Finance (No. 2) Bill
Published date : 16 November, 2021
One concern many have about the national insurance increase is that there is an understanding about how much that will raise but no understanding whatsoever about how much will eventually make it through the NHS to social care in England. I am sorry to say that leads many of us to think the Government might not have much of a plan for how they are going to use it first in the NHS and then to benefit service users in the social care sector. Will the Minister have another go at helping those of us with that mindset to understand?
It is a pleasure to follow the hon. Member for Brentford and Isleworth (Ruth Cadbury), whose speech was punctuated throughout by the sound of many nails being hit on the head.
The Budget and this Bill needed to address three key issues: the cost of living crisis; the supply crisis with the resulting inflationary crunch from that; and of course the environmental crisis. With regret, I have to say there is little cheer in the Budget or the Bill for anyone other than a bank shareholder or those who profit from the lack of urgency from this Government to tackle financial criminality and the lack of financial transparency as London rapidly gains the unenviable reputation of the washing machine for the dirty money of the world.
Let me deal first with the cost of living. Many Members have spoken at length, in the Budget debate and today, about the Conservatives having broken their manifesto pledge on increasing national insurance. We all know by now—I hope it is incontestable—that that increase hits the lowest earners the hardest. It bakes in generational and geographical inequalities, which will be a feature of our social and economic outlook for many years to come.
I intervened on the Financial Secretary to the Treasury—she was gracious enough to accept that intervention—to try to get some clarity on how the money raised by that increase will make its way through to the social care sector. We all understand that it will go into the health service, and we all appreciate that it can do much good in dealing with the crisis there, but I am sorry to say that until some answers start to be forthcoming about what impact it will have in the social care sector—and, importantly, how—the UK Government will be left looking very much as if they lack a plan.
The UK Government have barely even started to get to grips with the nature of the whole-system problems that we are facing in health and social care, and the need to integrate them. That was the case even before the covid crisis. We require a whole-system approach to many of the problems that we are seeing in health services, and I get absolutely no sense that the UK Government have thought that through. They are doing what they have routinely criticised many other Governments for doing and focusing on the inputs without having any reasonable or intelligent focus on the outputs.
It is not just direct taxes that affect the cost of living crisis; indirect taxes have a massive impact too. My colleagues and I have called for a continuation of the VAT reduction for hospitality. It seems unconscionable and unexplainable that that should be withdrawn in the early part of next year. It is often said that a banker is somebody who will offer you an umbrella when it is not raining and then take it back the instant that some dark clouds appear on the horizon, and many hospitality
businesses will feel that that analogy applies to them with the VAT reduction. With lower footfall and cash flow, they did not get the chance to benefit throughout this year, and just as they come into what will be a crucial summer season for many of them, that financial boost is to be taken away. I strongly urge the Government to reconsider that and to allow those businesses to trade their way back to health.
Of course, VAT is intended to be a tax on non-essential goods, yet it is still levied on a wide range of goods that we simply cannot do without, such as domestic energy. It is a tax that can influence behaviour, but it can also be used to stimulate growth and the kind of recovery we need.
I would like to pick up one anomaly in the way that VAT is applied currently, and that relates to school uniforms. I have to say that I was not a particularly enthusiastic wearer of the school uniform when I was at school, unless I had to wear it when I was representing the school, in which case I did not have any quarrel with it. Nevertheless, I accept the arguments on the importance of school uniforms. They are an enormous leveller. The uniform instils a sense of pride and belonging, and it means that everybody is the same. It can also be a boost to household incomes not to have to compete when it comes to the clothes that children wear to school.
School uniforms are often compulsory, yet we still charge VAT on them, at the full 20% rate, for children over the age of 14, and even for children who are under that age yet have grown beyond the size that HMRC stipulates for certain school uniform items. That is hitting hard-working families really hard in the pocket at a time when a whole range of other factors are conspiring to squeeze their incomes. I do not believe that that can be right.
The British Educational Suppliers Association estimates that the cost of waiving VAT on school uniform items in Scotland would be about £1 million. To do it right across the whole UK would not cost a great deal more than £10 million. That is not a sum that is going to trouble the Treasury unduly. Some Conservative Members might not even get out of bed for a consultancy if they were earning less than that. Nevertheless, removing 20% VAT on what are essential purchases in anyone’s estimation could really make a big difference to individual families. We will look to return to that in Committee. I hope the Government will listen very carefully on that because it could benefit family incomes the length and breadth of the UK.
There have been many other hits to household finances in recent times. There is the removal of the £20 universal credit uplift. There is a Government commitment to a real living wage which seems to be at a rate running one year in arrears. No sooner do the Government expect plaudits and hurrahs for hitting the target, than a month later the rate is revised and the Government wait another 11 months to play catch-up. We are also seeing the removal of the pensions triple lock. All those matters will conspire to squeeze family incomes at a time when families can least afford it.
In the remainder of my contribution, I would like to concentrate on the impact of the failure to get to grips with the supply and environmental crises, particularly in the north-east of Scotland. An enormous series of problems is being caused by shortages of labour. That applies in the haulage sector and, in particular, in the
food and drink, hospitality and agriculture sectors. We have seen crops rotting in the field because there are not enough people to harvest them. We are seeing a crisis in the pig industry. There simply are not enough skilled abattoir workers and butchers to deal with the throughput from that industry, which is leading to a looming animal welfare and human crisis.
I have heard many Conservatives say, “Why can’t you just hire local workers?” Well, frankly, you cannot just hire that sort of skilled, dedicated and experienced labour. We cannot just wave a magic wand and magic it up out of nowhere. However unskilled and unspecialised the Government might consider many of those positions, they really do need to act and act swiftly. This is not even a financial measure; it is simply about making sure all parts of the UK have an immigration policy that is appropriate for their economic and social needs. If the UK Government are not prepared to do that themselves, they should devolve it to the devolved Administrations to decide for themselves. I have absolutely no doubt that the devolved Administrations could make much better and much more enlightened and productive choices than the UK Government have shown themselves capable of making so far.
Finally, there is the environmental crisis. Let me be very clear about this: there can be no transition to net zero in the UK without the skills, human capital, knowledge and the expertise of the north-east of Scotland, particularly the contribution of the constituents I represent. COP26 made many important steps forward. Despite that, we are still seeing an almost complete mis-match and failure to engage the clutch plate when it comes to aligning Government rhetoric with actual tangible Government action in this Bill.
The Government have already failed to match the £0.5 billion commitment from the Scottish Government to net zero transition work in the north-east of Scotland for Aberdeen city, Aberdeenshire and Moray. They have also, completely and inexplicably, failed to proceed with the Acorn carbon capture and underground storage project just north of my constituency in Peterhead. An enormous percentage of the potential carbon capture storage is just offshore from Peterhead. It was the most advanced project. It is the only one that can repurpose existing infrastructure. It is the one that can come online most quickly. It is the one that can accept imports of carbon dioxide from other parts of the UK that are as yet not up and running and do not have the ability to sequestrate their own carbon. I am thinking particularly of the clusters in south Wales and around the Solent. It is an absolutely inexplicable decision, which seems to have been taken purely for partisan political reasons and the benefit of playing the politics of the pork barrel in parts of the north of England.
In conclusion, the Bill fails to get to grips with the key challenges that we knew we were facing heading into the Budget. We can only hope that it improves as it goes through Committee and on Report.
Will the Minister give way?
As the Minister is so good at maths, can she tell us what the tax rate would be if the surcharge was not being reduced?
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