Finance (No. 2) Bill

Part of Bill Presented – in the House of Commons at 5:32 pm on 1st April 2014.

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Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 5:32 pm, 1st April 2014

I have great respect for the North East chamber of commerce, but it represents only a certain section of the business community—it does not represent all the business community—and I have never seen it disagree with any Budget, because, understandably, it likes to keep in with the Government of the day. The “Conservative” Member for Redcar is clear in giving an upbeat assessment of his own constituency, but it is not one that I recognise and neither do many Members representing north-east constituencies.

The hon. Member for Macclesfield said that the Government had a clear sense of direction and Charlie Elphicke said that they had a clear plan, unlike the Opposition. Let us look at this clear plan and sense of direction. The narrative goes as follows, and before any Government Member says differently, these things are not invented by the Opposition; they are what this Government did when they came into power. We should recall that in 2010 our economy was actually growing. Why did it go into recession? It did so because of what happened during their first few days, including the measures on investment, which my hon. Friend Chris Leslie mentioned. What the Government did sucked money straight out of the economy, so demand went down. We have had the longest recession and recovery in history. On the Conservative party’s and the Chancellor’s own figures—these are not my figures or the Labour party’s—by now we should have seen 8.4% growth, whereas we have actually seen 3.8% growth. We were supposed to have got rid of the deficit by 2015, but we are actually borrowing another £190 billion more than we were planning to borrow.

That is the Chancellor’s supposedly successful plan. People would think that he would apologise for that, but that is about as likely as Jacob Rees-Mogg walking into the Chamber wearing a pair of Wrangler jeans. The fact is that the Chancellor’s plan has not been working, with the root cause—the Liberal Democrats have been going along with this—being an ideological Conservative party, which is not just about deficit reduction, but is actually about small state Conservatism. The headlines in last week’s Budget were clearly designed around things such as the pension measure, which I will discuss in a moment, but tucked away were another £1 billion of cuts, which the Chancellor made permanent for future years. So that is more pain for Departments across Whitehall and communities across our country.

The Budget headline was clearly on pensions, and much has been said about the freedoms the measure is going to give. I do not usually agree with Richard Harrington, but he made some interesting points in his contribution and I share his fear about people’s ability to get proper financial advice about what to do with their pensions. I take his point that we are dealing with relatively small sums in terms of pension pots of £20,000 to £25,000 and the costs of giving that advice would be astronomical. Are we, however, going to avoid the chaos we had—many of us remember seeing it in the 1990s—when the vultures descended on workplace pension schemes, advising people to take money out and put it into all sorts of products, which led to people making bad investment decisions?

The Minister of State, Department for Work and Pensions, Steve Webb, who is responsible for pensions, says that he is not really bothered if someone wants to go and blow it all on a Lamborghini. Hon. Members might not be surprised to learn that I do not know a great deal about Lamborghinis, but I was a bit disappointed that he did not use an example of a British car, because it would have been a good idea to boost the British economy if he really wanted to give an example of an expensive car. Today, I looked up the cost of the cheapest Lamborghini and found that it is £300,000—that represents quite a big pension pot. The problem arising out of that policy is that the Government have not published the modelling on what the effects will be on the public purse. They need to do that because hidden issues need addressing. It is right to give people choice and freedoms, but the Chancellor did nothing at all to affect the charges, fees and so on that small pension pots are attracting, which can be substantial, not only at the time of buying an annuity, but over the lifetime of the pension. That would be a thing to do.

I have serious concerns. For example, if a pensioner uses their £300,000 plus to buy a Lamborghini—or possibly a Bentley, which would at least boost jobs in this country rather than in Italy—what do they do when they have no money left? The Pensions Minister says, “Well, that’s fine because it has all been taken care of by the new generous state pension.” He forgets that there are other things. There is no mention, for example, of care costs or of housing benefit. Those things need to be explained. It helps the Chancellor; he has a figure in the Red Book for the amount of tax he will raid out of pensions in the short term. There will clearly be a boost if people spend their money in the economy. I am not usually a great fan of the Association of British Insurers, but a serious issue has been raised about the future of the annuities market. Insurers do not just get in money and sit on it; they invest it, so we are talking about long- term investment that is being taken out of projects and businesses. To make a full assessment of the effects of this move, we need to understand the modelling of the scheme, and that has not been forthcoming. It will be interesting to see whether the Government will produce it.

The other issue is the increase to £15,000 a year in the allowance for individual savings accounts. Like the hon. Member for Macclesfield, I speak to my constituents. It is laughable to suggest that they may have £15,000 lying around to invest each year. I think that most people are in the same position. As my hon. Friend Mr Bain said, people are not investing the money; they are actually spending it to live in their old age. Some 8 million people in this country have no savings whatever, and another 32% have less than £1,000 in savings, so the proposal will not help anyone. It may help some who have £15,000 to invest. Should we welcome that? Possibly, but the idea that it will help most of my constituents, or most of the constituents of my hon. Friends, is frankly not right. On Saturday, when I was out at an event in Chester-le-Street in my constituency, someone said to me, “Who’s got £15,000 lying around to invest in that type of savings plan each year?”

When the Chief Secretary to the Treasury opened the debate, my hon. Friend the Member for Nottingham East said that he was suffering from Stockholm syndrome, because he has actually become part of the Conservative party. Indeed, having heard the speech and the comments of Ian Swales, I think that he also has a very bad dose of the syndrome.

I asked the Chief Secretary at what point in the previous Labour Government did his party say that spending was too high. I then gave him another chance and asked him whether the Liberal Democrats had called for reduced expenditure in any area—whether it be in the NHS or anywhere else. There was not one single area. At least the Conservatives could say that they ditched the pledge around 2008-09. The Liberal Democrats kept going right into the last general election. To hear the hon. Member for Redcar now, we might think that he had long been there calling for fiscal responsibility and less expenditure. The Liberal Democrats may trumpet it now, but that was not the case back then.

The Chief Secretary to the Treasury said that he was proud that the increase in allowances was straight from the last Liberal Democrat manifesto. It might have been, but the commitment on VAT—he was challenged about what happened to that—went the same way as the commitment on tuition fees. Remember the VAT bombshell? It was the first thing they did and the Liberal Democrats could not even claim at that stage that they had been affected by Stockholm syndrome, as they were only in the early days of captivity. And what did they do? They increased VAT. The hon. Member for Redcar says that the increase in VAT is a progressive form of taxation. I am sorry, but it is not. All the indications show that it is a regressive form of tax that hits some of the poorest in our communities, including in Redcar.