Finance Bill

My Lords, I rise in support of the coalition’s Budget proposals although, as the noble Lord, Lord Tunnicliffe, has indicated, it is immaterial whether or not I do as this is a money Bill and we can only talk to it, not vote on it. I rise to support it as the relevant Liberal Democrat spokesman; I am not part of the Government but am in the coalition. This is probably the first Budget to emerge from a coalition since the 1930s. Apart from trying to provide stability for our government, one reason why the Liberal Democrats went into the coalition was to see which of our measures could be implemented by the coalition agreement and what our track record would be, having implemented the sort of policies on which we fought the election. Of course, no one will know what went on within the Cabinet rooms in the Treasury when the Budget was agreed; nor indeed will we know until we see everyone’s memoirs, which I suspect will not be rushed out quite as quickly as those of the noble Lord, Lord Mandelson. However, looking at the proposals in the Finance Bill and the related announcements, there are clearly some issues where the Liberal Democrat members won the relevant arguments. I suspect that there would not be the proposed bank levy, on which we campaigned during the election, without the influence of the Liberal Democrats, and, bearing in mind the hostility that came from certain elements of the Tory party against an increase in capital gains tax, I suspect that the proposals to increase capital gains tax enshrined in this Bill came from the arguments raised by the Liberal Democrats. As noble Lords will know, we attacked over a period of years the Labour legislation under which, to coin a phrase, many of the rich paid less in capital gains tax compared with the income tax paid by those who cleaned their offices. As the Minister indicated, the coalition Government have taken the first steps to eliminate from tax altogether people with an income of under £10,000, and, as he has indicated today, those proposals are part of a process which the coalition has agreed will continue throughout the period of the Government. Most importantly, we have long advocated the restoration of the earnings link on pensions—something that Labour has always resisted—and that link is now being restored. I have said what I agree with in the Budget and have referred to the legislation that reflects Liberal Democrat policies. However, I think that the role of the Liberal Democrats in your Lordships’ House is also to question the coalition about areas at which the Government need to look carefully. Taking up the point that the Minister made regarding the fairness of the Budget, undoubtedly both parties in the coalition have tried to demonstrate that this Budget is fair across all elements of society. However, there is no doubt that there are issues here, one of which was touched on in the intervention of the noble Lord, Lord Lea of Crondall. The Budget briefing indicates that the package mitigates, "““the impact on the most vulnerable in society””," and that fairness will be achieved by sharing the impact across all income deciles—a wonderful Treasury phrase. It claims that, while the bottom 20 per cent will lose, on average, 0.9 per cent of income, the top 20 per cent will lose 2 per cent. However, as always, the devil is in the detail, and Robert Chote, the head of the IFS, has said that the problem is that that does not take into account alterations in welfare benefits. If the coalition is to claim that this is a fair Budget, the Government need to look at how the Treasury models the impact of the reductions in taxation at the bottom end and plugs in the impact of the loss in welfare benefits. I certainly urge the Government to do that. A number of right wing newspapers have trumpeted the impact of reductions in housing benefit, and there have been horrendous stories of people getting hundreds of thousands of pounds in housing benefit in the wealthier parts of London; but as the noble Lord, Lord Best, indicated in the debate on Thursday, that is just the tip of the iceberg of the issue and the proposals to cut housing benefit could bear down particularly on the unemployed in London and the south-east. Why should we attempt to make life tougher for the unemployed? As some of these measures will require legislation, I urge the coalition Government to have a look at the detail in order to see the extent to which these problems can be ameliorated. The elephant in the room, which the noble Lord, Lord Tunnicliffe, touched on, is what will happen in the comprehensive spending review in October. We are all aware that the Finance Bill and the Budget proposals have, in a sense, a relatively small impact compared with the CSR. I am sure that the Liberal Democrat Members of the Government will be arguing strongly with the Tories that—whatever happens in the CSR, and clearly there will be significant cuts—we should endeavour to ensure that they do not bear unfairly on those in our society who are less able to cope. One point which nobody has touched on yet is the fact that managing economic policy is not just about fiscal policy or public expenditure; there is also the whole area of monetary policy, which has now been handed over to the Bank of England. I refer to a point which a former member of the Monetary Policy Committee raised today in the New Statesman. Will the Minister indicate whether, if the MPC were to lose control of its senses and significantly raise interest rates, tightening monetary policy at the wrong moment, the Government would not rule out exercising Section 17 of the relevant legislation, which allows the Chancellor of the Exchequer to overrule the committee? Although it looks like that will not be necessary, it would greatly comfort those of us who follow these matters to know that that would not be ruled out. I listen with absolute fascination to what the Labour Party has to say on the Budget, the Finance Bill and the Government’s current economic policy. Let us look first at the point that the noble Lord, Lord Tunnicliffe, made on VAT. Not only did Alistair Darling indicate that he had been in favour of an increase in VAT when he appeared on ““The Daily Politics”” and ““The Andrew Marr Show””; the third man has indicated it as well. In his book, he said: "““Alistair’s final pre-election PBR was due to be delivered on December 9 ... he told me his proposed surprise announcements would reduce the bill for basic-rate taxpayers … here was the shock—to balance these moves he was minded not only to restore VAT to its previous level of 17.5 per cent, but … even to 19 per cent””." ““I was impressed””, said the third man: "““These were exactly the sort of hard choices that would enable us to regain the initiative … Gordon … vetoed [it], point blank””." Alistair Darling floated a VAT increase before the March 2010 Budget, and again Gordon Brown vetoed it. Alistair Darling disclosed that on ““The Andrew Marr Show””, but he had also done so on 13 July on ““The Daily Politics””, when Andrew Neil asked him whether he had considered an increase in VAT, which Gordon Brown was against. Alistair Darling said: "““This is public knowledge. It’s well known that there was this difference between us””." So, on the question of VAT, the Labour Party really should keep silent. Let us consider Labour’s record. Labour has left this country with the second largest deficit in Europe. On the OBR’s forecast, the UK deficit will be 10.1 per cent of GDP in 2010-11. That is higher than France, at 8 per cent, Germany, at 5 per cent, Japan, at 6.7 per cent, and—would you believe it?—Greece and Portugal, the two weak members of the euro zone, at 9.3 per cent and 8.5 per cent respectively. Under Labour the UK has had the deepest recession on record, and the longest recession in the G20. Labour cannot deny that. There have been six consecutive quarters of negative growth, and no other country has had that. There is also no doubt that the Labour Party was planning cuts just as large as those which the coalition Government are proposing. The IFS has indicated that on Labour’s own Budget plans we would have to have cuts of 25.4 per cent to non-protected areas. Those are huge cuts which Labour was committed to bringing in but which it was not prepared to disclose in the run-up to the election. As I said in the debate on the gracious Speech, to misquote Attlee on Laski: a period of silence from the Labour Party on this issue would not come amiss.