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Mr Iain McKenzie (Inverclyde) (Lab): My hon. Friend has noted a number of ways in which people are suffering up and down the country. Does she agree that society suffers the most when the gap widens between rich and poor, that we are now seeing it stretched to the absolute limit, and that the Government either do not recognise that or choose not to do so?
Cathy Jamieson: My hon. Friend is a powerful advocate for the people in his constituency who are bearing the brunt of the Government’s policies, and he is absolutely right. It is important that there is no further widening of that gap. This is not just about the money in people’s pockets, important though that is, but the fabric of society and the relationships that people build in their local communities.
It is important to consider the impact on our high streets. For generations, local businesses have offered jobs and the convenience of shopping in the local high street, and have been involved in providing services there. They are now under pressure from the flatlining economy. Consumer spending has been constrained by high inflation and stagnant wages, leading to a 6% fall in real disposable income in 2008, with a devastating impact on our local high streets. Shops are lying empty, with a threefold increase in that trend since 2008. Household names such as HMV, JJB Sports, Blockbusters and Comet have been forced to close a large number of stores or to shut up shop completely. It is estimated that last year 1,800 shops were forced to close—a staggering tenfold increase on the year before. We have heard about the impact on the pub industry, and there has been a call for the VAT rate to be considered in that context.
Not only is retail suffering, but businesses of all kinds up and down the country are feeling the impact of the Government’s failed economic policies and the flatlining economy. That has led, and is still leading, to a lack of confidence, particularly in the construction sector, with many arguing that more must be done to get people back to work and to get projects under way. Sadly, Project Merlin did not deliver the new era of loans that it was supposed to. We learned this week that lending to UK businesses fell by £2 billion in December alone, and it is down by £18.6 billion over the past year, while businesses continue to suffer. The Business Secretary seems perhaps finally to be recognising this failure. He boasted at his party conference that he would set up a Government-backed bank to get billions of pounds to businesses that need it, but we are still awaiting the fine detail of what that bank will do and when and how businesses will be helped. They may well have to wait some time for it to be up and running.
I shall draw my remarks to a conclusion because I want to give other hon. Members the opportunity to raise issues on behalf of their constituents and put the case to the Government. There are things we can do to help businesses and individuals through these tough times. We could reform the funding for lending scheme so that banks can access the lowest rates of funding only if they increase lending to businesses as well as overall lending, and extend it beyond the end of 2013, as currently envisaged by the Government, to the end of 2014. Let us do what every other G8 economy has done and set up a state-backed investment institution to provide credit to small businesses where others will not by establishing a proper British investment bank. As we
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have argued, that could be done through a new network of regional banks like the German Sparkassen. That would also help to return SMEs to a local relationship with banking, with managers who know what is needed on the ground and have the discretion to make local lending decisions. Regional banks are committed to their regions and in touch with local business. We have called for, and will continue to call for, the Government to bring forward these measures to help boost our businesses and get our economy moving again.
Even if the Government accepted all those proposals and they were acted on today, the benefits would take some time to come to the fore and to be felt. However, the one step we could take now that would immediately make a difference would be for the Government to agree to reduce VAT to 17.5% to put money back into the pockets of hard-working people and give a stimulus to local economies. That would put something back into the pot to help the local businesses we have talked about, whether by reducing fuel costs or stimulating the economy such that people feel that they are able to spend again. We need to get consumers back out there spending their money, supporting our high streets and businesses, and helping our economy to grow again. It is for the Government to explain to the people of the UK why they will not listen to the arguments that have been advanced and are not prepared to take this action as a stimulus to the economy and to help to get things moving again.
Mr Redwood: The proposed new clause is designed to stimulate strong growth, which I suspect everyone in this House would welcome. I trust that the Government are in the market for ideas that would stimulate strong growth, but my sad conclusion is that a sudden cut in VAT of undefined duration is neither a sufficient condition for stimulating strong growth in the economy nor even a necessary precondition of such stimulation.
We have to ask what the alternative is to the Opposition’s recommendation, which we all agree is well-intended because they wish to see strong growth. I submit that the prime thing the Government need to do to raise the growth rate and get over this period of extremely disappointing performance is mend the banks. It is surprising that the official forecasters at the Office for Budget Responsibility thought there would be strong growth over the past three years, because they knew that the official policy on the Royal Bank of Scotland, which is largely state owned, was to push the bank through the most enormous slim-down, a continuation of the policy begun in 2008 when it was largely acquired by the state under the previous Government.
So far, £900 billion of assets and liabilities have been removed from RBS’s £2.2 trillion balance sheet since the state foolishly took them on. How can we expect the British economy to grow rapidly when its leading bank is going through a forced slimming programme of £900 billion? This is big money, even for a £1.5 trillion economy. We spend most of our time in this place discussing the odd £5 billion or £10 billion—we are now billionaires in our discussions rather than millionaires— but these figures have very little overall impact on a £1.5 trillion economy, whereas £900 billion is eye-poppingly large. We have to deal in trillions now if we want to see
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the things that really make a difference to the economy. I submit that the main reason why our economy is not growing rapidly is that the banks, led by RBS and abetted by HBOS, have been on a very sharp slimming programme. It is true that some of those assets were foreign and a lot of them were derivatives and so on, but overall, this massive slimming programme has clearly placed enormous pressure on the UK economy.
In addition, this place, as part of the political debate, has discovered that bankers are even more unpopular than politicians, so it has taken great delight in trying to do as much damage as possible to the banking industry. I understand that the banking industry did not do well for itself—I am enough of a politician to realise the politics of all this—but if we target one of our biggest and most successful industries of the previous decade and force it into slimming down measures and tax it more, we should expect a drop in output, and that is what has happened. One of the reasons why we do not have much growth in this country is that our lead sector of the previous decade has taken such a big hit and is now so politically unpopular that pressures remain to prevent it from growing and recovering as some of us would like.
A third area that has caused considerable problems is oil and gas. We cannot legislate to change the age profile of our reservoirs, many of which have aged a lot recently in terms of the amount of oil and gas left to exploit. There are arguments about other tax policies we could pursue to stimulate more finds and exploitation, but some of the big, successful reservoirs of previous years are now ageing, so whoever was running the country was going to experience a reduction in output from another of our high-value-added sectors—oil and gas—and that was bound to hit the growth rate.
What more can we do to overcome those difficulties in two of our lead sectors? Tax measures proposed by other clauses that we will discuss later could be helpful. Broadly speaking, the lower the tax rate, the better from the point of view of stimulating growth, and there have been some measures in the right direction.
The problem with the proposed new clause’s VAT measure is that it is so expensive and I do not think we would get a big enough return for the colossal loss of revenue that it would cause. We have already heard an estimate of about £10 billion, but the Labour Opposition have given us no figures whatsoever. They have not told us how much it would cost, how long it would be a concessionary rate and on what conditions they would return to the new rate. That weakens their case, because if they wish to make this a serious policy, they need to cost it and explain by how much the deficit would rise in the early stages and at what point the growth would accelerate enough to start to generate serious revenues from increased activity.
The evidence seems to be that, whereas it is possible to do serious damage to the revenues generated by income tax and capital gains tax if the rates are put up too much—I fear that that is what has happened under the Labour and coalition Governments in recent years—it is more difficult to depress the revenues of VAT. Indeed, the increase from 17.5% to 20% actually produced some increase in revenue, despite the poor performance of the economy, so the argument that cutting the rate generates more revenue—economists call it the Laffer curve argument—does not apply in the same way as it does to
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taxes geared towards gains and income, whereby more realistic rates would do two good things, namely generate more growth and, therefore, more tax revenue. I fear that the problem with the VAT proposal is that this short-term measure would definitely increase the deficit and that the stimulus from VAT would not be sufficient to replace the lost revenue in any serious period of time over which this experiment might be tried.
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Meanwhile, the banks would still underperform, unless we changed regulatory policy towards them, and we would still be under-banked, because I do not believe there is enough banking capacity to fuel a proper domestic recovery and we do not have enough competition in the banking sector so we do not have choice or good value offers. People still tell me that if they try to get certain kinds of lending for business or for property, the answer is either no, or yes, but at an incredibly high cost with all sorts of restrictions and difficulties that make it unattractive.
If we tried to promote growth against the background of some of our primary export markets on the continent collapsing as a result of the foolish euro policy and the extreme austerity policies that are doing so much damage to the continent, we would need to be extremely clever in offsetting the additional headwind caused by that collapse. If we tried to promote growth against the background of major difficulties in our banking sector, we would need to ask ourselves how we can mend that sector, first to finance a better recovery and secondly because one of the main reasons why the output figures are so poor is that the banking sector itself—one of our best performing sectors—is now doing so badly.
I urge my right hon. and hon. Friends on the Front Bench to turn their attention to the central issue that the Opposition have rightly highlighted. I know that the Government are doing that, but I want them to look at splitting up RBS and creating banking competition in the market so that we can finance a better recovery and get some growth in output from the banking sector at the same time. They need to focus on tax rate cuts that would produce more revenue rather than those that would produce less. Although we would like lower taxes, we cannot afford less revenue and the Opposition have hit upon the one tax reduction that would produce less revenue, as I think all forecasts would rightly show. I trust that the Opposition’s good intentions will be welcomed, but that their proposal will be dismissed, because I simply do not think that it would trigger the fast growth that they want and that they have not even bothered to define.
Albert Owen (Ynys Môn) (Lab): I always listen with interest to what the right hon. Member for Wokingham (Mr Redwood) has to say in these debates and he has been very consistent about low taxation over a number of years. I agree with him that external factors such as banking and energy costs are suppressing growth in our country, but I also think that the domestic economy needs a boost and he did not offer any solutions. Small businesses on our high streets are all asking for help from the Government and I believe that the proposed new clause would help them. Money is being taken out of the economy at a time when we need to be putting money back into it.
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Mr Redwood: The hon. Gentleman makes a fair criticism of my remarks, but to stay in order I did not mention the changes to energy policy necessary to have cheaper energy or the changes to other taxes that I would like implemented to boost to the economy.
Albert Owen: As a member of the Energy and Climate Change Committee, I understand the difficulties. I realise that one of the major problems—the price of crude oil and gas—is external and that we could have a wider debate about that, but I am talking specifically about the need to boost the domestic economy.
Small businesses tell me that high street names are folding, first, because they have tight margins, and secondly because, although footfall might be steady, people are spending less money. The 2.5% increase in VAT is making a real difference and taking money out of people’s pockets. I support raising personal income tax thresholds as a way of helping the low-paid, but it can have no impact if cancelled out by a VAT increase. That is what business tells us. A small business leader in my area makes a little joke about the Chancellor: every time that that business leader goes out with his wife, daughter and son-in-law, he has to take the Chancellor with him, because one-fifth of the bill is shared with him. That is not a good state of affairs. If business people are starting to think like that, it means that confidence has been eroded. One way of providing the necessary boost to confidence in the domestic market would be to reduce VAT temporarily.
Those are not just my words; they were also the words of the Prime Minister before the general election, when he said that VAT was a regressive tax, which it is. I am in full agreement with him. The Deputy Prime Minister—there are not many Liberal Democrats here today—said that putting up VAT during a recession would be a bombshell for the economy, yet that is exactly what the Government have done. I have argued consistently for keeping VAT, which is a regressive tax, as low as possible in order to stimulate the economy.
Mr Robin Walker: I admire the hon. Gentleman’s consistency, but does he accept that this was a matter of debate during the general election because the then Labour Chancellor was clearly preparing to raise VAT to 20%, as he has subsequently admitted? It is wrong to imply that his party has been as consistent as him.
Albert Owen: That argument is completely wrong. It might be Conservative central office’s take on it. The previous Chancellor suggested a VAT rise, but was outvoted by the Cabinet. He was just one individual. The current Prime Minister, however, was clear that he would not put it up, but then did. The hon. Gentleman cannot accuse the previous Chancellor of making an argument and then blame the last Government for not listening to him. It was the leader of the Conservative party, now the Prime Minister, who turned circles on this issue.
This regressive taxation hits the most vulnerable in our society. According to the Office for National Statistics, 9.7% of the money the poorest 20% spend goes on VAT, and they spend more on VATable goods than the richest 20%, for whom that figure is 5.8%. It is an unfair tax, as well as one that takes money out of the economy.
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The Conservatives have been consistent in shifting from direct to indirect personal taxation. It was Anthony Barber who introduced VAT, at 10% I think, and a later Chancellor, in 1979, who raised it from 8% to 15%, which had a negative effect for many years. In 1984, it went up to 17.5%. As I said, in opposition, the Conservatives said that they would not do this, yet it was one of the first things they did. They are not getting the revenue yield they expected, because the economy is in such dire straits—it is stagnating, in many ways. My hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) talked about wage freezes and other impacts of Government policy. With a policy of reducing VAT, the Government could actually do something, instead of blaming the previous Government, the European Union or other external factors. Here is an opportunity for them to use one of the levers of power at their disposal.
I hope that the Liberal Democrats will support us. They have made such a big issue of it in the past. There is only one Liberal Democrat here today, the hon. Member for Eastleigh (Mike Thornton), but I would be happy to take an intervention from him, if he feels as strongly as his party did—not him personally—before the general election. It is a big issue. I talk to small businesses, and they tell me that the rate of VAT is having a negative impact on their businesses. Everyone in the House wants to stimulate the economy, and here is a way of doing it relatively quickly.
There is evidence that along with other measures—it cannot be seen in isolation—the previous Government’s VAT reduction from 17.5% to 15% actually helped the economy at a difficult time. The car scrappage and other short-term schemes were also introduced to boost the economy. The Government should be considering those sorts of things, rather than just blaming others. The economy is at a difficult juncture. Unemployment is rising again, after temporarily falling: 2.54 million people are on the dole—that is mass unemployment—and are not spending. Helping them, with their small incomes, by reducing VAT would have a big impact on the economy. The way forward is to create more jobs and get them back to work.
The Government have said—I am sure that the Minister will clarify this matter—that it is not possible to reduce VAT, but that is not the case. I have heard them mention on numerous occasions a mechanism by which Europe can prevent them from reducing VAT, but it could be done as a temporary measure. There are also many variations, zero-rating exemptions and concessions that could be applied to VAT.
Mr Gauke: I want to help the hon. Gentleman on this point. There is flexibility when it comes to reducing the rate, but the difficulty is that if one plucks a particular item, such as petrol, and reduces VAT on that alone, as his party advocated, it would need to be consistent with the VAT directives and that would require a derogation, which would take some years. The concerns we raised related to the ill-thought-out specific proposal that those on his party’s Front Bench put forward a year or so ago.
Albert Owen:
I am grateful for that clarification. I recall that Labour Front Benchers said at the time that the proposal was specific to one thing, but this is a
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flexible measure. We can exempt certain goods from it. Yes, there are the European directives, but we could do this immediately and in doing so send out a positive message to the country and the business community and increase footfall in our shops and high streets.
The argument about reducing tax and increasing yields is perfectly legitimate. Some say that reducing corporation tax automatically boosts business, but it also results in a drop-off in the money that the Treasury takes. Nevertheless, it seems to be a favourite of the Conservatives, and I, too, support it. I support having a low-tax economy and reducing many of these taxes, but we should be consistent and do the same with VAT. The increase in it was supposed to raise several billions of pounds, but it has failed to do so because spending has fallen.
I support the proposal to reduce VAT. Action is need and needed now. The Chancellor could do it, and if he wanted to, he could do it straightaway. I accept that the poorest in the country, on the lowest wages, will benefit from the change to income tax thresholds, but they will lose out overall. The TUC is not alone in making this point. The Institute for Fiscal Studies has said that the combined tax increases, of which there have been several, both direct and indirect, will make the average family £900 worse off. If families are worse off in this country, spending is reduced and the economy is bound to contract. That is basic economics. We need to stimulate the economy, and one way of doing it correctly is to reduce VAT temporarily from 20% to 17.5%. Let us get the economy moving. The Chancellor has the power to do it, and he should support the new clause.
Mr Stewart Jackson: It is always a pleasure to follow the hon. Member for Ynys Môn (Albert Owen). I am not sure that it is necessarily a pleasure for the Whips, because the Committee will know that in the last Budget I was not exactly that supportive of my party on VAT, having opposed VAT on caravans and, by virtue of my being the Member of Parliament for Peterborough, on ecclesiastical buildings.
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I would like to develop some of the points made by my right hon. Friend the Member for Wokingham (Mr Redwood), although I am hesitant to do so, given his expertise. We are debating an Opposition amendment, which I had hoped would be a coherent alternative to the Government’s Budget and this Finance Bill. However, we do not see that clear and coherent alternative, not least because those on the Opposition Front Bench have not really taken into account the externalities that my right hon. Friend touched on. He has forgotten more than I will ever know about the banking crisis, but he touched briefly on the effect on business confidence of the disastrous market conditions in the European Union. Hon. Members will know that I have consistently taken a robust line on the euro and the ongoing bail-out efforts for southern European countries such as Greece and Portugal. Business confidence is suffering, not least because, in the name of German economic policy, we are inflicting destitution and poverty on thousands of working people across southern Europe. That is an issue.
My right hon. Friend also talked about the availability and adequacy of capital. That, too, is an issue that will not necessarily be addressed or ameliorated by changes in VAT.
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Sheila Gilmore: Would the hon. Gentleman like to comment on the numerous observations and reports suggesting that, in fact, capital is available? Many businesses have capital available; the reason it is not being used to invest is that there is low demand in our economy.
Mr Jackson: The hon. Lady anticipates my next point. By any respectable indicators over the past few years, the cash reserves that British business has for investment are enormous. The issue is business confidence. To develop that point, parts of the economy are doing significantly better than others and have not been affected by this cyclical change, which has lasted since the onset of the Northern Rock crisis of 2007-08 and the wider banking crisis.
I am a Conservative, so of course I am in favour of tax cuts. Would that we were in a position to have a tax cut by virtue of the Opposition’s new clause 2, but let us make no bones about it: it is an unfunded tax cut—if it walks like a duck and swims like a duck, it is a duck. I always thought that Labour’s credo in recent times was not to support unfunded tax cuts. With all due respect to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), who is a very competent, proficient performer at the Dispatch Box, she failed to answer the points raised by me and the hon. Member for Dundee East (Stewart Hosie) and say where the money would come from. We are talking about £100 billion of indicative funding, which has to be found from somewhere. It is all very well saying, “We’re going to have a progress report at the end of this Parliament to see how things are going,” but once we put in place that tax cut, we would cut off that income stream. We would then have to find other ways to fund core expenditure.
Albert Owen: I hear what the hon. Gentleman is saying, but he referred to a figure of £100 billion, which is the total VAT take. We will not lose all of it: there will be a 2.5% reduction.
Stewart Hosie: A 10% reduction.
Albert Owen: Yes, a 10% reduction. The hon. Gentleman is talking about losing that, but unemployment is going up—these are the factors—and we will be paying more out of the Treasury for those things. We are talking about stimulating the economy, which I understand is difficult to quantify, but it would be positive.
Mr Jackson: The hon. Gentleman might say that, but it is incumbent on Her Majesty’s loyal Opposition to specify the amounts and where the cuts would be made in other ways. It is not acceptable to dodge the issue, and that goes even for the simple question of what is “strong growth”. At what stage would that be measured? How would we quantify “strong growth”? It is rather mealy-mouthed.
Let us look at the wider context. Interest rates are historically low. Perhaps the hon. Gentleman is not old enough—or maybe he is—to know that in 1975 they were 27%, under a Labour Government. Inflation was substantially higher through most of the ’70s and ’80s. We now have big cash balances, lower interest rates, relatively low inflation, lots of money in the economy and quantitative easing, which has been in place for many years. Even if we accept the traditional Keynesian
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view—that just pumping money into the economy will deliver growth, jobs and prosperity, which seemed to inform the argument that the hon. Member for Kilmarnock and Loudoun made—we should accept that it has not worked so far through quantitative easing, with the balances that are available. The issue is business confidence.
In the wider context—wider even than that—between 2000 and 2010, public expenditure rose from roughly £450 billion to more than £700 billion. That is the context in which we should look at these fiscal changes. It is not as if we have starved the economy of money in the public sector. The difficulty for the hon. Member for Ynys Môn in arguing in defence of the Government at that time is that the economy was so unbalanced. It was focused disproportionately on the housing market, public expenditure and financial services. Part of our challenge as a Government is to try to rebalance the economy, so that it can make people prosperous and create jobs across wider economic activities, which is happening organically on its own.
Those on the Opposition Front Bench also fail to take into account the other, bigger policies that the Government have embarked on. I will not pretend that things such as the national insurance holidays or the regional growth fund have been an enormous success. I serve on the Public Accounts Committee and we have been critical of things that the Government have pursued in some areas. Nevertheless—the hon. Gentleman alluded to this—the Government are looking at tariffs for utility bills, the beer duty escalator and the fuel duty escalator. We are looking at substantial changes that will have a fiscal impact on welfare, through the universal credit and so on making work pay, rather than paying for idleness and allowing people’s talents to be wasted. We are also putting money into the mortgage market and assisting new house building. Some 42,000 of my constituents had a tax cut last week as a result of the massive fiscal changes that this Government have made, with 2,000 of my constituents paying no tax at all and 24 million people affected. It seems rather unfair not to take that on board.
I also alluded earlier to the progressive nature of our tax changes. Whatever we say about them, it cannot be argued that we have not looked at the top 5% or 10% of income earners in this country to ensure that they are paying a significantly higher share than others. They are the people who will specifically be more worse off than anyone else, whether the hon. Gentleman likes it or not.
Mr Redwood: It is unfair to say that VAT is a very regressive tax. If it were applied across everything, it would be, but because it does not apply to food and some other items that figure much more highly in low-income budgets, it is not nearly as regressive as has been suggested.
Mr Jackson: Exactly. We could argue at length about the progressiveness of various taxes—no doubt others would want to—but my right hon. Friend makes an astute point.
The final example is council tax. That depends on the local authority, but in general, most councils have frozen council tax. Therefore, the suite or portfolio of the Government’s fiscal changes that have helped working people is quite significant.
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Let me say in finishing that we expect more from an Opposition two and a half years into a Parliament. We expect them to come up with policies that are credible. We expect them to move on from policies that just tick the box of opposition. No doubt the hon. Member for Kilmarnock and Loudoun, who is well connected in the Labour party, will have read the comments of Tony Blair, a three-time election winner, in the 100th anniversary edition of the New Statesman. He cautions the Labour party not to fall back into the comfort zone, not to be a repository of anger, but to be an outward-looking, forward-looking progressive party. I am sure that the Labour Whip on the Front Bench, the hon. Member for Sedgefield (Phil Wilson), would agree with his predecessor and say that that is sage and intelligent advice. It is so because we expect proper, costed policies. What we have had today is an unfunded tax cut that does not help the people I believe the Labour party genuinely wants to assist to have a better life. I would caution the hon. Member for Kilmarnock and Loudoun to come back with more coherent, more intelligent and more credible policies. That is why I will not support new clause 2.
Alex Cunningham: Some Members have chosen to talk about billions of pounds. I will speak about the odd pound and the odd penny, because that is what makes the difference to many of the people I represent.
The cost of living is one of the defining issues of this Parliament not only because of what the Government are doing but because of what they are not doing. Following the announcement yesterday of a huge increase in unemployment—12,000 in the north-east of England—in the last hour, we have learnt that another 160 jobs are going at SABIC, a pharmaceuticals company on Teesside. That is not good news.
The Chancellor’s VAT hike has been shown to be a mistake and it is hitting the vulnerable and those on the lower end of the income scale the hardest. Yes, one of the millionaires who uses his £100,000 tax cut under this Government will pay more VAT than the vast majority of other people when he buys himself a luxury car, but that will not make the difference to whether or not he can buy an extra loaf of bread or a pound of mince for his family’s evening meal. A cut in VAT of 2.5% may just buy some extra peanuts when the banker buys his champagne to celebrate his latest million-pound bonus, but it is the people earning peanuts for working hard to support their families who can put the extra pound or two from a cut to good use.
The previous Labour Government showed that that works when they temporarily reduced VAT to 15%. The reduced tax on sales provided an effective stimulus to the economy. Likewise, a VAT hike was always going to suppress consumption, and hit ordinary families in places such as my Stockton North constituency hard.
Jonathan Edwards: As the hon. Gentleman is aware, the rise came in the emergency Budget in 2010. There was a vote on the rise and the Labour party abstained. Can he explain the voting record of the Labour party?
Alex Cunningham: That is a very difficult question to answer but easy enough to ask. I regret that that happened.
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The Chancellor once spoke of the liberal credentials of his public school, so he could change and understand a bit more about the people out there. At the time, The Guardian quoted him talking about St Paul’s. He suggested that everyone was treated the same and said:
“It didn't matter who your parents were. Your mother could be the head of a giant corporation—or a solicitor in Kew”.
I have news for the Chancellor. Contrary to his blinkered view, solicitors and captains of industry do not encompass the full imaginable spectrum of socio-economic status. Not everyone out there can absorb VAT increases and not notice the difference. One has to add teachers, police, social workers, canteen cleaners, domestic staff, joiners, bricklayers, call centre staff, health care assistants and so many more to one’s list of acquaintances if one is really to understand the impact of his policies on people.
The statistics speak for themselves. The impact of the VAT increase will cost the lowest-paid workers four times more than any gain from the £10,000 personal allowance, when it is introduced in 2014. Like other Labour Members, I approve of the allowance being at that level. It is good that hard-working families can get extra money, but when the Government take it away with the other hand and people end up paying more, that is not a good thing.
Food prices are also up. I know it has probably been a long time since the Chancellor has nipped around the supermarket to do his weekly shop, if he ever has done so, but if he did so regularly he would see that food and other grocery shop prices are somewhat higher than he imagined and, for many items, way ahead of what his inflation figures are suggesting. Whether it is the price of caulies or a budget chicken, my constituents tell me they are having to pay more, or sadly just do without. Families at the bottom of the income scale—on average, on £53.81 a week—will suffer a 6.3% drop in their overall income following the VAT rise, personal allowance increase and other minor tax changes.
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I am unsure why the Government would oppose reducing this regressive burden, and I very much support my Front-Bench colleagues in arguing for a temporary cut, which would put extra pounds and pennies in people’s pockets, which they would spend in our economy. However, it is not just VAT that is making life more expensive for those without well-paid jobs, investment portfolios, or savings to support them, like the Chancellor’s solicitor friends in Kew.
The National Housing Federation estimates that, across Stockton borough, there are 2,806 losers from the imposition of the bedroom tax. There is a shortage of one-bedroom properties for tenants to move to, so they have nowhere to go. Why are the Government penalising my constituents for choosing not to move to properties that do not exist? How can that be fair? Any reduction in VAT, if not used to put a better meal on the table, could at least contribute a little to that extra rent burden.
Again, I say that it is not only VAT and the bedroom tax. Changes to council tax benefit are adding yet more to the cost of living in areas such as my own. Hundreds of my constituents will see their council tax rise by around £3 per week, or £156 a year—money taken away by the Government.
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One man who suffers from a degenerative condition came to my advice surgery to tell me that he had a choice: either he paid the council tax contribution, or he bought his prescription certificate, which provided best value for money for his medication. As he buys medicine, food and little else, I know that any cut in VAT would put only a few extra pence in his pocket, but he is simply desperate. Ministers—I nearly said monsters—will be delighted that he blamed the local council for that new expense, but rest assured that he is now in no doubt about who is responsible for taking the very medicine out of his mouth, and I am looking across the Chamber at them.
We are also feeling the impact of the 1% increase in annual benefit rates, which as hon. Members will know is a real-terms cut. There are 7,900 people in my constituency claiming working tax credit, and 15,000 across Stockton borough as a whole. Each of those people will see a real-terms cut thanks to higher inflation, which has been caused, in part, by the VAT rise.
The same goes for the minimum wage. Although the Government have talked about an increase, this is a real cut in the value of the wage of some of the hardest working and poorest paid in our society. Cutting VAT would allow us to increase the spending power of those on the minimum wage, although I for one would rather see the wage index-linked at least as we move towards a real living wage.
In my constituency, people on very low incomes will be asked to pay sums of money they simply cannot afford. Like the VAT rise, these policies impact on those least able to bear the burden of their weight, and combine to place near unbearable pressure on them. I support the new clause because I recognise the immense strain that the sky-rocketing cost of living is imposing on people across the country.
A lower VAT rate would not just ease the strain on families and individuals buckling under the weight of the cost of living; it would also help to lower the cost of those things that contribute to that weight. I know VAT is at a lower rate on domestic fuel bills, but I return yet again to the fact that a cut in VAT for everything else, including petrol and diesel, would make life easier for energy customers who have never needed it more than they do now. Everyone is aware of the rocketing cost of energy. Electricity and gas bills have risen by 145% over the past decade, and at £1,653 a year they account for almost one fifth of household costs and represent the second biggest share of household expenses, having overtaken council tax. Yet even this week, we read in The Observer that the big six energy companies are making more profit per household than ever before.
A recent survey by uSwitch found that 14% of households were in debt to their energy supplier, with the average amount owed standing at 4% higher than last year at £131. This is pushing people into fuel poverty. Department of Energy and Climate Change projections for 2012 show that the number of people in fuel poverty across the country is likely to rise to 3.9 million, a situation that is fuelled by increases in energy prices.
In Stockton borough, my local council has pioneered a unique external cladding and insulation project that has focused on private sector homes and helped to bring energy bills down. Unfortunately, the Government’s
18 Apr 2013 : Column 558
failure to take any meaningful action on soaring energy bills has not only cancelled out the council’s good work but reversed any progress that has been made.
The same goes for vehicle fuel. The Chancellor has repeatedly made great play in his Budgets of freezing fuel duty, but he has increased the cost with the increase in VAT. A temporary cut would put money in the pockets of motorists and help to stimulate our economy, making it easier for people in rural areas and commuter towns to get to and from work. More than that, it would reduce costs for haulage companies who would charge less for transporting the goods that we need in our shops, again helping to cut prices.
I urge all Members to support the amendment to reduce VAT, which would put more cash into the pockets of the people most likely to spend it on the essentials in life. Such a measure would make life easier for everyone in this country, stimulate much-needed economic growth, reduce unavoidable costs such as fuel costs and provide much-needed respite for my constituents and for people across the country.
Mr McKenzie: It is a pleasure to serve under your chairmanship, Sir Roger.
It is blatantly obvious that families up and down the country are paying the price of the Government’s failure to come to terms with the economy and to create growth and prosperity for all. The cost of living has never been higher. I speak as someone who brought up a family in the 1980s, and I thought that times were hard then. I am now seeing those circumstances repeated in my constituency. My constituents, especially the working families, are finding it extremely hard.
One of the indicators is the rise in unemployment, yet again, across the country. That illustrates that times are doubly hard for those who can least afford it and who are struggling to get employment. In my constituency, we have been fortunate in keeping unemployment down. Before Government Members jump to their feet saying, “We did it for Inverclyde”, however, let me advise them that they did not. The reason that we have been so successful in reducing youth unemployment is that my Labour-led council has put its money where its mouth is and continued with the future jobs fund for the past two years, to ensure that our young people have a future. It has ensured that they have employment not just for a few weeks or months, and it has gone back to the employers and the young people to ensure that their employment is sustainable for years. Now, 80% of those given employment places have remained in them for more than a year, and we are glad that that success is doing something to alleviate unemployment among young people in Inverclyde.
Unfortunately, however, there has been little impact on those who have been unemployed for more than two years, and the Government have offered them no assistance other than shipping them off to a private firm to be placed in employment somewhere for a week or two. It is clear that only Labour can guarantee those people a job with a living wage.
Prices are rising faster than wages. The Office for Budget Responsibility has confirmed that, by 2015, people will be worse off than they were in 2010. That illustrates the result of this Government’s policies. Most people in my constituency feel that, while Ministers
18 Apr 2013 : Column 559
might have read economics at university, it is they who are actually living the economics, day in, day out. The cost of living has never been higher, and that is partly due to increased food prices. I encourage any Member to go round their local supermarket and do their weekly shopping, as I do. I see less and less going into the trolley, and more and more going into the till at the end of my shopping trip. Even those families who are thrifty and who shop around and buy own-brand items are seeing a dramatic increase in their food bills. They are being pushed into using food banks, which is another indicator that times are indeed hard.
In my constituency, we have the i58 project, in which one of the local churches has been running a food bank since last September. I was staggered when I visited it at Christmas. It thought that the numbers of people being referred to it had peaked at 1,000—mine is not a large constituency, after all—but the figure has continued to increase in the new year. It is deeply regrettable that we are not seeing any reduction in those numbers. Ever more families, including working families, have been referred to food banks.
Even with the steps we have taken in my area to insulate homes to try to keep energy bills as low as possible, there have been dramatic increases in households’ energy costs. That seems to happen year in, year out. There seems to be no stopping the price rises introduced by the energy companies. These ever-increasing bills spread fear, particularly among the elderly and those on low incomes. People are struggling to pay to heat their own homes. In my area of Scotland, investment in home insulation has been in place for four or five years, yet people are still struggling to pay their energy bills.
Rents have increased recently, too. Not enough homes are being built, so increasing numbers of people are unable to find social rented accommodation. They are pushed into the private sector, which has taken full advantage by pushing up rents time and again. That, too, is having a dramatic impact, particularly on those who can least afford to pay.
We have already heard about the high fuel prices. Those who are fortunate enough still to be able to afford to run a vehicle find that the price of petrol at the pump increases year after year. A number of approaches to the Government have been needed to get them to halt the increases in prices, but we continue to ask for VAT to be removed from fuel. That has one of the biggest impacts on fuel prices, as was pointed out in an earlier intervention. It was also pointed out that we can drop VAT, on an individual basis, from fuel.
There is more evidence of hard times to be seen on the high streets, with shop after shop closing, and brand name after brand name disappearing. The shops that are replacing them are loan shops, bookmakers and pawnbrokers, which shows that those on low incomes are increasingly having to make visits—perhaps on a weekly basis—to such shops in order to bridge the gap between what they are receiving and what they are having to spend on the bare essentials.
The way to deal with the increasing costs of living is through employment. All wealth comes from employment and we must make sure there are as many jobs as possible. We must create jobs by stimulating the introduction of projects throughout the country. We welcome the large projects, of course—we had great success with
18 Apr 2013 : Column 560
the Olympic games, and in Scotland I am sure we will have great success with the Commonwealth games—but the smaller projects in and around our communities need to happen as well, to stimulate local economies and get things moving. We all know of shovel-ready projects in our areas that need to go ahead, but they are not progressing.
Last year, the Government gave additional funds to the Scottish Government for shovel-ready projects. Where that money has gone remains to be discovered, as to date only £10 million has seen the light of day in projects across Scotland.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): What my hon. Friend says highlights one of the advantages of the proposal to cut VAT. Even with the best will in the world, investment in infrastructure can take a long time to get through all the resistance, which is why even now, after up to three years of trying, we are still not seeing the full benefits of that, whereas a cut in VAT would have an immediate effect on the high street, and on construction and many other sectors of our economy. That highlights why it is so important that the VAT cut should go ahead.
Mr McKenzie: My hon. Friend makes a good point. I visited some of the employers in my area in the Easter recess. Time and again they told me they needed a stimulus to the local economy from a VAT cut, to get people spending and buying things. My local construction firms in particular said they needed a reduction in VAT to get people to consider going ahead with smaller projects such as house improvements, thus creating employment locally. They felt a VAT cut would serve to stimulate that local growth and get things moving; otherwise, they could see only a bleak future, if any future at all, for the construction industry. They also brought up the continuing difficulty of being closed out of local and national Government contracts. The procurement process still seems to be far too complex and to exclude the small and medium-sized businesses that could stimulate the local economy.
3 pm
The problem, as we all know, is that there is no growth in the economy. It has flatlined. There has been no demand for the products that businesses say would allow them to grow and create employment, and thereby help the economy. I support the new clause and think that it would stimulate growth in the economy.
Mr Gauke: It is a great pleasure to serve under your chairmanship, Sir Roger.
I will deal with new clause 2 in a moment, but what has driven this debate, initiated by the Opposition, is the cost of living. That is an important matter for our constituents and the Government recognise the pressures that households face. We are taking action to support households with the cost of living, within the fiscal constraints that exist.
A key part of that has been to increase the personal allowance. Clause 3 will ensure that the benefits of that increase are shared fairly. In 2010, when the coalition was formed, individuals could earn just £6,475 before they began to pay income tax. Thanks to the actions of this Government, from April next year, the figure will be £10,000. That is an increase of £3,525, which means
18 Apr 2013 : Column 561
that the personal allowance will have risen by more than 50% in just four years, thereby helping our constituents with the cost of living. Our priority has been to help those on low and middle incomes, and we have. The changes in clause 2 mean that a typical basic rate taxpayer is already nearly £600 better off in cash terms under this Government. From next year, that figure will rise to more than £700.
That is not the only action that we are taking to help households with the cost of living. The fuel duty increase that was planned for September will be cancelled. The Finance Bill keeps fuel duty frozen at current levels, maintaining the longest freeze in fuel duty for 20 years. That is helping households and businesses with the cost of motoring. Fuel duty is 13p per litre lower than it would have been had we implemented the Labour party’s planned increases. We have also taken action to help local authorities in England to freeze their council tax for the third year in a row and to cap rail fares for commuters.
Albert Owen: The Minister and his Front-Bench colleagues are always talking about the freeze in fuel duty, which I welcome and for which I campaigned. However, has the Treasury made any calculations on the extra 2.5p in each pound that ordinary hard-working families spend on their petrol at the pump because of their measures?
Mr Gauke: Of course, that has been far outweighed by the steps that we have taken to reduce fuel duty. The net effect has been a substantial reduction in the amount of tax collected for every litre of petrol.
New clause 2 returns us to the big, fundamental economic argument that we have been having for some years on deficit reduction. I could deliver the standard speech that we give in such circumstances about how it is a strange way to deal with a debt crisis to try to increase borrowing. However, this is one of those rare occasions when the Opposition have put forward a policy and we have an opportunity to ask questions about it. I know that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) will be keen to enlighten the House on the policy she has set out in new clause 2, and if I may, I will ask a number of questions—[Interruption.] I am sorry; there seems to be some objection from the Labour party. New clause 2 is being proposed by the Labour party. I want to ask questions about the policy behind it, so let me ask those questions.
First—this is the point raised by my right hon. Friend the Member for Wokingham (Mr Redwood)—new clause 2 states that VAT will be reduced until “strong growth” is achieved. What is strong growth?
Chris Leslie (Nottingham East) (Lab/Co-op): I cannot believe he said that.
Mr Gauke: That term is used in a new clause tabled by the Labour party.
Mr Gauke: I would give way to the hon. Gentleman, but he was not here for the early part of the debate. He may not have read the new clause, but the policy depends on the definition of “strong growth” and the Labour party has not provided a definition.
18 Apr 2013 : Column 562
Secondly, the cost of this measure will be £12 billion to £13 billion a year. How will that be paid for—an issue raised by my hon. Friend the Member for Peterborough (Mr Jackson)? Will it be through higher taxes, a reduction in spending or—as we believe—an increase in borrowing? What consideration has been given to the impact on the cost of borrowing? A 1% increase in Government bond yields would add around £8 billion to annual debt interest payments by 2017-18 and result in an increase of £12 billion in households’ mortgage interest payments—the equivalent of £1,000 for a household with an average mortgage in its first year. Has the Labour party considered the consequences of that discretionary fiscal stimulus?
What is Labour’s view on the profile of deficit reduction? We believe that over the whole deficit reduction period, 80% should be achieved through spending cuts and 20% through tax increases. The Darling plan had two thirds on spending cuts and one third on tax increases. What is the view of the Labour party, given that it has put in front of the Committee a proposal for a £12 billion or £13 billion tax cut? Does it suggest that the ratio should lean more towards public spending cuts rather than tax rises? What assessment has Labour made of the impact of different taxes on the economy? My right hon. Friend the Member for Wokingham mentioned the fact that VAT is, as many economists would argue, less harmful to growth than other taxes. Is that the view of the Labour party? Why has VAT been picked as a particular issue?
The Labour party does not come forward with policies often, but I am pleased that it has done so today so that Labour Members have the opportunity to tell the Committee exactly what their policy is. They can explain that policy, and if they would care to answer those questions the Committee will be able to judge whether it should support new clause 2. My advice to my right hon. and hon. Friends is that this is just more of the same from the Labour party. It is more borrowing and more debt, and it fails to get to grips with the fiscal situation and the mess in which the Labour party left this country and which we, the coalition Government, are addressing.
Cathy Jamieson: It is an interesting experience to see Ministers ask a whole range of questions without addressing why we introduced the proposal. The Minister failed to recognise work that shows how VAT hits those on lower incomes disproportionately hard. He shakes his head but we can point to research which backs that up and businesses that say—I have spoken to people personally as I am sure have other hon. Members—that a temporary cut in VAT would help to stimulate the economy and growth. The Minister asks what the definition of strong growth would be. It certainly is not what this Government have provided.
Mr Gauke: The Opposition propose a new clause that depends on the definition of “strong growth” but do not tell us what that means. They object to questions being asked about what the new clause means. It is the hon. Lady’s new clause, so will she tell the Committee what she is getting at, why she has chosen VAT, what the fiscal implications will be, and what will happen if borrowing goes up by £12 billion or £13 billion?
18 Apr 2013 : Column 563
Cathy Jamieson: I am sure the Minister has heard what I have said. We believe that the new clause is one measure that can be introduced now to ensure that there is a stimulus in the economy.
The Government believe that consistently high rates of VAT are helpful to the economy. The Opposition disagree and believe there is an alternative. I find it interesting that the Minister constantly presses Opposition Members to define “strong growth” when it is clear that the Government’s policies are introducing something that is far from strong growth. It is important to recognise that, once again, the Opposition are standing up for the people whose incomes are being squeezed and who are being hit hard by the Government’s policies. The Minister can shake his head as much as he likes, but he knows in his heart of hearts that the Opposition are speaking out for the people who are hit hardest by the Government’s policies. That is why I intend to press new clause 2 to a Division.
Question put, That the clause be read a Second time.
The Committee divided:
Ayes 193, Noes 244.
Division No. 216]
[
3.11 pm
AYES
Abrahams, Debbie
Ali, Rushanara
Allen, Mr Graham
Ashworth, Jonathan
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Bayley, Hugh
Benton, Mr Joe
Berger, Luciana
Betts, Mr Clive
Blackman-Woods, Roberta
Blears, rh Hazel
Blenkinsop, Tom
Blunkett, rh Mr David
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Byrne, rh Mr Liam
Campbell, Mr Alan
Caton, Martin
Champion, Sarah
Clark, Katy
Clarke, rh Mr Tom
Coaker, Vernon
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Creasy, Stella
Cruddas, Jon
Cryer, John
Cunningham, Alex
Cunningham, Mr Jim
Dakin, Nic
David, Wayne
Davidson, Mr Ian
De Piero, Gloria
Denham, rh Mr John
Dobbin, Jim
Dobson, rh Frank
Docherty, Thomas
Donohoe, Mr Brian H.
Doran, Mr Frank
Doughty, Stephen
Dowd, Jim
Doyle, Gemma
Dromey, Jack
Dugher, Michael
Eagle, Ms Angela
Edwards, Jonathan
Efford, Clive
Esterson, Bill
Farrelly, Paul
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Gapes, Mike
Gardiner, Barry
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Godsiff, Mr Roger
Goodman, Helen
Green, Kate
Griffith, Nia
Gwynne, Andrew
Hamilton, Mr David
Hamilton, Fabian
Hanson, rh Mr David
Harman, rh Ms Harriet
Harris, Mr Tom
Hendrick, Mark
Hillier, Meg
Hilling, Julie
Hodge, rh Margaret
Hodgson, Mrs Sharon
Hoey, Kate
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Hunt, Tristram
Irranca-Davies, Huw
Jackson, Glenda
Jamieson, Cathy
Jarvis, Dan
Johnson, rh Alan
Johnson, Diana
Jones, Graham
Jones, Helen
Jones, Mr Kevan
Jowell, rh Dame Tessa
Kaufman, rh Sir Gerald
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lewis, Mr Ivan
Llwyd, rh Mr Elfyn
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
MacNeil, Mr Angus Brendan
Mactaggart, Fiona
Mahmood, Shabana
Malhotra, Seema
Mann, John
Marsden, Mr Gordon
McCann, Mr Michael
McCarthy, Kerry
McClymont, Gregg
McDonagh, Siobhain
McDonald, Andy
McDonnell, John
McFadden, rh Mr Pat
McGovern, Alison
McGovern, Jim
McGuire, rh Mrs Anne
McKechin, Ann
McKenzie, Mr Iain
McKinnell, Catherine
Meacher, rh Mr Michael
Mearns, Ian
Mitchell, Austin
Morden, Jessica
Morrice, Graeme
(Livingston)
Morris, Grahame M.
(Easington)
Mudie, Mr George
Munn, Meg
Murphy, rh Paul
Murray, Ian
Nandy, Lisa
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Osborne, Sandra
Owen, Albert
Paisley, Ian
Pearce, Teresa
Perkins, Toby
Pound, Stephen
Powell, Lucy
Qureshi, Yasmin
Raynsford, rh Mr Nick
Reed, Mr Jamie
Reed, Mr Steve
Reynolds, Emma
Riordan, Mrs Linda
Robertson, Angus
Robertson, John
Rotheram, Steve
Roy, Mr Frank
Ruddock, rh Dame Joan
Sawford, Andy
Seabeck, Alison
Sharma, Mr Virendra
Sheridan, Jim
Shuker, Gavin
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, Angela
Smith, Nick
Smith, Owen
Spellar, rh Mr John
Stuart, Ms Gisela
Sutcliffe, Mr Gerry
Tami, Mark
Thomas, Mr Gareth
Thornberry, Emily
Trickett, Jon
Twigg, Derek
Umunna, Mr Chuka
Vaz, Valerie
Watson, Mr Tom
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Williams, Hywel
Williamson, Chris
Wilson, Phil
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:
Heidi Alexander
and
Susan Elan Jones
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Steve
Baldry, Sir Tony
Baldwin, Harriett
Barclay, Stephen
Barker, rh Gregory
Baron, Mr John
Barwell, Gavin
Beith, rh Sir Alan
Bellingham, Mr Henry
Beresford, Sir Paul
Berry, Jake
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Bone, Mr Peter
Bottomley, Sir Peter
Bradley, Karen
Brady, Mr Graham
Brake, rh Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Steve
Bruce, Fiona
Bruce, rh Sir Malcolm
Buckland, Mr Robert
Burns, Conor
Burns, rh Mr Simon
Burstow, rh Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cairns, Alun
Carmichael, rh Mr Alistair
Carmichael, Neil
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clark, rh Greg
Coffey, Dr Thérèse
Collins, Damian
Cox, Mr Geoffrey
Crouch, Tracey
Davies, Glyn
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Doyle-Price, Jackie
Duddridge, James
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evennett, Mr David
Fabricant, Michael
Featherstone, Lynne
Field, Mark
Fox, rh Dr Liam
Francois, rh Mr Mark
Freer, Mike
Fuller, Richard
Garnier, Sir Edward
Garnier, Mark
Gauke, Mr David
George, Andrew
Gillan, rh Mrs Cheryl
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Green, rh Damian
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Halfon, Robert
Hancock, Matthew
Hands, Greg
Harrington, Richard
Harris, Rebecca
Harvey, Sir Nick
Haselhurst, rh Sir Alan
Hayes, rh Mr John
Heald, Oliver
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Howarth, Sir Gerald
Howell, John
Hughes, rh Simon
Huppert, Dr Julian
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, Sajid
Jenkin, Mr Bernard
Johnson, Gareth
Johnson, Joseph
Jones, Mr Marcus
Kelly, Chris
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lansley, rh Mr Andrew
Latham, Pauline
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Leech, Mr John
Leigh, Mr Edward
Letwin, rh Mr Oliver
Lewis, Brandon
Lilley, rh Mr Peter
Lloyd, Stephen
Lord, Jonathan
Loughton, Tim
Luff, Peter
Lumley, Karen
Main, Mrs Anne
Maude, rh Mr Francis
Maynard, Paul
McIntosh, Miss Anne
McVey, Esther
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, rh Maria
Mills, Nigel
Milton, Anne
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Mosley, Stephen
Mowat, David
Mulholland, Greg
Newton, Sarah
Nokes, Caroline
Nuttall, Mr David
Ollerenshaw, Eric
Ottaway, Richard
Paice, rh Sir James
Parish, Neil
Patel, Priti
Paterson, rh Mr Owen
Pawsey, Mark
Penning, Mike
Penrose, John
Percy, Andrew
Perry, Claire
Phillips, Stephen
Pincher, Christopher
Prisk, Mr Mark
Pugh, John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reevell, Simon
Reid, Mr Alan
Robertson, rh Hugh
Robertson, Mr Laurence
Rogerson, Dan
Rosindell, Andrew
Rudd, Amber
Ruffley, Mr David
Russell, Sir Bob
Rutley, David
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Sharma, Alok
Simpson, Mr Keith
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Smith, Sir Robert
Soames, rh Nicholas
Soubry, Anna
Spencer, Mr Mark
Stanley, rh Sir John
Stephenson, Andrew
Stewart, Bob
Stewart, Iain
Streeter, Mr Gary
Stride, Mel
Stunell, rh Andrew
Sturdy, Julian
Swayne, rh Mr Desmond
Swinson, Jo
Syms, Mr Robert
Teather, Sarah
Thornton, Mike
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Turner, Mr Andrew
Tyrie, Mr Andrew
Uppal, Paul
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Watkinson, Dame Angela
Weatherley, Mike
Webb, Steve
Wharton, James
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Wiggin, Bill
Willetts, rh Mr David
Williams, Mr Mark
Williams, Roger
Williams, Stephen
Williamson, Gavin
Wilson, Mr Rob
Wright, Simon
Yeo, Mr Tim
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Mark Lancaster
and
Mark Hunter
Question accordingly negatived.
18 Apr 2013 : Column 564
18 Apr 2013 : Column 565
18 Apr 2013 : Column 566
Basic rate limit for 2013-14
Cathy Jamieson: I beg to move amendment 10, page 2, line 11, at end add—
‘(3) The Chancellor shall produce a report on subsection (1) which shall include an assessment of the impact of changes to taxation on the living standards of basic rate taxpayers which shall be placed in the House of Commons Library within three months of Royal Assent.’.
The Temporary Chairman (Sir Roger Gale): With this it will be convenient to discuss clause 3 stand part.
Cathy Jamieson: It is a pleasure to be back at the Dispatch Box. Had amendment 4 been selected for debate, we could have engaged in further discussion about the mansion tax and the 10p income tax rate. However, I think that some of the broader issues that I shall raise in relation to clause 3 are relevant to that subject.
Clause 3 sets the 2013-14 basic rate limit for income tax at £32,010. In doing so, it overrides the indexed amount, which would otherwise have been set at £35,300 as announced in the 2012 autumn statement. The explanatory notes on the clause state that it is
“part of a package of measures”.
18 Apr 2013 : Column 567
I shall say something further about the implications of that package of measures as we go on. Effectively, the rise in the personal allowance from £8,105 to £9,440 for this year and the rise to £10,000 from 2014, however welcome they are and regardless of the difficulties raised concerning those who will not necessarily benefit, will in part be clawed back by the measures implemented in this clause and a further reduction in the basic rate limit next year to £31,865.
3.30 pm
We have heard a lot of warm words from the Government about the package. The Chancellor called the rise in the personal allowance an
“historic achievement for this Government and for hard-working families across the country.”—[Official Report, 20 March 2013; Vol. 560, c. 944.]
However, as we heard in the previous debate, there is not that much celebration going on at the moment among most ordinary hard-working families across the country who are seeing their incomes squeezed. There is concern that the announcement and the clause are just smoke and mirrors.
I do not want to repeat the points we made in the earlier debate, but extensive mention has been made of the fact that the Opposition will welcome any steps that will help families and hard-working people through these tough economic times. However, we do not believe that these measures go nearly far enough to make up for what many basic rate taxpayers have already lost thanks to the tax and benefit changes made by this Government. Those measures have indisputably taken money out of the pockets of people who need it.
It is important that we consider the changes in the round rather than focusing on individual measures. That is why we, through a fairly mild-mannered amendment, are calling on the Government to produce a report that would comprehensively assess the impact of changes to taxation on the living standards of basic rate taxpayers. As we all know, times are incredibly tough for families up and down the country, for pensioners and for hard-working people who are paying taxes.
Basic rate taxpayers, who work hard and try to dothe right thing, are the ones who are hurting. That has been backed up by various external organisations and commentators, including Citizens Advice, which said about the rise in the personal allowance for basic rate taxpayers:
“This is obviously helpful to all basic rate taxpayers. A single person with earnings of £30,000 a year will for example, gain £5.12 a week in April and will have gained the full £11.37 from the rise in the personal allowance…However”—
and this is the important point—
“this does not mean that families on low or even middle earnings will see an actual gain of this much: any rise in net earnings leads to a reduction in housing benefit and council tax benefit.”
We feel that the assessment and report are important because, in reality, 2.4 million families on low incomes will pay on average £138 more in council tax in the year 2013-14 as a result of cuts to council tax benefit, according to the Joseph Rowntree Foundation; 660,000 people will lose an average of £728 a year or £14 a week as a result of the “bedroom tax”, according to figures from the IFS; and child benefit will be frozen for a third year, while tax credits and other working age benefits
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will increase by just 1%, causing problems for many families. Those are real-terms cuts that will affect 9.7 million households, of which 7.3 million, or 75%, are working households, according to the IFS.
If we take into account all of the tax and benefit changes introduced since 2010, including the personal allowance package of which the Government are so proud, analysis of figures published by the independent IFS shows that families will be £891 worse off on average in the new financial year. If the Government do not want to listen to independent figures, how about looking at their own figures? According to the distributional analysis issued by the Treasury after the Budget, the cumulative impact in cash terms for the bottom 10% of households from tax, tax credit and benefit measures in 2013-14 would result in a £200 reduction in incomes for the poorest group in society. What the Government are giving with one hand, they are taking away, and more, with the other. Perhaps the most shameful and the most concerning of all are the Government’s own figures revealing that the changes to support, including in-work support for basic rate taxpayers, will push a further 200,000 children into poverty. That is the real package that we should be concerned about.
The Government have an opportunity here to take that on board, carry out the assessment and provide the report. That would be important for both parts of the coalition. Some people have chosen to characterise the changes that the Government have made as marking the return of the nasty party. Perhaps we would not be entirely surprised at the steps that the Conservatives have taken, but many supporters of the other part of the coalition, the Liberal Democrats, who voted in these measures, will be surprised, and I hope Liberal Democrat Members will consider supporting us to ensure—I see heads shaking so I can only assume they are supporting the Conservative cuts and the measures that the Conservative part of the coalition is taking. I am disappointed that they would not even support the production of the report that the amendment calls for.
If the Government are confident of their actions, if they have nothing to hide, and if members of the coalition, including the Liberal Democrats, honestly believe that all the changes they are making are for the best and that Labour has got it wrong—as they consistently try to portray in the face of evidence and despite the opinion of independent commentators—and that the changes will help basic rate taxpayers, will make work pay and will help boost the economy, why do they not agree to commission a report, which would look straightforwardly at how the changes will impact on the living standards of basic rate taxpayers? With regard to the impact on those brought into the higher rate of tax, I hope the Minister will be able to clarify the number of people affected.
We in the Opposition do not believe that the measures in the package proposed by the Government go far enough. We have outlined other elements that could be included to help those who are suffering as a result of the failed economic policies. As I said in an earlier debate, we do not accept the Government’s mantra that we are all in it together—not while cuts to tax credits, in-work support, council tax and housing benefit, maternity pay, sick pay and a range of other benefits are impacting on people who are hard at work. Those changes are being made in the very same month as 267,000 people
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earning over £150,000 will benefit from a cut in the top rate of tax, including 13,000 people earning over £1 million, who will each receive an average tax cut of £100,000. Again, I am using the Government’s own figures to make those comparisons.
People throughout the country are saying that that simply is not fair and it is not good enough to get the economy working and growth moving again. People believe it is not fair that while some of the wealthiest in our society are receiving £100,000 back from the Government, those at the other end of the scale, those least able to do so, have been asked to shoulder a bigger burden.
I am conscious of the time. Other hon. Members want to speak and we want to hear the Minister’s response. I ask the Minister and those on the Government Benches to recognise the amendment as a straightforward request for a report to be provided. If the Government are confident about what they are doing and if they have nothing to hide or to fear and they want to produce such a report, we of course will work with them on that. Sadly, I have my doubts whether that offer will be accepted but I am always open to being surprised by the Minister, and I look forward to hearing that, for once, he will accept our mild-mannered, straightforward amendment and commit to producing the report.
Mr Robin Walker: It is a pleasure to take part in this debate and to speak about one of the most important and beneficial changes announced in the Budget. In dealing with the clause stand part element of the debate, I intend to talk about the level of the basic rate of income tax and, more importantly, the increase in the threshold, which, as the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) said, are directly linked.
I would first like to clarify one point, having been contacted by a very concerned constituent who had heard that the basic rate for the top level of tax was being reduced to £32,000 and, as she earns £35,000, was worried that she will suddenly become a 40% taxpayer. It is important to clarify that the basic rate thresholds are set on top of the threshold for paying income tax and that no one is being asked to pay the 40p higher rate until they earn £41,450.
Stewart Hosie: Of course, that is only part of the story, because the threshold before one pays 40% has gone down from £37,500 to £32,000, a reduction of over £5,000, while the 20% threshold has gone from £6,500 to £10,000, which is an increase of only £3,500. In fact, 670,000 more people are now paying the 40p rate than were doing so three years ago, so many more people now fall within a tax band that used to be only for the rich.
Mr Walker: I take the hon. Gentleman’s point. I had thought that his party was in favour of progressive taxation. Certainly, I believe that raising the income tax threshold and taking many people out of tax is one of the coalition Government’s great achievements. It was a Liberal Democrat policy at the general election, and on this occasion I will admit that they had an excellent idea.
The coalition Government are right to recognise that it is vital to make work pay and that that cannot be done through welfare reforms alone. By also ensuring
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that people can keep more of the money they earn, we will stimulate the economy, reward work and alter the balance between dependency and opportunity.
I am delighted that Ministers have been able to bring forward planned changes to the income tax threshold by a year so that workers at the lower end of the wage spectrum will not have to wait until 2015 to pay less tax. As a result of the changes announced in the Budget, more than 34,000 people in Worcester will receive a tax cut and 3,370 people who would have been paying income tax in 2010 will pay none at all. That will not only reward those people, but directly stimulate our local economy—we have heard from Labour Members about the importance of people having money in their pockets to spend in the shops. In four years, the threshold at which people have to pay tax will have been raised by 50%, which is good news for millions of part-time workers who have been taken out of the tax system altogether and full-time workers on average earnings who benefit from a reduced burden of income tax.
The Opposition have downplayed those changes and focused on changes to tax credits to argue that some working families will be worse off. In doing so, they show a profound misunderstanding of the pride people take in the money they earn and their desire to support themselves. It is far better for the individual and their family to earn their money, keep the fruits of their labour and be able to spend it as they see fit than for it to be taken away and for the individual to be dependent on the faceless benignity of an all-knowing state that might choose to hand a proportion of it back—might—but that, if Labour ever gets control of the Treasury again, might find itself without the means to do so.
To listen to some of the speeches we have heard from the Opposition over the past few weeks, one might be forgiven for believing that the tax credits system, as it currently stands, was a vital part of Attlee’s welfare state and a bastion of the post-war consensus; it is not and it was not. In its current form, it is the creation not of a Beveridge or a Bevan, but of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who so rarely graces the House with his presence. I am glad that that complex system, which takes money away from working people to feed it through the Government sausage machine and re-allocate some of it, is to be rolled into universal credit and reformed to ensure that work will always pay.
It is far better to remove the tax from thousands of hard-working people in my constituency, and millions across the country, so that they can keep the money they have earned for their needs, their homes and their families. If we are to support families, it is far better, as the right hon. Member for Birkenhead (Mr Field) has argued, to use public money to invest in early intervention than to use it to prop up a complex system of credits that fails properly to support work and has always failed to reach millions of the people who, in theory, are eligible for it.
The fact that the Government are increasing the tax threshold shows that we are rewarding work at the same time as simplifying the tax system. The fact that we have been able to bring forward those changes shows that there is a sense of urgency about delivering an unalloyed public benefit, which many Labour Members have supported today.
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I would argue that the same sense of urgency should be brought to the issue of child care support for working families. The Prime Minister set out exciting policies on that before the Budget but my constituents are being asked to wait until 2015 for the support. I have heard from many constituents who are delighted to hear that it will be available through the tax system but are then devastated to realise that by the time it is implemented, their children will have grown out of the eligibility criteria.
If a thing is worth doing, it is worth doing now. I urge the bright and brilliant men and women of the Treasury to bend their backs to the task of bringing those valuable initiatives forward in the shortest possible time. While they are at it, I urge them to consider a proper transferable married person’s tax allowance to support the family.
I welcome many initiatives in the Budget and I hope that the Chair will not rule me out of order if I touch briefly on a few of the others that will make a real difference to people in Worcester. Freezing once again the duty on fuel is more than welcome and much appreciated. Removing the much loathed beer duty escalator will raise a toast in many of Worcester’s pubs. The employment allowance will help more small businesses to create vitally needed jobs.
Returning to my opening remarks and the matter under consideration, I make one suggestion for the future, and I sincerely hope that Treasury Ministers can take it on board. Raising the income tax threshold is and has been the right thing to do, and it remains so. It is wonderful that we have brought forward to 2014 the date at which the threshold will reach the magic number of £10,000. However, today we should open a debate about that number. The figure of £10,000 was not worked out by economists or in careful consultation with employers and workers, nor was it based on any reflection of financial reality; it was drawn up as a manifesto promise in a party conference on the eve of an election.
In my view, the Conservative party missed out by not making that promise ourselves. Today we should start to consider the level at which the threshold for income tax should be set in the future. I believe that it should be the same as the earnings of a full-time worker on the minimum wage.
Stephen Williams: I was hoping that my hon. Friend would make that point. He has already acknowledged the Liberal Democrat pledge on the £10,000 threshold at the last election. We have already decided that at the next general election we are going to link the income tax threshold to the national minimum wage, which is currently £12,071. If my hon. Friend is about to say that he endorses the Liberal Democrat position at the next general election, I will welcome that.
Mr Walker:
I will certainly urge my party to adopt a similar position. Raising the threshold to £11,500 or £12,000 in future Budgets would help millions more people and provide further stimulus. That, along with other policies that my party supports, and which the Liberal Democrats do not always support, such as keeping a freeze on council tax, could make a real difference. Raising the threshold would extend the legacy
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of that valuable change and do even more to make work pay. I urge Ministers to consider it for the future and commend them on the difficult job that they are doing well.
Sheila Gilmore: The hon. Member for Worcester (Mr Walker) has perpetuated some of the myths about some of the last Government’s policies. For example, he suggested that it would be better to put money into early intervention—presumably, that would involve paying things such as tax credits. Of course, it was not an either/or.
Anyone looking at the setting up of Sure Start and all the reports that were done on the importance of early intervention would see that we did not think, as is sometimes suggested, that the only solution to deprivation, child poverty and so on was simply to put money in. Money is part of the issue, but we certainly did not see things in terms of either/or. All the people up and down the country who have seen reductions in Sure Start services, for example, see that now it is not only not either/or—in many cases, it is neither/nor.
It is all very well for the Government to say, “We’re leaving you your own money so that is fine,” but the bottom line is that people have less money in their pockets. What has been suggested is a give-away in income tax is more than balanced, for many low-paid workers, by the reduction in tax credits and other provision. What matters to those people is how much they have to spend. Saying, “Oh, it’s wonderful that you’re getting to keep your own money” is no use. They cannot necessarily buy the things that they need.
The situation with child care is similar. The hon. Member for Worcester was right to say that the Government measure on that is not coming in right now; moreover, many people have already seen a cut in help. Child care tax credits were cut by the Government for many low-paid working families, so it has already happened.
The tax credits system was particularly beneficial for single parents, over 350,000 of whom went into employment as a direct result. There are serious concerns about universal credit as the answer to all this, particularly for single parents. Gingerbread and other organisations representing single parents have pointed out that their position could be worse under universal credit.
3.45 pm
Not only that, but there are changes to the restrictions and conditions put on to single parents when they go back into work. Under the previous Government, they had real flexibility and an understanding that the kind of work they could do had to tie in with their family and caring responsibilities. Those flexibilities are going to be swept aside under universal credit. The regulations now contain only one from a whole group of flexibilities. For that group in particular, and possibly for others, this system, far from being better, may well be worse.
In other respects, strangely, the Government are not so keen on people keeping their own money. Some changes have actually punished people for saving and being careful. One of those was the restriction on the receipt of employment and support allowance to a year. That means that at the end of that year, people who have savings, or have an early retirement pension because they retired sick, or have a partner in work but often only part-time work, no longer receive the benefit, so
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suddenly their income is reduced by as much as £91 a week. The argument we were given was that people should use up their own savings first before the state helps them.
Under universal credit, somebody in employment who has capital over the level of £6,000 will begin to have any benefit they get reduced as a result, and if they have more than £16,000, they will lose it altogether. People who may have been saving for their retirement or saving with a view to being able to buy a house, will find that they have to use that money up, because that is what the Government are saying. Not all these policies are even coherent. Let us look properly at the effects of tax rates on all income groups, because it would be very helpful to everyone if we did so.
Mr Gauke: Clause 3 sets the basic rate limit for income tax for the 2013-14 tax year. Let me make it clear at the outset, as I did in the previous debate, that we understand the financial pressures faced by households. As a Government, we have taken action to reward employment and to support hard-working families. That is why we have increased the personal allowance. I endorse the remarks made by my hon. Friend the Member for Worcester (Mr Walker) in support of the policy we have pursued. Budget 2013 announced that we will go further, with the personal allowance increasing by a further £560 to reach £10,000 in 2014-15, meeting the Government’s commitment a whole year early. These changes will benefit 25 million individuals and will take 2.7 million people out of income tax altogether by April 2014.
Clause 3 reduces the basic rate limit by £2,360 to £32,010 in 2013-14. When combined with the £1,335 increase in the personal allowance provided for by clause 2, the higher rate tax threshold for 2013-14 will be reduced to £41,450. This allowance increase will benefit all taxpayers with incomes below £116,000 by £200 a year on average in real terms. About 30% of the gains from the personal allowance increase for 2013-14 will be shared with most higher-rate taxpayers. The national insurance upper earnings and profits limits remain aligned with the higher rate tax threshold.
It might be helpful if I set out the reasons for this change. I have explained that this coalition Government are committed to creating a fairer tax system that rewards work, with real-terms progress every year towards increasing the personal allowance to £10,000. We are meeting that target one year ahead of schedule and the final step towards it will be legislated on in next year’s Finance Bill. For now, the £1,335 increase in the personal allowance, introduced by clause 2, represents a major milestone on the journey to £10,000. The changes that we are making for the 2013-14 tax year will lift an additional 1.1 million individuals out of income tax altogether and give 24 million taxpayers an average real-terms gain of more than £200 a year. For the typical basic rate taxpayer, that will mean an extra £267 of cash in their pocket for 2013-14, which is an extra £5 a week since the start of the new tax year.
On the specific issue of gains for higher rate taxpayers, when increasing the personal allowance by £10,000 in 2011-12 we also had to make sure it was consistent with bringing the public finances under control. Therefore, higher rate taxpayers did not benefit from that increase. However, we decided that the benefits of later increases
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should be shared with higher rate taxpayers. This supports growth by increasing the rewards to work for a wide range of individuals.
The £1,335 increase from April 2013 was announced in two parts. For the increase of £1,100 announced at Budget 2012, rather than pass on the full benefit of the personal allowance to higher rate taxpayers, an equivalent amount of funding was provided to assist in the fair implementation of the child benefit reforms. However, gains from the additional £235 increase announced at autumn statement 2012 have been passed on equally.
At that time the Government also decided that the higher rate tax threshold—the point above which the higher rate tax starts to be paid—will increase by 1% in both 2014-15 and 2015-16. These will be cash increases, the first in this Parliament, and they will ensure that higher rate taxpayers will gain equally from future increases to the personal allowance. The Government recognise that these are below-inflation increases, so they also raise about £1 billion in revenue to support our efforts to deal with the large deficit we inherited from the Labour party. We make no attempts to conceal that and have been very open and up front about it.
Opposition amendment 10 calls for a report on the cost of living for basic rate taxpayers. As I have said, we recognise the pressures that households face and we are taking action to support them with the cost of living. Indeed, in our debate earlier this afternoon I set out some of the policies. I have touched in this speech on the personal allowance and one could also point to our policies on fuel duty and beer duty, which were announced in the recent Budget, and on council tax, which are all intended to relive households from some of the pressures they face.
The Government have taken unprecedented steps to publish a distributional analysis alongside each Budget and autumn statement document. Such analysis shows the impact of all the Government’s policies on household incomes and separates the impact of tax measures from their other policies. It is important to consider all the Government’s policies, not just their taxation measures. The distributional analysis published at the Budget shows that the top 20% of households continue to make the greatest contribution towards reducing the deficit, both as a percentage of their income and in cash terms. We believe that producing a further report to supplement that would be unnecessary and a waste of money.
We have debated the wider point of the cost of living in two debates this afternoon, although admittedly this second debate has been short. As I made clear, the Government recognise the considerable pressures, consequent on rising commodity, food and fuel prices, that our constituents have felt strongly in recent years. The Government have taken difficult decisions to try to reduce the deficit, and undeniably that has had an impact on people, but we ought to be straight with the British public: whoever is in government will have to take measures to reduce the deficit. Anyone in a position of responsibility has to recognise that we cannot continue borrowing 11% or 12% of our economy. [Hon. Members: “But you are!”] While in office, we have reduced the deficit by a third.
Having listened to Opposition speeches this afternoon, I do not for one moment doubt their sincerity, but there has been the temptation to ignore the fact that there is a very large deficit that has to be dealt with by raising
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taxes, cutting spending or a combination of the two, and to pretend otherwise is to not be straight with the British public. Some of this afternoon’s speeches have given every indication that Labour is content with being a repository for people’s anger. To use even stronger language, Labour often gives every indication of being simple fellow-travellers in sympathy, but not leaders. That is Labour’s approach.
Sheila Gilmore: Would the Minister not rather be understanding of people’s very real anger than just ignore it? [Interruption.]
Mr Gauke: As the Financial Secretary to the Treasury points out, people should be angry about the state of the public finances left to us by the Labour party. I described Labour as the “repository for people’s anger” and as a “simply fellow-traveller in sympathy”, not leaders, because those were the words of the last successful leader of the Labour party, Tony Blair. I am afraid that Labour is too often in its comfort zone. We know that there are pressures on living standards, but ignoring the deficit is no way to deal with them. The Government are prepared to take those difficult decisions, while Labour is failing to address them.
Cathy Jamieson: I am disappointed to hear the Minister resort once again to the same tired old mantra.
We have listened this afternoon to some passionate speeches from Opposition Members talking about the very real experiences of their constituents, and it is disappointing that once again the Government choose not to recognise them. They do not seem to recognise their responsibility for the deficit and debt now—for the fact that they have to borrow more, for the lack of growth, for the fact that people are not getting back into work in the way we would want and for the problems with living standards.
Sadly, we saw some crocodile tears from the Minister, who on the one hand wants to say, “Yes, we understand the impact on people”, but on the other is not prepared to do anything about it. Opposition Members are rightly angry on behalf of their constituents. They are angry about the bedroom tax and about the fact that the Government have chosen today not to do something on VAT that would have made a difference to people in our communities who will also be angry that the Government will not even accept a mild-mannered request, as I described it earlier, for a report on the impact of the Government’s policies on basic rate taxpayers. For that reason, I intend to press the amendment to a vote.
Question put, That the amendment be made.
The Committee divided:
Ayes 192, Noes 248.
Division No. 217]
[
3.59 pm
AYES
Abrahams, Debbie
Ali, Rushanara
Allen, Mr Graham
Ashworth, Jonathan
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Bayley, Hugh
Benton, Mr Joe
Berger, Luciana
Betts, Mr Clive
Blackman-Woods, Roberta
Blears, rh Hazel
Blenkinsop, Tom
Blunkett, rh Mr David
Bradshaw, rh Mr Ben
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Byrne, rh Mr Liam
Campbell, Mr Alan
Caton, Martin
Champion, Sarah
Clark, Katy
Clarke, rh Mr Tom
Coaker, Vernon
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Creasy, Stella
Cryer, John
Cunningham, Alex
Cunningham, Mr Jim
Dakin, Nic
David, Wayne
Davidson, Mr Ian
De Piero, Gloria
Denham, rh Mr John
Dobbin, Jim
Dobson, rh Frank
Docherty, Thomas
Donohoe, Mr Brian H.
Doran, Mr Frank
Doughty, Stephen
Dowd, Jim
Doyle, Gemma
Dugher, Michael
Eagle, Ms Angela
Edwards, Jonathan
Efford, Clive
Engel, Natascha
Esterson, Bill
Field, rh Mr Frank
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Gapes, Mike
Gardiner, Barry
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Godsiff, Mr Roger
Goggins, rh Paul
Goodman, Helen
Green, Kate
Griffith, Nia
Gwynne, Andrew
Hamilton, Mr David
Hamilton, Fabian
Hanson, rh Mr David
Harman, rh Ms Harriet
Harris, Mr Tom
Hendrick, Mark
Hillier, Meg
Hilling, Julie
Hodge, rh Margaret
Hodgson, Mrs Sharon
Hoey, Kate
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Irranca-Davies, Huw
Jackson, Glenda
Jamieson, Cathy
Jarvis, Dan
Johnson, rh Alan
Johnson, Diana
Jones, Graham
Jones, Helen
Jones, Mr Kevan
Jowell, rh Dame Tessa
Kaufman, rh Sir Gerald
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lewis, Mr Ivan
Llwyd, rh Mr Elfyn
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
MacNeil, Mr Angus Brendan
Mactaggart, Fiona
Mahmood, Shabana
Malhotra, Seema
Mann, John
Marsden, Mr Gordon
McCann, Mr Michael
McCarthy, Kerry
McClymont, Gregg
McDonald, Andy
McDonnell, John
McFadden, rh Mr Pat
McGovern, Alison
McGovern, Jim
McGuire, rh Mrs Anne
McKechin, Ann
McKenzie, Mr Iain
McKinnell, Catherine
Meacher, rh Mr Michael
Mearns, Ian
Mitchell, Austin
Morden, Jessica
Morrice, Graeme
(Livingston)
Morris, Grahame M.
(Easington)
Munn, Meg
Murphy, rh Paul
Murray, Ian
Nandy, Lisa
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Osborne, Sandra
Owen, Albert
Paisley, Ian
Pearce, Teresa
Perkins, Toby
Pound, Stephen
Powell, Lucy
Qureshi, Yasmin
Raynsford, rh Mr Nick
Reed, Mr Jamie
Reed, Mr Steve
Reynolds, Emma
Riordan, Mrs Linda
Robertson, Angus
Robertson, John
Rotheram, Steve
Roy, Mr Frank
Ruddock, rh Dame Joan
Sawford, Andy
Seabeck, Alison
Sharma, Mr Virendra
Sheridan, Jim
Shuker, Gavin
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, Angela
Smith, Nick
Smith, Owen
Spellar, rh Mr John
Stuart, Ms Gisela
Sutcliffe, Mr Gerry
Tami, Mark
Thomas, Mr Gareth
Thornberry, Emily
Timms, rh Stephen
Trickett, Jon
Twigg, Derek
Umunna, Mr Chuka
Vaz, Valerie
Watson, Mr Tom
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Williams, Hywel
Williamson, Chris
Wilson, Phil
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:
Heidi Alexander
and
Susan Elan Jones
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Steve
Baldry, Sir Tony
Baldwin, Harriett
Barclay, Stephen
Barker, rh Gregory
Baron, Mr John
Barwell, Gavin
Beith, rh Sir Alan
Bellingham, Mr Henry
Beresford, Sir Paul
Berry, Jake
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Bone, Mr Peter
Bradley, Karen
Brady, Mr Graham
Brake, rh Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Steve
Brokenshire, James
Bruce, Fiona
Bruce, rh Sir Malcolm
Buckland, Mr Robert
Burns, Conor
Burns, rh Mr Simon
Burrowes, Mr David
Burstow, rh Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cairns, Alun
Campbell, rh Sir Menzies
Carmichael, rh Mr Alistair
Carmichael, Neil
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clark, rh Greg
Coffey, Dr Thérèse
Collins, Damian
Cox, Mr Geoffrey
Crouch, Tracey
Davies, Glyn
de Bois, Nick
Djanogly, Mr Jonathan
Doyle-Price, Jackie
Duddridge, James
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evennett, Mr David
Fabricant, Michael
Featherstone, Lynne
Field, Mark
Fox, rh Dr Liam
Francois, rh Mr Mark
Freer, Mike
Fuller, Richard
Garnier, Sir Edward
Garnier, Mark
Gauke, Mr David
Gibb, Mr Nick
Gillan, rh Mrs Cheryl
Glen, John
Goodwill, Mr Robert
Gove, rh Michael
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Green, rh Damian
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Halfon, Robert
Hancock, Matthew
Hands, Greg
Harrington, Richard
Harris, Rebecca
Haselhurst, rh Sir Alan
Heald, Oliver
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Howarth, Sir Gerald
Howell, John
Hughes, rh Simon
Huppert, Dr Julian
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, Sajid
Jenkin, Mr Bernard
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lancaster, Mark
Lansley, rh Mr Andrew
Latham, Pauline
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Leech, Mr John
Leigh, Mr Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Lilley, rh Mr Peter
Lloyd, Stephen
Lord, Jonathan
Loughton, Tim
Lumley, Karen
Main, Mrs Anne
Maude, rh Mr Francis
Maynard, Paul
McIntosh, Miss Anne
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, rh Maria
Mills, Nigel
Milton, Anne
Mordaunt, Penny
Morris, Anne Marie
Mosley, Stephen
Mowat, David
Mulholland, Greg
Newton, Sarah
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
Ollerenshaw, Eric
Ottaway, Richard
Paice, rh Sir James
Parish, Neil
Patel, Priti
Paterson, rh Mr Owen
Pawsey, Mark
Penning, Mike
Penrose, John
Percy, Andrew
Perry, Claire
Phillips, Stephen
Pincher, Christopher
Prisk, Mr Mark
Pritchard, Mark
Pugh, John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reevell, Simon
Reid, Mr Alan
Robertson, rh Hugh
Robertson, Mr Laurence
Rogerson, Dan
Rosindell, Andrew
Rudd, Amber
Ruffley, Mr David
Russell, Sir Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Sharma, Alok
Simpson, Mr Keith
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Smith, Sir Robert
Soames, rh Nicholas
Soubry, Anna
Spencer, Mr Mark
Stanley, rh Sir John
Stephenson, Andrew
Stewart, Bob
Stewart, Iain
Streeter, Mr Gary
Stride, Mel
Stunell, rh Andrew
Sturdy, Julian
Swayne, rh Mr Desmond
Swinson, Jo
Syms, Mr Robert
Teather, Sarah
Thornton, Mike
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Uppal, Paul
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Watkinson, Dame Angela
Weatherley, Mike
Webb, Steve
Wharton, James
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Wiggin, Bill
Willetts, rh Mr David
Williams, Mr Mark
Williams, Roger
Williams, Stephen
Williamson, Gavin
Wilson, Mr Rob
Wollaston, Dr Sarah
Wright, Simon
Yeo, Mr Tim
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Nicky Morgan
and
Mark Hunter
Question accordingly negatived.
18 Apr 2013 : Column 576
18 Apr 2013 : Column 577
18 Apr 2013 : Column 578
18 Apr 2013 : Column 579
4.10 pm
More than four and a half hours having elapsed since the commencement of proceedings, the proceedings were interrupted (Programme Order, 15 April).
The Chair put forthwith the Question necessary for the disposal of business at that time (Standing Order No. 83D).
Clause 3 ordered to stand part of the Bill.
Long haul rates of duty (Scotland)
‘After section 30A of the Finance act 1994 there shall be inserted—
“30B Scotland long haul rates of duty
(1) This section applies to the carriage of a chargeable passenger if—
(a) the carriage begins on or after the relevant day,
(b) the only flight, or the first flight, of the passenger’s journey begins at an airport or aerodrome in Scotland,
(c) the passenger’s journey does not end at an airport or aerodrome in the United Kingdom or a territory specified in Part 1 of Schedule 5A, and
(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at an airport or aerodrome in the United Kingdom or a territory specified in Part 1 of Schedule 5a.
(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.
(3) If the passenger’s journey ends at an airport or aerodrome in a territory specified in Part 2 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph, and
(b) in any other case the rate if the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.
(4) If the passenger’s journey ends at an airport or aerodrome in a territory specified in Part 3 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.
(5) If the passenger’s journey ends at any other airport or aerodrome—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the Scottish Parliament for the purposes of this paragraph.
(6) The rate of £0 may be set for the purposes of any paragraph.
(7) The same rate may be set for the purposes of two or more paragraphs.
18 Apr 2013 : Column 580
(8) Any rate set must not exceed the rate which would apply if this section were not in force.
(9) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.
(10) “The relevant day” means the day appointed as such by an order.
(11) Section 42(4) and (5) does not apply to any order under subsection (10).
(12) An Act of the Scottish Parliament means an Act passed under section 28 of the Scotland Act 1998.”.’.—(Mr MacNeil.)
Brought up, and read the First time.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): I beg to move, That the clause be read a Second time.
The Temporary Chairman (Sir Roger Gale): With this it will be convenient to discuss the following:
New clause 4—Air passenger duty: Wales
‘Schedule (Air Passenger Duty: Wales) has effect’.
New schedule 1—‘Air Passenger Duty: Wales
‘Air Passenger Duty: Wales
Part 1
Rates of Duty from 1 April 2013
1 Section 30 of FA 1994 (air passenger duty: rates of duty) is amended as follows.
“(4DA) Subsection (4DA) applies if—
(a) the passenger’s journey is a relevant Wales journey, and
(b) apart from subsection (4C), subsection (2) would not apply to the journey.
(4DB) The applicable rate in subsection (2) applies to the journey instead of the applicable rate in subsection (3), (4) or (4A) (as the case may be).
(4DC) A passenger’s journey is a “relevant Wales journey”—
(a) in the case of a journey which has only one flight, if the flight begins in Wales, and
(b) in any other case, if the first flight of the journey—
(ii) is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.”
The amendments made by this Part of this Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2013.
Part 2
Devolution of Wales Long Haul Rates of Duty
2 Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.
3 (1) Section 30 (rates of duty) is amended as follows.
(2) After subsection (1) insert—
“(1B) Subsection (1) does not apply to the carriage of a chargeable passenger to which section 30B below (Wales long haul rates of duty) applies.”
(3) Omit subsections (4DA) to (4DC) (as inserted by paragraph 1 above).
(4) The amendments made by this paragraph have effect in relation to the carriage of passengers beginning on or after the relevant day as defined in section 30B of FA 1994 (as inserted by paragraph 4 below).
18 Apr 2013 : Column 581
4 After section 30A insert—30B Wales long haul rates of duty
“(1) This section applies to the carriage of a chargeable passenger if—
(a) the carriage begins on or after the relevant day,
(b) the only flight, or the first flight, of the passenger’s journey begins at a place in Wales,
(c) the passenger’s journey does not end at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A, and
(d) if the passenger’s journey has more than one flight, the first flight is not followed by a connected flight beginning at a place in the United Kingdom or a territory specified in Part 1 of Schedule 5A.
(2) Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows.
(3) If the passenger’s journey ends at a place in a territory specified in Part 2 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(4) If the passenger’s journey ends at a place in a territory specified in Part 3 of Schedule 5A—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales with the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(5) If the passenger’s journey ends at any other place—
(a) if the passenger’s agreement for carriage provides for standard class travel in relation to every flight on the passenger’s journey, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph, and
(b) in any other case, the rate is the rate set by an Act of the National Assembly for Wales for the purposes of this paragraph.
(6) The rate of £0 may be set for the purposes of any paragraph.
(7) The same rate may be set for the purposes of two or more paragraphs.
(8) Subsections (5) to (7) and (10) to (12) of section 30 apply for the purposes of this section as they apply for the purposes of that section.
(9) “The relevant day” means the day appointed as such by an order.
(10) Section 42(4) and (5) does not apply to an order under subsection (9).
(11) A Bill containing provision authorised by this section may not be passed by the National Wales Assembly except in pursuance of a recommendation which—
(a) is made by the Minister of Finance, and
(b) is signified to the Assembly by the Minister or on the Minister’s behalf.
(12) “Passed”, in relation to a Bill, means passed at the final stage (at which the Bill can be passed or rejected but not amended).
(13) Duty paid to the Commissioners in respect of the carriage of chargeable passengers to which this section applies must be paid by the Commissioners into the Consolidated Fund of Wales.”
18 Apr 2013 : Column 582
5 (1) Section 33 (registration of aircraft operators) is amended as follows.
(2) After subsection (2A) insert—
“(2B) If the Commissioners decide to keep a register under section 33B below, an operator of a chargeable aircraft does not become liable to be registered under this section just because the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.”
(3) In subsection (3)(b) after “applies” insert “or, if the Commissioners have decided to keep a register under section 33B below, that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers apart from the carriage of chargeable passengers to which section 30B above applies.
(4) In subsection (7) after “section 33A” insert “or section 33B below.
6 After section 33A insert—
33B (1) The Commissioners may under this section keep a register of aircraft operators.
(2) If the Commissioners decide to keep a register under this section, the operator of a chargeable aircraft becomes liable to be registered under this section if the aircraft is used for the carriage of chargeable passengers to which section 30B above applies.
(3) A person who has become liable to be registered under this section ceases to be so liable if the Commissioners are satisfied at any time—
(a) the he no longer operates any chargeable aircraft, or
(b) that no chargeable aircraft which he operates will be used for the carriage of chargeable passengers to which section 30B above applies.
(4) A person who is not registered under this section and has not given notice under this subsection shall, if he becomes liable to be registered under this section at any time, give written notice of that fact to the Commissioners not later than the end of the prescribed period beginning with that time.
(5) Notice under subsection (4) above shall be in such form, be given in such manner and contain such information as the Commissioners may direct.”
7 In section 34 (fiscal representatives) in subsection (5)—
(a) in paragraph (a) after “33A” insert “or 33B”.
8 After section 41B insert—
41C (1) An officer of Revenue and Customs may disclose to the Secretary of State, the Treasury or the Department of Finance in Wales any information for purposes connected with the setting of rates of duty under section 30B above, including (in particular) to enable the setting of rates under that section to be taken into account (payments by Secretary of State into Consolidated Fund of Wales).
(2) Information disclosed under subsection (1) above may not be further disclosed without the consent of the Commissioners (which may be general or specific).
(3) In section 19 of the Commissioners for Revenue and Customs Act 2005 (wrongful disclosure) references to section 18(1) of that Act are to be read as including a reference to subsection (2) above.”
9 In section 44 of CRCA 2005 (payment into Consolidated Fund) after subsection (2)(cb) insert—(cc) sums required by section 30A(15) of the Finance Act 1994 (air passenger duty: Wales long haul rates of duty) to be paid into the Consolidated Fund of Wales,”.10 In column 2 of the Table in paragraph 1 of Schedule 41 to FA 2008 (penalties for failure to notify), in the entry relating to air passenger duty, after “33A(4) “insert “or 33B(4)”.11 The amendments made by this Part of the Schedule have effect in relation to the carriage of passengers beginning on or after 1 April 2013.12 The rate of duty in force under this Schedule shall not be greater than the rate which would be in force if the Schedule had not been enacted.’.
18 Apr 2013 : Column 583
Mr MacNeil: I shall speak to new clause 3 and against clause 183 stand part.
Air passenger duty is fast becoming one of the most damaging interventions by the Westminster Government in the Scottish economy, which over the past 30 years has provided more tax per person per year than across the United Kingdom as a whole. The chairman of VisitScotland, Mike Cantlay, says he is “extremely fearful” of the long-term impact of air passenger duty levies on the long-haul market to Scotland, which have left the country at a competitive disadvantage compared with countries such as Ireland. He added:
“To say to a potential visitor to Scotland from Australia, for example, that before you even book you will be paying hundreds of pounds extra for the sake of coming here, because the UK has a deficit to fund, is not an easy sell. It is lunacy for our industry.”
Mr Brian H. Donohoe (Central Ayrshire) (Lab): How many journeys would be affected by the new clause?
Mr MacNeil: I am sure that the hon. Gentleman knows the answer to that question better than I do. It will affect thousands, if not hundreds of thousands, of journeys. It is estimated that the present arrangements have cost Scotland about 2.1 million visitors since the introduction of air passenger duty a few years ago, and the effect of that on the Scottish economy is mammoth.
Mr Donohoe: May I draw the hon. Gentleman’s attention to the wording of new clause 3? Does it not in fact cover only long-haul flights? It does not cover connecting flights through Heathrow or any other airports. How many actual journeys will it therefore cover? I understand that there are only two such long-haul journeys per week to Northern Ireland, for example.
Mr MacNeil: The hon. Gentleman will understand that this covers all aspects of journeys feeding into Scotland, and he will know full well that air passenger duty is adversely affecting the Scottish economy. Does he take a contrary view?
Mr Donohoe: As the chairman of the all-party parliamentary aviation group, may I remind the hon. Gentleman that we have reported on this matter? The duty has a great effect on everyone in the United Kingdom, not just those in Scotland.
Mr MacNeil: I do not dispute that it has a great effect on everyone in the United Kingdom, but Scotland is currently in the United Kingdom and it therefore affects Scotland. I look forward to hearing the hon. Gentleman’s speech. I am sure that the points he raises will be very welcome.
Pete Wishart (Perth and North Perthshire) (SNP): My hon. Friend referred to numbers, and I am sure that he, like me, will have noted that the hon. Member for Central Ayrshire (Mr Donohoe) is the only Scottish Labour Member who has bothered to turn up for this debate, such is their concern about the issue we are addressing.
18 Apr 2013 : Column 584
4.15 pm
Mr MacNeil: My hon. Friend is right—[Interruption.] Yes, there is, of course, a Scottish Labour Member on the Front Bench, but the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) is present because of duty, rather than will, which is why the hon. Member for Central Ayrshire is here.
Mr Alan Reid (Argyll and Bute) (LD) rose—
Mr MacNeil: If the hon. Gentleman will be patient, I will make some progress before giving way to him.
Mr MacNeil: I am sure the hon. Gentleman will be patient. He is usually a patient man, and I am sure he can display some patience now.
The chief executive of the UK Airport Operators Association, Darren Caplan, recently said:
“Our eye-wateringly high levels of APD already mean we pay the highest passenger tax on flying in the world—and this is not disputed by anyone in Government.”
The truth is that APD rates are having a devastating effect on the UK, and especially on Scotland. Let me pass on the views of some key people in Scotland. Jim O’Sullivan, managing director of Edinburgh airport, said on the BBC news on 6 December 2011:
“APD is already costing Scotland passengers and having an impact on tourism revenues. We know from discussions with our airline partners that it is a major factor in their decision to connect further routes to Scotland. We would urge the Westminster Government to see Scotland as it does Northern Ireland and understand the need to both reduce and devolve this unfair and damaging tax.”
Amanda McMillan, managing director of Glasgow airport, said:
“On the question of devolution of APD, Glasgow Airport has always been supportive of this proposal given the Scottish Government’s more progressive approach to aviation and its greater appreciation of the role the industry plays in supporting the growth of the Scottish economy.”
Scottish Government Transport Minister, Keith Brown, said:
“We need to be able to deal with the competitive and connectivity disadvantages that Scotland faces and if APD were devolved now we could provide the means to incentivise airlines to provide new direct international connections to Scotland, benefiting our aviation industry and our passengers and supporting the growth of the Scottish economy. The UK Government needs to listen to the many voices in Scotland who clearly want to see full devolution of the policy on APD.”
Phil Wilson (Sedgefield) (Lab): Is it not true that APD was devolved to Northern Ireland because of the flights that would have left Belfast airport and gone instead to Dublin? The specific APD problem for Northern Ireland is that there is an international border between Northern Ireland and Eire.
Mr MacNeil: The hon. Gentleman is making my case. Airports are joined by air, not by land or sea. I am sure Prestwick is about as far from Belfast airport as Dublin and Shannon are, so if this is good enough for Belfast and Northern Ireland, it is good enough for Scottish airports.
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Mr Reid: The hon. Gentleman forgets one point: Northern Ireland is attached by land to the Irish Republic and Scotland is attached by land to England but is not attached by land to Ireland. The difference here is that people were driving from Belfast to Dublin to catch connecting flights, whereas, obviously, people cannot drive from Glasgow to Dublin to catch connecting flights.
Mr MacNeil: That is a very strange argument for a Member who, like me, represents islands. It also could be argued that a passenger travelling from Stranraer would have a far shorter journey to Northern Ireland than a person travelling overland from Cork to Northern Ireland. The hon. Gentleman may not be aware that aircraft travel through the air, not overland or across the sea.
Mr Reid: On the question of islands, the hon. Gentleman knows the following information as well as I do, but it is important that the Committee be given it: flights from the islands in our constituencies are exempt from APD.
Mr MacNeil: The hon. Gentleman is right about that to an extent. For some flights, however, APD is paid on one of the legs going into the islands, so he is not entirely correct, and the flights that are exempt are those capable of carrying under 20 passengers with a take-off load of less than 10 tonnes. He should know the details of what he is talking about.
May I ask the UK Government a simple question? Why are they not devolving APD to Scotland? Is it because the UK Government do not want to see Scotland doing better? Is it because the UK Government care only about collecting revenues from Scotland? Or is it that they think that once one tax goes, all taxes will go—and that the often peddled myth that Scotland receives extra money from the indebted UK will be seen for the lie it is? Is there a fear of APD today, oil revenue tomorrow, so the mantra is that it is better to keep taxes together at Westminster?
The Government refuse to listen to sensible voices in Scotland. Robert Kerr, the chairman of French Duncan and the Scottish accountant of the year, said:
“More helpful would be a reduction in the rate of air passenger duty (instead, the Chancellor announced in his Budget that it would increase at the highest level of inflation for two years)”.
“Scotland is preparing to welcome the world in 2014, when it hosts the second Year of Homecoming, the Commonwealth Games and the Ryder Cup. If we are to maximise the economic opportunities such events present, then we need more help from our governments rather than hindrance.”
I would add that when the referendum is won, Scotland will be in the world’s focus and many more people will want to travel to it. We do not want them to be penalised by the outgoing UK Government in Scotland.
APD should clearly be devolved. The UK Government have had enough time to think about the matter. Even the Calman commission, which was set up by the Tory-Labour tag team and their Liberal friends, recommended the devolution of APD. The UK Government’s response was to refuse to devolve it on the grounds that they were exploring whether to replace it with a per-plane tax. That decision has been made and the per-plane tax has been rejected, so what is the excuse now? I say that looking
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at the hon. Member for Argyll and Bute (Mr Reid). We look forward—if that is the right expression—to hearing the latest excuse from the Government.
Pete Wishart: My hon. Friend is correct that the Calman commission recommended the devolution of APD, but so does the jam-tomorrow Labour commission. At its conference in Inverness this weekend, Scottish Labour will be discussing the devolution of APD. I would be interested to hear whether the two Scottish Labour Members present will boycott that conference.
Mr MacNeil: I am sure that the hon. Member for Central Ayrshire will be on his feet presently to confirm his attendance in Inverness.
Mr Donohoe: That has nothing to do with this debate. The hon. Gentleman should know that his proposal, which is what we are discussing, does not constitute the devolution of APD. What he is talking about is the equivalent of what happens in Northern Ireland, which affects one flight a day. What I and the all-party aviation group are suggesting is that APD be taken away completely. If he proposed that, I would support him. Is the SNP likely to consider that?
Mr MacNeil: I am sure that the hon. Gentleman has investigated the level of APD on flights from London airports to Inverness. Doubtless, he will be flying to the happy band that is the Labour conference this weekend. [Interruption.] As my hon. Friend the Member for Perth and North Perthshire (Pete Wishart) says, he will no doubt do so with enthusiasm.
Not only does APD receive a lot of criticism in Scotland and the UK; it has attracted international derision. Two days ago, at a conference in Trinidad and Tobago, it was not only criticised by Caribbean countries as discriminating against the region, but was described as
“a clear market distortion and barrier”
to tourism worldwide by a senior UN tourism official, Carlos Vogeler, the UN World Tourism Organisation’s regional director for the Americas. He added that APD
“can actually produce a net damage to the economy, particularly in those destinations which are so dependent on air travel, such as the Caribbean”.
Surely, on a social union basis, we should treat other Commonwealth countries, such as the beautiful Bahamas, on a fairer basis. At £332 for a family of four flying economy, its air tax is higher than the £268 in tax when flying to Hawaii.
I will give four reasons why APD should be devolved to Scotland. First, APD is making Scottish airports uncompetitive in their efforts to attract new direct international routes. It is needlessly restricting Scotland’s ability to realise the economic and business benefits that direct air connections bring.
Secondly, APD is designed for the circumstances in the south-east of England, not the rest of the UK. It is, at best, a demand-management tool for Heathrow—a stretched airport that will have no further runways until one is built in a panic in a few years’ time, as Ryanair’s Michael O’Leary predicts. Heathrow needs demand to be limited because it is at capacity and the Chancellor therefore has a coincidental fiscal cash cow. Scottish airports have the capacity for growth and this tax
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blocks it. Independent control over APD through devolved powers would give Scotland the ability to meet its own needs rather than Heathrow’s. My view of demand management is supported by the chief executive of the Scottish Chambers of Commerce, Liz Cameron, who said:
“Current rates of APD seem more suited to controlling capacity constraints at Heathrow than they do with the needs of regional airports, and devolution of this tax would afford the Scottish Government the opportunity to create an air transport package for Scotland designed to improve our direct international connectivity.”
Thirdly, a Scottish aviation tax regime would incentivise the introduction of new direct international services, which is important for business connectivity and in-bound tourism. We could do that by reducing the rate of duty, or indeed exempting it, in the early years of a new service—the most challenging financial period—until a route is established.
Fourthly, the Treasury said that it is devolving “aspects” of APD in Northern Ireland, making great play of the “unique” commercial challenges it faces—that was perhaps mentioned earlier by the hon. Member for Argyll and Bute. Scotland’s aviation sector also has specific and long-running competitive disadvantages that need to be addressed, and only the devolution of APD will do that. It is unacceptable that the UK Government are still not prepared to commit to the devolution of APD to Scotland, and I warn that such intransigence angers people at first, but when they calm and look rationally at the situation, they see the need for independence, which will be voted for a year next autumn.
According to a report published in October 2012 by York Aviation,