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Finance Bill

I congratulate the hon. Member for Taunton (Mr. Browne) on tabling an amendment that gives us an opportunity to discuss a very important issue. It is clear that economic conditions have been very turbulent over the past 12 months. In terms of public policy, the Government were in a difficult position in the pre-Budget report. They had to decide what to do, and what to do quickly. A VAT cut is one of the main things that could be done quickly. However, a bigger cut over a short period might have been better than a cut of only 2.5 per cent. over a long period. That would have really pulled money out of people's pockets, and made them feel that they were getting a bargain. A cut of several billion over three months might have had more impact. My hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) quoted John Maynard Keynes. It is clear that anyone who wants to move the economy on cannot become involved in electrification schemes and railways and so forth. As we know, given our planning process, those things take a long time. My preference is for a middle view. The report suggested in the amendment would be useful, because it would enable us to judge what the Government did in the light of the alternatives. If we really want people to spend money, we give lower-paid people a voucher with an end date so that they can buy goods in a store. Alternatively, we give local authorities money that they can use to provide grants for environmental improvements to homes—which we know will be a major challenge—so that small business can become involved. Clearly, things have changed very rapidly. The Government made a decision in the pre-Budget report, and to some extent they are stuck with it. Therefore, it would be useful to have a report, particularly as 1 April 2010 is likely to be at the start of a general election campaign. We would have a document that we could discuss with great interest. I suspect that the cut will, of course, make a difference to UK economic growth, but I am not sure whether that impact is really worth the £12 billion or £13 billion. I am also unsure whether it will have much effect on the competitiveness of small and medium-sized businesses. We have heard in the debate that there are costs. There are certainly costs to local authorities and to many businesses in this manoeuvre. On the disposable income of low-income households, as such households have a higher propensity to spend what income they have, there may be some modest positive impact on them, but I suspect there are other means and policy instruments that could have been used to put money into people's pockets. The amendment has allowed us to debate this matter and if the Government produced a report, I rather suspect it would be useful in April 2010. However, as we have moved on and the overall financial situation has deteriorated, one would also have to assess other things, such as the £12 billion or £13 billion cut in VAT revenue. That will leave a long-term debt legacy in terms of interest and compound interest, and there is also the opportunity cost of what else could have been achieved in the medium term while leaving a legacy of some sort, such as insulated homes or improvements in the overall economy. The Government were in a difficult fix in the autumn. They faced an unfolding situation. There was clearly an imperative to take a particular decision: to try to put money into the economy. They made a choice, but I do not think it was a very good one; there are better steps that could have been taken. The amendment of the hon. Member for Taunton is a useful one for the Committee to consider, and I hope he is brave enough to press it to a Division.