(14 years, 5 months ago)
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The Secretary of State for Energy and Climate Change (Chris Huhne)
I am delighted to open this day of the Budget debate and I want particularly to do three things in this speech. One is to argue why the Budget strategy—what used to be called the Budget judgment—is an essential and correct response to the balance of risks that the economy faces. The second is to address the question that always arises at this stage of the business cycle, which is from where the jobs are likely to come during the recovery. The third is to outline why, like all other recoveries from deep recessions, we will build a new economy. Indeed, a large part of the answer as to where the jobs will come from are the new low-carbon industries which represent our third industrial revolution. In five years’ time, the outlines of a sustainable and resilient economy will be clear, thanks in part to the route map that we begin to sketch out in the Budget—the carbon price floor, the green investment bank and the green deal.
Let me start with the point about the balance of risks, and pick up where we left off in the last debate, when the right hon. Member for Doncaster North (Edward Miliband) was disparaging me for the “Greek defence” as he put it. This determines the timing of measures to cut the budget deficit. The last time that we debated these issues, the right hon. Gentleman accused me of performing a U-turn on whether there should be cuts in this year. I conceded that we in the Liberal Democrat part of the coalition had changed our minds. I also pointed out that we had done so on the basis of events in international capital markets, which have dramatically raised the risks of our being engulfed in a firestorm. If that were to occur we would not be looking at a proactive plan decided by Government, but at a forced reaction to market pressure, which would be unplanned, unconsidered and deeply damaging.
When I last made that point, the right hon. Gentleman said that there had been no change in circumstance that justified a change in judgment. So I looked up the figures for the key public finance borrowing interest rate: the 10-year bond yield for each of the afflicted economies and for our own. The 10-year bond yield determines the cost at which we finance our own borrowing, but it also sets the tone for interest rates in the rest of the economy. The 10-year yield for the Greek Government on the day the election was called in this country, 6 April, was a little less than 7%; it was 6.98%. It had hovered at or around that level for most of the early part of the year, yet during the general election campaign the Greek bond yield began lurching upwards, reaching a peak of more than 12% the day after our general election.
The right hon. Gentleman mocked my Greek defence and said that the circumstances were so different that we could not possibly be affected. I merely remind him that our Budget deficit is the second highest in the EU and currently higher than that of Greece. It is true of course that Greece has substantially higher public debt to national income ratios than we do, but that is not as consoling a thought as the right hon. Gentleman appears to think. Contagion does not work like that. It is, by definition, irrational and sees similarities even where a cooler mind sees differences.
Barry Gardiner (Brent North) (Lab)
Did the right hon. Gentleman have the opportunity to watch and listen to the eminent Japanese economist on “Newsnight” last night, who explained, on precisely this point, that were Britain to be paralleled with Greece, the bond rates in Britain would not be showing a four point spread at the moment and would not be being bought so avidly by British companies and consumers?
Chris Huhne
The hon. Gentleman makes a point about the circumstances, but markets travel on expectations. The expectations of what was going on in this country were very clear during the general election campaign: the hon. Gentleman and his friends were about to lose the election. It is precisely the case with the contagion in southern Europe that it spread quickly from Greece to Spain and to Italy. Italy, of course, has a very high public debt to GDP ratio and is clearly in a different category from ourselves. But that is not the case for Spain—one of the most substantial economies in Europe—where the central Government to GDP ratio is actually much smaller than ours. The debt to GDP ratio in Spain was 33% as against 60% in the UK at the beginning of this process. That is the problem that the right hon. Member for Doncaster North and his friends have to answer. It was absolutely clear from the rise in bond yields across southern Europe that we were in the firing line and it would have been completely irresponsible for us not to remove ourselves from it.
Matthew Hancock (West Suffolk) (Con)
Is the right hon. Gentleman aware that yesterday in the Chamber the shadow Chancellor argued that the problem with Greece, and one of the reasons for what happened there, was that the authorities did not act quickly enough? Does he share my surprise that the shadow Chancellor can combine that with an argument for not acting now here?
Chris Huhne
My hon. Friend is absolutely right. There is no doubt that the lessons of history are completely clear. Those countries that grip their problems and deal with them do so in their own time and their own way and in a proactive manner. Those countries that fail to do so end up like Greece and Spain—with socialist Governments—grappling with measures that will be far more severe than anything that we have introduced in this House. I simply remind the right hon. Member for Doncaster North that Lord Keynes, the great Liberal economist who continues to be an economic hero to me, was once famously accused of changing his mind. He splendidly replied, “When the facts change, sir, I change my mind. What do you do?” The right hon. Gentleman’s principal problem today is that the facts have changed and he has not changed his mind. That is precisely the argument.
I would merely remind the right hon. Gentleman of another dictum from a rather great economist—also something of a hero of mine; I should probably be looking towards the Liberal Democrats here—J. K. Galbraith. He served a number of American Presidents, including J. F. Kennedy, and I should point out to the right hon. Gentleman that it was J. K. Galbraith who said that the essence of leadership was for a leader to confront the greatest dangers of the people they aspire to lead. The right hon. Gentleman is not doing that.
Chris Bryant (Rhondda) (Lab)
I can fully understand why the Secretary of State feels the need to justify his change of position; he has a lot of voters to try to explain himself away to. I can also understand why he makes the argument that some elements of the economic situation in Europe have changed over the past few months. [Interruption.] No, I can see why he might make that argument, but I do not see why that means he has got to change his principles, because I thought one of his principles was that progressive taxation was better than regressive taxation, and that that was why he had a great big poster about a VAT tax bombshell. It is his principles that we are worried about.
Chris Huhne
The hon. Gentleman makes an interesting point, but I would merely commend to him the Institute for Fiscal Studies analysis published today, which looks in particular at the distributional consequences of value added tax. From the tables the IFS has usefully produced—at this point I rather agree with my right hon. Friend the Secretary of State for Business, Innovation and Skills that it would be helpful if we had a PowerPoint presentation pack in the Chamber for the edification of those who seem to be unaware of the evidence—and in particular from the analysis of the impact by decile of expenditure, it is very clear that VAT is not in fact the regressive tax that the Opposition have said. [Interruption.] Please, just look at the IFS distributional impact analysis, as it is made clear there. The reason for that—
Chris Bryant
On a point of order, Mr Speaker. “Erskine May” makes it very clear that hon. Members should be able to explain themselves without requiring documents that they then want to present to the House. The right hon. Gentleman has just said that Members should look at some document that he is referring to, but we are not able to do so. Should we not get back to the facts?
Mr Speaker
It is true that the use of visual aids in the Chamber is disorderly. I am going to be charitable and generous, and interpret the Secretary of State as suggesting that these are matters that people might like to take forward at another time outside the Chamber, but they clearly do not aid the debate in the Chamber now.
Mr Speaker
I fear that we are going to have a flurry of points of order. [Interruption.] No, they are not points of order. I therefore call the Secretary of State.
Chris Huhne
Thank you, Mr Speaker. Let me merely assert, until the hon. Member for Rhondda (Chris Bryant) has had the opportunity to check this for himself, that the distributional analysis of changing the main VAT rate produced by the IFS today shows that there is not a regressive pattern to that when looked at by decile of expenditure.
I am very happy to defend this Budget, not least on the basis that, astonishingly, it is the first Budget in which we have a serious distributional analysis of the impact of its measures. We had 13 years of a Labour Government producing Budget after Budget, and on not one occasion in one Red Book was there a section devoted in this way to distributional analysis.
Edward Miliband (Doncaster North) (Lab)
Why did the leader of the Liberal Democrats, now the Deputy Prime Minister, say on 7 April 2010 that we should remember that VAT is a regressive tax? How does the Secretary of State square that with the fact that he is seeking to claim from the Dispatch Box today that it is not a regressive tax?
Chris Huhne
If VAT is raised right across without the exemptions that we have for food, children’s clothes and books, for example, and without the lower rate on fuel, then it is a regressive tax. It is a standard feature of basic micro-economics that indirect taxes are more regressive than direct taxes, but I ask that Members please look at the IFS analysis, because it seems to me to undermine directly the case that the Opposition are attempting to make.
Rachel Reeves (Leeds West) (Lab)
The right hon. Gentleman talks about the IFS numbers on the distributional impact. Does he agree with the following numbers from the IFS? The impact of the measures announced on Tuesday on the incomes of the poorest—the bottom—decile will be minus 2.6%, whereas it will be minus 1.5% for the next two deciles, then minus 1.4%, minus 1.3%, minus 1.1%, minus 0.9%, minus 0.6%, minus 0.6% and minus 0.7%. So the bottom decile will see a reduction in their income of minus 2.6% and the top decile will see a reduction in their income of minus 0.7%. Is that regressive or progressive?
Chris Huhne
The hon. Lady clearly did not listen to my earlier answer. When looking at the distributional impact, it is very important, particularly with indirect tax measures, to look at the expenditure effects, not the income effects. The IFS report shows very clearly the enormous distinction between the conventional answer on the distributional impact on income and the answer when we look at the expenditure effects.
The choice for this Government has been clear: either we manage the transition to lower borrowing to sustain the recovery, or we will have those choices yanked from our hands by the markets and we will face force majeure. It is far better to design a fair package, as we have done, than to have an unfair package imposed on us that no one has had the time or thought or energy to design.
No fiscal package responding to a market emergency that I have ever seen has been fair, whatever Opposition Members may say. I spent five years of my pre-political life analysing sovereign risk and sovereign crisis. I was in Seoul before Christmas 1997, in Djakarta at the time of the food riots, and in Bangkok when the authorities struggled with the collapse of the Thai baht, and I never want to see a British Government have to go cap in hand to the International Monetary Fund as those countries did, as Greece is now doing and as the friends of the right hon. Member for Doncaster North had to do in 1976.
Had we run the risk of contagion—of a sharp spike in Government and probably short-term policy interest rates too—the impact on growth would have been severe. The truth is that the course of action that the right hon. Gentleman and his friends recommend—the Micawberish course of hoping that something will turn up—would have put the British economy and British jobs in the international firing line, and no responsible Government would have done that. Frankly, I have enough respect for the intelligence and judgment of the right hon. Gentleman to believe that he would not have adopted that stance if he and his friends had been re-elected.
Ian Swales (Redcar) (LD)
Does my right hon. Friend agree that regressive taxes are those that stay the same regardless of people’s income, such as council tax, whereas progressive taxes are those that increase with income, such as value added tax, under which the rich will pay more because they will spend more? [Interruption.] I say that as one of the qualified accountants in this House. [Interruption.]
Chris Huhne
Before Opposition Members start chortling away, let me say that my hon. Friend makes a very good point. I would merely remind Opposition Members which Government raised council tax so steeply—the most regressive tax in the entire toolkit. Year after year under a Labour Government it was pushed up and up and up.
Let me now turn to the issue of growth and jobs. At this stage in every business cycle that I have followed, going all the way back to the recovery from the bust that followed the Barber boom in the early ’70s, the cry always goes up, “But where will the jobs come from?” That cry is particularly urgent whenever, as has too frequently happened, Governments are trying to deal with the legacy of past fiscal misdeeds. However, the forecast from the Office for Budget Responsibility is a reasonable central assessment and is similar to independent forecasts. It shows that the biggest impetus to growth this year comes, as is usual at this point in the cycle, from the inventory cycle. Recessions inevitably put businesses under enormous financial pressure. Businesses try to raise cash by cutting output and by meeting the demand for their goods from stocks, but that process has to exhaust itself as those stocks of finished goods run down. More of the demand for those goods then has to be met from output, and businesses once again gear up production. That is where we are today. The inventory cycle is a powerful stimulus. The OBR forecast has it contributing 1.2% of gross domestic product this year.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
Let me take the right hon. Gentleman back to his defence of his party’s volte-face on VAT. He explained that VAT was not a regressive tax because of the range of exemptions from it. Will he tell us what exemptions there are now under the coalition Government that were not there before that make it less regressive than it was before?
Chris Huhne
The hon. Gentleman knows that the exemptions are exactly the same. I merely make a standard point that is made by the IFS every year when analysing the distributional consequences of any financial measures. We can always take individual measures—the hon. Gentleman refers to VAT, but, as my hon. Friend the Member for Redcar (Ian Swales) has mentioned, the distributional consequences of what the Labour Government did with council tax were appalling because it is such an unfair tax—but we must look at the package as a whole. If one looks at the section of the document that describes what the distributional consequences are, one sees that the package as a whole is a fair one.
An important part of the answer regarding where jobs will come from is, of course, from existing businesses as they recover, as I have described. That will in turn feed confidence, consumer spending and investment. However, there is also a deeper answer.
Chris Huhne
Let me make a bit of progress with the argument. The deeper answer is the profound change that must take place in our economy over the next 10 years, which will also be a great source of growth, jobs and profit. I am talking about the transition of our economy—the third, or green, revolution—to being powered from low-carbon sources. That is potentially as great a shift as some of the biggest changes in our economic history—from water to coal, from coal to oil and from gas to electricity. With each of those fundamental changes of technology, there was a wave of new investment that powered the recovery of a new and very different economy. We can look at the legacy of the rapid recovery in the 1930s from the point of maximum downturn in 1931. That was one of the fastest periods of British economic growth, with the development of new electrical appliances, other light industries and the suburbs around our major cities.
Let me cite some numbers to give a feel for the scale of the potential transformation that we face as a result of the green revolution. Thanks to the ageing of our energy infrastructure, my Department estimates that we will need £200 billion-worth of new investment in the next 10 years. That scale of investment will have substantial macro-economic consequences for businesses in the supply chain and for all those who work in them. I am pleased that my right hon. Friend the Chancellor announced in the emergency Budget, even though the focus was inevitably on averting a fiscal crisis, two measures that will support that investment. The first was our coalition commitment to remodelling the climate change levy and providing a carbon price floor to encourage low-carbon sources of energy, renewables and others. We will consult on that in the autumn. The second was, of course, the commitment to the green investment bank. We will be looking at the scope of the bank through the autumn and we hope to bring forward proposals on that.
Toby Perkins (Chesterfield) (Lab)
A lot of environmentalists were deeply disappointed that there were not more green taxes. Is that just another example of how little influence Liberal Democrat policy has had on what was a classic Tory Budget?
Chris Huhne
I honestly think that the hon. Gentleman is misreading the situation dramatically. We had three announcements; I have mentioned two of them already and I am going to expand on the green deal. It was an emergency Budget, and I would not have expected a substantial programme of reform on green taxes in an emergency Budget that was designed to take us out of the firing line. We have a clear coalition commitment, going forward, to a rise in revenue from green taxes as a proportion of total revenue. That is in the coalition agreement and I have absolutely no doubt that that is what we will see when the full Budget is brought forward in the normal way after the processes of consultation throughout Government.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
Even if we accept what the right hon. Gentleman says about the emergency Budget, there was a very carefully costed proposal on air passenger duty in the Lib Dem manifesto—at least my Liberal opponents said that it was carefully costed—which seems to have gone missing. Why has that proposal been replaced by some future discussion in some future commission? Why has it become something that only might happen, if it could, apparently, have added £3 billion a year to the Budget now, at a time when that money is clearly needed by the Government?
Chris Huhne
I hope that the hon. Gentleman realises that there will be a consultation on that proposal in the autumn. I have no reason to believe that it will not be brought forward in the normal course of events with ordinary Government announcements. It is part of the coalition agreement and is widely welcomed. I believe that it was in both the Conservative and the Liberal Democrat manifestos, but not everything can be announced on day one. The overwhelming priority for this Budget has been to ensure that we can sustain growth and jobs by removing ourselves from the substantial and real risk of contagion from the financial crisis in southern Europe. That has been the overwhelming priority.
Duncan Hames (Chippenham) (LD)
Given my right hon. Friend’s comments on the need to invest in the infrastructure needed for a low-carbon energy future, will he assure me that his Department’s investments in the south-west wave hub will endure and survive the current turbulence associated with the machinery of government of its sponsor body?
Chris Huhne
I thank my hon. Friend for that question. Obviously, he knows that we will go through the comprehensive spending review in the autumn, and the normal process is to make announcements when we have been through that, but I have no reason to doubt that the Government’s commitment to the support of infant wave, tidal stream and wind technologies will continue and I am confident that there will be announcements reflecting that priority, which is in the coalition agreement.
Chris Huhne
I shall give way a bit more, but let me make a little progress. I have been making the argument that the need to replace our ageing energy infrastructure will give enormous impetus to growth in coming years. The other part of the argument has to be about looking at the centrepiece of the Bill that my Department will bring forward later in the year and at what we are proposing on the green deal. That, too, is an enormously significant package that will have genuine macro-economic consequences for the transformation of the economy and the creation of a whole new industry.
Chris Huhne
The right hon. Gentleman mutters from a sedentary position that that was not mentioned in the Budget speech, but the Budget documents contain a clear commitment in that regard. It is very clearly something that we are proceeding with rather dramatically.
The point that I want to make is that this will be the first genuinely comprehensive attempt to make sure that all of our housing stock is retrofitted. We know that most of the homes that we will be using in 2050 have been built already, so we need a comprehensive way to get carbon emissions from our residential housing sector way down if we are to meet our 80% overall reduction targets.
Chris Huhne
Before I give way, let me make a couple of points about the economic significance of that approach. First, the potential increase in demand as a result of the creation of new industry will be absolutely enormous if we can get the Bill, the framework and the pay-as-you-save measures right. By way of indication, we would be talking, in practical terms, of 14 million homes that could be insulated with the support of the green deal. Purely arithmetically, if the average cost were £6,500, for example, we would be talking about a market worth literally tens of billions of pounds—£90 billion over a substantial period.
We are talking about creating a new industry that would be genuinely jobs-rich, as it would use skills already present in the construction sector and need unskilled labour as well.
Dr Whitehead
I thank the right hon. Gentleman for giving way. He envisages that his green deal will involve insulating and raising the energy rating of 14 million homes in the UK. The previous low-carbon transition plan envisaged that that would be done through the provision of subsidised loft, cavity-wall and other forms of insulation. Has he succeeded in defending the money set aside in his Department for subsidising that, or will he rely on Tesco to do the job instead?
Chris Huhne
I certainly do not believe that we can rely on achieving the sort of comprehensive approach that I am talking about merely through introducing pay-as-you-save measures. The reality is that there will have to be cross-subsidy, as there already is, but particularly to the fuel poor and to those in homes that are hard to heat and which need solid-wall insulation and so forth. I am afraid that the hon. Gentleman will have to wait for the final proposals in the Bill, but I very much agree that we need a comprehensive set of proposals to deal with the whole of the residential housing sector. Those proposals must cover homes owned by owner-occupiers but also the private rental sector, where many of the worst offenders when it comes to energy inefficiency are to be found. I hope that that is what he will see.
Barry Gardiner
I am grateful once again to the right hon. Gentleman. I welcome the measures that he is outlining and we will want to study them carefully, but I am troubled by his suggestion that one element of the coalition agreement was a decision that green taxes should rise as a proportion of the revenues into the Exchequer. I have heard him make the argument, from this side of the House, that green taxes should be used to change behaviour but not as long-term revenue streams on which the Exchequer can depend. I agree with that, but will he explain why that element of the coalition agreement is now seen to fund resource into the future?
Chris Huhne
The hon. Gentleman knows, as I do, that the two points that he makes are not as mutually contradictory as he suggests. There is a long history in this country of applying so-called “sin taxes” to alcohol and tobacco, and they have had the very desirable effect of helping to get people off smoking and of cutting their drinking. The success of those taxes is not perhaps as great as many hon. Members on both sides of the House would like, yet I am assured by the latest Red Book documents that the Treasury continues to raise a very substantial amount of money from both tobacco and drink excises.
The reality is that, while green taxes will change behaviour, the responsiveness of behaviour is such that revenue will continue to be raised for a very substantial period. I have to say that, in the present circumstances, that point is likely to commend itself to the Treasury, which always used to follow the motto of Colbert, the finance minister of Louis XIV, who said that the art of taxation lay in plucking the maximum number of feathers from the goose with the minimum amount of hissing. In that context, green taxes certainly are a very justifiable way to pluck the maximum number of feathers.
I shall give way once more, to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz), and then I shall wind up and let the debate make progress.
Mark Lazarowicz
I am very grateful indeed to the right hon. Gentleman for giving way. I want to leave Louis XIV and return to future technologies, and I was interested in the response that he gave to the hon. Member for Chippenham (Duncan Hames) about support for wave technologies. The right hon. Gentleman will probably know that two of the UK’s leading marine renewable energy businesses have their headquarters in my constituency. Can he assure me that support for marine renewables will be at the centre of his policies for every constituency in the UK, and not just those in the south-west of England? More specifically, will he tell us how the Government’s support for marine renewables will be affected by the Budget that we are discussing?
Chris Huhne
Quite properly, the hon. Gentleman wants me to anticipate announcements that will be made by the Government in the normal course of events. I understand that game, as I have played it myself on many occasions. At this stage, however, I can merely tell him that I visited Aberdeen recently for the All Energy conference, where I had interesting and fruitful talks with the marine energy specialists currently testing equipment off Orkney. I am deeply committed, as I believe the Government are, to making sure that what is a genuinely interesting source of potential future prosperity and jobs continues to get the support that it needs to get off the ground.
Obviously, we are in very tough times and have had to cut our cloth to fit our straitened circumstances, but I believe that marine energy offers real opportunities. We have made a number of proposals in that regard, and we will continue to support the sector.
Chris Huhne
No. I said that the previous intervention would be the final time that I would give way before winding up, and I have given way to the hon. Gentleman before.
By the way, I should add to my response to the previous intervention by saying that we have confirmed some of the grants and soft loans made available, for example, for wind energy.
Chris Huhne
I am not going to give way again. I am sorry, but I am going to end up—[Hon. Members: “But it’s a new Member!”] I am sorry, I did not realise that the request came from a new Member.
Dr Wollaston
I am extremely grateful to my right hon. Friend for giving way. My constituency is home to Transition Town Totnes, of which he may have heard. It leads the way in looking at climate change and peak oil, and I am sure that the people involved will be very interested to know the size and scale of the projects that will be funded by the green banks. What will be the time scale? When might they be able to start looking forward to making applications?
Chris Huhne
I thank my hon. Friend for that intervention. [Hon. Members: “Answer!”] Opposition Members know perfectly well that there are certain processes in Government that we have to go through. We have to consult. We have to make sure not only that we produce decisions at the moment that both Opposition and Government Members would like, but that those decisions are right and have gone through all the normal processes.
However, I want to pick up on one very important point. My hon. Friend mentioned peak oil, something that, especially in the context of Deepwater Horizon in the gulf of Mexico and our exploration west of Shetland, opens up a terribly important point about the whole thrust of what we are intending to do. That is that we have been given a wake-up call to move towards a low-carbon economy even more rapidly than before. That is not merely for climate change reasons but because an economy that is more independent of volatile sources of energy from geopolitically troubled parts of the world is also more resilient to oil price shocks. If the name of the game is not to end boom and bust, as the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) used to promise, but at least to moderate boom and bust, then an important objective for my Department has to be to ensure that that moderation takes place by making energy security a more serious objective and defining energy security not merely in terms of physical interruptions—problems, say, in the straits of Hormuz—but in terms of our ability to withstand price volatility and price shocks.
I think I have gone on far too long—[Interruption.] As the hon. Member for Islington South and Finsbury (Emily Thornberry) says from a sedentary position, and I can agree with her—[Interruption.] Sorry, the hon. Member for Wallasey (Ms Eagle)—I was being barracked. I want to make a key point about the prospect of the move to a low-carbon economy providing us with a new type of economy that will be more resilient to shocks, will be jobs-rich and will provide genuine prosperity, employment and profit for British businesses, including opening up enormous opportunities in export markets. The framework that we have set out enables us to do that, and I commend the Budget to the House.
Edward Miliband (Doncaster North) (Lab)
May I start by congratulating the Secretary of State? He is by my reckoning the first Liberal to open a Budget debate in peacetime since 1914. That is a remarkable honour, which we should note today.
Chris Huhne
I am delighted to accept the right hon. Gentleman’s commendation, but I should remind him that my right hon. Friend the Secretary of State for Business, Innovation and Skills opened the debate.
Edward Miliband
I do not want to be a pedant about this, but he was not the first speaker in the day’s debate. That was the only point that I was making. The Secretary of State can accept my congratulations or not. I also want to congratulate him on something else. Today we have seen the completion of a remarkable political journey by the right hon. Gentleman. Remember the Liberal Democrat leadership election, Mr Deputy Speaker? He was the tribune of the left. He ran to the left of the current leader of the Liberal Democrat party. Today we heard the most remarkable political transformation from left-wing Liberal to Thatcherite. He could be the Reg Prentice of 2010. He could easily qualify as a Conservative candidate at the next election on the basis of the speech that we heard today.
There is a proud tradition here—Reg Prentice, Hartley Shawcross; maybe soon he will join those predecessors. But the problem for the right hon. Gentleman is that in order to complete this political journey, he has to engage in the most remarkable amount of doublespeak, which speaks to the heart of the traditions of liberalism. I come to this House today to praise the traditions of liberalism; he comes to bury them. What is the legacy of John Maynard Keynes? [Interruption.] I know that the right hon. Gentleman does not want to hear it. John Maynard Keynes taught us about the dangers of fiscal austerity at a time of global downturn. This Budget pays no heed to those warnings.
What is the lesson of William Beveridge? It is the principles of social insurance and protecting the most needy. What is the legacy of David Lloyd George? In 1909, 101 years ago, David Lloyd George delivered the people’s Budget. The people’s Budget—I say this as a Labour Member of Parliament—was a remarkable example of showing that one could be fair at a time of fiscal challenge. Nobody could claim that Tuesday’s Budget was anything like a people’s Budget. So I am afraid I give up on the right hon. Gentleman, but there are some Liberal Democrats in the Chamber today, and of course the new tribune of the left is the hon. Member for Bermondsey and Old Southwark (Simon Hughes). I am afraid that we have to put our faith in him as far as this Budget is concerned, because we have to give up on the Secretary of State. [Interruption.] My hon. Friends say he is conning me. I think that we should give him a chance during this debate.
The Conservatives will vote for this Budget at the completion of the Budget debates on Tuesday because they vote for unfair, unjust, unequal Budgets. I say to Liberal Democrats in all candour that they have to make a judgment. If the Budget is akin to the people’s Budget of 1909 and if it shows fairness at a time of fiscal austerity, they should by all means vote for it. But if it is a rerun of Lord Howe’s Budget of 1981, they have a duty to vote against it. I know that power is tempting. The Secretary of State is in power and has been tempted by office, but there are Liberal Democrat Members who are not in office, and they need to examine their consciences between now and next Tuesday. They should ask themselves, “Is this what I came into politics for?” That is the argument that I shall develop in my speech.
Chris Huhne
I wish to nip in the bud any temptation for the right hon. Gentleman to make parallels between what my right hon. Friend the Chancellor has announced and what Lord Howe announced in the early 1980s. The right hon. Gentleman says that this Budget is worse, but if he looks at the fiscal tightening set out in the cyclically adjusted budget deficit in the Red Book, it is 0.5% of GDP. The right hon. Gentleman is too young to remember, but the Howe Budget was more than 2%. So this is a very different Budget. We are talking about something that allows growth to continue, and indeed safeguards growth, precisely because it takes us out of the firing line of the southern European crisis.
Edward Miliband
I am afraid I disagree with the right hon. Gentleman. The fiscal tightening may be less than the Howe Budget, but he has to look at overall conditions in the world economy. There is a reason why President Obama has written to G20 leaders ahead of the meeting this weekend to warn about the dangers of early exit from fiscal stimulus. President Obama is worried about the world economy. Of course one has to look at fiscal tightening, but one also has to look at conditions in the world economy.
Let me develop my argument. First, let us look at economic growth. There was an honest difference of opinion at the election about economic growth and how we could ensure that growth, which is the surest way of reducing the deficit, could be maintained. The Labour party was on one side of the argument. We said that growth should be maintained by maintaining spending this year. The Liberal Democrats—the Secretary of State admitted this—were also on our side of the argument, and the Conservatives were on the other side of the argument.
The Secretary of State made much play in his speech about Greece—the Greek defence as I called it last time. He said that everything had changed because of Greece. Has the right hon. Gentleman changed his position because he is now in power and must defend a Conservative Budget, or is his change of position genuine? If it is genuine, we should give him credit for that, but I am afraid I have to say to him in all candour that it cannot be a genuine change. Look at the facts. He made great play of the fact that Greek bond yields had gone up from 7% at the beginning of the election campaign to 12% on the day of the election. The question is not whether Greek bond yields went up but what was the impact on the UK. What happened to UK 10-year bond yields between those two dates? Ten-year bond yields went down during that time, so there is no evidence for his claim about contagion.
The right hon. Gentleman must face a hard and uncomfortable truth. I do not blame him for taking the chance of office that he was offered, but he must come clean with us and admit that he has had to accept a macro-economic strategy totally at odds with the one that he went into the election defending.
Edward Miliband
I will give way to the right hon. Gentleman. Perhaps he will say that because he wants to do good things at the Department of Energy and Climate Change—I do not doubt his good intentions—it was worth paying the price of supporting a Budget that he would have opposed before the election. That is the reality of the situation.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May we have short interventions? The right hon. Gentleman has already made a speech, and there are a lot of Members to follow.
Chris Huhne
May I remind the right hon. Gentleman that the former Chancellor of the Exchequer said that the ice always looks most solid just before it cracks? The contagion affected other countries in Europe including, as I cited, Spain, which had a lower central Government debt to GDP ratio than ours, and it is irresponsible to suggest otherwise.
Edward Miliband
I would give the right hon. Gentleman more credit if he had been more explicit about all these dangers before the election.
Interestingly, the right hon. Gentleman has been sufficiently concerned about the public finances to put pen to paper. We should take at face value the concern that he expressed at the start of the financial crisis in an interesting article in The Guardian titled “Cameron and Osborne are peddling skewed facts and scaremongering on public finances”. He felt moved to open his article by writing:
“You do not normally expect opposition politicians to leap to the defence of the government of the day, but there is an important national interest in doing so on the key issue of public finances. If David Cameron’s view that the ‘cupboard is bare’ gains ground, not only will policymakers feel more constrained, but we will risk thinking and talking ourselves into a worse downturn.”
He does not even have a blank record to defend, because his record is one of defending us on the public finances—[Interruption.] I do not want to take up too much time, but if he wants to explain away his article, I shall give way to him.
Chris Huhne
The right hon. Gentleman really has to take on board my case that while there was no evidence of contagion at the beginning of the election campaign, there was massive evidence by the end of it. I changed my mind when the facts changed. He has not done so, but he should not be proud of that.
Edward Miliband
No, at the end of the election campaign the right hon. Gentleman was offered the chance of office—and that is the sad truth of why he changed his mind.
Chris Huhne
The right hon. Gentleman recently accused me of not changing my mind because I wanted office when he suggested in a newspaper interview that our negotiating sessions with the Labour party showed that we had somehow become right wing because we were insisting on cuts in this financial year. He cannot have it both ways: either we accepted the cuts for opportunistic reasons because we wanted office; or we are saying that the facts have changed and we need to move the economy away from the risks of contagion from southern Europe.
Edward Miliband
The right hon. Gentleman’s defence is becoming even more contorted—I am not sure that even I understand it now. I shall make some progress.
The real problem with the Budget in respect of economic growth is that it ignores the lessons of Keynes. The right hon. Gentleman is defending a Budget that, on the Chancellor’s own figures, will reduce growth by 0.3% next year and lead to 100,000 fewer people in work not just this year, but next year, the year after and the year after that. Even that scenario is optimistic according to independent forecasters such as the Chartered Institute of Personnel and Development, which says that unemployment will go on rising, so there are real dangers in the Budget strategy.
A further problem with the Budget is that it has no plan for growth. The right hon. Gentleman waxed lyrical about green industries, but he can point to nothing in the Budget that will support the green industries of the future. The Liberal Democrats said at the election that they opposed cuts this year, but they are making not only the efficiency savings that the Conservative party promised at the election, but real cuts to regional development agencies, university places and Government support for industries of the future, the most outrageous example of which is the case of Sheffield Forgemasters.
During the debate on the Gracious Speech, I told the right hon. Gentleman that we would hold him to account on the Sheffield Forgemasters decision—and he will be held to account for it. I have to say to him in all honesty that the decision is short-sighted, damaging and wrong. The Labour Government approved a loan to Sheffield Forgemasters—not a grant, a loan. We had money from the European Investment Bank—those people do not throw money at problems when it is not required—and Westinghouse, which was going to order parts for the nuclear power stations that it wants to build in the UK, which will involve one of the only two reactor designs that we are going to have in the UK. The decision was therefore central not only to our economic strategy but to our green strategy. I know that the right hon. Gentleman does not like nuclear power, but prejudice against it will get us nowhere, either economically or in relation to the green industries of the future.
The grant to Sheffield Forgemasters would have given us the ability to make key components for the nuclear industry that currently have to be sourced from outside Britain, but the Government have turned their back on it. The Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), who is in the Chamber, is an honourable guy whom I respect, because he supports nuclear power—that is slightly complicated given his Secretary of State—but during a debate on Tuesday, he said about Sheffield Forgemasters:
“If one went to a bank and said, ‘I need an overdraft because I want to give more money to charity,’ the bank would question the wisdom of that approach.”—[Official Report, 22 June 2010; Vol. 512, c. 26WH.]
Sheffield Forgemasters is not a charity. It has the potential to be at the centre of the green industrial revolution that our country needs. I have spoken to the management of Sheffield Forgemasters, the unions and people in Sheffield, so I know that they are bemused by the Government’s decision.
I was the Minister who, along with Lord Mandelson, signed off the loan—it is not a grant—after we had looked at the arrangements over 18 months in government. It passed a whole set of value-for-money considerations, yet the Government have cut it off. I hope that the Secretary of State can force a reconsideration of the decision—
Edward Miliband
I have given way to the right hon. Gentleman a number of times, but if he is going to say at the Dispatch Box that he will reconsider the decision, I shall give way, albeit more in hope than expectation.
Chris Huhne
Does the right hon. Gentleman really think that an appropriate use of public money would be to ensure that the major shareholders in Sheffield Forgemasters do not have to reduce their equity holdings below 51%? I do not think that it would be.
Edward Miliband
That is an extraordinary statement to make on the Floor of the House. A set of commercial negotiations was carried out with Sheffield Forgemasters. The decision was signed off by the permanent secretaries of DECC and the Department for Business, Innovation and Skills as a value-for-money loan, but now the right hon. Gentleman questions that.
The right hon. Gentleman’s explanation is different from that offered by the Chief Secretary to the Treasury, who said that the loan represented value for money, but the Government did not have the money. The Secretary of State is not only wrong to oppose the loan, but confused about the reason why it is not being offered. I am afraid that the Government are hampering the green revolution that we need.
Toby Perkins
Does my right hon. Friend agree that the fact that a Liberal Democrat Chief Secretary to the Treasury came to the House to tell us the decision about Sheffield Forgemasters, and that a Liberal Democrat Secretary of State is supporting that decision today, is just another sign of how the Conservative Government are using the Liberal Democrats as a fig leaf, which will shame the leader of the Liberal Democrats in his Sheffield constituency?
Edward Miliband
My hon. Friend is completely right. He has experience of booting out Liberal Democrats locally—something that will happen in many constituencies at the next general election. It is blinkered short termism: that is the only way to describe what they have done.
What is the assessment of the Budget from a green point of view? Friends of the Earth says that the
“June Budget does little to suggest”
that the coalition will keep the
“promise to be the greenest Government ever.”
That is not a very good start, but I want to reassure the Secretary of State by telling him that there is praise for the Budget from an unlikely quarter. Roger Helmer, a Conservative MEP and a well known climate change denier, quite likes the Budget and says:
“Green lobbyists are whingeing that ‘this is the least green Budget for years’. Brilliant! Well done George. Maybe we’ve come to our senses”.
I have to tell the Secretary of State that for the first Budget in which he was involved to have congratulations from Roger Helmer and condemnation from Friends of the Earth is not a very good start.
The second test we should apply to the Budget is that of fairness. Is it a fair Budget or not? Let us be clear: as well as going beyond the decisions that the Liberal Democrats advocated for the first year, the Budget goes well beyond the pace of deficit reduction that they recommended. To sustain the Secretary of State’s argument, we are talking about not only cuts now, but a much faster timetable. He shakes his head, but the Institute for Fiscal Studies analysis published at the time of the election shows that the Liberal Democrats had set out exactly the same pace of deficit reduction in 2014-15 as we had, but this Budget goes beyond that, with £30 billion of extra cuts in spending and the rise in value added tax.
The question at the heart of the Budget debate over the past 48 hours is where do the cuts fall? Who bears the burden? That is the question that Lloyd George asked in this House years ago. The truth is becoming clearer: this is a regressive Budget, not a fair one. The Chancellor claimed in his speech that the Budget was fair, and I think it important to quote him exactly. These are not my words, but those of the Chancellor of the Exchequer. He said:
“Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. It is a progressive Budget.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]
That is simply not the case. That was exposed yesterday by the IFS. When one looks at the Budget measures, one sees that it is regressive, not progressive. According to the IFS, as my hon. Friend the Member for Leeds West (Rachel Reeves) said, as a result of the measures in the Budget the poorest 10% will pay four times more as a proportion of their income than the richest. I repeat: four times more.
Edward Miliband
I will give way to the hon. Gentleman in a minute, because as a former adviser to the Chancellor, he might be able to explain what is going on—but let me offer an explanation first.
What the Chancellor did was an extraordinary sleight of hand. He published in the Red Book figures that take credit for Labour’s last Budget, which was progressive, and he combined the impact with that of his regressive Budget. Remember, this is a guy who claimed in his Budget speech that there was a renewed transparency and honesty in the Budget process. What he had done was exposed within hours by the IFS. I give way to his former adviser.
Matthew Hancock
I can certainly be more proud of having been an adviser to the current Chancellor than if I had been an adviser to the one who said that he had abolished boom and bust.
Following on from the right hon. Gentleman’s misleading use of statistics, which are described by the OBR on page 93 of the Red Book as “misleading”, does he agree with me that the IFS said that when all the Budget measures are taken into account, the impact is greatest on the richest 10%, not the poorest 10%, and that he is quoting partially?
Edward Miliband
I want to be generous to the hon. Gentleman, as a new Member of Parliament, but I fear that he has walked into the most enormous elephant trap. Let me read from the last page of the IFS handout:
“Treasury said that reforms to be implemented between now and 2012-13 progressive, but
—This is mainly because of reforms announced by the previous government
—They only look at reforms to 2012-13—benefit cuts announced yesterday for subsequent years hit the poorest hardest”.
The IFS concludes:
“So likely that overall impact of yesterday’s measures was regressive”.
If the Chancellor wants to bring a new transparency and honesty to the debate, he cannot take credit for measures announced by my right hon. Friend the former Chancellor and say that they are somehow part of his Budget.
Edward Miliband
The right hon. Gentleman is itching to get back in, but let us be clear. The Chancellor’s words—the words a Chancellor uses in his Budget speech are a grave matter—were:
“It is a progressive Budget.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]
I cannot see how that can possibly be the case, but perhaps the right hon. Gentleman, in his newfound role of defending the Conservative party, can.
Chris Huhne
The reality is that it is perfectly legitimate for the Treasury to analyse pre-announced measures as well as the measures that are announced, because a new Government reverse measures that they do not like and confirm measures that they agree with. Look at, for example, the decision to freeze the threshold at which the higher rate of tax begins to be paid. Does the right hon. Gentleman support that measure? It will increase the progressive element by taking more tax from the best-off.
Edward Miliband
The doublespeak just gets worse. The Conservatives spend the election attacking the Labour Government for putting up national insurance contributions on employees, then they produce their own Budget which is regressive and unfair, then they realise that that will be pretty damaging for them, so they take credit for a measure that they used to attack. That cannot possibly make sense. The truth is that the Chancellor made a claim in his Budget speech that the Budget was progressive. The Institute for Fiscal Studies, to which the Chancellor referred in his Budget speech, has said clearly that if one looks at the measures announced in the Budget one sees that it is a regressive Budget—and not just regressive, but deeply regressive, because the poorest 10% pay three and a half times more than the richest 10%. However much they may twist and turn with the help of their new friend, the Secretary of State for Energy and Climate Change, who is auditioning to be a member of the Conservative party, it will not help them. People can smell it. People can see through the doublespeak.
Mr Mark Field (Cities of London and Westminster) (Con)
The right hon. Gentleman has made a statement about national insurance that he knows does not tell anything like half the truth. Our objection always was to the employer’s element—the jobs tax element—of the national insurance rises. It is that element that we have been very glad to put to one side, rather than the employee’s element, to which he gives such undue prominence.
Edward Miliband
I have enormous respect for the hon. Gentleman, but he will have to do better than that.
Rachel Reeves
Can my right hon. Friend confirm that, in addition to what I said earlier about this Budget affecting the top decile by just 0.7% and the bottom decile by 2.6%, Labour’s March Budget had an impact on the top decile of 7% and absolutely no impact at all on the income of the poorest decile? There is a different way of doing a Budget, and that was a progressive Budget.
Edward Miliband
My hon. Friend is right, of course. That is the difference between a Labour Budget and a Conservative Budget—
Edward Miliband
I am coming to them in a minute. That has been the case historically, but the difference this time is that the Liberal Democrats are faced with a choice. The hon. Member for Bermondsey and Old Southwark—someone I respect; a person of good conscience who came into politics to make our country fairer—has a big decision to make. He is not going to fall for the stuff we have heard from the Secretary of State for Energy and Climate Change, trying to explain away the Budget.
The hon. Member for Bermondsey and Old Southwark knows an unfair Budget when he sees one, so he has a decision to make in the coming days. He has an honourable path to take. He can say, “Up with this I will not put.” That is what Liberal Democrats throughout the country will expect him to do. Maybe he will defeat the Budget, maybe he will get the Government to rethink parts of it, but he could lead a movement, not just of Liberal Democrats in the House but of Liberal Democrats outside the House who will join him. He did not come into politics to put up VAT or to freeze child benefit. He campaigned against the freeze in child benefit in the 1980s under Mrs Thatcher. He did not come into politics to abolish the health in pregnancy grant. He did not come into politics to do those things, and he is not in office. He does not face the choice of resignation: he faces the choice of how to vote. In all candour I say to him that he wanted a Lib-Lab alliance after the last general election because he knew what would happen otherwise. He saw it in the runes. He saw where things would go, and he was proved right. But now he faces the ultimate choice in politics, which is between principle and expediency—and he should follow principle.
Ian Swales
Yesterday The Independent described the Budget as a social democratic Budget. I came into politics via the Social Democratic party, and I am very happy with the Budget.
Edward Miliband
The hon. Gentleman should not believe everything that he reads in The Independent. I say in all seriousness to him that, as we saw, the presentation from the Chancellor was that this was a fair Budget, and for a few hours it fooled some people, who thought that perhaps it was fair. But that has been completely exposed and blown apart by the Institute for Fiscal Studies. The Secretary of State shakes his head, but we all know what he would be doing if the Budget had been presented and he was not in government. He would be railing against it with his great eloquence. He would be talking about what he came into politics for: his belief in fairness.
One of the central arguments of the leader of the Liberal Democrats at the election was that the poorest people in our society paid too much in tax and the richest paid too little in tax. That was the central and powerful claim made by the Liberal Democrats at the election. The question one must ask is: what happens as a result of the Budget? It makes the situation worse. How can the hon. Member for Bermondsey and Old Southwark possibly vote for that? This is not a Budget that he can in all conscience support.
The Budget does not help to lay the foundations for economic growth and it is not fair. It also attacks some of the most important things that we have in this country to help the poorest families, such as tax credits. The Chancellor said in his Budget speech that he would reduce payments to families earning over £40,000 next year, but we learn from the Red Book that the cuts are for those earning over £25,000 a year—not well-off families.
What about fairness? How have the banks fared as a result of the Budget? The banks were a big target for the Liberal Democrats during the election campaign. [Interruption.] The hon. Gentleman shouts “Bank levy”. Perhaps this is the saving grace for the hon. Gentleman. Perhaps that is something that he can cling on to. It is interesting, because that is starting to unravel too. There was much trumpeting of the bank levy in the Budget as a fairness measure. But the reality is that the corporation tax cut from 28% to 24% will help every bank in the country. HSBC’s banking analysts say:
“We’d expect most domestically-orientated banks…to be better off after four years than they were pre-Budget.”
When the measures are taken together, the banks are not worse off but better off—another shred of credibility for the Budget destroyed. Deutsche Bank says that it is a good outcome for the banks. It is plain to see who bears the burden. This is not a Lloyd George Budget; it is a repeat of the unfair, unequal, unjust Tory Budgets of the past.
I end on a point about trust and credibility. The Liberal Democrats said that there should be no spending cuts this year; now they support them. They said that they supported our four-year deficit reduction plan; now they do not. They said that there should be no VAT rise; now they support it. They said that there should be protection for young people through the future jobs fund; now they support its abolition.
It takes a long time to establish an honourable political tradition, but it takes a very short time to destroy it. This is a week of judgment for the Government, but in particular it is a week of judgment for the Liberal Democrats. I say to them very clearly that they should exercise their conscience and be willing to oppose the Budget. The question that the hon. Gentleman and his colleagues need to consider this weekend is whether they are still the party of Keynes, Beveridge and Lloyd George. We all know that those three men would turn in their graves at the idea that the inheritors of the liberal tradition were supporting this Budget.
Today, Liberal Democrats face the ultimate choice between power and principle. They did not come into politics to raise VAT, freeze child benefit or do all those other things. No doubt they think that voting against the Budget would truly make them turkeys voting for Christmas. The opposite is true. If they vote for the Budget it will bring unfairness and injustice to the people whom they claim to represent. It will go against everything that they have claimed to stand for, and it will destroy for ever their claim to be a progressive alternative. That is why they should vote down this unfair, unjust Tory Budget that will damage our economy and divide our society. That is why they should join us in the No Lobby to vote down the Budget next week.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I am happy to take part in what is clearly an important debate, in which we are invoking the spirits of forebears of mine, of ours, whom I pray in aid as part of the traditions to which I belong. Lloyd George, Keynes and Beveridge are indeed part of the family of progressive liberals, of whom I regard myself as a modest inheritor.
The most important thing that was announced in the area of energy and climate change and environmental policy, the specific theme of today’s debate, was the green investment bank. It had been a Labour party commitment, and the Conservative party and Liberal Democrats were clear that it should be invented, created and got up and running. It is absolutely central to this Parliament’s strategy that we set up that bank in the near future. It must not be a modest little invention hidden away in a corner; it must be a central part of the new stage of the British economy and it must draw on money from the private sector, which will be used for projects that would not otherwise be funded. But it must also help us to invest in the new generation of green jobs that will make us again the country that can export our manufacturing abilities and the success of the world. For the last 25 years, we have slipped back in manufacturing and exports in these areas and have relied too much on the City, on finance and on banking. That is not enough to sustain a modern economy, and it is not enough to change the environmental way in which we do our business and honour our international obligations.
The second specific area that was much discussed when I shadowed the right hon. Member for Doncaster North (Edward Miliband) and my neighbour the right hon. Member for Lewisham, Deptford (Joan Ruddock) was how to ensure that households and individuals play their part. The Labour party started that process and I pay credit to the right hon. Lady and her right hon. Friend for beginning to ensure that we make households energy efficient, reduce bills, insulate homes properly, protect the vulnerable, and so on. But the scheme was never big enough; it was always a set of schemes that were confusing and lacking in coherence. The phrase “Green Deal” comes from the Conservative manifesto, but the idea comes from both manifestos. That we have a green deal for households must also be a central part of the Government’s strategy. We need to ensure that the new housing that is built and the housing that needs to be renovated and improved give us the safe, warm and pleasant housing that we need. My right hon. Friend the Secretary of State knows as well as anybody else, because he was the architect of the policy in our party a mere three years ago for a carbon neutral Britain, that the crucial area here is to ensure that the poor and the vulnerable are protected first, and that the people who spend a huge amount of their money on fuel when they cannot afford it are given the help that they need. One of the criticisms that I must repeat of the Labour Government, which I made when they were in office, is that when it came to helping the fuel poor—those who pay more than 10p in the pound of their income on fuel—they sadly failed. They tried, and I do not doubt their integrity in trying, but they failed, and we have to do better than that. We have to ensure that single people on their own, who make up 40% of households, and those with families do not have the ridiculous, out-of-control bills that they had; that we save the fuel and reduce the energy that we need as a country; and that we reduce our climate change liability.
Dr Whitehead
Does the hon. Gentleman agree that, if a programme such as that which he envisages is to have any real traction, there is an absolute imperative to defend and increase the almost £200 million that was set aside for the insulation of hard-to-treat homes and social housing? Will he put that in his book as a red line on Government investment in the energy efficiency uprating of social housing? If that investment does not appear, will he publicly underline his opposition to energy efficiency improvement methods that are not underwritten properly by Government funding?
Simon Hughes
The hon. Gentleman has a good, honourable and knowledgeable track record on the issue, and, as he would expect, in this Parliament I have already met the Housing Minister, the Secretary of State for Communities and Local Government and my friend the Secretary of State for Business, Innovation and Skills to ensure that those points are made. We are just beginning the debate about where the spending cuts must be made, and a coalition of Members needs to put the case for retaining that expenditure which is necessary to pump-prime, drive and incentivise the housing stock change that we clearly need. The other central point, on which the Government have made a commitment, is to introduce the power of general competence to local councils, so that they have much more flexibility over how they address such issues.
Thirdly, on the green agenda, I note the comments that my right hon. Friend the Secretary of State for Energy and Climate Change made about the carbon price, and we await with interest the publication of the proposals to reform the climate change levy. However, I remind him that we ought to reconsider introducing the emissions performance standard, which both our parties were willing to do. Labour resisted it, but I hope that it gets back on the agenda as a way of ensuring that we make progress not just in our country, but throughout Europe.
Fourthly, and more controversially, there is nuclear power, to which the Budget referred not specifically, but indirectly in relation to Sheffield Forgemasters. I made my position clear about nuclear power before the election, and when the initial announcement was made about the Sheffield Forgemasters loan, and I have always believed that the nuclear industry will not have a viable future unless it receives public subsidy. I have never had a theological opposition to nuclear power. I believed that it was the wrong answer, contributing too little to emissions reduction and to the country’s power needs, but in that context the Sheffield Forgemasters loan was inconsistent with a policy of not subsidising the nuclear power industry.
The announcement is difficult for Sheffield and for south Yorkshire, but we have to have a policy that applies from the beginning to the end, and we have to be tough on that. In reality, other countries such as Germany have now introduced a tax on nuclear power stations to make up for the fact that the industry benefits from a carbon price but does not pay for the clean-up of the legacy nuclear waste. There must be economic realism in the nuclear industry. That has been our position, and it has been accommodated in our parties’ agreement.
There is another matter on which I have lobbied the Government but not yet seen anything emerge, and if it could be dealt with in the ministerial winding-up speech that would be helpful. It is about helping with biodiesel that is made from recycled vegetable oil. I declare two interests: I drive a vehicle that uses it; and there is a firm in my constituency from which I purchase it, and which in turn takes it from firms locally. It is a good and environmental product, but the financial incentives for biofuels do not yet encourage the industry to grow. It is an industry of small businesses, it ought to be incentivised but the Treasury loses out because of the wrong incentives as well as inadequate incentives for the sector. I hope that that issue will be looked at, and that we might introduce an amendment to the Finance Bill in order to pick up on that individual and ring-fenced item.
On the Budget as a whole, the right hon. Member for Doncaster North rightly said that I had always assumed that the more natural coalition, had it been achievable, would have been between the Labour party and ourselves. There is no secret about that, but in the end it proved undeliverable on two counts: first, the numbers did not add up, and this country needed a secure, majority Government; and, secondly, the Labour party was not willing to move on key issues. They included political and electoral reform and a fairer taxation system—in particular, taking people on low incomes out of tax.
The measures that commend the Budget are specifically items that were in the Liberal Democrat manifesto, on which I did fight the election. They include, first, linking pensions with earnings. The link was broken by Mrs Thatcher and never reintroduced by Labour, but its restoration next year was committed to in this Budget. Secondly, there is the measure on taking people who have an income of less than £10,000 out of tax gradually, the first wave of which was introduced in the Budget, and which matters not to the absolutely poorest who have no incomes, but specifically to pensioners and working people who have a small income. Thirdly, there is the measure on increasing capital gains tax, because we believe that it should be set at the same level as income tax. There has been a debate among Government Members on that issue, and there is a difference in view, but there has been a move in that direction, which I applaud and recognise.
Toby Perkins
I congratulate the hon. Gentleman on his appointment as the deputy leader of the Liberal Democrats, but I fear it strangely apposite that at the moment he sits all alone on the Liberal Democrat Benches. If he feels that this is a coalition Budget, will he explain how much worse it would have been for the poorest people without the influence of the Liberal Democrats?
Simon Hughes
I am, and always have been, very clear about that issue. When it was obvious that there was no possibility of a coalition with the Labour party, we had the option either of letting the Conservatives become a minority Government or of being in coalition with them. I am very clear that it was better for the country and for the issues that matter to me that we were part of the Government—that we were influencing matters and ensuring that there was a shared programme, not a Conservative programme. I say that completely honestly, and the hon. Gentleman, with a constituency that is in some ways not dissimilar to mine, would expect as much. I have made it my business to battle for the people whom I represent in order to ensure that we end up with a fairer Budget, and a fairer Britain as the outcome. The election, the Budget and the next exercise, the spending cuts, must all be judged on whether we end up with a fairer Britain.
Let me therefore address the remaining issues that follow from that. There has been some press speculation that, because certain items are expensive, they are unaffordable and should be dropped. They include items for the poor, such as the freedom pass and the winter fuel allowance. There is no issue between me and my friends on the Treasury Bench, but the coalition deal is a deal and what has been agreed must stand. There cannot be any unpicking of items in that deal, otherwise the whole thing risks falling apart. There is no suggestion of that from the Government; there is a suggestion from outside the Chamber of changes. However, the deal must be that we go down the committed road. We signed up and the Conservative party signed up, all compromising where appropriate, and that must stand. If there were any suggestion that it change, there would be trouble. I do not think that it will change, because I have heard nothing from colleagues in government suggesting that they want it to, but let us be clear from the beginning: it is a deal, and if it is stuck to, it will last the five years.
I turn to yesterday’s Institute for Fiscal Studies report. The IFS is a respected organisation. It made clear that the Budget as a whole increases fairness, but that if it excluded the matters that were implemented by the Labour Government in the Budget earlier this year it would not be. However, the Budget does not exclude them; it has endorsed and continued them. The right hon. Member for Doncaster North and I know each other well, but the Government have continued with those elements that the previous Labour Chancellor introduced in the routine Budget earlier this year.
Simon Hughes
No, we are not taking credit for it—we are just making sure that we look together at the measures that this country has as its tax regime in the coming days and months.
On that basis, this is a Budget that produces greater fairness. There is difficulty in reaching the people at the very bottom end of the income scale who are not in work, and there are other difficult areas. However, my right hon. Friend the Chief Secretary and my hon. Friend the Member for Thornbury and Yate (Steve Webb), the Pensions Minister, who come from a proud tradition of knowing these issues well and campaigning for the poor and the disadvantaged, would not have signed up to something that undermines all the sorts of campaigns that they have been fighting for.
There remains the issue of VAT. I did not want a Budget with a VAT increase, nor did the Conservative party, and nor did the Labour party. I have no idea what was the view of some people in the Tory party behind the scenes, but there was a rumour that they would think it was a good thing. That is why, during the election campaign, we said that we thought it was a bad thing and challenged them to agree with us. Nevertheless, none of us ruled it out. I wish it were not here, as it is clearly less progressive than other taxes where people pay on the basis of income, but it is a necessary measure given that we have to fill the huge debt that the Labour party has left us.
We will vote for the Budget next week. However, if there are measures in the Finance Bill whereby we can improve fairness and make for a fairer Britain, then we will table amendments to try to do that. That is where we can make the difference, as we will during the spending review that will follow in the months ahead.
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)
I have seldom been so disappointed with a speech by the hon. Member for Bermondsey and Old Southwark (Simon Hughes) as with the one that we have just heard. I suspect that he will find life even more uncomfortable as time goes on. Having listened to the speech by the Secretary of State, and then heard the support offered by the hon. Gentleman, it seemed to me that many Liberal Democrat supporters will be thinking that this must be the biggest conversion since the Chinese general baptised a whole army with a hosepipe. We have had a whole election campaign in which many of the things commended today by Government Members were not only blatantly opposed by Liberal Democrats, but disowned.
I have had the privilege of serving for many years in the constituency in Lanarkshire that I represent, where my next-door neighbour was the late John Smith. More than once, he said to me, “You know, I judge a Budget on the impact I think it has on ordinary young men and young women, with all their aspirations, living in a council house in Lanarkshire.” It is on that test that I make my views clear.
We have heard today a defence of a Budget that is thoroughly unfair and absolutely vindictive towards a large number of people in this country, region by region, not least those in my own constituency. I am not at all surprised that the Conservatives have supported what is a Tory Budget; it is the kind of Budget that they have always wanted to introduce, with or without a global crisis. However, I have to say that the apologies from the Liberal Democrats are profoundly unconvincing, as they have shown again today. As Jeremy Thorpe might have said, “Greater love than this no man has—that he laid down his principles to save his Mondeo and his red box.”
I have to tell Government Members frankly that their claims for this already discredited Budget stand in stark contrast to the consequences for my constituents in Coatbridge, Chryston and Bellshill. For several years before the election, and then again during it, the Conservatives talked about “a broken Britain”, but no Budget has done more to introduce a broken Britain than this one. The most vulnerable have been attacked, with housing benefit cut, child benefit frozen, the health in pregnancy grant scrapped, and the maternity grant slashed—and we are told that this is a fair Budget.
Then we come to what I would regard as perhaps the most appalling aspect of this Budget—the increases in VAT, hugely painful because they are clearly regressive. A 2008 report by the Institute for Fiscal Studies demonstrated that cuts in VAT benefit the poorest 10% most, while increases hit them hardest. That is why during the election the Tories were particularly ambiguous on this specific issue, although I have no doubt that they had this policy in mind all the time. To be fair to the Liberal Democrats, they did warn us—for example, by unveiling a poster showing a “VAT bombshell”, with their leader standing beside it. What we got on Tuesday was a Trojan horse with their leader and his friends standing inside it.
We are told that we are all in this together—that this Budget is indeed fair. I invite the House, then, to contemplate for a few moments what it means for a constituency like mine. In Coatbridge, Chryston and Bellshill, the average wage of those in work is £18,000. Unemployment stands at 7.4%—lower than in 1997, but clearly unacceptable. Let us look at Tatton, the Chancellor’s constituency. The average wage is over £25,000, and unemployment stands at 2.9%. In Twickenham, the Business Secretary’s constituency, the average wage is over £33,000, and unemployment stands at 2.5%. Yet this Budget is being applied to the whole nation.
Of course there is a crisis, as recognised most recently in the letter that President Obama sent to those involved in the G20. However, the words that he repeatedly used about investment, about real fairness—and, above all, about growth—were hardly reflected in the Budget that we are asked to approve. More sustainable ways to reduce the deficit clearly apply to the growth that President Obama has promoted and that, along with progressive taxation, Labour Members strongly support.
I can see that for the Tories this is a matter of ideology. They do not like the public sector: they have made no bones about that. The public sector provides education, excellent services from the police, and infrastructure for providing new jobs—and, my heavens, we will need them after this Budget. How can they possibly argue that this Budget will not lead to unemployment? We need to build more schools. We need to make more industrial parks available, hoping to invite inward investment, via the regional authorities, and making more money available so that the Government are creating the environment by which jobs can be provided.
Kwasi Kwarteng (Spelthorne) (Con)
What does the right hon. Gentleman think about the remarks written down by his party’s former Chief Secretary to the Treasury, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who said, I believe, “There is no more money”?
Mr Clarke
I had assumed that the hon. Gentleman had a better sense of humour. It was clear to the whole country that it was a joke, so I do not regard that as being a serious point.
The Government blame the public sector for the recession, but what about the banks? [Interruption.] We must ask that question. My right hon. Friend the Member for Doncaster North (Edward Miliband) dealt at some length with how we have approached that important matter. While the Government have been hammering away at the poorest people in the poorest parts of our country, they have treated the banks with a feather duster. They have hardly responded to the problems that the banks themselves created, and no Member on their Benches can defend that.
Rachel Reeves
Does my right hon. Friend agree that it does not seem fair that the welfare bill will be cut by £11 billion, but we are asking the banks to contribute only an extra £2.4 billion?
Mr Clarke
Absolutely—that is an excellent point. Indeed, I wish now to compare the Budget’s response to local government, and to people applying for disability living allowance, with the way in which the Government have treated the banks. They have certainly not done so in a way of which my constituents, or the disability and local government organisations that I know of, would approve.
What the Government have done to local government is to cut, cut and cut again. They have offered the public a freeze in council tax but failed to explain that the services that they and the House have imposed upon local authorities cannot possibly be carried out without other services being slashed, including social services and social work for the most needy. That is clearly missing from the thoughts of coalition Members. I invite them to compare that with their approach to the banks, which I was heckled for mentioning.
What about those who seek to live on DLA? We are told that one by one, they are going to be recalled and re-examined. I was a Member of the House in the early 1980s when we had that version of Thatcherism, and I want never again to see men who have worked in the mining industry, and who have to be helped into my surgeries because they can hardly breathe, being cut off from benefit because they are told that they can walk 50 yards. If that is the type of policy that the so-called coalition Government are planning, which I believe it is, they can expect the utmost opposition.
At a time when there is a clear demand for housing, what the Government have done to housing support is simply disgraceful. I say that as somebody who was in local government before coming to the House. Even the Evening Standard had to point out last night that because of the Government’s approach to housing benefit, more poor people would be made homeless. I predict that local councils faced with the financial challenges that that represents will build fewer and fewer social houses, which the Liberal Democrats told us before the election were one of the important issues for them.
Mr Clarke
I will not, because I know others want to speak. I wish to conclude now for that very reason—many hon. Members wish to speak about the situation in their constituencies and the Budget’s impact on ordinary people and communities. They want to do so partly because we have seen this situation before—not in this generation, but certainly in the 1930s and the ’80s, and we do not want to see it again.
This is a regressive and dangerous Budget that will hit the poor hardest. Yesterday, my hon. Friend the Member for Derby North (Chris Williamson) referred to Orwell’s “Animal Farm”, and I wish to conclude by quoting some words from that work:
“Twelve voices”
—I look at the mixture of Liberal Democrats and Conservatives on the Government Benches—
“were shouting in anger, and they were all alike…The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”
But the British people can see through that.
Michael Fallon (Sevenoaks) (Con)
It is always a pleasure to follow the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke), but he will not be surprised that I cannot agree with his analysis. I wish to make two specific comments to him. First, he spoke passionately on behalf of the poorest people in his constituency, but I cannot see how one helps the poorest and those out of work in Coatbridge by messing up the public finances and producing spending plans that are unaffordable and cannot be carried through. Making promises of that kind does the poor no favours.
Secondly, I disagree with the right hon. Gentleman’s accusation that we take pleasure in the measures that were announced on Tuesday. There are many things in the Budget that I do not take pleasure from, and many spending cuts are coming that Members in all parts of the House will probably wish had not been made. There are certainly tax increases in the pipeline that we would not have wished for. However, many of the decisions that the Chancellor has taken were simply unavoidable because of the mess that we have inherited. We take no pleasure in the judgments that have had to be made.
It is heartening to Members on the Government side of the House, after so many years of hubris, boasting and declaration, to have a Budget that is so clear, honest and straightforward. Even if the right hon. Gentleman disagrees with the measures in it, it sets them out clearly and simply. It is refreshing to have a Budget that takes the longer view—a Budget for a whole Parliament. It is good to know now the structure of the measures in it, unpopular and unpalatable as some of them are to Members on our side of the House as well as his, and that if those decisions are carried through, the current structural deficit will be closed by the end of this Parliament.
It is refreshing also to have a Government who face up to a situation that has deteriorated rapidly, as we have seen in the eurozone. There is no exact parallel between our deficit and that of Greece, or between our debt and that of Spain, but there was a parallel between the Labour Government and the Governments of Greece and Spain in that all of them ignored successive warnings. They were all warned by the International Monetary Fund, the OECD and the European Commission to start putting their public finances in order, and they ignored those warnings. That is why we have had to be confronted with a second Budget in a year—an emergency Budget that puts right the weaknesses that have been identified.
Mr Tom Clarke
When the hon. Gentleman makes comparisons with other countries, will he bear in mind that we in Britain are not in the euro? Will he also, as he did when he was on the Treasury Committee, recognise that there is a big difference between short and long-term debt, and that that matters?
Michael Fallon
I accept both those points, and I am not drawing exact parallels with Greece and Spain. I am making the much more general point that when a country is warned by all the international agencies and commentators, and depends on the international markets to finance its accelerated borrowing, it has to listen to those warnings. That is why we are now confronted with a second Budget in three months.
The Budget is to be welcomed because the pain is quite clearly shared. We can of course argue about its relative impact on various deciles and so on, and we have had that argument. We can also discuss whether we should include the measures taken in earlier Budgets or just consider this Budget itself. What cannot be argued about, however, is that the pain is spread across all income groups and sectors. My constituents will bear some of that pain, just as the right hon. Gentleman’s constituents will in Coatbridge.
Let us be clear about some of the spending cuts that will ensue: they are legacy cuts; in the end, they are Labour’s cuts. We discovered that some of the spending promises made in January would, shockingly, have been financed from the reserve, which was set aside to ensure that our troops in Afghanistan would be properly financed if new need arose there for equipment and so on. It would have been raided to finance the extra spending commitments that were announced in the pre-election rush. The plain fact is that the spending was unfunded. We cannot continue to spend £700 billion and raise only £545 billion in taxes. That gap must be bridged and the Budget, for the first time in a series of Budgets, sets out a credible path for achieving that.
I am pleased that, when the Chancellor considered the make-up of those spending totals, he decided not to cut the capital spending programme further. That is important. Clearly, there are implications for jobs, and the capital spending totals were already being halved from their peak. There are explanations for that, but it was right not to cut them further.
I note that when the Chancellor reviewed the capital spending programme and future capital spending commitments, he was careful to preserve some of the commitments for key infrastructure projects in, for example, the northern cities. It is not true that the Budget hits Scotland, Lanarkshire or the north harder than other parts of the country. The dualling of the A21, for which we have long campaigned in Kent, was one of the first casualties of the spending review. Long-cherished projects in the south-east, too, are being further postponed. The pain is being spread across the country. That should be borne in mind when particular decisions, such as the loan to Sheffield Forgemasters, are considered.
I want to make three further comments about the Budget judgment. First, I assume—obviously, I must await the completion of the spending review—that there will be further contributions from annually managed expenditure. I assume that, as well as the decisions that have already been made—I accept that Labour Members may oppose them—about housing benefit and some of the other grants that have been mentioned, there will be more changes through some of the welfare reforms that my right hon. Friend the Secretary of State for Work and Pensions and his team are considering.
Secondly, I hope that, when an element of spending is protected, it will not be wholly insulated from the same downward pressures that we apply elsewhere to reducing management, eliminating unnecessary bureaucracy and focusing more spending on the front line. That must apply equally to health and international development as to other matters. Otherwise, in two, three or four years, those who happen to work in the health service will end up being better rewarded than those who have chosen to work in the education service or the police service. That would not be right.
Thirdly, I want to say a little more about the proposed freezes. There are freezes on public sector pay, child benefit and council tax. The reasons for them are all too obvious: the private sector has had to accept a huge measure of freezing—I pay tribute to trade unions in the private sector for the extent to which they accepted the necessary restraint on pay and the changes in working practices that had to follow in the teeth of one of the worst recessions we have had to face. It is therefore right that, as well as freezing pay, we should continue to consider the greater flexibilities that we need, and equity between the private and public sectors. Working practices, various entitlements and inherited rights should also be examined. It is not simply a question of freezing pay for two years and exposing public services to some of the problems that we have experienced in the past with incomes policy, when there is immediate demand for catch-up, immediate pressure for comparability and so on. While the freezes are in place, it is important to continue the search for radical reform, which helps restructure those services. That should apply across the public sector, where we have frozen pay and in local government, where we will freeze council tax. We must continue the drive for more efficient services, and shared services between councils.
The principle may also apply to some of the frozen benefits, such as child benefit, where freezing the benefit does not wholly tackle some of the inherent difficulties with universal benefits—the deadweight cost that is expended on those who are well able to afford to bring up their children but are entitled to exactly the same amount of child benefit as those much further down the income scale. Those issues need to be addressed while the benefits are frozen.
As we rebalance the economy away from the expansion in the public sector to encouraging the private sector to grow again—I welcome the enterprise measures in the Budget—it is enormously important to continue to focus effort on reskilling and ensuring that those who have to change their jobs and seek the new opportunities that are being provided have the necessary skills to alter their position in the labour market. We must get alternative training providers in alongside jobcentres and existing services.
Labour Members have described the Budget as a gamble. It is not a gamble, but a necessary judgment to restore the public finances and get our economy growing again in a way that provides the jobs of the future. We are in politics to make such judgments, and I am delighted that my right hon. Friend the Chancellor has set out his judgment so honestly in the Budget that I support.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
In my speech today, I will examine several different issues of Welsh, UK and international significance, noting the impact of the new Budget on the Welsh economy and Welsh families and communities. However, I begin by asking whether the Budget was even necessary, never mind whether it deserves the billing of an “emergency Budget.” It was clearly a political and ideological Budget, designed to shrink the state, and not one that was economically needed.
Indeed, even the Financial Times columnist, Sam Brittan, called it a “totally unnecessary budget” in his column of 18 June. We already had figures from the March Budget from the new Office for Budget Responsibility, and we all knew that the major announcements are actually the cuts that will be announced in October in the comprehensive spending review.
On Tuesday, the UK Government confirmed that, except for health and overseas aid, departmental budgets are to be cut by 25% during this Parliament. If we map that level of cuts on the position in Wales, around 60,000 public sector jobs are at risk—15,000 more than the 45,000 job cuts planned by Labour in March. Indeed, based on today’s Financial Times figures, 65,000 public sector jobs are in danger in my country. That is very worrying for many families in Wales, and we believe that it is unnecessary and avoidable.
Clearly, the national debt and deficit must be tackled, but there is a question of timing, and I cannot believe that increasing the cuts in this way and at this time is in any way beneficial to the people of Wales. However, the implementation of the recommendations of the Holtham commission on funding and finance in Wales would be beneficial. A major plank of that was the recommendation that a floor of 114% of English spend be implemented immediately, to ensure that Wales does not lose out further under the Barnett formula.
Plaid Cymru is not alone in calling for that. Government Members may recall that the Liberal Democrat leader in Wales said on 7 June 2009 that
“the Westminster Government should act immediately”
in introducing a floor. That £300 million a year would save around 9,000 public sector jobs in Wales, but would be only the first step on the way to the fairer, needs-based formula that we need. It is therefore disappointing that all this has been put on the back burner. With so much work on the issue contributed by Gerry Holtham and his team, as well as three other independent reports, I cannot see the need for an additional commission after a successful referendum on further powers for the National Assembly.
There were other areas where the new Budget is both tough and unfair. The most important are the cuts in the welfare budget, to the tune of £11 billion in coming years. As figures in the Financial Times showed, any cuts in welfare or the public sector hurt areas that are already in need of more. The change from upgrading benefits according to retail prices index inflation to upgrading them according to the consumer prices index will mean a lower rate of benefit growth than before, as well as a stealth saving. Having worked for Citizens Advice Cymru, I can tell hon. Members that people who rely on benefits will struggle because of those changes, and we are talking about real people and families on low incomes, not the “welfare scroungers” that the political right like to caricature.
Specifically, the proposals to lower the number of people on disability living allowance are a cause for concern. In Wales, more than 240,000 people are on DLA. Having seen the impact of tribunals and stricter qualification criteria on other benefits, we have concerns about how the new changes to eligibility will be implemented and who will make the final decision. What appeals system will be in place, for example? We and disability groups support getting people into work. That is a good thing, but when such schemes are suggested, especially in such a manner and in such a Budget, there is a wider concern that they are just a means for getting people off benefits, rather than supporting them back into work.
I must also say that, in many parts of the UK, even if people are able to work, they cannot. Some parts of my country have very few jobs available, with between 10 and 15 registered jobseeker’s allowance claimants for each advertised job, and that is even before adding people who are switched from disability benefits. It is the same with parents of young children going back to work. If the work is not available and we are forced into making savage cuts in the public sector, how are those people to find work?
However, there are some steps in the Budget that we welcome. There was a recognition that Wales and other parts of the UK have not shared in economic growth in the past and that a level playing field is required. Quite how Labour managed to create or accept a situation where only one private sector job was created in the north or midlands of England, but 10 were created in London, is beyond me. That shows Labour’s failure of imagination in growing or developing a balanced economy. However, the Conservatives’ proposal to allow a national insurance holiday is hardly likely to correct the years of economic centralisation in London and the south-east of England, or rebalance the economy geographically.
A more far-reaching idea might be the regionalisation of corporation tax according to gross value added. That would give the poorest nations and regions a competitive advantage. In west Wales and the valleys—the areas that I represent—GVA is only 64% of the UK average, so additional assistance to equalise that across the UK would be warmly welcomed. Another avenue might be the devolution of that tax, so that the Welsh Government could make their own decisions, within EU regulations. Bolder moves to develop the Welsh economy are needed than those given in the Budget. The route map for economic renewal, to be launched in a few weeks’ time by Welsh Deputy First Minister Ieuan Wyn Jones, will provide more nuanced, Welsh solutions.
Changes that bring about real-terms cuts in benefits and public sector pay freezes punish those who had nothing to do with the economic mess created by the banks. The general public will contribute £13 billion extra towards the deficit through the VAT hike. The bankers will pay a measly £2 billion a year through a levy, yet still see huge benefits in shifting their profits from income tax to capital gains tax. The levy is not only small; it is being introduced only gradually. The banks will not be squealing as a result of this Budget, as the cuts in corporation tax will compensate for the levy. Considering that the Public and Commercial Services Union estimates that there is £123 billion of uncollected tax, far from demonising vulnerable people struggling to get by, would it not be better if the Government targeted the super-rich for their tax avoidance and evasion? Instead, cuts to Her Majesty’s Revenue and Customs staff will reduce capacity to collect due tax from those intent on not paying their fair share.
There were elements of the Budget that must be welcomed, not least the increase by £1,000 of the level at which income tax is paid by basic rate taxpayers, a Plaid Cymru policy at the general election.
However, a further disappointment for my country in this Budget is that although confirmation was given of other transport schemes in England, the electrification of the Great Western line was noticeable by its absence. I do not need to remind you, Mr Deputy Speaker, that Wales ranks alongside Albania and Moldova at the bottom of the electrified rail track league table. Without a concrete timetable for either electrification of the Great Western line or the creation of a high speed rail link to south Wales and north Wales, we will languish there much longer.
Far from all of us being in this together, the emergency Budget aimed its axe at the poorest and the most disadvantaged communities, while being more or less “business as usual” for the economic elite.
Mr Deputy Speaker (Mr Nigel Evans)
Order. As hon. Members will have recognised, we have a 12-minute limit, and I am grateful to everybody for observing that. I am sure that the House will also want to observe the conventions associated with maiden speeches.
Karen Bradley (Staffordshire Moorlands) (Con)
It is an honour to address this House for the first time today. It is an equal honour to do so as the Member for Staffordshire Moorlands. I could easily use up all the time available in praising my beautiful constituency, and although I shall resist doing so, as there are pressing matters facing the House, I make no apology for my pride in representing the people of the Moorlands, among whom I feel very much at home, as I represent the seat where I was born.
I would like to start by paying tribute to my predecessor, Charlotte Atkins. She made many friends in the constituency in her 13 years of representing the seat. There are many local causes that she made her own, including her advocacy for the charity Sailability and her vocal campaign for the preservation and promotion of the canal network. I am privileged to take up the baton in representing the Staffordshire Moorlands in this House.
Right hon. and hon. Members may be aware of the unique character of the Moorlands. Staffordshire is a large county with a great industrial history, but sometimes we overlook its claim as home to much of the Peak district. The geography of Staffordshire Moorlands is demonstrated not only by the name, but by the fact that one third of the seat is made up of Peak national park land. I see it as one of my responsibilities to encourage visitors to that beautiful place, which is something of an undiscovered tourist gem. When hon. Members visit the Moorlands, they will find a wealth of natural attractions. The very many hills enjoyed by walkers provide striking and inspiring scenery, including the famous Roaches. While among the peaks, hon. Members can slake their thirst in up to five of the 10 highest pubs in Britain.
Alongside the wild shapes and deep colours of the moors and the peaks, we should not forget, of course, that much of the wonderful rural beauty is conserved for our enjoyment largely thanks to the hard work and dedication of farmers. As a result, Staffordshire Moorlands is an important source of the nation’s food. We are now entering the summer country show season, when the quality and variety of livestock will be on prize-winning display. We all benefit from the maintenance of the land that supports that vital industry. It will be one of my aims to encourage the House to ensure that farming—not hidden by the catch-all “rural affairs”— is given due attention by the Government.
There are opportunities not only for walking, but for bird watching, including around Tittesworth reservoir, and for sailing on Rudyard lake, the place after which the famous Mr Kipling—not the one who makes cakes—was named. The lake is no mean feat of engineering, and was created at the end of the 18th century to feed the canal network, another important part of our tourism industry. On top of those natural attractions are other reasons to be confident about the future for the Moorlands. The constituency is home to the most visited tourist attraction outside London, Alton Towers. There is also a thriving arts community, building on a long history that includes William Morris, who lived and worked in Leek for a time. Local painters such as David Hunt continue the tradition, capturing the essence of the area.
Of course, Staffordshire Moorlands is no simple rural idyll; it is also home to towns with an industrial, textile and mining history. Biddulph grew up on mining, but has adapted and is now finding its way with more modern industries. Leek prospered from the silk trade and has long been the home to two large providers of financial services, Leek United and Britannia. Contrary to some reports, manufacturing in the UK is not finished. Small firms in the Moorlands are making gearboxes, seat belts, chemicals and agricultural equipment, to name just a few.
I believe that the traditional character of our towns and villages and our farms has been strengthened by a feeling of togetherness—a feeling of the moorlands being something unique—but we have to trade some of that positive feeling for our fellow moorlanders with the difficulty of ease of access. There is, for example, neither a train station nor a dual carriageway in Staffordshire Moorlands. That lack of infrastructure might be one problem for our businesses that seek to connect quickly with others, but another, more severe, problem has been one of neglect of places such as the Moorlands—neglect by the previous Administration who developed policy with an eye only on its metropolitan heartlands and large companies. They were an Administration who strangled small businesses with regulation and looked on in ignorance of anyone who works on the land or cultivates livestock.
However, I do not think that I have been elected by the people of Staffordshire Moorlands just to sing the praises of the area. I consider that they have elected me also to support the new Government in redressing the balance in focus of our legislation. I welcome the intention to devolve powers to the right local level and recognise that the diversity in our country requires that we have strong principles and that we apply them appropriately. I also believe that my constituents expect me, along with all other right hon. and hon. Members, to uphold the supremacy of Parliament, because that is how their interests will be represented most effectively.
That brings me to the point I want to make about today’s debate. We have the duty, as well as an opportunity in this new Parliament, to hold the Executive to account, but we must understand clearly what we mean by the Executive. Today, it is not simply Cabinet Government, but the extension of Government through the civil service and numerous Government agencies. We must ensure that, as we vote for laws in this House, what we pass is actually implemented in practice.
My professional background is as a chartered accountant and chartered tax adviser—and I realise how many people would be disappointed if the word “tax” did not appear in this maiden speech. Over the years I have advised businesses, large and small, on their tax affairs, I have seen many instances of where the intention of the law has been altered in practice, not by another Act of Parliament or even by a judge, but by officials in Government Departments—in my particular case, by Her Majesty’s Revenue and Customs. That is a question not necessarily of unintended consequences, but of deliberately altered consequences by officials.
Let me provide a concrete example of what I mean; it relates directly to our debate on green energy and reducing carbon emissions. Under the Finance Act 1999, the then Government encouraged people to cycle to work—which given the terrain in the Moorlands, would keep us extra fit. Parliament determined that if businesses provided cycles for their staff, that provision would be exempt from tax. There are several ways that a business could do that—for example, by creating a pool of bikes or by setting up a salary sacrifice scheme. In the latter case, a credit agreement between the employer and employee is required.
One of the principles in the legislation is that the benefit should be “generally available”. However, HMRC guidance drawn up in the normal way on the matter results in a subtle, but different, position—that the benefit must be “available to all”. Crucially, employees under the age of 18 cannot enter into a credit agreement. This means that most employers could not offer the option to all employees; and, according to the Revenue, if it is not available to all, it cannot be available to any.
A Department for Transport guideline produced 10 years later attempted to clear up the anomaly, but why did we need guidelines from one Department to interpret guidelines from another when the intent of the law was quite clear? Why should HMRC apply the rules in this way? Did not Parliament say that it wanted this tax exemption to be given to employees to encourage green transport? Who gave the Revenue, a Government agency, the right to re-interpret the law? That may seem a small instance, but it is indicative of the larger problem we face. There is a culture of control often masquerading as advice, and there is a tendency to complicate the law—and not just in the area of tax.
Too many times my constituents have said to me that they do not understand why MPs or councillors have to take legal advice or are following the official guidance rather than doing what the intent of the law says. Parliament must be supreme, and not just in fiscal matters. Ministers and Members of this House must be confident that they are the masters of the rules, because they are accountable to those who have sent them here. If we pass fewer but simpler and clearer laws, there will be less scope for confusion. Simplicity will help Parliament maintain that supremacy, while transparency will also help to restore the reputation of politics.
Our electors are more than capable of judging what we are doing—and seeing whether it is worth while—if they can see what it is, and clarity of principle might even increase interest in the business of Parliament. People will see this House as a place of serious and relevant debate, and, dare I say it, simplicity might even help us make efficiency savings. I therefore ask that in this Budget debate, and in the debates that follow on of the Finance and other Bills, we ensure that what we intend the legislation to do is what officials implement and enforce.
Before I sit down, Mr Deputy Speaker, I hope you will indulge one final comment, as I want to thank the voters of Staffordshire Moorlands for putting their trust in me. I will endeavour to work hard for all of them and represent their interests in this House.
David Wright (Telford) (Lab)
I congratulate the hon. Member for Staffordshire Moorlands (Karen Bradley) on a genuinely excellent maiden speech. She mentioned 10 pubs that were among some of the highest in Britain. My love of a pint of beer will ensure that I visit her constituency very soon, perhaps over the summer holidays, and avail myself of a pint of bitter—or maybe even two—in each one of them. As a fellow midlands MP, it is a great pleasure for me to welcome her to the House. I was the Government Whip for her predecessor, Charlotte Atkins, to whom she paid worthy tribute. Perhaps I can encourage the hon. Lady to join us in the Lobbies next week, as I used to encourage her predecessor to do, but on the basis of her excellent speech, I think I might have some problems achieving that.
I want to speak about some general issues surrounding the Budget. First, I was struck during the Budget debate over the past couple of days about how the Budget failed to mention the scale of the global downturn over the past three or four years. Anyone listening to the Chancellor would not have believed that the world economy had gone through one of the greatest downturns—indeed, the greatest downturn—since the second world war. This omission amounts to a significant rewriting of history.
I recall visiting the United States when the housing crisis, prompted by the mis-selling of mortgages in the US, was just beginning to take hold. There was real fear on Wall street about the value and confidence of what was then triple A-rated debt. It sent a shockwave around the world, yet we heard no mention of that in what the Chancellor had to say, which I found quite remarkable.
I also found it remarkable that the Chancellor had nothing to say about the decisions taken by the Labour Government to support the economy at the height of the recession. I still believe that those decisions were the right ones to take, supporting the banks during the crisis and cutting VAT—perhaps the Liberal Democrats would like to reflect on that when it comes to the vote next week—to provide a stimulus to the economy. The car scrappage scheme was a particularly successful economic stimulus and was important for companies in my constituency and across the midlands. Quantitative easing was another positive step. During that period, the Conservative party largely got it wrong. It opposed a number of those initiatives, and was particularly slow when it came to supporting bailing out the banks. In large part, it got a number of those decisions wrong.
The crucial question facing us now is the speed at which we pay down the deficit that resulted from the global recession. We are all agreed on that. The risk is that if we take too drastic action, we could find ourselves pushed back into recession. On “Newsnight” last night, which I watched with my cup of tea, an economist, Richard Koo of Nomura Investment in Japan, said that there is a danger that the Budget will take too much cash out of the economy, and made the point that the private sector is deleveraging and might also be tempted to pay down debt. He made the point that, as a result of the Budget, we might find ourselves in a low-growth, low-inflation economic position, as experienced in Japan. At such times, he said, a portion of financial stimulus needs to be sustained, and that should have happened in Japan in the late 1990s. What happened in Japan was that it bumped along the bottom in economic growth. That is a worry.
The Budget envisages a massive shift to private sector investment and exports over the next three years. We should all support that and hope that such a strategy succeeds, but such a significant rise in private sector investment and exports over a three-year period is a tall order, especially if, as the Prime Minister said proudly from the Dispatch Box the other day, economies across Europe are contracting public spending. Several European Governments have withdrawn stimulus from the economy, which is a concern in relation to demand for exports over the coming three to four years. That is why the question of the speed of cuts is crucial.
The Canadian deficit reduction model, which is often cited by commentators in relation to the Budget, was pursued at a time of growth in the economy. I want to see more growth and I want to see the country succeed, as we all should, but my concern is that growth is fragile here. Businesses are concerned about the impact of cuts on levels of demand in the economy. The Shropshire Star, my local paper, did an excellent piece on the Budget—that will get me a good slot in the editorial tonight—and quoted Geoff Parkes, who runs a company in Telford, ASC Finance For Business. I do not know him or pray him in aid of the Labour party’s position, but he had this to say about the Budget:
“The big unknown is the effect of public sector cuts, reduction in tax credits, freezing child benefit and critically the rise in VAT to 20% from January 2011”.
He said that this
“will have an impact on demand in the economy—this means firms will have to compete harder for their share of the recovery”.
He is right: companies will have to compete harder for their share of the recovery. My concern is that we are taking public spending out of the economy too quickly. We need to cushion the impact of the cuts over the next two to three years; otherwise, we might find ourselves in a double-dip recession.
My concern about the Budget is the ideological drive of the Conservative party to reduce the role of the state. This is the kind of Budget that the Conservative party would have introduced whether we had these economic problems or not. The Conservatives have a big society view about the country based on a US small state theme. The headline from the Budget is, “Pain now, more pain later”. The massive spending cuts are pushed away to the autumn, when they can be announced by the Chief Secretary to the Treasury, the Chancellor’s personal human shield. I would not be surprised if the Prime Minister and Chancellor were well away—probably out of the country—when the Chief Secretary stands at the Dispatch Box to announce the savage cuts later in the year. In the meantime, the Budget can be presented as half the story of what needs to happen in our economy.
The Institute for Fiscal Studies has said clearly that if some Departments are to be protected, with perhaps 10% cuts, others will have to bear cuts of about a third. That is an enormous amount to come out of the budget in the next two to three years. I am extremely concerned about the impact that will have on police services in constituencies such as mine, where we will see fewer police officers on the street, fewer community support officers and fewer front-line services. Telford is heavily reliant on civil service jobs: defence jobs, Department for Work and Pensions jobs, and jobs that are reliant on work from the Treasury. I fear that there will be a significant reduction in the number of civil service jobs in Telford, which will have a consequential impact on our economy. I want us to protect those jobs in Telford, and I will fight to protect them. It is important for us to protect our local economy—an economy that relies so much on public sector jobs.
I was disappointed that the Building Schools for the Future programme was not mentioned in the Budget. A significant amount—more than £200 million—has been invested in the renewal of our schools in Telford, but there is currently no security for head teachers, pupils or parents with regard to the future of those schools. Secondary schools such as Wrockwardine Wood arts college, the Phoenix school, Lord Silkin school and Sutherland business and enterprise college are waiting to see whether the Government will proceed with Building Schools for the Future. I shall campaign with local communities to ensure that we complete that programme—a programme that we initiated as a Labour Government, and of which I am incredibly proud.
I believe that the Budget will have a disproportionate impact on the poorest people in the country. The Institute for Fiscal Studies stated clearly today that it believed that it would have a greater impact on the lower paid and the poorest than on anyone else. As our discussion over the past couple of hours has made plain, Labour’s last Budget was progressive and this Budget from the Conservatives is regressive. That has been the focus of the debate.
The core tax rise in this Budget is, of course, the increase in VAT. Before the election, both the Conservatives and the Liberal Democrats said that they had no plans to introduce increases in VAT. This VAT rise is a bombshell. We talked about it during the election in Telford, where it will have a significant impact on families. I shall be in the Lobby next week opposing it. Indeed, I shall be in the Lobby opposing the entire Budget package, because it is damaging to communities such as Telford and damaging to the country. We should oppose it because it is non-progressive—in fact, it is regressive—and I look forward to Liberal Democrat Members joining us in the Lobby to oppose it next week.
Mr Mark Field (Cities of London and Westminster) (Con)
I congratulate my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley) on her charming maiden speech. She spoke with great passion about her constituency, although I felt slightly guilty when she lamented the fact that there were no railway stations in it. There are 32 tube stations in my constituency, along with no fewer than three of the four railway stations on the Monopoly board. Perhaps we can swap a few between Cities of London and Westminster and Staffordshire Moorlands before the world is too much older.
The first Budget of any new Administration is always a momentous event. It inevitably sets the seal for much of what will follow economically. This is a groundbreaking and very brave Budget, which has expressly changed the terms of trade. In his speech, the Chancellor made a robust case for the nation to have a future that would be underwritten by the success of business and enterprise.
It is only the third time in more than three decades that such a Budget has been delivered. In the infinitely more clement economic weather of 1997, the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), while ostensibly sticking to his predecessor’s spending plans, announced fatefully his intention to restrict private pension tax breaks. At a stroke, the culture of personal savings was undermined, and a distinct shift from individual responsibility to collective state provision was flagged up. It has, perhaps, taken a full 13 years for us to appreciate the true implications of what many then regarded as a technical manoeuvre born largely from a need to secure an easily available pool of cash to spend on pet projects, a state of affairs that was necessitated by the making of an orthodox manifesto pledge.
In the emergency Budget of 1979, the incoming Conservative Government signalled a desire to unleash the power of the free market from the state’s grip, and to promote free trade after a characteristic spell of Labour mismanagement. Indeed, in the run-up to the general election this year, it became the pastime of many political commentators to draw comparisons between that momentous 1979 election and the political and economic landscape that faces us today. Yet, of course, that simplistic analysis ignored the significant differences between the two episodes. When the Conservative Government took control of the public purse in the final year of the 1970s, our nation had been subject to monetarist policies for two and half years courtesy of the IMF. In essence the very toughest decisions on public spending had already been made at that time.
In contrast, this year, while there was a superficial acceptance that the best of economic times was over, the sheer gravity of our economic problems has been too lightly skated over during the campaign skirmishes. Indeed, it served the expedient interests of all three main political parties to confine any economic discussion to a somewhat fatuous battle over public spending cuts of £6 billion; a sum of money that we borrow, not spend, every fortnight.
The public were willing to embrace change in 1979. Today, I fear that the electorate have been less willing to accept the seriousness of the national economic situation. The breathless relentless media coverage over the past two years charting stock market swings, house price crashes and global turbulence has convinced many that the worst is already behind us when, really, the reckoning has yet to begin.
I have felt that the past couple of years have been uncompromisingly ugly—we have seen that in many of the speeches from Opposition Members today—for those of us who support capitalism, free markets and open trade. Once again I am delighted that this Budget starts to make the case for empowering people, the smaller state and individual responsibility.
The election is now of course behind us. I remain concerned that our coalition Government do in all fairness lack the critical and explicit mandate to make some of the very tough economic decisions that are required as a matter of urgency to get the public finances back on track, for this Parliament—indeed probably for the entire decade—stands to be dominated domestically by the need to take a firm grip of the public finances.
This year’s public budget deficit of some £155 billion represents 11 per cent. of GDP and means that we continue to borrow fully £1 in every £4 that we spend. This colossal living beyond our means is made up of consumption rather than investment in any meaningful sense of the word. Correcting that imbalance will necessitate diminished living standards for the generation of taxpayers yet to enter the workplace. In a large measure, that means that we have to take an axe to public spending, and that has of course been a remarkably rare event.
I am delighted by the generally positive media response to the Budget, but I should point out to my hon. Friends that the pain of the tax rises accounts for only 23 per cent. of the overall measures. Details of the adjustments to public expenditure will be hammered home in the months to come and will become fully apparent only in 2011-12. That is when the real logistic and political tests will come.
There is much to learn from history about those very few previous episodes when we have needed to make a substantial cut in public spending. The single most significant period of efficiencies and reductions in public spending came in the aftermath of the first world war and, perhaps significantly, was also in a time of peacetime coalition between the Liberals and Conservatives under Lloyd George. The wartime economy at that juncture was characterised by huge unprecedented state control, so much so that when the conflict came to an end, there was a massive upswing in the economy as pent-up demand, wartime savings and the removal of wartime controls caused a boom. However, the first peacetime Budget in 1919 actually led to a budget deficit of 6 per cent. of GDP after the then Chancellor concentrated on building homes fit for heroes and embarking on an ambitious social programme rather than balancing books.
Hot on the heels of that boom, however, was a grim slump. Having been one of the world’s largest overseas investors before the first world war, Britain became one of the biggest debtors with interest payments taking up some 40 per cent. of all Government expenditure. The value of the pound was depressed, yet the anticipated export boom failed to materialise. Even preceding the slump there had been a public outcry at the Government’s extravagance. As the economic gloom descended and tax increased, the outcry against Government waste became a thundering clamour.
It was against that background of public pressure and economic misery that the then Prime Minister Lloyd George appointed Sir Eric Geddes to chair an independent review of Government spending in the bitter year of 1921, the aim being drastically to cut spending by eliminating the waste that had been identified. The Geddes committee was to become the most thorough and rigorous outside investigation of public expenditure ever conducted in Britain. It was also, of course, highly controversial. Its membership consisted of only a single elected MP and five unelected business leaders, and while it was lauded by the world of commerce and Conservatives and taxpayers, it was attacked by the fledgling Labour party and the trade unions.
In the end, Geddes was able to slice some £54 million off Government expenditure. That seems an almost risibly small sum today, but in those days it amounted to a 10% reduction. We should soberly remember that, once ring-fencing is accounted for, departmental cuts of about 25% are likely to be required next year.
Back in the 1920s, a clear message was sent to Ministers, Whitehall and the general public that spending in any form would be very closely scrutinised like never before. The committee’s work marked a crucial turning point in rebalancing the public finances from a distorted war basis to a peacetime basis. It is a lesson we need to learn in the months ahead as we go about the work of ensuring that these departmental changes happen.
The committee’s success in rapidly achieving its goal was due to a number of factors: it had professional and respected committee members; it enjoyed unstinting political support; it worked to a very swift timetable, which I think we will have to do again this time; there was widespread public support for its aims; and it was willing to compromise on proposals that proved to be politically unfeasible—I think we will find ourselves in that situation again in the months to come. The experience of nine decades also has demonstrated that while securing public expenditure cuts is very politically difficult, it is far from an impossible task, as is often claimed. We undoubtedly need to try to achieve great public support. The experience of the 1920s showed that while voters might agree in general with cuts, they almost never agree with specific cuts that directly affect them. To put it simply, we need to ensure that the cuts are fair, focused and effective.
History also provides important perspectives and pointers to the future. Wisely, the coalition Government have an even more recent precedent in mind. The hon. Member for Telford (David Wright) rightly pointed out that the Canadian model of deficit reduction in the first half of the 1990s took place in an era of great global growth and plenty. We should not underestimate how much easier that made its very painful readjustments, under which a quarter of public sector employees in the country lost their jobs. By contrast, today’s reductions in the head count will, to an extent, be tomorrow’s unemployment rise.
In Canada in the 1990s, the Government had already levelled with the voters over a period of time. They then proceeded to provide very clear evidence, on a year-by-year basis, of the gains as expenditure was reduced. They also made the moral case that the living standards of future generations of taxpayers should not be diminished to pick up the tab for the consumption and debts of current taxpayers. That is absolutely crucial.
This has been an extremely brave Budget from the Chancellor. The fact is that despite the—at times contrived—anger from Opposition Members, those who are most likely to suffer are middle England voters, who are the very people the Conservative party has relied upon for electoral support. The Budget’s promise to be tough but fair is largely borne out, especially in its protection for the poorest and most vulnerable in our society. Indeed, I have been calling for some years now for the removal of the very lowest earners from income tax altogether, and I am very pleased about the steps that have been taken in that regard.
I sound only two notes of caution. First, I believe that the Office for Budget Responsibility unemployment projections have been over-optimistic. Indeed, such has been the unreliability of economic forecasting over recent years, that I think that unemployment will not peak this year, but that it will be higher in both 2011 and 2012. Secondly, I fear that there is a real risk of serious sovereign default in the eurozone, as has been discussed.
I do, in part, accept the Opposition’s view that there is a significant element of risk in this Budget, with many of the toughest measures coming in next year when the coldest winds may well be sweeping across the continent. However, for the sake of this nation’s economic welfare, I believe this calculated judgment is well worth taking. Given that denial, debt and delay are part of the problem, I cannot see that they will be the solution to this crisis.
Clive Efford (Eltham) (Lab)
This is my first speech in the new Parliament, so let me take this opportunity to say what a pleasure it is to see you in your position, Mr Deputy Speaker.
One of the first things that we need to say about the Budget is that it is quite clear that the underlying narrative is an assault on the size of the state. It is not merely an attempt to deal with the deficit following what has been described as a profligate former Labour Government. It is an ideological assault on the state based on the belief that reducing the size of the public sector will create space and that the private sector will inevitably grow and fill the vacuum. Without question, this Budget is—apart, perhaps from the absence of the NHS from the cuts—the Budget that Margaret Thatcher always wanted to introduce. But who would have thought it would be the Liberal Democrats who would give the Conservatives the power to wield the axe?
The Deputy Prime Minister sat through the Budget nodding in support of every swing. We all remember the warnings that he gave during the election about what the Conservatives would do if they got into power—the VAT bombshell—but what changed? I think he is suffering from Stockholm syndrome, which is what happens when a hostage becomes emotionally attached to the people who are holding him captive. It is quite clear from his response to the Budget that there is something going on. He has now collaborated in the biggest robbery since Patty Hearst just went to the bank.
Perhaps I am being unfair. It could be that the Liberal Democrats just cannot help themselves. I am reminded of an experiment at Stanford university—the Stanford prison experiment—in which students were given the roles of prisoners and jailers. Very quickly, two thirds of the jailers became very sadistic, but the peculiar thing was that the prisoners, although they were free to leave at any time, decided to stay and take the sadistic treatment being dished out. I think that something is going on here. The Liberal Democrats who have taken the thirty pieces of silver and the Toyota Prius cars are clearly taking on the role of the sadistic jailers who have adopted the policies in the Budget. The Liberal Democrats who are left—I do not know what the collective term for them should be, but perhaps it could be dupes, as that is a term that someone has used recently—are unable to free themselves. They have internalised their grief and they are going along for the rollercoaster ride on the track that has been laid by the Conservatives in this Budget; they are hanging on for a white-knuckle ride.
There are endless quotes from the general election in which Liberals warned us about the Conservatives and what they would do in government, so there is no mandate for the Liberal Democrats to support the Budget. The majority of people who voted at the last general election voted for the parties that opposed the sort of cuts that are in the Budget.
The fact that we need to address the deficit is without doubt. If Labour were in government we would be cutting public services, and people would feel the consequences of those cuts; there is no doubt about that. However, the size and scale of what we have got from the coalition Government is beyond anything that anyone has attempted in the UK before. In one Budget, they are cutting back the size of the state, over six years, beyond what it was when Labour came into power 13 years ago. Under the guise of reducing the deficit they have set about reducing the size of the state, with an enthusiasm that Margaret Thatcher could only look on in wonder.
Kwasi Kwarteng
The hon. Gentleman mentions the deficit; who does he think was responsible for it?
Clive Efford
The hon. Gentleman will probably know the history of this matter. Until November 2008 there was an agreement in this House about how to deal with the deficit. The Conservatives supported what the Government of the time were doing, so I suggest that he go back and look at the facts of what was going on.
The Liberal Democrats conveniently forget the statements that they made expressing their fear of what the Tories would do. I remind the House of one that was made at the start of the general election campaign. In an interview with The Observer, the leader of the Liberal Democrats, the right hon. Member for Sheffield, Hallam (Mr Clegg), said this about a new Conservative Government:
“They then turn around in the next week or two and say we’re going to chuck up VAT to 20%, we’re going to start cutting teachers, cutting police and the wage bill in the public sector. I think if you’re not careful in that situation…you’d get Greek-style unrest…be careful for what you wish for.”
I think that those are very wise words.
The Government have also prayed in aid what has gone on in Greece, Sweden and Canada, but my right hon. Friend the Member for Doncaster North (Edward Miliband) pointed out at the Dispatch Box that comparisons with Greece are utterly ridiculous. In Sweden they cut back public expenditure by 20% over 15 years, an approach that bears no comparison with the scale of what is being attempted here. It is true that the Canadian Government carried out a consultation exercise, but that was confined to short-term measures to deal with the deficit, and the intention was always that there would be a return to expenditure.
What we are seeing is a permanent cut-back of the state, and a withdrawal from expenditure for ever. That is what the people of this country are being asked to participate in through this consultation.
The hon. Member for St Ives (Andrew George) is the only Liberal Democrat in the Chamber. I am not surprised that there no others participating in this Budget debate. I have quoted the party leader as saying
“be careful what you wish for”,
and I hope that the hon. Gentleman will remind his friends of that, especially the ones who cheered this Thatcherite Budget. Supporting this Budget is a proclamation of an intent to reduce the size of the public sector in perpetuity. Liberal Democrat Members cannot support reducing the size of the state and say with any credibility that the axe will not swing against the NHS in the long term. This is an ideological change, and they cannot escape that fact.
Clive Efford
I welcome the hon. Gentleman getting to his feet. Perhaps he will explain whether he supports the state being withdrawn in this way.
Andrew George
I am grateful to the hon. Gentleman for giving way. I certainly appreciate the attention that he is giving to my party, although he fails to recognise that this is a coalition Government. There will be elements of both the Budget and the coalition agreement about which the Conservatives are especially enthusiastic, and elements about which the Liberal Democrats are especially keen. The measures in the Budget include a raising of the personal tax allowance, a significant improvement in annual increases in pensions, increases in capital gains tax and the introduction of levies on banks—all things that Labour failed to do at all.
Clive Efford
If that did not sound like an excuse, I do not know what would. A person on a low income who receives benefits or child tax credits is going to see those benefits reduced, so raising the personal tax allowance will make very little difference to household income.
Clive Efford
I assume that the hon. Gentleman has applied to speak in the debate, but it is clear that I have touched a raw nerve with him.
It is as sure as night follows day that those who support this Budget will want to cut the NHS next. Attacks on what has been describe as an “over-bloated” public sector are attempts to soften the public up in preparation for an unprecedented attack on public sector workers and the people who rely on the services that they provide.
The public sector will be hit in three ways, with a triple whammy—a freeze on council tax, a freeze on pay, and a squeeze on workers’ pensions. The claim that none of those would be necessary if the previous Government had not left the country in the state that the present Government say that they did just does not stand up to scrutiny.
In this Budget we are being asked to vote for taking away £1.8 billion from housing benefit, £1.4 million from disability benefits, £11 billion from the welfare state overall—and £2 billion from the banks. The Government say that they oppose nationalisation, but they have certainly nationalised the cost of the banking failure, and it is the poorest people in our constituencies who will pay the price.
The figures show that £1 in every £7 spent by the poorest 10% in our communities goes on VAT, but that drops to £1 in every £25 for the richest 10%. The IFS has confirmed that Labour’s plans would hardly have touched the poorest 10% at all, but this Budget will reduce their income by 2.5%. Labour’s proposals would have reduced the position of the richest 10% by 7%, but the Budget adds only a further 0.6% of that.
Clive Efford
No. I have given way twice, and other Members wish to speak.
We can see who is paying the price for the Budget. The Government say that we are all in this together, but some of us are in it more than others, and the poorest are in it up to their ears.
There is no mandate for this Tory Budget. Despite all the coverage that we have read about it, no one has said, “Thank God the Liberal Democrats were there to hold back the nasty Tories.” Everyone says that it is a Conservative Budget—the Budget that the Conservatives would have introduced whether or not they had the rag, tag and bobtail of the Liberal Democrats tagging along behind them. This assault on our public services is founded on the misguided belief that as the pubic sector contracts, the private sector will expand and provide new jobs.
There is no intention of returning investment to the public sector. The dogma that drives the cuts is the same that drove the Tories to attempt to destroy the NHS when they were last in power. Anyone who votes for the Budget is signing up to a Thatcherite philosophy of slashing the public sector and paying no heed to the consequences for the most vulnerable people in our communities. Never again will the Liberal Democrats be able to claim that they are the party that stands up for the underprivileged and a party that is in favour of intervention. This is a Thatcherite Budget and anyone who votes for it will be a Thatcherite: Members on the Government side of the House are all Thatcherites now.
Mr Matthew Offord (Hendon) (Con)
I pay tribute to the speech made by my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley). I know her seat very well and I am tremendously proud that she is in the House. It was interesting to see the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in the Chamber earlier, but Conservative Members would have liked him to stay for the whole of today’s debate.
It is a great honour to speak in my first debate as the newly elected Member of Parliament for Hendon. Mr Speaker will know my seat well. He grew up in the neighbouring constituency, so he will know of many of my constituency’s attributes. Hendon is famous for many reasons, including the Metropolitan police training college, the Medical Research Institute, the British Library newspaper depositary, Brent Cross shopping centre and the RAF museum, to name but a few. Many people are migrating to Hendon for some of its other attractions, such as our lower than average crime rate, our good schools and our green spaces, all of which are within easy access of central London, so I urge hon. Members to travel on Thameslink or the Northern line to come and visit. I am sure that many Members, certainly those representing northern constituencies, have already visited Hendon, especially if they travel back to their constituencies at the end of the week by car along the A5, A1, A406 or even the M1.
My constituency is also known for many of its former inhabitants or those who were schooled in the area, including Oliver Postgate, the creator of Bagpuss and the Clangers; Garbo, the Spanish spy who fed the Germans false intelligence about the D-day landings 66 years ago; William Wilberforce, a former Member of Parliament and slave trade abolitionist; and Sir Stamford Raffles, the founder of Singapore. More recent Hendon characters include Henry Cooper, Denis Compton, Joe Beevers and even Lord Mandelson, who attended school in the area. That shows us that my constituency has attracted people who have contributed to a range of activities in our society and national life. It continues to do so, and I hope, as its new MP, that I will make my mark for the people of my constituency.
I pay tribute to the work of my predecessor, Andrew Dismore. He worked hard on many issues, and I intend to continue some of that work for different sections of our community. He set the bar high, but I intend to exceed it. He also prided himself on having made the longest speech in the Chamber in the past decade, but hon. Members will be pleased to hear that I do not wish to emulate that.
The constituency of Hendon is marked by extreme religious and cultural diversity, which is mirrored economically in the contrast between the affluent Hale, Hendon, Mill Hill and Edgware wards and the housing estates of Burnt Oak and Grahame Park, the Perryfields estate and Stonegrove. I am pleased to confirm, however, that the London borough of Barnet has already started work to regenerate the Stonegrove and Grahame Park estates.
One of the most tragic comments I heard during my campaign to be elected to Parliament came from a mother on the Grahame Park estate, who said that too many foreigners were coming into this country and taking social housing away, and asked how her children could have any chance of taking over the tenancy of their home. That illustrates the lack of aspiration that many people have today. I contrast her attitude with that of parents in other parts of the constituency who spoke about their children going to university, buying their first home and eventually getting married. We live in one of the most prosperous cities in the western world, but there remain yawning chasms between the aspirations of the people I represent.
In that respect, my constituency is probably a microcosm of London. In turn, London represents part of the affluent south that stands in total contrast to the other places where I have lived, such as Barnsley, Carlisle, Bodmin and Leek. The difference for those places is in how they are viewed by us, as law-makers. Without doubt there is an urban-rural dichotomy in this country, which even today is reflected in our politics. That was reinforced by the previous Government when they established the Urban Task Force and the Rural Task Force. However, when more than 80% of us live in areas, such as my constituency, that can be classified as suburban, it is anathema that the suburbs play a secondary role in regeneration and urban policy.
Given the importance of cities to Britain’s future economic prosperity, I urge the Government to recognise that suburban constituencies must play a key role in their policies for urban regeneration. Many commentators share my view, recognising that suburbs are the forgotten dimension in our urban policies. There are many initiatives that could overcome that issue. In the past, the former Member for Sedgefield spoke about “Education, education, education”, but I think that that was too narrow a focus. I would prefer us to instil in our people a sense of “Aspiration, aspiration, aspiration”, which will continue with them throughout their adult lives. But we cannot do that on a national scale. We need to allow local people to implement the right social and economic priorities for themselves on a suburban scale.
When I was deputy leader of Barnet council, I was proud to introduce a scheme whereby we employed our looked-after children, in the same way that any parent would employ one of their children in the family business. It was not a guarantee of employment, but an opportunity of aspiration that could be taken up—one which, I am pleased to say, several young people did take up and so improved their life chances by entering the local economy. Barnet council also led in the promotion of what became known as the Barnet bond—a financial scheme to raise more than £300 million to be invested in schools, transport and other local services that will be needed to provide the infrastructure to cope with the housing growth expected over the next decade in our suburban constituency. If Barnet does not achieve that—if it does not raise the aspirations of the area and the people who live within it—community life will be on a downward trajectory.
Today, I have heard some Labour Members say that Government Members dislike the public sector. I assure them that that is not the case. In fact, we believe that the public sector has a part to play but that there are others who are able to contribute better than the public sector. Unlike the previous Government, we do not believe that throwing money at problems is the way to create a better economy and better living conditions for our people. We believe that there are many other organisations—particularly in the third sector—that are better at deciding what local people’s objectives are and introducing action to achieve them.
My constituency has many organisations that provide benefits for civic and local life—my Seahorse sailing club on the Welsh harp; the Community Security Trust, which plays a great role in our Jewish community; the Mill Hill Preservation Society and the Larches Trust, to name but a few. Particularly when we talk about green energy and climate change, we must create the aspiration for those organisations and new ones to emerge and allow them to play their part. We must not let the budget deficit become an excuse for inertia.
Under the previous Government there was an increase in violent crime. More than 40 years ago Robert Kennedy told an audience that there is another kind of violence besides physical violence—one that is slower, but just as deadly and just as destructive—and that is the violence of institutions, particularly when they become indifferent, show inaction and produce slow decay. That is, in essence, a neglect of aspirations by politicians and policy makers. Because we do not have any money, we must look at alternative ways of reducing our deficit and improving our country.
Because of the massive economic deficit we must win the argument, particularly Conservative Members and with our colleagues the Liberal Democrats, that it is the opportunity of aspiration that will create private sector employment and pull us out of the state that we are in. It will not happen as a result of some of the objectives proposed by Opposition Members. We need to recognise that different communities work in different ways, be they rural, urban or suburban, and we have to give our constituents the ways and means to address the problems that they face and to introduce the right conditions for themselves. As the Member of Parliament for Hendon, I intend to play my part to achieve that.
Finally, I wish to thank the people of Hendon who gave me, and the Conservative party, their respect and trust in allowing me to come to this place.
Karl Turner (Kingston upon Hull East) (Lab)
I start by welcoming you, Mr. Deputy Speaker, to your position. One of the first tasks that I undertook when I came into this place was to put my cross against your name, so welcome. I also congratulate hon. Members on their maiden speeches. Members will share with me the sense of privilege and much pride that comes with entering this magnificent Chamber. That pride brings with it a real sense of responsibility, which I will keep to the forefront of my mind throughout.
However, the happiness of the occasion is tinged for me with some sadness and real fear: sadness because I do not take my seat on the Government Benches where the important decisions that affect my constituents will be made, and fear for the constituents whom I represent, and worry that the choices already made by the coalition will severely damage the good that has come from 13 years of a Labour Government. Those choices are driven by pure ideology, with consequences that are likely to be far-reaching and long-lasting. My constituency has benefited tremendously from a Labour Government, and I fear the clock being turned back to Tory time.
Hull East, or East Hull, as it is known to those of us who were born and bred there, is a fantastic place. Its greatest asset is its people. East Hull folk have a reputation for straight talking, and I hope that I bring with me to the House that special quality. East Hull people are enriched by many excellent qualities, among which are their good sense and sound judgment. I am delighted that they employ those when they vote Labour, which is why I am here.
To that end, I have the benefit in my constituency of the hard work and tireless commitment of many excellent Labour councillors, led by the leader of the Labour group, Councillor Steve Brady, and I thank them for their service. I can also tell the House that in the past few days we have had a new councillor on the Labour benches in the chamber in Hull—Councillor Maureen Bristow. She crossed the floor from the Lib Dems because, in her words, she did not come into politics to implement Tory policy that hit the hard-working and the poorest people the hardest. That sentiment is shared by people in Hull and throughout the country who have previously voted Lib Dem but will never make that mistake again.
I am often reminded that I have very big boots to fill, and I acknowledge that in paying tribute to my predecessor, John Prescott. It was 40 years ago on the 18th of this month that John was elected to the House. In that time he has been credited with many achievements, perhaps too many to mention in the short time that I am permitted to speak. Throughout his time here, he was blessed with the loyalty of his agent, Harry Woodford, who still attends Labour party meetings at the age of 93. I know that I can rely on the same loyalty from my agent, Howard Flitton. He is much younger than Harry, but, if I stay in the House as long as John, by then he will be about the same age.
While John was a Member, some say that he delivered many knockout blows. He was very faithful to his constituents and to the Labour party, and I hope to emulate that. Hon. Members might recall that in the 2001 general election, while on the campaign trail, John was involved in an incident in Wales. When his then boss, Tony Blair, asked him, “John, for heaven’s sake, what were you doing?” I am told that John replied, “Well you told me to go out there and connect with the electorate, so don’t blame me now.” He was straight talking, and he had a very good left jab.
John Prescott has a lot to be proud of. He rose from being a seafaring steward to the dizzy heights of Deputy Prime Minister, following the Labour party’s magnificent election success in 1997. I feel compelled to mention that, unlike the incumbent Deputy Prime Minister, John gained his place in government through the electorate and the then leader of his own party. It was not gained through the desire for power, whereby 22 Government jobs, with gold-plated pensions, have been traded for many thousands of public sector jobs—a desire for power that I predict will not come without a great cost to the right hon. Member for Sheffield, Hallam (Mr Clegg) and his party.
My predecessor is very different from the right hon. Gentleman, but there are some comparisons. I say that with some apprehension, because I am clearly at risk of offending my predecessor, and I do not suggest for even a second that John has, or will ever, utter the words, “I agree with Nick,” but interestingly enough at the general election he and the right hon. Gentleman asked the electorate to vote for their respective parties in order to stop the Tories ruining the economic recovery that was set in train by the previous Labour Government. Like the electorate, I have no recollection of the current Deputy Prime Minister saying, “I agree with Dave.” While making comparisons, however, I seem to share the Prime Minister’s sense of humour, because like him, I and many other Opposition Members have a new favourite joke. The former Deputy Prime Minister—the one whom the electorate wanted—will soon continue in the other place with his tireless commitment to his interests, and I wish him well there.
Indeed, I do have big boots to fill. The last Hull-born MP to represent the area was the great William Wilberforce, who began his political career in 1780 when he became the independent MP for Yorkshire, which at the time covered some parts of my constituency. He was a truly honourable man, who led the parliamentary campaign against the British slave trade, and after some 26 years the Slave Trade Act 1807 was passed. When Wilberforce left the House in 1826, he continued his campaign, and just three days before he died he learned of the passing of the Slavery Abolition Act 1833.
East Hull has a record of electing Members with seagoing experience. In 1945, the area elected Harry Pursey, a former naval commander, and of course my predecessor was a merchant seaman. Although I have no seafaring experience, I am the son of a former seaman, so to that end the tradition continues.
I am very proud of my roots. I was educated in a state comprehensive, and my school suffered from some shameful under-investment during the previous, 18-year-long Tory Government. I left school without having achieved much academic success, but after the first term of the previous Labour Government and their agenda for lifelong learning I had the opportunity and confidence to study law at the excellent university of Hull. I was eventually called to the Bar in 2005.
Hull has many things to be proud of, not least the excellent quality of its rugby league. In the east we have Hull Kingston Rovers and in the west Hull FC, both of which rival each other in the super league. We also have Hull City football club. Not unlike another team that are extremely close to my heart, we suffered last season what I hope turns out to be a short-lived demotion. The team were led by, I often argued, an excellent leader in Mr Brown—that is, Phil Brown.
Despite the coalition Government’s attempts to convince each other and the wider electorate that we got it wrong, Labour Members sit on this side of the House proudly and with our heads held high. We have an excellent record to defend. I am particularly proud of the national minimum wage; our investment in the NHS, with 85,000 more nurses and 32,000 more doctors, and cancer care that is again becoming the envy of the world; record numbers of students from normal backgrounds like my own going off to university; Sure Start; the winter fuel allowance; equality legislation set in train by the Labour party in government; the historic Good Friday agreement and the peace in Northern Ireland that it brought; tackling pensioner poverty; child tax credits; the abolition of section 28; the introduction of civil partnerships; massive investment in social housing; free bus passes for over-60s; free swimming for under-16s and over-60s; free nursery places for three and four-year-olds; and Building Schools for the Future.
On the economy, I am proud that we took decisive action when the global economic crisis hit. I am proud, too, that we saved the banks from inevitable collapse and invested in the economy, leaving the new coalition with an economy that is in growth. Make no mistake about it—we did mend the roof when the sun was shining. The vast majority of those policies were opposed by the new Government; some have already gone in the short time that they have held office.
I vow to hold this Government to account while I sit on this side of the Chamber, but in doing so I remember the responsibility that I have to my constituents. If the Con-Dem coalition gets it right, I will support it, but when the policy is wrong, when it is for ideological reasons, and when it adversely affects my constituents, I shall challenge it at each and every opportunity.
Angie Bray (Ealing Central and Acton) (Con)
Let me start by congratulating the hon. Member for Kingston upon Hull East (Karl Turner) and my hon. Friends the Members for Staffordshire Moorlands (Karen Bradley) and for Hendon (Mr Offord) on their excellent maiden speeches. I am sure that they will all make great contributions to this House over the years to come.
I cannot imagine that many of us who sat in the Chamber on Tuesday to hear the Chancellor’s emergency Budget statement will have found it exactly an enjoyable experience. Theatrical, yes; dramatic, yes; enjoyable, no. It was a bleak Budget statement drawn from a grim economic landscape bequeathed to us by the previous Labour Administration. We will all now be thinking about getting back to our constituencies this weekend and discussing with our constituents how we can face these tough measures together. Yet I suspect, judging by the Leader of the Opposition’s response, that many of those on the Labour Benches will be blaming everyone and everything but themselves for the situation in which we find ourselves. That is neither wise nor credible. I hope that at least some of them will recognise that under their governance this country was living way beyond its means for far too long. As the well-worn but true saying goes, all good things come to an end—only on this occasion, not just an end, but a juddering halt that has shaken the whole country violently.
I would like to put on record how much I abhor the manner in which the previous Labour Government, in their last few months, went round dangling all sorts of promises—this project, that programme—to dazzle the electorate, all of them knowingly unfunded, so that they were inevitably withdrawn when reality kicked in with the new Government. Another Labour Government—heaven forfend—would have been in no position to do any different from what we are having to do.
I believe that the Chancellor’s Budget is tough but fair. Responsible governance means taking tough decisions now to get our country back on its feet down the road. Fair governance means the better-off shouldering the biggest share of the burden, but most important, it means taking account of everyone in our society, ensuring that pensioners can enjoy dignity in retirement and that families in poverty receive the support they need. The long overdue restoration of the link between pensions and earnings and the triple lock is to be welcomed. The increase in child tax credits for the poorest families demonstrates that fairness is a priority for this Government. Raising the income tax threshold for those on lower incomes is a huge step forward. It means that 880,000 of the lowest taxpayers will be taken out of tax altogether. I recognise that that was very much a Liberal Democrat manifesto pledge, but it is no less welcome in our coalition for that. It also resonates closely with Conservative values, and I hope that the Chancellor will be able to get even closer to the £10,000 threshold that we all want to see when we can afford it.
Kate Green (Stretford and Urmston) (Lab)
It is all very well to say that this Budget will protect the poorest, but how can that possibly be reconciled with a long-term freeze or cut in benefits as a result of linking them to the consumer price index rather than the retail price index? That is to be compensated for only by the short-term measure of increasing the child tax credit. Surely this is not a Budget that is fair to the poorest but one that will leave people who rely on those state benefits in a much worse position.
Angie Bray
I have to say to the hon. Lady that needs must, to an extent, and we find ourselves in these problems thanks to the appalling governance of the Labour party. I also suggest that part of the problem, and the reason why I agree with her that many will feel the pain, is that the previous Government had a record of allowing a dependency culture to grow. Far too many people in this country depend on benefits, and we need to turn that around if we possibly can.
Matthew Hancock
Does my hon. Friend share my surprise that Opposition Members can possibly comment on the fairness of the Budget, given that under the Budget as a whole the richest will pay the most and the poorest will not, and that when they were in office, they doubled the tax of the lowest-paid in this country?
Angie Bray
My hon. Friend makes an extremely good point, and let us not forget that the gap between the rich and the poor actually grew wider under the previous Government.
I believe that the measures I have outlined will help ease the unavoidable impact of the rise in VAT. I am well aware that that proposal is especially hard and will affect every single person in the country. Thankfully, food, children’s clothing, books and newspapers are still exempted, but we will all undoubtedly be hit to some degree. My question, however, is this: if not a rise in VAT, which will bring in an estimated £13 billion, then what instead? If the Chancellor had not gone for VAT, he would inevitably have had to look elsewhere, including possibly at further curtailment of public spending.
Those on higher incomes will face the biggest share of the Budget burden. Tax credits will be limited to households earning less than £40,000, and the figure will go down. The 50% tax bracket introduced by the previous Government is being kept in place for those earning more than £150,000, and capital gains tax will rise from 18 to 28%. Fiscal drag will also mean more people paying higher-rate tax. I am not exactly thrilled by the prospect of any of those measures, but I accept that they play an important part in providing a fair Budget.
Prosperity for all is the long-term positive message to take from this week’s Budget. To move forward and replenish the enormous hole in our finances, we must support the people who can make that happen. Britain needs positive entrepreneurs, so a reduction in the tax on the profits that they make is welcome news. Allied with reductions in business taxes, it should kick-start our economy and be the decisive action that we need to lift us out of the mess that we are in—the mess created by 13 years of a Labour Government.
In my constituency, there are many fine examples of the type of people who will drive this country forward again through their own enterprise. They will certainly welcome the rise in the national insurance contribution threshold to ease costs for employers, and the cuts in taxes on businesses small and large. The regional growth fund is a great step forward in helping small businesses get off the ground. At the moment its remit excludes London constituencies such as mine. I know that it is only too easy to present an image of London as having streets paved with gold, but as we Londoners are well aware, our capital has many areas of serious deprivation that need supporting. I hope that, in due course, the Chancellor and his team will consider extending the scheme or taking other measures to help grow small businesses across Ealing Central and Acton.
I would also like to put in a plug for Crossrail. I am delighted that the Budget allows capital projects to proceed and I greatly hope that Crossrail will be one of them. It is essential to London and particularly important in my constituency of Ealing Central and Acton.
It is fitting that the Chancellor was allowed to bring out Gladstone’s original Red Box to carry his Budget to the House. There can be no doubt that Gladstone, a Conservative before becoming a Liberal, would fully support the coalition and the Budget. He was passionate about free trade and lower taxes when possible, and was clear that borrowing was no way to cover over deficits.
The coalition’s task is to turn around the biggest financial deficit that this country has faced since the second world war. The Chancellor and his team have taken courageous and difficult decisions, and provided us with a Budget that gives us every chance to turn the corner, get our country back on track and, most important, open Britain for business again.
Dr Alan Whitehead (Southampton, Test) (Lab)
I must say that I felt that the previous speech was derived directly from a Conservative central office handout, which was unfortunately handed out before any proper examination of the Budget and its impact on those who benefit from it and those who do not. It is beyond doubt that the Budget is unfair, and harms those least able to defend and help themselves as well as future prospects for the recovery and development of the British economy. I want to consider that in the context of the energy and climate change theme of our debate.
The Secretary of State, in introducing the theme, purported to defend the role of the Budget in the Department’s proper ambitions for a green energy economy and a green recovery in the overall economy, with prospects for green jobs and a change-round so that we produce the goods and services that we need at a fraction of the carbon output. I have great respect for the Secretary of State’s commitment to the environment, climate change and energy matters, so I am sad to say that I was reminded of the well known 18th century ballad, “The Vicar of Bray”, in which the vicar of Bray intoned against popery when it was out of fashion and greatly in its favour when it was again in fashion. I hope that the right hon. Gentleman’s—and, indeed, the Liberal Democrats’—principles on climate change and a low-energy economy are not affected by the expediencies that the Budget outlines.
We must take action to change the way in which our economy works in the next few years. We must keep in place the goals to ensure that we reduce carbon outputs in our economy so that we reach our target by 2050 of no less than an 80% reduction in carbon output in our country and a 50% reduction throughout the world. I hope that the Government do not resile from that target, even though they have taken away targets for waiting lists in hospitals and for house building. If they do not resile from that target, there will still be a number of imperatives—a number of which the Secretary of State outlined—in terms of the investment needed in our economy over the next few years to turn around how much of it works, and in terms of energy supply and a range of other activities.
That is why I thought, among other things, that the recent Forgemasters decision, although not enormous relative to some of those other areas, was nevertheless totemic. It was a decision for apparently short-term and expedient reasons to take away a loan—not a grant—from a company that would have invested in the future of our economy and, in particular, our low-carbon economy. I hope that the decision is not a precursor to other things for our low-carbon economy, because the coalition document sets out a number of ambitions that will work only if the investment, underpinning and Government support for such changes are put in place. They include ambitions on carbon capture and storage, a green investment bank, a floor price for carbon and a new green deal for home energy efficiency, all of which are essential pillars of that new, green, low-carbon economy. However, the prospect of a 25% cut in the Department of Energy and Climate Change’s budget over the next few years suggests, at the very least, that a number of those ambitions will not be supported and funded in the way that will be necessary.
I am concerned that the ambition for a green investment bank might turn out to be no more than a re-badging exercise, unless the Government are prepared to underpin the bank in a way that will secure those investments, which will go into new methods of production and new services that would not otherwise receive support from the traditional banking sector. If the Government have turned their face against loans that produce results far beyond the ambition of this loan, that would suggest that the green investment bank might just be the re-badging exercise that I have described. I would also be concerned if the green investment bank simply sought to replace money that is already in the system—for example, the £400 million for research and development in low-carbon technologies or the £120 million for the promotion and development of offshore wind—with other means, albeit perhaps with inferior outcomes.
As for a floor price for carbon, it is one thing to have an ambition for the future. Setting aside for a moment the fact that we operate in the context of a European Union with a single market and that if our country unilaterally set a floor price for carbon, others might free-ride on it, any floor will have to have intervention to support it if it is breached. Do the Government intend to provide the assistance to ensure that a floor price can be sustained or do they think—as the Budget suggests—that these things can simply be left to the market?
The green deal has been put in place, through the carbon emissions reduction target and the community energy savings programme, while the Great British Refurb is coming up—we hope—in order to ensure that houses across the country have the energy efficiency that they will require to play their part in the new low-carbon economy. Considerable investment will be needed to underwrite efficient home insulation for social housing and homes that are without cavity wall insulation. That will require several million pounds of Government support. All that was in place prior to the general election. Is it the Government’s intention to continue that underwriting or will that be left to the market as well?
A number of important aspects of the development of a low-carbon economy will require that intervention, support and underpinning. I am concerned that, instead of continuing to provide that underpinning, the intention might be to place increasing obligations on energy companies to undertake it instead. There are already obligations on energy companies concerning smart meter introduction, feed-in tariffs and the carbon emissions reduction target and, indeed, carbon capture and storage. As well as hearing about increased obligations on energy companies, we have heard that the introduction of smart meters will be rolled forward by a further three years, which will place a further obligation on energy companies to undertake the financing. Every obligation placed on an energy company increases the fuel price and puts more people in fuel poverty as a result. For every 1% increase in the fuel price, 40,000 people go into fuel poverty.
Is the Budget going to be fair when it increases VAT not necessarily on domestic fuel but on fuel across the board elsewhere, which also indirectly but eventually pushes up fuel prices, leading to more people living in fuel poverty in the future? Will the mechanisms ensure that fairness in fuel access and fuel price becomes a real part of the country’s future energy economy?
The final important totem to watch carefully is whether the renewable heat incentive happens over the next year. Will the Government put in the underwriting to make that renewable heat incentive work? If they are not prepared to do that or to make a number of the other necessary underwritings to take us towards the green economy, they will have aspirations without means and the principles set out today will prove to be nothing more than hollow promises.
George Eustice (Camborne and Redruth) (Con)
I am grateful for the opportunity to make my maiden speech. I start by congratulating my hon. Friends who have also made their maiden speeches today. I sympathise with my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley) in her frustrations over bureaucracy and her impatience at the way in which Whitehall sometimes adds additional layers to the laws that we in this House set out. I also congratulate my hon. Friend the Member for Hendon (Mr Offord) and I completely agree with him about the importance of building aspiration.
I would like, too, to congratulate the hon. Member for Kingston upon Hull East (Karl Turner), who I believe has just left the Chamber, on a very articulate speech. That might be something that the constituents of Kingston upon Hull East take a while to get used to. I am grateful to the hon. Member for Eltham (Clive Efford)—he has also left the Chamber—for his colourful description of, and personal perspective on, the new coalition, although when I heard him discussing the Stockholm syndrome, I wondered whether he was talking about the process whereby Labour Members stuck with their former leader, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), for such a long time.
The seat that I represent is a three-way marginal, as was the former constituency of Camborne and Falmouth. The election left me with a majority of just 66 over my predecessor, so it has certainly lived up to its reputation again this time around.
It is a special honour for me to represent my home town. I was brought up between Camborne and Hayle, in Cornwall, and my family have lived and worked in the area for more than 400 years. When one has such deep roots in a constituency, one feels a special responsibility for its long-term future.
My predecessor, Julia Goldsworthy, was also local, and came from a well known Camborne family. I pay tribute to her work for the seat in her five years as a Member of the House. When she was elected she was the youngest MP in England and one of the youngest in the country. She was quickly promoted within the Lib Dems, and became first a health spokesman, later shadow Chief Secretary to the Treasury, and finally Communities and Local Government spokesman. She also campaigned locally, most notably on water charges and the injustice in the south-west whereby just 3% of the population are expected to carry the burden of maintaining 30% of our coastline. I, and many other Devon and Cornwall MPs, will be persistent in pushing that agenda forward and trying to find a policy solution that ends that injustice.
Camborne and Redruth is a diverse constituency. To the south is the peace and tranquillity of the Helford passage and some fantastic gardens such as Trebah and Glendurgan, with their collection of plants. To the north is the rugged splendour of the north cliffs and undoubtedly one of the best beaches in the country at Hayle, with three miles of golden sands. At its heart, however, are the three industrial towns of Camborne, Redruth and Hayle, which have made a remarkable contribution to the industrial revolution. The steam locomotive was invented there by Richard Trevithick, the famous Camborne engineer, and the first ever gas lamp was invented by William Murdoch in Redruth. Ever since, there has been a healthy rivalry and competition between those towns and not least their rugby clubs.
The loss of the mining industry and iconic engineering firms such as Holman Brothers in Camborne dealt a serious blow to the Camborne and Redruth area. I truly believe, however, that we can be pioneers again and become the international centre of excellence in renewable energy and, most importantly, wave power. Cornwall’s coastline is second to none, and we have the engineering expertise to turn ideas into industry. The wave hub project, currently under construction near Hayle, will be the first of its type anywhere in the world—the first installation that can test commercial-scale wave devices. The constituency also leads in much of the academic research work that will enable wave power to move forward, especially at the Camborne school of mines, now located at the combined universities for Cornwall at Tremough.
My No. 1 priority for the area will be economic regeneration. I was delighted to hear the Chancellor say in his Budget that he does not propose to make a further cut to total capital spending. If we want to improve our infrastructure and competitiveness and rebalance our economy, it is essential that we continue to invest in that infrastructure. He is also right, however, that we should switch the focus to creating new enterprises and businesses, and that in particular we should encourage the development of new enterprise in those regions such as mine that have perhaps been too dependent in the recent past on the public sector. There is only one way out of the current recession: through new businesses setting up and new industries being created. We need to harness a culture in which entrepreneurs are willing to get out there, take risks, have a go, and feel that they can make a difference.
Earlier, I mentioned Richard Trevithick, the most famous inventor from Cornwall. Like many pioneers, Richard Trevithick never actually made any money from his idea of building an engine, but the rest of the country did, and the world has benefited from that invention and everything that followed it. Trevithick had no regrets about what he had done. Recently, when conducting some research, I came across an interesting extract from a letter that he had written. I shall end with this quotation, because I think it makes a very valid point.
“I have been branded with folly and madness for attempting what the world calls impossibilities, and even from the great engineer, the late Mr. James Watt, who said to an eminent scientific character still living, that I deserved hanging for bringing into use the high-pressure engine. This so far has been my reward from the public; but should this be all, I shall be satisfied by the great secret pleasure and laudable pride that I feel in my own breast from having been the instrument of bringing forward and maturing new principles and new arrangements of boundless value to my country. However much I may be straitened in pecuniary circumstances, the great honour of being a useful subject can never be taken from me, which to me far exceeds riches.”
I believe that as we face the present economic challenges and try to deal with the environmental challenge of climate change, we can learn a lot from pioneers such as Richard Trevithick. What we can learn is that Government cannot simply drop all the answers. I have heard a great deal in the debate today about how Government can do everything, but they cannot. In the final analysis, we need talented individuals to come up with the solutions. The role of Government is to enable those individuals, not to try to replace their role.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
I welcome you to your seat, Mr Deputy Speaker. I also congratulate the hon. Member for Camborne and Redruth (George Eustice) on his excellent maiden speech, and my hon. Friend the Member for Kingston upon Hull East (Karl Turner) on his.
Many of my hon. Friends have already raised their objections to the Budget. I share all those objections. As was pointed out by my hon. Friend the Member for Telford (David Wright), the Budget attempted to rewrite history, completely ignoring the world economic crisis. This is the first Budget of the 21st century that hits those who are worst off the hardest. Contrary to what was said by the hon. Member for Ealing Central and Acton (Angie Bray), who used the phrase “needs must”, the Tories told us throughout the election campaign that there would be no cuts in front-line services. There is no possibility of cuts of more than 25% in Government Departments without front-line services taking a hit.
I want to focus on two very different elements of the Budget which will have a negative impact on my constituency. The first is the appalling news that the Sure Start maternity grant is to be restricted to the first child. That raises a number of obvious problems, not least the moral hazard of cutting benefits for low-income families and their newborn babies when they need help most.
It seems obvious that, in the interests of all of us, children from low-income families should be supported as much as possible. The proposal in the Budget is less than clear. Will the restriction of the grant to a first child mean that those who did not take the benefit when they had their first child and are now having their second cannot receive it, even if they need it? That seems particularly likely to happen in a number of instances, especially following the recession. Moreover, the Budget seems to make no provision for a number of “blended” families. What of the mother with her first child who is the father’s third? Will that family be eligible for the grant? What of families in which a child is born while an older baby is still using the necessary equipment, and what of twins?
The Government will undoubtedly attempt to justify the cut by saying that the grant is intended to buy permanent equipment such as prams, cots and sterilisers, items that will last and can be used for siblings, but what their decision fails to recognise is that a great deal of the grant is used after the baby is born to offset the high cost of looking after a newborn child. The grant is often spent on nappies, milk, other food products, clothes, medicine, and any number of other perishable items that cannot be used for more than one child.
Furthermore, while it is somewhat more likely that a family with a second child will already have the necessary equipment, it is by no means reasonable to make such an assumption. That is especially true of low-income families who will often buy cheaper, less durable equipment that simply will not last long enough to be used by later siblings. Even if it were reasonable to assume that a pram, for example, could be used for a second child as well as a first, what of the third or fourth? The estimated cost of bringing up a baby during its first year is £4,000. I know from speaking to many constituents that the £500 Sure Start maternity grant has afforded babies in Wavertree a better welcome to our world.
The Chancellor said on Tuesday that his Budget would protect the most vulnerable.
Robert Halfon (Harlow) (Con)
The hon. Lady talked about cuts to front-line services in her constituency and I understand her wanting to protect those services, but why even in the boom times did her Government cut front-line services in my constituency, such as closing down the Territorial Army centre, cutting the budget of Harlow college by £1.6 million and closing down the Inland Revenue office? Why are Labour cuts ignored and Tory cuts condemned?
Luciana Berger
I thank the hon. Gentleman for his comments but I do not agree with them. My point was that the Conservatives campaigned during the election on a pledge that they would not cut front-line services. That will not now be the case.
Toby Perkins
Does my hon. Friend share my confusion? Have we not been told for the past six weeks that the Labour Government spent too much money? It appears now that we were cutting all the time. Is she as confused as I am as to the policy of the Government?
Mr Tom Harris (Glasgow South) (Lab)
My hon. Friend is making a powerful and significant contribution in talking about the difficulties that younger parents in particular have in bringing up their first and second children. What conclusions does she draw about the Conservatives’ approach to those difficulties from the fact that Conservative Members are mocking her and laughing when she is trying to make a serious point about the difficulty and cost of bringing up children?
Luciana Berger
I thank my hon. Friend for making his point and I am disappointed by the response from Conservative Members.
On Tuesday, the Chancellor said that his Budget would protect the most vulnerable. I urge the Government to address the question of what limiting support to the firstborn will mean in practice. No family that needs help should miss out and, contrary to the Chancellor’s declaration, this cut will affect rather than protect the most vulnerable.
The second very different element of the Budget I wish to raise is the remarkably short-sighted decision not to introduce tax relief for the UK video games industry, which makes a valuable contribution to the UK economy: in 2009, it generated £2 billion of sales, added approximately £1 billion to the UK’s GDP, raised over £400 million for HM Treasury in tax revenues, and employed more than 28,000 people. It is an export-oriented, high-tech, highly skilled, low-carbon industry.
As we speak, the best developers are leaving the UK and going to Canada and the USA. The UK lost 700 jobs in the sector from 2008-09; a full 7% of its work force. That not only is harmful to the UK industry and to games already in production but means that some games that would otherwise have been made in the UK are made elsewhere.
Why are so many of the video games industry work force leaving the UK at a time when global video game sales grew by 24%. between 2007-09? Why has the UK games development industry fallen from the third largest in the world based on revenue in 2006 to fifth place in 2009? It is because the UK’s principal competitors in Australia, Canada, China, France, South Korea, Singapore and the USA all received national or regional state tax breaks for games production. For example, in Montreal, Quebec, there is a five-year income tax holiday for foreign specialists and research and development tax credits cover 20% to 35% of qualifying expenditure.
Other competitive nations have taken a strategic decision that the video games sector is a key element of their economy. Research carried out by TIGA, the trade association representing the UK games industry, indicates that over five years games tax relief would create or save 3,550 graduate-level jobs, increase and safeguard £457 million in new development expenditure and save development expenditure that would be lost without tax relief. Most significantly, introducing games tax relief would increase and protect £415 million in new and saved tax receipts for HM Treasury—far outweighing the £192 million that games tax relief would cost.
Can the Minister explain why it is stated in table 2.1 of the Red Book that the non-introduction of video games tax relief would raise an additional £190 million over the next five years? How was that figure arrived at?
In my constituency and across Liverpool there are a number of video games developers: Genemation, Bizarre Creations, Magenta Software and Playbox. Sony Computer Entertainment, based at Wavertree technology park, employs more than 600 people. Games developed over the past 15 years in north-west England alone have produced and sold over 100 million units, equating to over £3 billion in revenue.
We have an outstanding record for vision and originality of games, but it is clear to me from having spoken to a number of people in the industry that there is a deep sense of frustration. All they want is a level playing field so that we can at least maintain the UK’s position, if not grow the sector, so that jobs are retained and we can compete on a fair basis.
The video games sector is an important and growing knowledge-based industry. More than a third of the work force are carrying out graduate-level jobs in games development. Average salaries exceed £30,000, which is above the national average of £22,000. There is absolutely no doubt that a cultural revolution is taking place in the games sector, whether in serious games such as educational programmes and defence training simulators or recreational games.
Interactive media industries are with us for the next century and we should be doing all we can to support the sector to be a world leader in the field. Just as we have film tax relief in the UK, the Government should uphold the commitment both coalition parties made before the election to have a games tax relief. Britain has traditionally been a leader in the field of video games development, and in many ways it still is. However, we cannot compete without the same tax incentive system that is in place in other countries.
Throughout the Chancellor’s speech on Tuesday, he kept on repeating that his Budget was an accelerated decrease in the structural deficit, but as I have shown through reference to just two of the cuts announced, it is actually an accelerated attack on families. It is an accelerated attack on those who are most vulnerable, on business and on growth and jobs. I will be voting against it next week.
Jeremy Lefroy (Stafford) (Con)
May I welcome you to the Chair, Mr Deputy Speaker? May I also congratulate those Members who have made their maiden speeches today: my hon. Friends the Members for Staffordshire Moorlands (Karen Bradley), for Hendon (Mr Offord) and for Camborne and Redruth (George Eustice) and the hon. Member for Kingston upon Hull East (Karl Turner)? We have heard some excellent speeches, and I was particularly pleased to hear from my hon. Friend the Member for Staffordshire Moorlands, whose constituency I often have the pleasure of walking through on my very rare days off these days.
I wish to speak briefly about business finance. Some Members have talked about the lack of discussion of growth today, and growth is clearly vital for our economy. Members have referred to the importance of the private sector and of private sector investment taking us out of the situation we are in and creating jobs and tax revenues.
The Budget Red Book rightly states that small and medium-sized enterprises
“are fundamental to the economic recovery and to tackling unemployment”,
and I listened with interest to the remarks of the hon. Member for Liverpool, Wavertree (Luciana Berger) about tax relief on video games. However, some SMEs continue to have problems accessing the affordable finance that they need.
It is important to put that statement in context. According to figures from the Institute of Directors, in 2001, 45% of its members were financing their businesses through bank loans and 40% through overdrafts. A recent survey shows that now only 28% do so through bank loans, 36% through overdrafts and 20% to some extent through credit cards. That is not a sustainable model for SME finance when we are looking to SMEs to be the engine that pulls us into the strong growth necessary both to tackle the scourge of unemployment and to generate the tax revenues that we so desperately need.
Why have things changed so much? An IOD survey of 1,045 directors earlier this year was revealing. It showed that 57% of businesses seeking bank finance in 2009-10 were rejected by their banks. Perhaps even more discouraging was the fact that 83% of those declined bank finance were not even offered information on the previous Government’s and the current Government’s enterprise finance guarantee. Indeed, personal guarantees were sometimes asked for even when the enterprise finance guarantee was offered.
The Government have increased the enterprise finance guarantee facility by £200 million for the current year to support additional lending of up to £700 million. I welcome that, but it is clear that implementation is key. The EFG will not help small and medium-sized enterprises if the participating banks do not make their customers fully aware of it. Neither will it help if the procedures are lengthy. Profitable SMEs often run into short-term cash-flow difficulties—I recently came across one such instance in my constituency—and swift and decisive help is needed in such cases. I therefore welcome the processing target, which is mentioned in the Red Book, of 20 business days for all major lenders participating in the EFG. Indeed, I think that serious lenders could do considerably better.
Although the EFG is welcome, it will not fix the problem of the lack of bank finance. The announcement that the Government will publish a Green Paper on business finance before the summer recess is an important and clear sign that they understand the situation, but we need action from banks now. Their reputation has been tarnished in recent years, and I do not make that point with any satisfaction because they are not the only people in that position. What better way for British banking to restore its reputation than to provide most of the finance that UK SMEs need to carry out the task of profitably creating jobs and generating tax revenues?
Bank loans and overdrafts are not enough. SMEs also need greater access to riskier capital, particularly equity and quasi-equity, but the UK has not excelled in that area. The new or growing business cannot necessarily provide security for loans, so more unsecured finance is desperately needed. I therefore welcome the growth capital fund that the Government will create as part of the existing £237 million programme of enterprise capital funds. I credit the previous Government with recognising the importance of such funding and I am delighted that this Government will build on that work.
Those amounts are necessarily small. It is the Government’s role to take the lead, but they cannot and do not shoulder the whole burden. In north Staffordshire, we have the Michelin development fund, which was set up by the tyre company to provide unsecured finance to local SMEs, with the specific remit of creating sustainable jobs in profitable businesses. There is also the North Staffordshire Risk Capital Fund, which invests in businesses in my constituency. It is a public-private partnership, with investment from local businesses, individuals and the regional development fund. It was set up with a 10-year life and is drawing to a close. We must ensure that it is renewed or replenished, because it performs a vital role. I will do everything I can to assist with that. In south Staffordshire, we have the Black Country Reinvestment Society, which supports firms in Stafford with secured and unsecured funding.
I believe that Members of Parliament on both sides of the House have a vital role to play in encouraging such funds to form and grow in our constituencies. In my working life in business, over more than 25 years, the greatest pleasure was in creating new and lasting jobs, and the times of most distress were when someone had to be made redundant. Working with local people to create or support such funds gives us the chance to play a direct role in helping SMEs to do the job that they want to do and that we so desperately need them to do.
Mr Chuka Umunna (Streatham) (Lab)
I have listened with interest to the various speeches made today and I do not think anybody denies the need to reduce the deficit. Neither do I think that my fellow Labour Members think that the answers all lie with government, but the big decisions that we are taking at the moment are about judgment and the direction in which we think economic strategy should go.
I want to pose some questions on those issues, because it is clear, on any analysis, that this Budget is going to hit everybody. My own view, which is obviously not shared on the other side of the House, is that it will hit the poorest and most vulnerable people in society hardest. How can it not, given the figures that we are looking at? The IFS data for 2012-13 leave no doubt of the Budget’s regressive nature. They make it clear for all to see: indeed, the Financial Times said yesterday that
“the result of cuts in government services will be felt more on Nottingham's estates than by the Notting Hill set.”
There has been a lot of talk in the Chamber today about comparisons with the situations in Greece and Canada, but in my view they are false. I think that the most appropriate comparison in many respects is a domestic one, and it was touched on by the hon. Member for Cities of London and Westminster (Mr Field). He is no longer in his place but he made a very interesting speech, in which he compared the present situation with the approach adopted by Geoffrey Howe and Margaret Thatcher. In fact, the Culture Secretary has been talking up the appropriateness of making comparisons with the Thatcher Budget of 1981 and the general economic strategy of that Conservative Government.
There are differences—we are in a different time, and the economic circumstances are not the same—but what is being done with this Budget has strong parallels with what was done in the early 1980s. Geoffrey Howe raised VAT from 8% to 15% in 1979, following an election campaign in which he said that his party had absolutely no intention of hiking up the tax. Today, of course, the Chancellor has raised VAT from 17.5% to 20%, following an election campaign in which he—and his coalition partners in particular—said that they had no plans to increase VAT.
Geoffrey Howe slashed benefits in the 1980s: the 1981 Budget made sickness benefits and unemployment benefits taxable, and unemployment benefit for the over-60s was reduced. The Chancellor today has done similar things today: among many other things, he has cut child benefit and disability living allowance, and reduced tax credits for young parents earning just £15,000 each.
The reactions from the national commentariat are similar too. In 1981, 364 economists signed a letter to The Times warning that the Thatcher Government’s policies would deepen recession and threaten social and political stability. In April this year, 80 economists signed a letter to The Times warning that the current Tory Government’s approach would lead to job losses that would affect spending and confidence and tip us back into recession.
Surprisingly, Washington in some respects took a more cautious approach, then as now. In 1981, just after Geoffrey Howe’s Budget, President Reagan signed the Economic Recovery Tax Act to stimulate US consumption. This month, President Obama wrote to the Prime Minister and other G20 leaders to remind them of the dangers of withdrawing stimulus and engaging in fiscal consolidation too quickly.
What were the effects of the approach adopted by Geoffrey Howe in the 1980s? I can describe what they were in my constituency, in which I am proud to say that I have lived all my life. In April 1981 my mother was out shopping with my sister and me in the middle of Brixton when the riots broke out. I was too young—just two and half—to be able to remember what happened, but my mother remembers it well, and it was terrifying.
Soon after those riots, Lord Scarman was appointed to hold an inquiry into what caused them. It is well known that racism in the police at the time was a major factor, and the rioting was attributed to a loss of confidence in the police among significant sections of the population in my constituency and the other two constituencies in the Brixton area. However, although the report said that
“the social conditions in Brixton do not provide an excuse for disorder”
it added that
“the disorders cannot be fully understood unless they are seen in the context of complex political, social and economic factors”.
The report continued:
“There can be no doubt that”
unemployment
“was a major factor in the complex pattern of conditions which lies at the root of the disorders in Brixton and elsewhere. In a materialistic society, the relative deprivation it entails is keenly felt, and idleness gives time for resentment and envy to grow.”
With regard to the Tulse Hill estate—I have just come from that estate to the House today—it was pointed out that high unemployment, coupled with society’s emphasis on material acquisition, led to both material deprivation and a sense of hopelessness, particularly among the youth. Of course we know what happened after that: unemployment rocketed beyond the 3 million barrier and stayed there until 1987.
Kwasi Kwarteng
Is the hon. Gentleman seriously suggesting that riots on the scale witnessed in Brixton in 1981 will come as a result of the Budget?
Mr Tom Harris
I rise in part to respond to the hon. Member for Spelthorne (Kwasi Kwarteng), because it was not my hon. Friend the Member for Streatham (Mr Umunna) who suggested that riots would return to the streets of Britain; it was the Deputy Prime Minister, who said just a few weeks before the general election that the scale of cuts foreseen at the time would result in civic society breaking down in this country. Is the hon. Gentleman suggesting that the Deputy Prime Minister is mistaken?
Mr Umunna
Silence.
There has been a lot of talk about IFS and Institute of Directors reports, various statistics, the extent to which we need to reduce the structural deficit and the extent to which it is cyclical—but we are talking about people’s lives, and I am deeply worried about what the approach adopted by the Government means for my constituents and those who live in similar areas. There was talk of contrived anger. My worry is not contrived; it is very real. As has been said, the Office for Budget Responsibility has revised up the unemployment forecast by 100,000 people. The Chartered Institute of Personnel and Development is saying that it is absolutely certain that unemployment will go beyond the 3 million barrier again.
I took the trouble to look into some of the cuts that Geoffrey Howe imposed on the country, and what worries me most is that they pale into insignificance compared with the cuts envisaged by the Government now. Howe cut spending by 4% between 1981 and 1984. The Chancellor is planning 25% cuts over four years.
Matthew Hancock
I thank the hon. Gentleman for giving way in his an extremely thoughtful speech. Does he not agree that we have to deal with these huge problems because of the structural deficit that we had going into the recession? Does he agree with this quotation:
“Public finances must be sustainable over the long term…If they are not, the poor, the elderly, and those on fixed incomes who depend most on public services will suffer most.”?—[Official Report, 2 July 1997; Vol. 315, c. 303.]
They are not my words but those of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown).
Mr Umunna
First, the deficit pre-November 2008 was primarily in some respects caused by increased spending to which those who are now in the Conservative Government were then committed. Conservative Members are continuing to promote the view that somehow there was no global credit crunch, and that the bankers, many of whom they are very friendly with, had nothing to do with it—but the general public do not buy that.
Conservative Members will have to accept that, but the real question that I want answered—I note that a Minister is still here—is: what comfort can he give to the people who live in places such as the Tulse Hill estate in my constituency that they will not have to pay the price? What measures will he take to help them to get back into work? What will he do to give them extra training and experience? Why on earth is he cutting programmes such as the future jobs fund, which I have seen working in my constituency, helping to get people back into work? The Government say that the future jobs fund is ineffective and a waste of money, but they do not have figures on which to base that assertion. The Red Book makes no provision for funding any programme to get young people back into work or into training that will replace what the Government are abolishing.
The Financial Secretary to the Treasury (Mr Mark Hoban)
Perhaps the hon. Gentleman will think back to the package of cuts that was announced last month. Some £500 million of the £6.2 billion of cuts was recycled into extra training and more apprenticeships; that is where this party’s commitment to growth comes from.
Mr Umunna
I am not going to say that I do not welcome things such as apprenticeships, because we need those programmes, but at the same time as the Government are putting in place 10,000 apprenticeships, they are slashing a programme that could place hundreds of thousands of people in work. I do not understand their approach; ultimately, my constituents want to know what is happening.
Guy Opperman (Hexham) (Con)
I remind the House that I have declared a previous involvement in manufacturing through my family firm.
Before I talk about the Budget, I wish to say something about the maiden speeches that we have heard. We heard an excellent maiden speech from my hon. Friend the Member for Staffordshire Moorlands (Karen Bradley). Her seat is similar to my Northumberland constituency, and she spoke eloquently about the contribution that can be made by tourism and farming, which I look forward to championing with her. My hon. Friend the Member for Hendon (Mr Offord) also spoke well, and the hon. Member for Kingston upon Hull East (Karl Turner) was a great deal more articulate than his predecessor in the House. My hon. Friend the Member for Camborne and Redruth (George Eustice) said that his family lived in his constituency 400 years ago. The constituency was also the home of Ross Poldark, who found fame and fortune in the novels, and I am sure that my hon. Friend will have a similarly colourful career.
It gives me no pleasure—to a certain degree I endorse what was said by the hon. Member for Streatham (Mr Umunna) on that subject—to speak in a Budget debate when we all face such difficult circumstances. Unemployment has increased considerably in the four Northumberland constituencies. It has increased by nearly 60% over the past five years in the two Labour-held constituencies of Blyth Valley and Wansbeck, and by a similar amount in Berwick-upon-Tweed. Unemployment in Hexham has increased by 67% in the past five years.
I have heard much of what Labour Members have said in today’s debate, but this is not a question of ideology. We are not Thatcher’s children producing Thatcherite views. I assure Labour Members that I did not join the Conservative party until considerably after Mrs Thatcher left office, and I am not in a position in which I want to put forward such a point of view. The ideology behind what we are trying to do to put things right is a simple question of maths. We have outgoings of £700 billion and incomings of £545 billion. Those figures are unquestionable; the issue is how we address the situation.
My ideology arises from the fact that my family came to this country nearly 100 years ago as immigrants with next to nothing. They had no opportunities, save what they could make. In the 1920s—when there was a real recession and things were really bad—my grandfather came home from school to be told by his father that school was no longer an option, and he would have to be withdrawn so that he could work for his father. The three children then began to work for their father in the basement of a small flat in Islington and built up a small manufacturing business on the back of a small gift of £40. I wish to say something about manufacturing. In 1997 we made roughly as much as we consumed in this country—about £160 billion, compared with £150 billion. Now, however, we consume nearly twice what we make.
In Northumberland apprenticeships are struggling. I visited Glendinning’s, a firm in my constituency, shortly before the election. I was told that the firm could not take up the Government’s apprenticeships, for the simple reason that they were so complex and so administratively difficult to implement that it was better off working outside the Government’s scheme and ignoring any Government money.
During the election I went round nearly all the stores in Wylam in my constituency and asked the owners what the effect would be if national insurance went up. Every single one said that if it was increased, they would have to put people out of work.
There are many responses to the Budget that we could discuss, but there has been little from the Labour leadership. I have listened to the debates so far, and yesterday I listened to the hon. Member for Harrow West (Mr Thomas), who uttered not one word about what he would do differently. It is all very well saying that the Labour Government were going to cut the deficit by 50% in a number of years—but surely the question is what would they cut, and what would they do differently? The answer to that is fundamentally lacking from the Opposition’s arguments. It is a bit like watching the French football team: everything is wrong, but they have no alternatives.
I have also read in detail the speeches of the shadow Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), and the right hon. and learned Member for Camberwell and Peckham (Ms Harman), who spoke on Tuesday. The only features of which she spoke in support were the capital gains tax measure, the 50p tax and the bank levy.
Earlier today, to support his argument, the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke) quoted the right hon. John Smith saying, “I judge a Budget on what happens to a person living on a council estate.” We have a number of council estates in my constituency, and during the election we constantly articulated the view that to spend £400 a week while making only £300 a week is to head for financial disaster. Everyone can understand that.
We have heard a lot in our debates in the House about various organisations’ comments on the Budget. I represent a north-east constituency. The North East Chamber of Commerce, an august body which represents more than 4,000 businesses and more than 30% of the region’s work force, says:
“The Budget clearly contained a number of painful measures on…taxation and spending. However… Funding for a strategic economic development body in the North East was maintained”.
The NECC continues:
“Reductions in employer National Insurance (NI) contributions and headline Corporation Tax are welcomed by businesses, as is the extra exemption on NI in certain regions”.
It says:
“The Chancellor was right to avoid further capital spending cuts and to confirm spending on the Tyne and Wear Metro”.
The NECC goes on:
“The scale of the public finance deficit clearly required radical action… NECC believes the measures taken broadly support the wealth-creating part of the economy in the North East.”
It adds:
“Freezing public sector pay and reforms to pensions were difficult but necessary decisions to address the deficit and help reduce the need for large job cuts in the region’s public sector.”
The NECC welcomes—[Interruption.] Bless you. I welcome the hon. Member for Washington and Sunderland West (Mrs Hodgson), a fellow north-east Member, who is suffering from hay fever. I am happy to have accepted her intervention, brief though it was.
The NECC has also welcomed the increased thresholds for employer national insurance contributions and changes to the headline rate of corporation tax. The one criticism I put to Treasury Ministers is that, like the NECC, I find it
“disappointing to see no change to empty property rates, which we continue to see having a punitive effect”
on businesses, not only in the north-east, but throughout the country.
On capital spending, it is wonderful to see that the Tyne and Wear metro will go ahead, and that the A1 will finally see some form of action, which has long been supported by many hon. Members—albeit that the money still has to be found.
As I was sitting here this morning representing a fundamentally farming constituency during questions to the Department for Environment, Food and Rural Affairs, there was a brief sighting of an interesting and rarely seen—in the House for the past six weeks—individual, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). He is not normally seen at DEFRA questions, and like a small badger he nipped in and, alert to a possible cull, nipped out again very quickly, before any of us could question him in any way whatever, whether on DEFRA questions—not something that I necessarily think he would have been seeking to answer—or on Budget matters. It would have been wonderful to have had the opportunity to ask the former Prime Minister just what he had to say about the state of the budget. I would certainly have wanted to make the point that we are set to miss his golden rule by £485 billion—quite a significant miss, one might think. One thing is for sure: when he is brought to account in this House, he will have to answer for the state of the nation and the country’s finances. He may run, but he will never hide from that issue. He has much to account for, and we will ensure that he does so.
I finish by recommending a study of all the finances. Some aspects might be due to other factors, but most of what we now see happened on the watch of the previous Government. I recommend the Budget to the House.
Valerie Vaz (Walsall South) (Lab)
It is a pleasure to follow the hon. Member for Hexham (Guy Opperman). He does his family proud. They will be very proud of him and the speech that he made today. It is also a pleasure to listen to all those who made their maiden speeches. They will do their constituents proud.
Thank you, Mr. Deputy Speaker, for allowing me to speak in the Budget debate. There was an audible gasp around the country, and that was just from the parents whose children had finished their GCSEs, and that includes my own daughter Liberty, my nephew Luke and 630,000 other 15 and 16-year-olds. They have worked hard and given up many activities, so that when August comes no one can say that they did not work hard and that exams are getting easier. When they end up here, as some of them will do, I hope that they will not condemn us by saying that we just taught them how not to pass exams and did not give them a decent education. We should acknowledge the efforts of their teachers, too. My husband Paul is waiting for an Ofsted inspection, so there is another major event in the family. I was pleased to invite his school, St Mary’s Roman Catholic primary, to the House. They came on Monday, and were greeted by their MP, the hon. Member for Brentford and Isleworth (Mary Macleod).
The Secretary of State for Education could learn something from those young people. He seems to misunderstand the word “free”. He wants people to set up free schools, but they are not free; the money is coming from the public sector and coming from taxpayers so that some people can say, “We’re setting up vanity schooling;” and that is just what it is.
Much has been said about public sector workers, and it is here that I have to declare an interest because I have friends and former colleagues who work in the public sector. I know how hard they work. They work beyond their contractual hours, and when there is a recruitment freeze, they pick up the slack and carry out the work created by the vacancies. They went into the public sector because they wanted to serve the public, and their only perk was a decent pension. They have never had a large wage compared with those in the private sector. They are the people who serve the House, who turn policy into legislation and who defend the Government. Instead of being accountable to members of the public, they seem to be accountable to accountants. They know where the budget can be trimmed. Every single minute of their working day is accounted for.
Public sector workers work beyond the call of duty just to ensure that the wheels of this country turn. They always act in the public interest and are committed and loyal to this country. I note that the Government want to hear from them about how to make cuts, but that old cliché of turkeys voting for Christmas comes to mind, because no one will say, “Here, have my job. Take this as a cut.” The Government should carry out a skills and policy audit of each Department, because that way they can decide their policies and priorities. I note from the Chancellor of the Exchequer’s speech that he has asked Will Hutton to look at plans for fairer pay throughout the public sector, and I ask the right hon. Gentleman to extend that remit to those private companies that received public money in the bail-out.
Will Hutton said himself in an article in The Observer that even John Lewis, the founder of the department store, thought it extraordinary that a chief executive should receive almost 20 times’ the pay of other workers. President Obama’s pay tsar is doing exactly the same in the United States, and Will Hutton’s remit should be used to renegotiate the payouts and compensation made to those who have received exceptional taxpayer assistance.
Much has been said about the private sector mopping up after the public sector, but the reality is there to be seen in my constituency. On Saturday I met a delegation of workers from Maple Leaf Bakery in Raleigh street. They told me how they are under pressure to sign a new contract at different hourly rates. If they do not, and even if they put in a letter of protest, they will be sacked, so they either accept the new rate or go. The rate has been reduced from £8.48 an hour to £6.88. Those people make our daily bread. I met them, and some have been at the factory for more than 37 years, so they have the skills. If there had not been a minimum wage, who knows what their pay would be? ACAS has been involved, and all that the workers want to do is work. They have a way forward and have suggested a team to look at ways of reducing waste, upgrading the plant and cutting the number of managers. Its parent company in Canada is making a loss, but the company in my constituency makes a profit. My hon. Friend the Member for Bolsover (Mr Skinner), commonly known as the beast of Bolsover, is sadly not in the Chamber, but he described the events of the economic meltdown as an “economic tsunami”. I could not put it any other way.
People forget that when the Prime Minister attends the G20 summit at the weekend, he takes with him the legacy of my right hon. Friends the Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling), who did not blink in the face of the huge financial pressures and meltdown but steered the ship of state into safer waters. That is the true legacy of the past 13 years.
Sajid Javid (Bromsgrove) (Con)
I pay tribute to those hon. Members who have made their maiden speeches today. My hon. Friends the Members for Staffordshire Moorlands (Karen Bradley), for Hendon (Mr Offord) and for Camborne and Redruth (George Eustice), and the hon. Member for Kingston upon Hull East (Karl Turner), all made excellent maiden speeches.
After 13 years of Budgets that were predicated on the mistaken notion that boom and bust had ended, it is hugely reassuring to see a Budget that restores some fiscal sanity. This Budget puts at the heart of our economic policy the restoration of our nation’s finances and the laying of foundations for stronger economic growth. In response to the hon. Member for Walsall South (Valerie Vaz), however, I must add that we do not know what the previous Government’s legacy is, because some costs of the past two or three years’ actions have yet to be borne—but will be unless this Government take preventive steps.
I shall not dwell on what has been bequeathed to us, but I must mention a few statistics that speak for themselves. The budget deficit is more than 11% of GDP, and the largest of all advanced nations; the visible national debt is 68% of GDP; and a record 28% of the adult working population—8 million people—are currently described as “economically inactive”. Despite all Labour’s efforts, no amount of spin can hide the truth of the abysmal inheritance that we have been given. Once again, it has been left to a Conservative-led Administration to clean up the mess of a former Labour Administration. As it says in the Budget, we have to start doing that by addressing this record peace-time deficit.
I am somewhat surprised that Labour Members continue to act as though we can keep living beyond our means, when only £3 in every £4 of Government spending is raised through general taxation. Only eight weeks or so ago, even the Labour leadership admitted during the election campaign that if they won the election they would have to carry out severe cuts as well. There were various estimates, but they averaged about 20% of real cuts in unprotected Departments over the course of the next Parliament. Notably, the then Chancellor of the Exchequer said in an interview that if he were re-elected he would have to make bigger and deeper cuts than Margaret Thatcher did in her time. Now, however, Labour Members act as though those cuts are not necessary and we are able to make a choice.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
It is not the reduction of the deficit that is the point of conflict between us but the scale and the speed of doing it. Doing it in the way that has been proposed risks pushing the economy back away from growth and into recession. In that situation, the deficit will increase, not decrease. Does the hon. Gentleman accept that point?
Sajid Javid
The hon. Gentleman’s own party said before the election that it expected to make very large, severe cuts, in the order of about 20% in real terms. Our Budget proposes cuts of about 25% in real terms in unprotected Departments. Is he really saying that the only thing bothering him is a difference of 5%? I have not heard anything from Labour Members in the past two or three days that remotely suggests how they would achieve the 20% cut that they have talked about.
James Carville, who was President Clinton’s political adviser, once famously said:
“I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone.”
Soon after that, President Clinton abandoned his plans to increase borrowing, recognising instead that, even at that time, he had no choice but to balance the budget. I have traded in the international bond markets for many years, and working on a trading floor I saw for myself just how severe the financial crisis was. There is no question but that we would have faced economic problems regardless of the actions that were taken by the previous Government, but their actions made things worse, and that is the key. The situation has been made worse by the huge amount of borrowing that we have taken on since that time.
Mr Tom Harris
Does the hon. Gentleman believe that it was right for the Government to bail out Northern Rock?
Sajid Javid
Personally speaking, on my own behalf, I would not have carried out the bail-out in such a way. I think that the true consequences and costs of that bail-out are yet to be borne out.
I know from my own experience of the bond markets that they take no hostages. We now depend on them utterly for the nation’s finances. My right hon. Friend the Secretary of State was absolutely right to point out that we face a major sovereign crisis unless we take serious action. Some Labour Members have said that it does not look as though we have had problems with financing our budget deficit to date. We borrowed about £225 billion in gilts in the last financial year, but at the same time, the previous Government, through the process of quantitative easing, printed about £225 billion of new money. It is therefore not difficult to work out how, in effect, much of that borrowing was paid for.
The United States was the only other major economy that went through a process of quantitative easing, and we cannot use it as an example to compare with ourselves because, as we know, it has a reserve currency and we do not. That makes its situation entirely different when it comes to such an economic policy. The only other country in the world that I can think of without a reserve currency that went ahead and printed money at about the same time as us—indeed, before—was Zimbabwe. It is rumoured that the Finance Minister of Zimbabwe sent a note in 2008 to the then Chancellor of the Exchequer offering him his economic advice in exchange for lifting visa restrictions on him and his family. I think the then Chancellor took the advice but did not give anything in return.
The bond markets are picking off grossly indebted nations one by one with rising bond yields and falling prices. We have heard today about Greece, and we have seen what has happened in Ireland, Portugal, Spain and Italy. Those who observe the markets carefully need only look at what has happened, to a lesser extent, in France in recent weeks, where problems have started. That is why France, too, recently announced an austerity package. We have no choice but to reduce the record budget deficit, or else we will face an economic crisis of cataclysmic proportions.
Chris Williamson (Derby North) (Lab)
I would be interested to hear what the hon. Gentleman has to say about Professor David Blanchflower’s comments yesterday. He said that the Budget made him more certain that there would now be a double-dip recession, with no room for manoeuvre because interest rates are already so low. Would the hon. Gentleman comment on that?
Sajid Javid
Yes; Professor Blanchflower has been consistently wrong for the past three years since the crisis started, and he was wrong in what he said yesterday.
We have no choice but to cut the deficit, and that requires both cuts in spending and the raising of taxes. As we have heard today, we have to a strike a balance between the two, and the burden must fall on public spending. We have no choice about that, because if we raise taxes too much we will destroy the very incentives that we need to create the growth that will get us out of this economic mess.
As we go through that process, we must naturally try to protect the most vulnerable as much as we possibly can. Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it, because there is an ideological difference between what they believe and what we believe about how to get our country back on track and our economy going.
The Opposition believe in some kind of Alice in Wonderland economics in which we can go on living beyond our means year after year. We believe in the real world, where we have to pay our way. They believe that the state has the answer to all society’s problems, but we believe that individuals, helped by the state, have the answers. They believe in an ever increasing welfare state, in which people are tied down and not allowed to profit from their own industry, and we believe in helping the most vulnerable in society—those who cannot help themselves—but freeing those who can work for themselves and earn an income, and giving them the incentives to do just that. Because of that, we believe that we can get more out of our constrained budget, repair our economy and create a fairer and more responsible society.
Sajid Javid
I should like to plough on for a bit, but I will give way in a moment.
The size of our national debt cannot be ignored, either. It has not been mentioned much—we have all talked about the deficit, but let us not forget the enormity of the problem caused by the national debt. Any Government will have to address it at some point. Benjamin Disraeli once said:
“Debt is the prolific mother of folly and of crime.”
He should have known, because there was not just public debt at the time; I believe he had some personal debt, and he was probably referring to that as well.
After 13 years in office, Labour took our visible national debt from £350 billion to more than £900 billion—an almost threefold increase. That does not include the invisible national debt, public sector pension liabilities, which reputable organisations estimate to be more than £2 trillion, and all the private finance initiative liabilities, which grew from approximately £20 billion to £150 billion. We have a huge debt problem, which must be addressed, otherwise not only will this generation and our children pay for it, but our children’s children will inherit it. Let us not forget the changing demographics in our country, where we have a growing elderly population and fewer people of working age. That means that there are fewer people to tax and fewer who are able to fund the state’s activities, including repayment of debt.
The Budget addressed how to start promoting growth, which will help us get out of the mess. The Government are reducing corporation tax, the tax on small companies and on entrepreneurs’ relief, and addressing some of the problems of bank lending Many banks have been held back from increasing lending since the onset of the crisis because of the uncertainty of the future economy. The Budget gives banks much more certainty about the future of our economy, and that gives them more confidence to lend.
The securitisation market has not been mentioned often in the debate. More than the equivalent of £5 trillion has been issued in the past 10 years. Many banks used that to provide funding to small and medium-sized companies and to fund mortgages throughout the world. Securitisation unquestionably caused some of the problems of the credit crisis, but we must consider that market if we are serious about getting banks to lend again. So far this year, European banks have issued €30 billion of securitised bonds, against €500 billion in the same period last year. Last year, 95% was purchased by the private sector; so far this year, 95% has been purchased by the public sector central banks throughout Europe, including ours.
We are considering a bold Budget to redress a dire situation. Its measures are thoughtful and disciplined and it aims to spread the economising process throughout the nation. No group is spared and none is favoured.
Toby Perkins (Chesterfield) (Lab)
It is interesting to follow the hon. Member for Bromsgrove (Sajid Javid). There was one thing in the past 14 minutes that I am glad that he acknowledged; otherwise there was little with which I could agree. However, I agreed with the admission that the Budget is ideological and that the Conservative party has delivered the sort of change that it always wanted to make and scrapped the massive improvements that the Labour party made in the public sector. It is not an economic but an ideological Budget. The hon. Gentleman’s honesty, at least about that, does him great credit.
I want to consider the huge and unnecessary gamble that the Chancellor has taken with our economic recovery, and why a genuine growth strategy would enable us to grow our way out of the economic crisis without threatening thousands of people with the dole, and without threatening those who rely on housing benefit or the economic recovery. I shall also talk about the Budget’s impact on my constituents in Chesterfield and Staveley.
First, I shall deal with the myth that the Chancellor had no choice and that the measures were taken out of economic necessity rather than, as the hon. Member for Bromsgrove admitted, political ideology. That is nonsense. The Chancellor’s Office for Budget Responsibility’s report confirms that the borrowing requirement this year was £8 billion less than that forecast by my right hon. Friend the shadow Chancellor in March. Before the Chancellor’s intervention in the Budget, we were on target for the growth forecast for 2011 of 1.25% that the shadow Chancellor had made. The OBR admitted that the shadow Chancellor’s plans for spending restraint over the next four years would have halved the budget deficit by 2014-15, just as he said they would when he delivered his Budget in March.
Uniquely among the main parties, the Labour party is putting forward policies that we campaigned on in the general election a month ago. This could catch on: we could go into elections telling the public what we wanted them to vote for, and then we could come to this place and deliver those policies.
Toby Perkins
My hon. Friend makes a valid point: it probably is not the new politics, but it is something that political parties should perhaps consider.
Hon. Members should remember that the previous Labour Government were the first Government for many years to start paying off the national debt. The stringent financial rules that the former Prime Minister put in place during his long stint at the Treasury put this country into the position whereby we entered the recession with the second lowest debt to GDP ratio in the G7.
Jacob Rees-Mogg (North East Somerset) (Con)
Is it not the case that the only time when the economy was run properly under the previous Government was when they followed Conservative spending plans in their first three years?
Toby Perkins
It certainly is not the case. The hon. Gentleman should remember that in 1997 we inherited hospitals that were in a disgraceful state and where people died of things that they could have been treated for, if only they had got to the top of the waiting list. We should also remember that we inherited schools where the roofs leaked every time it rained. Our children were educated in quite disgraceful conditions. That was the legacy of 18 years of the Conservatives, which is why when they lost, they lost so massively that they were not even credible as a party for another 13 years.
Mr Tom Harris
May I congratulate my hon. Friend on a terrific election result in Chesterfield? Does he share my bewilderment—and, I have to say, amusement—at the efforts by the Chief Secretary to the Treasury and the Business Secretary to claim not only that they were wrong to oppose an increase in VAT, but that they have miraculously transformed VAT from a regressive tax before 6 May into a progressive tax now?
Toby Perkins
I was certainly bewildered by the Secretary of State for Energy and Climate Change’s contribution in opening this debate, and by the idea that when the Liberal Democrats talked about the tax bombshell, what they meant was that VAT was regressive only if it was levied on food, a suggestion that nobody had made and which was never part of the debate. His speech was one of the most bizarre contributions that we have heard over the past three days. I look forward to watching it on iPlayer tonight and reliving the moment, because it is something that will live long in the memory.
I want to talk about the choice that the Labour party made. What we enjoyed under the previous Labour Government was 11 years of stable economic growth. That was the longest period of stable economic growth in this country’s history, yet unlike the Conservatives, we went into recession only when the entire world went into recession. The Conservatives did it differently: they could go into recession when the rest of Europe was in a strong position. It was only the global economic crisis that threw the economy off course under a Labour Government.
Kwasi Kwarteng
Will the hon. Gentleman enlighten me on one thing? What does he think the former Prime Minister and then Chancellor meant when he suggested that there would be no more boom and bust?
Toby Perkins
What he was probably referring to was 11 years of stable economic growth. What he did not foresee was that we would be hit by the biggest global economic crisis for more than 80 years. Of course, nobody foresaw that. There were no Conservative Members suggesting that the ways in which our banks were regulated would lead to the economic crisis. To pretend that you knew that that was coming or that the deficit that has been built up is somehow irrelevant to that is just ludicrous, and no one believes you, so you really must stop trying to treat people like fools when you say that the deficit that has been created was something that happened just because we had a Labour Government—
Mr Deputy Speaker
Order. I ask Members please to refrain from using the word “you”, because that means me, and the hon. Gentleman has just accused me of saying something that I have not said.
Toby Perkins
Please accept my apologies, Mr Deputy Speaker. I shall make sure that I address you and hon. Members correctly in future.
It is right to talk about the choice that Labour made, which was to protect the jobs that people relied on and to prevent an extra 500,000 going on the dole. Labour’s choice was to protect the homes that people had saved up over their whole lives to be able to buy. Labour’s choice was to support industry and bring forward public spending projects to keep the construction industry working when the private sector was sitting on its hands. Labour knew that the price of salvaging those jobs, those homes and those businesses would be an increase in our deficit. We delivered a plan for the recovery, which is working, and a plan for reducing the deficit after the recovery had been secured in the following year. The hon. Member for Bromsgrove told us that we could not keep living beyond our means, but of course we already knew that; that is exactly what the shadow Chancellor was referring to in the previously attributed quote. He made it absolutely clear what our strategy was.
Jonathan Reynolds
Does my hon. Friend agree that there is something deeply disingenuous about the fact that the Conservative party supported our Government spending plans until 2008—before the economic crisis hit home? They believe that we are living beyond our means, but they supported our spending at the time.
Toby Perkins
My hon. Friend effectively anticipates my speech, for which I thank him. He makes a very wise contribution. The reality between 1999 and 2008 was not that the Conservatives were calling on the Labour Government to reduce spending; quite the opposite, they were complaining about all sorts of things that we were not spending enough money on—from police to flood defences and all sorts of other things. Now they sit there and say that we should have known all along what was going to happen. No one can take what they say seriously.
Toby Perkins
Talking of no one taking the Conservatives seriously, I give way to the hon. Gentleman.
Matthew Hancock
The hon. Gentleman referred to the Labour Government’s plans for significant cuts in public spending. Can he give us one single example that they have set out?
Toby Perkins
Yes, as the shadow Chancellor made clear, we would have maintained spending over the course of this year and put in place a different Budget from that of the Conservatives, along with headline measures about what future spending would be. Of course it was too early for us to have a comprehensive spending review; when the Conservatives were in opposition, did they ever do a comprehensive spending review and tell us every line of the Budget they would have carried out? Of course not. That is the reality of the situation.
My hon. Friends have pointed out that under the former Prime Minister the Labour Government led the rest of the world to the solution when the global economic crisis was at its worst. Labour made the choice to protect jobs, as I said. Just as Labour made a choice—an ethical and a political choice as well as an economic one—so the Chancellor has made his choice with the Budget. He did not choose fairness; he chose to gamble. His gamble is based on an ideology that says that the growth of the public sector somehow constricts the private sector, but it is utterly fallacious to suggest that the success of the one has to be to the detriment of the other and that the role of Government is to keep taxes low for businesses and keep out of the way. That is the wrong choice. That is taking a gamble with the recovery that Labour was delivering in a stable and managed way. It threatens our recovery at a time when the economy is still fragile.
The choice to increase VAT is, of course, regressive. When even the TaxPayers Alliance denigrates the policy as hitting the poor, we really have to listen. This will take approximately twice the amount from the incomes of the bottom 20% as it does from the top 20%, and it will stunt growth. That is acknowledged on page 97 of the Red Book, so the Chancellor is introducing a policy that he knows will stunt growth. As a business owner myself, I know that this tax will directly remove 2.5% from the bottom line of my firm if it were not passed on to my customers.
I also know that cuts in corporation tax are not as important as having a market in which one can make a profit. While the VAT cut introduced by Labour in 2008-09 stimulated growth, this VAT increase will take about £300 out of the average family’s pocket at a time when families are crying out for more help from Government, not less. That will have a knock-on effect on business. The Government seem to think that reducing the corporation tax burden, already historically low on businesses, will stimulate growth, without recognising that the environment in which businesses trade is the most important part of making a profit.
Taking money out of the pockets of consumers also takes money out of the pockets of businesses. It increases redundancies and business failures, and it stunts our ability to grow our way out of recession. For the hundreds of extra businesses that will now struggle to stay afloat, the thought of a cut in corporation tax will merit little more than a mirthless laugh. At every level, the Budget stunts growth. Cutting the allowances on which manufacturing firms were relying, and replacing them with a corporation tax cut over the next few years, will result in businesses being less likely to invest and more likely to focus on bottom-line profits.
The starkest aspect of the Budget, however, was a complete lack of a sense that the Liberal Democrats have been a moderating influence on the Tory plans. Where were the Lib Dem influences in this Budget? Seriously, does anyone in the House believe that if the Budget had been delivered by a Tory majority Administration, the Liberal Democrats would have marched through the Lobby and supported it? I will take that as a no. Where was the £2 billion capital gains tax increase? It was less than halved. Where was the commitment to restrict tax relief on pensioners to the basic rate? It disappeared. Where was the mansion tax? It does not exist. Where were the green taxes? How can one justify a £2 billion bank levy that will be compensated by corporation tax cuts for the banks that caused so much damage? Where was the Robin Hood tax on bank transactions, which would have brought in more than treble the amount?
Toby Perkins
I am afraid that I do not have time.
This was a Tory Budget without a shred of Lib Demery about it. I will applaud the hon. Member for Colchester (Bob Russell) if he sticks to his guns and refuses to vote for it. The Chancellor had a choice: he made the wrong choice, and we will all pay a heavy price for years to come.
Mr Deputy Speaker
Three Members wish to catch my eye, and I intend to call the winding-up speeches at half-past 5. I am sure that Members will wish to show their characteristic generosity in sharing the time.
Nick de Bois (Enfield North) (Con)
Thank you, Mr. Deputy Speaker. I shall do some immediate live editing to meet your request.
As a relative newcomer to the Chamber, let me say that we need to remember that there is no such thing as free money. The vast sums that we are discussing have had to be earned by people, and those same people will pay the price for the failed policies of the previous Administration. We should bear in mind the fact that they will be making sacrifices because of Labour’s mistakes.
In a former life, I was fortunate enough to be able to run my own business. During 20 years in the private sector, I have enjoyed the ups and downs that go with that territory, as well as sharing the challenges and opportunities that all families face. Given that reality, I recognise that this Budget, and the legacy we have inherited, will hurt people, and will hurt some in their pockets. Obviously, no Chancellor would wish to give such a Budget, but it is the one that any responsible Chancellor would have to give.
We are like the receivers coming in to clear up the chaos left by the previous owners. It falls to us to tell the shareholders, the staff and stakeholders what must be done to save them from bankruptcy. In government, Labour Members were always keen to hold company directors to account for their mistakes, and would often pursue criminal prosecution. I notice that there is not the same alacrity to do so with the right hon. Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling).
In the limited time available, I want to focus on enterprise in the Budget, because my constituents in Enfield North will welcome steps to protect jobs and create an enterprise environment that can create new jobs—and why not? Given the 15% annual increase in the number of jobseeker’s allowance claimants under 24 and the 30% drop in the number of vacancies, jobs are clearly a key issue in our area.
By reducing the burden of taxation and regulation, the Budget will give business the confidence to invest in the long term, which is crucial. The hon. Member for Chesterfield (Toby Perkins) suggested that the tax cut for companies would be of no value and would do nothing except, perhaps, create extra profits for those involved. That is nonsense. According to a survey of its members by the Federation of Small Businesses, 42 per cent. of small firms will use savings from tax cuts to invest in growing their businesses, 20% will use them to employ more staff, and some 22% will try to invest in new services and products. We must allow our companies to invest and, in doing so, create jobs.
I welcome the benefits to increase the level of business rate support temporarily for new businesses. We are trying to introduce help in the regions, and the exemption from national insurance for the first 10 employees will certainly be welcome. Let me, however, introduce a note of caution, and ask my colleagues to bear it in mind. I do not want to see the emergence of a series of phoenix companies that may wish to take advantage of the exemption as an aside. This is not the occasion on which to discuss the merits of phoenix companies, but they have the potential to abuse what is otherwise a very welcome policy.
Above all, I welcome the Government’s commitment to urging banks to promote small and medium-sized enterprises in particular. That too is crucial. Many people in my constituency and—I declare an interest here—in my own experience have seen the abject failure of banks, some of them owned by the people, in that regard. Many pursue a twin-track approach: they tell us that they are publicly committed to lending to SMEs, while in the real world actively discouraging them from applying for loans. Such disgraceful behaviour should not be allowed to continue without comment. I for one will be watching the banks carefully and holding them to account in the future. Their behaviour explains why, according to the FSB report, only 18% of its SME membership apply for loans, and only 9% are awarded them. SMEs are being discouraged from applying, and that is distorting the certificates.
Andrew Bingham (High Peak) (Con)
I agree with what my hon. Friend has said about the banks. Will he also acknowledge that hard-working counter staff are being criticised by members of the public although they are not to blame for the difficulties that the banks have caused? They have been working very hard, and they are being unfairly criticised.
Nick de Bois
I thank my hon. Friend for highlighting that distinction. Indeed, it does not apply only to those working on the shop floor. Many senior managers are clearly being directed to follow a policy which—I am extremely pleased to note from the Budget—we are prepared to challenge. The Red Book refers to a review of the way in which banks should respond to the need to lend in the future. I realise that Britain needs its banks, but the banks need to play their part openly and honestly, and I look forward to seeing that happen. It is a key part of the proposals outlined in the Red Book.
This is a necessary Budget. It is a tragedy for our country that every 20 years or so Conservative Chancellors must make difficult decisions and accept public unpopularity for sorting out the mess left by their opponents. That has now happened again. I dislike many of the measures in the Budget, but I support them because I dislike even more the idea of our country literally going bankrupt. I hope that many of the tax rises that have been announced will eventually be reversed as our economy grows over the coming years, but our priority now is to stop the country slipping into a spiral of debt-driven decline, to rebuild our businesses, and to create jobs and opportunities to turn our economy round.
Matthew Hancock (West Suffolk) (Con)
It is an honour to be able to speak in this debate on what is, by common recognition, a Budget of historic proportions. After the Budget, I bumped into a group of former civil servants who were reminiscing about huge Budgets of the past and where this one came. They talked about the 1981 Budget that has been much discussed in this debate, and the 1970 Budget by Iain Macleod that was never actually delivered because he died before he had the chance to give it. Of course they talked about the big 1950s Budgets of Rab Butler. All those Budgets had something in common: they were Conservative, or mostly Conservative, Budgets that were clearing up the mess left by a previous Labour Administration. This one of course is no different.
The mess created by the Labour Government has not been left at their end. We know from the letter by the former Chief Secretary, of which we will no doubt hear more, that there is no money left. That only repeats a letter sent in 1964 by Reggie Maudling to Jim Callaghan, which said, “Good luck, old cock. Sorry to leave it in such a mess.” Here we are at the end of a Labour Government, once again clearing up the mess.
Before we hear too much from Labour Members, we must remember the economic as well as the budgetary consequences of former Labour Administrations. Under the Attlee Administration, unemployment went up by 280,000; under Wilson from 1964-70, unemployment went up by 226,000; under Callaghan, it rose by 479,000; under Blair-Brown, it went up by 460,000. In fact the only Labour Government under which unemployment fell was Ramsay MacDonald’s 1924 Administration. I am not sure that that is one that we should follow or one with which Labour Members would want to agree.
Those lessons from history teach us several things. One is that memories of the failure of an Administration run deep. We all remembered for a long time the winter of discontent. We now know that the public recognise that many of the measures proposed in the Budget are Labour cuts because they are the response to the legacy that Labour has left. As my hon. Friend the Member for Enfield North (Nick de Bois) has said, it is a responsible Government who pick up the pieces following the irresponsibility of a Labour Administration who sent us into a recession with the largest budget deficit in the developed world.
Opportunism and oppositionism make life harder in opposition, rather than easier. We have seen so many times from Labour Members today and in the debate on the Queen’s Speech the pointed finger and heard their lists of cuts, with almost no recognition of the need to deal with the size of the deficit that existed before the election.
There was one exception to this; the hon. Member for Streatham (Mr Umunna) made what I thought was an extremely thought-provoking speech. But at the end, he accused the Government of having nothing to say about reskilling and helping the unemployed. He was quite literally stumped and sat down after he was intervened on by the Minister who explained some of the proposals that the Government have put forward to help to lower unemployment and improve skills. At that point, the speech quite literally disintegrated. We have seen that repeatedly over the past few days.
Many Labour interventions have been based on accusations that are groundless. One is that the OBR shows a reduction in growth thanks to the Budget, but the OBR itself describes the contrast between two of its forecasts as misleading. It ignores the effect of the reduction in interest rates in the international bond markets that has happened since the election because of the anticipated action to deal with the deficit. Those interest rates have fallen further today. They are now half a point lower than at the election, and the total fall has been more than 10%. That is having a positive impact on companies throughout the country.
As Labour marches to the left, with its lengthy leadership contest meaning that the competition for taking up ever more left-wing positions intensifies, we increasingly find that there is a lack of credibility. The coalition parties are facing up to the seriousness of the situation and supporting measures that may not all be easily palatable. We support them because we see the long-term benefit of turning our country around and getting it back on its feet. There is no way that a position that lacks credibility, and simply attacks every cut and puts forward absolutely no alternatives, will be seen by the public as anything other than sniping from the sidelines.
The centre of the debate is how we get through this difficult period. Lessons from history also teach us that clearing up this mess is crucial to the success of the Government, and that the bigger argument about turning our economy around and dealing with the problems we face will trump every complaint about an individual problem and each cut. After all, the public are yearning for a stable and secure economy—we have seen the opposite of that in recent years—and this Budget attempts to deliver it.
I strongly believe that the coalition must govern in the national interest. It must eliminate the structural deficit. I was surprised by something the shadow Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said yesterday. He said that Greece
“took far too long to do what was necessary”,
and
“Had they done it in February, when the problems first became apparent, some, although not all, of those problems might have been avoided.”—[Official Report, 23 June 2010; Vol. 512, c. 312.]
How he can hold that view and also hold the view that we should not deal with the deficit in this country is baffling.
We must eliminate the structural deficit and ensure that growth returns by supporting the enterprise package and the corporation tax cuts and, of course, by stopping the jobs tax, which was an important part of the Budget. We must solve some of the long-term problems we face such as on public sector pensions—I am delighted that John Hutton will be producing a report on reform of public sector pensions.
Many Members have spoken of the impact of the Budget on their constituencies. I know that in my constituency there will be more support for enterprise, lower corporate taxes on successful businesses, more business confidence, which will allow people to create jobs, and lower interest rates for businesses that want to expand.
It is a bold Budget. It is undoubtedly a difficult Budget, but it is the right step for the country, and I commend it to the House.
Vernon Coaker (Gedling) (Lab)
On a point of order, Mr Deputy Speaker. Last Thursday, I tabled a written question for named day answer on Monday of this week, to which the Department for Education’s response was that it would reply to me as soon as possible. I had asked it to name the schools that had applied for academy status, and I read in today’s edition of The Guardian that that list is to be published tomorrow, but I have as yet received no communication from any Minister. I wonder whether at this late stage you have received any request from a Minister to come to the House to explain what is going on in respect of naming the schools that applied for academy status.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the hon. Gentleman for notice of that point of order. I have received no such request, but I know that Ministers in successive Governments have worked late into the night and the list might be being typed out as I speak and then be delivered to him. I know that the relevant Minister will want to keep his word, and I am sure that the Government Whip on duty will make sure the message gets through.
Kwasi Kwarteng (Spelthorne) (Con)
I am very grateful to you for calling me to speak in the debate, Mr Deputy Speaker, and I feel privileged to follow my hon. Friends the Members for West Suffolk (Matthew Hancock) and for Bromsgrove (Sajid Javid), who outlined in their compelling speeches why the Budget is incredibly important. The issue that we have not really focused on enough is the context of the Budget. We all—even Opposition Members—accept that the deficit is too large and that at some point in this Parliament we have to deal with it. The big point of contention between the coalition Government and the Opposition is how soon we should grapple with the deficit.
We forget the fair hopes that we had in 1997 when the then Chancellor of the Exchequer produced his first Budget, entitled “Equipping Britain for our long-term future”. That was the message that he wanted to send. That financial statement and Budget report came out in July 1997, and it was in that report that he famously stated his golden rule:
“The golden rule means that over the economic cycle the Government will borrow only to finance public investment and not to fund current expenditure.”
So far so good. The second rule was that he would maintain stable public finances—a requirement for our long-term economic stability.
Toby Perkins
The hon. Gentleman will be aware that those rules were changed only in the face of huge, global economic crisis. His party supported the change when the economic crisis struck, so was it incorrect to do that?
Kwasi Kwarteng
The hon. Gentleman will remember that the second rule was that
“public debt as a proportion of national income will be held over the economic cycle at a stable and prudent level.”
The then Chancellor concluded the 1997 report by stating:
“These rules will ensure that borrowing will be kept under firm control.”
Everyone applauded him. He was talking about prudence; he was the Iron Chancellor and very much the hero of the hour. In the same report, he referred to the recession of the early 1990s. His conclusion was that the public sector borrowing requirement rose to a peak at 7% of GDP and he said:
“The Government regards it as important that no similar risks should be taken with fiscal policy again.”
That was the position of the Labour party in 1997, and in 2006 Labour was repeating the same mantra and the same pie in the sky ideas. It was saying that
“public sector net debt is projected to remain low and stable over the forecast period”.
In 2007, it said:
“The Budget 2007 projections for the public finances are broadly in line with the 2006 Pre Budget Report”,
and so on.
David Wright
Will the hon. Gentleman outline what spending he would have cut between 1997 and 2007?
Kwasi Kwarteng
I am merely stating the very prudent rules that the former Chancellor and Prime Minister outlined. All the rules that he set in place in 1997—[Interruption.] The hon. Gentleman asked a question and I want to answer it. All those rules were ripped apart. The PSBR figure of 7% of GDP, which the then Chancellor had thought was a scandal, went up to 12%. According to the very rules that he set, we have failed and been found wanting. It is in that context that my right hon. Friend the Chancellor of the Exchequer introduced his bold and comprehensive Budget on Monday. It was only because we had to do this that the Budget was introduced to this House. It was not part of any ideology or master plan; it was an act of dire necessity.
I thought that the most interesting contribution in the debate was that of my right hon. Friend the Business Secretary, who recalled with a lot of emotion and understanding the experience of 1976. It was exactly that experience, when another Labour Government had bankrupted the country and had to go to the International Monetary Fund, that he was so anxious to avoid. It is in that spirit that the Budget has been introduced to the House and that is why I am very happy to commend this Budget and to go through the Aye Lobby to vote for it on Monday.
Ms Angela Eagle (Wallasey) (Lab)
It is a pleasure to welcome you to the Chair for the first time, Mr Deputy Speaker. I would also like to add my personal welcome to the Economic Secretary to the Treasury; this is the first time that we have debated over the Dispatch Box since the election, although it is not the first time ever. I hope that she will accept my personal good wishes in the job that she is now doing.
I would also like to commend the maiden speeches that we have heard in the debate today. In particular, I thank the hon. Member for Staffordshire Moorlands (Karen Bradley) for her praise of her predecessor, Charlotte Atkins, who is a very long-standing friend of mine. The hon. Lady spoke passionately about her beliefs and her constituency, which I know is a very beautiful one.
In his maiden speech, the hon. Member for Hendon (Mr Offord) talked about another good friend of mine, his predecessor Andrew Dismore. Alas for the hon. Gentleman, today’s 12-minute limit on speeches meant that he could not even begin to compete with Andrew’s record for the longest speech in the House. However, I am sure that he will rev up and have a go at that.
Unfortunately, my hon. Friend the Member for Kingston upon Hull East (Karl Turner) is unavoidably absent from the wind-ups tonight. As the successor to Lord Prescott he has very big shoes to fill, but his maiden speech was witty and astute. He spoke about his constituency and his political credo, and I am sure that we can look forward to many more contributions from him.
The final maiden speech was made by the hon. Member for Camborne and Redruth (George Eustice), who has one of the smallest majorities in the House. He spoke about Trevithick, the railway pioneer; as he did so, I was thinking about the fact that whenever I return to my own constituency, I travel through Rainhill, where the famous and historic trials that were won by the Rocket took place—an event that brings back many happy memories as we travel to Liverpool Lime Street station.
We have heard some important speeches today, from all sides of the House. One of most intriguing was made by the hon. Member for Bermondsey and Old Southwark (Simon Hughes). I shall say more about it later, but he said some intriguing things about how he might wish to amend the Budget—particularly with respect to VAT—as it goes through the House. I certainly look forward to seeing the amendments that he may propose. I think that I shall look on them with a sympathetic eye if they do what we want, which is to make this Budget more progressive than it is at the moment.
Other speakers in the debate included my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr Clarke), and my hon. Friends the Members for Telford (David Wright), for Eltham (Clive Efford), for Southampton, Test (Dr Whitehead), for Liverpool, Wavertree (Luciana Berger), for Streatham (Mr Umunna), for Walsall South (Valerie Vaz) and for Chesterfield (Toby Perkins). They all made extremely important contributions.
We heard some passionate speeches from the Government Benches, and I agreed with very little of them. However, I can certainly thank the hon. Member for Stafford (Jeremy Lefroy), who was unique among Government Members in recognising that the Labour Government did some good things while in office. I thank him for his grace in accepting that, although I am not sure that it will do him in any good, or help his career.
The hon. Member for Bromsgrove (Sajid Javid) gave the game away when he revealed himself in the Chamber as a crusading small-state Conservative, and proud of it. He praised the Government’s ideological basis, something whose very existence many Government Members were frantically trying to deny.
There were other important contributions to the debate today, and the short speech by the hon. Member for Spelthorne (Kwasi Kwarteng) was by no means the least among them. He asked us to look at the context in which the Budget was held, and I want to spend a little time doing that now.
We have lived through a difficult time in the last two years. We have seen the deepest and most synchronised global recession in living memory, with world GDP falling for the first time since the second world war as a direct result of the global credit crunch. That credit crunch was precipitated by monumentally reckless and greedy behaviour in the banking sector worldwide, which made a few people spectacularly rich but also impoverished countless millions of its victims around the world. I thought that the hon. Member for Cities of London and Westminster (Mr Field) probably came the closest of all Government Members to being up-front about that in his extremely good speech.
The credit rating agencies, which are now so frequently quoted by Government Members with reverence as economic oracles, were particularly compromised by the triple A rating that they awarded to complex derivatives masquerading as assets when they were in fact debts, and they did so for lucrative fees. The credit crunch was exacerbated by the undoubted failure of politicians, policy makers, economists and regulators to understand and price risk appropriately in the complex and interdependent global market. That led to a degree of complacency and the misreading of international conditions that were shared by almost every economic commentator. Hindsight is a wonderful thing, and with the benefit of it we can learn many lessons to prevent those problems from recurring—I certainly hope that we do.
Meanwhile, fiscal deficits everywhere had to rise dramatically to cope with the crisis. Our tax revenues here in the UK were significantly impacted, while spending had to rise to deal with the costs of recession. The fiscal stimulus, which was necessary to stop the global recession turning into a worldwide depression, also had an effect on the deficit. That is the cause of our deficit problem, and it is certainly not unique to this country. The previous Government were right to take the action that we did to protect people’s bank deposits and to shore up the very foundations of our economic system. I am proud that we were able to rise to that challenge.
I have taken some time to outline the economic context, in agreement with the pleas of the hon. Member for Spelthorne, because in four days’ debate on this theatrically named “emergency Budget”, we have not yet heard any Government Member, from the Chancellor down, have the decency and the honesty to mention it at all. They wish the country to believe that, somehow, the considerable economic challenges that we now face were all caused by the previous Government’s irresponsibility and have nothing to do with the greed of reckless bankers and speculators. That is arrant nonsense, and they know it.
Mr Mark Field
Does the hon. Lady not recognise that huge global imbalances built up, and that mistakes by policy makers and politicians of all colours from across the world had their part to play, rather than the problem just being caused by, as she would put it, the greed and recklessness of bankers?
Ms Eagle
I agree, and during an earlier part of my speech I listed all those people as being among those who had things to apologise for, as the hon. Gentleman will see if he reads the record.
In the prelude to the Budget, other preposterous myths have been peddled, designed to justify an austerity programme so severe that it is positively, even gleefully, sadistic. I will just mention one of them in passing. The myth says, “It’s all much worse than we thought.” We have heard the Prime Minister, the Deputy Prime Minister and the Chancellor all singing that refrain in recent days. They had prepared the ground, they had the newspapers all going along with it, and they had briefed their Back Benchers, who are even now loyally parroting the line. How irritating for them, then, that the facts have failed to conform to their prearranged narrative, and how positively annoying that the Chancellor’s new forecasting quango—the pejoratively named Office for Budget Responsibility—should so comprehensively give the game away just before the main show. It quickly became clear that, far from all this being much worse than we thought, it was actually better:
“embarrassingly, the economy is just not playing along. Things just keep getting better.”
I was quoting Fraser Nelson—that well known socialist writer—from the Telegraph.
Ms Eagle
The hon. Gentleman has not been here all day, so I will not give way to him.
In the pre-Budget report, Sir Alan Budd was obliged to point out that my right hon. Friend the shadow Chancellor was being too pessimistic—those who know him are not always surprised by that—and that on almost every measure, the public finances are in better, not worse, shape than we expected at the time of the March Budget. Unemployment, Sir Alan revealed, would be 200,000 lower than expected, and tax revenues would be much stronger than forecast. Thus the borrowing forecast was £8.4 billion lower this year than predicted in March, and £22 billion lower by 2014-15.
Ms Eagle
No.
No amount—[Interruption.] Conservative Members have had all day to peddle their view of what is happening to the economy. I am now responding to that, and they have to sit and listen whether they like it or not.
No amount of Orwellian double-speak emanating from No. 10 or No. 11 can cover up the basic fact that things are not worse as far as the deficit is concerned, but better. Shorn of the prearranged excuse for ratcheting up the pain levels in his austerity Budget, the Chancellor has been exposed as a small-state ideologue and a true child of the 1980s. He has imposed the most brutal cuts in public spending that the country has ever experienced in peacetime for reasons of dogmatic delusion, not economic necessity. The Tories are doing this not because they have to, but because they want to. They have made a political choice, not an economic choice, and we will see the results of their return to their Thatcherite roots.
There is no electoral mandate for the economically dubious dance with dogma that is at the Budget’s intellectual core. The majority of the electorate voted for parties that did not want to make immediate cuts at a time when the recovery was not locked in and our major EU trading partners were seeing their upturns falter. Those who voted Lib Dem did not expect their chosen party to experience a wholesale conversion to Tory fiscal hawkery after a quick cup of tea with the Governor of the Bank of England. They feel betrayed—and they have been.
Make no mistake: this is a very Tory Budget. It contains the largest spending cuts in our peacetime history, focused on the neediest areas of the country. It brings about a huge rise in the most regressive tax available, which will hit the poorest hardest. The decision to attempt to eliminate an 8% structural deficit in five years, and the choice of a ratio of 77% spending cuts to 23% tax rises, are more brutal than Mrs Thatcher ever dreamed of. The Chancellor has paraded Canada and Sweden as examples to follow, but as Will Hutton recently pointed out, the plans for fiscal consolidation in the Budget are three times tougher than those achieved in Sweden and twice as tough as the Canadian example. Sweden took 15 years to achieve 20% cuts in some departmental spending, but this Tory-led Government want to cut 25% in five years.
The lesson from Japan is that it is positively dangerous to attempt radical fiscal consolidation when the private sector is deleveraging, so why are the Government prepared to risk making the same mistake? Because of its error, Japan experienced a lost decade of growth and achieved the opposite of its intentions: not a shrinking deficit, but an increasing one. The Budget contains no strategy for growth beyond the usual tired old Tory refrain that the private sector will fill the gap. That is not a growth strategy, but a statement of blind economic faith that might or might not be fulfilled.
It has taken a mere two days for the pitifully thin Lib Dem veneer attached to the Budget to flake off completely. The Lib Dem leader promised us “progressive cuts”, but the devastating analysis of the IFS has put paid to that absurd and oxymoronic phrase. When we take out Labour’s remaining Budget changes, this Budget is deeply regressive, and it gets more regressive as the years go on and the huge cuts in welfare support and tax credits bite. It is now clear what the Deputy Prime Minister means by progressive cuts: he will cut this year, cut more next year, and cut even more the year after that. His phrase is true, when it is taken literally.
A Budget that targets £6 billion of cuts on the most vulnerable, including pensioners, by delinking benefit uprating from the retail prices index, yet hits banks with only a £2 billion levy that is being given back through corporation tax, is not sharing the pain. A huge hike in VAT that hits the poorest hardest is not sharing the pain. A deliberate decision to destroy large swathes of social support, and cutting support for the jobless and home owners when they are most under pressure, is not sharing the pain. The choices in the Budget make it abundantly clear that we are not all in this together.
Today’s Financial Times carries an article that states:
“Ministers warn that they may have to tear up some untargeted welfare promises—such as the £4bn spent on subsidising bus travel, winter fuel and television licences for older people…One minister said that such a move was ‘almost certain’”.
The hon. Member for Bermondsey and Old Southwark said today that he would not allow that to happen. Well, if he wants to stop that betrayal, he has to table those amendments and carry his Lib Dem colleagues through the Lobby with us to stop this Conservative-led Budget doing even more damage. We look forward to seeing him in there with us.
The Economic Secretary to the Treasury (Justine Greening)
Mr Deputy Speaker, may I start by saying what a pleasure it is to give my first speech as a Minister with you in the Chair? I thank the hon. Member for Wallasey (Ms Eagle) for her kind words. I very much enjoyed debating with her when I was the shadow Minister and I look forward to continuing to do so in government.
We have had a good debate this afternoon and evening. It was broadly meant to be about the Budget in relation to the environment, but we have not heard a lot about that, apart from in the thoughtful speech made by the hon. Member for Southampton, Test (Dr Whitehead). The hon. Member for Eltham (Clive Efford) said that there is little on the environment in the Budget, but given that the Labour Government had stalled on reducing emissions and wanted to go ahead with polluting measures such as a third runway at Heathrow, I am not surprised that the shadow Secretary of State for Energy and Climate Change failed to mention the environment in the half hour that he was on his feet.
I wanted to start by reflecting on the many speeches—23 or 24, by my count—made today, in particular some excellent maiden speeches. I was delighted to hear from my hon. Friend the new Member for Staffordshire Moorlands (Karen Bradley), especially when she said that she is an accountant. Speaking as an accountant myself, I think that this House needs more of us, and I dare say the Opposition could do with a few more as well, so that they can start adding up properly.
We also heard a great maiden speech from my hon. Friend the new Member for Hendon (Mr Offord). I remember his predecessor—indeed, I think I was present in the Chamber during that very long speech he made. If it is the one I remember, it was about animal welfare and lasted more than two and a half hours. On that occasion, the hon. Gentleman said how sad he was that his dog had died, and I intervened at one point to ask whether the dog had died of boredom. He said that it had not.
The new hon. Member for Kingston upon Hull East (Karl Turner), who is no longer in his seat, made a really good maiden speech. I hope he does not go around hitting people like his predecessor did, but his predecessor was certainly a colourful character, who brought his own personality to this place. We will see whether the new Member for the constituency can match him.
I thought the maiden speech of my hon. Friend the Member for Camborne and Redruth (George Eustice) was excellent, especially when he talked about how it is often individuals—their drive, initiative and creativity in working to tackle climate change and developing new technologies—who make all the difference. We should never forget—we on this side of the House certainly do not—that it is individuals who make the difference, not always Government alone. The latter theory has been tested to destruction by the Labour party.
We have heard a number of other speeches this afternoon, not least that of the shadow Secretary of State for Energy and Climate Change, who seemingly failed to mention anything about the environment. I have to say that the public watching the debate and hearing all the contributions from Labour Members would not have thought that they had just been through an election that they lost. It is as though they have learned nothing. They have not even paused to reflect on the message that they have just been given by the British people. They have handed over to this coalition Government an absolute basket-case of an economy, and what we have heard from Labour Members today is what we heard when we were in opposition: they always know better. They knew better in government and now they know better in opposition. They know better than the British Chambers of Commerce, which said
“The Chancellor’s message that Britain is open for business will be welcomed by companies the length and breadth of the country, and across the globe”.
They know better than the CBI, the Federation of Small Businesses, the Governor of the Bank of England, the G20 and the EU, which says that countries such as ours need to get on faster with reducing their fiscal deficit.
Clive Efford
Would the hon. Lady care to comment on a quote from the right hon. Member for Wokingham (Mr Redwood), who urged people hit by budget cuts to wear more clothes, turn down the thermostat and eat more vegetables? Is not that just about the most damning indictment of the Budget that we could have, from one of her own colleagues?
Justine Greening
The hon. Gentleman continues in the vein that the Opposition have adopted today, which is to try to score cheap political points. The message from the British public at the last election was that they want a constructive debate about how to solve the deep financial crisis that our country faces. We have had nothing from the Opposition. No alternative is being presented to all of the measures that were raised as concerns by Opposition Members. I presume that we can now start ticking them off as measures that the Opposition would say a Labour Government would take. We will rapidly reach the conclusion that there are no measures that the Opposition would take to solve this deficit. After all, they were happy to cancel their spending review, and now they are happy to play no role in having a constructive debate with the public and the Government about how we dig ourselves out of this mess. It is simply not true to say that the Opposition had no role in it. We were running a deficit long before the global crisis hit. That is why we went into the recession first, that is why we came out of it later, and that is why our recession was deeper. We have now had the longest and deepest recession since the second world war under the Labour Government. We need take no lectures from them.
Matthew Hancock
Does my hon. Friend agree that the Labour party’s views tend to be based on misrepresentations? For instance, I think that the shadow Minister said that according to the Office for Budget Responsibility on almost every measure things were better, but on the crucial measure of the size of the structural deficit, which is the measure that will not come back with economic growth, things are worse, and that justifies the position that the Government have taken.
Justine Greening
My hon. Friend is absolutely right. Let us just talk about the Office for Budget Responsibility. I still cannot quite work out whether the Opposition support it. I am happy to take an intervention from the shadow Secretary of State to clarify that. We are none the wiser.
On the point about changing forecasts, and the OBR forecast pre-Budget and its forecast on the Budget, let me be clear about what it said about comparing those two forecasts. If the Opposition have any shred of credibility, I hope that they will pay attention to this. At the bottom of page 94 of the Red Book it says it is
“misleading to interpret the difference between the pre-Budget and Budget forecasts as the economic impact of the Budget measures.”
The Opposition want it all ways. They want to quote some figures and, as my hon. Friend says, conveniently forget the key figure, which showed that the structural deficit was worse. They want partially to welcome it warmly, but to ignore what it says about the impact of comparing false statistics. They do the debate, which is important for people throughout the country as we go through an incredibly difficult process, a real disservice, because the British public need them to play a role, which should be for them as the Opposition to come up with some constructive comments. It would have been better if they could have come up with some kind of an alternative, but we have had none today.
We need take no lectures from the Opposition about fairness. This is the party that did a pensions raid. This is the party that came up with the 10p tax fiasco. This is the party that widened the gap between rich and poor. This is the party that told us we had an end to boom and bust. It is no wonder the savings ratio in Britain went down. If people had listened to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown)—who knows where he is now?—they would never have thought that they needed to save for a rainy day. The British people get it, because they have started paying down their debts, but the Opposition parties have totally missed the point. They seem to be living in a post-election bubble, and they have not taken a moment even to reflect on what has happened or on the verdict of the British voters, let alone to reach the stage at which they might apologise for the mess that they handed over to the coalition Government. The two parties in government have taken the decision that they need to work together for the British public’s interest in order to find a resolution to our crisis, and to get ourselves out of this financial mess.
Toby Perkins
The hon. Lady has referred to the election result a couple of times, but we remember the election result in 1997 after a long period of Conservative Government, when that party lost so badly that it was out of power for 13 years. If people were so dissatisfied with the Labour Government, how come the Conservatives could not even secure a majority?
Justine Greening
The hon. Gentleman, if he is not careful, might be projecting the political fate of his own party. With this Budget, we want to ensure above all else that we start addressing our country’s dire financial situation. By the end of this Parliament, we will have started to return to a sustainable set of public finances which puts us in a position to make sure that our debt is more affordable. He might think it acceptable that the average taxpayer pays almost £1,400 in interest to service the debt that his party racked up, but I do not, and over a period of years we want to get into a position where our debt is affordable once again. The process will not be quick; it will take us time, because of the gravity of the situation.
Let us make no mistake: we have no time to wait. Before the election, we had only to look across the water at some of our European partners to see what was happening to their countries. I shall draw an analogy, because in Spain the equivalent of the bank manager—the markets—said that they simply were not willing to lend to that country at the same rate of interest as previously. That debt now costs Spain’s taxpayers millions of pounds more in interest than it did when their credit rating was better. Greece has gone one step further and, effectively, has the bailiffs knocking on the door.
Our Budget was all about ensuring that we do not reach the position where the bank manager says that he is going to raise interest rates on us. We as a nation cannot afford it, and British households cannot afford it. We definitely do not want to reach the stage where we have the bailiffs knocking on the door, which is what has effectively happened in Greece. I am concerned, however, because in spite of everything that has happened in our country, including the election and the state of our public finances, we have still not heard a meaningful debate from the Opposition.
Dr Whitehead
As the subject of today’s debate is supposed to be energy and climate change, I wonder whether the hon. Lady has anything at all to say about the extent to which the Budget might facilitate a recovery towards a low-carbon economy, or whether, as I suspect the case may be, she does not.
Justine Greening
I am pleased that the hon. Gentleman has given me the chance to finish on that subject, because I wanted to take the time to talk about the environment in the context of the Budget.
We have said that we are determined to make progress on setting up a green investment bank; we have talked about ensuring that the green deal works, because it is critical that our housing stock be made more environmentally friendly; and, of course, the final piece of the Budget was about ensuring that we can move to a low-carbon economy that does not just put our energy strategy on a more sustainable footing, but includes the jobs that can be part of the green enterprise economy that we want to set up.
The hon. Gentleman was right to raise the matter, because too often the issue of climate change and the environment has been exclusive—the idea being, “If you can afford to save the planet, you can do it.” We want to make sure that everybody in our country is able to be part of tackling climate change. That is why the green deal and the green investment bank are so important. The supply side of technologies is critical in ensuring that these markets can get the finance they need. I can absolutely assure the hon. Gentleman—