Finance Bill

I have heard the hon. Gentleman espouse that rather spurious point before—and no doubt he will do so again. Of course, that is not a debt around their necks like a personal loan or a mortgage. It is part of the way in which we run our national accounts. Of course we will always require a level of borrowing. Perhaps the hon. Gentleman is suggesting that we should avoid the need for any borrowing whatever, but at this point in the cycle, if we are to ensure that our economy succeeds, we must have a borrowing facility. If the hon. Gentleman thinks that that is wrong, that is his own ideological position. However, I think that it would be exceptionally regressive not just to freeze child benefit for three years, withdraw the health in pregnancy grant, restrict the maternity allowance to the first child, remove the baby component of child tax credit, reverse the supplement for children aged one and two and abolish the child trust fund, but to make young people and families with children bear the VAT increase as well. This is an extremely important and serious issue. Some areas of child-related expenditure are, of course, either zero-rated or rated at a low level. There is a drafting error in my amendment: I had originally included nappies, but on learning that they were classed as children's clothing, I withdrew the amendment. For some reason it has remained in the group, but the Minister will understand the point that I am making. There is a set of items that young families cannot do without, and I believe that alternative forms of revenue could compensate for tax on those. I seriously ask the Minister to consider making such an exemption. The VAT increase will be very damaging in a more general sense. I worry not only about its inflationary impact, but about its recessionary impact. Given that it is equivalent to an income tax increase of about 3p, there is a serious possibility that we will end up with inflationary pressures and the return of higher interest rates. The hon. Member for Dundee East (Stewart Hosie) quoted Simon Newark of UHY Hacker Young as saying that the increase could push high street prices up by 2%, and that too is a serious issue. The impact on those at the other end of the age scale —pensioners—is also incredibly worrying. Whether it amounts to £8 billion, less or more, it will be very significant indeed. As well as having to finance the 25% reduction in their grant levels, those in charge of public services will have to fork out for this extra cost. I am particularly worried about the effect on the NHS and local government. Public spending on councils and the police, as well as some elements of spending on education, transport, housing and the construction industry, will not be protected. The Government's desire to opt for this most regressive of taxation options led certain City commentators, such as Ian Kernohan of Royal London Asset Management, to observe that the increase would hit all income groups particularly hard in the winter months. Although many of our constituents may at this point be oblivious to the approach of the change because other events have been in the news, there is no doubt that a winter of discontent potentially awaits the Government. Charities will be hit especially hard, and I am glad that Members have tabled amendments in an attempt to relieve them of some of the burden. So much for the "big society", when so many third sector organisations are expected to bear the strain. The Government are removing public services and placing some of the burden on charities. What a gift that is! In a wider economic context, the increase undermines much of the economic growth that may well come from the retail sector. We have heard about the particular impact on certain parts of the country near the Borders and elsewhere, but as soon as the Budget was announced, Morgan Stanley's broker analysis recommended selling stocks and shares in general retail, and buying in other areas that were exempt from VAT or in which it was minimal.