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Finance Bill

We all know that income inequality rises in periods of boom. It is not acceptable, and personally I would rather that we had been able to do much more. As under previous Governments, income inequality increased. However, social inequality decreased. Like many Opposition and Government Members I worked passionately to reduce poverty and we did reduce child poverty nationally. I regret that we did not manage to achieve comparable reductions in child poverty in London. The Government's cuts will be judged on the measure of progressivism, and it is a great shame that the Bill is not progressive enough. Using VAT to raise £13 billion is a regressive choice. Save the Children estimates that the poorest families in Britain will face VAT bills of about £1,600 a year. The Treasury's own figures show that the poorest are affected three times as much as others by changes in VAT. Many have argued that that is offset by the exempted expenditure on food and children's clothing, but it is quite the opposite. The poorest 10% of households already spend a higher proportion of their disposable incomes on VAT—about 14% compared with about 5% for the top 10%. These changes, combined with announcements in the Budget such as those on housing benefit, disability living allowance and other kinds of fixed income, alongside the removal of some £3 billion of support to families, will devastate many of the vulnerable families in constituencies such as mine and many others. Ministers and Government Members have been quick to say that restoring the link between earnings and the basic state pension is an important achievement, but unfortunately some 10,000 pensioners in my constituency will suffer from the VAT rise alone. The VAT increase will reduce consumption. It will hit small businesses, including almost 4,500 in my constituency, very hard. I do not accept the argument that it will be good for the economy. About 70% of those businesses in my constituency have fewer than four members of staff working for them, and there is no doubt that a reduction in consumption will affect them negatively. The Conservatives have been out of power for 13 years, and the first thing they now do is raise VAT. What does that say about their idea of progressivism? Those of us who were brought up in modest income households, like many millions of people in this country, have not forgotten the pain and suffering inflicted on families through VAT hikes in the past, and I simply do not accept that this is the right path now. I appeal to Liberal Democrat friends and to true compassionate Conservatives —I hope there are still a few left—who know in their heart of hearts that this VAT increase is bad for the British economy, does nothing to create fairness and social justice and does nothing to protect the most vulnerable in our country to think again and to vote with us. People on modest incomes in constituencies such as mine will have to make terrible choices between heating or feeding and clothing their families, or between new pairs of shoes for their children and taking the bus to work. Sadly, those are the kinds of choices that some people will be forced to make because they are already on low incomes, struggling to cope in this difficult economic climate. We know that in periods of recession people turn to loan sharks because they find it difficult to get other loans, and end up heavily indebted and trapped. We also know that despite efforts by the previous Government, many of the poorest people in this country still suffer from being in a poverty trap. Despite those efforts, child poverty still has not been reduced by as much as we would have liked. I believe that this Budget, particularly the VAT increase, will continue to damage vulnerable families. In Tower Hamlets, in constituencies such as mine, the Budget cuts have already amounted to about £9 million, and a further £55 million of cuts are proposed over the next three years. Although I welcome the bankers levy, where is the justice and fairness in raising just £2 billion, with no provision being made to tax bonuses? We may contrast that with the £6 billion of bankers' bonuses and with the billions of pounds of public service cuts for ordinary families and workers, and it just does not seem adequate. I am not saying that the public do not want to see the deficit cut, but where is the justice in such a comparatively small levy compared with what the public have to pay?