Mr Darling
My hon. Friend makes a fair point. It is interesting that the Liberal Democrats promised us that if they went into coalition they would get something in return on capital gains tax. They wanted a 40% CGT, yet they appear to have settled for 28%.
The Chancellor of the Exchequer (Mr George Osborne)
That is 10% higher than under Labour.
Mr Darling
The Chancellor says it is 10% higher, but when I raised capital gains tax to 18%, I remember the angry campaign waged against it by Conservative Members. They said that 18% would discourage enterprise and was a terrible thing, but they seem to have changed their minds on that absolutely and completely. By the way, we are not going to oppose the increase in capital gains tax; especially when there is a higher 50p rate of tax, sooner or later action would have to be taken to stop the real risk of leakage. As I think the Chancellor said yesterday, the real gain from raising capital gains tax comes from income tax receipts. The position of the Liberal Democrats, however, was quite different.
There are other areas, too, where questions of fairness will be raised. Where in the manifestos of either of the political parties that form the Government was it said that they were going to index benefits to the lower inflation index of the CPI—the consumer prices index—which takes about £6 billion away from people whose income, generally speaking, is not that great? Where was it said in their manifestos that they were going to cut more than £100 in relation to child benefit, or to freeze that benefit for three years? Other changes also deserve very close examination. Everybody knows that housing benefit is in need of reform, as is the disability living allowance, but as we all know, these are complicated, difficult and sometimes controversial issues. It will be interesting to see whether the coalition Government can deliver all the things they promised yesterday.
The Financial Secretary to the Treasury (Mr Mark Hoban)
We have had a good debate about the impact of the emergency Budget on the growth of the British economy over the years to come. The contributions from my hon. Friends the Members for The Cotswolds (Geoffrey Clifton-Brown), for Bournemouth East (Mr Ellwood), for Bexleyheath and Crayford (Mr Evennett), for Reading West (Alok Sharma), for Brentford and Isleworth (Mary Macleod) and for Caithness, Sutherland and Easter Ross (John Thurso) were passionate and well informed. There were contributions from the hon. Members for Hemsworth (Jon Trickett), for Kingston upon Hull North (Diana R. Johnson), for Ogmore (Huw Irranca-Davies), for Penistone and Stocksbridge (Angela Smith), for Pontypridd (Owen Smith), for Derby North (Chris Williamson), for Strangford (Jim Shannon) and for Brighton, Pavilion (Caroline Lucas). The debate was thoughtful and informative.
I am pleased to see the right hon. Member for East Ham (Stephen Timms) in the Chamber—[Hon. Members: “Hear, hear.”]
Some maiden speeches were made. There were three in yesterday’s debate. My hon. Friends the Members for Dewsbury (Simon Reevell), for Bedford (Richard Fuller) and for South Northamptonshire (Andrea Leadsom) made excellent speeches about the impact the Budget will have on their constituencies and the challenges it will address. Today, we heard maiden speeches from my hon. Friends the Members for Harrogate and Knaresborough (Andrew Jones) and for Carlisle (John Stevenson).
My hon. Friend the Member for Harrogate and Knaresborough spoke about the challenges in Harrogate. He brings to the House extensive experience in business. As someone who has contributed to the coffers of his former employers, I know that Betty’s is well known for selling fat rascals, but my hon. Friend does not appear to fit that description. I am sure that he will be a great champion for his community.
My hon. Friend the Member for Carlisle talked about the border relationship. Having been born in Scotland but now representing an English constituency, it is heartening to see that not only the coalition Government but Members on both sides of the House who might not be automatic England supporters have supported the English team in its victory today. My hon. Friend spoke well about the need to rebalance the economy, which is one of the big themes of the Budget. I am sure it will be as effective in Carlisle as in the country as a whole. He will make a great advocate for his constituency in the House.
The emergency Budget addresses the most urgent task facing our country and our economy: to put in place a credible plan to reduce the record deficit we have inherited. As a result of the mess that the last Government left behind, the Government have to borrow £1 for every £4 we spend, which is increasing the national debt by £3 billion each week. We cannot afford to let that go on at a time when fear about the sustainability of sovereign debt is the greatest risk to the recovery of European economies.
Failure to deal with the deficit is the greatest threat to growth. Failure to act now would mean higher interest rates hitting businesses, hitting families and hitting the cost of repaying the Government’s debt. That would mean more business failures and sharper rises in unemployment, and would risk a catastrophic loss of confidence and the end of the recovery. The Budget takes action now to restore the confidence in the economy that is needed to underpin the recovery.
The hon. Member for Harrow West (Mr Thomas) quoted from the IFS report. Let me quote from Moody’s commentary on the Budget:
“The UK budget is supportive of the country’s AAA rating and stable outlook because it is a key step towards reversing the significant deterioration in the government’s financial position that occurred over the past two years…Successful implementation would return the government’s finances to a more sustainable trend…the budget plan addresses the major concerns surrounding economic growth.”
Rating agencies endorse the message behind my right hon. Friend’s Budget—to tackle the deficit and ensure that there is a sound platform for economic growth in the future.
A number of Members on both sides of the House raised issues about the impact of the Budget on the most vulnerable in society. Yes, there have been some difficult decisions about taxes and benefits, but let us not forget the £2 billion extra that we have provided for poorer families in receipt of the child tax credit, the £2 billion extra that has gone into pension credit over the lifetime of this Parliament and the 800,000 people who have been taken out of the income tax bracket by the £1,000 increase in personal allowances. That is evidence in our Budget of the coalition’s commitment to fairness, but we must also ensure that the economy is open for business.
We will open up Britain for business by creating a more competitive system for corporation tax, reducing the rate from 28% today to just 24% over four years. That will give us the lowest corporation tax of any major western economy, one of the most competitive rates in the G20 and the lowest rate that this country has ever known. However, the Budget is about supporting not just big businesses, but small businesses, too. We will cut the small companies tax rate by reversing the previous Government’s plans to increase the rate next year to 22% and cutting it to 20% instead, thus benefiting some 850,000 companies. As well as supporting businesses with lower rates, we need to give businesses certainty about the future, so we have published alongside the Budget a five-year plan to fundamentally reform the corporation tax system, with lower rates, simpler rules and greater certainty. Even with our reforms to capital allowances, the manufacturing sector will still pay less corporation tax under the Budget proposals that we announced yesterday.
A number of hon. Members, including the hon. Member for Kingston upon Hull North, talked about the regional impact. A number of hon. Members whose constituencies are outside the greater south-east spoke in the debate, too. As the economy recovers, we must restore the balance not only between the public and private sectors, but across the different regions of Britain. As someone who was born and brought up in the north-east, I am acutely aware that the gap between the greater south-east and the rest of the country grew significantly under the last Government. Between 1998 and 2008, for every private sector job generated in the north and midlands, 10 were created in London and the south. The Budget sets out a new approach that empowers local leadership, generates local economic growth and promotes regional job creation. As well as creating a new regional growth fund worth £1 billion that will be focused on projects in the regions that will help to stimulate economic growth, we will shortly announce a new tax scheme to help to create new businesses in those regions where private sector growth is not strong enough.
For the next three years, anyone who sets up a new business outside London, the south-east and the eastern region will be exempt from up to £5,000 of employer national insurance contributions for each of their first 10 employees hired—up to £50,000 for new start-up businesses. That sends a tremendous signal to those businesses about the importance that they will play in reviving the economy and stimulating economic growth in the future. The Treasury estimates that some 400,000 businesses will benefit, thus ensuring all parts of our country benefit from a more balanced and sustainable economic future.
Huw Irranca-Davies
Will the hon. Gentleman assure us that one of the greatest drivers of economic prosperity over the next few years—high-speed rail electrification, which we have heard about in the Budget—will extend beyond Bristol? We are always told that investment in the railway from London to Bristol benefits south Wales, but we cannot expect the Welsh Assembly Government, who have no tax-raising powers, to fund an extension to Llanelli.
Mr Hoban
That is a matter for the Secretaries of State for Wales and for Transport, but the hon. Gentleman has made his plea for more Government spending. At the last general election, he stood on a platform of about £40 billion in cuts. However, what marks this Government out from our predecessor is, of course, that my right hon. Friend the Chancellor of the Exchequer has said that there will be no further cuts in capital expenditure beyond those announced by the previous Governments and the projects that my right hon. Friend the Chief Secretary to the Treasury announced last week. The major difference is that we are prepared to make the investment to sustain economic growth in the future, but the previous Labour Government were not prepared to make that decision and had announced before the election savage cuts in capital investment.
It is not just corporation tax reform that is needed to ensure that the economy continues to grow in future. There is widespread concern, as has been expressed by hon. Members on both sides of the House, about the importance of credit flowing to the business community. Several hon. Members expressed concern about the number of businesses in their constituencies that had been refused credit. That was why my right hon. Friend the Chancellor announced the £200 million extension of the enterprise finance guarantee scheme, which will support £700 million of additional lending to small and medium-sized enterprises until March 2011, benefiting at least 2,000 small businesses. However, he announced in yesterday’s Budget that we will also bring forward a Green Paper before the summer recess on alternative sources of funding for businesses so that they are not reliant only on bank finance. I believe that that will make a major contribution towards ensuring that growth continues in this country.
I have talked about the reforms to introduce a more competitive corporation tax model in this country. In the context of the regional package, I have also talked about the schemes that will be set up to enable start-ups in regions outside the greater south-east to benefit from a national insurance holiday. Of course, one of the big changes announced by my right hon. Friend was our reform to national insurance contributions. We made it clear that we thought that Labour’s jobs tax would be damaging to the economy. We want to support the growth of Britain’s businesses that will create jobs for British people.
The House will know that the previous Government planned a tax on jobs through a 1% increase in national insurance rates. The Budget reverses that negative effect by increasing the threshold by £21 a week above indexation. In one move, we are lifting 650,000 employees out of the tax altogether. Of course, the measure will have a significant benefit for regions, too. For example, there will be a £150 million benefit for businesses in the north-east, which will help to improve competitiveness. Taken together, the measures set out in the Budget offer a stable and consistent platform for a private sector recovery. They provide the element of growth that is needed alongside our necessary measures to cut spending and increase taxes to restore Britain’s fiscal position.
I referred earlier to the number of hon. Members who contributed to today’s debate, but one thing was missing from all the speeches made by Labour Members. Not one of them uttered a word of apology for the deficit. We saw not a single sign of humility for the mess in which they have left the country, and they did not give a single credible idea to tackle the legacy that they left the people of this country. At a time when Governments throughout the world are taking serious measures to restore public finances and economic confidence, it is remarkable that the Labour party is stuck in the past, refusing to accept responsibility for the problems that it left the country and that the coalition Government inherited. Labour Members are stuck in a world of their own. The mainstream political debate across the world has left them behind. They are stranded and in denial about the scale of the problems that they left this country. It has been left to the coalition to lead the debate on tackling those problems.
The Budget pays the bills of the past and plans for the future. It takes the tough decisions that Labour ducked. Labour Members say that £40 billion of cuts were outlined in their March 2010 Budget, but not one of them has been able to say where those cuts would fall. Our Budget brings spending under control and tackles the deficit. It takes difficult decisions on curbing our deficit, but at the same time, the cuts in corporation tax—reducing the headline rate for large businesses and cutting the small companies rate to 20%—the reforms to our tax system that make Britain more competitive and the reversing of Labour’s jobs tax send a clear signal that Britain is once again open for business.
The Budget tackles the toxic legacy left by Labour. It will remove uncertainty from businesses and boost confidence. It is about the values set out in our coalition agreement—values of fairness, freedom and responsibility. It marks a radical change from the economic policies of the past, offering transparency where before there was opacity. It offers a change—
The Lord Commissioner of Her Majesty's Treasury (Angela Watkinson)
Monday next, Mr Speaker.
Mr Speaker
Monday next. We are grateful.
The debate stood adjourned (Standing Order No. 9(3)).
Ordered, That the debate be resumed tomorrow.