The House is clear, strong and united on the subject of countries’ meeting pledges. The additional dimension to this matter is that if it is so difficult to come up with the $1.5 billion agreed in January at Kuwait, how difficult will it be to come up with the $1.5 billion every few weeks or couple of months that we are going to need if the crisis goes on and the numbers get much bigger?

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That is why I say again that our policy cannot be static. There is only a choice between the lesser of evils in how we pursue our policy on this subject, but that underlines the fact that we cannot ignore the crisis.

Mike Gapes (Ilford South) (Lab/Co-op): The Governments of Margaret Thatcher and Ronald Reagan armed the mujaheddin in Afghanistan, with unforeseen and terrible long-term consequences. Rather than giving to elements of the Syrian opposition surface-to-air missiles that can shoot down civilian aircraft, would it not be better to consider again whether a no-fly zone, controlled by us, is a better option?

Mr Hague: All options have to be considered. The hon. Gentleman has asked about the issue several times and has been pursuing it wholly legitimately. My answer is quite similar to the one I gave him last time. To enforce a no-fly zone, there are, again, international legal considerations. It would also require the participation of aircraft on a very large scale, so the decision would essentially be one for the United States, given the scale required. No such decision by the United States has been taken. We are working in an environment where we do not have a no-fly zone and we have to consider the options available to us in the light of that.

Richard Ottaway (Croydon South) (Con): I congratulate the Foreign Secretary on a successful conference, which obviously entailed a lot of hard work behind the scenes. On Syria, he said, “As things stand, we need greater flexibility if we decide that urgent action is necessary”. Does he accept that any further action in Syria must be lawful and have a legal basis if it is to have international support?

Mr Hague: Yes, absolutely. It is a fundamental principle for British Governments that the action that we take must be lawful. My hon. Friend will know that when, for instance, we took action ourselves in Libya, based on UN resolution 1973, the Cabinet collectively considered the legal advice before that took place. We were able to be clear about it in the House.

Yes, international law is of paramount importance for us. Due regard must be given in international law, of course, to extreme humanitarian suffering. There comes a point where trying to ameliorate extreme humanitarian suffering becomes the prime consideration. However, I assure my hon. Friend that such legal considerations will never be absent from our minds.

Keith Vaz (Leicester East) (Lab): I welcome the decisions taken by the summit in respect of the Roma-Lyon group and the fight against international terrorism. Last week, I visited Interpol and was briefed on the work of its Fusion Task Force. Does the Foreign Secretary agree that there seems to be a synergy between the work of the taskforce and the Roma-Lyon group? Will he undertake to try to bring those initiatives together while we hold the presidency of the G8, so that there is no duplication in the fight against international terrorism?

Mr Hague: I will certainly look at the point that the right hon. Gentleman makes. The G8 Ministers strongly and unanimously reinforced our commitment to countering terrorism effectively; that was a major part of our discussion. There is the kind of synergy to which he refers, and I will look at what we can do in that regard.

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Mr Bernard Jenkin (Harwich and North Essex) (Con): Will my right hon. Friend cast his mind back to the first G8 summit that he attended as Foreign Secretary? Was anybody forecasting that we would be facing a horrendous conflagration in Syria and the threat of thermonuclear war in North Korea? Does not that underline how unpredictable our current international security situation is and the fact that it is impossible for us to predict that we will not require nuclear weapons for our protection within the next 50 or 60 years?

Mr Hague: Yes, my hon. Friend is absolutely right, particularly with regard to the attempts of the DPRK to develop nuclear weapons and ballistic missile technology. The effects of the decisions that we are making about a successor to Trident will last for decades. We have to provide for the security of this country over several decades to come, and we must therefore, absolutely, have at the forefront of our minds the fact that we cannot predict—even a few years out, as he says—the threats that we might face. We can imagine that anyone in 1913, rather than 2013, who was trying to predict the threats they would face into the 1940s would have struggled very seriously to do so.

Meg Munn (Sheffield, Heeley) (Lab/Co-op): I congratulate the Foreign Secretary and all those involved in securing the declaration on preventing sexual violence in conflict. Will he say a little more about the development of the protocol that the UK will be leading on? Does he envisage any role at all for parliamentarians? If so, will he agree to seek a debate in Government time on this very important issue?

Mr Hague: Yes, there is absolutely a role for parliamentarians. Indeed, as we work on the protocol over the next few months and take it to the United Nations, I would welcome informal meetings and informal consultation with hon. Members of all parties. Of course, we would have to speak to the business managers about debates. We did have a short debate that covered the subject on 14 February, and there was enthusiastic support for this measure across the House. However, I am sure that as the year goes on—indeed, during the forthcoming debate on the Gracious Speech—there may be opportunities for us to look at this together.

Dr Julian Lewis (New Forest East) (Con): Even if the Assad regime fell tomorrow, the Government could give us no guarantee at all that their chemical weapon stocks would not fall into the hands of the thousands of al-Qaeda fighters who are fighting alongside the opposition—and it took just a couple of dozen people to organise 9/11. Would not a more sensible strategy be to work with the Russians and to try to get a ceasefire rather than to remain obsessed with overthrowing the regime?

Mr Hague: My hon. Friend must not misunderstand this. We are working on a political solution and endlessly debating and discussing it with Russia. We are not advocating, nor do we believe in, a military solution in any direction in Syria. The additional support that we give to the National Coalition is part of our effort to promote a political solution to show the regime that the National Coalition is not going to go away—and of course to save lives, which is another reason we give that

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assistance. We are not advocating the destruction of the institutions of the state. Whatever happens in Syria—if, as my hon. Friend says, Assad fell tomorrow—we do not want the same situation as arose in Iraq, when entire institutions and armies were disbanded. Therefore, a political settlement is absolutely what we should be looking for. Of course, we must also have contingency plans, and we must be discussing with other nations what we can do in emergencies about the security of chemical weapons. We do indeed discuss all those contingencies and we are preparing for them.

Mr Frank Roy (Motherwell and Wishaw) (Lab): What message does the Foreign Secretary give to journalists who endanger students by travelling with them secretly to film in North Korea?

Mr Hague: This is really a matter for the BBC and the London School of Economics, and the BBC will have to look at it. I think that I have enough matters to decide on with regard to the DPRK and all the international events we are describing without my intervening in that particular row.

Mark Pritchard (The Wrekin) (Con): I congratulate my right hon. Friend on the protocol on sexual violence in conflict and wish him success at the United Nations. He might recall that I was one of the first Government Members to back the army of the Libyan freedom fighters, but I have grave reservations about any army of Syrian rebel freedom fighters. Would their arms be subject—whether this is done unilaterally or multilaterally —to the new arms treaty regime, which, of course, the Foreign Office ably led on in New York over the past few weeks?

Mr Hague: I am aware of my hon. Friend’s long-held views on this. In any debate we have or decisions we make on this matter, the views of this House are, of course, of paramount importance. There are a variety of views across the House in the current circumstances. We strongly believe in the arms trade treaty and in applying its provisions. We also apply the consolidated guidance that applies to arms exports from this country, although we can choose to exempt some items from that in emergencies. Of course, having fought so hard for the arms trade treaty, we will uphold it.

Dr William McCrea (South Antrim) (DUP): May I express appreciation to the Foreign Secretary for his efforts in seeking to resolve many of the international challenges that he has outlined today? Will he assure the House that, should the present North Korean aggressive posturing be found to be more than rhetoric, he will endeavour to reach an agreed international response?

Mr Hague: Yes, absolutely. We do that, of course, at the United Nations Security Council, successfully so far. We have agreed with China, Russia and the United States on resolution 2094, the most recent resolution. The G8, including Russia, was completely unanimous, which was an important statement by many of the world’s leading nations. We concert closely on this subject with the United States, Japan and the Republic of Korea, so whatever we do on it we will do in very close partnership with those other leading nations.

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Martin Horwood (Cheltenham) (LD): The bombs of Korea and Syria understandably dominate many of the headlines, but the G8 is absolutely right to focus also on the more subtle dangers of cyber attack, not only to the digital realm, but to wider economies, societies and infrastructure. Is the Foreign Secretary confident that the UK and the G8 are devoting sufficient resources to countering this growing global threat?

Mr Hague: We in the UK are certainly devoting substantially increased resources. As my hon. Friend will know, we allocated in the strategic defence and security review an additional £650 million to developing our capabilities in the cyber area. One of the things that I discussed with my G8 colleagues is the setting up of our own cyber capability centre, which they can take part in and contribute to. I am satisfied that we are devoting the necessary resources. I think that, around the world, countries are in different stages of waking up to the scale of this threat. I discussed it with the South Korean Foreign Minister this morning and I welcome the fact that, later this year, they will hold the next international cyber conference, following on from the series that I started in 2011, to raise our awareness and co-operation on the issue.

Chris Bryant (Rhondda) (Lab): I congratulate the Foreign Secretary on the great progress made this year on the arms trade treaty, but implementation is often even more difficult than getting the agreement in the first place. Eighty-one countries have now signed up to banning cluster munitions and we are committed to trying to get other countries to ban them as well. Did the Foreign Secretary get a chance to mention the issue to the Americans or the Russians at the meeting the other day?

Mr Hague: That was not part of this meeting, but it is a regular part of our bilateral discussions with many countries. The hon. Gentleman is right that we have to maintain our efforts to increase that number. We are committed to it—again, on a cross-party basis—in this House and across Government, and support what the previous Government did and achieved on the issue. Although it did not figure in the G8 discussions, I assure the hon. Gentleman that it will continue to be part of our diplomatic effort around the world.

Robert Halfon (Harlow) (Con): On Saturday, The Times reported that the Ministry of Defence has evidence of chemical weapons being fired in Syria. What assessment has the EU made of reports that Assad has made efforts to transfer advanced chemical and biological weapons to Hezbollah in Lebanon? Is that factored into the EU’s efforts to proscribe Hezbollah?

Mr Hague: I cannot comment on intelligence matters. However, my hon. Friend will have heard me say in the statement how important it is that the UN Secretary-General’s investigation into the use of chemical weapons has access to all the areas involved in the allegations of chemical weapons use. We would be gravely concerned, as would most nations, about the transfer of such weapons to any other nation or entity. Indeed, the transfer of weapons to Hezbollah, let alone chemical weapons, would be a direct contravention of UN resolution 1701.

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We and many other countries would take that extremely seriously. However, I do not have any information to give my hon. Friend about that.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): Further to the Foreign Secretary’s answer to my hon. Friend the Member for Motherwell and Wishaw (Mr Roy), surely he has had a chance to form an opinion on whether the BBC’s “Panorama” programme and the manner in which the footage was obtained will help or hinder diplomatic processes.

Mr Hague: I honestly think that that is a matter for the BBC and the LSE to pursue. Since I have spent the day talking to the South Korean Foreign Minister, hosting the Moroccan Foreign Minister, launching our human rights and democracy report, preparing for this statement and overseeing the diplomatic arrangements for the funeral of Baroness Thatcher, I have not formed a view. It is for the BBC and the LSE to take the matter forward.

Neil Carmichael (Stroud) (Con): The Foreign Secretary has correctly noted that North Korea should be encouraged to participate in a multilateral framework. Following Secretary Kerry’s visit to the region and the encouraging signs that emanated from his talks with the Chinese, what can the Foreign Secretary tell the House that would encourage us to think that North Korea will move in the right direction at the appropriate speed?

Mr Hague: I have no immediate good news for my hon. Friend and the House on that matter, except for the clear unity in the G8 to which I referred. That unity extends beyond the G8 to our working closely with China. My hon. Friend referred to Secretary Kerry’s visit, during which he agreed that the United States would work with the Chinese Government. China has more leverage and influence over North Korea than any of the other nations to which we have referred. The extent of Chinese concern and determination that North Korea should not go down the path that it is on is one encouraging piece of information in an otherwise very difficult situation.

Mark Hendrick (Preston) (Lab/Co-op): The Foreign Secretary has commended the Chinese and referred to Secretary Kerry’s visit to China. That is positive and is in stark contrast to the position a couple of weeks ago, when the Americans, and to some extent our country, were saying that the Chinese were not doing enough with regard to North Korea. I am sure that the Foreign Secretary accepts the co-operation that is now taking place, but does he accept that if there was a major conflict on the Korean peninsula, the Chinese Government would have to deal with millions of refugees and the scale of the humanitarian disaster would make Syria look like a fairly small-scale operation?

Mr Hague: Of course, the prospect of any conflict on the Korean peninsula would be deeply alarming to the whole world. China, as a close neighbour, would be particularly concerned. That is always a factor in China’s foreign policy calculations in such matters. I welcome China’s agreement to UN resolution 2094, because it is evidence that it sees that the avoidance of such conflict involves additional pressure on the DPRK, although in

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a graduated way in its view. I welcome China’s position and we will continue to work with it, including through direct discussions in the coming days.

Mr Philip Hollobone (Kettering) (Con): How far are the United Kingdom and the international community prepared to go to prevent North Korea and Iran from getting nuclear weapons, and is the Foreign Secretary confident of success?

Mr Hague: We heard from our hon. Friend the Member for Harwich and North Essex (Mr Jenkin), who is no longer in his place, about how unpredictable world events are, and it is not wise for Foreign Secretaries to express complete confidence in a happy outcome for every single situation. I am confident, however, that the international community is united on both those issues, and given that unity it would be wholly irrational on the part of North Korea or Iran to continue down the path they are following at the moment. One cannot, of course, rule out miscalculations and sometimes irrationality, but I am at least confident that all countries that should be working together are doing so. I mentioned the unity on North Korea, and on Iran we work as the E3 plus 3, which includes all five permanent members of the Security Council, including Russia and China. There could not be stronger international unity on those subjects.

Hugh Bayley (York Central) (Lab): Humanitarian needs arising from Syria and work on violence against women both require aid. The last time the G8 met at a Heads of Government meeting in the UK, they came to an historic Make Poverty History deal to increase aid. The new Government support that decision but some G8 countries are backsliding from the commitments they made at Gleneagles. Will that be discussed when the Heads of Government meet in G8 format later this year?

Mr Hague: That was an important agreement and across parties we should be proud that this year we are hitting the 0.7% UN target on overseas aid. The hon. Gentleman is right to say that not all G8 members have done that—not all are even increasing their aid, let alone hitting the target. My right hon. Friend the Prime Minister will be chairing the Heads of Government meeting, and he is of course passionate about this subject. I will put the hon. Gentleman’s point to him.

Alec Shelbrooke (Elmet and Rothwell) (Con): I was a strong supporter of the arms trade treaty and I congratulate the Foreign Secretary on the work done by his office in ensuring that it became a reality. The world will be watching how that is engaged with in the situation in Syria. I wish to highlight to the House and the country something important that the Foreign Secretary said, which was that time is not unlimited in finding a diplomatic solution to Iran. I urge him to ensure that in E3 plus 3 meetings he takes the opportunity to encourage Russia and China to ensure that a proper strategy is in place to engage effectively and as ruthlessly as can be done with the new President of Iran who will arrive later this year.

Mr Hague: Absolutely. The E3 plus 3 group has been united in its approach in its negotiations so far, and I hope that will continue in any negotiations that take

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place after 14 June and the Iranian presidential election. My hon. Friend is right to say that that will be an important period, and if there is no diplomatic breakthrough with Iran before then, it will be seen across the world as crucial. When the elections are over and there is a new President of Iran, that period will be seen as the test as to whether Iran is going to engage seriously with the rest of the world.

Sheila Gilmore (Edinburgh East) (Lab): I sincerely commend the work done by the Foreign Secretary on sexual violence in conflict areas, and I know he is committed to that. I hope however, at the risk of being put down as a humourless feminist, that the kind of frisson that went round the Chamber at the mention of Ms Jolie was not intended to detract from the great seriousness of the issue. Are women’s rights organisations involved in this initiative, and does the Foreign Secretary have any proposals to give them funding?

Mr Hague: Yes, of course many organisations are involved and the steering board of my initiative includes many NGOs. It would be best for me to write to the hon. Lady with details of all organisations involved. The funding we deliver generally goes to overseas organisations such as those I saw on the ground when I visited the Democratic Republic of the Congo three weeks ago. I announced support for women’s groups that are active on the ground in the DRC and working to document cases of sexual violence in conflict so that prosecutions can take place. They need equipment that helps to gather and preserve the necessary evidence. I therefore announced a series of grants for those projects. I will send the hon. Lady a list of those things for completeness and to save time in the Chamber.

Rehman Chishti (Gillingham and Rainham) (Con): The Secretary of State will be aware that the Syrian regime has asked the UN to list Jabhat al-Nusra as a terrorist organisation. What will be the UK position on that?

Mr Hague: Of course, we will consider anything that is put to the UN Security Council and look at all the facts about Jabhat al-Nusra, but we must bear in mind that it suits the Syrian regime’s narrative to portray the opposition as a collection of extremist groups, whereas, as I pointed out earlier, the vast majority of the opposition are not. We will discuss that with other nations on the UN Security Council—the matter has not yet come to the Security Council—and I will keep the House informed.

Sandra Osborne (Ayr, Carrick and Cumnock) (Lab): I, too, welcome the protocol on preventing sexual violence in conflict and congratulate the Foreign Secretary on his work in that regard. As all hon. Members know, sexual violence in conflict has been a serious problem for a long time, and there are known perpetrators of it throughout the world. What can be done to pursue those people and bring them to justice?

Mr Hague: I am glad to say that some prosecutions are in prospect for such crimes. The recent arrest and transport to the International Criminal Court in The Hague of General Bosco Ntaganda for alleged crimes committed in the Democratic Republic of the Congo is

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one such case. I hope the initiative I am pursuing will lead to a sharp increase over several years in the number of prosecutions. That is the objective of the team of experts I have mentioned—we have already deployed it to several conflict-affected areas and will deploy it to several more this year. The team will help to gather the evidence, which means that prosecutions of both big offenders and individuals can take place so that the culture of impunity is shattered, and so that it is known all over the world that sexual violence in conflict is not something that people get away with any more. That is very much the purpose of the initiative.

Jonathan Ashworth (Leicester South) (Lab): I was grateful that the Foreign Secretary in his statement and the G8 communiqué referred to Burma and to the need to end religious and ethnic tensions there. I am sure he is aware that, in recent weeks, there have been more reports of sectarian violence against the Rohingya community and other Muslim communities. The root of much of it is Rohingya citizenship. What pressure, through the G8 discussions, can he bring to bear on Burma both to recognise Rohingya citizenship and to safeguard the human rights of all religious minorities in Burma?

Mr Hague: The focus of what we did on Burma at the G8 was supporting responsible investment in the country—responsible with regard to the population of Burma—but we are active in any case in pursuing the hon. Gentleman’s point. I met last month the Burmese Foreign Minister and made very strongly the point about sectarian violence in Burma and the need for the state to ensure that it comes to an end. I also discussed the matter by telephone last week with Aung San Suu Kyi, because it is important

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to pursue the matter with both the Government and the opposition in Burma. We will absolutely maintain our efforts on that.

Mr Andrew Love (Edmonton) (Lab/Co-op): I return at the end of the statement to the questions at the beginning on the growing humanitarian catastrophe that is overtaking Syria, the need for action, and the lamentable lack of action by the international community. You mentioned that some of the G8 had not lived up to expectations on UN aid, but you did not speak of the other nations. You have been very clear with us, but can you be clear what action the G8 proposed to deal with the matter, and what further discussions you will be having to ensure that everyone lives up to that commitment?

Mr Speaker: Order. I cannot be clear on any of those matters and will be having no such discussions, but the Foreign Secretary may be able to oblige.

Mr Hague: I am sure we would enjoy you being clear on this issue, Mr Speaker, but I will try to be clear on it. The G8 nations do not do badly in this regard, although everyone has to make sure that they deliver on their commitments. Most of the problems of not meeting commitments are outside the G8. Of course, we are working very hard, and my colleagues in the Department for International Development are working hard bilaterally with individual Governments, to say that amounts, adding up to $1.5 billion, that were pledged in Kuwait at the end of January—nearly three months ago—must be delivered if there is to be any hope of meeting the needs of the huge numbers of refugees that I have described. The Government are very active in trying to bring that about. Suggestions have been made by hon. Members during our exchanges about publishing some of the information, and I undertook to have a look at doing that.

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Point of Order

5.15 pm

Toby Perkins (Chesterfield) (Lab): On a point of order, Mr Speaker. You will remember that on 9 January the House unanimously passed a motion in favour of supporting the Government to regulate the pub companies industry. Consultees were expecting an announcement from the Government on 5 April, but that did not happen. On 7 April, The Mail on Sunday carried a piece saying that the Chancellor had overridden the Secretary of State for Business, Innovation and Skills and that that Government policy would no longer be followed. I have written to the Secretary of State to ask whether the Government have changed their policy, but I have had no reply. I wonder whether you might be able to advise me on how to ensure that the House is kept informed. If the Government’s policy has been changed, it seems most unsatisfactory that the readers of The Mail on Sunday should be better informed than Members of Parliament.

Mr Speaker: I note the hon. Gentleman’s point of order. In respect of his latter point, I simply make the observation at the outset that it does not necessarily follow that the readers of the organ in question are, as he puts it, better informed. That said, Ministers will of course be conscious of their responsibilities to the House. It is not a matter for the Chair, but the hon. Gentleman has placed on the record his real concern and it will have been heard on the Treasury Bench. He is a doughty campaigner and I feel sure that he will return to the theme if he remains less than satisfied.

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Finance (No. 2) Bill

Second Reading

5.17 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move, That the Bill be now read a Second time.

It is a great pleasure to present this year’s Finance Bill—a Bill that further demonstrates the Government’s commitment to creating a tax system that is fairer, simpler and more transparent, and one that will promote growth and reward work. Unlike the Opposition, those of us on the Government Benches recognise that we have to address the fiscal mess left us. That means that we have to resist the voices of those wanting to engage in a further splurge in borrowing. But we can take steps to make ourselves more competitive and help people with the cost of living, and that is what we will do in the Bill. I will happily take interventions this afternoon, but to give some structure to my speech it is perhaps worth while my laying out to the Chamber the order in which I intend to discuss the Bill. First, I will talk about the measures that will support growth and enterprise, then the measures that will tackle avoidance and evasion, and then the measures that will increase fairness. Finally, I will talk about the way in which the Bill will help to deliver a simpler tax system.

Kelvin Hopkins (Luton North) (Lab): On the issue of avoidance and evasion, the press reported over the weekend that Britain and its dependencies have more tax havens than almost any other country. Will the Government tackle evasion and avoidance seriously, and save us an awful lot of money?

Mr Gauke: As I was trying to make clear a moment ago, I will turn to the subject of evasion and avoidance later on in my speech. The Government have a proud record of taking steps to reduce evasion and avoidance, with legislative measures, support for Her Majesty’s Revenue and Customs and what we are doing at an international level to encourage greater co-operation between jurisdictions to ensure that the net is closing in on those who wish to evade their responsibilities. We will continue to take positive steps on that front.

Mr John Redwood (Wokingham) (Con): The Labour Government set capital gains tax at 18%, which is somewhere near the revenue-maximising rate. This Government put CGT up to 28% and, predictably, their own figures show that revenue is lower. When will they promote enterprise with a lower rate that will generate far more revenue, something we clearly need?

Mr Gauke: One has to look at the tax system as a whole, including capital gains tax, and I am not sure that I necessarily agree with my right hon. Friend’s interpretation of the period as a whole in relation to CGT revenues. In the year in question, there was certainly a reduction in deals done and transactions completed after the increase in the rate of CGT, but subsequent CGT revenues have picked up. We also have to bear in mind the relationship between CGT and income tax. I agree strongly with my right hon. Friend that it is important to have a competitive tax system that encourages enterprise and growth—indeed, I will turn to that now.

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One of the most important questions facing the country is this: at a time when much of the world is still coming to terms with the consequences of the financial crash, when many of our export markets face significant difficulties, and when international competition is becoming greater, and, because of the recklessness of the previous Government, we cannot afford to borrow more, how do we put in place the conditions for growth? In the specific context of the Bill, how do we ensure that we have a tax system that helps us to achieve growth and encourages businesses to locate and invest in the United Kingdom? As the Chancellor has made clear, our objective is to have the most competitive tax system in the G20.

Sheila Gilmore (Edinburgh East) (Lab): How can the Minister square the statement he has just made with the fact that all his predictions for borrowing are on the way up? Three years ago, we were assured that the Government’s policies would resolve this problem. If we are borrowing, would it not be better to borrow to invest, rather than to deal with failed economic policy?

Mr Gauke: Borrowing is down by a third from the position it was in when we came into office—that is the reality of the situation. We have to remember that if we had the policies advocated by the previous Government, borrowing in this Parliament would be £200 billion higher than it is going to be.

Chris Leslie (Nottingham East) (Lab/Co-op): I do not know whether the Minister did not get the memo, but the Office for Budget Responsibility confirmed that, compared with the Government’s predictions for the 2010 spending review, borrowing is predicted to be £245 billion more. The Minister needs to get a grip on the fact that borrowing is getting higher. I dare him to say that the deficit is being reduced in this financial year as compared with the previous financial year, because that is just not happening.

Mr Gauke: The hon. Gentleman is right to say that borrowing levels are higher than predicted by the OBR three years ago, but that is not the same thing as saying that borrowing is higher now than it was. The fact is that at the last Budget the OBR forecast that the deficit was going to be lower this year than it was last year.

Chris Leslie rose

Mr Gauke: The reality is that, had we pursued the policies the Opposition advocated at the last general election, let alone now, the deficit would be much, much higher. In fact, the Opposition are not standing behind any of the deficit-reduction policies they advocated at the last general election. For example, I think they support what we are doing on the fuel duty—it was one of the few measures the previous Government had in order to reduce the deficit.

Chris Leslie: I thank the Minister for giving way so generously, but I just want him to answer my question. He is not claiming that the deficit is still being reduced, is he? It is not falling this year compared with the last financial year, is it?

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Mr Gauke: That is not actually what the OBR numbers at the last Budget showed, but clearly we are faced with difficult economic conditions. It is striking, however, that whereas, when the previous Government faced difficult economic conditions, the deficit ballooned, we have taken tough action to ensure that we continue to reduce it. Would we like to be reducing it more? Of course we would. Why is that not happening? The difficult economic conditions clearly apply. But is the right approach to these difficult economic conditions to go on a borrowing splurge, as the Labour party consistently advocates? The answer is clearly no.

Mr William Bain (Glasgow North East) (Lab): If the Finance Bill is such a success in stimulating additional growth, will the Exchequer Secretary explain the statistics on page 103 of the OBR’s fiscal outlook, which reveals that since its December forecasts, forecast income tax revenues are £6.5 billion lower for 2014-15, £6.9 billion lower for 2013-14 and £7.1 billion for 2015-16? Not much of a success, is it?

Mr Gauke: If the hon. Gentleman looks through the OBR’s analysis, he will see its explanation for growth being lower than it had anticipated, which has an impact on the fiscal numbers. It is more than explained by the disappointing performance of our export markets and the fact that we have not been able to export as much as the OBR had anticipated. The question is: how do we respond to that? Do we try to put in place a competitive tax system that makes businesses and industries want to locate and invest in the UK? We have heard nothing from Labour on that front, whereas this Government’s record is very strong.

Geoffrey Clifton-Brown (The Cotswolds) (Con): In passing, may I say how hypocritical it is of Opposition Members to say what they have been saying about debt levels? Had they not left us with the debt level we inherited, we would not have this problem.

Despite what my hon. Friend might be hearing from the banks, my constituents tell me that they are lending only when they can get copper-bottomed, personal guarantees and that the lending they are getting is becoming ever more expensive. Will he look into the cost of export credit finance, which is a great hindrance to small and medium-sized businesses exporting?

Mr Gauke: My hon. Friend is absolutely right that we need to do what we can to ensure access to finance for those strong, viable small businesses that want to expand. That is why we have taken measures such as the funding for lending scheme and why we want to ensure that we have a business-friendly environment. I am grateful for his observations on export guarantees. He will be aware of some of the measures that the Government have taken over the past two or three years to try and support those exporting businesses. I note his comments and calls for us to go further.

Mark Field (Cities of London and Westminster) (Con): I appreciate that the Minister has to deal with an incredibly difficult situation that is not made any easier by this constant battling over borrowing figures. We all know how serious the situation is, and for my part I will not be spending my time blaming the last Government, which is unhelpful. We must look to the future.

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My hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) rightly pointed out the importance of export guarantees. If we are to get trade moving again, it is essential that we ensure a much more efficient export guarantee process, particularly with small and medium-sized enterprises. We must appreciate—I hope that the Minister does—that part and parcel of the guarantee is recognising that some of those guarantees will not come off and so will have to be paid for by the Government. If we are to break into developing markets, however, we need to do so with some aplomb.

Mr Gauke: I am grateful to my hon. Friend for his remarks. It is right to say that exporting is important. It is one area where, as an economy, we have not performed as well as we would have liked over many years, although we are making striking progress in some of the major developing economies. However, we face difficulties, in particular with the eurozone, which is our biggest export market.

Let me return to what we are doing as a Government to ensure that we meet our objective of having the most competitive tax system in the G20. We have already made considerable progress. As evidence, let us look at the KPMG annual survey of tax competitiveness, in which senior tax professionals were asked to name their three most competitive tax jurisdictions. In 2009, just 16% named the UK among their top three, but by 2012 the UK was named by 72% of respondents, ahead of every other jurisdiction. Since that survey was undertaken, the corporation tax rate has fallen from 24% to 23%, but we will not be complacent. Clause 4 will cut the main rate of corporation tax to 21% from April 2014. As we announced at the Budget, we will then reduce the corporation tax rate by an additional one percentage point from April 2015—a measure in clause 6 that will mean that the United Kingdom has the lowest business tax rate of any major economy in the world.

Geraint Davies (Swansea West) (Lab/Co-op): Given that before and after the Budget the corporation tax rate in France was 33%, while in Germany it was 29% and in Britain it was 21%, why is it necessary to reduce it to 20% and in so doing to get rid of 5% of the corporation tax yield? How long will it take to get that 5% back? Will we produce 5% more inwardly investing businesses or will the size of the business community grow by 5% to make it up? We are already extremely competitive on that front, so how long will it take to make up that money, which the Minister has given away for no apparent reason?

Mr Gauke: I hope the reduction to 20% will have all-party support, but I am sorry if it does not. The advantage of 20% is that we will have a corporation tax rate that is consistent with the small profits rate. It is the lowest in the G20 and sends a clear signal to businesses around the world that the UK is open for business. That is something that we in this Government are proud of and that we believe is putting in place the conditions for growth. I hope that the Opposition will support this measure, although Labour in government did not make as much progress in reducing corporation tax rates as it might have done and we lost a competitive advantage. This Government are restoring that competitive advantage, which is something we are proud of.

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It is not just corporation tax rates: clause 34 will introduce the new above-the-line credit for large company R and D investment from April 2013—a measure that will make the level of support more visible to those making investment decisions and thus more beneficial to foreign-parented multinationals looking to invest in R and D in the United Kingdom. This Government have also made a clear commitment to support the creative industries through the tax system. Building on the success of the film tax relief, which last year supported investment in more than 300 British films, clause 35 introduces new corporation tax reliefs for the animation, high-end television and video games sectors. The new reliefs will be among the most generous in the world, encouraging investment in these highly skilled and innovative parts of the creative economy. They are measures that will bring jobs to the United Kingdom and funds to the Exchequer.

This Government recognise the need for a broad industrial base, and measures in the Bill will support a wide variety of sectors. Clauses 77 to 90, for example, provide certainty over decommissioning relief on the UK continental shelf. Clause 7 supports small business by increasing the annual investment allowance for two years and clause 56 provides for an extension of the capital gains tax holiday. Those measures send the clear message to businesses, entrepreneurs and investors across the world that if they want to come to the UK, invest in the UK and employ people in the UK, they will be very welcome in the UK.

Mr Redwood: I strongly support the corporation tax move, which will be extremely helpful to Britain’s competitiveness, but when people are thinking about where to locate their businesses, they worry not only about profits tax but about personal tax. Does my hon. Friend agree that, given the current inherited income rates and capital gains tax rates, a lot of the high earners in those companies do not want to be anywhere near London because the taxation rates are still very heavy?

Mr Gauke: My right hon. Friend makes a valuable point. This underlines the fact that the Government were right to reduce the 50p rate of income tax, because it was out of line with the vast majority of our international competitors. We have to look at the tax system as a whole. I believe that we have made striking progress in delivering that, and in ensuring that we are open for business. It is also striking that, since we have embarked on our package of reforms, the flow of businesses leaving the country has already been stemmed. Indeed, we have seen many businesses either returning to the UK or coming here for the first time. They include WPP, Lancashire, AON, Rowan and Seadrill, and I believe that more will follow.

Mark Field rose

Stewart Hosie (Dundee East) (SNP) rose

Mr Gauke: I will give way first to my hon. Friend the Member for Cities of London and Westminster (Mark Field).

Mark Field: I give my hon. Friend credit for what he has done for the animation and video games industries in my constituency. As he will know, there has been a

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long-standing campaign for such provisions, and I am by no means the only Member of Parliament who has lobbied for them in recent years. Will he ensure that we will be able to act as nimbly as possible if our tax rates become uncompetitive, for whatever reason, for those internationally competitive businesses? Such action might need to be applied to a whole range of industries, well beyond the IT and animation industries. As he has rightly pointed out, it is very easy to lose such jobs nowadays, and we need to ensure that they come back to these shores at the earliest possible opportunity.

Mr Gauke: My hon. Friend makes an important point. The Government recognise that capital and investment can be very mobile, and that they are more mobile in some sectors than others. We have demonstrated a willingness to listen in this regard. Our principal policy in this area has been to adopt a lower rate, but we have recognised that in certain areas of considerable mobility, we need to respond to what is happening. We have done so through the measures in the Bill, and through the patent box in last year’s Finance Act, which was important in further ensuring that the UK is an attractive location for investment. I shall now give way to another Member of Parliament with a constituency interest in the video games industry.

Stewart Hosie: I welcome some of these targeted measures, particularly those relating to video games. I think that they are sensible. I also welcome the tenfold increase in the annual investment allowance, but does the Minister not think it odd that that increase will last for only two years? Given that certain capital investments will take some time, is it not ludicrous that in two years’ time, the general annual investment allowance will revert to £25,000 a year? Might not that create uncertainty? Would it not be better to maintain the general annual investment allowance rate at a higher level, to encourage medium-term investments not only for two years but for three, four and five years?

Mr Gauke: There is a balance to be struck, and we have rightly focused on bringing down the rate of corporation tax, not only for larger businesses but for smaller ones as well. Let us remember that the small profits rate was set to go to 22% when we came into office, and that it is now 20%. We have increased the annual investment allowance for that two-year period to try to stimulate investment at a time that is not necessarily the easiest for many businesses. That is part of what we have done to help small businesses during this difficult period. Taking steps to bring the rate down is important; it is a tradition, if you like. It has been our direction of travel in the UK over many years, and I think that we have now got the balance about right.

Geraint Davies: I have here a letter to the Chancellor from the Admiral group in Swansea—the biggest business in Wales. It expresses disappointment that Swansea was not included as a city with super-connected city status in the last Budget and asks that it continues to be considered in future. Will the Exchequer Secretary positively consider that request? Business is asking for the infrastructure tools to succeed, particularly so that large businesses can connect worldwide with

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suppliers and prospective clients. We obviously welcome the investment in the creative industry, which is also very important.

Mr Gauke: I shall certainly take that intervention as lobbying in support of the proposal. The hon. Gentleman is right to highlight our super-connected cities policy, which is further modernising our economy and further benefiting a number of cities. I appreciate the case he makes for Swansea, and I am sure that it will be properly considered.

Justin Tomlinson (North Swindon) (Con): The tax breaks for the video games industry are a fantastic opportunity to create swathes of new jobs, but it is essential that the Minister continues to apply pressure to address the shortage of computer programming graduates or we shall miss out on a fantastic announcement.

Mr Gauke: I am grateful to my hon. Friend for putting that point on the record. He will be aware of the efforts made by the Government to strengthen our capacity in that respect, and I am sure his remarks will be noted carefully by my ministerial colleagues in the Department for Business, Innovation and Skills.

I turn to tax avoidance and evasion. Although we believe in a competitive tax landscape, we are not by any means a soft touch on tax. As a Government, we have made very clear our expectations of businesses. We expect businesses to pay tax in accordance with the law, but we also want to ensure that aggressive, artificial tax avoidance is dealt with, which brings me to the second key theme of the Bill.

The vast majority of individuals and businesses pay their fair share of tax, but the Bill takes determined action against those who choose not to do so, by introducing a further package of measures to tackle tax avoidance.

Ian Swales (Redcar) (LD): When people engage in practices where assets are bought and sold for different prices—for example, film rights were headlined in a recent case—it is actually tax evasion, and prosecution should follow. Does the Minister agree with that analysis?

Mr Gauke: Where there is an element of dishonesty, it is clearly tax evasion, and Her Majesty’s Revenue and Customs has indeed been successful in bringing prosecutions in a number of high-profile cases. Under this Government we have seen the number of prosecutions by HMRC increase fivefold, which is a reflection of how seriously we consider tax evasion and of our determination to assist HMRC in addressing it as much as possible.

Kelvin Hopkins: A theme I have raised many times in the Chamber is the number of staff in HMRC. I am sure the Minister knows that every additional tax officer collects many times their own salary, and in the case of business taxation, it can sometimes be hundreds or even thousands of times their salary. Do we not simply need a substantial increase in the number of professional staff in HMRC to make sure we collect all the tax?

Mr Gauke: The hon. Gentleman and I have debated that point on a number of occasions. The important thing is to ensure that HMRC has the right expertise

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and skills, and the right people doing the job. In truth, there has been a significant reduction in HMRC staff over recent years, the vast majority of which occurred under the previous Government. We are increasing the numbers working in the enforcement and compliance area, but a lot of the answer is about ensuring that HMRC can work in the most effective way. I was struck by the increase in the number of tax professionals being trained by HMRC. We do want to invest in skills within HMRC. This is not simply a numbers game but, as it happens, the number of people working for HMRC in enforcement and compliance is going up, not down.

Geoffrey Clifton-Brown: While I strongly support the move in the Budget to reduce corporation tax, it is no good encouraging companies to come to this country if they then avoid paying corporation tax. Is it not important that big multinational companies pay corporation tax on the profits that they make in this country? Equally, is not my right hon. Friend the Prime Minister absolutely right to ensure that, through the G8, we have international agreements so that multinational companies cannot go around the world, especially to third world countries, and make profits without paying the relevant corporation tax?

Mr Gauke: My hon. Friend is absolutely right. We want an international tax system that ensures that economic activity is taxed where it occurs. That involves working internationally, and he is right to highlight the Prime Minister’s ambitions while we have the presidency of the G8, which will feed through to the G20 and the work that the OECD is already doing, which we support. It is right to have an international tax system that reflects the reality of how multinational businesses work.

Clauses 203 to 212 introduce the UK’s first general anti-abuse rule—GAAR—which will provide a significant new deterrent to abusive avoidance schemes and strengthen HMRC’s means of tackling them. On top of that, we are taking action to close a further 15 tax avoidance loopholes, which will increase tax revenues by almost £1 billion up to 2017-18, as well as protect future revenues. The Chancellor gave a clear warning in the 2012 Budget that the Government would take action on aggressive stamp duty avoidance. The Bill follows up on that warning by legislating against those who continue to avoid tax on property transactions. All these measures will stop people exploiting legislation to gain tax advantages that were never intended, and they will also encourage fairness.

Chris Leslie: While the Minister is on the subject of companies that might not pay their fair share of corporation tax, will he confirm that the banks received a substantial corporation tax cut in the past financial year and the one before that, yet he has done nothing to correct the situation?

Mr Gauke: No, I cannot confirm that, because it is not correct. The reality is that the reductions in corporation tax falling to banks have been more than offset by increases in the bank levy. We have sought on every occasion to offset the decreases in corporation tax through increases in the levy.

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Chris Leslie: I had a feeling the Minister would say that the corporation tax reduction had been offset by the bank levy. However, although the Prime Minister promised that the levy would raise £2.5 billion, it raised only £1.8 billion in 2011-12—[Interruption.] Perhaps the hon. Gentleman is getting an answer to this point from the Economic Secretary. In the past financial year, the levy raised only £1.6 billion, so there is a massive shortfall compared with the amount that the Prime Minister said it would raise. How on earth does that offset the corporation tax cut for the banks?

Mr Gauke: We were clear that our objective was that the bank levy would collect £2.5 billion, on a permanent basis, which is more than the bank payroll tax ever collected. When the amount has fallen below our expectations, we have adjusted the levy, and the independent Office for Budget Responsibility anticipates that the bank levy will raise £2.5 billion this year. We have made adjustments largely because the banking sector has continued to be afflicted by economic difficulties throughout the world, as a consequence of the crash, so fragile global conditions have played a part. I am not going to be preached to by the Opposition on the taxation of banks. We have introduced a bank levy; the Opposition had 13 years in which to do something about that, but failed to do so.

Mr Andrew Love (Edmonton) (Lab/Co-op) rose

Mr Gauke: I shall give way to the hon. Gentleman before moving on to other subjects.

Mr Love: One can understand that conditions will affect the amount that the banks pay, but surely it is a simple measure of adjusting the rate to ensure that the calculation generates £2.5 billion as promised.

Mr Gauke: The hon. Gentleman is right. We have adjusted the rate, and increased it to a level at which the OBR believes it will bring in £2.5 billion.

Tim Loughton (East Worthing and Shoreham) (Con): Perhaps the Minister will remind Opposition spokespeople that corporation tax is payable only on profits. Many banks that were forced into disastrous mergers by the previous Government are still turning in losses, which might account for the shortfall in the figures given by the hon. Member for Nottingham East (Chris Leslie).

Mr Gauke: I am grateful to my hon. Friend for making that helpful point.

Turning to the wider issue of fairness, in addition to the steps that we have taken on avoidance and evasion, the Bill builds on previous coalition policy by ensuring that individuals and businesses will make a fair contribution, while the Government continue to support those on the lowest incomes. We continue to reward work and help hard-working families with the cost of living, and the Bill therefore increases the income tax personal allowance to £9,440 from this month. That represents the biggest ever cash increase, and the Chancellor has announced that the threshold will rise again, to £10,000, from next year.

Justin Tomlinson: This announcement is extremely welcome, but most people simply do not know how much the changes will help them. Does the Minister

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agree that any changes, good or bad, should be displayed on payslips, in the same spirit that changes in council tax or business rates are displayed in the annual bill?

Mr Gauke: My hon. Friend makes an interesting point. He will be aware of the steps that the Government have taken to introduce personal tax statements that will make the tax system much more transparent. It will be clearer to people how much tax they are paying, and how that money is being spent. We believe that those are helpful steps, and those tax statements can demonstrate the way in which we have made great progress in increasing the personal allowance.

Several hon. Members rose

Mr Gauke: I shall give way to the hon. Member for Corby (Andy Sawford), as I have not given way to him yet.

Andy Sawford (Corby) (Lab/Co-op): The Minister may be reluctant to offer real transparency on the impact of the Government’s changes because of the findings of the Institute for Fiscal Studies that the average family will be £891 a year worse off as a result of the cumulative effect of the changes under his Budgets over the past three years.

Mr Gauke: I do not recognise those numbers. We have taken steps to try to get the country out of a significant fiscal hole. We have taken steps to reduce the amount of tax that millions of households will pay as a consequence of the increase in personal allowance. We have reduced income tax for 25 million people. That is something we are proud of, and something that we did not see when the Opposition were in power.

Sheila Gilmore: What the Minister fails to appreciate, in saying that he does not recognise those figures, is the fact that the increase in the tax threshold has been wiped out for many families, particularly those with children, by the changes in tax credits. At the same time, the cost of increasing the tax threshold is £9 billion, so it is not the best way of targeting help on the low paid.

Mr Gauke: I am grateful to the hon. Lady for putting on the record her opposition to the increase in the personal allowance. I am sure that is something that will be read with interest by her constituents.

Stewart Hosie rose

Mr Gauke: Because he is insistent, I shall give way to the hon. Gentleman.

Stewart Hosie: The Minister is keen to discuss the change in the basic rate allowance, but he is rather less keen to discuss the 40% threshold, which has gone from £37,000 to £34,000, then to £32,000. The Government have dragged an extra 670,000 people into the 40p tax rate, which used to be for the rich, and that is before this year’s changes. He is rather less keen to discuss that. I wonder why.

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Mr Gauke: The vast majority of those people will pay less income tax in total as a consequence of the measures that we have introduced. As a result of the change in thresholds, most support has been focused on basic-rate taxpayers and people who have been taken out of income tax altogether. For the vast majority of people who now find themselves in the higher-rate band, the gains that they have made from the increase in the personal allowance more than outweigh the additional tax they will pay on the higher rate.

In that context, it is worth highlighting the steps that we have taken to ensure not only that we protect the poorest but that the wealthy pay their fair share of tax. Clause 16 will legislate to cap previously unlimited income tax reliefs at £50,000 or 25% of an individual’s income, whichever is greater. That will prevent those reliefs from being exploited unfairly, so that individuals, many with very high incomes, cannot use those reliefs to reduce their income tax bills to zero year after year. As announced in the Budget last year, clauses 91 and 172 will legislate for an annual tax on enveloped dwellings. That is a charge on residential properties valued at more than £2 million held by certain non-natural persons. To complement that measure, the Bill includes the extension of capital gains tax to certain non-natural persons disposing of UK residential property valued at over £2 million. For too long, the well-advised wealthy have found ways around paying stamp duty land tax. The Government have acted to address that.

Clauses 47 and 48 legislate for the further reduction of lifetime and annual allowances for pension contributions. That is not an easy measure to introduce, but it will leave the vast majority of those saving for retirement unaffected while curbing the rising cost of pensions tax relief. Other measures in the Bill will curb unwelcome rising costs. The Government understand the costs that have the biggest impacts on families and businesses every day, and as such, we have taken action in the Bill to help those individuals and businesses that have been impacted by persistently high pump prices. Under clause 177, fuel duty will be frozen at current levels, meaning that it will be 13p per litre cheaper than under the previous Government’s plans.

The Bill will cut the cost of the average pint of beer by 1p. Not only is that good news for the beer drinkers among us, but it represents excellent news for the brewing industry and for pubs. The reduced duty under the small breweries relief has helped to build a thriving brewing industry, which demonstrates that lower duty can lead to growth, investment and jobs. That 1p cut will be a further step to supporting a successful British industry.

It is the Government’s belief that the most effective tax policy is that which is devised in the most transparent fashion, and as such, the majority of measures in the Bill have been formulated following lengthy consultation with interest groups, business and the public. Thirty-six formal and eight informal consultations took place last summer. In December last year, over 400 pages of draft legislation for the Bill were published for technical consultation, alongside explanatory notes, tax information and impact notes. We received more than 400 comments on the technical consultation, which has helped to make sure that the measures in the Bill are as easy to understand as possible, and thus as easy to comply with as possible.

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Geraint Davies: I am grateful for the Minister’s enormous generosity in giving way a third time. On the issue of transparency in pensions, does he accept that the people who are going to be hit hardest are the current young, who are the future old? They are also paying much higher student loans, they face debts, they will need much higher deposits for their mortgages, they will have to pay higher rents so they cannot save, and they face much greater uncertainty about job prospects. Downstream they will be hit again by the pension changes, which are not transparent to them, partly because they are not thinking about that now because they are young.

Mr Gauke: I will try not to digress too much. If I can be helpful to the hon. Gentleman, I do not think he is concerned about the proposals in the Bill, which will apply only to those who make the biggest contributions to their pension fund and receive tax relief for that. He makes a number of important points, but those are not necessarily relevant to the proposals on pension tax relief. If he is concerned about that, I look forward to hearing his concerns over the course of the many debates that we will have.

The Bill is substantial. Building on the invaluable work of Michael Jack and John Whiting at the Office of Tax Simplification, it delivers a number of important reforms to simplify the tax system, including the implementation of recommendations from their reviews of small business tax and tax-advantaged share schemes. This is a significant Bill. It is a clear statement of our ambition to secure a tax system that restores the competitiveness of our private sector, clamps down on avoidance and evasion, and helps to build a fairer society for those who want to work. It is a clear statement that we remain committed to reducing the deficit and building a prosperous economy in the United Kingdom once again. It is a Bill that will energise business and support hard-working people, and it is a Bill that I wholeheartedly commend to the House.

6.1 pm

Chris Leslie (Nottingham East) (Lab/Co-op): The Minister’s job was clearly to drill down into the technical details, rather than focus on the big picture of the Budget and the Finance Bill. [Interruption.] There is heckling already. It would have been nice to see a bit of life from the Minister during the debate. How to draw the sting from a Finance Bill? Send for the Exchequer Secretary. It is true that he is less provocative than the Chief Secretary to the Treasury; I will give him that.

It is true that the Government wanted to kill off any interest in the Bill and put it on the back burner. Towards the end the Minister tried to arouse the enthusiasm of his colleagues on the Back Benches for the Bill by saying that it was about building a fairer society and energising Britain, but it is not a Bill for building a fairer society or energising business. It is not a Bill for the economy. It is not about what is best for the country at all. It is a Bill totally designed around what the Chancellor thinks is best for him. As the weight of evidence mounts that his plan is failing, he flails around desperately to justify his strategy, casting around constantly to blame everyone and everything else for the fact that everything is going so badly wrong.

The Bill gives us a glimpse of just how desperate things must be getting inside the Treasury. For the Treasury team, it is all about the politics, but what about the

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economics? Let us be clear. There is no positive impact on economic growth from the Bill. The Government’s own Office for Budget Responsibility on page 46 of its report on the Budget states that it will have

“no impact on the level of GDP at the end of the forecast horizon.”

The OBR also says that

“these measures reduce GDP growth”

in 2013. After all that effort by the Chancellor, culminating in the Budget and this weighty Finance Bill, what is the impact on economic growth in this calendar year? It is negative.

It is no wonder that the Treasury’s plans and the OBR forecasts are on a slippery slope, constantly and continuously downgrading their projections for the economy while upgrading the size of the deficit. Those grandiose plans and supposedly tough decisions that the Chancellor set out three years ago have seen economic growth of just 0.8%, compared with the 5.3% that they forecast and promised at the time. All the while, our international competitors are moving forward, leaving us behind. Only two other G20 countries have grown more slowly than the UK since the 2010 spending review—Japan and Italy.

David Rutley (Macclesfield) (Con): Will the hon. Gentleman give way?

Chris Leslie: Let us not forget the double-dip recession, together with the shrinking economy in the last quarter for which figures are available.

I give way on the double-dip recession.

David Rutley: I thank the hon. Gentleman for giving way. I am pleased to see that he has departed from the vaudeville act that we normally see from the shadow Chancellor, and instead adopted the posture of Eeyore. Has he failed to notice that the IMF has projected that the growth in the UK for this year and next will be greater than that in both France and Germany?

Chris Leslie: I am sorry if I am upsetting the hon. Gentleman by having to emphasise some of the things that are going wrong in the Government’s plan, but somebody has to wake up the Back Benchers after the scintillating comments that were made from the Government Front Bench. If the hon. Gentleman thinks he has the capability to stand up and defend his Government’s record on economic growth, we would all be impressed. He must surely accept that it has been a massive and total failure and a disappointment which has not only hurt all our constituents, but has made the public finances far worse than the Government were predicting.

The Government said that they wanted to rebalance the UK economy, but look at the latest trade statistics, which showed our trade deficit increasing by £1 billion between January and February, with the balance of payments deficit for our country now at £36 billion. Despite the depreciation of sterling, our exports are shrinking, and despite the problems in the eurozone, our exports to other non-eurozone countries, such as the United States, are getting worse as well, and all that from the Chancellor who two years ago promised he would deliver

“a Britain carried aloft by the march of the makers.”

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Mark Field: The hon. Gentleman will appreciate that the global situation, particularly among the eurozone countries, makes it incredibly difficult for us to achieve the export-led growth that we would all have liked over the past three years. Will he give credit to the Government for the fact that more than 1 million private sector jobs have been created over the past three years? That should be welcomed and should counter some of the pessimism emanating from his speech.

Chris Leslie: If I can try to be optimistic, I hope that there will be a sustained increase in employment, but I am getting worried. The latest figures showed that unemployment is rising again. We must look at the underlying situation reflected in the productivity gap and the capacity problem in the economy, which the Treasury is worsening. The Minister spent a large part of his speech trumpeting the reductions in corporation tax that the Treasury have put into the Bill as the big solution to those problems. Of course we want the UK to be seen as a good place for investment, but the Treasury has not produced any analysis of how those further cuts in corporation tax will feed through into economic growth. We hope they will, but it is time we saw some clear proof that inward investment and business growth are flowing from that approach, and that we are not just stacking up corporate surpluses which are locked away because businesses fear that they will not be able to access bank credit.

Geraint Davies: My hon. Friend will know that the debt to GDP ratio will have grown from 55% in 2010 to 85% in 2015, and that the way to sort that out is by confronting the debt and/or confronting the GDP—namely, growth. Does he accept that even though 1 million more people are in jobs, overall production has not gone up, so their average productivity has gone down? Does he agree that it is time to invest in infrastructure, super-connectivity and skills, and to make Britain more productive and make it grow?

Chris Leslie: My hon. Friend makes a good point. It is not a good sign that it is taking more and more people to produce the same amount of output. In the long run that is not a sustainable strategy for our economy. Ministers need to look more seriously at that issue. The problem is not just the fact that the Bill neglects economic growth.

Tim Loughton: I am slightly puzzled that the shadow Minister cannot see the link between the reductions in corporation tax and attracting businesses to this country. He should get out more. Is he not aware of a number of companies which have relocated from the Republic of Ireland, for example? Bank of America has relocated £50 billion worth of its trading business to the City of London. Firms in my constituency are bringing business back from Denmark to this country because the corporation tax rates are much more beneficial for them. That sends out a clear message that this is the place to do business.

Chris Leslie: I am afraid that the former Minister’s suggestions are not borne out by the evidence. Ultimately, corporation tax benefits a company only if it is turning a profit. I am yet to see action being taken in the Bill to help businesses now, particularly those struggling to get back into the black. Those are the steps that are needed to help the businesses that are finding the current economic conditions very difficult indeed.

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It is not just the failure on growth; the Bill does not contribute to deficit reduction either. The deficit is already set to be £245 billion larger than the Government planned. The OBR reacted to the Budget and the Finance Bill with some stark predictions. In fact, it stated on the first page of its Budget analysis that the deficit reduction plan has now stalled. The £121 billion deficit recorded in 2011 will turn out to be the same for 2012, and the OBR predicts that it will be the same for this financial year. I challenged the Minister earlier to stand up and say that the deficit is still falling. He tried to claim that the OBR figures pointed in that direction. Well, they point in that direction by less than one tenth of 1%—a fig leaf of £100 million. The claim that the Government still have a deficit reduction strategy is not credible. The deficit reduction strategy is gone.

The Deputy Prime Minister and the Chancellor of the Exchequer both promised that they would balance the books by 2015, so what has happened to that promise? Their explanations for the failure become more and more desperate. They blamed the snow, the royal wedding, Europe, the banks and the unemployed. The blame has been laid at everyone’s door except where is belongs—No. 11 Downing street. The time has come for Ministers to take some responsibility for their failings.

The OBR also predicts—these are pretty shocking figures—that real wage levels will fall by 2.4% over the course of this Parliament. Wages are forecast to fall most steeply this year, relative to prices. The cost of living it increasing, but it is getting harder and harder for people to keep pace.

Where are the measures in the Bill to create a fairer society? The Budget and the Bill are deeply unfair for millions of hard-working families who will be, as my hon. Friend the Member for Corby (Andy Sawford) said, on average £891 worse off this year because of the changes introduced since 2010. In fact, the Institute for Fiscal Studies statistics show that a lone-parent household in work will lose £1,206 this financial year, a couple with children where both parents are earners will lose £1,869 and—this is the most staggering statistic—a couple with children where only one parent is an earner will lose, typically, £3,995 this year as a result of the changes the Government have announced since 2010.

Tim Loughton: On that point about families in which one parent is an earner, will the hon. Gentleman therefore commit his party to supporting a transferable tax allowance for married couples, which, as well as sending out a strong message, would specifically help those couples where one person goes out to earn and the other looks after the children?

Chris Leslie: I understand that the hon. Gentleman will be tabling amendments on that issue and look forward to seeing how he will frame them. I know that Ministers are looking forward to seeing those amendments, because they will spark a useful debate within the Government ranks. Personally, I do not think that is the best strategy. I think that it would be better to look at the damage his hon. Friends have been doing to the tax credits system. It is women and families, in particular, who are paying the price for the Chancellor’s economic mistakes. In fact, the Government have cut support for parents by reducing statutory maternity and paternity

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pay so that by 2015 it will be worth £180 less than it would have been had it been uprated in line with inflation. I think that the hon. Gentleman needs to look at that point. The Prime Minister once promised—I know that this is something the hon. Gentleman feels keenly—that he would lead the most family-friendly Government ever, but it is ordinary families across the country who are paying the price for the Government’s failed economic strategy.

The Finance Bill will make Britain less fair. We are definitely not all in this together. For example, let us look at the Government’s “shares for rights” scheme, set out in clause 54, which I know we will be considering again in the Chamber. The Government’s view of a fairer society is one in which businesses are allowed to force new employees to give up their rights at work, including the right not to be sacked unfairly and the right to redundancy pay, something so unpopular that even former Conservative Ministers voted against it in the House of Lords. It is not even as if the business community is asking for that power. Of the 184 businesses that responded to the official consultation, only three said that they wanted to use the scheme. Ministers are totally out of touch with employees and employers on that issue.

Whatever rosy picture the Minister tries to paint, the public can tell that living standards are falling, not rising. The Government just do not seem to understand how extreme austerity has hit consumer confidence, how it is sapping business confidence and how precipitous cuts and tax rises have had the opposite of their intended effect. Let us take the study published only last week by the Financial Timesshowing that they are harming the prospects of recovery for some of our most fragile local economies, especially in poorer areas of the country, by removing £19 billion of spending power from their residents. It is the regions of the UK most in need of regeneration and private sector investment that are feeling the heaviest impact.

Andy Sawford: My hon. Friend is making an incredibly important point about the uneven effects of the Government’s policies. In some parts of the country people have been able to return to work, according to the much-vaunted statistics on unemployment in recent months, but across East Northamptonshire 126 more people this year are on employment and support allowance because of the Government’s failure to get our economy growing overall and their particular failure to help those communities that have suffered most in recent years.

Chris Leslie: Where is the regional economic strategy from the Government? Where is their attempt to revitalise those parts of the country that have suffered most of all? I am sorry if I sound a little like Eeyore to Government Members, but somebody has to say, as my hon. Friends have been saying, that Government policies are just going to harm those parts of the country that are in desperate need of regeneration and will make the situation worse for them. My hon. Friend makes that point well.

Geraint Davies: Does my hon. Friend accept that one of the Government’s biggest failures has been not to resuscitate consumer demand, which would stimulate growth? It is the poorest in our communities who

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spend the highest proportion of their income, because they cannot afford to save. By hitting the poorest the hardest the Government are hitting growth overall and making a more unbalanced economy and a more divided society.

Chris Leslie: It is the politics of shooting oneself in the foot. The difficulty is that the Chancellor does not even understand that his strategy is making his task far harder in the long run. It is not just the fact that people on lower and middle incomes are suffering as a result; it is the unfairness when they compare it with what the Government are doing for those parts of the economy and of society that they favour. The banks are still getting away with not paying their fair share. A tiny corner of the country is doing very well out of the Chancellor. The banks, whose actions created the deficit, are not contributing their fair share towards repairing it. In fact, astonishingly, they are benefiting from the Chancellor’s generosity. This Bill fails to get a grip on the contribution the banks ought to be making. It is still too weak on the very institutions that had to be bailed out by the taxpayer because of their perilous self-indulgence. We have debated in the past, and we will do so again, the fact that Ministers have failed lamentably when it comes to tackling bonuses. In opposition, the Prime Minister promised:

“Where the taxpayer owns a large stake in a bank, we are saying that no employee shall be paid a bonus of over £2,000”.

My hon. Friends probably remember that comment. However, when I express my dismay about the Bill’s weakness, I am not just talking about the lack of a bank bonuses tax. The Government said that the bank levy, as a charge on bank balance sheets, was their answer to clawing back some of the costs for the taxpayer.

The Prime Minister said in 2011 that once the levy was “fully up and running” it would raise £2.5 billion each year—in fact, he said that it would raise £9 billion over the spending review period. We now see that the Government have totally failed to live up to their promise and that the banks have swerved to avoid the bank levy; they have not paid anything like the amount mentioned. In fact, the Chancellor has raised nearly £2 billion less from the banks since the Prime Minister made that promise just two years ago. Those are not my figures, but the latest figures from the Office for Budget Responsibility and HMRC.

The Government repeatedly claim—the Minister did it again today—that the bank levy will raise £2.5 billion a year and that the cuts in corporation tax will not benefit the banks; the Minister said that those corporation tax cuts would be offset by increases in the levy. However, the OBR figures, published alongside the Budget, estimate that in the financial year that has just ended, 2012-13, the bank levy will raise just £1.6 billion—a massive shortfall. We have then to deduct a further £200 million because of the generous corporation tax cut. All in all, the banks have paid £1.1 billion less than Ministers promised. That is even worse than in the previous financial year of 2011-12, when the combined shortfall was £800 million less than the Minister promised.

What on earth is going on? Why cannot the Minister get a grip of the issue? The bank levy strategy is haemorrhaging money when it should be boosting the Exchequer far more significantly. I ask my hon. Friends to think of what that nearly £2 billion could have achieved in the past two years. This is the third or fourth

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attempt by the Government to get the issue right, but each time they have failed to raise what they promised. The Minister has to go back to the drawing board now and come up with a policy that will actually work, rather than something designed to pass a press release test.

The Chancellor is making bad decisions because he is getting deeper into difficulty, proving time and again that saving his own skin comes before getting the judgment right. It did not take long for the world to see, for example, that the Government had not properly thought through their flagship Help to Buy scheme after it was announced in the Budget. That was hailed as the boost that we needed for housing, but focusing only on demand without any corresponding action to supply more affordable homes is only a half-policy partially thought through.

I hope that the scheme succeeds, but why on earth cannot the Government ensure that funds are not siphoned off for second-home purchases? By contorting the scheme so that it does not count against the deficit figures, do they not realise that they have added complexity that might hinder take-up? After all, the Government promised that 100,000 people would have used last year’s NewBuy scheme by now, but only 1,500 people have become involved so far.

Mr Love: If the Government take action on demand without equivalent action on supply, will that not lead to a massive increase in house prices?

Chris Leslie: We will undoubtedly be able to judge the success of these issues, but there are some deeper flaws in the design of the Help to Buy scheme; we will debate that issue in more detail this week. It all reeks of a policy that has not been thought through properly—designed in haste and yet again not having the intended effect.

Understanding what the Government have put into the Finance Bill requires an understanding of what they have not put in. This was the Budget and the Finance Bill that were supposed to learn the lessons of the 2012 omnishambles Budget and Finance Bill—the pasty tax, the granny tax and the caravan tax. Here is the product of all the Government’s care and vigilance this year; I am sure that the Minister’s officials will be proud of him. The Government have painstakingly avoided anything that will have a positive and significant impact on growth, meticulously evaded any measures that might stimulate job creation and sidestepped anything that might repair the mess that they are making of the public finances.

In fact, the only real aspiration in the Bill is to get through it without any more U-turns. But by avoiding the bold action that we need to stimulate the economy, the Government have created a Bill bereft of the major reforms we need. So many measures are conspicuous by their absence. The Government have cut public investment, and now they are cutting back on policies, too.

I had hoped that the Chief Secretary to the Treasury would be here today; normally, he would open the debate on the Finance Bill. I do not know whether his not being here is a deliberate strategy or whether he has a decent reason; the shadow Chief Secretary has a decent reason for not being here, but that could not apply to the Chief Secretary.

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We had hoped, before the Budget, that the Liberal Democrats would stick to one pledge—their pledge to support a mansion tax. We even tabled a one-line motion for Lib Dems to vote for, but they did not want to offend the Conservatives. But they should not worry because we will give them another chance to support their own policy later in the week—a mansion tax on properties worth over £2 million to deliver a tax cut for lower and middle-income households. We favour a 10p starting rate of income tax as the best way to do that and we think that should be in the Bill.

Why have the Government not legislated for their child care voucher extension, which has been pencilled in vaguely for some time after the general election? Where is the national insurance help for small businesses that we have been calling for and which the Chancellor should be acting on sooner? Why is that not in the Bill? It is not good enough for such provisions to be in black and white in a Budget book; it needs to be in the Bill. There have been so many promises in the media, but they have not been seen through in the Finance Bill.

The Finance Bill could be the moment when the Government change their mind on the bedroom tax, and it should be the legislation that repeals their lovely gift of an average £100,000 tax cut for Britain’s lucky millionaires through the cut to the 50p tax rate. As I have said before, it seems that with this Government there is one rule for the rich, but only one room for the poor.

Where do the Government get such a gratuitously unfair sense of priorities? The language used to validate a cruel, harsh, selfish approach is breathtaking—they insist on the caricature of the “spare room subsidy” and bristle at the term “bedroom tax” because they know that the public can see the policy for the disaster it is proving to be. The Chief Secretary to the Treasury, who is not here, wrote in The Sun on Easter weekend that he wanted to tackle the “bedroom blockers”—that from a Liberal Democrat Chief Secretary who could and should have blocked the bedroom tax in the first place.

Mark Field: Like me, the hon. Gentleman represents an inner-city seat. He will know from his own mailbag that the biggest housing issue is overcrowding. I find that in my constituency, and I cannot believe for one moment that the hon. Gentleman does not get similar letters from constituents. That is what is behind the so-called “bedroom tax”. We are trying to ensure that more vital social housing resource is made available to those in genuine need.

Chris Leslie: The Government are not putting any of those resources into building affordable social housing. Kicking people out of their homes will not help people in that way. We have already seen evidence that nine out of 10 of those affected by the bedroom tax have no option of going anywhere else at all. The Government have totally neglected the supply of affordable housing. They have not prioritised that.

Then we come to the grotesque spectacle of a Chancellor of the Exchequer demeaning his office—using the case of a multiple child killer to argue for his changes to the welfare system. We knew that Conservatives relish any opportunity to do down social insurance protections and that the Government’s policies are actually pushing more people into welfare—not helping them out, but

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pushing up the welfare bill to record levels. However, we did not know the depths to which the Chancellor would stoop. The nasty party is back.

The Chancellor certainly grabbed the headlines, but I say to Government Members that what he said diminished his standing in the eyes of millions who rely on benefits—those in work relying on tax credits as well as people looking for work, pensioners and the disabled. Those millions have absolutely nothing in common with Michael Philpott whatever and were all sickened by the evil behind those crimes. In his speech at the beginning of the month, the Chancellor had the audacity to castigate his critics for their “shrill, headline-seeking nonsense”—he said that without a hint of irony. He suggested that those who dared to criticise his plans

“always complain, with depressingly predictable outrage”

and are just another bunch of “vested interests”.

Let us just think about that accusation—“vested interests”. Putting to one side for a moment the fact that the Chancellor knows a thing or two about defending positions of privilege, is he really saying that those who care about defending the well-being of some of the most vulnerable in society are “vested interests”? Well, for the record, yes—we are interested in, and deeply concerned about, the impact that the bedroom tax, the withdrawal of council tax benefits and the changes to disability benefits will have. However, the more important question is why the Chancellor is not interested. Why does he think it makes sense to tell 660,000 people, most of whom have a disability, that they need to give up a spare room but leave nine out of 10 with no option of moving anywhere smaller? Why does he think that some of the poorest and most vulnerable can cope with significantly higher council tax bills as a result of the withdrawal of council tax benefit, the arrears from which could end up costing a fortune to collect? Why does he think it makes sense to penalise working people by cutting their tax credits at a time when we should be making work pay?

The Chancellor is not concerned because for him this is a political game. He is not serious about helping those on welfare; for him, and for the Conservatives’ new spin supremo, Lynton Crosby, this is all about ideology and tactics.

Geraint Davies: My hon. Friend will be aware that housing benefit costs have doubled in the past 10 years, but is he also aware that 70% of that increase is due to private sector rents because rents have been inflating and we have not been building enough houses? Does he accept that if we built more houses we could lower average rents, sort out housing benefit and give people stable communities and more chance of getting a job as well?

Chris Leslie: Looking at the situation in the round, that is exactly the sort of welfare reform that we need. If we are going to get to the root of these problems, we must have serious reforms to our welfare system, and we need a Government who are serious about delivering them.

The Chancellor and his Ministers are not serious about solving these issues; all they want to do is to stoke up fear and prejudice, blame the unemployed and the welfare system, and deflect attention from their own woeful failures to repair public finances. Serious welfare

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reform has to be a continuous process to fit the modern circumstances of society. Reform is never just a “job done”, nor should it aim only at being headline-grabbing. We should crack down harder on fraud but also on tax evasion, we should better reflect the contributory principle, and above all, we should focus relentlessly on getting people back into work so that they are making a productive contribution while also paying taxes again to bring in those much needed revenues.

A Work programme where only 2% of participants find themselves in sustained employment is a humiliation for these Ministers. They should never have scrapped the new deal, and if they were genuine reformers they would immediately set out a compulsory jobs guarantee, using the repeat of the banker bonus tax to fund a minimum-wage job placement for all young people unemployed for a year, and using the money saved from reducing the pension tax relief for the richest 1% to fund a job for all adults who are long-term unemployed for two years or more. No excuses: if they turn down those decent and properly paid job opportunities, they should forfeit unemployment benefits. Languishing on the dole for the long term must end, but we need to treat those looking for work with respect and give them a decent and real job opportunity, not cast them aside.

Andy Sawford: My hon. Friend rightly highlights the importance of helping the long-term unemployed back to work and the new deal’s success relative to the Government’s Work programme, which is a contradiction in terms. Does he recognise that in my constituency, which, according to independent surveys, is the most difficult place in the country for young people to find work, we need approaches such as the future jobs fund, which the Government scrapped as one of their first acts of vandalism on coming into office? We need those programmes, which we have proposed.

Chris Leslie: This is the answer to Ministers who were saying earlier from a sedentary position, “Where are your policies?” The difference between the parties is that they do not understand that jobs, at the heart of welfare reform, are the way to get revenues flowing into the economy. If they neglect economic growth and do not recognise that growth has an effect on the wider prosperity of society as well as on public finances, they will never repair the deficit as they claimed they would, and they will never have the fairer society that the Minister had the cheek to mention when concluding his speech. Ministers talk about fairness: tell that to the families who are losing £891 this year—households who are in work—when at the same time they see these Ministers giving away £145 million in the Budget to hedge fund managers by abolishing stamp duty reserve tax on some unit trust investments; tell that to those who are forking out 20% VAT and losing hundreds of pounds through higher taxes while the banks are let off the hook; and tell that to our constituents who we see, all too frequently, left with only £60 per week to live on while Ministers lavish on millionaires an average £100,000 tax cut in this financial year by scrapping the 50p top rate.

The Chancellor either does not understand fairness or does not care that he is creating unfairness. The Finance Bill will make the rich richer but do nothing to help the vast majority to secure a better standard of

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living. Worse still, the Bill will harm the prospects for our economy this year. Just at the moment we need measures to stimulate growth, the Government have produced this misguided Bill. They give a little away with one hand but take away so much more with the other. Their tax rises and cuts more than offset what they have promised in several years’ time on child care or changes to the personal allowance. Taking a penny off a pint of beer does not go very far when they have added 5p a pint through higher VAT.

Why is this such an inappropriate Bill? It is because the Chancellor does not prioritise the British economy or the prosperity of the British people. His No. 1 priority is himself: his own political reputation. It is all about reviving his own fortunes and trying to shore up his ideological credentials. This Budget and this Finance Bill were not about anyone else’s job but the Chancellor’s. That explains the fudging of the public accounts to make it look as though the deficit was falling when it is plainly as high as the year before. It explains the Chancellor’s refusal to budge from a failing strategy in case he had to admit his mistakes and swallow his pride, it explains the ever-widening net of blame for why things have fallen so off course, and it explains why the country’s fortunes have been downgraded while he carries on regardless. It is time that the Chancellor’s reputation was not the be-all and end-all of Treasury policy. It is time that we put the boost that our economy needs at the heart of everything we do. This Bill is bereft of the bold steps we need to kick-start Britain’s economy. I urge my hon. Friends to oppose it because Britain deserves better.

Several hon. Members rose

Mr Deputy Speaker (Mr Nigel Evans): Order. Although there is no time limit on speeches this evening, I hope that Members will be mindful of the fact that others wish to contribute to the debate when considering the length of their own contributions.

6.36 pm

Mark Field (Cities of London and Westminster) (Con): If there is one small area where I would agree somewhat with the hon. Member for Nottingham East (Chris Leslie), it is that the Chancellor’s room for manoeuvre was incredibly limited as he delivered the Budget four weeks ago. There is no doubt that many of those constraints come as a result of global events. The latest stage in the eurozone debacle as Cypriot banks have been underpinned is a contemporary case in point, and we see ongoing problems in Portugal that I fear will deteriorate as the weeks and months go by.

However, it has become ever clearer that in the coalition Government’s first Budget in June 2010, they were, I accept, complacent about growth. The short pre-election boom following the 2009 VAT reduction and the very large early rounds of quantitative easing lulled the coalition, on assuming office, into believing that the growth that had come about in the two or three quarters before the 2010 election was baked into the system and would somehow do the heavy lifting when it came to deficit reduction. The coalition’s plans to eliminate the structural deficit required the gap between revenue and expenditure to be narrowed by some £159 billion

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by 2014-15. Tax rises were expected to contribute £31 billion and spending cuts £44 billion, and the remaining £84 billion was meant to come from compound growth of 2.7% throughout the Parliament.

Unfortunately, however, as we now know, the coalition ended up with possibly the worst of all worlds. It has received unwarrantedly relentless criticism from Labour Members for so-called harsh austerity measures when, in reality, it has too often lacked the political will to execute the levels of savings required. For all the rhetoric, we are still overspending by some £300 million every day. We are borrowing, not spending, that amount each and every day, and that means that we will continue to have to borrow to the tune of some £120 billion year on year.

Kelvin Hopkins: The hon. Gentleman seems to be saying that the Conservative coalition Government had the benefit of Labour’s reflationary strategy, which was implemented before the election, but then reversed it so that things have got worse ever since. Should they not simply have carried on with Labour’s strategy?

Mark Field: The hon. Gentleman makes a good case, I suppose, but we all know that the reality was that the short-term boost of VAT reduction and the early batches of QE was unsustainable. They were a pre-election boomlet, but, as I have said, the entire political class became rather complacent and thought, somehow, that the worst was behind us after the crash of 2008. We now know that that simply was not the case.

In 2010 the entire political class should have looked the electorate in the eye and been clear about the magnitude of the task that lay and, I am afraid, still lies ahead to rectify the public finances, but we are where we are. I personally take the view that talk of radical tax cuts from some on the Government Benches is perhaps unrealistic. I fear, for a start, that confidence is so low that until it is restored almost any tax give-aways are more likely to be squirreled away by individuals and companies than pumped back into the economy.

I also think we would run the serious risk of the markets losing faith if we were to play even faster and looser with public borrowing. In spite of the recent loss of our triple A rating from Moody’s, the Chancellor’s great achievement—it should not be underestimated—is that we are still able to borrow in international markets at such low interest rates. The lesson of both 1931 and 1976 is that once the markets turn, all is lost.

My main hope for the Budget and this Bill was that the coalition would take some of the longer-term decisions that the British economy requires. I am pleased that resource is being set aside for key, shovel-ready infrastructure projects. I had hoped that cash would be accompanied by decisions and leadership on aviation and energy infrastructure. We cannot let these sensitive political footballs be kicked once again into the next Parliament. I think that the UK, as a trading nation, requires certainty on those issues, not an endless parade of commissions and reviews.

I am pleased, however, that the Treasury has helped out small business. The march towards ever lower rates of corporation tax, as the Exchequer Secretary has pointed out, is highly welcome, as are assurances that small firms will be given a chance to bid for Government contracts under the small business research initiative.

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The extent of capital gains tax relief to attract start-up capital for new limited companies is also very good news. Best of all, however, is the knocking off of the first £2,000 of employer national insurance contributions for small and micro-sized businesses. That will, I hope, begin to chip away at the worryingly high levels of youth unemployment by lifting some of the obvious disincentives to taking on new staff.

I am afraid that I am a little less sanguine about the Chancellor’s flagship Help to Buy plan. I appreciate its raw politics, underpinned as it is by a desire to help struggling younger people on to the housing ladder, many of whom are paying much more in rent than they would as part of a mortgage, if only they had a deposit. Nevertheless, I ask the Treasury to give considerable thought in the consultation period to what we are trying to achieve. Let us look carefully at supply rather than just finance, since I suspect that the latter will simply help keep prices out of the reach of the very people whom we wish to serve, as the hon. Member for Edmonton (Mr Love) has said. I do not wish the taxpayer to be on the hook for the consequences of a reinflated property bubble. Let us not forget the US experience that lay at the heart of the financial crisis.

I, like many other Members, am also disappointed that the Office for Budget Responsibility’s predictions for our economy as recently as the autumn statement on 10 December 2012 were proved, only 14 weeks later in the March Budget, to have been so considerably off beam. Few doubt that economic forecasting is an especially dismal science. However, the OBR’s intervention in December proved essential in buying the Chancellor crucial breathing space at a time when many commentators had assumed that we were about to flunk our plan to reduce the deficit year on year. To that extent I accept what the hon. Member for Nottingham East has said. Many even-handed people will regard that as a sleight of hand, but, more importantly, the scene was set for cynicism and deep disappointment when aggregate borrowing for the next four years was projected at some £49 billion higher only 14 weeks after the autumn statement.

It is worth saying, however, that that is part of a tradition during all my 12 years in this House. Every single Budget between 2001 and 2007 forecast that public finances would move back into surplus in about three or four years’ time. Instead, as the hon. Gentleman will remember, debt and the annual deficit rose inexorably while the Treasury conjured the illusion of fiscal stability. Similarly, at every autumn statement since June 2010, the OBR has, I fear, been forced to downgrade growth out-turns while continuing to hold somewhat optimistically to the notion that the public finances will be transformed by robust growth in two years’ time.

The establishment of the OBR was meant to herald a fresh era of forecasting credibility, but it now seems all too reminiscent of the previous Administration’s discredited financial projection. I think that observers are beginning to wonder whether we should have any regard for the OBR’s latest set of predictions or, indeed, take with anything more than a pinch of salt assurances that recovery is only around the corner.

Sheila Gilmore: Will the hon. Gentleman clarify his position? Is he suggesting that the OBR—which was hailed as a great independent organisation that would

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keep us right—has somehow gone wrong, rather than that it is his Government’s policies that have lead the OBR constantly to downgrade its predictions?

Mark Field: I am expressing the concern that the OBR was somehow seen as a panacea of independence in a lot of its projections when it has got things uniformly wrong almost every time. As I have said, that is partly because of international events that one cannot exclude. We live in a global economy and are a great global trading nation. The problem is that we have not been able to get the export-led growth that we all want and as a result there has been constant downgrading.

There was some good news in the Budget, as the Exchequer Secretary has said, about the co-operation between the Treasury and our Crown dependencies of Jersey, Guernsey and the Isle of Man on new financial disclosure agreements. As an adviser to the law firm Cains, I am pleased that our Crown dependencies have led the way with the FATCA—Foreign Account Tax Compliance Act—arrangements. That is to the Treasury’s credit. We saw at ECOFIN only last weekend that we are also looking to bring on board the Cayman Islands and the British Virgin Islands to ensure that there is more transparency. It is very easy to berate a lot of the international financial centres—many of which have long-standing historical links with not just the City of London, but the UK—but the importance of the liquidity that they bring into play should not be underestimated. It made a big difference in the immediate aftermath of the crash of September 2008 and might yet do so at some point in the future.

I am a little more concerned that the Treasury is not making entirely clear what is considered abuse and avoidance when it comes to tax arrangements. The earlier exchange between the hon. Member for Burnley and the Exchequer Secretary brought that to mind. [Interruption.] I apologise: it was the hon. Member for Redcar (Ian Swales)—my view of the hon. Gentleman means that it was an all too easy mistake to make. Without clarity about what amounts to avoidance as opposed to abuse, we risk throwing a veil of uncertainty over the UK’s business environment.

I speak to firms large and small in my own constituency. I say to those on the Treasury Bench that, suddenly, for the first time ever, global corporations are beginning to consider the almost unthinkable prospect of a certain amount of political risk being attached to the UK. Foreign direct investors would be right to feel aggrieved if legitimate tax-planning activities suddenly were deemed by Her Majesty’s Revenue and Customs to be aggressive tax avoidance, with punitive fines and damaging public relations to follow.

On that note, I should like to raise a specific instance of retrospection that is causing financial hardship among some of my constituents. Section 58 of the Finance Act 2008, brought in by the previous Government, was designed to close down certain tax-planning arrangements with retrospective effect. I am afraid that it has left some residents in my constituency with demands for huge amounts of back tax, which in some extreme cases is leading to threats of bankruptcy.

The Exchequer Secretary is aware of those concerns, because he has responded to my correspondence on them. Unfortunately, however, some of those affected

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by section 58 are not convinced that he is properly listening to the argument. One constituent advised:

“The tax arrangements I used were not only legitimate and openly declared, but expressly considered, debated and approved by parliament back in 1987. This means that according to the HMRC’s declaration, I was not engaged in aggressive and abusive tax avoidance but simple, legitimate tax planning.”

Although I accept that HMRC wants to bring more money in and to close down aggressive tax avoidance schemes, if it has known that arrangements or schemes have been in place for 25 years and has made no move to close them down, it cannot be right for retrospective activity to take place. My constituents therefore request the repeal of section 58.

I would be grateful if the Treasury gave serious consideration not only to the arguments of the campaigners, but to the message that retrospective legislation sends to business people who are trying to act in a lawful and transparent way in planning their taxes. The Exchequer Secretary rightly pointed out that we should be proud of being a country that is open for business, but we must ensure that what we do and what we say in that regard coincide.

To conclude, if I have one message for the Treasury as we consider the Finance Bill in the days ahead, it is to forget about the pressure for quick fixes and transient boosts, and instead to focus relentlessly on delivery and longer-term measures to make the UK an ever more tempting prospect as a place in which to do business. If the UK economy is not to get substantial growth before the 2015 election, let the coalition at least get some credibility for doing the right thing for the nation and giving our people a genuine sense of hope for the future.

6.51 pm

Chris Evans (Islwyn) (Lab/Co-op): If there was one test that the Government put in place from the day that they got into power, it was reducing the deficit. Three years on, what do we see? Borrowing is increasing by £245 billion and there is no chance of the deficit being paid off by 2015. By 2016-17, debt as a ratio of GDP will be 85.4%. Those are damning figures.

On 23 April 2012, the Prime Minister said:

“We’re involved in an economic rescue mission, but we’re not just a bunch of accountants dealing with a deficit, there’s also a driving passion and vision to change this country and make it much more on the side of hard-working people who do the right thing.”

Unfortunately, those who work hard and play by the rules have seen the top earners in society get a tax cut of 5p. I will not denigrate success: there is nothing wrong with people striving to work hard and enjoy the fruits of their labour; aspiration is what the party I represent is about and it is something that we should believe in. However, if the Government could find a tax cut of 5p for the highest earners, why could they not do it for the middle-income earners, for the families who are worried about their jobs and for the people sitting around their kitchen tables today who see the price of their groceries going up all the time, inflation going up and real wages dropping by 2.4%? Who is standing up for them? Nobody.

We hear wonderful words and statistics from Government Members, but the simple fact is this: we are still stuck in the grip of an economic theory that failed. We were told

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that tax cuts for the very rich would trickle down through society. We were told that the highest earners would somehow create jobs. What did we see by the end of the ’80s? We saw a record recession in 1990, with more houses repossessed and more businesses going bust than ever before, all because of the belief that we should be on the side of those who ride in limousines, rather than those who go to work every day in their vans.

I believe in one thing. It may be old-fashioned, but I believe that work is the only way out of poverty and the only way to reduce the ills of this country. Having people in work and paying their taxes is the only way to reduce not only the deficit, but the national debt. It is up to this Government and to any Government, whether they be red, blue, yellow or whatever blue and yellow are when they come together, to create jobs and to reduce all the barriers to people getting into work.

What does the Bill do? We have heard Government Members lauding the right to buy scheme. We have heard them talk about getting more people on the property ladder, even though rents are through the roof and it is hard to get a deposit. The average age of a person buying their first house is now 37. At that age, my mother and father had already had two children and got divorced—they had already lived their life. Now, people of that age are still struggling to get on the ladder.

What is the problem? It is not home ownership or high rents, but the lack of housing in this country. Instead of following the pledge of the Labour party to build 100,000 new houses using the sell-off of the 4G spectrum, the Government have ignored the problem completely. How many people will take advantage of the right to buy scheme? Will it go on failing like it is? Only 1,500 people took advantage of it last year. That is not a scheme that will create a nation of home owners; all it does is provide warm words. Whether we are on the right or the left, we have to get to a point in this country where the best ideas are used. Surely, the best idea is to use the money from the 4G spectrum to invest in homes and thereby create jobs.

The next matter that I want to talk about is barriers to work. We can quote statistics all we want, but the simple fact, as Harold Wilson said, is that it does not matter what the employment rate is in the country; for an unemployed person, the unemployment rate is 100%. Most of the people with children whom I talk to in my surgery and around my constituency say that the biggest barrier to getting back to work is child care issues. That is the elephant in the room. We can talk about job creation schemes all we want, but if people have child care issues, their priority is to look after their child.

On 19 March, a Treasury press release lauded the

“New scheme to bring tax-free childcare for 2.5 million working families”.

When I saw that, I applauded it and thought that it was the way forward. However, I then found out that the scheme will not come in until 2015. That means that people who have child care issues now face cuts to their child tax credit. A family with two children have already seen a cut of £1,500 a year in their child care funding. There is not only a cut in child care funding; since 2010, there are 400 fewer Sure Start centres and early years budgets have been slashed. That affects the economy, because if parents cannot go back to work, whether

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they are mums or dads, it adds to the welfare bill. I genuinely believe that it is economic madness to cut jobs or not allow people to go back into work if it creates a welfare bill that adds more and more to the deficit.

I will move on to another barrier to work. Like many hon. Members, I am bombarded by e-mails and letters from the FairFuelUK campaign. That must be the campaign from which I have received the most e-mails, letters and communications. However, those communications are coming not from a national campaign, but from the ordinary motorist in work. He is struggling to get to work. Again, the Government laud their freezing of petrol duty in September and say that they are on the side of hard-working families and people who need their car for work.

Andy Sawford: Does my hon. Friend agree that if the Government had taken the sensible advice of shadow Treasury Ministers to cut VAT, that would have provided much more significant help with the price of fuel than their small offering?

Chris Evans: I thank my hon. Friend, because I was building up to that point.

The Conservatives like to tell people that they are the party of low taxation. They might have cut income tax in the ’80s, and cut it now from 50p to 45p, but the one thing they have used over and over again is value added tax. Under the Conservatives, VAT has risen from 15% to 17.5% to 20% as it is now. That is the tool they have always used. It is all very well someone being taxed on what they spend or buy, but everybody has to pay VAT, whether they are a struggling pensioner, a student who needs clothes or equipment for university, or a single parent. Everybody has to pay VAT, whether they are a duke or on the bins.

When VAT is put on petrol, it is instantly put up by 3p. The Government’s proposal means absolutely nothing. This Government could show some bravery and leadership by reducing VAT. I know they will say that once VAT has been put on some goods it has to stay, but that does not mean it has to stay at 20%. When the Labour party was in power in 1997, we reduced VAT on fuel bills to 5%. It has been done before; a precedent has been set and it can be done again.

When I look around my constituency I see so many hard-working people who are being squeezed. The most heinous thing, which I hear all the time, is people being demonised because they claim benefits, even though six out of 10 people who claim benefits are in work. That says one thing: work is not paying. What do the Government do? They make a tiny increase this week to the minimum wage. For me, the minimum wage is the cornerstone of welfare reform—a decent living wage. I am sick to death and tired of hearing my constituents be demonised and criminalised because they find themselves unemployed. They are all pushed together in sweeping statements; they are called scroungers, and being from the valleys that hurts me, because I know how proud is the tradition of working. That is the most heinous thing.

One thing the Government could do to prove that we are—to use a phrase that has not been heard for the past two years—“all in this together” is repeal the bedroom tax. That is close to my heart, because the average person in Islwyn will pay an extra £91 for having an extra bedroom. There will be pensioners who

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have lived in the same council house all their lives, brought up a family and made a home, but who are being kicked out because they have a three-bedroom house. What are they to do—bring in a lodger or someone they do not know? No. In my constituency of Islwyn in Caerphilly county borough, 80% of my constituents who are renting will be affected for the simple reason that in 1945 the Labour Government did not build council houses just to house people: we built family homes. We built two and three-bedroom houses in which families could grow and thrive in a safe environment. That was a cornerstone of Aneurin Bevan’s vision as Housing Minister—a contribution that people often forget.

I am concerned that ordinary people are getting squeezed all the time. The Finance Bill represents an opportunity for the Government to show that they can be caring and compassionate, but this opportunity has been wasted. It was not a steady-as-you-go, as-you-were Budget, and the figures bear out the situation. Growth in this country is anaemic; it is flatlining and needs investment. The Prime Minister’s mantra at Prime Minister’s questions every week is the same: “All Labour wants to do is borrow more money; it wants to go the same way as Greece and spend it all.” To me, however, it is an absolute no-brainer. We are already borrowing £245 billion, so what is wrong with trying to invest that in creating jobs and building new houses?

I oppose the Second Reading of this Bill because it does nothing for the people we seek to represent. This is not about steady-as-you-go; the Government have failed in their primary aim of reducing the deficit, and therefore the Bill does not deserve a Second Reading.

7.4 pm

Ian Swales (Redcar) (LD): I welcome most measures in this Bill, particularly the rise in the personal tax threshold to £9,440 this year. That is already cutting in half the tax bill of people on the minimum wage, and next year the threshold will rise to £10,000 and 24 million people will receive a tax cut. That is the No. 1 Liberal Democrat priority, and I am delighted to see that it is being delivered by this Government.

We hear a lot about millionaire tax cuts, but I think that when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) decided to raise taxes in the last month of his failing Government, he knew that it would be the gift that kept on giving in terms of headlines. Unfortunately, however, it was not the gift that kept on giving to Her Majesty’s Revenue and Customs, as figures have shown. Millionaires will pay £381,000 more in income tax and national insurance in five years of this Government than they paid in the last five years of the previous Government.

Julie Hilling (Bolton West) (Lab): What does the hon. Gentleman think about HMRC saying that the tax would actually have brought in £1 billion? The problem is that we had it only for the first year when people prepaid it, and this year when people will postpone it, but we did not bother to watch what happened in that middle year.

Ian Swales: HMRC is well aware that people with those sorts of income levels have many choices about what they do with their money, and we have seen the effects of that. Once tax gets to 50%, people do other things, and that is what we have seen.

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I wish to mention one or two relevant changes to pensions. I welcome the cut in allowances for pension savings. It is incredible that under the previous Government someone was allowed to save £255,000 a year for their pension and receive full tax relief worth £127,000. This Government have cut tax relief to £50,000, which will fall to £40,000, so the taxpayer cost of £127,000 will be £18,000 by next year—a huge change that will bring in, I believe, £4 billion. I also welcome the steps for 1992 Equitable Life annuitants. I have a number of constituents who felt very unfairly treated, and although the £5,000 they will receive does not go all the way to meeting their needs, it at least recognises the trauma they have experienced. I welcome the increase in the allowance for draw-down pensioners. That was also painful for some who took a big cut in their income when the Government Actuary changed the figures.

The Minister mentioned tax avoidance. I will not replay the debate in this Chamber from last January, but it had lots of content and I am pleased to see the Government acting on some of that. However, there is still a lot more to do on the internet and international businesses, and I look forward to seeing further measures. I also feel that the lines between avoidance and evasion are getting more blurred. Cases such as that of the bogus charity that was headlined in The Times only a couple of months ago are not just about avoidance and when HMRC should take people to court to get the tax—people need to end up in jail as a result of such schemes. It is high time that we were clear about schemes that are entirely fictitious, and things such as assets changing hands at different prices at the same time need to be viewed as criminal activity.

The Labour party has spoken a lot about the growth measures—or lack of them—in the Budget, and both I and the hon. Member for Cities of London and Westminster (Mark Field), who is no longer in his place, would like to see an export-boom recovery. One problem is that under the previous Government manufacturing went from 22% to 11% of our economy. That amazing fall means there are a lot fewer makers in the march—we all want to see the march of the makers. I welcome the steps the Government are taking to do something about that, including the regional growth fund, which has given out large amounts, mostly to manufacturing industry; the fact that the Government will act on the Heseltine review, which made many of the same points, such as the need to support regions such as mine in the Tees valley; and the tenfold increase in capital allowances from £25,000 to £250,000, which will encourage manufacturers to invest, which we badly need. The new employment allowance of £2,000 will help the smallest businesses to make a bit more money and encourage them to take on more people.

There are measures on infrastructure investment. The Budget plans contain a map of the country featuring the different infrastructure projects, so it is wrong to say that infrastructure investment is not happening. I welcome the Government’s targeting of strategic sectors that they have identified for success, such as automobiles and life sciences. A lot of work is being done on that, and along with the investment in supply chains, which seeks to get our supply chains back onshore after so many disappeared, it is already paying dividends—car

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parts manufacturers are coming back to the UK and so on. I believe that many of those steps are in the right direction.

On carbon taxes, all hon. Members understand the need to take care of climate change, but we must also ensure that our energy-intensive industries remain competitive. The Government are taking steps in that direction, but there is a lot more to do. We have increases in the climate change levy and the carbon price floor, both of which perhaps send the message to our heavier industry that it is not welcome here. We need to take steps to ensure that that is not the case.

The hon. Member for Cities of London and Westminster said that we do not want retrospective changes. One specific example is the climate change levy for combined heat and power organisations such as Sembcorp in my constituency, which invested millions in new equipment on the expectation that the regime would remain until 2027. The regime changed retrospectively and, all of a sudden, its investment case was gone. I have written to the Minister on that, and it needs considering specifically. It is no good expecting people to invest in green technology if we do not make the ground rules clear. If people start to believe that the ground rules will move, they will not invest.

I welcome the announcement in the Budget on the two areas that will benefit from carbon capture and storage. I would liked to have seen Teesside on the list, but I recognise that the decision was based on energy. I welcome the Government’s recent heat strategy, which specifically mentions the need for carbon capture and storage for industry. I hope that future Budgets cater for a project on Teesside to do exactly that. Teesside has an excellent business case for the Government if they take into account enhanced oil recovery and the revenue that will flow from petroleum revenue taxes as a result of the CCS projects. I hope the Treasury considers that carefully in future.

Generally, the Government are taking many steps towards encouraging green investment. I hope only that they can take the one extra step, which is to ensure that a lot of the investment that goes into new energy projects results in UK manufacturing and supply. Too much of the manufacturing has so far been offshore, including for a wind farm going up right outside my house in Redcar.

I have listened carefully to the speeches today, including those from Opposition Members. I understand some of their points but am confused by others. The hon. Member for Islwyn (Chris Evans), in one of his characteristically passionate speeches, mentioned VAT. I believe that this is the wrong time to introduce a measure that gives the most to those who spend the most—the richest get the most out of cuts in VAT. Most people at the lower end of the scale do not spend much on standard rate VAT items, so the measure he proposed would involve borrowing £12 billion to, for example, cut the price of a Ferrari by £4,000. This is the wrong time to do that. There are much better ways to spend £12 billion if that is what he wants to borrow.

Under the previous Government, three gaps widened: the gap between rich and poor, the gap between north and south, and the gap between the north and the south of the region where I live. That is a shameful record. I and the Liberal Democrats want a stronger economy and a fairer society, and I support the Budget.

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7.15 pm

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): I should like to address the comments of the hon. Member for Redcar (Ian Swales) about capital allowances. I, too, welcome the Government’s capital allowance proposals, but they are a U-turn—the Government reduced pre-2010 Labour levels of capital allowances to 25% of what they were, but have since returned them to pre-2010 levels.

The north-east leads the way on exports. Government Members have said that the export recovery has not occurred, but the north-east already had very good exports from industry. Compared with other regions in the country, the north-east leads the way. For example, Cleveland Potash at Boulby in my constituency today announced a £300 million investment, which will create 120 new jobs and secure more than 1,000 existing jobs in the potash pit. That occurs on the one-year anniversary of the recommencement of iron and steel production at the Redcar blast furnace at the Teesside Cast Products site, which is under the joint operation of Sahaviriya Steel Industries and Tata. That is a victory for the campaign of local people on Teesside, of which I was proud to be a part, as was the hon. Member for Redcar. Success is now synonymous with Teesside, and people in Teesside are proud to say that they are a success. We look forward to a future built upon the industrial development and manufacturing legacy of the 13 years under Labour.

Organisations such as the North East of England Process Industry Cluster were created in conjunction with the Labour Government and One North East. NEPIC centred on the north-east’s assets, particularly in the chemical and steel industries, and the heritage of shipbuilding—TAG Energy uses the Haverton Hill site, formerly a shipyard and dock, to produce monopile construction units for the offshore wind turbine market.

By contrast, the words “double dip”, “double debt” and “credit rating downgrade” are synonymous with the Prime Minister, the Chancellor and the Government. Since the autumn statement, growth, which was estimated to be poor, has halved in just over three months from 1.2% to 0.6%. The accrual of debt by this downgraded Chancellor from 2010 to 2015 is more than the total debt accrued by the previous Labour Government in their entire 13 years. Despite that and the overwhelming evidence, the Chancellor affirmed in his Budget that borrowing is falling. Public borrowing shows that the Government books were in the red to the tune of £121 billion last year. They are forecast to improve only marginally to £120.9 billion in 2012-13.

Tax revenues have fallen £5.1 billion short of the predictions in the autumn statement, despite the hailed employment figures. That is largely owing to the fact that, despite increases in nominal employment, productivity has fallen massively. That is matched by a huge fall in tax take. The irony is that we have always been told that the private sector is more efficient. Supposedly, we have 1 million more private sector workers, and gross domestic product is falling, so more people are doing less. That is a re-unbalancing of the economy if I ever saw one.

Similarly, the increase in the number of employed women is largely due to the fact that fewer women between the ages of 60 and 64 have retired. Women are working to a later age because state old age pensions

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have changed. That has undoubtedly helped employment figures. The Chancellor was able to massage his borrowing down only by persuading the OBR that Government Departments would spend £3.4 billion less than their allocated budgets this year. Only three months after the previous forecast, the budget deficit is expected to be an average £11 billion worse throughout the five-year forecast period. In cash terms, the problem lies with poor tax receipts, which have been hit by disappointing revenues this year, and vastly reduced forecasts for nominal gross domestic product, which is now at one seventh of the original growth expectations set in June 2010.

On the other hand, Robert Chote and the OBR assume the economy has the scope for rapid catch-up growth of 2.3% of national income even after April 2018. But with so much slack in the economy to be assumed for the rest of this decade, it is strange that the OBR does not show inflation falling below its target level of 2% at any time. Are Ministers concerned by that? If the OBR admitted this to be the case, it could no longer live within the Chancellor’s demands and would probably have to admit not £9 billion, but something more in the region of £17 billion a year of tax rises or spending cuts, as a result of earlier Government inaction.

The nation’s debt and the Government’s borrowing are completely dependent upon the Chancellor’s “monetary activism”. However, minutes of the Bank of England’s latest meeting show that the new Governor, Mark Carney, failed to win any support for his case for further quantitative easing. Most of the MPC look worried about the potential damage of a run on sterling, and the effectiveness in any case of further asset purchases as banks and households look to clear debts. However, without further QE, the Chancellor cannot keep his borrowing rates down, as the borrowing at low rates to buy gilts in order to borrow at low rates is the true reason for low interest rates, not the heavily front-ended, growth-strangling cuts we have witnessed to date.

Furthermore, big businesses continual deleveraging will not be turned into sudden investment with further corporation tax cuts. Corporation tax cuts will just aid business to further deleverage debt. It has never been so cheap for the state to borrow, and the Chancellor is neither using this cheap accessible capital to pump-prime the economy nor persuading banks and big business to free up their substantial reserves and corporate funds. The Chancellor’s language and tone set the mood music for the economy, and his constant message of national deleveraging has sent everyone into a deleveraging frenzy. Banks are hoarding excess capital and large corporate companies are simultaneously paying out large dividends to shareholders while sitting on excess capital, with the explicit purpose of holding it in case they need to make future debt clearances rather than investments.

Ian Swales: The hon. Gentleman is making a powerful case. Does he not welcome the Infrastructure (Financial Assistance) Act 2012, which uses low Government interest rates to underwrite £50 billion of infrastructure spending?