Category: Debates

Mr John Redwood (Wokingham) (Con): What is the Department’s estimate of the increase in output if all the measures recommended by Beecroft were adopted?

The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk): I do not have a specific estimate, and that is why we have issued a call for evidence. My right hon. Friend is right to ask about that issue, which the hon. Member for Streatham (Mr Umunna) unfortunately did not mention. We need to understand that there is a cost to every regulatory measure that is brought forth, not only economically but for people on the edge of the labour market who want the chance to have a job. If we regulate them out of work, we have to take responsibility for that, so my right hon. Friend is right to reflect on the costs.

Mr John Redwood (Wokingham) (Con): I remind the House that I offer business advice to a global engineering business and a small investor management business.

We meet today with the winds of danger blowing once again from the euro area. We meet to discuss measures in the Queen’s Speech to make Britain more competitive, to equip Britain better, and to produce more jobs and deliver more goods and services around the world. No one in this House would disagree with the aim. All the main parties agree that we need more economic growth. I think they all agree it is easier to get a deficit down when we are creating more jobs, getting people who are out of work into those jobs, and generating more income and activity, than when we are not. There is no disagreement across the Floor of the House about the aim.

However, when debating how we are going to get that growth and give the best possible support to the companies and individuals who create the jobs and make things happen, we must also recognise that there is a very threatening and menacing problem on our doorsteps. As we meet here today, we know that the Greek political parties may not be able to form a Government at all, or they may not be able to form a Government that can put through the necessary measures to meet the requirements of the EU and IMF loans in Greece. They may decide on new elections in some weeks’ time, creating a dangerous hiatus; and those elections may produce a Government who fully reflect the view of the Greek people, as expressed in the last election to a considerable extent, that they do not wish to co-operate any longer with the lethal mixture of policies that the euroland senior politicians have put forward.

That matters to the United Kingdom, not only because some of our exports and services are sold within euroland, but because, as members of the European Union, we will participate in some of the meetings about what kind of growth strategy Europe as a whole can develop, and we will be a party to some of the decisions that will determine the future of the euro. If the Greek tragedy unfolds such that the Greek state cannot meet the requirements, the European Union has to decide either to give in yet again and come up with another compromise, or that there has to be an early exit of Greece from the euro. It would be better for the British economy and for the future of euroland if an early exit of Greece from the euro were organised quickly, and in confidence up to the point when the necessary announcements must be made. I would not expect the British Government to confirm that that is their aim, but I hope that Ministers are working closely together, representing the greatest financial centre in western Europe and perhaps the world, with that in mind. The sooner the Greek problem is solved, the sooner we can get on with sorting out some of the wider problems in the European economy.

If it is decided to cobble together another compromise, massive headwinds against growth and prosperity in our continent will continue to blow forcefully. Will an early Greek exit be easy to handle? No, of course not. Will it be pleasant? No, of course not. But the Greek people have got to the point where they cannot take any more years of austerity, and in some way or another Greece has to be made competitive. If is it is completely impossible, as it seems to be, in a democracy to slash wages by the amount the German side of the argument seems to say the Greeks should slash wages by, other means have to be used: having a devaluation and having a new currency.

The United Kingdom has one big advantage in thecrisis: we have our own currency, it is freely floating,and we are much closer to having competitive prices than Greece, Italy or Spain can possibly be within the euro. Any measures that my right hon. Friends can take to improve our competitiveness in order to create more export jobs, the better. How right Ministers are to see that there has to be a huge reorientation of British exports towards the emerging markets—to the faster-growing territories of Asia, Latin America and parts of Africa—because Europe is making such a comprehensive mess of its economy and its prospects. It is destroying hope and jobs on such a massive scale that our only hope as a country is to support and orient our businesses to where the growth is and where the opportunities are to be found.

That means taking urgent action to mend our banks and to establish more competitive banking, with more money to lend to our companies, because they are going to need working capital and investment capital. They are going to need to gear up for the 2.5 billion Indian and Chinese who want to come to the world party, many of whom, I am pleased to say, will come to the world party and will be the market that replaces the European market, which is failing so visibly.

We also need competitive energy. Surely the Secretary of State would agree, at least in private, that if we wish to lead an industrial revival in this country or anywhere else, we need cheap and competitive energy in plentiful supply. We should not be saying, “Let’s make everything in China, so it does not score against our carbon dioxide totals.” Let us make things here. If we have cheap energy, we will have more chance. Modern manufacturing creates lots of jobs in marketing, legal work and promotion. It does not create many jobs on the shop floor because it is automated, which requires access to lots of cheap energy. That is what I want this Queen’s Speech to address: cheap energy, less intensive regulations—

Mr Deputy Speaker (Mr Nigel Evans): Order. I remind hon. Members that there is a six-minute limit on speeches.

Mr John Redwood (Wokingham) (Con): Does the Minister believe the UK is bound by the Maastricht rules that its deficit should be 3% per annum and no more, and that it should have a stock of debt of only 60% of national income?

The Financial Secretary to the Treasury (Mr Mark Hoban): We are required to endeavour to achieve the Maastricht criteria. A very different regime is in place for the UK because of the opt-out that John Major negotiated under the Maastricht treaty. We have been clear, as the economic governance package has developed in recent years, on preserving that opt-out and the different treatment for the UK as compared with other European member states. One achievement is that we are not subject, for example, to the sanctions regime to which other member states are subject.

We jealously protect our particular position in the process, as I am sure hon. Members on both sides of the House would want us to do. Clearly, were we to follow the Leader of the Opposition’s policy—he wants us to join the eurozone at some point—we would have to give up those safeguards and protections. That is not a policy that this Government or the Conservative party would support.

…

Mr John Redwood (Wokingham) (Con): I have some sympathy with the Minister in this debate, which is about colossal issues, such as the future of economic prosperity throughout the European Union and its impact on our own economy, yet it is also a rather absurd debate. Successive Governments have felt that they have to table documentation and figures to the European Union, but they are embarrassed by that fact because they know that many of us feel that it is this Parliament, which answers to the British people, that should debate and settle these issues, and that what we are doing is none of the EU’s business. If we do a good job, we will stay in office; if we do a bad job, we will be thrown out of office, and the British people will rightly choose another group of people as they decided to do in 2010 as this crisis developed. We think that that is the right approach.

I must tell my hon. Friend the Minister that if the Opposition had tabled a motion suggesting that the House should tell Brussels that we would no longer send it these documents, I would probably vote with the Opposition, because I would consider that a sensible way of trying to send an obvious message to Brussels. However, we are being invited to spend more time debating the crucial topic of what kind of economic policy would best promote growth and stability in our own country, and what contribution wider economic policies can make to stability and growth in the European Union as a whole.

The description of the pact that we are debating as a stability and growth pact to be a grotesque bad-taste joke at the expense of the European peoples. It is clear from the way in which it now operates in the euroland countries that it is actually an instability and recession pact. It is a pact for mutually assured deflation. It is intended to do more damage at the very point in an economic cycle when an economy is performing very badly, to withdraw spending power from both the private and the public sector in an economy with too little demand, and to take jobs away in an economy with a problem of mass youth unemployment.

Mark Hendrick (Preston) (Lab/Co-op): I accept that the policies of many euro area member states are deflationary, but it is ridiculous to deride them simply because those countries are members of the eurozone when our own Government’s policies are equally deflationary.

Mr Redwood: As I shall make clear shortly, our policies are rather different. For one thing, the coalition Government decided to increase current public spending, which is running at £64 billion a year more this year than in the last year of Labour government. The Red Book shows that real current public spending has risen in each of the two years of the coalition Government, although not by very much. The Government are clearly not trying to deflate the economy by introducing massive current spending cuts, given that overall current spending has been rising.

Stewart Hosie (Dundee East) (SNP): The right hon. Gentleman, who knows the Red Book inside out, will recall that it makes clear that the Government’s projected discretionary consolidation by 2016-17 amounts to £155 billion a year, of which 81% will be delivered by cuts in services and the remainder by tax increases. The hon. Member for Preston (Mark Hendrick) was right: the Government are embarking on precisely the policies for which the right hon. Gentleman is criticising others.

Mr Redwood: I am afraid that the hon. Gentleman has not read the Red Book intelligently. The 80:20 statistic on which Members seem to rely relates to changes compared with much bigger growth in public spending that was in inherited programmes. It is not the reality. The reality of the Government’s strategy is a massive increase in taxes over the planned five years of the present Parliament to pay for rather modest increases in current public spending over the life of the Parliament, and to get the deficit down. The 2010 strategy suggested that tax revenues would be £171 billion a year more in year 5 than they had been in the last Labour year. The Government have now had to reduce that figure a bit because—as other Members have pointed out—the expected growth has not been forthcoming, for a variety of reasons.

We need to promote growth vigorously and actively, which is common ground between the Government, coalition Back Benchers and many Opposition Members. The argument, surely, concerns what measures are most likely to bring that about. It appears that over the last four years both Governments have operated policies involving actively increasing public spending, with the exception of capital spend—certainly overall spending has risen—and actively promoting massive borrowing, while at the same time the economy has bombed very badly. I am not suggesting that that is causal, but it should lead Opposition Members to ask why that fiscal injection—massive borrowing and an increase in current public spending—has not done the job. There seems to be some disconnection between the remedy that they recommend and the reality of what is happening.

When we look at the way in which other countries have pulled out of crises of this kind, and, indeed, the way in which Britain has pulled out of similar but, perhaps, less aggressively damaging crises than the one that we inherited, we see that there is nearly always a period during which public spending must be reduced or controlled quite strongly to make room for a private sector recovery, and that a series of measures to promote that recovery will then be necessary. As I have explained at length in the past, banking reform and competitive banking are crucial. The Government’s theory favours a tight fiscal policy and a loose monetary policy. They want to allow more money to circulate through the private sector through credit and through the banking system, and they want to lower the deficit gradually in the public sector so that the fiscal policy becomes a bit tighter.

Mark Hendrick: The right hon. Gentleman makes great play of tax revenues. We all know where they come from—they come from those who can least afford to provide them—but given that only one private sector job is coming along to replace every 10 jobs that are being lost in the economy, where will they come from in future?
Mr Redwood: So far the strategy has generated quite a lot of new private sector jobs, which is very welcome, but it is obvious that it needs to generate many, many more over the next three years if it is to secure the savings on welfare benefits that I am sure all Members wish to see.

It is nonsensical for Opposition Members to say that the poor will be paying the taxes. We have just seen a big increase in thresholds which takes many people out of income tax altogether at the lower end of the income scale. Moreover, if the hon. Gentleman looks at the Red Book, he will see that there will be a sharp acceleration in self-assessment income tax—the income tax that is paid mainly by the rich—once we get the rate down. I know that Opposition Members do not like reading the figures in the Red Book, but it provides a much better case than Ministers ever provide for why we need to get back closer to Labour’s rates of income tax.

One of the things that I most admired about the former Prime Minister and last Chancellor of the Exchequer but one was his insistence that 40% was the highest rate of income tax that could be charged to optimise the amount of money obtained from the rich. He stuck to that view throughout his time as Chancellor and most of his time as Prime Minister. We all know that he only put it in as a political trap at the end of his period in office when he could see the writing on the wall, but it is obvious from the Red Book figures that he was right: 40% is about as high as we can go to optimise the revenue.

According to the forecast in the Red Book, the revenue will stream in after the rate falls to 45p. If Opposition Members look at the Red Book, they will see that last year, under the 50p regime, self-assessment income tax fell by an amazing 9%. That was because rich people who have a lot of freedom and ability to decide how much to pay themselves—I know that Opposition Members do not like that, but it happens to be the state of play—decided to pay themselves a great deal less. Both the outgoing and the incoming Governments had said that the tax was temporary, so they decided that they would hold back their income. It was obvious that they would do that.

Gavin Shuker (Luton South) (Lab/Co-op): The right hon. Gentleman is talking like a cheerleader about the Laffer curve. Why does he think that the UK economy is not growing?

Mr Redwood: I think that the UK economy may be growing. We will know the facts tomorrow, when we see the first quarter figures, but I suspect that the economy will grow this year. I accept the Government’s forecast of a slow and modest rate of growth. Why, though, is the economy not growing more quickly? There are two main reasons.

The first reason is banking. All the cash that the Bank of England is printing is not going into circulation in the private sector. It is very helpful to keep the Government’s rate of interest down, and it is very helpful to make the increase in public spending more affordable because it controls the interest rate cost for the Government; but the money cannot enter the private sector in any real quantity because the banks are under a huge regulatory cosh to hold more cash and capital at what is, in my view, the wrong stage in the cycle, which means that we cannot secure the growth in banking credit that would finance a better recovery.

The second reason is that taxation is now very high overall in the United Kingdom, which—combined with the inflation tax that has resulted from the high inflation rate that we inherited, which has remained persistently high—means that real incomes are being badly squeezed. It is plain to us all that real incomes started the squeeze under Labour, when the recession really hit, and that that squeeze has continued. A progressive squeeze on the scale that we have experienced since 2008 hits demand and makes recovery that much more difficult.

Graham Stringer (Blackley and Broughton) (Lab): Is there not a third reason: that we are in the wrong part of the world, next to the eurozone, which has no mechanism for the poorer countries to get rid of their trade imbalances or for Germany to get rid of its trade surplus? Normally that would be done by revaluing or devaluing those currencies, but having one currency makes it impossible.

Mr Redwood: I know that you would like me to wind up quickly, Mr Deputy Speaker, because others wish to contribute, but it is such a pity, as this is a crucial issue. I entirely agree with the hon. Gentleman that there is great difficulty in financing the big balance of payments deficits in the eurozone. Now that a mechanism has been found—German surplus deposits in the ECB being routed to weak member states’ banks through the ECB—the Germans are kicking up a fuss, because they suddenly realise that they have €600 billion at risk and they are not very happy. However, as the main surplus country, Germany has to finance the transfers in the union, and until she does so actively and in an encouraging way, there will be all these kinds of problems.

We have problems in Greece, Portugal and Ireland, which we know about. We now have deep problems developing in Spain, and we even have a problem in the Netherlands—which was meant to be one of the good guys—because of a falling out over the rather modest cuts needed to hit the Maastricht criteria. I agree that we need to get to 3% and 60% in due course—I have no problems with the European targets—but I feel strongly that we should do so for our own reasons, in our own time. It is nothing to do with Europe how we run this economy, and the sooner Ministers have the courage to tell Europe that, the better.

Mr John Redwood (Wokingham) (Con): Given that I agree with the Chancellor that IMF money should not be used to bail out a currency, will he urge the IMF to make sure that loans are made available to European countries only when they are in a position to devalue or when they are withdrawing from the single currency? Otherwise, as with the sterling area, surely the responsibility rests with the governing authorities and the central bank of the euro to make the money, the loans, the subsidies available.

The Chancellor of the Exchequer (Mr George Osborne): I do not agree with my right hon. Friend on this point, because if the IMF said it was never going to support a loan or undertake a programme with a eurozone country, it would, first, be walking away from one of the largest economic areas in the world. Secondly, all those eurozone countries would presumably then cease to be members of the IMF, because there would be no interest in it for them. So France, Germany and other countries would then withdraw from the IMF, and I do not think that that is what we want to see happen in the IMF. The IMF needs to support all countries that get into difficulty, provided the conditions are met and the rigour is applied to those programmes.

Mr Redwood: I remind hon. Members that I am an adviser to an industrial company and a small investment management business. I am not a tax adviser, so I feel able to participate in this debate.

I was interested in the Opposition amendment and it turns out to be rather disappointing, for a number of reasons. It asks the Government to produce a report

“on how the additional revenue…would be invested to create new jobs and tackle unemployment.”

As phrased, it does not actually ask for a report on how a bank payroll tax would work, although that is perhaps what Labour Members wanted, too. Interestingly, the Opposition have shifted from wanting a bank bonus tax—a tax originally described as a “one-off” and clearly aimed at very high earners in certain kinds of investment bank, which everybody loves to hate at the moment—to wanting in this amendment a general bank payroll tax. I ask them to think about what that means, because most of the people on the payrolls of our leading large banks are, of course, modestly remunerated. This payroll tax would give a further incentive to bank directors and managers to try to get rid of personnel they are employing, because if we tax something, we clearly do not like it. The Opposition say that they do not like payroll, so they are trying to tax payroll.

Owen Smith: I am grateful to the right hon. Gentleman for giving me this opportunity to clarify the wording—[ Interruption. ] No, there is no “Ah ha” moment, I am afraid. The wording we have used reflects the wording used by the OBR to describe the temporary bank payroll tax. It is no more than that.

Mr Redwood: It is worth teasing these things out, because I think we have had confirmation from the Opposition that they have in mind a general payroll tax, which would hit people other than the very high earners in investment banks. The amendment does not say “a bonus tax for investment bankers”, for example; it says a “payroll tax”. One therefore has to assume it would affect conduct.

Owen Smith: With the greatest respect, either the right hon. Gentleman misunderstood what I said or he is deliberately misrepresenting what I said—mischievously, I suggest. We were not intending to do anything other than replicate that which we have done previously, so a bonus tax is what we were talking about. The language adopted in the amendment is reflective of that used by the Government and the OBR—that is all.

Mr Redwood: Well, I think we are very grateful for that clarification. We await the details that, unfortunately, we did not get from the Opposition about how they would target the measure, whom they have in mind, how much those people would have to earn and how much bonus they would get. The point rests on perhaps a narrower base than the words in the amendment lead one to infer. One has to assume that the tax will lead banks to employ fewer people.

The tax that the Government have adopted also has consequences. They have decided to get extra money out of the banks by taxing the size of their balance sheets. I think the Government might be right that that is a slightly better way of doing things than taxing personnel costs because it is more general, but that too has adverse consequences. All taxation has adverse consequences as well as some positive uses. The Government tax encourages banks to shrink their balance sheets because they do not wish to pay too much tax. What does that mean in normal language? It means they want fewer deposits and less share capital and that they want to lend less money to people because the way to reduce the tax burden is to have less taxable capacity in the United Kingdom. The tax therefore has a cost. I do not disagree with what the Government are doing: I understand the awful financial situation that the country finds itself in and I can see how this tax is more popular than many others, but let us not pretend that these things are costless. At a time when we need more growth and more loans of a suitable kind to people who can afford to pay them back in order to create demand and more loans to smaller and medium-sized enterprises at a time when they need to grow, taxes on banks are not terribly helpful.

I am enough of a politician to know that banks are very unpopular and that it is an easy hit for politicians who want to improve their own popularity to take a position against the banks, so I am being something of a foolish hero by standing up and saying that not all banks are bad and that quite a lot of people who work for banks are perfectly decent people doing a decent job. The banking service that is supplied around the country to small and medium-sized enterprises and to you and me, Sir Roger, is very necessary, and sometimes it is well handled and well conducted.

There is a dreadful run of debate in this country that everything to do with the word “bank” is evil and wrong, that it serves the banks right and that everything has to be directed against them, but we have to work with the banks—the good, the bad and the indifferent—because we need them to be on the side of economic growth and recovery to tackle the very real problem that the Opposition have identified in the second part of their amendment—tackling unemployment. We need to get unemployment down, and one way of doing that is by having a strong banking sector working closely in partnership with the small and medium-sized enterprise sector and with those people who have a reasonable income and might want to borrow more to buy things and create demand.

Kelvin Hopkins: The right hon. Gentleman glosses over the fact that the banking system has two distinct components. There is the banking for ordinary people and small businesses and then there is the casino component, which is about gambling with vast sums of money—often our money—and often losing it by the billion. That is the bit of banking we are complaining about, not the retail banking that looks after our money and ordinary working people’s money.

Mr Redwood: If it were that easy to make the distinction and to close down or punish the one and reward or encourage the other, I am sure the outgoing Government would have done it. The fact that they did not implies that in office they realised the situation was far more complicated. When we consider the complications of a large conglomerate bank—as it happens the taxpayer should have a lot of knowledge about them because we are the forced owners or part-owners of two such banks—it is immediately obvious to any sensible analyst that the activities of the investment bank are deeply integrated with, and related to, those of the normal commercial bank; for example, in their service for small and medium-sized enterprises. A small or medium-sized export business may need forward currency cover or trade finance and credit, or it may have an investable surplus. It may need all kinds of services that go well beyond the basic banking that the hon. Gentleman was trying to describe—just having a current account to make payments and a simple savings account. The world is much more complicated than that. If we are to survive and compete in a global world with international trade, we need to be able to handle its requirements.

Mr George Mudie (Leeds East) (Lab): I do not share the right hon. Gentleman’s confidence that the banks are so optimistic, and that they are so ambitious to provide loans that will get jobs for the million youngsters who are out of work. The Government signed up to Merlin scheme for loans to small businesses, but were badly let down by the banks who did not live up to their part of the agreement. This year’s Budget wheeze is the loan guarantee scheme, which is supposed to get jobs for youngsters. The Treasury Committee took evidence and accepts in its report that the scheme will not provide additional lending for firms; it is only a method for lowering current rates, so why is the right hon. Gentleman so confident?

Mr Redwood: I do not think I expressed any confidence on the subject at all. The hon. Gentleman, the Government and I are in agreement that past levels of lending have been inadequate. That is why the Government have come forward with yet another scheme to try to encourage more lending, which I should have thought everyone in the House would want them to do. If the hon. Gentleman wants to know why there has been too little lending in the last couple of years, there are two simple reasons. The first is that after the crash the banks were forcefully regulated not to lend more—[ Interruption. ] The hon. Gentleman says that is nonsense, but their problem is obvious. The banks were told by the regulator that they needed to hold more cash and capital relative to their lending; the only way they can do that, especially the nationalised ones, is to keep lending down. They are not in a position to raise more money because the taxpayer does not want to put more money into RBS at the moment, and I entirely agree with the Government’s view that we should not be doing so. There is thus a regulatory squeeze on the amount of lending.

The banks would say that the projects are not out there. I am not so sure. The hon. Gentleman and I probably know of financeable propositions on which we would like to see the banks rise to the challenge. We hope that will be possible with the new scheme, but under the Opposition amendment we would spend any revenue that might be raised from what they call a payroll tax, although it is apparently a bonus tax on new jobs and tackling unemployment. We do not know exactly how much they have in mind; the amount would probably be quite modest, as it was from their bonus tax. If the banks see another bonus tax coming in this climate, there will be even fewer bonuses to tax, but the Opposition may welcome that.

Mr Dave Watts (St Helens North) (Lab): Is it not right that the people who caused financial problems and hardship for many families and created mass unemployment pay a fair amount of tax to compensate for the damage they did to the economy? Is that not exactly what the amendment would provide for?

Mr Redwood: Many people would think that the outgoing Government had a lot of responsibility for the crash, along with their professional advisers, the quangos and the Bank of England, who apparently did not see it coming. They had very light regulation in the lead-up to the credit crunch and then very tough regulation. [ Interruption. ] Labour Members feel there is some justice in my response, as they are getting very heated, but we are straying rather far from amendment 5.

The point of the amendment is that the Labour party wants to raise an unspecified amount by taxing unspecified people who apparently earn more than Labour thinks is good for them. The Opposition would spend that on youth measures, and they want the Government to come back with a report on how that money could be spent.

My hon. Friend the Member for Staffordshire Moorlands (Karen Bradley), who rightly said that she could support a bank levy to try and get the deficit down, was speaking sense, but this, as she will have realised, is not the proposition of the Labour Opposition. They do not want to get the deficit down. They want to find another pot of money to increase spending. I am with them in their aim of reducing youth unemployment. We will make much more progress in reducing youth unemployment if we have stronger banks able to finance a more vigorous recovery. I urge the Government to work more strongly on that. The more money they take off the banks in taxes, however tempting that is, the less the banks will be able to lend to people to get the recovery going, so the proposal could be self-defeating.

Mr Redwood: If the hon. Gentleman reads the Red Book further, he will see that £4 billion-plus more a year will be raised from self-assessment income tax under the 45p rate than under the 50p rate. Indeed, in the year to April 2012 there was a 9% reduction in self-assessment income tax, because the top income tax payers paid themselves 25% less than the year before.

Mr John Redwood (Wokingham) (Con): When the Government proposed VAT on pasties, did they feel they needed to do that to protect other VAT revenue on takeaways from European challenge? Is that what is in the Chief Secretary’s mind?

The Chief Secretary to the Treasury (Danny Alexander): No, that is not what is in our mind. It is one of a number of anomalies in the VAT system that we addressed in the Budget, although it is not actually a matter contained in the Bill. My right hon. Friend will be aware of the comments of, for example, the National Federation of Fish Friers, which makes the point that small independent fish shops, of which there are thousands around the country located in the constituency of every Member, have for many years been charged VAT on sales whereas other retailers have not. We are seeking to correct that anomaly.

Mr John Redwood (Wokingham) (Con): I fully support the Government’s aim. We need to earn our way out of the fiscal crisis, the massive over-borrowing and the large deficits. I also fully support their aim to get more money from taxing the rich, and we need a tax break for everybody else. We need a stimulus to demand and growth in this country and it is welcome that, given the difficult figures before the Chancellor today and the situation he inherited, he has managed to find a way of cutting tax for most people. That will be welcome relief from the relentless pressures on private budgets that hon. Members and their constituents have been experiencing as we try to climb out of the crisis.

It would be helpful to remind the House of the general shape of the five-year programme to try to get the deficit down. We want to get to a position in which we are adding less to the new borrowing. It is not that we are paying off the debt or dealing with the nation’s mortgage and credit card; we are just not flexing them quite as much as before. The Government have said that, over the five-year period of the planned coalition Government, they wish to increase current public spending by £90 billion and tax revenues by £174 billion a year by the fifth year of the programme, compared with the last Labour year. The House can see that, on most normal ways of looking at the situation, the plan is for the heavy lifting of getting the deficit down to be done by a very large increase in tax revenues.

Those tax revenues best roll in if the economy grows reasonably rapidly. The more quickly the economy grows, the easier and less hurtful it is to get money out of people; the less the economy grows, the more the choices become difficult.

Barry Gardiner (Brent North) (Lab): The right hon. Gentleman says that the heavy lifting will be done by the rise in tax, but does he accept that there is a ratio of 4:1 in the amount that will come from cuts in public spending and benefits to the amount that will come from tax rises?

Mr Redwood: I have just given the figures—they are taken from past and current Red Books—and the hon. Gentleman must make his judgment. I am giving the House my interpretation. Most people who see spending going up by £90 billion and revenue going up by £174 billion will say that the increase in revenue is doing the job of bringing the deficit down. If he compares that with Labour’s plans for even bigger increases in public spending, he can make a case. He may also have in mind—we have debated this in the House before—whether the cuts are real or not. Some programmes will experience real cuts. We know that because there is a much slower rate of growth in cash spending than anything this country has been used to for a very long time.

If debt interest takes too much of the extra money, and if welfare benefits take too much, other things will obviously be squeezed more, which could lead to very unpleasant consequences. That is even more reason why the Government are right to try to get the deficit down, so that we do not keep on increasing the debt at such a huge rate, and why they are right to keep official interest rates low—that helps with the cost of the deficit. It is also why they are right that we need to earn our way out of the situation by getting many more people back into decent jobs, so that they are paid more in work than they are paid on benefit. Surely the whole House can agree on that and share that aspiration.

Sheila Gilmore (Edinburgh East) (Lab): We obviously want to get more people into jobs, but will the right hon. Gentleman comment on something the Prime Minister said in Prime Minister’s questions? He said that 600,000 new private sector jobs had been created since the election, but a year ago he said that 500,000 new private sector jobs had been created since the election, and three months before that he said that 500,000 new jobs had been created since the election. Is not the rate of creation of new jobs slowing down massively under this Government?

Mr Redwood: We all know from the output and jobs figures that the economy did not do as well at the end of last year as it had done at other times since the Government were elected, but we also know that the forecasts are that growth will now pick up. I am sure the hon. Lady will welcome that and join me in having a serious debate on what this Parliament can do to make it more likely that my constituents and hers have jobs, and more likely that they are better-paid jobs.

The question whether real public spending is falling or not depends on the rate of inflation in the public sector, so I urge again that we take advantage of the tough times. There is a two-year pay freeze for public sector workers, and the Government say that they are buying things more cheaply throughout the public sector. In addition, there are recessionary conditions in Europe and other parts of the world. If we take advantage of those things, it should mean that we do not have to have big real cuts in spending, because we will have that £90 billion per annum to spend by the fifth year of the strategy.

However, we should focus today on taxation, which is clearly what the Leader of the Opposition wanted to focus on. I do not think he listened to the Budget speech or the numbers he was told, because my right hon. Friend the Chancellor made it very clear that he had come up with a series of targeted measures to tax the very rich more than if he had not made the changes. That is fine by me, and I would hope it is fine by the Labour party, but the Leader of the Opposition seemed to say that it was not fair, because some rich people would still get away with it. However, if we get enough or more out of them overall, is that not worth while? Surely even Labour would accept that if we raise rates too high, the very rich go away—they find ways around paying the tax or do not pay.

Labour in opposition does not take that seriously enough, but the former Chancellor and Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), took it very seriously when he was in office. As Chancellor, he had the option of putting the 40% rate up to 45% or 50%, or the 83% that Labour had when previously in office, but he never chose to do it. I wish he were here today. If he were, I would ask him, “Why not?” I think his answer to Labour groups around the country is, reportedly, that had he raised it above 40%, he would have raised less money in taxation rather than more. Naturally he wanted to get more out of the rich—on that I agree with him entirely—but the way to do that was to keep the rate at a sensible level.

The Opposition should study the figures for tax receipts. If they look in the new Red Book, they will see that self-assessment income tax is plunging this year. That is exactly the problem that my right hon. Friend the Chancellor has to tackle. Under Labour, self-assessment taxation at 40%—the then rate—brought in £22.5 billion at its best, before it made a mess of the economy. The forecast for 2010-11 out-turn is £22 billion, and the forecast for the 2011-12 out-turn—soon to be seen—is only £20 billion. That means that the Treasury now expects a 10% reduction in self-assessment income tax receipts, which is where many of the high earners congregate with their complicated tax affairs. Those, then, who think that a 50p rate raises a lot more money have a lot of explaining to do given that we are in the middle of this collapse.

Dame Joan Ruddock: Will the right hon. Gentleman give way?

Mr Redwood: I am sorry but I will not get any more time, so I am afraid I cannot.
If the Opposition study the Red Book, they will also see that when the 45p rate is firmly up and running, there will be a surge in revenues compared with the current bitter experience with 50p. Self-assessment income tax is scheduled to rise to £28.5 billion by the last year of this Parliament, showing that, according to the Treasury’s own model, growth is expected. However, I think we will see a much disrupted experience of tax collection now, because if we give advance warning of a new lower rate, we might have a problem in the year before, but we will have to see—we will watch with great interest.

Overall, however, the House should note that there are difficulties with getting the massive increase in taxation from the country which everyone wants. According to the current receipts table, there has been slippage every year in the current receipts forecast under national accounts taxes compared with the autumn statement. Some of that, of course, is the result of the policy change on lower tax designed to help people—we welcome that very much—but we have to understand that it is very difficult to get as much tax out of the economy as many MPs would seem to like.

The Government are right to want a Budget for aspiration; they are right to want a Budget that allows us to earn our way out of this situation; and they are right that we need to make it more worthwhile to work. I hope that they will reinforce that message in future Budgets. Since the 1970s, in which time we have had Labour Governments as well as Conservative and coalition Governments, no Government have ever been able to raise more than 38% of the total national income from taxes. I am sure that Labour would like to try it, but actually the record shows that Conservatives have taxed a bit more as a percentage of national income than Labour—normally because they have had to clear up the mess, the debts and the deficits that they have inherited.

There is a natural ceiling on how much we can get out of people in a free economy. When we have a footloose international economy, it is all too easy for the people with talent and money—Labour might not like them—to go somewhere else, spend their money somewhere else and invest in jobs somewhere else. We desperately need every job that we can get, and we desperately need the good will of those with money, talent, entrepreneurial flare and ability. We also need the money of some of those who do not have any of the above—we still want them here and to ensure that they spend their money here.

The Budget therefore has to concentrate on the crucial issues of how we reward aspiration and generate true prosperity. A much greater man than I, I think, said, “You cannot tax a country into prosperity.” This country is not short of taxes. Governments have been incredibly inventive in finding all sorts of ways of taking money off people. They are taxed again and again and again—on income, on spending, on savings, on capital gain. There are endless taxes. We are not short of taxes. We do not need new taxes. We need a growing economy and to persuade people to pay the taxes that we have put in place trying to pay for the public services.

We want great public services but we need to understand the language of priorities. I think those priorities are shared across the House. Both Labour and Conservative Members would choose to make health and education their top priorities for public spending. The last Government certainly did that with large sums of money, and this Government are doing it with what money they can find. However, I also hope we would agree—this is more difficult when Labour are in opposition—that we need reform of those public services so that every pound we spend is a pound well spent. We need to increase productivity and quality, and get more for our money, because everyone has to accept that times are hard and the amount of money available will be limited.

The Front-Bench team need to do all they said in the Budget to promote growth; they need to do more to sort out the banks because until we have properly functioning and competitive banks—super-charged to lend against good projects—we will not go as quickly as we would like; and they need to ensure that every pound they spend in the public service is well spent. That is the way to earn our way out of the crisis and into prosperity. We cannot tax our way into prosperity but we can earn our way there.

Mr John Redwood (Wokingham) (Con): I support the motion, but will my hon. Friend make this point clear to me: presumably, she would want the British Government to be able to get rid of the much-hated and stupid discards policy and be free to decide ourselves how to conserve stock?

Miss Anne McIntosh (Thirsk and Malton) (Con): I am going to be very methodical and discuss discards later, as we have some interesting things to say about them and I hope that hon. Members from all parts of the House will elaborate on the matter.

On the treaty base, I hope that the Minister has now had the opportunity to analyse what we are proposing. This is the first time anyone has identified what is staring us in the face—that all we have to do is amend the regulations, which form the whole context of this round of the common fisheries policy reform. The feedback we have had from the fishermen we have consulted, as well as from the Danes and others, has been very positive.

It is important to recognise that the little fish do not swim around with a Union Jack on them. Much as I would like to say that the fish outside Filey have a Yorkshire flag on them and the fish in the Scottish waters have the saltire on them, they do not; they swim across the various waters. So it is absolutely right that the Commission should retain some competence in this area, and I, for one, do not wish to reopen the treaty base that gives exclusive competence on the resources to the Commission. By allowing the coastal states that neighbour the individual fisheries to take the day-to-day management decisions, we will save a lot of the Minister’s time every December, as things will be managed on a more regular basis. The approach will be much more local, it will be based on science and it will be about working more closely with the fishermen.

Mr Redwood: Nor do the fish swim around with an EU flag on them. We should accept that it is our fishing resource if it is in our wider waters—we have to pay the bills, so we should be responsible for it.

Miss McIntosh: My right hon. Friend has put his finger, possibly inadvertently, on the nub of the issue. This is a shared resource and we need to conserve it. The Committee has gone through things and we have identified many ways in which we believe we can do that.

Mr John Redwood (Wokingham) (Con): Will the Deputy Prime Minister introduce a freedom Bill to get rid of a lot of bossy and unloved regulations?

The Deputy Prime Minister (Mr Nick Clegg): As my right hon. Friend knows, we have already introduced a large set of measures that have removed a lot of unnecessary clutter from the statute book, and we will grab any further opportunities to do so with open arms.