‘The Chancellor shall publish, within six months of Royal Assent, a review of the impact on revenue from rates and measures in this Act, resulting from the Spending Round 2013. He shall place a copy of the Review in the House of Commons Library.’.—(Catherine McKinnell.)
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
The Opposition’s new clause 10 challenges the Chancellor to publish, within six months of Royal Assent, a review of the impact of last week’s spending review announcements on tax receipts. Should the Government agree to undertake such a review, as we hope they will, we suspect that its conclusions would be pretty short, given the Chancellor’s comprehensive failure to deliver the economic boost that this country so desperately needs. It was a dead duck of a spending review, and it was even more disappointing, given the context in which it was made. The Chancellor did not want to come to the House to announce a spending review last week, but he was forced to announce a further £11.5 billion of spending cuts in 2015-6. Why? Because his economic plan has utterly and categorically failed.
Is the hon. Lady suggesting that the Government should be borrowing even more billions of pounds than is already the case, or that they should make further cuts? If it is the latter, she should not be surprised if she gets some support from the Government side of the House.
I am pleased to hear the hon. Gentleman suggesting that those on the Government Benches are considering supporting our proposal. I wonder whether he has realised that his Government are borrowing £245 billion more than they planned to do, because they have failed. Their economic plan has failed—it has failed on living standards, on growth and on getting the deficit down. The Chancellor promised in 2010 that by 2015 he would have balanced the books, yet he is borrowing £245 billion more than he planned—and those books will not get balanced in the time frame that he promised.
I support new clause 10 because it is really important to see whether the measures in the spending review will increase tax receipts. My hon. Friend is highlighting the failure over the last three years to get the economy growing and the impact of that on tax receipts. That explains the reality of the further and deeper cuts that the Chancellor promised us we would not have to face.
I thank my hon. Friend for that interjection, which gets to the crux of the matter. The Chancellor had to come here last week to announce further spending cuts in 2015-16, planning for future failure, because he is failing to deal with the economic reality that we face today. Ultimately, we are tabling this new clause because we hope that the Government will take stock of the situation in which they are leaving households up and down this country. The price of the failure of the Chancellor’s economic plan is not being paid by those at the top. We debated at great length yesterday the fact that the top-earning taxpayers are getting a tax cut from this Government, while it is ordinary families that rely on public services that are paying the price for this economic failure throughout the country.
Despite the pain being meted out to those who are least able to bear it, the coalition’s self-defeating economic policies have resulted in the Government failing their own economic tests. They are borrowing more than they planned and they are not going to balance the books by 2015. Rather than spending his time planning how to boost jobs and growth now, the Chancellor is planning for failure in 2015. He should be laser-focused on injecting a stimulus into the economy to secure jobs and growth now, so that we no longer need to plan for failure and for further cuts in 2015. It is common sense.
My reading of the new clause is that the review would have to be placed in the House of Commons Library within six months. Is it my hon. Friend’s intention to urge the Government to look at infrastructure spending in the review and, specifically, to include the figures on the impact of cutting capital investment again, year on year, in the spending review and what that does for our economy?
Indeed, it is very much the hope that the Government will shine this laser focus on measures to boost spending and boost jobs and growth now in order to stimulate the economy, get people into work and get the welfare bill down. We know that that bill is rising as a result of the failure of the Government’s economic plan. They should focus on infrastructure spending, which is not just what we say, but what the IMF says, too.
How does the hon. Lady think she could work out the true implications and effect of the spending review in only three months? Why did she choose three months rather than six months, nine months or one year?
That is an interesting question because the new clause suggests that the review should be published “within six months”, so I wonder whether the hon. Gentleman has simply misread our new clause. We feel that there is no time to lose, but that six months is a reasonable period to give the Government time to consider the likely impact of the spending round in 2013 on tax receipts. Ultimately, if we are to balance the books and get borrowing down, we are going to have to increase our tax receipts into the Exchequer.
Does the hon. Lady recognise that one of the biggest effects of the spending review will be on local government expenditure, which of course has to be dealt with in the following May—falling outside the six-month period? Some of the greater impact of the spending review will be felt after she has asked the Government to produce the report.
I am pleased that we have the hon. Gentleman’s support in principle for the fact that the Government need to take stock of the impact of these spending decisions and his acknowledgement of the devastating impact of the cuts to local authority projects, which we have rehearsed many times here, particularly in areas such as the one I represent. We will not see the impact straight away; we will see it in six months, 12 months, 18 months or two years’ time. The Government have imposed cuts without allowing the economy time to grow, create jobs and consolidate the debt in a responsible way, so we will face the consequences of this economic approach for many years to come. I am pleased, as I say, that John Pugh recognises that.
My hon. Friend has mentioned local government cuts. According to my reading of the spending review, capital spending in the budget of the Department for Communities and Local Government is to be cut by 35.6%. Could the review take account of that, although it will be some time before we are aware of its full impact on the economy?
The purpose of the proposed review is to encourage the Government to become laser-focused on the impact of their spending review. My hon. Friend is certainly laser-focused—not just on the impact of the cuts on local authority budgets, but on their impact on jobs and economic growth up and down the country.
Common sense tells us—well, it tells everyone but the Government, it would appear—that boosting growth and living standards this year and next would bring in tax revenues and reduce the scale of the cuts that will be needed in 2015, but nothing in the spending review will boost the economy over the next two years. It seems incredibly complacent and counter-intuitive to come to the House and simply plan for the consequences of economic failure in 2015. We believe that the Chancellor should have used his spending review to concede that he has got it wrong and has failed to secure growth. He should be proposing genuine investment in infrastructure this year.
My hon. Friend is, again, making a powerful speech. Is it not the case that 1% growth since 2010 would have generated an additional £335 billion in the economy? As a result of this incompetent economic policy, however, the Government are having to come back and ask for more.
My hon. Friend has made a very good point. I should be interested to hear the Minister’s response to the figures that she has given, and to what she has said about the lost opportunities for growth. Those opportunities, moreover, have not just been lost over the last three years; the Government are planning on the basis of a further two years of lost economic growth, which simply defies common sense. According to the International Monetary Fund, they should be investing in infrastructure this year to boost economic growth and the housing market, and to encourage job creation and increased tax receipts. The Government seem to be ignoring not only what we are saying, but what the IMF is saying.
The hon. Lady has referred several times to the impact of Government policy on jobs. Does she not recognise and welcome the fact that under the present Government there are more people in work that at any other time in our history? We have created more than 1 million private sector jobs—three for every job lost in the public sector.
I acknowledge what the hon. Gentleman has said, but I do not think that it can be linked to the economic reality—the reality of what households and people are experiencing. Many people are in insecure work, many are on zero-hour contracts, and many are self-employed. People all over the country feel that their living standards are being squeezed to such an extent that they cannot afford to pay for what they need by the end of the week.
The fact is that the employment rate is lower now than it was in 2008. Absolute numbers mean nothing. The rate is lower now than it was before the recession.
Order. The debate is, to put it politely, starting to go a little wide of the new clause. Perhaps we could focus—in a laser fashion!—on new clause 10.
Thank you, Madam Deputy Speaker, but I think that my hon. Friend has made an important point. What we needed to hear from the Chancellor last week was a plan for economic growth that would boost tax receipts and increase the number of jobs. Ultimately, that is how we can balance the books and reduce the deficit: by getting people into work and reducing their dependence on welfare.
My hon. Friend made a powerful point: the Government should not be so complacent about the unemployment situation in this country, and in particular the long-term unemployment situation.
Well, I am pleased that the Minister is engaging with the need to review his own Government’s spending plans so they can take stock of precisely how those plans are working to resolve the unemployment situation and the lack of economic growth in this country. If the Minister could provide some reassurance that his Government are focused on reducing the debt, that would be very helpful.
My hon. Friend was speaking about the spending review’s failure in respect of living standards, and that is crucial. Real wages are set to fall by 2.4% over this Parliament, meaning people will be worse off at the end of the Parliament than they were when this Government came to office. That is the real story: it is a spiral of lower wages, lower living standards and lower tax receipts, and then ultimately more debt, more borrowing and a higher benefits bill. Does my hon. Friend agree that that is the spiral we are in?
Yes. My hon. Friend makes a powerful point, and it highlights the complacency of this Government. They feel it is a case of “job done” as some jobs have been created in the private sector, but ultimately the reality families are facing is that they cannot afford to pay for heating and buy food and what they need for their children and their families because living standards are being so desperately squeezed.
I just want to give the hon. Lady another opportunity to answer the simple question I asked. The position of her party has for some time now been to favour a cut in VAT. We do not support that approach, but does she support it? Does the Labour party still believe that, at this precise moment, VAT should be cut to 17.5%?
The Government clearly do not support that approach because one of the first things they did when they came to power was increase VAT and the costs for ordinary families up and down the country. We have said all along that we would not have taken those decisions. We would not have chosen to give a tax cut to those on the highest incomes. We would not have slapped a 2.5% charge on poor families who are struggling to make ends meet. We have made that very clear, but the Government have ignored that call. We think the Government should be taking action now to try to stimulate the economy and put some money back into very hard-pressed families’ hands.
Yes, it was a huge blow for families across the country to see costs spiral overnight. This Government seem incredibly complacent about the impact their spending decisions have had, not only on families but on economic growth. We need to look at the facts. The Chancellor promised growth of 6% in 2010. He also promised that he had asked the country for all he would ask for and would not come back for more, but there he was last week, planning for more cuts in 2015 and completely failing to recognise both that his economic plan has resulted in 1% growth, not the 6% he promised, and that his increase in VAT was very much a part of the reason for that.
May I press the hon. Lady for a third time on the question my hon. Friend the Minister has been asking? At this moment in time, given where we are with VAT at 20%, would she advocate, as her party has in the past, that it now be reduced to 17.5%? Also, is her party still in favour of the five-point plan for growth, of which the VAT reduction is but one part?
It is very strange that Government Members, who are in power and making the spending decisions that are having such an impact on families, are solely obsessed with what Labour would be doing. We are in opposition. The hon. Gentleman can speak to his Minister and implore him to make the necessary changes that will bring economic growth back to this country. That is what the Government need to be focused on. The Chancellor is so obsessed with his own economic failure—a failure to recognise that his plan has completely failed—that the Government simply obsess about and focus on what we would be doing, but we are not in government.
I came in to support my hon. Friend in pushing for new clause 10, which focuses on the impact of the spending review on the economy and, in particular, on tax revenue, so I am a little surprised at the nature of the debate. However, would she envisage the review examining the implications of the tax cut for millionaires on the economy over the past few years? Would it examine the impact of giving the richest people in our country a tax cut, as that is an actual policy?
To be fair, and to stay laser-focused on the new clause, I should say that we hope and envisage that the Government’s review would look at the impact of the spending review they announced last week. We heard more promises of action from the Government last week, but we did not hear about action that will take place next week, next month or even next year. We heard the Government pledging action on infrastructure investment in two years’ time.
That would be bad enough even if the Government had a proud record, or indeed any record at all, on delivering on the infrastructure projects they announced three years ago. As we have heard a few times—it bears repeating because the figures are so shocking—just seven out of 571 so-called “priority” projects identified by the Government in 2011 in their national infrastructure plan have actually been completed; 80% of the projects announced have not even got off the ground. Despite all the hype, if we delve into the figures, we find that the Government are cutting investment in infrastructure in real terms by 1.7% by 2015. Instead of an urgent boost to jobs and growth, which this country is crying out for, by bringing forward long-term investment in infrastructure, as advocated not only by us but by the International Monetary Fund, all we got was a series of empty promises for two years’ time—and some for beyond that—from a Government who lack all credibility on this issue.
My hon. Friend rightly talks about how few of the Government’s priority infrastructure projects have begun. Does she hope the review would also examine progress on the Government’s priority school building programme? I understand that there are 261 projects, and I wonder whether she has had time to consider how much progress has been made on them.
That is another absolute failure in terms of the promises made by this Government that are simply not delivered. I hope that the Government will agree to undertake the review we are calling for today and that the House will, by voting with us, acknowledge that the economic plan the Government have so far pursued is failing and that they need to examine what last week’s spending review will deliver. I hope that there will be a recognition that they promised to rebuild, again as part of a “priority” programme, 261 schools and only one project has begun. It is devastating, not just for the children who need those new schools, but for the communities that need those jobs and the small businesses that need to supply the construction industry, which, as we know, has been brought to its knees by this Government’s failure to invest in infrastructure. Instead of investing in affordable homes, improving transport links and repairing Britain’s broken roads, which would give the country the short, medium and long-term returns that we are looking for, the Government are cutting capital spending in 2015. Announcing infrastructure projects for two years’ time will not create a single job today.
My hon. Friend is making a crucial point about the impact on jobs. I had hoped that the spending review would consider jobs in the construction sector, where 84,000 jobs have been lost since the Tory Government came to power—that is, between the second quarter of 2010 and the first quarter of 2013. That is a shocking figure: 84,000 jobs have been lost when we should have seen 84,000 jobs created in the construction sector.
My hon. Friend makes his point very powerfully. It is a fact that a number of jobs have been lost in the construction industry that should have been created if the Government were taking not just our advice but that of the IMF and investing in infrastructure projects now. If they did so, tax receipts would improve this year and next year and we would not have to plan for failure in 2015, which is what the Chancellor came here to do last week.
My hon. Friend is right when she talks about the implications of the Government’s failure to invest in house building and construction in this country on the revenue from rates. Does she think that the review placed in the Library ought to consider the implications of the lack of receipts from house building in the Government’s vaunted programmes, such as the community infrastructure levy and so on, as well as of the business rates raised from firms in the construction industry? Is scepticism not one reason behind this request for a review? Four major housing announcements have been made in the past three years, and there have been 300 announcements, four launches and no action, and the lowest house building in 2012 for 70 years, so is there not some scepticism behind it?
My hon. Friend tempts me to suggest a less than honourable motive for our tabling the new clause. I appreciate that there may be some scepticism about the Government’s commitment to investing in infrastructure and growth and that last week’s announcement was simply about planning for more cuts to public services rather than a genuine attempt to try to look for opportunities for growth. It must be said, however, that the spending review, which plans more cuts in 2015 and was accompanied by an infrastructure announcement on Thursday that was mostly reheated—I think my hon. Friend Chris Leslie described it as a “microwave statement” as its announcements had been reheated so many times—failed to impress anybody.
Liberal Democrat Members in particular should be concerned by statements from the Deputy Prime Minister. He has commented that
“the gap between intention, announcement and delivery is quite significant”.
He puts that rather mildly, and I would hope that by supporting our new clause the Government could take stock of the impact mot just of the 2013 spending round they announced last week but of the delay in delivering any of the projects that have already been announced, as well as the delay pursuant to the announcements that have been made for 2015. This is an important opportunity for the Government to take stock and consider why their economic plan has so catastrophically failed. That would mean that rather than planning for failure in 2015, they could take the steps necessary now to bring forward infrastructure investment and put into play the infrastructure investment that has already been announced so that we can start to create jobs and opportunities for communities up and down the country that are suffering from stagnation in the economy.
The hon. Lady has made the link between infrastructure and its impact on the construction industry and jobs. Does she therefore welcome the recent survey by the ManpowerGroup of more than 2,000 companies in the construction sector, which concluded that we have the best outlook for construction job creation for five years?
I would welcome any signs of positivity in economic growth from any sector of our economy, especially the construction industry, which has suffered catastrophically from the cuts and stagnation in the economy over the past three years. I would indeed welcome that small piece of good news. It is a step in the right direction, but our amendment calls on the Government to take stock and do more.
I think construction is an incredibly important part of the economy, so I think it is right that Mel Stride suggests that the review six months after the spending review would look at construction. I hope it would explore the figures that I have seen, suggesting that the volume of new construction orders fell by 10% between quarter 4 of 2012 and quarter 1 of 2013. Construction is going in the wrong direction at the moment, and we need to know from the review whether the measures in the spending review will actually make that worse.
My hon. Friend makes an important point. Ultimately, it is about what we hear in our communities when talking to businesses about confidence—the confidence to invest, the confidence to take seriously the Government’s commitment to investing in infrastructure and growth. The reality on the ground is deeply worrying. Members of the public will be concerned about the complacent tone that the Government adopt towards the economic situation. The Government are apparently ignoring the fact that they promised 6% growth and delivered only 1%, that they promised 576 infrastructure projects and have delivered only seven, that they promised 261 rebuilt schools and have only put spades in the ground in one. Members of the public will be worried to hear how complacent this Government seem to be. That is why we tabled the new clause—to give the Government the opportunity not just to make the announcement and walk away, hoping that nobody will notice that they are doing nothing about economic stagnation, but to spend some time reflecting on what these announcements will mean in real terms in respect of expected tax receipts.
There is one key Government Department that is capable of increasing tax receipts to the Exchequer, and that is Her Majesty’s Revenue and Customs. Indeed, without the receipts that HMRC collects, there would be no funding to invest in public services. HMRC’s capacity and resources are therefore absolutely critical, and it is widely accepted that it can make a pretty impressive return on investment. Last year, senior HMRC officials brought in £16.7 billion over and above what was returned voluntarily by businesses and individuals.
I am very pleased to hear my hon. Friend highlight the important role that HMRC plays in our economy. Whatever the review shows about the implications of the spending review, one of the key aspects is HMRC’s effectiveness in bringing in tax revenue. Will my hon. Friend therefore urge the Government, in this review, which I hope they will support, to look at the implications of underpayment of wages to people, particularly minimum wage avoidance issues? HMRC recently sent a team to my constituency, and found that £100,000 was owing to local workers. There are huge implications for receipts at HMRC.
My hon. Friend raises a very important point. I have tabled several parliamentary questions to the Minister on that subject, and I look forward to his response outlining what action the Government are taking, alongside HMRC, to ensure that it not only collects tax throughout the country but ensures that employers abide by the national minimum wage legislation to ensure that employees do not fall short despite the fact that they are working. It is imperative that HMRC has the Government’s support and also has the correct resources to ensure that workers are not exploited in the way that my hon. Friend suggests is prevalent in his part of the country and which I have no doubt is a phenomenon that impacts on hard-working people countrywide.
Despite the headlines suggesting that everybody is avoiding tax, we are generally a tax-compliant nation—I believe the current figure is approximately 93%. Of course, it is the 7% for which HMRC needs extra support and resources to get the returns. The Association of Revenue and Customs estimates that a senior tax official earning £50,000 a year can expect to generate additional yield of at least £1.5 million a year—a return 30 times greater than the cost of their salary. That is a good investment, I think most would agree.
When the Chancellor announced a further £11.5 billion of cuts to public expenditure, what did that mean for HMRC, a department already faced with a net reduction in funding of £2 billion over this Parliament and the loss of an additional 10,000 staff? Well, the right hon. Gentleman announced that HMRC’s target for additional revenues raised, including from tax avoidance and evasion, would be increased to £24.5 billion in 2015-16—£1 billion more than the 2014-15 target and £10 billion than the 2010-11 target. According to the spending round report, HMRC will be required to contribute
“to deficit reduction through the collection of an additional £95 million in tax credit debt on an innovative payment by results funding basis.”
However, under the funding settlement announced by the Chancellor last week, at the same time as it is required to bring in those additional revenues, HMRC must cut its costs by a further 5% in 2015-16, on top of the significant efficiency savings and cuts it has already been expected to make. Can the Minister confirm, for the benefit of the House and as part of the review for which we are calling, precisely how much funding will have been cut from HMRC between the coalition coming to power in 2010 and the end of financial year 2015-16? A clear picture of the figures would be useful. Also, will he confirm the total number of HMRC posts that are expected to have been lost during that period?
My hon. Friend’s question to the Government is incredibly important and I hope we hear an answer. Does she share my concern that some of the measures in the spending review will have serious implications for tax collection unless HMRC has sufficient resources? For example, the director of the Institute for Fiscal Studies said of the shares for rights policy that it has “all the hallmarks” of another tax-avoidance opportunity, and Lord Forsyth, the former Conservative Employment Minister, said it
“has all the trappings of something that was thought up by someone in the bath”.—[Hansard, House of Lords, 20 March 2013; Vol. 744, c. 614.]
HMRC will have to be very alive to these issues of tax avoidance.
My hon. Friend makes an important point. The Bill Committee debated at some length the fact that the Government like to talk the talk on tax avoidance, but have created another tax-avoidance opportunity in the hare-brained shares for rights scheme. I think we all agree with Lord Forsyth.
The hon. Lady talks about the importance of clamping down on tax avoidance, and Andy Sawford talks about tax avoidance in the context of share transactions. Does she, as I do, condemn the £1.65 million donation to her party by John Mills using precisely that type of scheme—a share donation—as means to “tax efficiently” avoid tax?
The hon. Gentleman seems to be expressing some consternation about his Chancellor’s new shares for rights scheme. I am not sure I heard him express the same concerns when this House debated and voted on that scheme. He knows that any donations made to the Labour party are made within all the rules on donations, and any tax due on those donations will be paid. I think he can rest assured that that is in hand.
Returning to the point made by my hon. Friend Andy Sawford, it is vital that when additional tax avoidance opportunities are created, HMRC has the resources to deal with them, and that it does not take its eye off other aspects of its activity, such as enforcing national minimum wage legislation and general customer service. We know that the National Audit Office report on HMRC’s customer service performance, which was published in December last year, contained some worrying figures on HMRC’s ability to handle customers.
We hope that the review that we are calling on the Government to undertake will look at HMRC’s ability to recover tax receipts and ensure that its customers, many of whom are not customers by choice, get the support they need in order to pay their tax—not just individuals, who are often dealing with tax credits and find that they need support from HMRC, but small businesses that need support in order to pay the right tax. It is not right that individuals and small businesses in particular, but large businesses too, are left struggling to pay the tax that they wish to pay HMRC voluntarily. The Government should be aware that there is a limit to the extent to which HMRC can do more with less, as they are asking of it in the spending review.
Order. Mr Sawford, I do not need your help in chairing the debate in the Chamber today. I have done enough Finance Bills to know what is in order and what is not in order. The question that has been put is about tax receipts, excluding the reference to individuals, and that is in order.
It is open to the Government to support our proposed review of spending round 2013 and the impact that that may have on tax receipts. If Mel Stride wants to support our motion today and the Government in undertaking such a review, it is open to him to do so. We have not specified exactly what should be included in that review and it is open to the Government to look at whatever avoidance opportunities they consider relevant to ensuring that we protect future tax receipts.
I know from written answers that I have received from HMRC recently that staff numbers were projected to fall from 88,875 in March 2009 to 58,464 by March 2014. Will the Minister provide an update on those figures, and in particular what HMRC’s headcount is expected to be by March 2016, following last week’s spending review and the additional resource reduction flowing from it? It is concerning that despite much-publicised announcements about increased investment in tax avoidance and evasion activity, the number of HMRC staff working in enforcement and compliance was expected to fall from 34,762 in March 2009 to 26,905 in March 2014.
I assume that given the Government’s much-stated commitment to getting tough in this area, the predicted fall in staff numbers is no longer going to happen and that we will see a rise in the number of HMRC staff dedicated to enforcement and compliance work. It would be helpful if the Minister could confirm that for the House and tell us how many HMRC staff will be working in this area between this year and 2015-16.
In conclusion, the Government had the opportunity last week to boost tax receipts by announcing measures that would provide the short and medium-term boost our economy needs while providing a long-term return for the country, yet despite the catastrophic failure of their economic plan to date, the Chancellor came to the House and announced that he would continue ploughing the same infertile furrow he has been on since 2010. He just cannot bring himself to admit that it has gone badly wrong. We believe that conducting the review set out in new clause 10 might just help the Government to take stock and note the error of their ways to date. I therefore urge all Members to support the new clause, not only for the sake of their constituents, but for that of our country’s finances.
I will try to say something positive about new clause 10. It is quite laudable, in a way, because it would link spending to taxation and get us to engage in retrospective analysis, and frankly we do not do enough of that in this place. We talk about policy a great deal, but the long-term effects are often hidden from us. It can be quite counter-intuitive. We had an interesting debate yesterday on the 50% tax rate, the Laffer curve and the effect that such a rate might or might not have. There are plenty of other examples where the effect of taxation needs to be adequately scrutinised. In Committee we debated what tax avoidance measures would do to people’s behaviour, what petrol taxation would do to people’s behaviour and to the revenue we get, what landfill tax would do to councils’ behaviour, and what the video games industry would make of the various changes that will affect it.
My problem with what Catherine McKinnell is saying is that I think Parliament should do what she is suggesting. It seems to me that Parliament does not have enough good, accessible data and that we make no real effort to examine the whole business of tax revenue yields in any systematic, thorough, regular or routine way. When it comes to spending, there is a very similar picture. There is no real scrutiny of spending in this place. The scrutiny we do is not even as good as that which might be found in a local council. We have the big events, such as the announcement of the spending review, but there is no detailed examination of expenditure.
If Members do not believe me, they should come along to estimates day tomorrow and see the examination of estimates that is imposed in this place. The last time we had an estimates day, I was actually ruled out of order by the Deputy Speaker—not you, Madam Deputy Speaker—for talking about the estimates, which was thought improper.
We do not examine the non-controversial, everyday departmental expenditure that goes on from year to year and the errors that occur in it. The Public Accounts Committee does a very good job of looking at the controversial stuff, but there is no rigorous, effective or ongoing examination of expenditure. We do not do enough of that and we do not know enough about what tax policy actually does, how Departments spend and what the profile of a Departments is on a day-to-day, month-to-month and year-to-year basis.
Arguably, somebody in the basement of the Treasury knows the spending profile of Departments, but they would probably be unable to give the hon. Lady the answer she wants in three months, and probably not in six months. I think she has to recognise that she is making a hard ask and, in my view, probably a futile one, because if we do not do any real scrutiny of taxation in this place—we scrutinise policy, but certainly not outcomes—beyond headline figures and big grandstanding days such as the announcement of the spending review, then what we are essentially doing with the Government finance is firefighting.
What takes place in this place is not effective financial scrutiny. We do not look at the boring, pedestrian, routine and important spending, which is massive. The new clause asks the Treasury to mark its own work, and I am sure that it would be perfectly happy in some contexts to do so, but what we really need is to get Parliament to do the work and to give us an answer that would satisfy us, including the hon. Lady.
It is a pleasure to follow John Pugh, who began by underscoring how important it is to have retrospective analysis, which is exactly what the new clause asks for. It is difficult to see how it can be argued against. It says:
That would assist good governance and assist the people out there whom we come here to represent. Indeed, so far the arguments have been supportive, although there has been useful interrogation of the issues as the debate has progressed, which everybody has welcomed.
The economy expands and responds positively to acts by the Exchequer or the behaviour of individuals, the Government or business. At the time of the 2010 election, our economy was not in great health but was steadily moving in a positive direction. There was growth and good stimulus in the economy through, in particular, the strong infrastructure spending that was driving it forward. The then Government were, properly, using their resources to drive forward spending, confidence and movement in the right direction. This Government came into office in a state almost of panic and switched off of the tap of infrastructure spending. The figures now show that infrastructure spending is much less than it would have been if the plans that were in place and were helping to drive the economy forward had been continued.
That has had an impact on business confidence. We have already highlighted the crucial importance of construction as a driver of the economic health of the nation. Construction businesses have been having a torrid time over the past few years. Sadly, a serious number of subcontractors have gone out of business. Local construction companies tell me that the difficulty they are having in getting sufficient credit from their builders merchants to do the jobs which are now beginning to emerge in the economy presents another structural problem. The root cause of that is the fact that so much Government infrastructure spending was taken out of the economy in 2010, 2011 and 2012.
Many businesses have struggled and lacked confidence. Some do have reserves, but they are wisely holding on to them for a rainy day. They are not spending and making the investments in the future direction of their businesses that they might otherwise have done because they do not have the confidence to do so. The Government are not spending, businesses are not spending, and, equally, individuals are lacking confidence and not spending. When we debated VAT earlier, the Minister posed an interesting question, and rightly so. However, the reality is that putting up VAT when his Government did had an immediate hit on individuals’ spending confidence which has helped to create this downward spiral.
The new clause would ensure that there are marks in the ground to show where the Government must come back to the House to account for the impact of their policies. When the Chancellor set out his policies in his emergency Budget, which has led us to the sorry pass we are in today, he was confident that we would be in a completely different place. If he had implemented the provision in new clause 10 at that time, that would have assisted him in rethinking his policies. It would also have assisted the British people in not having to suffer the consequences of those policies for so long, because he would have reappraised the situation.
The new clause is needed to help every Member carry out one of our fundamental duties on behalf of our constituents, namely taking action to improve the nation’s economic performance and to build the confidence of businesses and individuals.
Every Budget begins with the Chancellor giving a résumé of the implications of his policies. I cannot remember that ever being greeted with wholesale acclamation from all parties. What the hon. Gentleman is asking for is more of the same, is it not?
The hon. Gentleman makes a good point. Chancellors sometimes glance back at the effect of their Budgets with rose-tinted glasses instead of seeing the real effects of their economic policies, including the decisions made in 2010, 2011 and 2012.
I congratulate the Government on moving their rhetoric to the right place: suddenly, words such as “growth” and “investment” are as prominent in their lexicon as they always should have been. However, as my hon. Friend Catherine McKinnell has pointed out, their promise on infrastructure spending is to spend tomorrow—most of it in 2014, 2015, 2016 and even 2017—rather than now. It is spending decisions taken now that will have an impact on the lives of people today, rather than waiting and hoping for things that may happen at a future date.
Boosting growth and living standards this year and next year would bring in more tax revenues and reduce the scale of the cuts needed in 2015. Taking action now to boost economic growth—by, for example, bringing infrastructure plans forward so that they happen now rather than tomorrow—would make a real difference. That is why the new clause would be helpful: it would test the impact of the spending round on tax receipts and, as my hon. Friend has said, do so in time to make any necessary adjustments to improve not only the economy, but people’s lives and living standards.
The figures revealed by the Government last week showed another cut of 1.7%—or nearly £1 billion—to capital investment in 2015-16. One would not have thought that to be the case on hearing the announcement, but having looked at the plans I know that that is what they reveal. Capital spending is down by 1.7% in education, by 2.3% in defence and by 17.6% in the Home Office. In the Department for Communities and Local Government, including housing, it is down by a massive, staggering 35.6%, and by 57.6% in the Department for Culture, Media and Sport. Those are large figures and we need to know whether their impact on the economy’s behaviour will be beneficial or, as I fear, not.
If we move away from the rhetoric and look at the facts, we will see that in their first three years this Government have spent £5.6 billion less in capital investment compared with the plans they inherited from Labour. That amounts to a £5.6 billion cut to spending that would have taken place had this Government continued with the plans they inherited from the previous Government. What has happened illustrates the importance to the health of the economy of continuity in large infrastructure projects. It is difficult to get that right between the parties, but we must recognise that there are plans for infrastructure spending so that the tap cannot be turned off easily, as the Government did with the Building Schools for the Future programme. If that programme had been carried forward, it would have assisted economic development, as well as continuing to revolutionise the learning environment of children up and down the land.
In the three months to April 2013, output in the construction industry was 4.7% lower than in the same period a year earlier. Construction output is down by 11.2% since the 2010 spending review. Construction—that energetic sector that drives the economy—continues to struggle. That is why we need to check, three months down the line, the effect on the economy of the decisions that are being made today to ensure that we are moving in the right direction.
The volume of new construction orders fell by 10% between quarter 4 of 2012 and quarter 1 of 2013. That is a massive dip. The number of new orders for infrastructure fell by 49.8% over the same period—the largest fall since 1987. The value of public sector infrastructure orders fell by £2 billion between quarter 4 of 2012 and quarter 1 of 2013. Those are significant contractions of demand in the economy.
That clearly has an impact on jobs. At the end of the day, jobs are what transform people’s lives. There is unanimity about that across the Chamber. The construction sector has lost 84,000 jobs since the Government came to power. That has an impact on the well-being and quality of life of individuals, as well as on the economy and the livelihoods of people beyond the construction industry.
There is much more that I could say, but I will return to the essence of this simple, helpful, concise new clause. I can see no argument for the Government not accepting it. It would help us all if they accepted it gracefully so that we can move forward together in harmony.
The points made by the Institute for Fiscal Studies last week when the comprehensive spending review was published support what we are trying to do with the new clause:
“The documentation and explanation accompanying yesterday’s spending review announcements was woeful”.
It went on to say:
“Publishing such a small amount of information with little explanation is not an exercise in open government.”
That warning says it all. It reflects the Government’s total incompetence on the economy.
Last week’s spending review was further evidence that the Government’s economic policies are failing. They were warned by my right hon. Friend Ed Balls that cutting too far and too fast would smother growth, and that is just what has happened. The Chancellor promised that he would deal with the deficit by 2015. That will not happen. He promised that his emergency Budget and his first comprehensive spending review in 2010 would deal with the nation’s finances and put the country on the road to recovery. Again, that has not happened.
It is interesting to hear the hon. Lady refer to Ed Balls. She is critical of our Government’s policy, but does she support increasing the debt? She criticises not bringing down the deficit faster, but if she followed her right hon. Friend’s policy, I am afraid the deficit would be going up, as would the debt.
“We have already asked the British people for what’s needed.”
He promised that he would not come back asking for more, yet last week we were here again. I hate to draw parallels with Oliver Twist, but it is a little like him coming back for more. In three years, the Chancellor has managed to hollow out the economy. He has not sorted out the City, and he is passing it off as everybody else’s fault, rather than his own.
There is a thing called “chutzpah”. Is the hon. Lady saying that her party bears no responsibility whatsoever for the enormous debt legacy and deficit the country was left with? The Government are making progress. More men and women are in work than ever before and the deficit is down by a third. Yes, the debt is not going down as fast as possible—
On the hon. Gentleman’s final point, there is more to come in my speech: “And there’s more”, I promise—I never did a good impersonation of Frank Carson. On employment, however, the hon. Gentleman is wrong. Employment is lower than in 2008 and I will come on to that—those are official statistics, so he cannot refute them. At the end of 2010, our economy was growing, yet we have been bumbling along the bottom for three years. We had a double-dip recession and barely escaped a triple-dip recession. Growth has been downgraded at every turn.
No, I will not give way now, as I want to carry on with my argument. There may be an opportunity later.
Amazingly, just a few months after the Chancellor delivered his autumn statement, he had to halve his estimates for growth this year. We will be borrowing £245 billion more than planned since 2010, and as we have heard, the deficit will not be eradicated as the Government promised in 2010. In spite of being told how important austerity was for economic confidence and low interest rates, the triple A rating has been downgraded by not one but two credit rating agencies. The Government tried to blame everybody except themselves and said that austerity was the only way, only to receive an embarrassing rebuke from the chairman of the Office for Budget Responsibility who said that public spending cuts wiped 1.4% off growth last year. The International Monetary Fund followed suit shortly afterwards.
Should anyone wish to know how we relate to the rest of the world, we come 18th in the G20, due to our appalling economic performance. Even after the IMF revised its multiplier, the Chancellor remains steadfast. I could go on—[Interruption.] I am tempted. Our rate of inflation is way above the Bank of England’s 2% target. Employment is lower now than in 2008 and one in 10 people are underemployed. Whatever economic indicator we use, the Government are failing. By all accounts, the public are now starting to see that. Earnings are falling in real terms by 2%, and a recent poll showed that four out of five people feel that austerity is not working. As we have heard, the Chancellor is resolute and sticking fast. The Chancellor and the Prime Minister have also tried to pass this off as everybody else’s fault, but we need to examine the arguments put forward to explain why we are in this mess.
The previous Labour Government have been blamed, but that ignores the fact that this was a global financial crisis. We should remember that at the time the Chancellor and the Prime Minister failed to suggest that our financial institutions required more regulation. The Chancellor has tried to suggest that it is a public spending issue, but public spending as a percentage of GDP was 36.5% in 2007, compared to 42.5% in 1997. In other words, the Labour Government did repair the roof when the sun was shining. We brought down the deficit when we were in power, and it is outrageous to suggest anything else. After injecting funds into our banks, public spending rose to 60% of GDP, but the City’s debt was 245% of GDP. For this Government to pass the crisis off as a sovereign debt problem is absolutely outrageous. This was a problem in our financial institutions that they said nothing about when they were in opposition. They are still failing to grapple with this major issue. They have not managed to improve it.
The Government are trying to distract attention away from our financial institutions and blame what they refer to as shirkers and scroungers. Their attack on the social security budget is outrageous. We must not forget that 43% of social security is paid to older people through old age pensions. This attack is on our pensioners, and that is disgraceful. Growth of just 1% a year since 2010 would have generated £335 billion more. If growth had been 2% a year, that figure would have been £551 billion. Many economists have said that the lack of growth as a result of the failure of economic policy may not be recoverable.
On the areas taking the biggest hits in the spending review—I have just alluded to the Department for Work and Pensions—we must not forget local government. What will the cuts hit? They will hit our social care budget—the budget for the most vulnerable in our society. That is outrageous. Although the NHS budget has been protected, the Institute for Fiscal Studies predicts that job losses are likely to continue. We have already seen 300,000 people lose their jobs in the public sector. It is estimated that another 300,000 will lose their jobs in the next two years. The indirect effect of cuts to work and pensions, local government and the NHS will be to hit our pensioners and increase the number of children growing up in poverty, which will affect the rest of their lives, to more than 1.1 million. We are also seeing, for the first time in decades, life expectancy coming down in certain areas. I could go on, but I will finish there.
New clause 10 asks for a review of the impact on tax revenues of the measures set out in the 2013 spending review. I note that the Labour party again seems to be interested in discussing matters that are not in the Bill as such. Rather than discussing the Bill, Labour Members want to discuss the spending review—although given how the spending review went for the Opposition, they might have done better to spend last week debating the Finance Bill.
Let me explain briefly why new clause 10 is unnecessary. The House will be aware that in 2010 this Government created the Office for Budget Responsibility in order to ensure that the impact of Government policies is independently scrutinised. The OBR routinely publishes economic and fiscal outlooks, which provide a transparent and independent assessment of the impact of Government policy on the public finances, including receipts, and the economy. The impact of the policies announced in the 2013 spending round will be reflected in the OBR’s autumn forecast, which will be published alongside the autumn statement, so there is no need for a parallel review, which is what new clause 10 would involve.
We have had an interesting debate about the measures in the spending review. At times I have been somewhat confused about the Opposition’s position. I had understood that they accepted the spending review envelope, although it certainly did not sound like it from what Catherine McKinnell said. She described local government spending cuts as “devastating”, so we assume that she opposes that measure. She was not quite clear about where further cuts would be made to compensate for that, but no doubt she will enlighten us in future.
We also heard the Opposition make the argument that we should take steps to boost growth now, rather than focusing on 2015-16. That was not an endorsement of changes such as planning deregulation, which can help growth, or a more competitive tax system. Indeed, we have tried to work out exactly what Labour believes in this area, but it was not clear. We have consistently heard about a five-point plan from the Opposition, including a cut in VAT, which was the flagship of that plan. On three occasions the hon. Lady was asked whether Labour still favoured a temporary cut in VAT under the current circumstances; on three occasions that question was evaded. I will happily give her the opportunity to intervene now if she wants to provide an answer. Do the Opposition believe in cutting VAT now? [Interruption.] She is not going to answer that question. I think we have seen the abandonment of the five-point plan—
One of the frustrations for my constituents is hearing the Government give highly political answers when they are being held to account. New clause 10 is important because it seeks to look at the impact of the measures in this spending round. The Minister says it is unnecessary, but if he looks at the contrast between the OBR forecast at the time of the 2010 spending review and real growth in the economy, he will see that it was wide of the mark and that our economy has been flatlining for the last three years. That is why we need to know the real implications.
If the hon. Gentleman accepts the OBR numbers, he really ought to accept the OBR analysis of why what he describes has not happened.
However, let me not go into that. Rather, let me turn to what appears to be the panacea coming from the Opposition, which is to say that we should borrow more in order to invest in capital infrastructure. It ignores the fact that the Darling plan—Labour’s plan to partially address the deficit—involved substantial cuts in capital spending. It also ignores the comments made by the right hon. Member for Edinburgh South West (Mr Darling) about some of the challenges of using infrastructure for pump-priming purposes. The argument also ignores the fact that we will be spending more on capital infrastructure as a proportion of GDP in this decade, a period of austerity, than in the previous decade, when the Government were throwing money around. It also ignores the measures that we have set out for delivering the biggest programme of road investment since the 1970s, for updating our rail networks, for securing our energy infrastructure, for investing more in science and innovation, for building new homes and schools, for establishing the single local growth fund, for expanding digital coverage and for investing in our flood defences.
I was hoping to leave the Minister time to respond to some of the serious concerns that we have raised, but this complete fantasy-land account of the Government’s record on infrastructure investment has prompted me to jump to my feet. Will he confirm that his Government are investing less in infrastructure than was proposed under the Darling plan? They are investing 1.7% less in real terms over the course of this Parliament, and again in 2015-16. They are also borrowing more.
It is clear that the balance of our plan has focused much more on current spending, as compared with capital spending, than did the plans that we inherited.
I want to turn to the issue of HMRC, which the hon. Lady rightly raised. I can assure her that, as a consequence of the measures we are taking, HMRC’s yield is going up compared with what we inherited. By 2015-16, yield will have increased by approximately 70%, which represents a staggering increase in the performance of HMRC under this Government. Yes, staff numbers are falling but, when it comes to enforcement and compliance, staff numbers will be higher in 2015-16 than they were under the previous Government. We should not always focus on inputs; we should focus on outputs. The record on outputs is very good. If the hon. Lady wants to focus on inputs, however, she should be aware that the record of the previous Government involved the number of staff working in enforcement and compliance falling by 10,000. Under this Government, that number will be increasing.
I have run out of time, but I believe that the spending review is evidence of a Government who are prepared to take the difficult decisions that we need, and a Government who have economic credibility. The contrast with Labour could not be greater.