Budget Resolutions - Income Tax (Charge)

Part of the debate – in the House of Commons at 6:29 pm on 31st October 2018.

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Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 6:29 pm, 31st October 2018

It is a pleasure to follow Vicky Ford. I may not always agree with her—I do not agree with her assessment of the Budget—but I know that she is passionate about science. I fear she misunderstood: she has a shared passion for science with my hon. Friend Chi Onwurah, particularly for quantum physics. Indeed, my hon. Friend has visited physics facilities in my constituency, so she and the hon. Member for Chelmsford are perfectly in accord.

We have heard some excellent contributions today, with important points being made on both sides of the House, and I will refer to as many of them as I can in the time available. As many Members have suggested, this is sadly a complacent Budget, and that accusation came not only from the Opposition during this debate. That complacency was perhaps at starkest in the Chancellor’s assessment of our country’s economic health, and I was surprised to hear that repeated by the Secretary of State for Business, Energy and Industrial Strategy. He is usually a stickler for detail, but he seemed to suggest this afternoon that the estimates underlying the Government’s plans could be revised upwards if a good deal was done with the EU. However, those estimates already presuppose that a deal along the lines advocated by his Prime Minister will be struck with the EU, a fact which is obviously being challenged by many Conservative Back Benchers. Such hubris is reckless in the extreme.

At the beginning of the Red Book, we see the claim that the Government’s approach has created a so-called “stronger and fairer economy”, but the statistics tell a different story, as we have heard throughout today’s debate. The one indicator that the Government frequently refer to is the employment rate. Now, of course it is positive to see an increase in the proportion of people working, but we must be careful because that has not happened everywhere. For example, IPPR North has shown that there are now 25,000 fewer jobs in the north-east than in the immediate aftermath of the financial crisis in 2008. We should have had a full recovery, but we have not.

It is deeply complacent of this Government continually to fail to acknowledge the burgeoning proportion of people who are now in insecure work—one in nine working people. My hon. Friend Jim McMahon painted a disturbing picture of the reality of the workings lives of many of his constituents. If we MPs, as a body of people, were in the same position as our constituents, over a quarter of Government Members would not know from one week to the next how many hours they would be likely to work. That may come to pass anyway in the fullness of time but, to be serious, that high rate of insecurity—among one in nine people—is deeply damaging.

The problem has of course been exacerbated by low wages, and here I must point out the Government’s brass neck. They argue that wage growth is at its strongest in 10 years, omitting the fact that this welcome upturn has come after the longest period of wage stagnation since Napoleonic times, all of which—outside the immediate impact of the financial crisis—came on their watch. The increased so-called living wage proposed in this Budget falls short of the £10 an hour that is needed to lift people out of poverty pay.

Finally, as many colleagues have mentioned, the changes to universal credit only repair half the damage done to the system in 2015, and there is nothing in the Budget to repair the damage done to the incomes of disabled people, as was rightly referred to by my hon. Friend Marsha De Cordova. Taken together, insecure work, low wages and cuts to social security have meant that, for the first time in many decades, getting into work no longer means leaving poverty behind. Two thirds of children living in poverty are now in working households.

It is little wonder then that personal debt is rising, as referred to by Sir Michael Fallon, who pointed out that current levels of saving are at their lowest for 50 years. While we have seen some change, there has been no adoption of the measures that Labour has advocated to combat out-of-control overdraft fees or credit card debt. It is perhaps no wonder in such circumstances that so many people now feel that the economy is simply no longer working for them, as shown clearly in polling undertaken in September for the IPPR.

The indicators for the future are deeply worrying. Yesterday my right hon. Friend Joan Ryan rightly quoted extensively from the OBR’s commentary, and I will not repeat her words or the OBR’s at this point. Suffice it to say that surely there is little room for celebration when we learn that GDP growth in future years has had to be revised down, business investment is falling and our levels of productivity growth are so much lower than those in comparable countries.

My right hon. Friend Mr Jones and my hon. Friend Mr Cunningham clearly set out how different the situation was under Labour, which indicates how short the memories are of some Conservative Members. I respectfully suggest to Stephen Hammond that perhaps he needs to have a word with his former Chancellor, George Osborne, given the latter’s recent comments, as well as with the many economists and international leaders who praised Gordon Brown’s approach to dealing with the financial crisis.

Are the Government finally moving in the right direction to protect our economic future? The evidence of this Budget suggests otherwise. It proposes a temporary increase in the annual investment allowance to £1 million and a new allowance for investment in non-residential structures and buildings but, at the same time, it continues to choke off the nascent onshore wind and energy efficiency industries in this country with its frankly reactionary approach to regulation and support. Appallingly, investment in renewables is going down—it fell by 56% last year—bucking the trend in many comparable countries. My hon. Friends the Members for Ynys Môn (Albert Owen) and for Vale of Clwyd (Chris Ruane) spoke forcefully on that issue, as on others.

We also have worrying falls in investment in the motor industry. I pay tribute to the work of my hon. Friend Mr Bailey, and I thank him for his pertinent remarks in this debate. I also thank my hon. Friend Matt Western, who made similar points.

Today, as on Monday, we were told that this Government will facilitate a renaissance on our high streets. Well, let us look more closely at the current proposals. The suggested changes to business rates only make good on the damage due to the Government’s botched evaluation back in 2017.

The shadow Minister for industrial strategy, science and innovation, my hon. Friend the Member for Newcastle upon Tyne Central, rightly made it clear that we desperately need not these temporary measures but a proper root-and-branch review of the business rates system. That is particularly important as a growing number of local authorities are expected to rely solely on council tax and business rates to fund local services. In this debate we have heard about the human impact of the cuts to central funding for local government in both St Helens North and Vale of Clwyd. The impact is very worrying.

When local authorities complain about the situation, the Government tell them, “Well, you can just go and raise council tax.” That position was rightly critiqued by my hon. Friend Rachael Maskell, who also correctly pointed to the Government’s lack of grip on the speculative purchase of so many properties on our high streets by tax haven-based businesses—the Government are doing very little about that.

My right hon. Friend David Hanson and my hon. Friend Susan Elan Jones correctly referred to the need for investment in north Wales, an approach echoed for Yorkshire by my hon. Friend John Grogan. They all pointed out the inadequacies of the Government’s current approach.

We need to be clear that this Government have chosen to continue placing the burden of cuts on the worst-off people, and they continue to expect a greater contribution from local council tax payers. It is important to note that, under this Government, a smaller and smaller proportion of councils are able to provide council tax relief to low-income people. In many of our areas that means that council tax increasingly resembles the cruel poll tax it was meant to replace.

Again in relation to our high streets, this Government’s proposals to promote further the conversion of commercial properties to residential use will starve many growing businesses of the space they need, at the same time as the Government condemn desperate householders to cramped living conditions. How many Members in this Chamber would be willing to live in a flat with a floor surface of 15 square metres? I do not see anyone putting their hand up, but such flats exist in Croydon because of this scheme. It is worth noting that that is half the recommended floor space for housing chimpanzees, and we are talking about people, not animals.

As well as dealing with that problem, we also need action from this Government to protect local amenities such as post offices. On the helpful point my hon. Friend Ellie Reeves made, the Secretary of State needs to be aware that 112 post offices closed last year.

On productivity, again we did not see the action we need to halt the relative stalling in productivity gains that we have seen in the UK compared with other nations. The £1.6 billion earmarked in the Budget for science and innovation, which the Red Book says was “announced” in this Budget, was nothing of the kind—only £56 million of it is new money. It was not announced in this Budget at all.

Sadly, we have seen minimal action from this Government to deal with the skills shortages in the UK. My hon. Friends the Members for Darlington (Jenny Chapman) and for City of Durham (Dr Blackman-Woods) both noted eloquently that widespread concerns exists about the plummeting by half in the number of adult learners since 2010 and the fact that further education funding has been slashed by a third. My hon. Friend James Frith also mentioned that issue, perhaps in slightly more explicit language. His anger about it reflects the frustration of many teachers and students in further education. The impact of cuts on young people was also rightly referred to by my hon. Friend Mr Sweeney, and I am grateful to him for his remarks.

During this debate, a number of Conservative Members rightly and properly represented their constituencies by voicing concerns about the lack of extra funding in this Budget for schools’ running costs. My hon. Friend the Member for Keighley suggested that the so-called “little extras” patronisingly provided for in this Budget were like a disappointing Christmas present, but I would go a little further. Where I am from, Santa can be nasty as well as nice; one year my little brother had said the “worst word” one too many times, so on Christmas morning he got a stocking that was filled not with presents, but with straw. I rather suspect that his reaction was similar to that of many teachers and parents on being told that they might perhaps be able to have a “little extra” such as a whiteboard or computer for their school, when they are struggling for teachers, for teaching assistants and for basic educational materials. As my hon. Friend Matt Rodda said, this was an insult.

On productivity, as on so much else, this was a short-term Budget, rather than the long-term programme we need. The Chancellor this time has benefited from an unexpected windfall due to higher than expected tax receipts and lower than expected Government spending, rather than carefully engineering a successful recovery. There is no guarantee that these conditions will persist. The Chancellor had the chance this year to put public finances on a more sustainable footing, by cancelling his planned cuts to corporation tax and adopting Labour’s more progressive approach to income tax, which would require the top 5% to contribute more, but he chose not to do so.

Again on the subject of revenue raising, this Budget contained a commitment to a new digital services tax. Although it was announced with much fanfare, the devil is in the detail. I will not go into detail now, because I want to hear the Minister’s response, but I would just say that the safe harbour principle within that proposal for a digital services tax and the double threshold rule seem to be subject to exactly the same problems that have beset this Government when they have tried and failed to raise corporation tax from many of these digital giants; this seems to be riddled with loopholes and inadequate. What we really need is a more thorough-going approach, of the type that Labour set out in our tax transparency and enforcement programme.

In conclusion, in his opening remarks the Secretary of State said—I hope I have remembered his words correctly—that he was confident that the life sciences in our country would continue to be strong under “all scenarios” of exit from the EU. That is not what I have heard from biosciences companies, nor from firms in many other sectors. My hon. Friend the Member for St Helens North spelled out very clearly how a chaotic, no-deal Brexit would cause “economic catastrophe” for areas such as the one he represents, and indeed many others, as was highlighted by my hon. Friends the Members for Hampstead and Kilburn (Tulip Siddiq) and for Bristol North West (Darren Jones).

This week started with the Prime Minister contradicting her Chancellor over whether a no deal Brexit would require a new economic plan. This week surely has to end with our Government waking up to the reality that they must rule out a no deal outcome to the Brexit negotiations, and start putting our country and the jobs of our people first.