Clause 3 — Rate of value added tax

Part of Bill Presented — Shared Parenting Orders Bill – in the House of Commons at 7:45 pm on 13th July 2010.

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Photo of Liam Byrne Liam Byrne Shadow Chief Secretary to the Treasury 7:45 pm, 13th July 2010

I am very grateful, Mr Hancock.

This has been a good debate. I know that the amendments have been grouped in a certain way because of how they interrelate, but none the less, having heard the debate and the contributions of right hon. and hon. Members, we will seek to divide the Committee on amendments 41 and 46, as well as on clause 3. I think that we will turn to amendment 35 in a moment.

This has been an important debate, because we have seen with greater clarity where not only Conservative but Liberal Democrat Members stand on the issue before us. However, Andrew George, looking at tax policy in the round, was right to say that the VAT rise has to be-in his words, I think-among the least welcome alternative proposals. He did not want to be drawn into the Chancellor's wider fiscal judgment, and that was unfortunate; instead, the hon. Gentleman wanted to debate the balance of measures in the Budget, and he sought a different balance. He could have made more of the fact that the Budget hits growth in this country so hard that an extra £9 billion of tax has to be raised to make up for lost growth.

The hon. Gentleman's hon. Friend, Stephen Williams, confused us-perplexed us, slightly. I was not sure whether he was elected, appointed or anointed to the position from which he spoke, but he confirmed that he was speaking on economic affairs on behalf of Liberal Democrat Back Benchers, rather than Front Benchers. I was not sure whether that was a device for saying one thing and doing another, but he rapidly disabused us of that with his support for the Government's case. His was a strange argument, because he said he would not support our amendments to protect pensioners and others, as somehow our arguments lacked moral force. So there we have it: the party of Lloyd George is now so empty of moral momentum that it has to look to the Labour party for its source of ethical locomotion.

We heard some powerful speeches from Opposition Back Benchers. My hon. Friend Chris Leslie underlined the point that the Budget does not share out the pain, and that those with children, in particular, will be hit very hard. He was right to highlight the commentary in the City outlining the hit that retailers will take, and he had a very good phrase: VAT will be both regressive and regrettable. That is a good conclusion to our debate.

My hon. Friend's speech was echoed well by my hon. Friend Rachel Reeves, whose constituents, she said, earn just £16,000 a year. They will be hit very hard by this Budget, and that particular unfairness was highlighted by my hon. Friend Owen Smith, who made an excellent point about the problem of irrecoverable VAT and how it will hit the national health service. My hon. Friends the Members for Caerphilly (Mr David) and for Hemsworth (Jon Trickett) also made excellent arguments about the hit on jobs. Of course, there has been some confusion about that from Government sources over the past couple of weeks, but the bottom line is pretty clear: employment will be much lower as a result of this Budget, in contrast with previous Budgets. The IMF, if we needed any help reinforcing the point, backed up that argument earlier.

We are having this debate ultimately because of the Chancellor's wrong-headed decision on the fiscal judgment. The Budget was so damaging that his own independent advisers told him that they had no choice but to downgrade the country's growth forecast, and the IMF rapidly followed suit. Just when Britain needed a Budget to speed up the recovery or, at the very least, maximise its certainty, we were given a Budget that actually slowed the recovery down. The reason we were given was the strange behaviour in the markets, but in fact interest rates and long-term bond yields had been falling for some time before the election. This Budget entirely ignores that point. It hits growth so hard that it has to raise extra taxes, and that is before we address the impact on jobs.

We are still trying to get to the bottom of the changes to how the OBR forecasts job losses, but the Red Book's judgment was grim enough: 100,000 fewer people will be in work as a result of this Budget. That is because the Conservatives have reverted to type and decided that, just as in the 1990s, 1980s and 1930s, unemployment is a price worth paying. It is only a shame that the Liberal Democrat party-the party of Keynes-has abandoned its intellectual heritage and signed up to the economic doctrine of Lord Lamont, the man who famously sang in his bath as unemployment spiralled, "Je ne regrette rien."

All this follows from one decision-that of the Chancellor to bring forward by just a year the date at which debt as a proportion of GDP begins to fall. The price of that is a £40 billion increase in taxes and spending. It means that the Chancellor is now relying on a growth strategy for the next few years that is quite unlikely to come to pass. He has not hedged his bets; he has decided to hit domestic demand and consumption as hard as he possibly can. He is, I am afraid, going for broke.

That is why we object so strenuously to clause 3. I hope that the Government see fit to accept the amendments that we have tabled to try to protect people from its most egregious impacts. If they do not, I am afraid that we will have to vote against clause stand part