Liam Byrne
MP for Birmingham Hodge Hill and Solihull North · Labour · United Kingdom
“The loss of 4,000 jobs at Jaguar Land Rover is a body blow for workers, families and communities across the west midlands, so I commend Richard Parker, the Mayor of the West Midlands, for moving quickly on Monday to put £500,000 on the table to help ensure that everybody gets back to work.”
“I wholeheartedly welcome this well-rounded statement from the Foreign Secretary, and put on record my thanks to the new Prime Minister for the hard yards that I know he has put in over recent days and weeks.”
“I am grateful to my hon. Friend for giving way, and I offer my warmest congratulations to her on her appointment to the role; she will be a brilliant Minister.”
“Let me start with a word of thanks to my hon. Friend the Member for Chester North and Neston (Samantha Dixon), who is not in her place, who said quite rightly that an awful lot has changed since the Bill was first introduced to this House. Indeed, a lot has been revealed over the course of the summer.”
“The effect of new clause 34 would be to ban off-ramping, ban new forms of digital currency transactions and ban memecoins, which are exactly the kind of measures that Ministers now need to bring forward. If we want to take the crypto system out of political finance, this is what we need to do.”
“No doubt we will learn that Mr Cottrell was in fact on the electoral register when that money was passed. No doubt we will discover that his mother, Fiona Cottrell, declared and did not disguise the fact that the money had ultimately come from her son.”
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“Before the hon. Gentleman leaves the subject of VAT, can he clear up one problem that I came across in the Red Book? The scorecard for the Budget says that about £8 billion will be raised in taxes by 2014-15, yet the Office for Budget Responsibility forecast in the back of the Red Book says that only £3 billion in tax will actually come through the door. Why is there a £5 billion difference?”
“The matter can be cleared up very quickly. The scorecard on page 40, with which the hon. Gentleman will be enormously familiar, states that the “total tax policy decisions” will result in £8.230 billion being received in 2014-15, whereas table C12 on page 101, which shows the OBR forecast, says that only £3.1 billion in receipts will actually come in. Why is there a difference between what is on the scorecard, which is a little more than £8 billion, and what is in the OBR forecast for the money that will actually be raised, which is £3 billion?”
“Is not the answer very straightforward? Is not the answer that the Budget depresses growth so much that tax receipts will actually be down, so even though the scorecard sets out a series of measures that should, in theory, raise the amount that it sets out, the OBR, understandably, knowing that growth is depressed, has set out that far less money will actually come through?”
“I rise with the ambition of being helpful to the Minister as he will not want knowingly or unknowingly to mislead the House. He will know that the OBR forecast on page 101 is a forecast of what tax receipts will come in on the basis of the Budget set out in the Red Book. These things are entirely consistent with each other and the forecast has nothing to do with previous Budgets or previous OBR estimates. Will he confirm that for the House?”
“Not since 1945 has the world been hit by a recession on the scale of that which hit our shores in 2008. The global economy shrank by some 1% for the first time since the war, G7 economies shrank by some 3% and world trade fell by some 12%. What started as a collapse in confidence on Wall street rapidly infected the world’s financial system and triggered a disastrous domino-like collapse in confidence among markets throughout the world. No country, not least one of the world’s great trading nations, could be isolated from its effect, and we were not.”
“I am very grateful for the opportunity to say a few things in conclusion to our debate about the panic Budget that has been sped through this place. To all those who have observed these debates about the Budget and the Finance Bill, it is now clear that the Budget is born not of economic necessity, but of political anxiety—anxiety that, if Liberal Democrat Members are allowed to see any more evidence of the damage that the Budget is doing to confidence and growth, they will remember where they buried their Keynesian tradition, disinter it and refuse the Chancellor their support. The great question that this Budget and Finance Bill should have answered is how do we lock in the recovery that Labour left? Winning that recovery dominated our final two years of office.”
“Here in London, countries from throughout the world agreed a plan, including a £1.1 trillion support package, that helped to ensure the revision of global growth from 1.9% last year up to 3.5% this year. We are very proud to be the party that stopped the British banking system collapsing in the face of its exposure to melting international credit systems, and we are very proud to be the party that put in place here at home the most comprehensive recovery plan to protect people’s jobs from the axe, homes from repossession and employers from liquidation.”
“The National Institute of Economic and Social Research has also already estimated that output in the second quarter of this year could hit 0.7%. If that comes to pass, it will be no mean achievement, especially when our neighbours tell us precisely how hard it is to sustain recovery. In the first quarter of this year, our last quarter in office, growth in this country reached 0.3%. In Germany, it was lower; in France, it was lower still; in the eurozone, it was lower; and Spain, Ireland and Greece are all forecast to see negative growth this year. Labour is proud to be the party of the recovery, and the question that the Bill should have answered is, how do we guarantee the recovery’s future? We are proud to have been the party that brought together a global response to the recession.”
“Precisely. The Minister could not understand that point from his own Budget, but I shall explain it in more depth in a moment. On Friday this week, we will be able to test the durability of the recovery that Labour delivered. Almost two years on from the oil price hitting $147 and the collapse of Lehman Brothers, the Office for National Statistics will publish growth figures for the second quarter of 2010, which I am sure all hon. Members await with some interest. But this much we already know. The ONS has told us that our economy has grown by 0.7% since its low point last year; that growth in the first quarter of 2010 was some £8 billion larger than it was in the final quarter of 2009; and that output is growing by about £88 million a day.”
“Perhaps the hon. Gentleman will intervene again and remind us what happened in Germany and Japan. Will he tell us a little more about what happened to unemployment in other major economic nations?”
“Let us come to that point directly. If we want to understand the difference between our parties, we need only compare the recession that we have been through in the past two years with the one presided over by the Conservative party. Unemployment in this recession is half what it was during the recession of the 1990s. Furthermore, repossessions are 40% lower and company insolvencies are running at about a third of the rate reached in the 1990s recession. We Labour Members believe that it is right to act to protect people’s jobs and homes and the firms that they work in.”
“It would be churlish of the hon. Gentleman not to acknowledge the role that the Labour Government played in bringing the G20 to London and agreeing a £1.1 trillion package of support, as well as the measures on international banking reform. All that ensured that whereas fairly low levels of growth in world trade and world economic improvement were projected last year, we are now looking at a significantly better picture. Surely he will acknowledge that.”
“I do not know what figures the hon. Gentleman is looking at, but in the March Budget the fiscal stimulus provided by automatic stabilisers was about 4.4% of GDP. The idea that a fiscal stimulus was not sustained into 2010 is fantasy.”
“Thank you, Mr Deputy Speaker. I want to pursue the argument for a moment longer. The implication of the intervention by the hon. Member for Bromsgrove (Sajid Javid) is that somehow there was a cut-price way for us to have ensured the recovery, which is now under way in this country. Sometimes when I listen to Conservative Members, I cannot make out whether their preference is simply to have done nothing during the past two years or whether it is that we should have invented some kind of cut-price plan to kick-start the recovery. Sometimes I feel that there is an illusion on the Government Benches that we could have rummaged around in a Budget bargain basement and found a Ryanair, cut-price, no-frills plan that would have delivered the economic growth that this country is now experiencing.”
“Perhaps the hon. Lady could explain why the Conservatives supported our spending plans until 2008. As for public sector productivity, she will know as well as I do that if more medical staff are put on to nurse patients, one might get a higher survival rate and better care, but such outputs do not show up in the cold light of productivity statistics.”
“In life’s difficult moments, one is always open to advice, but the truth is that if we had followed the prescription of the Conservatives, we could have kissed goodbye to the recovery, not least because our banking system would have collapsed, the cash points would have stopped, the dole queues would have spiralled, repossessions would have spiked, and Britain’s small businesses would have been submerged beneath a wave of foreclosure, bankruptcy and liquidation.”
“I am grateful to the hon. Gentleman for raising the question of mandates. If one thing is clear in the debates that we have had in the months since the election, it is that there is absolutely no mandate for the VAT measure in the Finance Bill. I would be interested to hear how he is explaining that to his constituents. I do not believe—nor have I heard any explanation of this—that some kind of recovery plan on the cheap could have delivered the economic recovery that is now under way.”
“With such an unlikely scenario for growth in his pocket, one would have thought that the Chancellor might just hedge his bets a little and ensure that the private sector was creating jobs at some pace before bringing forward plans to sack up to 800,000 public servants. One might have thought that he would have some regard for cities such as my home town, Birmingham. It already has high unemployment, but if the Chancellor cuts 9% of the 156,000 public sector workers there, it will potentially rise by 14,000 people. That will not help the recovery in Birmingham; it will act as a drag anchor on recovery. That story can be told in towns and cities all over the country.”
“How can we guarantee the recovery’s certainty and begin to marshal investment into rebuilding an economy that is better balanced? Instead of providing any answers to those questions, the Budget and the Finance Bill will slow the recovery down and put more people on the dole. They offer a strategy for rebalancing the economy composed in equal measure of a wing and a prayer. Nothing better illustrates the gambling instincts of this Government than the fast cuts to public sector jobs and the depression of consumer demand through VAT. With the most breathtaking casualness, they are prepared to put our hardest-fought recovery at risk.”
“Not only did that policy work well, and not only was it morally right, but it was economically wise. Our policy has delivered unemployment that is 2% lower than either in America or across the European Union. In the Budget in 2009, we had to assume that unemployment would stick at about 2.44 million. A year later, in the 2010 Budget, that forecast had fallen by 700,000 people to 1.74 million. That meant that over the four years from 2010 to 2013, there would have been a fall of £14 billion in the unemployment benefit bill, as well as an incalculable saving in human misery. With that inherited recovery in place, the question that the House should ask in relation to the Finance Bill is what action should be taken to speed up the recovery.”
“Friend the shadow Chancellor told the House that the deficit this year was £13 billion better than expected for 2010-11; in June, the Office for Budget Responsibility said that it was £8 billion better even than that. Since February, £123 billion has been knocked off projections for national debt, and that is before we sell our shares in the banks. The Government’s budget was underspent last year to the tune of £5 billion according to Treasury figures that we saw a week or two ago, and interest rates were falling in the months before the election. When we examine the savings generated by falling unemployment, we can really see the wisdom of a strategy that hinges on growing our way out of recession. Our policy all along was to act to ensure that we kept unemployment down.”
“Over the 10 years before the crisis, UK borrowing averaged 1.4% of GDP compared with 1.9% for the rest of the OECD economies. As a result, even amid the current expense, our national debt will simply rise in line with every other major economy. We have learned something from the debates on the Finance Bill and the Budget about the disposition—the economic philosophy—not only of the Conservatives but of the Liberal Democrats. They may feel that the price of recovery was not a price worth paying, but they cannot ignore what economic statistics are now saying about how the recovery is improving the position of the public finances. In March, my right hon.”
“I seem to remember that the Government’s response to the banking system was opposed by the Conservatives when it came down to the substance of a vote. When legislation was brought before this House to accelerate the way in which the banks could be sorted out, the Conservatives voted against it. In the Budget and the Finance Bill, the Conservatives should have centred their rationale on how the recovery can be sustained. In the debates on those measures, I think we have established that there is a consensus that the deficit has to come down. The price of dodging an economic doomsday was not cheap, and the deficit was bound to rise. However, when the shocks hit back in 2008, we had the second lowest debt in the G7. Between 1997 and 2007, we cut public sector debt from 42.5% of gross domestic product to 36% of GDP.”
“Britain is now saving money that is not being spent either in the shops or on building new factories or production lines. The Budget has not restored confidence but is draining it fast.”
“My hon. Friend highlights the second risk that I wish to move on to. With risks so great, and talked about so freely and with such casualness, one would have thought that at the very least, the Finance Bill would contain one or two more measures to encourage the growth of domestic demand instead of measures to try to tax it back into recession. The truth is that the Bill attacks domestic demand with such viciousness that the country is now hoarding its silver at an almost unprecedented pace. Britain’s families and businesses now have so little confidence in the future of the economy that rather than make the odd investment here and there, they have tucked away something of the order of £130 billion in the bank as the household saving rate has escalated.”
“Of course I will give way to the hon. Lady. She has been chuntering away so assiduously from a sedentary position, and it will be nice to hear her from the Dispatch Box.”
“No. I am saying that the country’s investors now have so little confidence in the economic plan that they would rather save their money than dare to invest it in productive capacity and growth for the future. Let us look at some of the measures that show the decline in confidence. The Bank of England says that mortgage approvals fell in June; last month, the consumer confidence index fell for the first time in a long time; and yesterday, Rightmove told us that house prices have been cut for the first time this year. The Budget and the Bill are putting Britain’s recovery in the slow lane. The greatest irony of all is that we must all pay more as a consequence.”
“The Budget scorecard on page 40 of the Red Book says that by rights, the Chancellor’s decision ought to bring in an extra £8.2 billion in tax by 2014-15, but the OBR says that only £3.1 billion will actually come through the door, because growth will be depressed so much by the Budget. The Red Book goes on to say—on page 97, table C9—that something like £9 billion in extra taxes and spending cuts are necessary because of this go-slow Budget. In other words, the Government have almost halved the contribution of growth to closing the deficit. It is now quite clear to the House that although the Government may have lost their monetarists, they have certainly not lost their masochists.”
“That plan involved £57 billion-worth of discretionary action, which was set out in detail in chapter 6 of the March Budget—£19 billion in tax increases and £38 billion of spending cuts. However, £21 billion of the deficit was projected to be closed by the economy returning to growth, with higher tax receipts and lower benefit bills. The June Budget appears to hit growth so hard that £9 billion of extra tax is necessary to make good the effect of lower growth. That is the price of slowing the recovery. The Liberal Democrats are awfully pleased that they got an increase in income tax thresholds, and I congratulate them on securing that concession, but the truth is that they have been sold a pup. They could have had the increase in the threshold they originally wanted if we did not have to pay for the cost of lost growth.”
“The alternatives for reducing the deficit that we have rehearsed in the past couple of weeks bear a final word this afternoon. I want to return to the explanation of the difference between the scorecard projections for tax growth and what the OBR said would come through the door, which the Exchequer Secretary struggled with earlier. The point centres on how much growth will contribute to paying down the deficit over the next four years. The Labour Government’s deficit reduction plan projected that the deficit would be reduced by something of the order of £78 billion over the next four years, and the OBR inconveniently told the Chancellor that we were on course to deliver that.”
“The hon. Gentleman makes an extremely good point. The evidence on that is mixed. The CBI industrial production survey, which was published earlier this afternoon, shows that manufacturers reported that the second quarter of this year was good and that they have a degree of confidence in exports. However, the problem is that the OBR is projecting a £100 billion increase in exports over the next four or five years. That is the equivalent of our exports to America tripling, our exports to China going up by something like 20 times, and our exports to India going up by something like 40 times. That may well come to pass, but it is safe to say that very few people would bet on it. That is why the Opposition believe that the Government should do a little more to nurture both domestic business investment and domestic demand.”
“Gentleman will have to reconcile himself in the months to come to the impact of slower growth and the fact that we are now having to put taxes up—something that I always thought the Conservatives opposed—because demand has been depressed to such an extent.”
“I hope that at some point in his future illustrious career in this House the hon. Gentleman has the chance to put that argument to the chief economist of the Treasury, David Ramsden. The growth forecasts that were published in our Budget were set out by Treasury civil servants. Like me, the hon. Gentleman will have noticed that the rebound in growth that was projected by the then Chancellor—now the shadow Chancellor—was very much in line with the rebound in growth that we saw after recessions in the 1980s and 1990s, but it was supported by far stronger monetary policy action. We were comfortable with the growth forecasts that we presented. The hon.”
“That is why we will campaign up and down the country for a proper plan for growth and jobs, and for proper protection from this Budget for our pensioners. It is also why we will oppose this Bill in the Lobby tonight.”
“If I am not mistaken, the entire contribution of the big society bank that Labour created will be wiped out by the VAT increase— [ Interruption. ] I hear protests from the other side of the House. If they read the March Budget they will see clearly set out the measures to recycle dormant accounts into the social investment wholesale bank. The proposals appeared under that heading in many manifestos. What a cruel con trick to perform on some of Britain’s most deserving. Yesterday, the Prime Minister told us that he wanted to put some oomph into Britain’s communities. Many of us would agree that it was a phrase worthy of the Mayor of London. This Budget tells us that the only thing going into communities from this Government will be the boot.”
“The truth is that the Government were so embarrassed—perhaps some of their members were even slightly ashamed—that the Budget was so regressive that they only dared describe its effects flattered by Labour measures and three years before the full horrors take effect. We did not hear a word from the Government about the £8 billion hit that our country’s pensioners will take in new VAT bills. Nor were we told about the £70 million of extra, irrecoverable VAT that our charities will now pay. We gave both the Conservatives and the Liberal Democrats a chance to vote for an amendment to delay the VAT increase until a plan was in place to compensate pensioners and charities fully, and they voted against it. The public will draw only one conclusion—that this Government simply do not care.”
“The hon. Lady is right to underline the virtues of the OBR. I, too, welcome it, which is why it is so regrettable that it moved forward its press releases and gave the appearance of supporting the Prime Minister through what was a sticky Prime Minister’s questions. I look forward to the day when Members of Parliament have the right to appoint the leadership of the OBR, just as I look forward to the day that we have the right to appoint leaders of the Office of Tax Simplification, who—we learned this afternoon—appear to have been appointed on some kind of whim. My final point is the basic failure of fairness in the Bill.”
“I understand the debating technique that the hon. Gentleman is adopting—trying to set up a straw man in order to knock it down—but our deficit reduction plan contained £57 billion of decisions relating to fiscal consolidation alongside £22 billion of growth. Fiscal consolidation was not posed as an alternative to growth; actually the two things were seen very much as twins.”
“I am following the hon. Gentleman’s argument with great interest. He will have worked at the Bank of England for long enough to be able to read bond yields. Like me, he will have noticed that they were actually coming down from late 2008, down to a low point in February, not least because there was a flight to safety in the European bond markets. As people began to worry about what was going on in the eurozone, they chose to transfer to safer assets, including UK gilts. That was because there was credibility in what was the fastest and clearest deficit reduction plan of any country in the G7.”
“I am following the right hon. Gentleman’s argument with some care. He said that motorists get only a limited amount back from the taxes that they put in. Does he therefore support arguments in favour of the greater hypothecation of taxes such as the insurance premium tax, to help to resolve that problem?”
“Where there is certainty, the Government in their panic have decided to substitute mystery. So much for the simplification credentials. The effect of clause 4 on one level, as I have said, is reasonably straightforward. It raises the higher rate of insurance premium tax from 17.5% to 20%. That would appear to be a fairly automatic consequence of the decision to raise VAT to 20%. The higher rate of IPT was introduced in 1999 to prevent a problem called value shifting, whereby some retailers and other producers tried to lower prices of goods and bundle them with insurance policies, for which they redeemed some of the value. I was not sure whether that was some of the financial innovation that the hon. Member for Dundee East was beginning to welcome in his remarks. Perhaps he will say more about that a little later.”
“We were told with great fanfare a few weeks ago that the Government were introducing an emergency Budget. The Bill and the clause illustrate in our debate this afternoon that the only emergency was the need to get some pretty difficult changes on to the statute book by the summer, before Liberal Democrat members on the Treasury Bench got cold feet or had, dare I suggest, too many conversations with their constituents. So the result of that emergency—something that some would uncharitably call a panic—is a Finance Bill with measures such as clause 4 that so far are bereft of logical explanation. The strategy has also produced clause 5, which we shall debate later this afternoon, which withdraws tax legislation without putting anything back in its place.”
“It is an enormous pleasure to follow the hon. Members for Christchurch (Mr Chope) and for Dundee East (Stewart Hosie) and the right hon. Member for Wokingham (Mr Redwood). The strength of their contributions was in illustrating that the proposals in clause 4 raise a wide range of policy concerns and debates. Hitherto, the House has not had much explanation of the logic or rationale of all the changes set out in the clause. The arguments for some of the proposals are fairly easy to deduce, but the core of the clause is the increase in the standard rate of insurance premium tax, which has not been explained. The lack of explanation underlines the fact that the Bill is somewhat piecemeal. It is fragmented. It is not a whole Bill; it is not even a half Bill; it is a bit of a Bill.”
“That commitment was given to the House on Tuesday night, and we will all watch the Government’s adherence to it with a great deal of attention over the next few years. That decision to keep in place a series of zero ratings and exemptions just adds to the mystery of why this standard rate has been singled out for such an enormous rise.”
“The hon. Gentleman raises an important question. The answer is that I do not know. It is a mystery. The Budget scorecard has a certain number, but of course it has bundled together the revenue that is to be raised from the increase in the higher rate and the increase in the standard rate. I hope that the Minister will be able to enlighten us. It is possible to deduce why the higher rate has gone up, but it is curious that the Government have chosen to increase the standard rate. We have to assess that decision alongside the decision to preserve exemptions and zero-rating from VAT on a range of goods and services. We were told on Tuesday night by the Economic Secretary that the existing zero ratings and exemptions would be kept in place for the course of this Parliament.”
“My hon. Friend raises an extremely significant point. I am sorry that his amendment was not selected. The insurance industry will almost certainly pass on the increased taxes directly to consumers. That has been the history of increases in this kind of tax. So there is a strong case for advertising the increase more widely. I am sure that all of us as politicians will do our level best to make the news known in our constituencies.”
“It is important that we have some assurances this afternoon that there will be no further rises in IPT in this Parliament. Subject to satisfactory assurances and explanations of the points I have raised, I would see no need to put the amendment to a vote. I very much look forward to hearing what the Minister has to say in reply.”
“She said: “Rates vary tremendously across Europe, but they are significantly higher than in the UK, which has one of the lowest rates.” It was put to her that the rise was part of a wider, hidden plan to increase the rate successively to levels in Europe, but my right hon. Friend was clear: “The increase does not signal a future change.”—[ Official Report, Standing Committee B, 15 June 1999; c. 642.] I should like the same assurance from Ministers on the Treasury Bench this afternoon. Can the Exchequer Secretary confirm that the change is not part of a plan successively to increase rates of insurance premium tax to levels across Europe, which amount to 11% at the low end of the range in countries such as Austria and 22% at the higher end in countries such as Italy.”
“I should be grateful if the Exchequer Secretary would set out his assessment of the impact of that hike on Britain’s pensioners? What will be the impact of the increase on the availability of general household insurance for people on low wages? Why is he raising the rate from 17.5% to 20%? Is it to preclude the value shifting that was the inspiration for the rate change in 1996? Most important, why is he raising the standard rate from 5% to 10%? Can he confirm that it is not the Government’s policy to harmonise the standard rate with levels across Europe? In 1999, when Labour raised the IPT rate, my right hon. Friend the Member for Bristol South (Dawn Primarolo), then the Paymaster General, was clear on the matter.”
“Member for Dundee East also mentioned Eric Galbraith, who said bluntly: “This is a tax on protection.” That is a public policy concern which we need to hear more about. We do not have a theoretical objection to insurance premium tax and, subject to a decent explanation from Treasury Ministers, I do not plan to put our amendment to a vote. The history of IPT is one of consensus. It was introduced by the right hon. and learned Member for Rushcliffe—now the Lord Chancellor—and increased in 1999 by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown). None the less, there are some important questions that it is important for the Government to answer this afternoon. What assessment has been made of the increase in insurance premium tax?”