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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“Over the short number of years that I have served in the House, I have seen many constituents who did not have insurance and lost everything in burglaries and had to rebuild their lives, sometimes from scratch. The ABI has told us that for the average household a 1% increase in IPT will put at least another £8 a year on the general cost of household insurance, taking it up to £850. For many of my constituents, £850 is unaffordable, particularly if they live in areas that attract premiums. For those reasons, the director general of the ABI has described the move announced by the Chancellor as “regrettable”. Kerrie Kelly, in remarks to which the hon. Member for Dundee East alluded, was clear, saying that the change “is a direct tax increase for the vast majority of people who sensibly protect themselves.” The hon.”
“Member for Wokingham spoke eloquently about the impact that the increase will have on young drivers. Some press reports estimated that the bill would rise by only £15, but the intimation in the right hon. Gentleman’s remarks, and those of the hon. Member for Christchurch, was that it might be a little higher. Of course the increase comes at a time when car insurance premiums have been rising consistently for the last 12 months. There will be an impact on travel insurance, to which Members have alluded, but many Opposition Members are particularly worried about increases in the cost of general household insurance. Many of us serve constituencies with high rates of poverty and worklessness and many areas, including some in my constituency, are also troubled by relatively high rates of crime, with drug use fuelling burglary.”
“It imposes a disproportionate burden on the less well off individuals and the smallest businesses. These are most likely to need the protection of insurance.” Given those arguments, we deserve a full and thorough explanation of the public policy rationale for introducing such taxes. We have heard about the impact that the tax will have on consumers. The hon. Member for Christchurch did not remind us of his distinguished career as a Transport Minister, but he understands well the impact of higher rates on, for example, car insurance. In the days shortly after the Budget, The Guardian told us that the average car insurance buyer would pay about £18 a year more in tax. The AA said that the bill would be slightly higher—at least another 35 quid on an average insurance policy. The right hon.”
“I have not studied the Bill, so I am grateful to the hon. Gentleman for drawing it to my attention. We have had good debates over the past two or three weeks about the need for greater transparency both in economic policy making and in tax policy. The Bill certainly sounds as though it would contribute to that agenda. The hon. Member for Christchurch raised a number of public policy points. He did not dwell much on the impact of the new charges on low income groups, and I should like to touch on that different policy question. It is important that we debate it this afternoon. The Association of British Insurers has argued for a long time that the tax is regressive. IPT has been raised in the past by Conservative and Labour Governments, and the ABI has been consistent: “IPT is a regressive tax.”
“Will the Minister remind the Committee of something? On the two or three previous occasions when IPT has been increased, how much of the increase was passed straight on to consumers?”
“The Minister is making an argument about choices that are made in order to increase revenue, but I think the Committee is struggling to understand the reason for the increase in the standard rate of IPT. Other choices were available. Why have increases in cider duty been withdrawn, for example, while new taxes are being introduced on insurance?”
“My ambition this afternoon was simply to tease out from the Government the principle behind the increase in IPT. The hon. Gentleman may be able to help me with this, but I think that I detected that the ambition was simply revenue raising. Was that his interpretation too?”
“The hon. Gentleman is being slightly unfair. We had a very different approach to introducing £19 billion of new taxes. The Government have chosen a different course, but they have had to raise so much in VAT and IPT because the Budget so slows down the recovery that £9 billion in extra taxes will have to be raised to make up for the lost growth.”
“When the Chancellor rose to give us his Budget a few weeks ago, he promised that he would give it to us straight. He somehow forgot to tell us that Britain’s pensioners may face an £8 billion VAT bill over the course of this Parliament. Given that neither Government party has a mandate for introducing VAT increases, does the Minister agree that, at the very least, this House deserves a report on the impact of VAT on pensioners before the increase comes into effect?”
“Indeed, the hit to our growth is so severe that buried in the tables at the back of the Red Book we learn that an extra £9 billion of tax increases are required simply to make good the loss of growth and the loss of jobs.”
“In the Budget debates over the course of the last couple of weeks, we heard that the Chancellor is now pinning all his bets on an increase in business investment and in export growth. We have achieved that before, but only once since the Library started collecting figures on the subject in 1966. Of course, the Chancellor is relying on that happy coincidence of business investment growth and export growth in every one of the next three or four years. It is fair to say that most people would not quite bet on such an outcome coming to pass, but rather than seeking to stimulate domestic demand and to create better conditions for business investment in the UK domestic economy, the Chancellor has instead chosen to give consumption the biggest whack possible and to introduce a consumption tax.”
“This clause is the automatic consequence of the fiscal mandate that the Chancellor set out for us a few weeks ago and, in particular, of his ambition dramatically to accelerate the time period in which we will eliminate the structural deficit in this country in order to bring forward by just one year the date at which debt as a proportion of our GDP begins to fall. The price of accelerating that moment is, of course, £40 billion of extra tax rises and spending cuts. That has left the Chancellor—we might get a chance to discuss this in a clause stand part debate later—reliant on Office for Budget Responsibility forecasts, which are optimistic. To give Sir Alan Budd his due, even he says that there is only a 40% chance of his forecast coming to pass next year.”
“It is a pleasure to follow the hon. Member for Dundee East (Stewart Hosie). I want to support amendments 40, 41 to 43 and 46, tabled in my name and those of my right hon. and hon. Friends, as well as to discuss clause stand part. This is a vital debate. The debate on clause 3 touches on the core of the Budget that the Chancellor presented to the House some two weeks ago. The tax measures that sit at the heart of the Budget and that are the subject of this clause all flow from the decisions and the fiscal judgment that the Chancellor took when he presented the Budget to us.”
“Today’s debate is important for Parliament and for the public, and I certainly hope that we will not be subjected again to the spectacle of the Government Chief Whip, who is not in his place, seeking to force a closure motion on a Finance Bill debate. Over the centuries, nothing has prevented Parliament from debating the wisdom of the Executive’s attempts to tax the people of the country, and it would be unfortunate, particularly for the Conservative party, which prides itself on being a party of tradition, if the Chief Whip were single-handedly to put one of our most cherished traditions in the bin.”
“The hon. Gentleman knows that the Chancellor is a member of the Cabinet and, as in all Cabinets—I am sure this is true of the Cabinet today—the then Chancellor was subject to the collective responsibility that we all shared. The judgment that he reached was his final judgment, and that was the judgment that he presented in the March Budget. I want to touch on three aspects of the debate. If I may, I will start with amendments 41 to 43, the purpose of which is quite straightforward: they seek to make good the fact that there is no mandate for the clause. I do not think that either Government party could truly claim to have solicited from voters any ringing endorsement for clause 3. If anything, in their hearts, they could assume that the public voted against the subject of the clause.”
“We know that there are more Finance Bills in the pipeline, some of which might arrive in the House fairly soon after the summer recess, but the House will want to be able to press the Government—from both sides, I hope—on the need to include in future Finance Bills measures to compensate those who have been hit particularly hard by the increase in VAT should it arrive successfully on the statute books this afternoon. The reports are enormously important because the public were denied a debate, during the election, about what protections should be put in place. Indeed, they could be forgiven for believing that no party intended to increase VAT.”
“Amendments 41 to 43 ask the Treasury to prepare a report on the impact of the rise in the standard rate of VAT on pensioners, children and child poverty, inequality, the bottom 20% of households by income, charities, the informal economy and the black market. Under the amendments, if those reports are not completed, the increase in the standard rate of VAT would not occur until 4 January 2012. The purpose of the amendments is perfectly straightforward.”
“I am greatly reassured by that, Mr Hood, as I was worried that the Chief Whip would again, later this evening, detect a certain exuberance or failing of stamina among some of those in his pastoral care. The first group of amendments has a very simple purpose. As the clause is a measure with no mandate, it is surely important for hon. and right hon. Members present not just to vote for it in the dark. Surely, we have a responsibility, as legislators, to ensure that we genuinely understand the impact of the VAT increase on the people whom we are here to represent. It is perfectly possible that even when that clarity has been acquired, the Government will say that they want to press ahead with the measure come what may, but we should study how different groups will be hurt by the VAT increase.”
“I was one of those who were lucky enough to get a copy of the poster before the Deputy Prime Minister took it off his website last Tuesday night—it is good to note that at least they were not all in the bar. The poster was clear. It said: “Tory VAT bombshell. You’d pay £389 more a year in VAT under the Conservatives.” The Deputy Prime Minister’s assertion, however, that no rise in VAT was needed in the Liberal Democrat plans found its echo in words from the right hon. Member for Tatton (Mr Osborne), who is at ECOFIN today. He told The Times on 10 April: “We have no plans to increase VAT.””
“For the hon. Gentleman to begin quoting private correspondence, even that written in bad taste and in jest, is particularly inappropriate in a Finance Bill debate on a £19 billion tax increase of which his constituents will pay part. If that is the strength of his contribution this afternoon, I think that they will be disappointed. I was about to say that the Deputy Prime Minister was among those who gave the public the impression that there was not a plan to increase VAT. He said on 8 April: “Our plans do not require a rise in VAT. The Tory plans do. Their tax promises on marriage and jobs may sound appealing”— appealing to him, I think he meant— “But they come with a secret VAT bombshell close behind.” There was, of course, a nice poster to go with the quotation, which we talked about last week.”
“I know that the hon. Lady is not trying to run away from this debate, because she has been writing to colleagues in Scotland and including in her letters the immortal sentence, “The increase in VAT did not feature in any of my election publicity.” She would have to accept therefore that the impression given by both the Deputy Prime Minister and the Chancellor in the words that I have just read out would conjure up in the minds of voters the idea that there was no plan for a hike in VAT. The point that I am making this afternoon is that because that illusion was created, rightly or wrongly, by the Conservative and Liberal Democrat parties, the public did not get a chance to think about the kind of protections that would be needed. That is why the amendments call for reports to be laid before the House of Commons.”
“My right hon. Friend puts it rather well. My point is that, because individuals did not rule things out categorically in the Chancellors’ debate and other debates, the hon. Member for East Dunbartonshire (Jo Swinson) should accept that the impression was given that a rise in VAT was not imminent. Politics aside, I hope that she accepts that the public were not given much incentive to ask us, if a VAT increase did come down the tracks fairly quickly after the election, what protections we would put in place. That is why the amendments are so important; they seek to solicit from the Government a detailed study of the impacts of the VAT rise so that in future Finance Bills we can ensure that, where needed, people are protected from the egregious consequences of this change.”
“That is a very subtle argument. I think I just about followed the hon. Gentleman step by step and link by link, but cutting to the chase I hope the point we can agree on is that the public were not given much incentive to ask of us, at hustings or elsewhere, “If there were VAT increases, what would you do to protect different groups?” Given the fact that we all know there are future finance Bills to come, possibly in short order, it is important that we try to understand the real impact of the VAT increase, especially on the groups I have listed in my amendment, so that we can ask the Government to bring in protection for them.”
“If the hon. Gentleman will forgive me, I will reveal my hand on our voting strategy slightly later on in the debate. The point is clear. We are seeking from the Government a number of protections to ensure that the people we think will be hit by VAT are not hit by it. If our amendments are not successful, we shall of course oppose the clause.”
“He said that “you could try, as you say, put it on VAT, sales tax, but again if you look at the effect of sales tax, it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you.” That is what the Prime Minister said at one of his popular Cameron-direct events in Exeter in May.”
“There was the now infamous graph on page 66 of the Red Book, to which the Economic Secretary referred in questions earlier this afternoon. The graph purported to show that the Budget was fine—the very model of progressive politics. Only after interrogation did it emerge that the picture looked half decent only because it incorporated Labour measures and did not include the full extent of the welfare cuts that await the country in years to come; indeed, just a third of those welfare cuts were put into the picture, so unsurprisingly, it was flattering. The best arguments for the reports we are asking for were made not by the Economic Secretary or by me, but by the Prime Minister and the Deputy Prime Minister. During the election the Prime Minister said that he could “absolutely promise” that VAT is regressive.”
“I am now tempted to keep the hon. Gentleman in suspense for a little longer. I hope he will bear with me. I was making the point that if the Committee does not agree to support the amendments and does not agree that we should make reports and study the impact, it will be tantamount to our saying that we do not care how VAT will hit different groups, but I know that there are people in the Government, and Members in the House, who do care. They worry about the impact of VAT because they, like Labour Members, came into politics to try to make this country a fairer and more prosperous place to live in. The reports we are asking for are all the more urgent because evidence has emerged over the last couple of weeks from the Government and elsewhere that VAT increases are both unfair and regressive.”
“And on top of that £18 billion in winding down capital spending, we then set out very clearly £20 billion of savings to current expenditure. The hon. Member will recall that £4.5 billion of savings were to be achieved by holding down public sector pay, of which £1 billion would be gained through reform of public sector pensions by 2012, £5 billion by cuts to a range of lower-priority programmes across Government, and about £11 billion of savings were to be gained by revolutionising the way that Whitehall conducts its business. So there is a very clear plan set out in chapter 6 of that Budget—it is only 20 pages; I recommend it to the hon. Member if he has not read it. But why not have the debate now?”
“I know the hon. Member is new to the House, but the report to which he refers is called the Budget, and in chapter 6 of the March 2010 Budget the plan that the Chancellor decided on is set out very clearly. He said that the deficit should be halved over the next four years and that that would require £57 billion-worth of discretionary action. That would require £19 billion of tax increases, of which broadly half came through an increase in the national insurance rate, some of which the Conservative party has kept. About £18 billion of savings would come through reducing capital expenditure as a share of our economy, from the 3.5% which it hit in order to fight back against the recession, down to about 1.25% of GDP in a couple of years’ time. That is, by the way, still twice the level that we inherited back in 1996-97.”
“That is what his constituents would expect, and it is why I hope that he will support me in these amendments to carry out a study of the impact of the new tax, so that we can understand how to remedy the problem in the next Finance Bill.”
“Happily, the question is hypothetical, because the then Chancellor reached a decision on the right package of measures needed to halve the deficit over the next four years. The hon. Gentleman’s problem is that the Conservative party concluded that it needed to bring forward by a year the date at which debt as a proportion of GDP needs to start to fall. Therefore, another £40 billion in tax rises and spending cuts are needed. The only way to secure that is to take an enormous risk by whacking domestic consumption with a regressive tax. So he must contend with a question of economics and one of fairness. [ Interruption. ] He says from a sedentary position that it is a question of leadership, but the art of fairness is integral to the effective leadership of this country.”
“My hon. Friend was making an important point, and she is absolutely right. We also said very clearly that more than half of the £19 billion in taxes that we proposed to raise—a measure not completely different from the figure that the Government are seeking to raise—should be paid for by the top 2% of earners. I have not yet seen a similar analysis produced by the Government.”
“Again, my right hon. Friend is absolutely right. One reason why we have always approached VAT in the manner that she has described is that we know that, as a flat tax, it is regressive.”
“The overall effect of the Government’s proposed VAT hike is that the revenue raised will increase from between £2.8 billion to £2.9 billion in the current financial year to £12.1 billion, £12.5 billion, £12.9 billion and £13.5 billion over the course of this Parliament. Using the Office for National Statistics’ study of pensioners’ share of spending, the Library estimates that this year—so, before pensions rise in April—Britain’s pensioners will pay £422 million of extra VAT. That figure will then rise to £1.8 billion, £1.9 billion, £2 billion and £2 billion by the end of the Parliament. I think the House will agree that that is a serious hit on pensioners’ fixed incomes.”
“Today, I am afraid, we hear that pensioners could face an £8 billion VAT bill during the course of this Parliament. When the Budget was presented, we heard a little about the protections that were already being put in place, but on closer inspection it turns out that pensioners will be hit by different changes each and every year. Amendment 46 would therefore require the Treasury to prepare a report on the impact of the increase in standard rate VAT before any further Finance Bill were brought before the House in the current Session. In that way, right hon. and hon. Members would be able to insist upon proper remedies for pensioners to protect them from VAT. It is worth setting out what the Library has published.”
“We want Parliament to take the lead role in appointing the OBR’s new leadership, and we want also to ensure that financial, tax and economic policy is conducted as transparently as possible. That was the instinct behind the creation of the code for fiscal stability many years ago, and we need to carry on the work of reform so that we truly strengthen the role of this House in holding economic policy to account. The purpose of clause 6 is to seek to protect a group of people who are very important to all Members—our pensioners and retired citizens. Ultimately, the reason why Labour decided to raise national insurance instead of VAT was a concern for fairness, and we knew in particular that those on fixed incomes, such as pensions, would struggle most when faced with sharply rising prices.”
“I am grateful to the hon. Gentleman, who has exposed my utter lack of originality. This position is not uniquely adopted by Opposition Members. Indeed, part of the inspiration for our amendments is the amendment tabled to the Budget resolutions by the hon. Member for St Ives (Andrew George). There is a consensus that, over the years to come, we want the institutions that help to govern our macro-economic policy to be as strong and robust as possible. That is why the shadow Chancellor has welcomed the initiative of the Office for Budget Responsibility, but put on the record our ambition to ensure that it is truly as independent as possible. That is why it is important that there is no question about its conduct, the publication of its reports and the synchronisation of its reports with Prime Minister’s Question Time and so on.”
“According to table C2 on page 84 of the Red Book, in 2012 RPI will be 3.2%, average earnings growth will be 2.3%, and CPI will be 1.9%. We can therefore assume that under the triple lock system, the pension increase will be only 2.5%—lower than VAT-fuelled RPI, which will be 3.2%. The increase in pensions will appear to fall behind the increase in prices.”
“The Library states that in 2008 the typical household in the retired category spent £353.70 a week, and that the amount would rise to £358 after the VAT increase. That represents a rise in the VAT bill of about £4.30 a week. However, the rise per week in the basic state pension—delivered by the triple lock that was so trumpeted—is less than the increased shopping bill that pensioners will pay. I should also like to make a point about the following year, 2012, because the Chancellor did not present matters very clearly when he announced the Budget. Analysis shows that the Treasury’s switch to using the lower-rising consumer prices index instead of the retail prices index to measure price rises means that pensioners’ income will fall behind VAT-fuelled price rises in 2012.”
“My hon. Friend, from a sedentary position, is absolutely right. The Library produced exactly the kind of report that I have just set out, and— [ Interruption. ] In the spirit of candour with which the question was asked, I note that there were serious mistakes with the way in which the 10p rate was changed, and my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Prime Minister, has been very open about that. That is precisely why we need to learn lessons about the way in which tax policy and economic policy is conducted. Generally the rule is, the more transparency, the better, so I hope that the hon. Gentleman will support our amendments, because the transparency at which he hints reveals a further problem in 2011.”
“That may or may not be the case. My point is that the Treasury has decided, without really publicising the fact, to switch the way that it measures price rises. A great fanfare was attached to the notion of the triple lock and raising pensions by prices, by average earnings or by 2.5%, whichever was higher. Somehow missing from that presentation, however, was an acknowledgment that RPI would be higher than any three of those measures in 2012, with the price being paid by Britain’s pensioners.”
“One million people of pension age are on DLA—they represent 34% of DLA recipients of all ages—so it is a risk that we in this House should demand we understand before changes are made.”
“I think that once local authorities are confronted with 25% to 40% budget cuts later this year and we face, as Age UK has warned, the possible collapse of the social care system, we will see whether the freeze in council tax is truly delivered. Even towards the end of this Parliament, the hits to pensioners will just keep coming. The Library assesses that by 2013, pensioners could face cuts to disability living allowance benefits totalling an extraordinary £350 million a year. That is alongside cuts to housing benefit and the lower uprating of public service pensions and other benefits, which are now also linked to the lower-rising CPI rather than RPI. I accept that reforms to DLA are not yet clear, but we have to accept that Britain’s pensioners face a new risk that has not yet been explained to this House.”
“The final amendments that I should like to speak to are amendments 40 and 44, which are probing amendments. We want to give the Government the opportunity this afternoon to put on record their intention to rule out the removal of zero-rating VAT status on any further items. Amendment 40 would require the Treasury to lay a report on the scope of the standard rate—”
“I have not presented to the House any definitive statement on how pensioners will be hit by VAT. I have not conducted some kind of distributional impact analysis using a Treasury dynamic model of the interrelationship between the basic state pension and the pension credit uprating, but I think the Government should. If they are relaxed about the matter and truly believe that they have compensated pensioners fully for the rise in prices for which they are legislating, they should put the matter beyond doubt. They should show the House and the public beyond that the very people to whom we owe so much are protected from a measure that they did not vote for and that threatens the standard of life that they worked so hard and long to secure.”
“Precisely. That is the point that Age UK made in its response to the Budget. It issued a stark warning that thousands of older people’s lives would be at risk from even a 25% cut in local authority budgets; now we are warned by the Chief Secretary, with a casual disregard for the seriousness of the situation, that there could be cuts of 40%. Looking around here this afternoon, I can see many right hon. and hon. Members who came into politics to champion the cause of fairness and who work extremely hard on behalf of pensioners in this country and in their own communities. I very much respect the campaign work that has been conducted by Members in all parts of the House, not just those from my own party. It is a cause that has been championed, in particular, by those on the Lib Dem Benches.”
“The VAT increase is a measure without a mandate and there is therefore an obligation on Members to ensure that the people who need to be protected are protected by the votes that are taken this afternoon.”
“We learned from those on the Treasury Bench this afternoon that Ministers will not extend VAT to hardback books or newspapers, which is very welcome, but there are of course a range of goods that are currently zero-rated, including food, clothing, footwear, transport, talking books for the blind and the disabled, sewerage and water, building construction, protected buildings, caravans and houseboats, drugs, medicines and aid for the disabled, tax-free shops and some charitable contributions. We should like to hear more from the Government about whether there are any plans, either now or later on in the Parliament, to withdraw what is currently zero-rated. We want to give them the opportunity to put that beyond doubt. This is an important debate.”
“I am grateful, Mr Hood. I will therefore confine my remarks to amendment 40, which asks the Treasury to lay a report on the scope of the standard rate before the Commons before the rise takes effect on 4 January 2011. The reason for our concern is that in the past, the Deputy Prime Minister has said that it is more liberal to tax people on their income than on their work. That automatically raises questions about whether the scope of VAT as currently set out by the Government is set to widen and widen. We have a few assurances on the record.”
“On that point, the hon. Gentleman must surely accept that a pretty comprehensive tax plan was set out in the March Budget. We were seeking to raise an extraordinary amount of money—£19 billion is not small potatoes—and we set out specifically how much would come in through national insurance increases, how much through changing the tax treatment of pension contributions, and how much through putting taxes on incomes up and keeping them up, and taxing certain incomes at the 50p rate. Some of those measures have been kept, but those were not easy decisions to make. They were difficult decisions, but they did bring in £19 billion of income to the Exchequer.”