, 189 and 209, Schedules 1, 23 and 33, and certain new Clauses and new Schedules relating to value added tax)

[1st Allocated Day]

Considered in Committee

[Mr Lindsay Hoyle in the Chair]

[Relevant document : The Thirtieth Report from the Treasury Committee, Budget 2012, HC 1910-I.]

Clause 1

Charge for 2012-13 and rates for 2012-13 and subsequent tax years

12.50 pm

Owen Smith (Pontypridd) (Lab): I beg to move amendment 1, page 2, line 4, leave out paragraph (c).

The Chairman of Ways and Means (Mr Lindsay Hoyle): With this it will be convenient to discuss the following:

Amendment 76, page 2, line 4, at end insert—

‘(1) The Treasury shall, within two months of Royal Assent of this Act, publish a report on the additional rate of income tax.

(2) This report shall make recommendations on—

(a) preventing the tax-avoidance measures employed by individuals to avoid making payments at the additional rate of income tax, and

(b) the impact upon Treasury revenue of setting the additional rate to—

(i) 50 per cent and

(ii) 45 per cent in the tax year 2013-14.’.

Amendment 7, page 2, line 5, leave out subsections (3) to (6).

Amendment 62, page 2, line 22, at end add—

‘(7) The Treasury shall, within two months of Royal Assent, make an assessment of the relative administrative costs of—

(a) making an additional charge to income tax payable by all individuals with an adjusted net income above a certain amount; and

(b) the measures in section 8 of, and Schedule 1 to this Act.’.

Clause stand part.

Owen Smith: It is a great pleasure to be under your chairmanship, Mr Hoyle.

The legislation we deal with in this House can sometimes appear rather obscure or require a significant amount of interpretation. For financial legislation that is often true in spades, but not so with this Bill, because what do we have, straight off the bat, on page 1, in part 1, chapter 1, clause 1? A tax cut for millionaires—£40,000 for 14,000 millionaires, signed away in one short line, in subsection (2)(c), which cuts the additional top rate of tax from 50p to 45p. Let me be clear: our amendment would get rid of that provision. It would do what we as the Opposition are able to do and strike out from the

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Bill the change from 50p to 45p. Let there be no doubt whatever: we will be voting to remove paragraph (c) later today.

The Exchequer Secretary to the Treasury (Mr David Gauke) rose—

Owen Smith: But for now I look forward to the intervention that I am about to receive from the Exchequer Secretary.

Mr Gauke: I am grateful to the hon. Gentleman for giving way, but under his amendment there would be two rates of income tax for 2013-14: 20% and 40%.

Owen Smith: No; which is why I wanted to nose off on this point. Let us clear out of the way this obscurantist nonsense that we are hearing from those on the Treasury Bench—first from the Prime Minister earlier today and now from the Exchequer Secretary. He will know that protocol dictates that we cannot table an amendment that would straightforwardly put the rate back to 50p. That is what colleagues on the nationalist Benches attempted to do, and they were ruled out of order. However, what has been ruled in order by the senior Clerk responsible for this Bill is precisely what we have done, to try to get rid of the Government’s shift from 50p to 45p. The Government would then need to decide exactly what they would do with that rate, but our view is clear: it should be 50p, as it was previously. That is why we have tabled what we have tabled, on the Clerk’s advice.

Mr Gauke rose—

Owen Smith: I will give the Minister one more chance, but I warn him that he will listen to the country, and the country is telling him that it knows where Labour stands on this issue. We are in favour of keeping the rate at 50p. The Government are getting rid of the 50p rate; the rest is complete nonsense, and smoke and mirrors. If he wants to blow some more smoke, come on up.

Mr Gauke: The country is aware that Labour did not vote against the change to the 50p rate in our debates on the Budget resolutions, although the nationalists did. It is indeed the case that there would be two income tax charges as a consequence of the amendment that the hon. Gentleman is moving. I do not want to do his job for him, but if he wanted to achieve the objective that he is setting out, he could have tried to remove subsection (2) entirely, but he did not. He has kept the charge at 20% and 40%. If his amendment succeeds, we will have those two rates of income tax next year.

Owen Smith: I am not going to indulge in this procedural nonsense much longer, because frankly the country is interested in the substance of the debate. However, if the Exchequer Secretary wants to intervene on me one more time, he can take the opportunity that the Prime Minister eschewed earlier today and correct the misleading comments that he made about the 50p rate, which he said raised no money. We know that it did raise money. We know that page 52 of the Her Majesty’s Revenue and Customs report makes clear how much money it raised and how much it would have raised in future. If the Exchequer Secretary wants to intervene on that point he can, but as for our amendment, drafted on the

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Clerk’s advice, we are confident in it, we are happy about it and we will debate the substance rather than the nonsense.

Chris Bryant (Rhondda) (Lab): I am grateful to my hon. Friend and neighbour from Pontypridd for giving way. He will know that my constituents, like his, find it inconceivable that the Government should be trying to reduce the tax rate from 50p to 45p at this time. Will he confirm that literally the only people in this House who can even table an amendment to put it back to 50p are Ministers of the Crown? That is what they should be doing today, rather than hiding behind the procedure of this House.

Owen Smith: I am grateful to my hon. Friend because he reiterates the point that I have made. The Government are the only body in this House who can choose to raise taxation.

Michael Ellis (Northampton North) (Con): Will the hon. Gentleman give way?

Owen Smith: No, I am not going to give way.

The Government are the ones who could decide today to put the rate back up to 50p. They have chosen to cut it from 50p to 45p. We are not going to indulge in any more of this procedural gibberish. The reality is that we are here to debate the substance of the issue, which is the values and the evidence that underpin the decision.

Graeme Morrice (Livingston) (Lab): My hon. Friend has referred to the fact that at Prime Minister’s questions today the Prime Minister said that the 50p tax rate provided no additional income to the Treasury. However, can my hon. Friend confirm what the actual loss to the Treasury would be from reducing the rate to 45p?

Owen Smith: I would be absolutely delighted to confirm that, because we have got it in black and white, in the HMRC’s dodgy dossier, as I think of it these days. Page 39 of the HMRC paper says that the post-behavioural yield—that is, the amount of money realised—of the 50p rate for the one year in which it was in existence was £1.1 billion. The summary, on page 2, says the same thing. In answer to my hon. Friend’s supplementary point, the amount of money that would be forgone in forthcoming years, which is captured in table A2 on page 51, is £3 billion, rising to £4 billion over the spending period. That is the reality, there in black and white in the HMRC document. These are not uncertain numbers, like some of the other ones. I will now give way to the hon. Member for Northampton North (Michael Ellis)—[ Interruption ]—who is looking off into the ether.

Michael Ellis: I am grateful to the hon. Gentleman for giving way. If he disputes the Government’s suggestion that his amendment would reduce the rate to 40%, can he say what it would reduce it to? Also if he thinks it so important that the rate should remain at 50%, why did his Government sit on their hind heels for 13 years before raising it to 50%?

Owen Smith: I will answer the hon. Gentleman’s last point first, because I answered it on Monday, too. When we introduced the 50p rate, in the Budget for the year

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before it took effect—we first floated the notion in 2009, allowing a year for it to be implemented, as is good practice—the rationale was simple. We wanted the people with the broadest shoulders to pay the maximum amount, and to pay an amount that is fair and just. This Government have a different set of priorities.

Graeme Morrice: I am grateful to my hon. Friend for giving way again. On the basis of the confirmation from the official HMRC report that the loss is indeed in excess of £1 billion, does he think that the Prime Minister should be asked to come back to the House and correct the record accordingly?

Owen Smith: I do. It is absolutely extraordinary that the Prime Minister should have misled the House in the manner in which he did. However, it is in keeping with the misleading of the House that is writ large throughout the HMRC document, which has frankly come up with this £100 million loss—not flat, as the Prime Minister suggested—with the flimsiest of evidence and on the basis of economic modelling that I intend to take to pieces later on.

1 pm

Derek Twigg (Halton) (Lab): There are a couple of points to make. First, there is no uncertainty that 14,000 millionaires will significantly benefit from the change. Where there is uncertainty, however, is in the Government’s arguments about the overall impact on the Exchequer, in terms of tax gained and tax lost. The Select Committee on the Treasury has said today:

“The cost and benefits of reducing the additional tax rate to 45p are both highly uncertain”.

The Government have tried to make an argument, but they have not even got the facts right in the first place to make their argument stick.

Owen Smith: The word “uncertain” is used so many times in the various documents that I have lost count. In fact, I must apologise to the Committee. On Monday evening, I said, perhaps with my dander up, that there were three instances in the HMRC document of the words “uncertain” or “uncertainty”, when there are in fact 32 such references—one for just about every page. I shall read out some excerpts from the document later.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The reason that amendment 6 was not selected for debate was that the House had already divided on that matter. Unfortunately, the hon. Gentleman’s party abstained on that occasion. On his amendment, it is my understanding from the Clerks that there must be an additional rate in the Bill. Is there not therefore a danger that the Government could use his amendment to drop the top rate of tax to 40p, thereby creating a tax break on a tax break? Several Members made that point on Monday.

Owen Smith: I suppose that there is a risk of that happening, because the Chancellor has wanted to reduce the rate to 40p all along. He might even want to go lower; perhaps we will get an indication later of how low he and his Ministers think they can go on income tax. With respect to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), the reason that he gave was not the reason that his amendment was not selected. It was not selected because it is only the Government who can choose to put up taxes—

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Mr Gauke rose—

Owen Smith: I am not going to give way again to hear more obscurities of protocol. They are nonsense and are just being used to distract attention from the measures.

Elizabeth Truss (South West Norfolk) (Con): What impact does the hon. Gentleman think having the highest rate of income tax in the G20 has on this country’s competitiveness?

Owen Smith: We do not know—[ Laughter. ] Conservative Members might laugh, but I would like to see them present some evidence on this, instead of the flannel and rhetoric that we are hearing—[ Interruption. ] The Minister is waving the HMRC report. Will he point to the part of it that gives definitive data on the impact on competitiveness of any rate of tax? There is nothing about that in the report, which is why he is not getting up to point it out. Come on! Let him show me the part of the report that substantiates the point made by the hon. Member for South West Norfolk (Elizabeth Truss).

Kwasi Kwarteng (Spelthorne) (Con) rose—

Owen Smith: Is the hon. Gentleman about to—

The Chairman of Ways and Means (Mr Lindsay Hoyle): Order. I am sure that the hon. Member for Spelthorne (Kwasi Kwarteng) has only just walked into the Chamber. He cannot have picked up the debate quite this quickly. He might need a little more time to listen before he intervenes.

Owen Smith: We should give the hon. Gentleman time to warm up, but if he wants to intervene to tell me where in the HMRC report we can find a definitive set of data on the impact on competitiveness of the various rates of tax, I will gladly sit down and wait for him to do so.

Mark Reckless (Rochester and Strood) (Con) rose—

Owen Smith: Does the hon. Gentleman want to intervene on me on the point of competitiveness using evidence or anecdote?

Mark Reckless: The document says that all this is highly uncertain. That means that there is a significant possibility that the 50p rate was losing the Government revenue. Would the hon. Gentleman therefore welcome support for his amendment from the Government Benches at 4 o’clock?

Owen Smith: I am very pleased that I gave way to the hon. Gentleman. His intervention has exposed the fact that Conservative Members do not read the documentation, even though they listen to the flannel from their Front Bench. I repeat that page 39 of the document shows, under the heading “Adjusted impact on 2010-11 tax liabilities”, that the post-behavioural yield is £1.1 billion. It is there in black and white. That is how much money the 50p rate raised. No one is disputing that, and I presume that the Exchequer Secretary is not going to get to his feet and dispute what is written on page 39, or indeed, what is written on page 2, in the summary. I do not think that he is going to do that.

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Kwasi Kwarteng rose—

Alun Cairns (Vale of Glamorgan) (Con) rose—

Owen Smith: I am not going to give way at the moment. I want to carry on with my speech, then I will give way again. Perhaps by then the hon. Member for Spelthorne (Kwasi Kwarteng) will have warmed up and will be able to give us some evidence, instead of more rhetoric.

Sammy Wilson (East Antrim) (DUP): Much has been made of the effect of the top rate of tax on revenue and on competitiveness. Given that the Government have stated their intention to change the top rate of tax, is it not surprising that the Chancellor has said that he is going to initiate

“some real research into dynamic scoring, and what the broader economy effects are of changes to taxation”?

It seems that even the Government do not know the impact of the change in taxation.

Owen Smith: I knew it would be worth while giving way to the Treasury spokesman for the Democratic Unionist party. His intervention offers a contrast to some of the more pedantic contributions that we have heard from Conservative Members. He is right to say that it was far too early to make a decision, ostensibly based on evidence, just one year after the implementation of the new tax rate. That is what the Institute for Fiscal Studies has concluded, and it is what the Office for Budget Responsibility has effectively concluded in suggesting how uncertain the conclusions are. It is also, unfortunately, what the country is concluding.

Andrew Gwynne (Denton and Reddish) (Lab): The information in the report shows that the cost to the Treasury of the tax cut will be £3 billion. That is rather conveniently predicated on behavioural change bringing in an extra £2.9 billion. Given that scorn has been poured on that figure of £2.9 billion, what confidence does my hon. Friend have that this tax change will not end up costing the Treasury far more than its report suggests?

Owen Smith: I have absolutely no confidence whatever. My hon. Friend’s point goes to the heart of the dodgy economics in the dodgy dossier. The figure of £100 million is entirely predicated on the assumption that there will almost be a net offset of the £3 billion static loss as a result of the change to the 50p rate, through people deciding to work harder, save less, take their income in the current year, and hide their income less. Those are the behavioural changes that the Government are assuming will take place, but there is no real evidence base for the change. It is fundamentally dodgy.

Alison McGovern (Wirral South) (Lab): Does my hon. Friend agree that we are debating the difference between those of us who do our economics using evidence and those on the Government Benches who do it using spurious theory? We should all be responsible; we should look at the evidence and report that evidence. That is why it is important that the Prime Minister should return to the House to correct the record.

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Owen Smith: I am tempted to say to my hon. Friend that the golden phrase “expansionary fiscal contraction” tells us all that we need to know about the ability of those on the Treasury Bench. Expansionary fiscal contraction! That is working really well, isn’t it? It is going splendidly.

Nadhim Zahawi (Stratford-on-Avon) (Con): If we set aside the shadow Minister’s amendment, which would leave us with a 40p top rate of tax—[ Interruption. ] Let us set that aside for the moment. My question to him is this: would he reverse the decision on the 50p tax rate if he were in office? A yes or no is all I require.

Owen Smith: Yes. Right now, we would not have cut the 50p rate in this Parliament. Full stop. End of. Thank you very much.

Nadhim Zahawi rose—

Owen Smith: No, the hon. Gentleman has just heard my answer. Throughout this Parliament, we would not have done that. No tax rate is set in stone for ever, but the question of whether we would reverse that decision is irrelevant because we are not in government. You lot are, and you cut it, but that would not have been our priority. Neither was it the priority of the present Chancellor just 18 months ago. When we introduced the 50p rate, we said that we wanted those with the broadest shoulders to pay the most, in order to deal with the global turmoil—[ Interruption. ] Members should just listen for a moment. When he was shadow Chancellor, the present Chancellor said that he agreed with us. In October 2009, he said that

“we could not even think of abolishing the 50p rate on the rich while at the same time I am asking many of our public sector workers to accept a pay freeze to protect their jobs. I think we can all agree that would be grossly unfair.”

I still agree with that.

Brandon Lewis (Great Yarmouth) (Con) rose—

Kwasi Kwarteng rose—

Owen Smith: No, there is more from the Chancellor. Conservative Members ought to listen to this, because it is their very competent Chancellor speaking. A year later, in October 2010, he said:

“The public must know that the burden is being fairly shared. That’s why I said last year: we are all in this together. And I am clear…that those with the most”—

like those on the Treasury Bench—

“need to pay more. That is why… I have stuck with the 50p tax”.

Have I missed something over the past 18 months since this Chancellor has been in trouble? As far as I have seen, the economy has flatlined, growth is at absolutely zero, business investment is going nowhere and inflation is rising. The only thing that has fallen recently is unemployment. Thanks be to goodness that it has dipped today, but it is still at 2.6 million, and as I pointed out to the Minister on Monday night, 2,500 people were queuing for 200 jobs at a supermarket in my constituency last week. That is the reality of the economy under this Government, unfortunately.

Alun Cairns rose—

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Owen Smith: I shall give way to a Welsh colleague.

Alun Cairns: I am grateful. How does the hon. Gentleman reconcile his enthusiasm for the 50% rate with the view of the former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who said that the 50% rate was temporary? How temporary is temporary for the Labour party?

Owen Smith: The 50p rate was introduced, as I said earlier, when we were in the depths of the biggest global recession—[Interruption.] I add the word global, unless Government Members are still suggesting that the collapse of Lehman Brothers in the US was the fault of the Labour Government. Among the many risible claims of the present Government, that is right up there with “expansionary fiscal contraction”. While we are still asking the poor to pay the price for that global recession and piling misery upon misery on them, with VAT changes, increased job insecurity and wage stagnation, cutting the 50p rate is fundamentally the wrong thing to do.

Chris Bryant: My hon. Friend the shadow Minister has referred to several things that are uncertain, but has it not already become clear that two things are absolutely certain? The first is that the Prime Minister gave us a pork pie earlier when he was talking about how much the 50p rate would raise. Secondly, the only reason there have been so many cock-ups in the Budget and the Finance Bill is that the Government have had to try to justify to the public their cut to the 50p rate. The whole mistake of the Budget hangs on that one initial mistake in cutting the 50p rate.

Owen Smith: I grateful for that intervention. I am not sure whether the pork pie was served at ambient temperature, but it was certainly a pork pie.

Mark Reckless rose—

Mr David Lammy (Tottenham) (Lab) rose—

Owen Smith: I have already pointed out three times that it was a pork pie, including to the hon. Member for Rochester and Strood (Mark Reckless), to whom I do not intend to give way. I will give way, however, to my right hon. Friend.

Mr Lammy: My hon. Friend has done a very good job of demonstrating that the Government are not at all clear on the figures and the money that will be lost. Does he think that the Government have more clarity about the Mayor’s position on this issue? Boris Johnson, the Mayor of London, made eight separate interventions to get this tax reduced, but made no interventions on VAT, no interventions on an increase for pensioners and no interventions on charities. He sought to intervene on behalf of the richest Londoners. My hon. Friend may agree that the Government ought to publish those interventions, so that we can be absolutely clear whether or not the Mayor has any evidence.

Owen Smith: Again, I am pleased that I gave way, as I think that is an excellent suggestion, which we really should take up. Of course the series of interventions on the 50p rate from the current Mayor of London—I say

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current; I hope he will not be Mayor for much longer—and, indeed, the series doubtless coming from the Chancellor’s and Prime Minister’s other wealthy mates, backed up the ideological decision to get rid of it. In fact, I am tempted to say that the cut in the 50p rate gives a whole new meaning to the phrase “mates’ rates”.

Mark Field (Cities of London and Westminster) (Con): The hon. Gentleman will recall that when, in November 2008—for the first time and 11 and a half years into the Labour Government—the suggestion was made to change the higher rate of income tax, the then Chancellor suggested bringing in a 45p rate. Might that rate have been suggested simply because it was felt it would maximise the tax take from it? Is that not one reason the hon. Gentleman is somewhat misguided in supporting this amendment?

1.15 pm

Owen Smith: No, and I shall get into the technicalities in my response, if I may. When the 45p rate was initially mooted, the recession was not as profound as it subsequently became, justifying the shift to the 50p rate. If we look at the calculations underpinning the suggestions of the 45p and 50p rates, we find that they were informed by the use of a taxable income elasticity number of 0.35, which shows that an even higher rate, nearer 56%, might have been the optimal level for imposing the tax. We did not impose that rate, and—before the hon. Member for Cities of London and Westminster (Mark Field) bobs up and down excitedly—I am not for a minute suggesting we ought to impose it. What I am saying is that there is uncertainty about the optimal rate, which is why it is so foolhardy for this Prime Minister and Chancellor to hang their credibility, and the claim of fiscal neutrality at the heart of their Budget, on economic calculus and economic modelling that is inevitably uncertain. That is the word used 32 times in the document, and I am going to use it some more in a moment. Unfortunately, it shows the truth for this Government.

Mark Field: I entirely appreciate that the hon. Gentleman’s case applies to all sides—that there is much uncertainty about precisely the optimum rate of tax—but does he not accept that the 45p rate mooted three and a half years ago, which has now been put in place, was suggested simply because of the totemic effect of having to pay less than half one’s income at the highest rate of income tax? That totemic effect has a massive impact on both entrepreneurial spirit here and the international competitiveness that my hon. Friend the Member for South West Norfolk (Elizabeth Truss) mentioned earlier.

Owen Smith: What I would accept is that the rate was raised to 50p in the end because we felt that there was still an overriding imperative to help through the period of recession the people in our economy who are the most vulnerable and to ask those who are the most fortunate in our economy to bear the broadest and biggest burden in order to allow that transfer to occur. That is the totemic rationale from our perspective. What is totemic for this Government, I fear, is the idea

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that the 50p rate is not approved of in the City or by the wealthiest people, but I do not believe that that provides a justification for making this decision—and nor does the Chancellor, which is why he eschewed the possibility of arguing from a political or ideological perspective to justify the cut to 45p. He argued that it was being done on the basis of evidence. In fact, that was the only Keynesian bit of logic in the Chancellor’s Budget speech. He effectively said, “The reason I no longer believe what I believed in 2009 and 2010 is that the facts have changed”, and he changed his view accordingly. In his view, based on the dodgy dossier, the rate was not bringing in the anticipated amount of money, which is what justified paring it back to 45p.

Mr Andrew Love (Edmonton) (Lab/Co-op): There appears to be an emerging cross-party consensus that there is great uncertainty in this area. Is it not therefore appalling that the Chancellor should go ahead at such short notice without any evidence base? Does that not confirm that he had made up his mind without looking at the evidence?

Owen Smith: I hate to say it, but it is worse than that. What happened is that the Chancellor made up his mind, and then made the evidence fit his decision. [Interruption.] I am asked where is the evidence, but 32 times in the one exculpatory piece of evidence provided, the Treasury covered its behind by referring to uncertainty. I shall go through them in a minute, but that shows how often it was necessary to justify this damascene conversion.

Mark Reckless: Does the hon. Gentleman not accept that because the situation is uncertain, the 50p rate might have cost revenue, so the Government had less money for the least fortunate in society?

Owen Smith: I do not know how many times I need to keep telling the hon. Gentleman this, but the simple answer is no. He should turn to page 2 of the document, which clearly says that this rate raised £1 billion; he should turn to page 39, which says that it raised £1.1 billion; he should turn to page 51, which says that it will rise to £3.1 billion next year. These would be the static costs. It goes on to say—[Interruption.] No, £1.1 billion is the actual amount lost to the national accounts as a result of this change. That is a fact. It is not uncertain; it is a fact. The Treasury thinks that the money would have gone up to £3 billion, rising to £4 billion subsequently.

Harriett Baldwin (West Worcestershire) (Con): Will the hon. Gentleman give way?

Owen Smith: Yes, for the last time.

Harriett Baldwin: Can the hon. Gentleman confirm that his party’s next manifesto will contain a pledge to restore the 50p rate?

Owen Smith: When we get close enough to the next election to write our manifesto, we will write it, and the hon. Lady will be able to see it then. That is the simple answer to her question. Can she tell us exactly what will be in her party’s manifesto at this stage? I do not think so, and I do not intend to tell her what will be in ours. We will decide.

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I wonder what the Tory manifesto will say about the NHS and VAT at the next election. I suspect that it will not say that the Tories will look after the former or fail to increase the latter, because no one would believe them any longer, would they?

Let us be clear. The document says that £3 billion would be the static cost of a cut in the rate to 45p. It also says that the behavioural change based on the magic of Arthur Laffer’s cocktail napkin calculus would generate £2.9 billion. Unfortunately, as I have said, HMRC is not terribly certain about that, which is why it has covered its rear so often.

I promised to give the Committee a few examples of the use of the words “uncertain” and “uncertainty”, which occur more than 30 times in the document, and I cannot resist doing so, because they are so juicy. The document states that

“the yield estimates were highly uncertain.”

It states:

“There is considerable uncertainty over the true level of the elasticity.”

It states:

“The incompleteness of returns at this stage gives the results and conclusions a margin of uncertainty.”

In fact, there is so much uncertainty in it that there is a separate section entitled “Areas of uncertainty”. My personal favourite appears on page 38, where uncertainty is expressed about the uncertainty. In an attempt to estimate the behavioural effects, the document states:

“The level of uncertainty associated with this estimate is therefore driven by the uncertainty of all the other stages described above.”

Why is the document so uncertain? The reason, in short, is taxable income elasticity or TIE. The Treasury decided that the appropriate TIE for the calculation of a £100 million loss was 0.45; not the standard number that the previous Treasury had used, 0.35, and not—I look forward to an intervention on this point—the standard numbers used in the vast welter of academic research which puts a delta at between 0.12 and 0.4. The figure of 0.46, which is used in this Treasury document, is at the very top end of the possible delta. Even if it were true that 0.45 is appropriate, however, the uncertainty would still be enormous. All we need do is shift the figure slightly to 0.35, and what do we find? Not a £100 million loss, but a loss of £700 million. If we shift it nearer to the 0.12 that has been used in many United States studies, we see a loss to the tune of between £3 billion and £4 billion.

Paul Johnson, director of the Institute for Fiscal Studies, told the Treasury Committee, whose report was published only today, that the Treasury’s

“central estimate… is incredibly uncertain, to the extent that we think that its estimate suggests there is only a two-thirds probability that a revenue-maximising rate lies between 30 per cent and 75 per cent.”

That is what the IFS had to say about what the optimal rate might be on the basis of the Treasury’s calculus. Mr Johnson continued:

“Those numbers are absurd in some sense, but that gives you a sense of the level of numbers of assumption and uncertainty that underlie what”

the Treasury

“has done.”

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Mr Gauke: The hon. Gentleman has referred to the academic debate. May I refer him to page 20 of the HMRC document, which relates to the IFS study? It states that Brewer, Saez and Shephard estimated a TIE of 0.46 in 2008, and Gruber and Saez estimated a TIE of between 0.5 and 0.7. It also states:

“The TIE estimate of 0.35 used in the Budget 2010… estimate”

—which the hon. Gentleman described as “standard”—

“was deliberately at the low end of the academic elasticities surveyed.”

The 0.45 TIE is much more consistent with the academic position than the claims of the last Government.

Owen Smith: I am thrilled to have given way to the Minister, because his intervention has revealed that, although he may have read the dodgy dossier, he has not read the academic literature. If he had done so, he would have read more recent publications such as that of Saez, Slemrod and Giertz, which is a review of all the pieces of work done on TIE. It concluded that many of the earlier studies, including the HMRC study, had relied on estimates that were excessively high owing to flaws in the data and the methodology used. Saez et al suggested that

“the best available estimates range from 0.12 to 0.40”.

That is the same Saez from whose earlier paper the Minister quoted. In his most recent paper, he changed his mind and concluded that between 0.12 and 0.4 was the generally accepted estimate. The Treasury has cooked the figures on the basis of one academic study produced as part of the Mirrlees review.

Mr Love: Is my hon. Friend aware that the IFS study that is cited so regularly by Government Members refers to taxes increasing in the 1970s and decreasing in the 1980s, and is way out of date in relation to today’s circumstances?

Owen Smith: Absolutely. The key correlation is not between top rates of tax and GDP. There is very little evidence of that. However, there is evidence that top rates of tax have a massive impact on the distribution of wealth across the deciles, and are concentrated on the richest percentage of our economy. That is the truth, and that is why the Government ought not to have made the decisions that they made.

All this stuff may seem rather arcane, but it is central to the Budget. If the Treasury got it wrong—if the amount that will be lost is not £100 million, but a great deal more—the neutrality of the Budget is bust, as is the credibility of the Government. Who will pay the price of that bust? It will not be the 14,000 millionaires who are 40 grand better off as a result of the extraordinary largesse from this millionaires’ Government. It will be the pensioners, the unemployed, the vulnerable, and squeezed middle-earning and low-earning families throughout the country, who will be £500 worse off as a result of this Government’s activities.

We fear that that is the price that will be paid. We believe that written into clause 1 are the priorities and the politics of the Government, which are ideological, value-driven and fundamentally wrong: wrong for this time, and wrong for this country. That is why we will vote against the proposed change and in favour of our amendment, and we hope that Government Members will look to their consciences and do the same.

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Elizabeth Truss: I am delighted to see the back of the 50p tax rate. Of all the shallow, politically motivated activities of the last Government, it was possibly the worst. They spent 13 years enjoying the fruits of the 40% top rate of tax that had been put in place by our reforming Chancellor Lord Lawson in 1988. It was a bold move at the time to create a top tax rate at that level, but, as we have seen, other countries around the world have been reforming their tax systems and tax rates in order to become competitive and to face the other countries—the emerging economies—that are now competing on the world stage.

The 50p tax rate was announced in the 2009 Budget, five weeks before the last general election—an election the Labour party knew it would lose. Can things get any more cynical? That was the ultimate scorched-earth policy, and it has done enormous damage to our economy. Labour knew the economics were flawed, and the increase in the tax rate from 40p to 50p raised only a third of the £3 billion it had predicted. Meanwhile, between £16 billion and £18 billion was moved forward into income in the previous year, diverting productive activity from industries that we needed to thrive in order to keep our economy going during the recession. The change to the rate was made purely for political motives.

1.30 pm

Mark Reckless: My hon. Friend makes a powerful case for the merits of a 40p top rate of tax. Will she therefore support the Opposition amendment?

Elizabeth Truss: I am not quite sure whether their amendment expresses what they wanted it to express. As with the HMRC report, there may be some uncertainty about what exactly the Opposition intend to do.

First, the introduction of the 50p tax rate diverted resources from the productive economy at a very important time—just as we were heading into the worst recession, thanks to the dreadful economic policies of the previous Government.

Sheila Gilmore (Edinburgh East) (Lab): How can people postponing their income from one tax year to another, but nevertheless presumably still getting that income, prove so damaging to the economy? Is the hon. Lady suggesting that, having got the income a year early, they simply sent it abroad? Surely it can still be invested.

Elizabeth Truss: When income is artificially moved from one year to the next, it is not properly used for investing in projects. Under the previous Government, a lot of expenditure went into unproductive areas of the economy. Much of it went on excessive public spending and into the property industry, leaving us with the scorched-earth situation that we have had to address.

The signal that the previous Government sent to the rest of the world was that Britain was anti-aspiration, anti-business and anti-work. That happened at a time of increasing international competition, as it is now ever easier to move people and capital around the world because of improved technology and globalisation. Other countries were reforming their tax system, however, so as they were moving forwards, we were moving backwards.

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Kwasi Kwarteng: Will my hon. Friend outline just how uncompetitive the 50p rate was compared with the rates of other G20 countries?

Elizabeth Truss: It was the highest income tax rate in the G20. We heard earlier from the Opposition spokesman that Labour did not understand the effect that that would have on our international competitiveness, which shows why it is not fit for office.

Harriett Baldwin: Did my hon. Friend share my shock at hearing the Opposition Front-Bench spokesman arguing that the sensitivity of the top rate of tax is static? The logic of that argument is that the top rate should be 75p, 80p, 90p or, perhaps, even 100%.

Elizabeth Truss: Yes, and perhaps some Opposition Front-Bench Members should move to France, where they might find that such policies are more conducive to their way of thinking.

At this time of increased international competition and great movements of people and capital around the world, and with new economies rising such as in India and China, according to the World Economic Forum Britain is 94th in the world in respect of the effect and extent of our taxation. One factor in that is the top rate of tax under the previous Government, and another is the extremely long tax code, which is a result of their meddling with our tax system over many years.

The UK is 11% less productive than the G7 average, and our skills base is lower than that of the US, France and Germany. If we are to become competitive again and improve our productivity and skills, we need incentives for people in this country to work and to invest in their skills, and we need to rebalance the tax system away from income tax and taxes on work such as national insurance, which the previous Government increased. We also need to reform our education and welfare systems and take the 2 million lowest earners out of tax, in order to give everybody more incentive to work. We must also merge our income tax and national insurance system to make things simpler for employers. We need to get rid of the previous Government’s flagship 50p tax rate as well, as it has done so much damage to people in this country who are seeking to work, to invest and to be part of building our future economy.

The Government have made it clear that we want shareholders to have proper control over executive pay in their companies, and that must happen. People must be rewarded in line with the skills they use, the risks they take and the income they generate. We need incentives for people to set up businesses, and to create and produce more. We also need to look outside Britain and see what the rest of the world is doing. We need to move away from the myopic approach that it does not matter what is going on elsewhere. If our country takes that approach, we will not succeed.

Chris Bryant: I had not intended to speak in this debate, but the previous—[Interruption.] I am grateful for all the waves from Government Members. The contribution of the hon. Member for South West Norfolk (Elizabeth Truss) has prompted me to speak, however.