House of Commons

Wednesday 23rd March 2011 Commons Chamber

Wednesday 23 March 2011

The House met at half-past Eleven o’clock

Prayers

Wednesday 23rd March 2011 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Wednesday 23rd March 2011 Commons Chamber

The Secretary of State was asked—

[Guto Bebb (Aberconwy) (Con)]

1. What recent progress has been made in discussions with the Northern Ireland Executive and the Chancellor of the Exchequer on changes to corporation tax in Northern Ireland.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

I have had discussions with my right hon. Friend the Chancellor on this issue yesterday and today. A Government consultation paper on rebalancing the Northern Ireland economy will be published tomorrow. The paper will include a discussion on the potential for transferring the power to reduce corporation tax to the Northern Ireland Executive.

[Guto Bebb]

To what extent has the Azores judgment had a bearing on the Government’s ability to vary the rate of corporation tax in Northern Ireland and other regional authorities?

[Mr Paterson]

I thank my hon. Friend for that question—given that I converted him to the Conservative party in my kitchen. The Azores judgment will conform to our plans, which will be laid out in the consultation tomorrow. We agree that the powers should be devolved to an Assembly that has entire control over its own area and that there should be no countervailing intervention from central Government.

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the Secretary of State for his interest in the subject. Will the Government now consider the devolution of further tax-raising or tax-varying powers to the Northern Ireland Executive? Does he agree that the more economic levers the Northern Ireland Executive and the Northern Ireland community have available to them, the more the economy will be helped to develop in a better way?

[Mr Paterson]

I thank the hon. Lady for her question. We have no plans to devolve further powers, and I would stress to her and her colleagues that we are talking about a consultation. It is not in the bag. We have lengthy discussions with other colleagues and the Treasury, and it would help if she could galvanise a campaign across Northern Ireland to work with us.

[Mr Shaun Woodward (St Helens South and Whiston) (Lab)]

It is good that it is not yet in the bag, because the Secretary of State will know that since 2000, 80 countries have cut corporation tax rates. I am sure that, among those, he has studied Puerto Rico, a territory of the United States which has an effective corporation tax rate for manufacturing of 2%. What assessment has he made of how that has helped tackle unemployment in that United States territory, and how it has helped those countries generally to recover from global recession?

[Mr Paterson]

I am most grateful to the shadow Secretary of State for his question, but Puerto Rico is a bizarre comparison. I spent three and a half years travelling to Northern Ireland every week. Week after week I went to businesses, and week after week they said that a reduction in corporation tax would most help them.

[Mr Woodward]

It is clear that the Secretary of State travelled week after week, but it is also clear that he learnt nothing. Unemployment in Puerto Rico went up again last month, to 16%. The economy remains in recession for the fourth year. We need Northern Ireland to get out of recession, not to stay in it, so let us be clear—and a simple yes or no will do. Given the vital importance of infrastructure, education and skills to attracting and retaining business, will he guarantee that any consequential changes to the annual block grant and from tax revenue will not leave the Executive with an annual net loss? Yes or no?

[Mr Paterson]

We need no lectures on the economy from the right hon. Gentleman. He was in the bunker with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and he left us with a bill of £280,000 a minute in borrowing and £120 million a day in interest costs. We are absolutely clear that, following the example of the Republic of Ireland, we will grow the revenue.

[Paul Uppal (Wolverhampton South West) (Con)]

2. What recent assessment he has made of the state of the economy in Northern Ireland.

[David Rutley (Macclesfield) (Con)]

8. What recent assessment he has made of the state of the economy in Northern Ireland.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

Northern Ireland Executive Ministers and I agree that the economy in Northern Ireland needs to be rebalanced. The Northern Ireland economy is too dependent on the public sector, for all the reasons that the House will understand. The consultation paper that we are publishing tomorrow and our ongoing work with Executive and Treasury Ministers will play a significant part in boosting the private sector and attracting investment to Northern Ireland.

[Paul Uppal]

In the last quarter for which figures are available, almost 22% of 16 to 24-year-olds were not involved in education, employment or training, at a cost of more than £250 million. What measures can be taken to rectify that?

[Mr Paterson]

The detail of training and employment policy is now in the hands of devolved Ministers, but my hon. Friend has touched on a common theme. We all have an interest in reviving the private sector in Northern Ireland and seeing those young people put into worthwhile employment.

[David Rutley]

Does my right hon. Friend agree that Northern Ireland benefits from being part of the United Kingdom economy, because it is this Government and this Chancellor who will get the budget deficit back under control and rebalance the economy in favour of sustainable economic growth, as highlighted recently in the OECD report?

[Mr Paterson]

My hon. Friend is absolutely right to remind the House of that. We have a worse deficit than Ireland or Greece, yet our interest rates are considerably lower. That is thanks to the robust measures that the coalition Government have taken to enable us to recover from the wreckage left behind by the previous Government.

[Mr Nigel Dodds (Belfast North) (DUP)]

Is the Secretary of State aware that the very high price of petrol and diesel in Northern Ireland—the highest in the United Kingdom—is having a severe impact on the living standards of families and the viability of businesses? In his discussions with the Chancellor yesterday and today, has he raised support for a fuel duty stabiliser and other measures to tackle this crippling problem, specifically in relation to Northern Ireland?

[Mr Paterson]

The right hon. Gentleman is absolutely correct to raise the issue of fuel costs in Northern Ireland. He will have to be patient and wait to hear what the Chancellor has to say in a few minutes, but I can tell him that the issue has been raised at the highest level.

[Mr Dodds]

I thank the Secretary of State for that answer. An issue that he can respond on is his talk of an enterprise zone for Northern Ireland. Will he elaborate on that and tell the House what specific measures he has in mind to bring about real change and boost competitiveness for Northern Ireland businesses? Has he looked at the specific issue of air passenger duty, which is having a detrimental effect on Northern Ireland compared with the Irish Republic?

[Mr Paterson]

I have been using the expression “enterprise zone” for three and a half years as a cover for looking at ways of reviving the private sector in Northern Ireland. As the right hon. Gentleman knows, I am a convinced evangelist for the proposal to devolve corporation tax, to allow it to be lowered. The paper published tomorrow will also contain an amalgam of ideas from the Executive. On the issue of air passenger duty, he will also have to be a little more patient and wait for the Budget statement.

[Stephen Pound (Ealing North) (Lab)]

On the subject of robust policies, we have now had nine months since the emergency Budget, yet the 65% employment rate in Northern Ireland is the lowest in the UK and unemployment is rising to 8%. May I ask the evangelical Secretary of State how much further pain families in Northern Ireland must be expected to bear?

[Mr Paterson]

The hon. Gentleman should remember the Budgets that he voted for. I remind him that we are borrowing £280,000 a minute, and that we are spending £120 million a day on debt interest, compared with £95 million on education. That is where the money is going: we are paying off the deficit that he left behind.

[Naomi Long (Belfast East) (Alliance)]

3. What assessment he has made of the likely effects of changes in air passenger duty on business travel between Northern Ireland and London.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

I have had meetings with the Northern Ireland Minister of Enterprise, Trade and Investment and with my hon. Friend the Economic Secretary to the Treasury to discuss air passenger duty. My Treasury colleagues fully understand the issues involved. The rates that took effect last November were, of course, set and legislated for by the previous Government.

[Naomi Long]

I thank the Minister for his answer. He will be aware that, in addition to air passenger duty, Heathrow and Gatwick intend to levy passenger landing charges for regional flights, which will compound the problem. Will he confirm that this matter is at the top of his agenda, so that we can ensure that Northern Ireland businesses have access to the capital?

[Mr Swire]

Indeed; these things have been discussed at ministerial level. I am glad that my right hon. Friend the Chief Secretary to the Treasury is here to listen to the hon. Lady’s comments. We take this matter very seriously. A lot of the issues to do with Gatwick and Heathrow are commercial matters that are more properly dealt with by BAA.[Official Report, 4 April 2011, Vol. 526, c. 12MC.]

[Mr Laurence Robertson (Tewkesbury) (Con)]

Will the Minister continue to speak to the Chancellor of the Exchequer about the possible dangers that a per plane duty could pose for businesses in Northern Ireland, given the geographical situation of the Province?

[Mr Swire]

My hon. Friend raises a good point. It is worth pointing out that 75,000 fewer people—business men and tourists—went to the island of Ireland every week last summer. It is important that we keep up the amount of people who come here. I think that his question might be better directed to Ministers after the Budget, which will follow in a few minutes, but I am sure that his comments will have been heard.

[Glyn Davies (Montgomeryshire) (Con)]

4. What recent discussions he has had with ministerial colleagues on the registration of donations to political parties active in Northern Ireland.

[Graham Evans (Weaver Vale) (Con)]

10. What recent discussions he has had with ministerial colleagues on the registration of donations to political parties active in Northern Ireland.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

An order to extend the current confidentiality arrangements for political donations in Northern Ireland was debated and approved by both Houses last month. [Interruption.] This order came into effect only from 1 March, so I have not had discussions on this issue with ministerial colleagues since then. [Interruption.]

[Mr Speaker]

Order. I understand that the House is eagerly awaiting subsequent business, but there are far too many noisy private conversations taking place, which is very discourteous to the people of Northern Ireland.

[Glyn Davies]

While discussing donations to political parties in Northern Ireland in the Northern Ireland Affairs Committee, the Minister made reference to “details of the recipient”, “the amount received” and when donations were made. Those were the reference points, so can the Minister tell us what progress has been made?

[Mr Swire]

Indeed, I can. I remain firmly of that view. We are not in the position that we would like, but I am advised that there are serious doubts about whether the issues that I mentioned can be addressed under existing legislation, which is very tightly drafted. I hope to make provision to bring more transparency to existing arrangements when a suitable legislative vehicle can be found.

[Graham Evans]

Will my hon. Friend let us know when legislation will be brought forward to make sure that donations and loans made to political parties in Northern Ireland during the prescribed period are not disclosed when the prescribed period expires?

[Mr Swire]

My hon. Friend makes an important point, which was behind the introduction of the statutory instrument. I hope that this will happen at the earliest opportunity. Primary legislation will be required: we have extended the order for a further two years, so it allows us time to find a suitable legislative vehicle.

[Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)]

One of the problems with regulating donations to political parties in Northern Ireland is that a loophole enables some parties to bring funds in through the Republic of Ireland—without requiring the kind of registration that applies to funds donated within the United Kingdom. Will the Government move to close this loophole so that there is a level playing field for the funding of political parties in Northern Ireland?

[Mr Swire]

The right hon. Gentleman will be aware that any donation over £7,500 has to be declared to the Electoral Commission, as it does in the rest of the UK, so that is covered. When we move towards a Bill on the whole issue of elections in Northern Ireland, we can certainly look at that issue, along with other anomalies that we believe exist.

[Steve Rotheram (Liverpool, Walton) (Lab)]

The Ulster Conservative and Unionist New Force was the snappy title given to the alliance adopted by the Conservative party and the Ulster Unionists in last year’s general election. Will the Secretary of State share with the House how the new force in UK politics is doing these days?

[Mr Swire]

We remain committed to bringing national politics to Northern Ireland. I am not sure that the hon. Gentleman’s question is within the scope of the subject of registration of political donations, but I can assure him that many people in Northern Ireland and in the rest of the United Kingdom wish to support a Conservative party, which is why we are in government and he is not.

[Mark Durkan (Foyle) (SDLP)]

5. What recent discussions he has had with the Chancellor of the Exchequer on the aggregates levy credit scheme in Northern Ireland.

[The Minister of State, Northern Ireland Office (Mr Hugo Swire)]

I have spoken with my hon. Friend the Economic Secretary on this matter. The Government remain fully committed to reinstating the aggregates levy credit scheme in Northern Ireland. The Treasury is in regular contact with the devolved Administration to co-ordinate the provision of evidence to the European Commission to support a new scheme.

[Mark Durkan]

I thank the Minister for that reply. He will be aware that the withdrawal of the scheme is having a severe impact on a hard-pressed sector in Northern Ireland. It is also having an impact on the public purse in its effect on capital expenditure. As well as talking to the Treasury, will the Minister consider together with the European Commission whether a recasting of the overall agricultural levy scheme could help to get Europe round its undue hang-ups?

[Mr Swire]

The hon. Gentleman signed the early-day motion on this matter tabled by the leader of his party, the hon. Member for South Down (Ms Ritchie), who is in her place. My right hon. Friend the Secretary of State has twice met Gordon Best, the director of the Quarry Products Association, and we are seized of the importance of this industry to Northern Ireland and of the unfairness with the Republic. All I would say to the hon. Gentleman is that the Treasury is continuing its negotiations with the Commission and that the proper place for suggesting ideas is through the Treasury to the Commission. The Government remain committed to addressing this very serious—

[Mr Speaker]

I am grateful to the Minister for that answer.

[Jim Shannon (Strangford) (DUP)]

I represent an area that contains seven quarries which employ more than 100 people and generate a multi-million industry that exports to all parts of the globe. Will the Minister confirm that he will work industriously with the Northern Ireland Executive and, indeed, the Treasury to ensure that the exemption for the quarries continues in the near future?

[Mr Swire]

It is quite handy having the Chief Secretary to the Treasury here to listen to Northern Ireland questions. We should try to arrange for it to happen more often.

The Government remain very disappointed by the suspension of the aggregates levy credit scheme, but, although disappointing, it is unavoidable. I hear what the hon. Gentleman says about his constituents in Strangford, but this does not affect only Strangford; as I have said, the industry is important throughout Northern Ireland. We are in a difficult position, but I can reassure the hon. Gentleman that we are working closely with Treasury Ministers, as indeed are the Executive in Northern Ireland. The Finance Minister himself discussed the matter recently with the Economic Secretary to the Treasury.

[Mr William Bain (Glasgow North East) (Lab)]

6. What recent steps the Government has taken to increase economic competitiveness in Northern Ireland.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

The Government are committed to working with the Northern Ireland Executive to help boost private sector growth and investment in Northern Ireland. The consultation proposals for rebalancing the economy that the Government will publish tomorrow will send a powerful message to overseas investors. They have the potential to make Northern Ireland a beacon for foreign investment.

[Mr Bain]

Does the Secretary of State recognise that one of the most competitive parts of the Northern Ireland economy is the renewable energy sector? Will he convey to the Chancellor the message that the establishment of a strong green investment bank with its own borrowing powers during the current Parliament is essential to drive the green economy in Northern Ireland?

[Mr Paterson]

I thank the hon. Gentleman for that constructive question. He will have been pleased to note the significant investment in Harland and Wolff’s wind apparatus by DONG Energy the other day—that is very much a theme of the coalition Government—but if he wants to hear further announcements, he will have to restrain himself and wait for the Budget statement which will be delivered in a few minutes’ time.

[Julian Smith (Skipton and Ripon) (Con)]

Northern Ireland, like North Yorkshire, is powered by small business. What message does the Secretary of State think today’s sizzling Budget for growth will send to risk-takers in Northern Ireland and beyond?

[Mr Paterson]

We have the Ulster fry, with which we can celebrate in numerous splendid establishments in Northern Ireland. I think the message is that we have stabilised the economy. We have moved out of the danger zone that we used to inhabit after inheriting the mess from the last Government, and today we can celebrate moving forward with a constructive Budget and specific measures to help small businesses in Northern Ireland.

[Sammy Wilson (East Antrim) (DUP)]

I hope that the Budget sizzles but does not burn the economy.

Does the Secretary of State believe that a corporation tax change for Northern Ireland which also imposes a huge financial burden on public expenditure is likely to promote the competitiveness to which he has referred? Will he ensure that if corporation tax is devolved, it is devolved at a fair rate and in a way that does not make it—

[Mr Speaker]

Order. I should be grateful for a reply from the Secretary of State.

[Mr Paterson]

The hon. Member for East Antrim (Sammy Wilson) and I discussed this matter at length at Hillsborough the other night. We talked until after midnight. He knows that we are proposing a consultation. If the power is then devolved, it will be up to him and his colleagues to decide the manner in which that is done. [Interruption.] He also knows—if he looks south of the border—that the reduction in corporation tax there was recently described as a “cornerstone” of the success of the rebuilding of manufacturing in the Republic of Ireland.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

Can the Secretary of State give us any advice on steps that the Northern Ireland economy might take to become more productive and efficient? [Interruption.] I am thinking especially of research and development, and in particular of European framework programme 7 for R and D funding.

[Mr Speaker]

Order. I appeal to the House to come to order. It is very difficult for Ministers even to hear the questions that they are being asked.

[Mr Paterson]

The hon. Gentleman will have to wait until tomorrow to see the details in the consultation paper, but I can tell him that we have taken up a range of measures proposed by the Executive. Let me also draw his attention to the national policy that we have imposed, which involves a huge range of measures to revive science and research in this country.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

7. When he expects plans to establish an enterprise zone for Northern Ireland to be announced.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

My right hon. Friend the Chancellor of the Exchequer will unveil the Government’s plans for enterprise zones later today in the Budget. Separately, tomorrow we will publish a consultation paper on rebalancing the Northern Ireland economy and making Northern Ireland an even more attractive place to do business.

[Luciana Berger]

I thank the Secretary of State for that reply. A recent report by the Work Foundation found that 80% of the jobs created by enterprise zones are a result of relocation, and therefore are not new jobs. How will he ensure that the enterprise zones in Northern Ireland will be different?

[Mr Paterson]

The hon. Lady probably does not know that I have been using the phrase “enterprise zone” as a cover-all term for a whole range of measures that would revive the private sector in Northern Ireland. I am sure she agrees that it is unsustainable for—according to one report—77.6% of the gross domestic product of the Northern Ireland economy to come from public spending. Tomorrow, we will publish a paper blending our ideas with those of the Executive on how we will rebalance the Northern Ireland economy.

[David Simpson (Upper Bann) (DUP)]

Does the Secretary of State agree that an enterprise zone across the whole of Northern Ireland is one thing, but if it is interpreted as it was in the 1980s, that will cause major displacements throughout the Province?

[Mr Paterson]

I repeat again what I just said: I have used the phrase “enterprise zone” over the past three and a half years as a cover-all term for referring to investing in a whole range of measures that will help revive the private sector. I have visited the hon. Gentleman’s constituency, and he agrees with me that we must rebalance the economy. The Chancellor will announce the detail of specific measures on enterprise zones in a few minutes, and I hope they will be taken up by the Executive, who will have responsibility in Northern Ireland.

[Andrew Stephenson (Pendle) (Con)]

9. What recent assessment he has made of the level of threat to security in Northern Ireland posed by residual terrorist groups; and if he will make a statement.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

The threat level in Northern Ireland remains at severe. This Government continue to support the Police Service of Northern Ireland in countering the small but dangerous groups who regularly endanger the lives of police officers and the general public. That is demonstrated by the recent exceptional provision of an additional £200 million for the PSNI over the next four years to combat the threat.

[Andrew Stephenson]

I am sure Members of all parties will join me in condemning the small number of dissidents who continue to use violence. Will my right hon. Friend reiterate how important it is for the public to co-operate with the PSNI by passing on any information that could lead to taking terrorists off our streets?

[Mr Paterson]

My hon. Friend is absolutely right to draw attention to the role that the public can play. The PSNI now has broad support across the community, and as Robert Peel said, the police are citizens in uniform. If the Antrim road bomb had gone off, members of the public would have been maimed by a device put on a bicycle.

[Lady Hermon (North Down) (Ind)]

I thank Members for their silence.

Given that during the troubles terrorist organisations murdered 102 members of the Royal Ulster Constabulary reserve, and that the Secretary of State could not attend a thanksgiving service for the reserve at St Anne’s cathedral on Sunday, will he please take this opportunity to put on record his appreciation of the outstanding courage and enormous sacrifice of the RUC reserve?

[Mr Paterson]

I wholeheartedly endorse the hon. Lady’s comments. Unfortunately, the Minister of State and I had long-standing commitments that we could not break, but we were ably represented by my hon. Friend the Member for Bournemouth West (Conor Burns), who stood in for us, and who will have visited several people there and expressed the same opinions we would have expressed had we been in his place.

[Patrick Mercer (Newark) (Con)]

11. What assessment he has made of trends in the level of dissident activity in Northern Ireland.

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

Terrorists remain active and the threat level remains at severe.

[Patrick Mercer]

Will the Secretary of State join me in congratulating the Garda on the outstanding co-operation over the past few weeks, particularly over the arrest of several dissidents just south of the border?

[Mr Paterson]

I am very grateful to my hon. Friend for his continued interest in Northern Ireland, and we value his experience. I wholeheartedly wish to place on the record our tribute to the Garda for the work that they have done. We have an unprecedented level of co-operation with them: I have met Martin Callinan, the new commissioner; I met the Taoiseach in Washington last week; and I will be visiting Dublin soon to follow up my recent discussions with the new Tanaiste and Justice Minister. We are indebted to the work that the Garda have done and by working with them we will bear down on these unrepresentative dangerous terrorists.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The dissident threat level remains high. Yesterday, the Secretary of State announced the end of the 50:50 discrimination rule in recruitment to the police. Will he join us next week in ensuring that the 10 years of discrimination against young Protestants is completely at an end, and in ensuring that young Protestants and young Catholics can join that police service to combat dissident threat levels and ensure a return to normality in Northern Ireland?

[Mr Paterson]

I am grateful to the hon. Gentleman for his question. We are happy that the Police Service of Northern Ireland now represents the community and offers a career path that attracts people from all across it. The issue is now in devolved hands, which is where it should be.

The Prime Minister was asked—

[John Woodcock (Barrow and Furness) (Lab/ Co-op)]

Q1. If he will list his official engagements for Wednesday 23 March.

[The Prime Minister (Mr David Cameron)]

I am sure that the whole House will wish to join me in paying tribute to Private Daniel Prior, from 2nd Battalion the Parachute Regiment, who died on Friday at Queen Elizabeth hospital in Birmingham having been wounded in Afghanistan on Wednesday. Tragically, Private Prior had just become a father and our deepest condolences should be with his family and friends, especially his wife and his newborn son. We must make sure that he grows up in a country where everyone honours the memory of his father and what all our armed forces stand for.

This morning, I had meetings with ministerial colleagues and others, and in addition to my duties in the House, I shall have further such meetings later today.

[John Woodcock]

I thank the Prime Minister for that answer and associate myself, and all on the Opposition side of the House, with his moving tribute to Private Daniel Prior.

The Prime Minister has taken the right decisions to extend the life of the Nimrods and HMS Cumberland so that our armed forces remain equipped to protect in this conflict. He knows the uncertainty we now face, so will he, in due course, extend that rethink of our defence capabilities?

[The Prime Minister]

Obviously we will look very closely at all the lessons we should learn from what we are engaged in: diplomatically; politically; and in terms of both foreign policy and military equipment. What I would say, though, is that the whole predication of the strategic defence and security review was that we should be able to deploy at speed anywhere in the world and have very flexible armed forces, with particular emphasis on transport and on things such as special forces. We think that we did anticipate the sorts of things we are doing now, but if there are further lessons to learn, of course we should learn them.

[Jo Swinson (East Dunbartonshire) (LD)]

Q2. Our hearts go out to the people of Japan as we watch their horror unfold and see warnings today about heightened radiation in Tokyo’s water supply. It is not just earthquakes and tsunamis that can threaten the cooling systems of nuclear reactors, so does the Prime Minister agree that what has happened at Fukushima will have consequences for the new nuclear power stations proposed for the UK?

[The Prime Minister]

I am sure that the whole House will want to join the hon. Lady in sending our condolences to people in Japan and to express our admiration for their incredible bravery and resilience in dealing with this immense crisis. Of course we must learn any lessons that need to be learned about nuclear power, which is why the head of the nuclear safety inspectorate is looking at this issue. As I have said before, the power stations we have in Britain are of a different type from those in Japan. We are not planning to build any like those, and we are not in an earthquake zone or a zone subject to tsunamis, but of course we have always got to test against all eventualities. I am sure that there is further testing we can do on nuclear power.

Japan is doing a good job in dealing with this problem and the signs from the nuclear station are a little better than they were a few days ago, but it is certainly not out of the danger zone. What we should do is make sure that we give the correct advice to all British citizens in Tokyo—that is what we have done and what we will continue to do.

[Edward Miliband (Doncaster North) (Lab)]

I join the Prime Minister in paying tribute to Private Daniel Prior. He demonstrated outstanding bravery in the line of duty and our thoughts are with his wife and young son and all his family and friends.

I am sure that the whole House will also want to think of our armed forces personnel now in action in the military operation in Libya and to pay tribute to the outstanding work they are doing. Following the overwhelming vote in the House on Monday, will the Prime Minister update the House on the progress of our military operation and the actions of British forces?

[The Prime Minister]

I thank the right hon. Gentleman for what he says and for his speech in that debate on Monday, which I thought was extremely powerful. To update the House on the military operations, a no-fly zone is now in place over Libya and 11 nations are contributing more than 150 aircraft. As we discussed on Monday, there has been an early and good effect as regime forces have had to retreat from Benghazi, but there is clearly great concern about what the regime is doing in Misrata. Any idea that the second ceasefire was any more meaningful than the first is, we can see, complete nonsense. We made good progress in the no-fly zone and good progress in turning some of the forces back and protecting civilians. Everything is clearly still in the early stages, however, and a lot more remains to be done.

[Edward Miliband]

I thank the Prime Minister for that answer and for what he said about the debate on Monday. We support UN resolution 1973 to protect the people of Libya. The support of the Arab League was a key factor in securing the UN resolution. Will the Prime Minister update the House on the military contribution that Arab states will make to the operation and what conversations he has had with Arab leaders about their continued role in the enforcement of the resolution and the plan of action?

[The Prime Minister]

I can do that. First, the Arab League met again yesterday and reinforced its view that a no-fly zone is right and that it supports UN Security Council resolution 1973. In terms of concrete assets, I can confirm that yesterday the Qataris deployed the first of their contribution—Mirage aircraft and other support aircraft—and we will get logistic contributions from countries such as Kuwait and Jordan. I hope that further support will be forthcoming but I would like to be clear that because we had to act so quickly on Saturday it was not possible to bring forward as much Arab support as might have been welcomed by, I think, everybody in this House. There is clear support from the secretary-general of those Arab nations. I also had a meeting with the Saudi Foreign Minister yesterday and I believe that support in the Arab world—not just among Arab leaders but among Arab people—for saving lives in Libya is very strong.

[Edward Miliband]

Let me emphasise something that the Prime Minister mentioned on Monday, which is the importance of the contribution of Arab countries to the military operation. He also said that there would be a regular and more formal process with the Arab League and others. It seems to me very important that that process takes place. Let me ask the Prime Minister one other thing about our action. Will he clarify the Government’s position on the targeting of Colonel Gaddafi? It is important that we stick to the terms of the UN resolution as we seek to maintain the coalition we have built on that resolution.

[The Prime Minister]

I am grateful for that question and for the chance to set this out clearly to the House. All our targets must be selected to be absolutely in line with UN Security Council resolution 1973. That allows us to take “all necessary measures” to enforce a no-fly zone and to put it in place as safely as possible as well as to take action to protect civilian life. All targets should be in line with that but I do not propose to give a running commentary on targets or, frankly, to say anything beyond that.

[Mr David Amess (Southend West) (Con)]

Q3. As my right hon. Friend struggles to sort out the mess left behind by the previous rotten Labour Government, will he take this opportunity to unite the House on health matters by praising the work of Marie Curie nurses, highlighting the dangers of prostate cancer and supporting low salt week?

[The Prime Minister]

I yield to no one in blaming the last Government for all sorts of ills, but I think even I would probably draw the line at blaming them for the level of salt in food—[Hon. Members: “Oh, go on.”] Well, I suspect that the previous Prime Minister probably put salt in his porridge, but we will have to leave it there.

My hon. Friend mentions a very important charity, Marie Curie Cancer Care, and the work it does to help people, particularly when they are suffering often incurable conditions; it should be praised by everyone in this House. The whole point of what we want to do through our health reforms is to involve in an even greater way such great charities, which do so much to help people across our country.

[Mrs Mary Glindon (North Tyneside) (Lab)]

North Tyneside’s Tory, elected mayor has spoken of her intention to become the council’s chief executive under new government powers. Does the Prime Minister think that the mayor, who was elected on a political ticket under the alternative vote and has no proven professional experience for such an apolitical role, should go back to the electorate in the true spirit of localism and get their opinion on this issue?

[The Prime Minister]

I thank the hon. Lady for reminding everyone that North Tyneside has an excellent Conservative mayor who is doing a great job. It will be a matter for her and the people and the council of North Tyneside to work out what a fantastic job she can do in future.

[Gavin Barwell (Croydon Central) (Con)]

Q4. Croydon town centre is just 15 minutes from central London by rail, but rateable values are 60% lower. Does my right hon. Friend agree that there is huge potential to save public money by relocating part of the Government estate from the most expensive real estate in the country in SW1?

[Bob Russell (Colchester) (LD)]

Let’s start with IPSA.

[The Prime Minister]

I just heard a suggestion from my hon. Friend that the Independent Parliamentary Standards Authority should be based in Croydon.

My hon. Friend the Member for Croydon Central (Gavin Barwell) makes a very good point. We have already saved £50 million by relocating Government property. The Minister for the Cabinet Office and Paymaster General, who sits in the Cabinet and does an excellent job, has saved £2.6 billion by combining quangos and public bodies, but I am sure there is more we can do, including, perhaps, in Croydon.

[Edward Miliband]

Will the Prime Minister explain why he proposes to remove the mobility component of disability living allowance from 80,000 care home residents?

[The Prime Minister]

The short answer is that we are not.

[Edward Miliband]

Not for the first time, I have to tell the Prime Minister what is in his own legislation: clause 83 of the Welfare Reform Bill proposes precisely that and people do not understand why he is doing it. If he is saying that he is going to abandon the policy, then, great, let us abandon the policy.

[The Prime Minister]

The review of disability living allowance and the mobility component is wrapped up in the new personal independence payment. That is what is happening. To be frank, this point has been raised right across the House of Commons and is a point that we have responded to. It is a review that the right hon. Gentleman can take part in; perhaps he can say something constructive.

[Edward Miliband]

It is not a review, it is a proposal—a clause—in the Bill to take away the mobility component of DLA. Some 22 disabled persons organisations up and down the country are saying that the Government should abandon the policy. I have a suggestion for the Prime Minister: why does he not complete the review now and say that he is dumping the policy? He has done it before.

[The Prime Minister]

The first thing the right hon. Gentleman said about disability living allowance was that he wanted to support our gateway reforms, but we do not hear much about that any more. As I have said, the review of DLA is rolled into the personal independence payment. That is how we will reform the mobility component. Instead of getting so excited about it, he should congratulate the Government on listening to opinion from across the House.

[Karl MᶜCartney (Lincoln) (Con)]

My right hon. Friend the Prime Minister might be aware that the Financial Times reported earlier this week that Gaddafi is sitting on $6.5 billion-worth of gold in his war chest. Although there is precious little to commend the current leader of Libya, gold has been the great inflation hedge throughout our history. Britain, on the other hand, sold off her gold reserves at the behest of the shadow Chancellor, when he worked as a bag carrier at the Treasury, in order to bolster the then failing euro. Which of those two is more psychologically flawed?

[The Prime Minister]

That was an ingenious question from my hon. Friend. I have to say that selling the gold was one of the many appalling decisions taken by the previous Government and was advised by the two people now responsible for their economic policy in opposition.

[Chris Evans (Islwyn) (Lab/Co-op)]

Q5. Why is poor performance still being rewarded in the banking industry with massive bonuses?

[The Prime Minister]

What we have done in the banking industry is make sure that it is paying a £2.5 billion banking levy, not as a one-off, but every single year during this Parliament, so under this Government, the taxes it pays will go up; the bonus levels have gone down; and the lending to small businesses—and large businesses—will increase. The hon. Gentleman should welcome that approach.

[Alun Cairns (Vale of Glamorgan) (Con)]

What conclusions has the Prime Minister drawn from the statement of the secretary-general of the OECD, who recently said

“if you don’t deal with the deficit you can be assured that there will not be growth”?

[The Prime Minister]

The OECD was in town last week and gave the clearest possible message: if we do not deal with the deficit, we will not get any growth. That is what it said, and it is about time that the Opposition started listening to it.

[Roberta Blackman-Woods (City of Durham) (Lab)]

Q6. I am sure the Prime Minister is aware that unemployment in my constituency will increase as a result of public sector cuts. What is his Government doing to expand private sector job opportunities in the area, such as supply-chain jobs from the Hitachi train-building programme? Will he ask the Business Secretary to meet local businesses and Durham county council about that, to boost jobs in Durham and the north-east?

[The Prime Minister]

I am very happy to arrange that meeting. The point that the hon. Lady makes is absolutely right: at a time when, frankly, any Government would have to make public sector cuts, we have to make sure that the private sector grows. That is why we have the regional growth fund, which is putting money and leveraging new jobs into the north-east. That is why we will introduce things such as enterprise zones, and that is why, if she sits and waits patiently, she will hear in the Chancellor’s Budget a whole series of measures to fire up the private sector and make sure that we get growth right across our country.

[Richard Fuller (Bedford) (Con)]

After fuel duty, council tax is the most despised tax in the country, and under the Labour Government it increased mercilessly, year on year. Will the Prime Minister tell me how many councils, like Bedford borough council, have taken advantage of the offer made by the Chancellor in last year’s Budget and frozen or reduced council tax?

[The Prime Minister]

My hon. Friend makes a good point. It is worth while noting that we now know that every single council in the country has agreed to take part in the Government’s council tax freeze. I would have thought that would be welcomed across the House of Commons, because people do face a difficult situation with the cost of living. We have taken action on council tax; we are lifting people out of income tax; we are uprating the pension in line with earnings, instead of prices; and I hope that the Chancellor will have a few more things to say in a minute or two.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Q7. The Prime Minister knows of my passion for the no campaign on the alternative vote, and I know that he will be working day and night on that subject. However, I have another passion: legal aid. What will his Government do to protect those who are debarred from legal aid, and to get rid of all the abuse in the legal aid system at present?

[The Prime Minister]

Of course, this is a devolved issue for Scotland, but what we have done elsewhere in the United Kingdom is maintain the grant that we give centrally to the citizens advice bureaux to make sure that work goes ahead. If the hon. Gentleman looks at the comparative figures, he will see that this country spends way more per head on legal aid than comparator countries, and it is right that it should be reformed.

[Mr Laurence Robertson (Tewkesbury) (Con)]

Q8. Is the Prime Minister aware of the very poor rail services between Gloucestershire and London? As a result of that problem, my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) and I have campaigned very long and hard for the line between Swindon and Kemble to be redoubled. Will the Prime Minister give every consideration possible to that project?

[The Prime Minister]

I do know the problems that there are between London and Gloucester, and also, as a Member of Parliament with a seat to the west of London, I know the problems on the Cotswold line, which has recently been improved through redoubling. I hope that my hon. Friend will sit patiently, because I very much hope that the Chancellor might have something to say about how we will make life easier for my hon. Friend’s constituents who want to get to and from Gloucester and London.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Q9. Will the Prime Minister update the House on the representations that he has received from the Deputy Prime Minister on reinstating the loan to Sheffield Forgemasters?

[The Prime Minister]

The hon. Lady knows well that this was done on the basis of affordability, but she also knows that Sheffield Forgemasters has been encouraged to bid under the regional growth fund; that is an approach it can take.

[Elizabeth Truss (South West Norfolk) (Con)]

Given the central role that RAF Marham and the Tornado have played in securing a no-fly zone over Libya, and the brave actions of our service personnel despite the ongoing uncertainty at that base, is it not time that we confirmed the future of RAF Marham as a fast jet base?

[The Prime Minister]

My hon. Friend makes an important representation on behalf of a vital base in her constituency. It gives me the opportunity to pay tribute again to what our brave pilots are doing, whether flying Typhoons in order to police the no-fly zone, or flying Tornadoes in order to carry out vital operations on the ground in Libya. She makes a very strong case, but I know that others will be making a case too. These decisions will be taken in due course by the Ministry of Defence.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Q10. Last week the Prime Minister told the House that people here are twice as likely to die from a heart attack as people in France, but is not the truth that survival rates are improving, we will have a lower death rate than France by next year, and we have record levels of satisfaction with the NHS? When will he stop talking down the NHS and distorting the figures?

[The Prime Minister]

The NHS has done extraordinary things for me and my family. I am passionate about the NHS. I passionately want it to remain free at the point of use on the basis of need and not related to people’s ability to pay. The point of reforming the NHS is to safeguard it for the future. That is what everyone in the House wants. I will never talk down the NHS, but if we really believe we cannot do better on cancer, heart disease and stroke, we are fooling ourselves. We must do better, and that is the aim of our reforms.

[Duncan Hames (Chippenham) (LD)]

The coalition agreement promises the public greater accountability in NHS commissioning through directly elected individuals on the boards of primary care trusts. As PCTs are on their way out, does the Prime Minister accept that the best way now to deliver that commitment is to reserve places on GP consortia boards for locally elected people?

[The Prime Minister]

One of the ways we can make the NHS more accountable is through the better combination of the NHS and local government. That is what our proposals envisage. That is the best way to make sure that there is good democratic accountability for what happens in our NHS.

[Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab)]

Q11. The Government have not yet factored into their future Budget proposals the sell-off of the bank assets that we own. Given the Prime Minister’s commitment to volunteering and the dire straits that many young people face because of unemployment, will he consider an endowment fund for a nationwide volunteer programme, building on the six-week national citizen service and benefiting individuals and the nation as a whole?

[The Prime Minister]

The right hon. Gentleman makes an extremely interesting suggestion. Obviously, there will be an opportunity to sell the bank assets that we own. I do not think that that opportunity is right now, or that we should wait to get national citizen service, which he rightly mentions, up and running. I want to see every 16-year-old in our country have the opportunity to take part in something like that to make them feel more part of our country and recognise the responsibilities that we all have as we move towards adulthood.

[Neil Carmichael (Stroud) (Con)]

Q12. With the recent OECD report underlining the fact that the structural deficit has caused so many difficulties for our economy, does the Prime Minister agree that it is all the more important that we upgrade our industry and business by providing training opportunities for young people?

[The Prime Minister]

My hon. Friend makes an important point. It is why we are making bold and difficult reforms in education. As we stand today, less than 50% of young people at 16 are getting grades A to C in English and maths. We must make sure that people are properly prepared for the world of work, and that is not good enough. I pay tribute to my right hon. Friend the Education Secretary, who is setting a higher bar for himself and for the Government. We have to make sure that we get over it.

[Mr Denis MacShane (Rotherham) (Lab)]

I welcome the Prime Minister’s U-turn yesterday with the announcement that the United Kingdom will now opt into the EU directive on sex slave trafficking, which many have campaigned on for six months. This is a cross-party issue which he takes seriously. Will he ask the Home Secretary, seated on his left, to look particularly at unaccompanied children arriving at the Eurostar terminal at St Pancras, as there is evidence that some of them may be trafficked? We may be able to put some block on this terrible thing with a bit of work there.

[The Prime Minister]

I am grateful to the right hon. Gentleman for his question. He is absolutely right: this is an issue of cross-party concern. As he knows, we completely agree with what was proposed for the human trafficking directive. We decided to wait and check that it would actually be in line with what was wanted and did not have further dangers in terms of our immigration policy. I am happy to say that we will be opting into the directive, with parliamentary permission. Above all, we must ensure that our arrangements are in place to help trafficked children, including in the way he suggests.

[Matthew Hancock (West Suffolk) (Con)]

Q13. A recent Public Accounts Committee report found that in the past hospitals were built under the private finance initiative even though it was more expensive than other forms of financing. In some PFI hospitals, it now costs £333 to change a light switch. What is the Prime Minister going to do about it, and whose fault was it?

[The Prime Minister]

My hon. Friend makes an important point. Some of the PFI deals that were entered into were extremely expensive, and the costs will rack up on taxpayers for years to come. He does not have to believe me, as we now have it from Labour’s shadow Health Secretary, who has made a number of helpful interventions in recent weeks. The latest one was in the Morning Star—not a paper I always read. Whether talking to a communist paper or backing Tory plans, he is very consistent: he is always in favour of what the Government are doing. He said:

“There is definitely a case for saying we were poor at PFI, poor at negotiating PFI contracts from the outset.”

I could not agree more.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Q14. Some £180 million of land and property assets assembled by One North East are at risk of a fire sale to benefit central Government coffers. The Association of North East Councils and the Northern Business Forum have joined forces in a bid to take on those assets for the benefit of our region. Will the Prime Minister back the bid and put his warm words on localism into action?

[The Prime Minister]

I am grateful to the hon. Lady. As we move from the regional development agencies to the new local enterprise partnerships, many of which are up and running and doing a good job, it is important that we ensure we have good consistency and continuity, and I will certainly look at the case she makes.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Will my right hon. Friend comment in advance of the Budget on this country’s current financial situation in terms that I can use to convey to my constituents the dreadful state of the economy that we inherited from the party opposite?

[The Prime Minister]

One way of putting that inheritance is that we had a Budget deficit that was bigger than Portugal’s, bigger than Spain’s and bigger than Greece’s. It is only because of the action we have taken in government to show how we will pay down our debts that we have interest rates in this country that are at a similar level to Germany’s. That is what we have been able to do, to the huge benefit of our economy and with absolutely no help from the party opposite.

[Paul Blomfield (Sheffield Central) (Lab)]

Q15. It was reported at the weekend that the Department of Health has failed to publish research it commissioned and received last autumn showing the highest ever level of satisfaction with the NHS. Will the Prime Minister urge the Secretary of State for Health to publish that research without further delay, or, by not doing so, will he confirm that the British Medical Association was right last week when it deplored the Government’s use of misleading and inaccurate information to denigrate the NHS and justify their reforms?

[The Prime Minister]

This Government have published more information about the NHS than any other. Indeed, the hon. Gentleman is quoting from a published report. The point I would make to him is this: if we had survival rates for cancer that were the same as the European average, we would save 5,000 lives every year. Do Members opposite want to save those lives, or are they going to stick with the status quo and say that there should be no choice, that patients should not have a say in how they are treated and that doctors should not be more involved in the health service? What a backward step, and what a backward lot.

[Mrs Anne Main (St Albans) (Con)]

Parents value the 15 hours’ free nursery provision they are given, but 22 nurseries I have met are concerned that the new guidelines do not give enough flexibility. Will the Prime Minister talk to my right hon. Friend the Secretary of State for Education to see whether there is a problem?

[The Prime Minister]

I will certainly do that. Obviously, what we have done is to make sure that we have properly funded the extra hours of nursery education for three-year-olds and, for the first time, introduced that provision for disadvantaged two-year-olds, so that is a big step forward. At a time of spending constraint and austerity, we have been able to help the poorest families in our country to have a better future, but I will certainly take on board the point my hon. Friend makes and make sure that she meets my right hon. Friend the Education Secretary to ensure that it is introduced in the right way.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

In a newspaper interview last weekend, the Secretary of State for Energy and Climate Change cast doubt on the viability of investment in the civil nuclear energy industry. Given the strategic importance of the industry and the need for certainty and commitment from the Government, can the Prime Minister reassure the House and business that his policy is unaltered in that area?

[The Prime Minister]

I can do that, and the point I would make—the Energy and Climate Change Secretary would say exactly the same thing—is that what we have done is to create a fair playing field where that private investment can come forward. What we should not be doing is having unfair subsidies. We are making sure that on issues such as planning and carbon pricing the situation is very clear, so that nuclear, which is part of the energy mix in this country, can go on being part of the energy mix in our country.

[Nicky Morgan (Loughborough) (Con)]

Last Friday I visited Rawlins community college in my constituency and spoke to a very bright group of economics students. We discussed the fact that Governments cannot spend money they do not have. The students understood that; why does my right hon. Friend think the Opposition do not?

[The Prime Minister]

My hon. Friend makes a very good point. I know the Opposition do not like to hear about the mess they left, but let me give them some new published information about the mess they left. This is what we inherited: we are 72nd on wastefulness of Government spending, behind Kazakhstan and Cambodia; 108th on Government debt, behind Malawi, Lesotho and, yes, you’ve guessed it, Libya; and—this is the best one—on the soundness of banks, we are 133rd. Our banks, under Labour, were less sound than those in Serbia, Estonia, Madagascar and Chad. That is the record we inherited from the Opposition, and we will not tire of reminding them.

Child Health

Wednesday 23rd March 2011 Commons Chamber

Andrea Leadsom (South Northamptonshire) (Con)

- Hansard - - Excerpts

The petition states:

The Petition of Staff and Pupils of Hackleton Church of England Primary School,

Declares that just over eight million children die every year before their fifth birthday, mostly from preventable causes like diarrhoea and pneumonia; that ensuring that proven, cost-effective, preventative measures such as immunisation and breastfeeding are available at family and community level can save millions of these lives; that, where child health is prioritised, in countries such as Malawi, there are real and long-lasting results, showing that change is possible; and notes that the petitioners believe that global leaders must prioritise child health and end these unnecessary deaths.

The Petitioners therefore request that the House of Commons urges the Secretary of State for International Development to widen the Government’s approach on maternal and newborn health in the developing world to include child health.

And the Petitioners remain, etc.

[P000906]

Hospital Services (Shropshire)

Wednesday 23rd March 2011 Commons Chamber

Glyn Davies (Montgomeryshire) (Con)

- Hansard - - Excerpts

I bring to the Floor of the House of Commons today a petition in the names of Donna Benbow and Helen Jervis, both young mothers, both constituents and both concerned about the movement of maternity and other services from the Royal Shrewsbury hospital to the Princess Royal hospital at Telford.

By way of background, I should explain that the Shrewsbury and Telford Hospital NHS Trust which serves Shropshire and mid-Wales proposes a reconfiguration of the service that it currently provides. The petition is supported by 3,745 names. The case is also supported by more than 800 people who attended public meetings. Another constituent, Sally Jones, has contributed thousands of names to a petition that is to be presented by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski).

The petition states:

The Petition of residents of Montgomeryshire,

Declares that the petitioners oppose plans to move the Special Care Baby Unit, the Children’s Ward and some maternity services from Shrewsbury to Telford.

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to prevent these services being moved from Shrewsbury to Telford.

And the Petitioners remain, etc.

[P000907]

Hospital Services (Shropshire)

Wednesday 23rd March 2011 Commons Chamber

Daniel Kawczynski (Shrewsbury and Atcham) (Con)

- Hansard - - Excerpts

Like the petition of my hon. Friend the Member for Montgomeryshire (Glyn Davies), my petition revolves around the concerns of local constituents about the move of maternity and paediatric services from the Royal Shrewsbury hospital to Telford. In the six years that I have been the Member of Parliament, I have never received such a large number of signatures—more than 29,000—which reflects the huge objection to the proposals, in conjunction with the opposition of paediatric consultants. For the board to try to move maternity and paediatric services away from Shrewsbury to Telford would be highly flawed and would fly in the face of all Government guidelines.

The petition states:

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to prevent these services being moved from Shrewsbury to Telford.

Following is the full text of the petition:

[The Petition of residents of Shrewsbury and Atcham,

Declares that the petitioners oppose plans to move the Special Care Baby Unit, the Children’s Ward and some maternity services from Shrewsbury to Telford.

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to prevent these services being moved from Shrewsbury to Telford.

And the Petitioners remain, etc.]

[P000908]

Ways and Means

Wednesday 23rd March 2011 Commons Chamber

Financial Statement

Wednesday 23rd March 2011 Commons Chamber

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Before I call the Chancellor of the Exchequer, it may be convenient to remind hon. Members that copies of the Budget resolutions will be available to them in the Vote Office at the end of the Chancellor’s speech. It may be also appropriate to remind Members that it is not the norm to intervene either on the Chancellor of the Exchequer or on the Leader of the Opposition.

12:33

[The Chancellor of the Exchequer (Mr George Osborne)]

Last year’s emergency Budget was about rescuing the nation’s finances and paying for the mistakes of the past. Today’s Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future; and it is about doing what we can to help families with the cost of living and the high price of oil.

We understand how difficult it is for so many people across our country right now. That we are able now to set off on the route from rescue to reform, and from reform to recovery, is because of the difficult decisions we have already taken.

Those decisions have brought economic stability, and without stability there can be no sustainable growth and no new jobs. Without stability, Governments have to keep coming back to their citizens for more—more taxes and more spending cuts. In Britain, we do not have to do that today.

We have inherited a record budget deficit, but we have set out a credible, comprehensive plan to deal with it. We have had to undertake difficult measures, but we have already asked the British people for what is needed, and today we do not need to ask for more.

So this is not a tax-raising Budget. But nor can we afford a giveaway. Taken together, the measures I will announce today are fiscally neutral across the period. This is a Budget built on sound money; a Budget that encourages enterprise; that supports exports, manufacturing and investment; that is based on robust independent figures: a Budget for making things, not for making things up. Britain has a plan, and we are sticking to it.

In recent months, many other countries have seen their ratings downgraded and their borrowing costs soar. Our country’s fiscal plans have been strongly endorsed by the International Monetary Fund, by the European Commission, by the OECD, and by every reputable business body in Britain. For anyone who questions whether this matters in the real world, to real businesses and families, they should consider this. Market interest rates in Greece are at 12.5%, in Ireland they are close to 10%, and in Portugal and Spain they are 7% and 5%. Today our country’s market interest rates have fallen to 3.6%. We have a higher deficit than Portugal, Greece and Spain, but we have virtually the same interest rates as Germany. This is our powerful monetary stimulus to our recovering economy. Stability, credibility, lower interest rates—that is what we have achieved.

But stability is not enough. So today, in addition to the Red Book, we are publishing “The Plan for Growth”. For this Budget confronts the hard truth that has been ignored for too long. Britain has lost ground in the world’s economy and needs to catch up. In the last decade, other nations have reduced their business tax rates, removed barriers to enterprise, improved education systems, reformed welfare systems and increased exports. Sadly, the reverse has happened in Britain. We gambled on a debt-fuelled model of growth that failed. With the state now accounting for almost half of all income, we simply cannot afford to go on like this. Britain has to earn its way in the modern world.

I turn to the forecasts. Last November, I told the House that the recovery was going to be more challenging than recoveries from recessions in recent decades. That is inevitable when we have had the sharpest fall in output since the 1930s, the highest budget deficit in our peacetime, and the largest banking crisis in our entire history. But I said that thanks to the course we have set, the independent forecast was for our economy to grow in each of the next five years, for unemployment to peak this year and then fall, and for employment to rise through this Parliament. That remains the case in the independent forecast we published today.

Those forecasts have been drawn up by the Office for Budget Responsibility. This important change has transformed the way Budgets are put together. So instead of Chancellors fixing the figures to fit the Budget, they now have to fix the Budget to fit the figures. Yesterday, the legislation to put the Office for Budget Responsibility on a permanent, statutory and independent footing received Royal Assent. I am sure that the whole House will want to thank Robert Chote, Steve Nickell, Graham Parker and their whole staff for the very professional job they are doing.

Let me start with their growth forecasts. It has been known for Chancellors in recent years to rattle these off at great speed in the hope that no one will keep up or notice. I will not do that. Although average quarterly growth this year is set to be higher than was previously forecast, the annual forecast for 2011 has been revised to 1.7%. This the OBR attributes specifically to the weaker-than-expected final quarter of last year, the rise in world commodity prices, and the higher-than-expected inflation in the UK. However, the OBR points out that the effect, in its words,

“creates scope for slightly stronger growth in later years”

than previously forecast. So while it expects real GDP growth of 2.5% next year, it forecasts it will then rise to 2.9% in 2013; to 2.9% in 2014; followed by 2.8% in 2015.

The European Commission has also this month published its growth forecasts. These show that the UK is forecast to grow more strongly in the coming year than Spain, Italy, France, the average for the eurozone and the average for the European Union.

All countries have to steer a course between two central risks: the risk of a European sovereign debt crisis on the one hand, and, on the other, the risk that comes from rising global commodity prices. Food prices around the world have increased by nearly 50% since the beginning of last year. Oil has risen by 35% in just five months. That is why the OBR expects inflation to remain between 4% and 5% for most of this year, before dropping to 2.5% next year and then to 2% in two years’ time.

I have today written to the Governor of the Bank of England to confirm that the inflation target for the Monetary Policy Committee will remain at 2%, as measured by the consumer prices index. I can also confirm that the asset purchase facility set up by my predecessor will remain in place.

One cause of current instability is the conflict inside Libya. The whole House will praise the courage and professionalism of our armed forces, who are trying to bring that conflict to an end and save lives. I can confirm that the additional cost of military operations will be met entirely from the Treasury reserve.

The House will also know that last week I authorised for the UK to take part in a co-ordinated G7 currency intervention in support of the Japanese yen. Our hearts go out to the Japanese people, and this is one way in which Britain can help. It is still too early to say what lasting impacts the earthquake and tsunami will have on the world economy. But this is an opportunity for me to report that we had already decided to rebuild the UK’s foreign currency reserves, which are at an historically low level. We will purchase a range of high-quality assets, although unfortunately, with the price of gold now at a record high, we will not be able to replenish the gold reserves sold at a record low.

I turn now to the fiscal forecasts for our debt and deficit. Borrowing to fund the deficit this year is now set to come in below target at £146 billion. It will then fall to £122 billion next year, then £101 billion the year after, then £70 billion in 2013-14, then £46 billion, and then £29 billion by 2015-16. Inflation has had its impact, but crucially, the OBR assesses that next year’s structural deficit remains the same as forecast last November. In other words, the size of the task of repairing Britain’s finances is unchanged. Our national debt, as a share of our national income, is forecast to be 60% this year, before peaking at 71%, and then starting to fall, reaching 69% by the end of the period.

This leads me to one of the central tasks of the OBR: that of assessing the Government’s performance against their stated Budget goals in an open and independent way, so that we avoid repeating the disastrous experience of the so-called golden rule. Our fiscal mandate is to achieve a cyclically adjusted current balance by the end of the rolling five-year forecast period, which is currently 2015-16. We have supplemented that with a fixed target for debt, so that debt should be falling as a proportion of GDP by the year 2015-16 as well. I can report to the House that the OBR confirms that on its central forecast we will meet both these objectives—a balanced structural current budget and falling national debt—by the end of the Parliament. Indeed, the forecast remains that we will meet both these objectives one year earlier.

I said at the start that stability and fiscal responsibility were not enough. Our country has to compete if we are going to create growth and jobs. Britain has fallen behind many others in the world in the last decade. We have dropped from fourth to 12th place in the world global competitiveness league, and growth in our country has become so unbalanced. Consider this staggering truth: during the boom years before the bust, private sector employment actually fell in a region as important as the west midlands.

So today’s Budget is an urgent call for action for Britain. Private sector growth must take the place of Government deficits. Prosperity must be shared across all parts of the UK. Yes, we want the City of London to remain the world’s leading centre for financial services, but we should resolve that the rest of the country becomes a world leader in advanced manufacturing, life sciences, creative industries, business services, green energy and so much more. This is our vision for growth. Difficult decisions and major reforms are needed to make it happen, but the alternative is to accept Britain’s economic decline and a continuing fall in living standards for our population, and that is not an alternative anyone in this House should be prepared to accept.

This Budget sets for Britain these four economic ambitions: that Britain should have the most competitive tax system in the G20; be the best place in Europe to start, finance and grow a business; be a more balanced economy, by encouraging exports and investment; and have a more educated work force who are the most flexible in Europe. Let me now set out the measures that will achieve these ambitions.

First, on taxation, here’s the truth: Britain used to have the third lowest corporate tax rate in Europe. It now has the sixth highest. At the same time, our tax code has become so complex that it recently overtook India’s to become the longest in the world. From Adam Smith to Nigel Lawson, people have set out the principles of good taxation, and this Government declare these principles again for the modern age. Our taxes should be efficient and support growth. They should be certain and predictable. They should be simple to understand and easy to comply with, and our tax system should be fair, reward work, support aspiration and ask the most from those who can most afford the most.

In July last year, we set up the Office of Tax Simplification to provide independent advice on how to reduce the complexity of the existing system. I want to thank Michael Jack and John Whiting for the work that they have done. Following their recommendations, I can announce today that this Budget abolishes no fewer than 43 complex reliefs. This includes the millennium gift aid system, which we will not need for another 989 years. However, I have decided not to follow their advice to abolish the community investment tax relief, and instead I encourage people to take it up. But this Budget, at a stroke, removes over 100 pages from our tax code and begins the work of simplification.

In the last Budget, I announced that from next month welfare payments and public service pensions would be uprated in line with the consumer prices index. I said at the time that we should also consider uprating the tax system in the same way, so from April 2012 the default indexation assumption for direct taxes will move to CPI. There will be protection through this Parliament for those eligible for age-related, married couple and blind person’s allowances, and for employers’ national insurance contributions. The increase in the personal tax allowance already announced will vastly exceed anything lost through employee NICs uprating, and that is even before any further increases in that allowance. This will bring coherence to the tax and benefit system, and we look to moving indirect taxes on to the same basis when the fiscal position allows.

But there is one further step that we want to undertake that will dramatically simplify the tax system. For decades, we have operated income tax and national insurance as two fundamentally different taxes and forced businesses large and small to operate two completely different systems of administration, with two different periods and bases of charge. The resulting anomalies are legion, and it imposes totally unnecessary costs and complexity on employers and costs the taxpayer in the extra burden that it places on Her Majesty’s Revenue and Customs. So I am announcing today that the Government will consult on merging the operation of national insurance and income tax.

I am not proposing that we extend national insurance to pensioners, or to other forms of income, or that we abolish the contributory principle. Our purpose is not to increase taxes; it is to simplify them, and this huge task will therefore require a great deal of consultation and take a number of years to complete, but it is time we took this historic step to simplify dramatically our tax system and make it fit for the modern age.

Making our tax system more competitive is another challenge for the times we live in. Again, let us face facts. Other countries are quite deliberately making their tax systems more competitive and attracting multinational companies away from the United Kingdom. We could stand there and do nothing, but increasing the living standards of every hard-pressed family in the country depends on keeping companies, and the jobs, the investment and the tax revenues that come with them, here in the United Kingdom. So we will go ahead with the highly competitive tax rate on profits derived from patents in industries like pharmaceuticals; we will fundamentally reform the complex rules for controlled foreign companies and make them more territorial; and we will introduce new rules that effectively apply an ultra-competitive 5.75% rate on overseas financing income. This will give us a far more attractive system than France, America or Germany. I want Britain to be the place international businesses go to, not the place that they leave.

But today I want to do even more, so I can announce that from April this year, corporation tax will be reduced not just by the 1% I previously announced, but by 2%, and it will continue to fall by 1% in each of the following three years, taking our corporate tax rate right down to 23%—16 % lower than America, 11% lower than France and 7% lower than Germany—the lowest corporation tax in the G7. Let it be heard clearly around the world, from Shanghai to Seattle and from Stuttgart to Sao Paolo: Britain is open for business.

To ensure that this is not a net tax cut for banks, I am adjusting the bank levy rate next year to offset its effect. In each and every year of this Parliament, our permanent bank levy raises more in any one year than the last Parliament’s bank taxes.

The most competitive tax system in the G20 is the first of our economic ambitions. The second is that Britain becomes the best place in Europe to start, finance and grow a business. Again, let us face facts: we are not that today. In the last decade, countries such as Germany, Denmark, Finland and the Netherlands have all overtaken us in the international rankings of competitiveness. That is not surprising when the total cost of regulation imposed on business since 1998 is almost £90 billion a year.

So in today’s plan for growth, we take action: £350 million worth of specific regulations will go, including the costly dual discrimination rules in the Equality Act 2010. Lord Young’s recommendations on health and safety laws will be implemented in full; the no-win, no-fee legal services that prey on employers will be restricted; existing regulation will be scrutinised in a public consultation process; and from April, we are going to impose a moratorium exempting all businesses employing fewer than 10 people, and all genuine start-ups, from new domestic regulation for the next three years. We will also take this fight against regulation to Brussels, where this week my right hon. Friend the Prime Minister will be recruiting other European allies to ensure that our continent does not price itself out of the world.

We are also going to tackle what every Government have identified as a chronic obstacle to economic growth in Britain, and what no Government have done anything about: the planning system. Councils are spending 13% more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third. Yes, local communities should have a greater say in planning, but from today, we will expect all bodies involved in planning decisions to prioritise growth and jobs, and we will introduce a new presumption in favour of sustainable development, so that the default answer to development is yes. We will retain existing controls on green belt, but we will remove the nationally imposed targets on the use of previously developed land. We will also allow certain use class changes, introduce time limits on applications and pilot, for the first time ever, auctions of planning permission on land.

Cumbersome planning rules and bad regulation stand in the way of new jobs, and so too does the shortage of finance. Small businesses are the innocent victims of the credit crunch, and that is why we have agreed with the banks a 15% increase in the availability of credit to small businesses. But the lack of start-up capital has long been a problem in the British economy. Too often we have great ideas in Britain, but it is other countries that exploit them, so today I announce sweeping changes to improve the generosity, the simplicity and the reach of the enterprise investment scheme. From April this year, income tax relief will increase from 20% to 30%. Next year, we will double the amount that any individual can invest through EIS, increase the size of company that can qualify for investment, and raise the limit on the amount that can be invested in a company by 400%.

Next week, my right hon. Friends the Prime Minister and the Business Secretary will launch “Start-up Britain”, a new campaign by entrepreneurs for entrepreneurs, supported by many of Britain’s most successful firms, that will help people to start and grow businesses. Today we can add to that help. From 6 April this year, I am doubling the size of entrepreneur’s relief to £10 million. Let Britain be the home of enterprise in an age when people can invest all over the world.

It is time too that we ended the uncertainty around the taxation of non-domiciles. They are welcome in this country, but I have always believed that they should pay something in return for their special tax status. The last Government followed our advice and introduced a £30,000 charge for those who had lived here for seven years. I think we can ask more from those who have been here even longer, so I am increasing the charge to £50,000 for non-doms who have been in the country for 12 years. This will raise over £200 million in the coming years but, in return, and to encourage investment in our country, I am removing the tax charge when non-doms remit foreign income or capital gains to the UK for the purpose of investing in a British business, and we will introduce a statutory residence test. To end the speculation and uncertainty, and to provide stability, I confirm that I will be making no further changes to the taxation of non-domiciles in this Parliament.

In an age when business and capital and people can increasingly move anywhere, high tax rates can do real damage. That is true for high corporate tax rates, and it is true for high personal tax rates too. They crush enterprise, undermine aspiration and often undermine tax revenues as people avoid them. I am clear that the 50% tax rate would do lasting damage to our economy if it were to become permanent. That is why I regard it as a temporary measure, just as my Labour predecessor, the right hon. Member for Edinburgh South West (Mr Darling), did when he introduced it. I have said before that now would not be the right time to remove it when we are asking others in our society on much lower incomes to make sacrifices, for we are all in this together, but I think it is sensible to see how much revenue it actually raises. I have asked Her Majesty’s Revenue and Customs—[Interruption.] I have asked HMRC to find out the truth when the self-assessment forms start coming in.

Of course, taxation must be fair. It is right that the wealthiest should pay more than others, and it is especially wrong when they avoid taxes. I will have much more to say later on in this speech on tax avoidance and evasion, but there is one area that needs extra work in the coming months—the taxation of very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share. So as well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.

Help for small businesses, a boost for enterprise, reforms to planning, and cuts to existing regulations and a moratorium on new ones, are all part of our ambition to make Britain the best place in Europe to start, grow and finance a business.

Our third ambition is to encourage investment and exports as a route to a more balanced economy for Britain. In “The Plan for Growth” that we publish today, we set out specific measures we can take to help a wide range of businesses. In life sciences, we will radically reduce the time it takes to get approval for clinical trials; in our digital and creative industries, we will improve the intellectual property regime; and in our professional and business services—one of our unsung success stories—we will reform our burdensome money laundering regime now, promote the UK as the global centre of legal arbitration, and launch a new, trusted business visa service.

Our retail sector includes many small shopkeepers who are anxious about the impact of coming business rate rises. The last Government planned that the current rate relief holiday for small businesses should end in October this year. I do not think that that would be right, so I can announce that, at a cost to the Exchequer of £370 million, I will extend the rate holiday for small businesses for another year to October 2012.

We will also take action to help the construction industry. Stamp duty will now be levied on the mean value of the houses being purchased within a portfolio, not the bulk cost, and real estate investment trusts will be simplified to encourage home building. But average mortgage deposits are close to 30%, and this puts home ownership beyond the reach of many, many families. This is not fair.

So I can announce today that, from the proceeds of this year’s bank levy, we will fund a £250 million commitment to first-time buyers. A new shared equity scheme, First Buy, will be available for first-time buyers who want to purchase a newly built property, but who cannot afford the high deposits. This will help 10,000 families get on the housing ladder for the first time. The previous Government intended to end the temporary changes to the support for mortgage interest scheme next January. Instead, we will extend them for another year. That will reduce mortgage arrears for around 100,000 out-of-work home owners.

Manufacturing is crucial to the rebalancing of our economy. Over the last decade, the share of the economy accounted for by financial services increased by over two thirds, while manufacturing’s share fell by almost a half. Under this Government, manufacturing is now growing at a record rate, and 14,000 more jobs have been created in the sector in the last three months. To help that continue, the Government are announcing plans today to make our export promotion more entrepreneurial and create new export credits to help smaller businesses; launch Britain’s first technology and innovation centre for high-value manufacturing; and fund a further nine new university centres for innovative manufacturing.

Science is one area where Britain already has an advantage over many other countries, and it is central to our future as a place to create businesses. That is one reason why I protected the science budget from cuts last year. I can tell the House that I have been able to find—again from this year’s extra bank levy—an additional £100 million to invest in new science facilities at the Babraham research campus in Cambridge, the Norwich research park for environmental and life sciences, the International Space Innovation Centre at Harwell, and the national science and innovation campus at Daresbury.

But if Britain is really to become a home of innovation, we want research and development to take place not just in our great universities, but in our smaller businesses too. One of our greatest high-tech innovators, James Dyson, has urged me to increase the support that they get. I have listened to him, and have gone even further than he recommends. From April this year, the small companies research and development tax credit will rise to 200%, and from next year it will rise again, to 225%.

We also want to encourage manufacturers to invest in the latest machinery and technology, so I propose to double the limit on capital allowances for short-life assets from four to eight years. We will also extend the allowance for the renovation of business premises in assisted areas—which was due to expire next year—for a further five years. Supporting the private sector across the whole of the United Kingdom is central to our economic ambitions.

Savings in the Department for Transport mean that we can also afford £200 million of additional investment in our regional railways. We will go ahead with the £85 million Ordsall chord scheme, linking Manchester’s Victoria and Piccadilly stations and significantly reducing journey times between Liverpool and Leeds. We can commit—I know that hon. Members have been calling for this, as we have just been hearing—to the Swindon-to-Kemble redoubling scheme, which will complement our electrification of the Great Western main line to Wales. We can also find another £100 million to help councils repair the winter potholes on our roads.

Helping all parts of our country to succeed is also the purpose behind the new enterprise zones that we launch today. There have been reports that we would be able to fund 10 new enterprise zones. Today I confirm that instead we will fund 21 new enterprise zones. Businesses will get up to a 100% discount on rates, new superfast broadband and the potential to use enhanced capital allowances in zones where there is a strong focus on manufacturing. In return for radically reduced planning restrictions, we will let local authorities keep all business rate growth in their zones for a period of at least 25 years to spend on development priorities.

The first 10 enterprise zones will be in urban areas of highest need, but also the highest potential. They will be in Birmingham and Solihull, Leeds, Liverpool, Greater Manchester, the Tees valley, Tyneside, the Bristol area, the black country, Derbyshire and Nottinghamshire, and Sheffield. Tomorrow, my right hon. Friends the Prime Minister and the Deputy Prime Minister will announce some of the specific locations of the new enterprise zones. I can confirm that a further zone will be located in London, where I have asked the Mayor to choose a suitable site. A further 10 enterprise zones will be announced in the summer. I want local enterprise partnerships all over the country to come forward with proposals.

Responsibilities are devolved in Northern Ireland, Scotland and Wales, so we will work with the Administrations so that they, too, can enjoy the benefits of this policy. In Northern Ireland, the Treasury will publish a paper tomorrow on how we help its private sector to grow. To deal with the unique issues posed by the Irish Republic’s business tax regime, the paper will consider the case for Northern Ireland having an even lower rate of corporation tax than the rest of the UK. I look forward to engaging with all parties there on the way forward.

There is one other issue that affects a specific part of our country, and that is the very high water bills for customers in the south-west, because of the geography there, particularly for those on lower incomes. We will come forward with public money to help bring those bills down.

Let me turn now to the opportunity presented by the green energy revolution and our determination to be the greenest Government ever. We have already announced our ambitious renewable heat incentive and support for low-emission cars, and changes to the company car tax regime today will increase that support. Our green deal to reduce energy bills for homes will be introduced next year. I can confirm that we will act to incentivise and encourage its take-up. We are pioneering new carbon capture and storage technology, with £1 billion already provided. Future projects will be funded out of general spending rather than a complex new levy, but we need to take two further, bold steps if we are to make the green energy revolution a reality.

First, as I have long argued, investment in green energy will never be certain unless we bring some stability to the price of carbon. Today we become the first country in the world to introduce a carbon price floor for the power sector. The price will start at around £16 per tonne of carbon dioxide in 2013, and move to a target price of £30 per tonne in 2020. That will provide the incentive for billions of pounds of new investment in our dilapidated energy infrastructure. To ensure that customers get a fair deal, we will closely follow developments in the energy sector in the light of the Ofgem review published on Monday. At the same time, I am extending the climate change agreements to 2023 and increasing the climate change levy discount on electricity for those who sign up from 65% to 80% from April 2013. This will help our most energy-intensive industries. Green taxes will increase as a proportion of total tax revenues, as we promised.

The second bold step that we take today is the creation of the green investment bank, to support low-carbon investment where the returns are too long term or too risky for the market. We have already committed £1 billion to the bank; today I commit £2 billion more, funded from asset sales and underwritten by the Treasury. This will enable the green investment bank to start operation one year earlier than planned, in 2012. It will leverage an additional £15 billion of private sector investment in green projects over this Parliament. I can also confirm today that from 2015-16, and subject to our overall debt target being met, we will allow the green investment bank to borrow and invest in a better future.

So, a green investment bank with its resources trebled; a new carbon price floor; new capital allowances for manufacturing; new support for home builders and first-time buyers; an economy where growth happens across the country and across all sectors—that is our ambition.

That leads me to our fourth ambition: to create a more educated work force who are the most flexible in Europe. Britain’s working-age population has lower skills than the populations of America, Germany and France, and that is probably the biggest problem facing our economy in the future. That is why we are undertaking far-reaching reform of our schools and universities, and funding a pupil premium and additional early-years support for our most disadvantaged children in poverty. It is also why we commissioned Alison Wolf’s impressive report.

The Government are committed to funding new university technical colleges, which will provide 11 to 19-year-olds with vocational training that is among the best in the world. The curriculum is being developed in close co-ordination with both local universities and leading employers. I commend Ken Baker on getting the new colleges up and running in our manufacturing heartlands. To date, the Government have announced that we will fund 12 new university technical colleges. I can tell the House that we will provide funding to double that number to at least 24.

We will also deal directly with the challenge of youth unemployment that has been on a steady rise for the last seven years, and give people direct contact with the workplace. Instead of 20,000 young people benefiting from our new work experience scheme, as we planned, we will increase that number fivefold to 100,000 places over the next two years. In Austria, Germany and Switzerland, around one in four employers offer apprenticeships. In England fewer than one in 10 do. That has got to change, after 10 years of a Labour Government.

Last year, my hon. Friend the Skills Minister published a skills strategy and confirmed the largest-ever expansion in adult apprenticeships. Today, I am funding another 40,000 apprenticeships for young unemployed people. There are currently only 1,500 higher level apprenticeships across the whole of England. This Budget provides for 10,000 more. That brings a total of 250,000 more apprenticeships over the next four years as a result of this Government’s policies—a Government backing what works: real training, secure jobs and more growth.

We should not talk about those at the start of their working life without also talking about those who are coming to the end of their working lives and looking to retirement. I am very proud that it was this coalition Government who took the decision to re-link the basic state pension to earnings and guarantee its increase through a triple lock. This would simply not have been affordable, as Adair Turner’s report argued, without an increase in the state pension age. The state pension age is set to rise to 66 by 2020. I can tell the House that we will now seek, hopefully with all-party support, a new, more automatic mechanism for future increases in the state pension age based on regular, independent reviews of longevity. This is another major reform that will help Britain to live within her means.

We also need to make sure that our public service pensions are fair to those who give their working lives to help others, and fair to the taxpayers who have to fund them. Today we publish the result of our consultation on the discount rate, which shows that a more appropriate rate would be inflation plus GDP growth. This reinforces our case for increasing the employee contributions by an average of 3%. Indeed, the new discount rate could be used to justify further contribution rises. As part of the wider reforms, I am not proposing to ask for more than the 3% average.

John Hutton has now completed his final report, which looks at the pension benefit. I am sure that Members in all parts of this House will want to thank him for a very impressive piece of work—[Interruption.] Or at least in part of the House. I confirm today that the Government accept Hutton’s recommendations as a basis for consultation with public sector workers, unions and others. There should be no cherry-picking on either side. I believe that this House should also recommend similar changes to the pensions of MPs.

We should also address the state pension system, which has become unbelievably complex. If people cannot work out what they are going to get in retirement through the second state pension or how much will be clawed back by the means tests, then they cannot work out what they need to save. So the Pensions Minister, the Pensions Secretary and I have worked together to develop options including a new single-tier pension. It would be simple, it would be based on contributions, and it would be a flat rate, so people know what to expect—and it would cost no more than the current system. We currently estimate that this new single-tier state pension would be worth around £140 per week. It will not apply to current pensioners, and it will take years fully to come into effect.

As with the other major reforms that I have announced today to simplify our tax system, to improve our economic performance and to reform our public sector pensions, this Government are doing the right thing for the long term: the most competitive corporate taxes; the best place to start up and run a business; an investing, exporting, greener, manufacturing and more balanced economy; a better educated work force; a fairer pensions system. These are our ambitions for Britain, with the measures to match.

Let me now turn to personal taxes and duties, and let me start by noting that a society should not just be judged by the strength of its economy alone, but also by the compassion of its people—[Interruption.] Well, that is what I happen to think, anyway. The Culture Secretary and I have been working on a series of substantial reforms that will support giving, from the largest donations to the coins collected in the charity bucket.

First, we will dramatically simplify the administration of gift aid. Instead of asking charities to submit a written record of every donation made, we will by 2013 pay for a much easier online system. Secondly, we will encourage wealthy people in our society to give even more. The gift aid benefit limits will be increased from £500 to £2,500 so that charities and museums can say thank you properly. We will consult in the coming year on how to encourage the donations of pre-eminent works of art and historical objects to our nation in return for a tax deduction. We will introduce from April next year this major change to our inheritance tax system: if you leave 10% or more of your estate to charity, the Government will take 10% off your inheritance tax rate. Let us be clear. No beneficiaries will be better off as a result of this policy—just the charities, to the tune of £300 million. I want to make giving 10% of your legacy to charity the new norm in our country.

The third reform we make to the charitable taxes is about not the biggest donations but the smallest. We will introduce a new scheme where gift aid can be claimed on small donations, up to a total of £5,000 a year per charity, without the need for donors to fill in any forms at all. That means gift aid on the contents of the collecting tin and the street bucket, and 100,000 charities will benefit to the tune of £240 million. Together, these represent the most radical and most generous reforms to charitable giving for more than 20 years. Do the right thing for a charity, and the Government will do the right thing for you. It is a big help for the big society.

But our charity does not extend to those in our society who seek to avoid paying their fair share of taxes. Tax avoidance and evasion mean that we have to ask more from working families, and that is not fair. Unfortunately, not enough has been done in recent years to tackle this injustice. HMRC estimates that £14 billion was lost through avoidance and evasion in 2008. Today we publish our new strategy paper on tackling tax avoidance and we take specific measures to shut down the open abuses that have been allowed to continue for too long.

We will close down three forms of stamp duty land tax avoidance, tighten capital gains rules for companies, and end the practice of disguised remuneration, which sees highly paid employees offered tax-free, lifetime loans that are never repaid; and we are going to tackle the exploitation of low value consignment relief that has left our high street music stores fighting a losing battle with warehouses in the Channel Islands. In total, on the numbers audited by the independent OBR, the tax avoidance measures in this Budget raise around £1 billion a year—that is £4 billion over the Parliament. We are doing more today to clamp down on tax avoidance than in any Budget in recent years.

That gives us more resources, in a fiscally neutral budget, to help those families who do pay their taxes, but who are struggling with the daily cost of living. We have already taken steps to help from this April. I am glad to report that, following measures in my Budget last year, every local authority in England has chosen to freeze council tax in the coming year. Compared with the amount that council tax could have risen by, this freeze will save a family in an average band D property £72 a year. In two weeks’ time, the child tax credit for lower-income families will increase by an additional £255. I can confirm today that in the coming year all workers in the armed forces, the prison service and the NHS, and teachers and civil servants, earning £21,000 a year or less will receive a pay uplift of £250.

As I said last year, the national insurance rate rise that the last Government announced will have to go ahead, but because we have increased the threshold, it will actually be cheaper to employ people on incomes of less than £21,000 than it is today. That is how we have stopped Labour’s jobs tax. Anyone earning less than £35,000 a year will also be better off because in 14 days’ time, the personal income tax allowance—the amount people can earn tax free—will go up by £1,000. That is the largest rise in our history. That means, in real terms, around £160 extra per year or £200 in cash terms for 23 million taxpayers.

The coalition agreement commits this Government to real increases in the personal allowance each and every year and sets this country the goal that no one earning less than £10,000 should be caught in the income tax net. This Budget today takes another step towards that valuable goal. I can confirm that from April next year, the personal tax allowance will increase by a further £630 to £8,105. That is another real increase of £48 extra per year, or £126 in cash terms—together with this year’s rise, a total of £326 extra money each year for those working hard to pay for their family’s needs. It means that just 10 months into office, this coalition Government have taken 1.1 million low-paid people out of tax altogether. And one more thing: last year, we restricted the allowance increase to basic rate taxpayers; this year, we have not. The result is that no more people will be pulled into the higher rate tax band as a result of this Budget.

Let me turn now to excise duties—first, air passenger duty. Let me be straight with the House: we had hoped that we could replace the per passenger tax with a per plane tax. We have tried every possible option, but have reluctantly had to accept that all are currently illegal under international law. So we will work with others to try to get that law changed. In the meantime, we are consulting today on how to improve the existing and rather arbitrary bands that appear to believe that the Caribbean is further away than California. We will also seek to bring private jets, which pay no duty at all, into the scope of taxation. The wealthiest should not escape the tax that the ordinary holidaymaker has to pay. I can tell the House that with the hefty duty rise last year and with the cost pressures on families, we think it would be fair to delay this April’s air passenger duty rise to next year.

Let me turn to duties on alcohol. We have already announced plans to increase duty on the strongest beers and cut in half the duty paid on low-alcohol beers. Beyond that, I can tell the House I have no further changes to announce to the rates of alcohol duty put in place by the previous Government. As usual, these changes will come in at midnight on Sunday. As announced again by my predecessor, tobacco duty rates will increase by 2% above inflation. However, it is clear that the structure of the tobacco duty regime is being exploited to produce cheaper cigarettes, so we will change the regime to narrow the differential between these lower-cost brands and the rest, and between cigarettes and hand-rolled tobacco. This will reduce smoking and improve our nation’s health. These tobacco duty changes will come into effect at 6 pm this evening.

I turn now to other excise duties. Rates of vehicle excise duty will increase by inflation only and we will freeze rates for heavy goods vehicles to help our hauliers. I am also proposing to increase the approved mileage allowance payments. This mileage rate has not increased at all since 2002, making those who depend on their car for work increasingly worse off. It will now increase from 40p to 45p per mile and I can tell the House that we will extend this relief to cover volunteers travelling as passengers, as charities and others have been calling for for many years.

All other duty rises will remain exactly as planned by the previous Government—except fuel duty. The price of petrol has become a huge burden on families. In the last six months, the cost of filling up a family car such as a Ford Focus has increased by £10. This rise has also hit businesses hard, especially small businesses. It is important that when shocks like the steep rise in the oil price occur, a responsible Government are able to listen and respond.

Let us be clear about what is within our control and what is not, so that we do not raise false hopes. British Governments are not in charge of the world’s oil price, and as we have seen, events like those in the middle east can push the cost of petrol at the pump higher. But British Governments are in charge of the duty that we levy on petrol, and the previous Cabinet put in place, before they left office, a new fuel duty escalator that involved seven fuel duty increases. Three have already taken place, adding just over 3p to the price of petrol. The third step on the escalator is due to come into effect next week, and that would add almost another 5p to the price of a litre of petrol.

I have made it clear that I would listen to the concerns put to me by so many people. Many have suggested that we should use the extra revenues we automatically get from the North sea. It is true that they go up when the oil price rises, but the OBR confirms that rising oil prices also cause other tax revenues across the rest of the economy to fall by a similar amount, and I am not prepared to undermine the public finances like that.

Others in this House have suggested that we create a separate VAT rate for petrol.The Treasury has examined this proposal. It would not fully offset the 5p rise that is coming, and it would take six years to come into effect—and that is because it turns out to be illegal. So I have decided to reject this approach and do something different.

The North sea oil tax regime was most recently changed in 2006, when the price of oil stood at $66. It is now almost double that amount. That means that oil companies are making unexpected profits on oil prices that are far higher than those that they based their investment decisions on. Other oil-producing countries have a tax regime that automatically regulates returns when prices rise. We do not, and the North sea is too mature to introduce such a regime now. Instead, we can do something else: we can introduce a fair fuel stabiliser.

From tomorrow, the supplementary charge levied on oil and gas production will increase from 20% to 32%. Even after this, profits on a barrel of oil are forecast to be higher in the next five years than in the last five years, but this will raise an additional £2 billion of revenue, and we will use the new tax money to do this: first, we will delay the inflation rise in duty planned for next week until next year and also delay the April 2012 inflation rise until the following summer; secondly, the fuel duty escalator that adds an extra penny on top of inflation every year will be cancelled—not just for this year or next year, but for the rest of this Parliament.

But I do not want important investment in the North sea lost, so if the oil price sustains a fall below $75—and we will consult on the precise figure—we will reintroduce the escalator and reduce the new oil tax in proportion. That is how it will work: no escalator when the oil price is high; no extra tax on the profits of North sea oil companies if the oil price falls and stays low. That is the fair fuel stabiliser, and this is the result for Britain’s hard-pressed families: I have made sure there will be no fuel duty rise this year; I have cancelled the fuel duty escalator when the oil price is high; and one final thing, as well as stopping these fuel duty rises, I am today cutting fuel duty by 1p per litre. This will take effect in petrol stations from 6 pm tonight.

I know that by itself this will not end the pressure on family budgets, but we have done what we can to help—help for families, help for businesses: a Government who listen and help. There were some who said that this year my job was to help families with the cost of living, but there were others who said, no, my task was to back enterprise, support business and undertake far-reaching reform to help the economy grow. It is the central understanding of this Government, and core to our strategy, that these are not two separate tasks: they are one and the same thing.

We are only going to raise the living standards of families if we have an economy that can compete in the modern age. So this is our plan for growth. We want the words:

“Made in Britain”, “Created in Britain”, “Designed in Britain” and “Invented in Britain”

to drive our nation forward—a Britain carried aloft by the march of the makers. That is how we will create jobs and support families. We have put fuel into the tank of the British economy. I commend this Budget to the House.

PROVISIONAL COLLECTION OF TAXES

Wednesday 23rd March 2011 Commons Chamber

Motion made, and Question put forthwith (Standing Order No. 51(2),

That pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—

(a) Increase in rate of supplementary charge (Motion No. 8);

(b) Alcoholic liquor duties (rates) (Motion No. 10);

(c) Tobacco products duty (rates) (Motion No. 12);

(d) Amusement machine licence duty (amounts of duty) (Motion No. 13);

(e) Fuel duty (rates from 23 March 2011) (Motion No. 14);

(f) Stamp duty land tax (prevention of avoidance) (Motion No. 49).—(Mr George Osborne.)

Question agreed to.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I now call on the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate on Tuesday 29 March.

Budget Resolutions and Economic Situation

Wednesday 23rd March 2011 Commons Chamber

Amendment of the Law

Wednesday 23rd March 2011 Commons Chamber

Motion made, and Question proposed,

(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation,

(b) for refunding an amount of tax,

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.—(Mr George Osborne.)

13:32

[Edward Miliband (Doncaster North) (Lab)]

The Chancellor spoke for an hour, but one fact says it all, and he could not bring himself to mention it. Growth is down, last year, this year and next year. It is the same old Tories. It’s hurting, but it isn’t working.

What did the Chancellor say last year about growth? “Judge me on the figures.” Well, judge him we will. Every time he comes to the House, growth is downgraded. Last June, 2011 growth was down from 2.6% to 2.3%. In November, it was down again. In January, what did the Prime Minister say? His three priorities for the year were growth, growth, growth. And what has happened in this Budget? Growth is down, down, down. Taking account of all the measures—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We should show the Leader of the Opposition the same courtesy that was shown to the Chancellor of the Exchequer.

[Edward Miliband]

What is the Chancellor’s singular achievement? To deliver a budget for growth that downgrades the growth forecasts. Growth is down this year to 1.8%, and it is downgraded next year too. That did not happen by chance; it happened by choice—the Chancellor’s choice—and it was the wrong choice: to go too far and too fast. In the Chancellor’s own words in the June Budget, he chose to go £40 billion further and faster in tax rises and spending cuts than our plan to halve the deficit over four years. That pace of cuts has seen consumer confidence fall in almost every month since the general election.

In his first Budget, the Chancellor promised

“steady and sustained economic recovery”.—[Official Report, 22 June 2010; Vol. 512, c. 168.]

When last September’s growth figures were published, he took the credit. He called the figures “a vote of confidence” in the Government’s economic policy. But when the economy contracted in the fourth quarter, what did he do? He blamed the snow. Even he must appreciate the irony. While the Prime Minister was grounded from his Christmas trip to Thailand, the Chancellor was on the piste in Klosters. I suppose it was the right type of snow for a ski-ing holiday; it was just the wrong kind of snow for our economy.

What is it about the British snow? There was worse snow in Germany, a big freeze in France, and in the United States the worst blizzards for decades. Despite all that, those country’s economies grew in the fourth quarter. While our growth forecasts have worsened, theirs have improved. [Interruption.] The Chancellor should calm down a little. The German economy is forecast to grow more strongly than last year, and so is that of the United States. Growth in the world economy has been revised upwards. Which is the major country that is downgrading its growth forecasts? The United Kingdom. It is not the wrong type of snow that is to blame, but the wrong type of Chancellor—the wrong type of Chancellor in the wrong type of government with the wrong priorities for Britain—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Courtesy should be shown. The public out there also want to hear what the Opposition have to say. If there are Government Members who do not want to listen, will they please leave the Chamber? The public out there want to hear both sides of the argument. Some people may agree, and some may disagree.

[Edward Miliband]

Government Members shout and jeer, Mr Deputy Speaker, as unemployment hits a 17-year high. What more do we need to know about the Conservative party?

The Chancellor also promised in his June Budget that he would deliver “low inflation”, and what has happened? Inflation has risen, month after month after month. That did not simply happen by accident. It is happening because the Chancellor made the wrong decision on VAT. Same old taxes, same old Tories.

The Chancellor promised us falling unemployment too, and what has happened since he delivered his first Budget? Over 60,000 more people are now looking for work. To this Tory Government, just like those of the past, unemployment is a price worth paying. People who heard the Chancellor’s Budget speech today will wonder what world he was describing. [Interruption.] I think that the Chancellor should listen to this.

In the constituencies of more than 130 Members of Parliament, 10 people are chasing every vacancy. One in five young people is looking for work. Families are seeing their living standards squeezed, not just this year but year after year. What do the Government say to communities that are losing their jobs? Let me tell the House what they recently told the people of Newport, justifying the closure of their passport office. They said that the redundancy payments of the staff who were being sacked would provide a

“boost in trade for the local economy”.

What kind of planet do these people live on? On growth, on inflation, on unemployment, on the promises that he made, the Chancellor could not bring himself to admit that his second Budget tells the story of the failure of his first. At this stage of the recovery, growth should be powering ahead and unemployment should be falling fast. Every month that unemployment is higher than it should be stores up long-term damage for our country. Every month when growth is lower than it should be, that hits the future potential of our economy. The problem is that, instead of admitting it, the Chancellor refuses to change course. What did the Energy Secretary say? If the figures change, the Government

“should not be lashed to the mast”

of their reckless gamble. They should be willing to change and to think again.

It is not as if the Government have not had practice in the U-turn business. Indeed, they are becoming past masters at it. On forests, school sport, housing benefit for those looking for work and even the vanity photographer, they have been forced to climb down. It is on this, the issue that matters most, that they are least willing to change. At the weekend we learned something new about the Chancellor. Apparently, his political aspiration is to be a blend of Nigel Lawson and Michael Heseltine. Another comparison springs to mind. We see the same hubris and arrogance that we saw in the early 1990s, the same broken promises, the same view that unemployment is “a price worth paying”. The Chancellor is Norman Lamont with an iPod, and on his playlist, no doubt, is “Je Ne Regrette Rien”.

This is not a growth Budget. It is not a jobs Budget. It is a Budget for more of the same, from a complacent, arrogant Chancellor in a complacent, arrogant Government. It’s hurting, but it isn’t working.

Let us not forget that these are not just the Chancellor’s decisions, and they are not just the Prime Minister’s decisions; they are the Deputy Prime Minister’s decisions too. He is an accomplice to the Tory plan. When it comes to the economy, the man who coined the phrase “alarm-clock Britain” has the snooze button well and truly on. Nobody voted for this deficit plan, least of all his Liberal Democrat voters, who were told in promise after promise that he would never countenance it. If I can put it this way to him, it is no wonder nobody wants to share a platform with him.

On the measures in the Budget, I welcome the support for the armed forces, and on the measures the Chancellor proposes to support growth, we will look at them but there is little reason to believe they will make the difference to growth that we need. Indeed, the Justice Secretary fell asleep during the Chancellor’s speech, his growth strategy was so compelling. The Office for Budget Responsibility has already factored in every single measure he has just announced, and it still produced today’s downgraded growth forecast.

We cannot blame people for being sceptical when the Chancellor says he has a new flagship policy for growth, because they are asking what happened to his last flagship policy for growth at the centre of his June Budget. Does anyone remember the national insurance holiday? He was strangely silent about it today. In June, he took the credit at the Dispatch Box for helping 400,000 small firms, but how many have actually benefited? He has been strangely shy in revealing the figures, but someone let slip to the Financial Times that by mid-January it wasn’t 400,000, it wasn’t 40,000, it wasn’t even 4,000; it was less than 0.5% of the number he promised, just 1,500 businesses.

On the Chancellor’s incentives for small firms, we will look at the detail, but I have to say that his decision to cancel flexible working for families with children aged between 16 and 18 is extraordinary. This Prime Minister took the credit for championing that policy with Mumsnet, and then a few months later he takes the credit with small business for dumping it. We have to ask, has he got no shame? The idea that families needing flexibility imperil our economic future is, frankly, absurd, and it tells us all we need to know about this Government’s values and how they think our economy succeeds: greater insecurity as the route to greater prosperity. We take a different view. Flexible working is yet another broken promise from the broken-promise Prime Minister.

While we are on the subject of broken promises, let us remember what the Prime Minister said before the election: he said he would be the banker basher in chief. The Chancellor made great play of that in his Budget speech, but the reality is this: last year Labour’s bonus tax raised £3.5 billion—it is in the Red Book—and this year the bank levy raises just £1.9 billion; it is a Tory Government cutting taxes for the banks while they raise taxes for everybody else. He should have used the money from the bank levy to invest in the future jobs fund—which they abolished—to make a real difference to housing in this country and to boost enterprise.

They are failing on growth, and they are failing on living standards too. What did the Prime Minister say before the election to families receiving tax credits? He said that below £50,000 a year, their tax credits were safe. When Labour said otherwise, the Home Secretary said this:

“That is a lie, and it is irresponsible for Labour to be…worrying families needlessly.”

But what is the truth? Next year, over 1 million families with incomes as low as £26,000 will lose all their tax credits. The Government should be ashamed of their broken promises on tax credits.

That is part of the cost of living crisis they are imposing. The Chancellor trumpeted the rise in the personal allowance, and said everybody earning under £35,000 would be better off, but let us look at the facts. He came along in the June Budget and put up VAT, costing families £450 a year. Now he has the nerve to expect them to be grateful when he gives them a fraction of their own money back. What did the Institute for Fiscal Studies tell us this morning? It said:

“there is an awful lot of giving with one hand...and taking away with lots and lots of other hands.”

It is a classic Tory con.

What about their decision on petrol? The Chancellor has done the same thing again. He has cut duty by 1p, but he has whacked up VAT on fuel by 3p. Families won’t be fooled; it’s Del Boy economics. For a two-earner family, both on average wages, it will be 5p up in the basic rate of income tax and just 1p down next year. What do the British people know from history? They know that every Tory tax cut ends up costing them more; same old Tories, same old deceit.

We needed a Budget that changed the direction of economic policy. We needed a Budget that protected the promise of Britain that the next generation does better than the last. We needed a Budget that changed course on cutting too far and too fast. The Chancellor said at the weekend, with his customary modesty, that he had completed his rescue mission of the British economy. After this Budget, it is not the Chancellor who is rescuing the country; it is the country that needs rescuing from the Chancellor. When families look at this Budget—look at the squeeze on their living standards, look at the job losses in their communities—they will conclude: it’s hurting but it isn’t working.

[Ian Murray (Edinburgh South) (Lab)]

On a point of order, Mr Deputy Speaker. A former Chancellor of the Exchequer, Mr Hugh Dalton, resigned in 1947 for leaking part of his Budget to a journalist when on the way into the Chamber to deliver it. Given that we have heard nothing in the Chancellor’s statement today that had not already been trailed in the media on Monday, Tuesday and this morning, please will you, Mr Deputy Speaker, use the good offices of the Speaker to make sure that senior members of this Government make important statements to the House before going to the media?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

The principle is clear, and it will have been heard by those on the Treasury Bench. We must now move on.

13:48

[Mr Andrew Tyrie (Chichester) (Con)]

This Budget will be judged on whether it keeps us on course to tackle the deficit, and on whether it provides a strategy to improve the long-run performance of the British economy. I will mention a number of concerns about the growth strategy shortly, but first let me say that we all need to be clear about one thing: we as a country are living beyond our means, with £1 in every £4 we spend being borrowed. That overshadows everything else today.

Despite all the clash of party cymbals, the gap between the parties on the scale of the action required to reduce the deficit is not so big; at least two thirds of the adjustment had been signalled by the previous Chancellor in his Budget a year ago, and I regret that he is not in the Chamber at present. It was courageous of him to set out that deficit reduction plan and those spending cuts before the election, but he did it, and today the current Chancellor has stuck to his plans to sort out the public finances. That has taken courage too, and he deserves our full support, as he has done the right thing.

I want to make three further points on the deficit. First, the Government are not reducing public expenditure to dangerous levels. At 40% of gross domestic product by the end of the Parliament, it will be returned to broadly the same level achieved by Labour in 2008. None the less—my second point—the retrenchment will feel more painful from this time on. The consolidation in each of the next three years, at about £25 billion to £30 billion a year, is three times the amount implemented in the first year of this Government.

The third point I wish to make on the deficit is that the pressure to flinch will now mount and we simply must not do so, for at least two reasons. First, doing so would cost the country a fortune in higher debt service costs as markets lost confidence in economic policy. Secondly, doing so would mean that the spending lobbies would have a field day and once they smelt blood the Government’s economic strategy would be put severely at risk.

I wish to say a few words about the growth strategy. Today, the Chancellor announced a comprehensive new approach, containing many measures that we should welcome, not least the large list of deregulation measures he cited, the simplification of planning and the measures to improve access to start-up capital. On all those, it is essential that each part of the strategy is consistent with other parts of public policy. Individually, direct measures always sound attractive, but the test is whether they form a coherent strategy. On those grounds, I warmly welcome what amounts to a new agenda for tax reform to create the most competitive tax system in the advanced world. I particularly support the reductions in corporation tax, which will bring it down to 23% within a few years.

It is an absolute disgrace that the UK now has the longest tax code in the world. The complexity of the system is getting in the way of thousands of small businesses in our constituencies—these are the very people who can take us back to sustained growth. We must have a tax system that allows enterprise to flourish. A few weeks ago, the Treasury Committee published a report setting out the key principles that should underpin tax reform. I can summarise them briefly: let us have more simplicity, let us have more stability and let us have lower rates and fewer reliefs, where possible. I note that in this Budget the Chancellor has abolished 43 reliefs and got rid of 100 pages of the tax code, which is a huge step forward. Let us have less meddling in the tax system as well. The Chancellor appears to have set us out in the right direction and it will be for the Treasury Committee and others to judge whether his proposals match up to the principles set out in our report, which match closely what others in the tax advice industry have concluded as being the right way forward.

The Treasury Committee will also examine who gains and who loses from the Budget. Last year, the Committee demanded an unprecedented amount of detail on the distributional effects of the Budget and the Chancellor responded by publishing more information than had ever been provided by a Chancellor before—I commend him for that. This will be particularly important with respect to the plan to merge income tax and national insurance contributions. Successive Chancellors of the Exchequer have examined that beguiling idea closely and in the end rejected it, largely because it hits the incomes of certain groups in unexpected ways. Perhaps its time has come, and the Treasury Committee will take evidence on whether the time has indeed come to implement it. We should also examine a number of other proposals that may have long-term distributional impacts, among which is the encouragement of charitable giving with the sizeable extension of gift aid and the inheritance tax reliefs. I hope that the vast majority of us in the House welcome that too.

The Committee will also do its best to examine the coherence of some of the Chancellor’s other measures when set against wider public policies. I can best illustrate that by alluding to points made to me by colleagues in the House in recent months. For example, the Chancellor announced the creation of 21 enterprise zones, which must be designed carefully to ensure that they create jobs and increase overall activity. The risk with such zones will always be that they distort activity at the boundaries and add no new jobs.

[Robert Halfon (Harlow) (Con)]

I thank my hon. Friend for his thoughtful remarks. Does he not agree that the enterprise zones should be extended out of the cities and into towns such as Harlow, which has a strong scientific corridor?

[Mr Tyrie]

It just crosses my mind that my hon. Friend might have an interest in Harlow. The crucial issue is that if we are to create areas that have special reliefs, we must not inadvertently end up merely moving activity around the country while adding nothing to the overall welfare of UK Inc. That involves a difficult judgment and we need to look extremely carefully at it.

[Jonathan Evans (Cardiff North) (Con)]

My hon. Friend will have heard the Chancellor say that discussions will take place on the position in Wales and Scotland. If the Welsh Assembly were not to follow this policy, the existence of an enterprise zone in the Bristol area might result in that very relocation to which my hon. Friend refers.

[Mr Tyrie]

I note what my hon. Friend says and think that careful account needs to be taken of those points.

Another area in which it is important to have coherent policy is on the cost of fuel. This Budget gives some relief on fuel duty rises, with the cancellation of the fuel duty escalator, among other things. However, while motoring bills are being reduced, other Government policies are putting up the cost of energy for a lot for businesses and home owners in other ways, not least through the price of electricity, and the cost of rail travel is also increasing. Does all this—a reduction for motorists, but an increase for rail users and much higher energy bills—form a coherent policy? I do not know, but that needs to be carefully examined, particularly in the light of the Chancellor’s announcement of a floor price for carbon. All these issues need to be carefully examined, because a distortive energy policy will make Britain less competitive, particularly in our export markets.

In our efforts to return to sustained growth, we need to make the best use of every pound invested in our public services. Another example of the need to make sure we have coherence in growth policy has been put to me by colleagues on both sides of the House. They have asked whether spending £17 billion on a high-speed rail link is better use of the money than investing in modern rolling stock and improving the existing tracks. I suspect that millions of rail commuters who cannot currently get a seat and whose trains are unreliable and relatively slow will be interested in the answer to that question. I am very pleased that the Select Committee on Transport has just announced an inquiry into that matter, as a lot of people will await its outcome.

[Steve Baker (Wycombe) (Con)]

Does my hon. Friend agree that high-speed rail has the potential to be a profoundly bad economic decision for the whole country?

[Mr Tyrie]

What I am trying to do is not answer the questions, but pose them for Select Committees and others to try to answer. I am trying to point out that in order to generate a coherent growth strategy, a large number of policies need to be looked at in the round to ensure that we are not wasting public resources.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

rose—

[Mr Tyrie]

I shall give way to a fellow member of the Treasury Committee.

[Mr Love]

Does it not concern the hon. Gentleman that nothing has been said in today’s Budget about the centrepiece of the Government’s growth strategy—the national insurance holiday for small companies outside London and the south-east? Should we not know more about how that is going and whether it is, in any way, a success?

[Mr Tyrie]

That is an interesting point. As the hon. Gentleman knows, the Committee will be holding hearings next week and we will have an opportunity to take evidence on exactly that point.

I wish to draw my remarks to a close by observing that growth and the deficit reduction strategy—the two issues I have been discussing—will be one and the same thing if a reduction in the size of government allows room for the private sector to grow. I know that this is not something on which agreement will be reached across the House and that it is the very stuff of party politics, but I hope that Members sitting on the other side of the House will permit me to end with a personal view. Even if there were no deficit, we should still reduce public spending because at close to 50% of gross domestic product it is too high. It reduces choice and freedom for millions of individuals, and it burdens enterprises with unacceptable levels of taxation. During the 13 years of the previous Government, public spending averaged about 40% of GDP. I support this Government’s plans to reduce it to that level again.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. Many Members want to speak today—quite rightly—and we want to get as many in as possible. There is no time limit on speeches but brevity would help other people.

14:00

[Sir Stuart Bell (Middlesbrough) (Lab)]

I am grateful for the opportunity to speak early and to follow the hon. Member for Chichester (Mr Tyrie). He made three points that I would like to take up. First, he referred to the reduction in the deficit over the next four to five years and said that he thought that that would cause grave concern and bring great pressure to bear on the Government not to continue with the programme. He is perfectly right: £146 billion will be reduced to £122 billion, which will be reduced to £70 billion, which will be reduced to £26 billion in the years 2015-16. That is a massive and steep drop and will have serious consequences for the public sector, which the hon. Gentleman acknowledged.

In his Budget speech, the Chancellor did not mention the welfare state or the point on which the hon. Member for Chichester finished his speech, which is the balance between the public and private sectors. We will see a clear imbalance between the public and private sectors as regards the question of whether the public sector can shed jobs and whether they can go into the private sector. That is an interesting point that will be followed closely in the north-east of England, where some 47% of employment is in the public sector. We will then see the difficulties and dangers of moving quickly and rapidly with such a massive debt reduction over four to five years.

Harold Wilson once said that one man’s pay rise was another man’s ticket to the dole queue, but the deficit reduction we are talking about today involves one man’s job passing from the public sector to the dole queue. I must tell the hon. Member for Chichester, since he made the point, that he must remember that those who work in the public sector are producers who pay taxes and consume and to remove them from that sector with such a drastic and rapid reduction in the deficit will not add to the prosperity or standard of living of our people.

[Mr John Redwood (Wokingham) (Con)]

The hon. Gentleman should remember that the Chancellor has announced today that over five years, this Government plan to borrow an additional £485 billion—or a 50% increase in official state debt. They are not paying down the deficit or paying off the debt—they are just trying to borrow a little less each year, but it is still adding a huge amount to the national mortgage.

[Sir Stuart Bell]

I was much amused when statements were made about how the debt was reduced, how much we had to pay off and how much the Labour Government borrowed. In the month of February, the Government borrowed £11 billion when they should have borrowed £8 billion. It is perfectly correct that we have mixed up the structural deficit with the overall deficit, but public spending will continue to go up. There was a certain sleight of hand from the Chancellor when he made his Budget speech.

[Mr Kevan Jones (North Durham) (Lab)]

Does my hon. Friend agree that cutting public sector jobs has a direct effect on the private sector? I do not know whether he has seen the study modelling done by Durham university that shows that in the north-east, some 50,000 jobs will go because of public sector cuts, 20,000 of which will be in the private sector.

[Sir Stuart Bell]

I have seen that study. I have also seen the study by PricewaterhouseCoopers about the impact on the north-east of the various deficit reduction plans.

May I, without in the least way being sycophantic, congratulate the Leader of the Opposition? He made a short and precise speech but he hit every nail on the head that needed to be hit. Growth is down. Snow or no snow, we entered into zero growth in the last quarter. Where is growth going this year? It is at 1.7% for the year. How does that compare with Germany, where there is 3% growth?

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Will the hon. Gentleman enlighten the House about when in any recovery from any major asset-based deflation growth has returned within even a five or seven-year period? One thinks of the 1930s, and there was no return to growth until the end of that decade, and of Japan, where there was no return to growth until the beginning of this decade. How can he possibly attribute the situation as regards growth to this Government in such a way?

[Sir Stuart Bell]

I am grateful to the hon. Gentleman for his point, because we have argued consistently—and so has the international community—that we had a financial crisis from 2008 and 2009 and that out of that financial crisis, without referring to tsunamis or earthquakes, there have been many aftershocks and it will take much time to get over that. I agree with that point but it was not us who said that we would raise growth last year—it was the Conservative Government. The hon. Member for Chichester made an excellent point when he said, quite rightly, that under a Labour Government we had 40% debt in relation to gross domestic product. My recollection is that for some years it was 37% and it was the financial crisis that pushed it up to where it was.

[Toby Perkins (Chesterfield) (Lab)]

Would my hon. Friend also say that what is particularly startling today is that, after all the measures we have heard from the Chancellor about in the Budget, the growth forecast has taken place as an after-effect? How bad would the growth forecast have been without those measures? It is still drastically down from what the Chancellor suggested that it would be when he delivered his previous Budget nine or 10 months ago.

[Sir Stuart Bell]

That is the point that the Leader of the Opposition made. I was reminded by those on the Front Bench—I had not got so far in my speech—that if growth is down, inflation is up. The Chancellor made a point about commodity prices going up. They are going up in France, where inflation is 2%. We have higher inflation because of the Government’s policy. We have depreciated the value of our currency over a period of time by 25%. We have increased our exports but we have also increased our imports. Our imports are still greater than our exports. We are now importing inflation. The difference between French inflation at 2% and our inflation, which will run between 3.5% and 5%, is that we are importing it, because of Government policy.

Unemployment is going up; it is at a 17-year high. The Chancellor made a great thing about 3,000 jobs in the manufacturing sector, but he did not refer to all the jobs that have been lost. How many more jobs will be lost when we move into the cuts to local councils that will start on 1 April? How will Middlesbrough council cope with a 28% deficit reduction? How will the national health service cope? We know that we will lose at least 1,000 jobs in Middlesbrough and unemployment in my constituency is disgracefully high. We have the fourth highest unemployment rate in the country and that is wrong. It happened under a Labour Government and under a Tory Government. The cuts that are being announced and those that have been made through the massive deficit reduction programme announced by the Chancellor in his previous Budget will push us further down.

No reference was made, as I have said, to the welfare state. What happened to the welfare state? What happened to the balance between the public and private sectors? What happened to those who are unable to look after themselves? Where was all that in today’s Budget?

[David Rutley (Macclesfield) (Con)]

The hon. Gentleman has talked about what is happening in the north-east. In the north-west, we have seen public sector jobs increase by 100,000 between 1999 and 2009, whereas in the private sector, we have seen growth to the tune of 10,000 jobs in the same period. That is completely unsustainable. What are the Opposition’s proposals to address that situation?

[Sir Stuart Bell]

That might be the figure in the hon. Gentleman’s part of the world, but it might not be a figure in other parts of the world.

Let me get back to the point—we created a balance between the public sector and the private sector and we believed that that balance was right for our country. In the north-east of England, when we lost manufacturing jobs, steel jobs, coal jobs and shipbuilding jobs, they were absorbed into the public sector. Those who worked in the public sector created careers for themselves. My hon. Friend the Member for North Durham (Mr Jones) made this point: there was a relationship between the public and private sectors. They worked together.

[Mr Stewart Jackson (Peterborough) (Con)]

The hon. Gentleman is being most generous in giving way. Can he explain why the Government whom he supported were running a structural deficit several years before the financial crisis?

[Sir Stuart Bell]

We had no difficulty with the structural deficit because we believed in infrastructure projects. We believed in public-private initiatives and off-balance sheet finance, which was exactly the same as what the Germans were doing. At the time, it was thought a fine way of doing things and it is still a fine way of doing things. In my constituency, we got the first public-private initiative in the James Cook university hospital, so we have nothing to regret about what is now called the structural deficit. As I said earlier, the structural deficit is like any other, it is part and parcel of the fullest objective. The right hon. Member for Wokingham (Mr Redwood) was right to say that, while we are tackling that particular deficit, public expenditure in other areas is going up. We need to get the balance right, but that is not happening at the moment.

The Chancellor said that we had moved from fourth in the league of competitiveness to 12th and made a big thing about competitiveness, but he did not mention the eurozone, not surprisingly. He did not mention the conference tomorrow and the day after when the 17 members of the eurozone will get together to create a competitiveness pact. Why are they doing that? Because they wish to increase their growth and exports, and we are in competition with them. We are in competition with Germany and France and we will be in competition with those other countries.

The Chancellor talked about Greece, Portugal and Spain, but why does the fourth-largest economy in the world have to compare itself with Greece, which has a deficit of 150% against gross domestic product, not the 60% or 50% we are talking about? Why does our nation state have to be compared with a small country such as Greece? On that basis, we had £67 billion-worth of deficit reduction in one Budget. Today, the Chancellor was very gracious in saying that, now he has taken all that money out of the economy, he will not take any more out. He might have said, “I’ll do you all a favour: I’ve hit you on the head with one big hammer, so I’m not coming back with another.” How gracious of him to destabilise, within the space of nine months, our economy. That is what he has done and is continuing to do. He will certainly rebalance the economy—away from the welfare state, the public sector and the work force of our country—and he will weaken the fabric of our country. He will weaken the standard of living of all our people.

[Jesse Norman]

It is not the Chancellor who has associated our economy with those of Portugal, Ireland, Greece and Spain, but the international markets. When the Governor of the Bank of England was before the Treasury Committee two weeks ago, he and his team confirmed that without a package of fiscal austerity measures, this country would be borrowing in the international markets at a rate 3% higher than we currently are. That is the Bank’s official position and that is why those difficult measures have been taken.

[Sir Stuart Bell]

I am not going to go down the route that the shadow Chancellor of the Exchequer might have gone down at one stage of attacking or criticising the Governor of the Bank of England. That would not be appropriate for me. The advice that was given to the Government, when they came to government, was very severe and we were compared with Greece.

The hon. Member for Hereford and South Herefordshire (Jesse Norman) makes an interesting point. At what point in our history did we turn over our economy to the rating agencies instead of saying, “It’s only the rating agencies”. When the rating agencies call the Élysée palace, they have a fit of panic there, asking, “You’re not going to reduce our rating are you?” Why did we, as a nation state, give our economy over to a rating agency—to Fitch, Moody’s or Standard and Poor’s? Where was the Chancellor of the Exchequer who stood up and said, “No, I am not going to do that”? The rating agencies had accepted the Labour Government’s deficit reduction plan and were at ease with it. They were happy with the four-year programme and it was the current Government who fell back to the age of Lord Lamont and John Major, whom my right hon. Friend the Member for Doncaster North (Edward Miliband) has mentioned, and ideas such as, “If it’s not hurting it’s not working”.

[David Morris (Morecambe and Lunesdale) (Con)]

Does the hon. Gentleman agree that when John Major left office, he left us with no deficit, unlike the previous Government?

[Sir Stuart Bell]

That is not true and could not possibly be true.

I have just referred to the fact that we borrowed £11 billion in February alone. My point in relation to Lord Lamont and John Major is that if one takes every aspect of the Government’s policy on competitiveness, growth, unemployment and inflation, one sees that they are falling back to where they were in the years between 1979 and 1983 and into 1992. So, it seems that the public sector and the welfare state do not count for much and that what counts is balancing the budget. I am surprised that the hon. Member for Chichester did not go one stage further and say that in five years we might adopt the German approach of balancing the budget completely.

I do not want to hold up the House for much longer, but I want to mention my constituency and say to the Chancellor that we are very grateful that we have an enterprise zone and a local enterprise partnership for Tees valley and that we will work closely with the Government on both of them. The mothballing of Redcar steel mill has been reversed and there is a new buyer taking it over. On Teesside, we will look to the Budget, the LEP, the new enterprise zone and the new steel mill, which will create jobs and bring in £600 million in investment. So, despite the cutbacks and the impact on local councils, the future is bright for Teesside. I am happy to be confident in that future, notwithstanding all the blows that we will take over the next four years.

14:17

[Mr John Redwood (Wokingham) (Con)]

I remind the House that I offer industrial business advice to a Swedish, quoted international industrial group and investment advice to a British investment company.

Some Opposition Members have expressed displeasure that Government Members should have mentioned the circumstances in Greece and Portugal. The Opposition rightly remind us that we have a much bigger economy than those of Greece and Portugal and I am pleased to say that ours is also currently better managed. Those points are important because our public deficit was larger even than theirs, as a proportion of national income, when the big deficit reduction programme started. I praise my right hon. Friend the Chancellor for seeing that his single, central task, day in, day out, month in, month out, year in, year out—indeed, the five-year burden for all of us in the House—is to get that deficit down before it kills our public finances and our economy.

If anyone thinks there is no risk, I invite them to visit Greece, Portugal or Ireland and see what happens when a country ignores a deficit for the best of reasons and says, “I do want to spend a little more on a good public cause so I will borrow it to spend it.” Of course, we all have great causes on which we would like to spend more money. Borrowing is so often the easy option, but when a country gets to the point at which it is borrowing too much, it does not just destroy the general economy and place too big a burden on those who have to pay the taxes and interest charges—in the end, it brings down the public sector as well, with far bigger cuts and far less favourable choices than we have when we take matters into our own hands by planning a steady deficit reduction.

We are debating, in a relatively civilised atmosphere and in a relatively sane and sensible way, an economic position about which there are strong disagreements. However, there is no overall disagreement about the imperative to avoid big rises in bond rates and interest rates and to get on with some kind of deficit reduction. It is particularly poignant that we are having this debate on the same day that the Portuguese Parliament is meeting to discuss not its first, second or third, but fourth package of emergency, deep, damaging public spending cuts and unaffordable tax increases. Such is the plight that its economy has been driven into by reckless overspending and too much borrowing and, of course, by being in the euro area.

[Jesse Norman]

Does my right hon. Friend agree that to answer the question of the hon. Member for Middlesbrough (Sir Stuart Bell), who asked when the rating agencies took over, one need go no further back than 1949, 1969, and 1976 to 1979, when there were runs on the foreign exchange markets under Labour Governments?

[Mr Redwood]

My hon. Friend is quite right, but the Labour party could point to one or two examples under Conservative Governments, so I do not want to be drawn too far down that historical path. We can see what we need to see by looking at the modern reality. As my right hon. Friend the Chancellor said, fortunately, British bond rates—the rate that we have to pay to borrow money for public purposes—are much closer to those in Germany than those in many other countries in Europe. They are under half the level of those in troubled Portugal. The Portuguese 10-year rates went above 8% today. I stress to beleaguered Portuguese parliamentarians, who are battling over whether a general election is the answer to their problems, that if they do not take dire and immediate action, their country simply will not be able to borrow at an affordable rate of interest. They cannot go on spending the extra 10% of national income that we are spending, which is borrowed, to tide us through and get us to better-managed times.

My right hon. Friend the Chancellor, having set out a pathway for tackling the deficit, was right to turn to the question of how he can accelerate growth. The truth of the five-year deficit programme is simple: we need well-above-average growth in the last three or four years of the programme to deliver the numbers in the Red Book, which are similar to those in the Chancellor’s first edition of the Red Book last summer.

To remind the House of the scale of the task, the Government plan to spend £70 billion a year more, in cash terms, in the fifth year of the plan—2014-15—than in the last Labour year; that is not a big increase, but there will be pressures because of it. They plan to get the deficit down by increasing the tax revenue collected in the last year of the plan to an eye-watering £175 billion more than in the last Labour year. We believe that we have seen all the important tax rate rises that the Chancellor thinks are needed to do that; the rest depends on the above-average growth that is still in the official forecasts of the Office for Budget Responsibility.

[Mr Love]

As I understand it, the right hon. Gentleman is laying out why we need a credible reduction in our deficit in the light of the likely market reaction, but is he not concerned about the impact that any austerity programme might have? Although there has been only a limited impact so far in the United Kingdom, as in Greece and as is likely in Ireland, it may be too much, too soon.

[Mr Redwood]

That is absolutely right. The policies that Ireland, Greece and Portugal are being driven to may well not work because they are excessive, but that is the result of going into the euro and following the market pressures that that inevitably produces. I see some Labour Members trying to pretend that that is nothing to do with them, or looking the other way. I remember being a pretty lonely figure in the ’90s when I said that we should never join the euro. I am pleased that my party now seems to be very broadly of that view, and I believe that the other two principal parties in the House have come round to the view that we certainly should not join the euro any time yet, but we have still to receive apologies from them. Surely they must now accept that if Britain had been driven into the euro, as they wanted, we would have broken the euro and broken ourselves. The euro could scarcely contain small economies the size of Greece, Portugal and Ireland, with their amount of debt; it certainly could not have contained Britain comfortably with the level of debt that the previous Government started to incur. It would have found the British banks over-mighty subjects, just as it is finding the Spanish banks rather difficult to tackle.

[Sir Stuart Bell]

I am glad that the right hon. Gentleman added the words “any time yet” to his remarks about joining the euro, because it is inevitable that, over many years, we will join the euro. Tomorrow and the day after, 17 euro states will get together and put forward a proper plan for competitiveness within the euro. For the first time in our history, the United Kingdom is excluded.

[Mr Redwood]

If those countries come up with good ideas, we can adopt them, and if they come up with bad ideas, we would be wise to sidestep them; that is exactly the freedom that I and others have argued for passionately over many years, and that the Government wish to enjoy if all goes well.

The hon. Gentleman also said that the reductions could prove difficult. Believe it or not, I did not become a Member of Parliament to have teachers sacked from my schools or doctors sacked from my surgeries; I want them to be well paid and well funded, and I want sensible growth in numbers where there is extra demand. We are all of that view—it is quite misleading of the Opposition to suggest that some of us do not appreciate that and do not want that for our constituents—but it has to be affordable. It has to be within the power of the free enterprise part of the economy to pay for that out of reasonable taxation in a way that does not damage our growth; that is so important.

The Government have managed to find an extra £70 billion of cash spending for the fifth year of the plan, compared with in the start year. It is crucial that we keep public sector costs down, so that the maximum amount possible can go to improving service and quality, and, in some cases, to improving the amount of service, and the minimum goes on extra costs and extra inefficiencies. All parties will say in office that they want more efficiently run public services, but they have to will not only the end but the means. That is why the reforms on which the Government are embarking are so important. It is crucial that the Government listen, and that sensible criticisms be taken on board, but public services have to be reformed so that we can say to people in five years’ time, “You are getting more for that £70 billion. We haven’t had to cut things that really matter, because we have managed things better and have found a bit of extra money.”

[Jesse Norman]

Is my right hon. Friend aware of the enormous interest in the private finance initiative community in reform of the PFI? A succession of chief executives of PFI companies have asked me, “Why can we not be allowed to save money?” The reason is the enormously expensive procurement process. Not a single school has been built recently that does not have an atrium, and that is because it has been decided that schools, which have nothing to do with corporations, must have corporate atriums. Nothing could be sillier or more resistant to good Government spending.

[Mr Redwood]

My hon. Friend is quite right. Improving the quality and cost-effectiveness of our purchasing is crucial in Government. There are many opportunities; PFI and public-private partnerships provide some good examples, but so does general purchase. It would speed up the deficit reduction if there were a stronger moratorium on purchasing items and supplies where there are already stocks. Any company undertaking the kind of radical turnaround that the country is trying to achieve would immediately freeze all unnecessary purchases and make people run stocks down to save money.

Where I have had answers to my questions on this subject, I have found that the current rate of natural wastage of staff in core Departments is running at about 6% per annum; it was about 4% in the first eight months. Quite a number of those posts have been filled by taking on new people from outside. I urge my friends on the Front Bench to get more of a grip on that, because the easiest way of reducing the administrative overhead on the scale that they want—the least painful way for their staff, who need their morale to be up—is to not replace people who leave and not to make others redundant. We cannot afford the redundancies. If we make greater use of natural wastage, Ministers can say to their staff that it means better opportunities for promotion and a change of job. If the post vacated is not essential, it should be removed; if it is essential, we should appoint someone from inside and remove some other, less important, post. That surely is the civilised, sensible way to tackle the necessary task of cutting the administrative overhead. If the Government can cut their administrative overhead by the very large 30% that they are talking about, it takes the pressure off cuts in the areas where none of us wish to see them—in the schools and hospitals, the front-line services that matter so much.

The question that I was about to ask before the interventions was about the international context. How easy is it going to be for the Government to have the three or four years of above-average growth which are so crucial to the strategy? I must warn those on the Front Bench that I fear that the world background will get more difficult going into 2012 and 2013 than it is at present. There has been a prolonged boom in the emerging market world, and we now see China, India and Brazil lifting their interest rates to very high levels. They are desperately trying to squeeze inflation out of their system, so in a year or so we must anticipate some fall-off in demand and spending power growth rates in those big emerging market economies.

The United States economy will have a good year this year, by the looks of it, on the back of a lot of money printing, low interest rates and other matters. That comes to an end in the middle of this year, so by next year we will see a slower rate of growth in the United States of America as well. Were the situation in the middle east to get worse, and the damage from politics to spread into oilfields outside Libya, we could have another unpleasant external shock on the oil price, which would also serve to impede the growth of the world economy.

The conclusion that I take from this is that the world economy does not look as though it is going to go back into another deep recession—we are not going to have that kind of impossible situation—but the world economy is not going to provide the impetus that it is currently providing. It may not feel that great, but it is providing quite a bit of impetus at the moment. It will provide less impetus next year and beyond. That means that the Chancellor must intensify his pursuit of measures that make the UK that much more competitive and that much more successful.

[Andrea Leadsom (South Northamptonshire) (Con)]

Will my right hon. Friend comment on the importance of improving our export position vis-à-vis the BRIC countries in particular—Brazil, Russia, India and China—and how important a part that could play in our recovery?

[Mr Redwood]

It is a good point. We have heard figures from the Government indicating that we export less to the BRIC countries combined than we do to Ireland, but we have a close relationship with Ireland and we are close neighbours. It is understandable that we export a lot to Ireland and it to us. That figure conceals one important point, which is that British business has probably been a little more active than it suggests, but for various reasons the larger British companies tend to go into India, Brazil and China and set up joint ventures or factories of their own there to service the local market. It is easier to service those markets in that way, for reasons that we need not go into in detail today, but I agree that it would be good if we exported more, and it would be good if we helped small and medium-sized enterprises that do not have the capability to set up factories on the other side of the world to export in their turn.

The devaluation that happened more than a year ago has given us one nasty result, which is a much higher inflation rate than comparable economies, but it has given us one pleasant result, which is that it is very easy to export out of a British base now because British industry is so much more competitive at the current level of the pound. We should have that on our side. Paradoxically, quite a bit of British business in the manufacturing sector is close to capacity, and those businesses are tending to put the prices up a bit to collect a little more revenue and improve their balance sheets because it is not that easy to expand turnover. That is where the things that the Chancellor is talking about are vital and need to be done speedily.

Britain needs to be able to put up factories more quickly and get them into use more quickly. It needs to define the skilled engineers and the other skilled individuals who want to work in an industrial setting rather than in an advisory or City setting, and then expand the capability of their companies as a result. Modern manufacturing requires a very high degree of skills input, talented people and good management. It does not require so many people to operate machines because really good manufacturing now is highly automated. It needs the precision of expensive machinery. Indeed, the easiest way to compete out of a German or a British base is to have highly automated plant, so labour costs are a rather unimportant part of the total cost. The intellectual property content, the skill content and the plant and equipment content are much higher, but they are affordable with a quality product.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

Further to my right hon. Friend’s points, a director from JCB gave evidence to the Select Committee on Education yesterday and said that he had 57 vacancies for engineers that he cannot fill order to ensure that JCB’s products remain globally competitive, reduce energy usage and so on. That, unfortunately, is a legacy of too many years in which we have not delivered the technical, vocational, practical education that is required. Is my right hon. Friend, like me, enthusiastic about the Government taking forward the programme from the Wolf review and supporting Lord Baker with his university technical colleges?

[Mr Redwood]

I am happy with those proposals. The Government are clearly on the right lines and I hope there will be cross-party agreement that we need to raise our game at skills, training and education, particularly in engineering, pharmaceuticals, chemistry and so forth, where we have an advantage and can have a much bigger advantage if we do more. Yes, we need to review how easy it is to buy or build a factory and how easy it is to equip it. Anything that can be done to lower the effect of tax rate on business will make Britain a much more attractive place to be.

As hon. Members know, I take the view that if we set lower rates, we normally collect a lot more revenue. If we want that kind of growth rate, the lower the realistic rate that we can set, the more revenue growth and the more overall growth we will have. It would be a great tragedy to abort the recovery in certain sectors because the tax rate was too high. I am pleased to see the progress on corporation tax. We need to see the details of some of the individual tax schemes and how the carbon tax rebate would work. If we went ahead as trailblazers in Britain and set a high carbon price, we would price our energy-intensive business out of Britain into a less clean or less acceptable venue. It is important that the rebates and discounts are properly thought through, so that at a time when the Government are trying to promote more industry, they are not taxing it too heavily.

[Margot James (Stourbridge) (Con)]

On the competitiveness of British industry, my right hon. Friend has in the past talked of a cut in regulation being equivalent to a free tax cut. Does he welcome the measures in the Budget to have a low level of regulation for new start-up companies and small companies? Does he share my hope that Europe will become more competitive by reducing the regulatory burden that it seeks to impose on British business and business in other member states?

[Mr Redwood]

Of course I welcome that. One of the big barriers to entry and to more effective competition for the large companies in Britain is the weight of regulation, which hits anyone who tries to start up a new business. I have done it in the past and I know what it feels like. One has to raise a lot more extra money because for six months to a year one is just trying to comply in many areas before one can trade. Yes, of course we want sensible regulation. We do not believe in an unregulated world. We believe in the law of contract. We believe that people should have a duty of care towards their staff and their customers, but if there are too many and too detailed competing types of prescriptive regulation, it puts people off and they say, “It’s too expensive. I can’t be bothered.”

[Geraint Davies (Swansea West) (Lab/Co-op)]

But does the right hon. Gentleman agree that the issue for small business today is not so much regulation as liquidity and lending to SMEs by the banks? A constituent of mine, Alun Richards, is on hunger strike. He had a business with net assets and a limited amount of debt, and Lloyds bank came along and withdrew the debt. Now he is going bankrupt because he has no working capital. Does the right hon. Gentleman agree that that is disgraceful, particularly from a bank that is owned by the taxpayer? Poor old Alun Richards wants to run his business, not to be undermined by the banks. What are the Government doing about that?

[Mr Redwood]

Of course I agree that if there is a solvent and enterprising business and it is not getting proper banking facilities, that is very bad indeed. It is particularly bad if it is a state-owned or state-influenced bank that is responsible.

My final points are about banking, as time presses and many others want to speak. Of equal importance to the weighty matters covered by the Chancellor today will be the Vickers report and the Government’s response to it. I believe that we will have interim conclusions from Sir John Vickers on 11 April. We are not going to have fast, sustained, above-average growth in this country unless we sort out the banks a little more than we have done so far. All colleagues in the House are united in having individual cases where they feel a company could have been saved or could have grown more rapidly if only there had been more sympathetic or understanding bank managers and facilities. There is a problem with British banking serving the SME sector town by town, county by county. There is a lot of talent in the banks, concentrated at the national level and in the big national accounts. Many hon. Members like to knock those people, but they made an important contribution to the growth rate under the previous Government and to our economy.

[Andrea Leadsom]

In the last quarter of 2010, lending to the SME sector dropped by 38% from the last quarter of 2008. One of my big concerns is that this reflects the incredible concentration of SME lending among the four or five largest banks, which are responsible for around 90% of all SME lending. Does my right hon. Friend agree that the work of the Vickers commission and the Treasury Committee should focus on breaking up the oligopolistic positions of some of those big banks?

[Mr Redwood]

I certainly hope that when we see the Vickers report and have a proper debate on it we will be able to find sensible ways of promoting much more competition in the domestic banking market. We need more competition on the high street for individuals and families and more competition in town centres for SMEs, which in previous generations probably had better and more direct relationships with local bank managers, who had a bit more authority to grant loans and make money available on judgment than is currently the case through the box-ticking, centralised computer systems.

[Geraint Davies]

In that case, and given the last intervention, does the right hon. Gentleman agree that perhaps the Budget should have introduced tax relief or tax credits for individuals wanting to invest in SMEs, because venture capitalists want too high a return and the banks are failing the small business sector? We want an inclusive economy. Surely there should have been some support for SMEs so that we could all invest in small businesses more effectively.

[Mr Redwood]

That is exactly what the Budget contained. I think there was a revamped and revised enterprise investment scheme and an improvement in the capital gains treatment for successful entrepreneurs. It is always nice for new people setting up small businesses to be able to dream, and why should those of them who are successful not keep the proceeds if they have created jobs and done so much?

The outcome of the Budget will depend on two important considerations: whether we can put enough measures in place along the lines that the Chancellor has laid out for promoting growth; and whether there is a happy and sensible resolution to the banking problems as they affect SMEs and the wider public in Britain. There has been much discussion of the big banks, the investment banks and all those sorts of issues, but we now need to laser in on how the banks serve local communities and the SME sector. We need a more pro-competitive answer. I have some thoughts on how we could do that, but will not detain the House with them because today is not the day for that. However, without such measures the Budget will find it difficult to deliver the very large figures for increased revenue on which the whole plan rests.

14:43

[Sammy Wilson (East Antrim) (DUP)]

I appreciate being called so early in the debate, Mr Deputy Speaker. In Northern Ireland we are in competition with neither the Conservative party nor the Liberal Democrats when it comes to elections, so I suppose I can afford to be a little more objective in my assessment of the Budget. As we know, the allies of the Conservative party in Northern Ireland have now abandoned them, and the hon. Member for Belfast East (Naomi Long), who had some association with the Lib Dems, has abandoned them since coming to the House, so I hope that I can be objective on this.

The Chancellor made it clear in his speech today that his ambition for the Budget is that it should promote growth in the economy, and I wish him well in that. Coming from a part of the United Kingdom where growth has been most sluggish and, as a result, unemployment is rising faster than in any other part of the UK, I know that success for the Chancellor will mean success for our economy. It will reduce the deficit so that huge resources will not go simply on paying interest, put people back into work, increase living standards and, in the long run, provide funding for vital public services.

I wish the Chancellor well in that, but I think it is a little ironic that the Budget has been headlined as a Budget for growth, because one of its major statistical announcements is that growth forecasts have been downgraded once again. Indeed, the Chancellor optimistically indicated last June, and again in October, that the measures he would undertake would give us growth of around 2.5% or 2.3%, but in the six months since then we have had a 33% reduction in his forecast. There is a certain degree of irony in that, which is one of the reasons I believe that some of the criticisms that have come from the Opposition about the speed and depth of deficit reduction have some merit. I remember that when I used to teach economics I would say that there are always two sides to the economic growth coin. First, there is the question of how to increase the economy’s potential to produce more. If we do not increase potential, once demand goes up, all we get is inflation, or we will suck in imports.

The Chancellor outlined a number of measures today—I will not go through them all—some of which are contradictory. The measure that he held out as the beacon at the start of his speech was the decrease in corporation tax, which he argued will give firms the ability to keep more profits and, therefore, the opportunity to invest in new equipment, new markets or research and development. According to the Red Book, the decrease in corporation tax should put £1.075 billion into the coffers of companies over the next five years, so it could certainly be argued that the Chancellor has released resources for companies to invest if they choose to do so.

However, on the next page we see that, as a result of wanting to be a trendy green, or I suspect of looking for a stealth tax, he is imposing a carbon floor price. By 2015, all the additional revenue that firms will have from the decrease in corporation tax will be more than absorbed in the carbon price floor tax—£1.41 billion. On the surface, the measure appears to be a way of releasing resources to companies, but closer examination shows that companies will not be much better equipped.

[Stephen Williams (Bristol West) (LD)]

Will the hon. Gentleman concede that the whole purpose of a carbon tax is to incentivise firms to change their behaviour so that those that do change their behaviour by producing goods more sustainably will pay less carbon tax and benefit from reduced corporation tax and those that do not will pay more?

[Sammy Wilson]

That is clearly not what the Chancellor intends, because he hopes to raise £1.4 billion. If the hon. Gentleman is saying that this is all about changing behaviour so that firms do not get the money, there is an immediate hole in the figures the Chancellor is presenting to the House today. I suspect that it is not all about that at all, but is another way of raising tax. What appears on the surface to be a good supply-side measure will be more than offset by some of the other measures undertaken. Of course, the kinds of firms that are most likely to be hit by this are the very firms that the Chancellor says he wishes to promote: those in manufacturing industry. The service industry will not be hit by those measures as much as manufacturing will, and, given Northern Ireland’s reliance on gas and oil to fuel and power manufacturing industry, and the fact that our energy costs are already higher than in other parts of the United Kingdom, that will gravely disadvantage manufacturing firms in Northern Ireland, at the very time when the Executive in Northern Ireland is trying to rebalance the economy.

[Sajid Javid (Bromsgrove) (Con)]

The hon. Gentleman started his speech by saying that he would provide a more objective analysis, and I was excited by that. In that vein, does he accept that the Chancellor’s announcement that, for the first time, as a major departure from corporation tax policy, he would consider a separate tax rate for Northern Ireland, making the whole Province an enterprise zone, is very welcome and could help with some of the things that the hon. Gentleman is pointing out?

[Sammy Wilson]

I wish to come to that point later, but I hope the hon. Gentleman will accept that my comments so far, at least, have been objective, because they are based on the figures that the Chancellor has provided.

The Chancellor talked about another measure today for encouraging growth, the enterprise zones that the hon. Gentleman mentions. When we look at the figures in the Red Book, however, we find that in the first year, 21 enterprise zones will eventually be in place but the money made available to businesses as a result of tax exemption will amount to £20 million. By the final year, the figure will be £80 million, and I do not know whether £4 million in each zone will generate a great deal in additional output.

[Mr Kevan Jones]

In 2009-10, the budget for the nine regional development agencies in the UK was £2.2 billion.

[Sammy Wilson]

That probably puts it all in perspective. The measure looks good in the Chancellor’s speech, but, when one looks at the resources that it releases, which in turn are supposed to increase the willingness of firms to invest and the productive potential of the economy, one sees just how miniscule it is, and we have to judge whether it will make a very great impact.

[Mr Nigel Dodds (Belfast North) (DUP)]

My hon. Friend speaks with great expertise as the Minister for Finance in Northern Ireland, and I congratulated him on the production of his budget there just a few weeks ago. Does he share my concern at the response from the Secretary of State for Northern Ireland, during Northern Ireland questions? When asked about the enterprise zone and the real substantive changes, he said that it was really a phrase he had been using to “cover”—that is the word he used—the idea of Northern Ireland being more open for business in relation to corporation tax. Does my hon. Friend share my concern that, in Northern Ireland, there might not be much substance to that phrase?

[Sammy Wilson]

My fear is that, not just in Northern Ireland but throughout the United Kingdom, the measure will be more like a branding exercise and good for a soundbite, rather than something that will have any real impact. I hope that the measure has an impact, but, if I look at the amount of resources that will go into the zones, and at what really is required to lift such areas, I fear that it will not.

Other changes have been mentioned, such as those to the tax structure, and I noted what the Chancellor said, but some of them might not include extensive consultation—the issue is complex—and might be years away. So, again, they look good in the Budget, but what is the immediate impact going to be?

[Helen Goodman (Bishop Auckland) (Lab)]

On that point, it is interesting to look at the changes to national insurance contributions, which are forecast to have an impact right out to 2016, because they show that the proposed bringing together of the two taxes—national insurance and income tax—will not happen for at least five years.

[Sammy Wilson]

I hope I am not quoting the Chancellor wrongly, but I think he talked about nine years in the future before those changes have an impact, so again we have to ask, “What is the impact going to be?”

[Dr William McCrea (South Antrim) (DUP)]

Does my hon. Friend agree that the Chancellor missed a vital opportunity for the Northern Ireland economy today? Does my hon. Friend think it right that a £7.5 billion loan from the British Exchequer to the Government of the Irish Republic should be used to enable that Government to abolish air passenger duty, which in turn gives them an unprecedented competitive edge on flights, bearing in mind that it impacts on my constituency and the international airport in it?

[Sammy Wilson]

I am a bit miffed, because I wanted to use that point later in my speech, so I will have to scribble it out. When we look at some of the issues, whether they are the delays, the amount of money being put in, the offsetting of increases in taxation when some tax cuts have been made, the regulations or the consultation that has still to take place with Europe to see whether we can reduce red tape, we have to ask whether the predictions for future growth based on the supply-side measures in the Budget are as fragile as the autumn predictions that were wiped out by a fall of snow. If that is how fragile the predictions are, then I have concerns.

There is another side to the coin, because not only do we have to increase the productive potential of the economy, but people must be willing to purchase the goods that can be produced, and aggregate demand can be made up of several different factors. The Government have already ruled out one for very good reasons, and I accept that the deficit has to be reduced. I may have some issues about how quickly it is being reduced, but the one thing we do know is that Government spending is not going to take up the slack that already exists in the economy.

Consumer spending is not going to take up the slack, either, because the Chancellor made it quite clear that he would not make any tax giveaways. Indeed, if one looks at what he said about the indexation of direct taxes, one finds that he has now built automatic increases into the tax system for the next four years. There will not be discretion on a year-to-year basis; inflationary increases are now built into the tax system.

That leaves investment demand and exports, and it seems that the Chancellor is emphasising the role of exports. Given that over the past year and a half the exchange rate has fallen by 20%, our export growth is still one of the weakest among the OECD countries. Investment might improve competitiveness, but the only direct measure that the Chancellor has produced today is the export credit guarantee. I have quickly looked through the Red Book to see how much the guarantee involves, and I cannot get a figure, but that is the only measure to increase the one component of aggregate demand on which the Chancellor is relying to improve growth in the economy.

If we look at the supply-side measures and the lack of demand-side measures, we have to ask, “Can we really be confident that this is a Budget for growth?” The conclusion that I come to—not because I want to take a pot-shot at the Government, but because I want to get in behind the figures to see whether the hope being held out is genuine—is that I am left with some concerns.

[Mr Graham Stuart]

The hon. Gentleman is right to be sombre because of the situation the country is in. The Chancellor mentioned what is happening in other countries, and we are in a fragile position because of the appalling inheritance. The growth predictions, however, are no longer the predictions of a politician; they are the predictions of the OBR. We are in a very fragile state, and it is no wonder that predictions change, but the prediction is that over this Parliament this country’s growth will be higher than the EU average. That, considering where we started, would not mean golden times, but it would be a solid achievement.

[Sammy Wilson]

Of course, the earlier growth figures were also OBR-ified, if one wants to use that term, yet they did not prove to be realisable over a six-month period. We cannot simply rely on the assurances that the OBR has looked at the figures and thinks they are okay, as there could well be a revision. I am merely pointing to some aspects within the Budget document that give me cause for concern as to whether these growth figures can be achieved. If they cannot, there are implications for the deficit, for employment, for living standards, and for the ability to provide public services in future.

Let me turn to some of the measures that apply to Northern Ireland. As we heard in an earlier intervention, tomorrow morning an announcement will be made about the corporation tax proposals for Northern Ireland. I am waiting to see that. I have no doubt that the ability of the Northern Ireland Administration to reduce corporation tax could be a useful lever. As a Unionist—I know that the hon. Member for Dundee East (Stewart Hosie) will probably be totally appalled that anyone from a devolved Administration should say this—I do not want to see huge fiscal powers devolved to Northern Ireland. I am part of the United Kingdom, I want to remain part of the United Kingdom, and I wish fiscal powers to stay part of the United Kingdom.

There has been a groundswell of opinion for some variation in corporation tax; indeed, the Secretary of State for Northern Ireland has been very enthusiastic about it. However, there is no point in devolving corporation tax if the price tag attached is such that it savages public expenditure, which has already suffered a huge cut as a result of the Budget decisions made last October. There would be a gestation period between a reduction in corporation tax and the impact on jobs on the ground, whereas any cut in public spending or in the block grant would take immediate effect. There would be no increase in private sector employment, together with an immediate decrease in public sector employment, and that cannot be good for economic recovery.

I fear that the figures in the document that we have tomorrow will be neither a fair reflection of the cost of devolving corporation tax to Northern Ireland nor the kind of opportunity and offer that would be attractive to the Northern Ireland Administration. We will want to see that the Treasury and the Government have not made a savage reduction in the block grant even though it bears no relation to what the real cost of devolving corporation tax might be.

[Mr Dodds]

Does my hon. Friend agree that there is a supreme irony in the fact that as part of the conditions for the bail-out of the Irish Republic—£6 billion of UK taxpayers’ money—the Irish Republic insisted that its corporation tax rate would stay at 12.5%, yet Northern Ireland, which, uniquely within the United Kingdom, is in direct competition with the Irish Republic, would be allowed to reduce its corporation tax but would not receive any similar subsidy from the UK Treasury, whereas the subsidy is going directly to the Irish Republic?

[Sammy Wilson]

We can see how the bail-out of the Irish Republic conflicts with what is happening in Northern Ireland. My hon. Friend the Member for South Antrim (Dr McCrea) mentioned air passenger duty. I am disappointed about this because the Chancellor could have done something about it. In particular, the one flight between Northern Ireland and North America is very important in attracting not only tourists but inward investment. A sum of £2.1 million would have ensured that that flight continues, yet the Chancellor did not find that he could allow for regional variation. There are precedents for that because regional variations are allowed for Scotland. The irony is that the Irish Government, using the £7.5 billion that was obtained from the United Kingdom, are now going to abolish air passenger duty, which places them at an even more positive advantage regarding the service that flies from Northern Ireland.

[Mark Durkan (Foyle) (SDLP)]

Will the hon. Gentleman acknowledge that the Irish Government had made the decision about air passenger duty before any loan facility was agreed with the UK Government—and I stress that it is a loan facility?

[Sammy Wilson]

I find it strange that the hon. Gentleman should want to apologise for the Irish Republic, which is in direct competition with the economy of the area that he represents, but we will leave it to his constituents to question him about that.

The Chancellor has made much of the fuel duty escalator. Northern Ireland does not have the highest fuel prices in the United Kingdom, but it certainly has the second highest, and we also have the problem of the border with the Irish Republic. I would have hoped that the Chancellor would come through on the promise that he made when he was in opposition. We have a promise that future price increases will be deferred, but the impact on current prices will be very slight. That leaves Northern Ireland, with its high dependence on road transport for its manufactured goods and its dispersed rural nature, at a disadvantage.

I acknowledge that the Government have responded to some developments recently. I look forward to seeing the outcome of the aggregates levy and the allowance that has been made. I welcome the fact that the loan facility for the Presbyterian Mutual Society has been built into the Budget. In his concluding remarks, the Chancellor said that he would put the fuel in the tank of the British economy so that it could drive forward. I may be about to show my age, but I hope that it is a tiger in the tank so that we finish up with a tiger economy. I fear that we are going to run out of fuel very quickly, and we will all be poorer for it.

14:59

[Mr Robert Syms (Poole) (Con)]

I should like to draw Members’ attention to my declaration in the Register of Members’ Financial Interests in case I stray into the subject of property or something similar.

The situation at the end of the previous Government’s time in office was unprecedented in international terms. The way that they handled things in their last 18 months was not too bad. They went down to 0.5% interest rates, allowed the automatic stabilisers to come in, and allowed the pound to devalue, as we could because we still control our own monetary policy. Everything possible was done to adjust to the dire situation in the banking system.

To be less complimentary, the regulatory regime that allowed the banks to do some of the things that they did was set by the former Prime Minister when he was Chancellor by taking powers away from the Bank of England. That was a retrograde step, and I am glad that the current Government are reviewing it. Before we hit trouble, the deficit was 3%, whereas the German economy had a surplus of 3%. The difference that we can see today is that the Germans have a deficit of 5% or 6%, while we have one of nearer to 10%. That means that the adjustments we will have to make over the next four or five years will be much more difficult, and it will take longer to get there.

[Mr Kevan Jones]

I accept the hon. Gentleman’s point about bank regulation, but he has a very short memory, because I remember being in this House when the current Chancellor and Prime Minister were calling for more light-touch regulation of the financial industry, not for more regulation, as they seem to be doing now.

[Mr Syms]

It was nothing to do with light-touch regulation; in fact, we needed more competent regulation. The Financial Services Authority was not up to the job, and the Bank of England would have done a better one.

The key thing is that we now have a great imbalance in our economy. Over the long term, Britain has always tended to have public spending of about 40% of GDP, taxation of about 40% of GDP, and a national debt of about 40% of GDP. We have always managed to grow and export, and to be a fairly successful economy. We now have to yank public spending and the deficit back to those sorts of levels. As was pointed out earlier in the debate, even after five or six years, we will only be back down to where we were towards the end of the Labour Government when we had to go into deficit to deal with the difficult economic situation.

I think that the Government’s response is sensible. It is planned over five or six years, and is gradual. For all the talk of expenditure cuts, the expenditure cuts will be gradual over that period. The plan, as the Chancellor set out today, is for the economy to grow. That should generate more tax revenue. The difficulty, of course, is that we will have to raise taxation, as can be seen in the plans, to help balance the budget. I hope that that is more of a short term, rather than a medium to long term thing, because we need to build incentives back into the British economy.

[Helen Goodman]

On that point, has the hon. Gentleman not noticed that table 2.1 on page 42 of the Red Book shows that, over that period, personal tax allowances will increase substantially, because the switch to CPI and the changes to national insurance outweigh significantly—by several hundred million pounds—the increase in personal allowances that the Chancellor made? This is a tax-raising Budget, not a neutral Budget as he said.

[Mr Syms]

The key fact is that the Government whom the hon. Lady supported left us with massive debts. There is no honest or honourable way in which we can deal with that problem, other than taking tough decisions, which will involve many of our constituents paying considerably more money. Over the next five years, unfortunately, more money will come in through taxation. There is no way around that. That is the legacy that Labour has left us. If we want to be responsible, to get the economy back into balance and to have long-term economic growth, we have no choice but to take tough measures.

[Richard Fuller (Bedford) (Con)]

Does my hon. Friend agree that the previous Government were the worst villains in fiscal drag that this country has ever seen? They failed to raise thresholds year after year, and dragged many taxpayers into higher income tax brackets.

[Mr Syms]

My hon. Friend makes a good point. I welcome what the Chancellor has done with the personal allowance and the £10,000 target. If a central part of the Government’s plans is welfare reform, it is inevitable that we must reduce the tax on the lowest-paid. Otherwise, we will not get people off welfare and into work, which I think is what all of us want.

I will touch on one or two measures, but I do not want to take up too much time. I welcome the Government’s plans to assist the housing market. I wish they had gone farther, because there is a lot of capacity in the housing market, which could provide more jobs and help to get the economy going. However, what the Chancellor announced was very good.

I welcome the Chancellor’s proposals on charities. Poole has one of the biggest charities in the UK, the Royal National Lifeboat Institution, which raises a considerable amount of money from bequests. People getting relief on inheritance tax will be a major boost to that charity and to many others.

I welcome the move back to enterprise zones, because we have to become an enterprise economy. One lesson of the last decade is that we do not want to rely on an overheated south-east and London. We must ensure that future growth is balanced so that it occurs in greater Birmingham, Manchester, Leeds and many of our great provincial cities. What the Chancellor announced will assist in that.

The Government are doing what they can to help people, with limited room for manoeuvre, by putting off the fuel duty rises and freezing council tax. We have a difficult inheritance and the Chancellor has precious little room for manoeuvre. He started his Budget speech by saying that this is basically a neutral Budget. I think that it is right to have a neutral Budget. In some respects, it would be better not to have a Budget at all, but just to let the long-term plans of the Government roll on. That gives the best hope of getting the economy sorted, and of restoring growth to the British economy.

We have heard debate about the OBR forecasts. They are forecasts and will change several times before we know what the situation is. I think that we have an excellent chance over the next four or five years to get growth. I think that the Government’s strategy is right. They are concentrating on training and simplifying the tax code. Hopefully, when we can, we will start to reduce the rates.

15:14

[Dame Anne Begg (Aberdeen South) (Lab)]

At the end of every Budget speech, the Chancellor has to pull a rabbit out of the hat. I will begin my remarks on the rabbit that I was not expecting today. It is something that will affect my constituency. Because I have been sitting in the Chamber since the Chancellor made his speech, I have not been able to quantify exactly how it will affect my constituency, but I have great fears that it might have a devastating effect.

I should explain that as a Member for Aberdeen, the economy of my constituency is based on the offshore oil and gas industry. I should also explain that I am the chair of the all-party group on the offshore oil and gas industry. Aberdeen has survived the downturn probably better than anywhere else, because the oil industry has been fairly buoyant. Unemployment in my constituency has risen from only 1.9% to 2.5%. I appreciate that that will sound very good to many Members. I fear that because of the rabbit that the Chancellor pulled out of his hat, that may not continue.

I speak, of course, about the fair fuel stabiliser. I think that that has the potential to destabilise the offshore oil and gas industry quite dramatically. I appreciate that the Chancellor was looking for something so that he could bring down fuel prices. However, it appears from the Red Book that huge amounts of money will come from the North sea. Apart from in the financial year 2011-12, in which the amount that will be given back to the taxpayer is £1.9 billion and only £1.78 billion will come in from the North sea from the increase in the supplementary charge, in every other year more will be raised by the Exchequer from the North sea oil and gas industry than the Chancellor will give away by bringing down petrol prices.

[Helen Goodman]

I also noticed that very interesting line in table 2.1—line 28. It shows that the proposed revenue stream is the same in every year. However, as the Chancellor said, that will depend on the oil price. Unless he is absolutely confident that the oil price will remain at the same level throughout the period, these are completely unfounded forecasts and estimates.

[Dame Anne Begg]

Indeed, if the oil price goes up, the amount that the Chancellor gets will go up. These must at best be guesstimates. Therein lies the problem for the offshore industry. The North sea is a mature province, but there is still a lot of oil left. In fact, there are probably as many known oil reserves in the North sea today as there were in the 1970s, but they are much harder to reach and more challenging to get out of the ground. The one thing that the offshore oil and gas industry needs is stability—stability in what the Chancellor is going to do. The last time the tax revenues for the offshore industry were changed, by the last Labour Government, there was a slowdown in the industry for a good two years before it recovered. The industry complained about the unexpected nature of that change and the fact that it was not able to plan for it. This change comes into effect from 12 o’clock tonight, so it will come as a huge shock to the offshore sector that it will be affected.

[Mr Kevan Jones]

Does my hon. Friend recognise, given her expertise on the oil industry, that investment in exploration is long term? In some of the fields that she is talking about, planning and investment can take up to 10 years. A fluctuating oil price will make such decisions very difficult. That will have a direct impact on Tyneside and Teesside, which are strongly supported by the supply industry for North sea oil.

[Dame Anne Begg]

I could not agree more. In fact, I believe that 200 constituencies have 50 jobs or more that are directly related to the supply chain of the offshore industry. The change will come as a big shock out of the blue, and I do not think people are prepared for it.

As my hon. Friend suggests, in its long-term planning, the offshore sector tends to use an oil price of between $50 and $60 a barrel. In other words, it projects a stable oil price in its forward planning. That is clearly not the real situation, because sometimes the price dips below that level and sometimes, as at the moment, it goes up to $100 a barrel. The fluctuation of the oil price makes the sector’s long-term planning difficult, and the Chancellor has added another factor that will fluctuate, making the situation even less stable. To call it a fair fuel stabiliser is a complete misnomer.

[Brandon Lewis (Great Yarmouth) (Con)]

Like the hon. Lady, I represent an area in which the oil and gas industry is prevalent. Does she agree that the measures that the Chancellor has taken today deal with the problem that arises when there is effectively a windfall for companies because of oil prices? In the long run, the change will be neutral to the taxpayer and the companies will not be at a loss. It just deals with what are effectively windfall profits that they have received because of the current high oil prices, to the benefit of the consumer.

[Dame Anne Begg]

With all due respect, that is not how the Chancellor has sold it. Even if there has been a windfall, perhaps it would have been better had he given some warning of the change so that people in the oil industry in particular could have taken account of it in their planning.

When we look at the Red Book, we see that the change is not tax-neutral. It states that by 2012-13, the tax raised will be £2.2 billion, and that it will be £2.1 billion the following year. The Chancellor is expecting to raise more than £2 billion a year—a much larger amount than is being given back to the consumer who buys petrol at the pump. Line 6 on page 42 of the Red Book shows that the Chancellor is taking more from the offshore oil and gas industry than from the banks, by a factor of 10.

[Helen Goodman]

I am grateful to my hon. Friend for being so generous in giving way. The other interesting thing in those numbers is that whereas the Chancellor claimed that the banks would not benefit from the corporation tax change, we can see from the Red Book that corporation tax reliefs will rise over the period in question but the bank levy will absolutely collapse.

[Dame Anne Begg]

Indeed, the bank levy will come down to just £100 million by 2015-16.

The change to the oil and gas charge has come as a bit of a shock, and it worries me. From looking at the Red Book, I am getting more and more worried about what the Chancellor has announced today. The Red Book states:

“The Supplementary Charge on oil and gas production will therefore increase to 32 per cent from midnight tonight.”

There was no warning, and it will have come as a big shock to the industry. The effect could be dramatic in my constituency. I only hope that the Chancellor has thought the matter through and had some discussions with the industry. I suspect he has not, and I am worried about what will happen.

I wonder what other nasties are lurking in the Red Book. Last time it was the 10% sanction on housing benefit when someone had been out of work for a year, which we did not discover until days afterwards. I am glad that the Government have backed down on that and that today’s Red Book shows that money again.

From a cursory glance at the Red Book, I discover something that comes as a bit of a surprise to those of us who were here for Prime Minister’s questions today. The Leader of the Opposition asked the Prime Minister why the Government were taking the higher-rate mobility component of disability allowance from people living in residential care. Those who were here will remember that the Prime Minister replied, “We are not”—a simple, straightforward answer. However, line d on page 44 of the Red Book is about the plan to

“remove mobility components for claimants in residential care from April 2013”,

with a figure of £155 million to be saved. That is different from the last Red Book, which stated that the change would come in in 2011-12 and save £135 million. All that the Government have done is delay it by two years. As the Leader of the Opposition pointed out, the change is still in the Welfare Reform Bill, and here it is in the Red Book. Perhaps the Prime Minister might want to come to the Chamber and apologise for not having been as accurate as he might have been.

[Richard Fuller]

For clarification, has the hon. Lady checked the following page, page 45, which mentions the disability living allowance reform gateway funds, which will kick in at £360 million in 2013-14 and rise to £1.45 billion? How does that match the figures that she has given, if at all?

[Dame Anne Begg]

They do not match, because they are totally different things. In fact, the Prime Minister did not quite understand that. The DLA gateway is about tightening up the criteria for those coming on to DLA. That will come in with the introduction of personal independence payments. The reform of the gateway is totally different from taking DLA away from people who live in residential care. By any criteria, such people would qualify to get through the gateway. The Government have decided that they will not get the money because they live in residential care, not because they do not fit the criteria.

[Richard Fuller]

I am grateful to the hon. Lady for that clarification. I am sure she will recognise that there are hon. Members on both sides of the House who share concern about the continuation of the mobility component of DLA. I believe that Ministers are looking for a way to both maintain the mobility component and expand personal payments, so that people with disabilities who live in care homes continue to receive the funding that they require for a decent living. If that is not included in the Budget, I will be very interested to talk to her about it.

[Dame Anne Begg]

What I have said is based on a cursory glance at the Red Book, but the evidence from the Welfare Reform Bill, which states that those in residential care will not get higher-rate mobility DLA, and from the Red Book makes it appear that the Government still intend to take the mobility element away from such people, albeit two years later. Those of us who said that the proposal was unfair thought we had won the battle, but it now appears that we have not won it at all. I am grateful to the hon. Gentleman for his intervention, because I know that Members of all parties objected to the proposal. I hope that he will put pressure on his Government to reconsider the matter.

I wish to say a wee bit about the merging of national insurance and income tax. It was trailed slightly in the press, but we needed to find out what it meant in reality. The Chancellor said it would not be the end of the contributory principle, but it is very hard to see how it cannot be. There needs to be a debate about the future of that principle, because other measures that the Government have taken have undermined it. People are quite shocked about what is happening, having paid their national insurance all their lives thinking that they were paying into an insurance scheme and that they would get money out of it when something went wrong. People get only six months’ jobseeker’s allowance of £65 a week as a result of their NI contributions when they are unemployed. Under the Welfare Reform Bill, people will get only one year’s sickness benefit under the new employment and support allowance as a result of such contributions. Most people assume that they get the basic state pension because of their NI contributions. That is the big one, because people are quite happy to pay their NI contributions for that, but the Government plan to introduce a flat-rate, £140 a week state pension. Such contributions pay for the basic state pension state and the earnings-related pension scheme as well as pension credit, and everything then gets divided out.

It is difficult to see how pensions can be based on a contributory record, as the Red Book says they are, if everybody gets the same. The Work and Pensions Secretary said a couple of weeks ago that he will introduce the flat-rate pension, and that that will help women, but it will do so only if it is not dependent on contributions. The Government cannot have it both ways. Either people get the flat-rate pension based on their working record and NI contributions, which will be part of income tax, or they get it because they have fulfilled other criteria, such as residency. The country and all parties in the House need a proper debate on how we fund welfare, the basis of our welfare system, and the future of the contributory principle.

[Lorely Burt (Solihull) (LD)]

The Liberal Democrats take pensions very seriously. I acknowledge that a lot of consultation and working out must be done, but does the hon. Lady welcome a basic state pension of £140 a week?

[Dame Anne Begg]

I advocated a universal or citizens pension as a Government Member for many years, but one strong argument against such a pension is that many people are very attached to the contributory principle. That came out in the original discussions, when the Government of the day decided to reduce the state pension qualifying years down to 30 for both men and women.

Part of the problem in this country is that we have no means other than NI contributions by which to determine who should qualify for a state pension, because we do not keep residency records, which is how the judgment is made in, for instance, New Zealand. The problem in this country is more complex than it may seem.

The state pension age is about to go up to 66 for men and women by 2020. This was meant to be a Budget for growth, but the very first thing the Chancellor spoke of was the downgrading of the growth figures. I am worried about where all the jobs will come from given the increased number of people in the workplace. The numbers in the work force are expected to increase because of the new work obligations on jobseeker’s allowance claimants; because lone parents will be expected to look for work when their youngest child is five; because 30% of incapacity benefit claimants will be assessed as fully fit for work and expected to go into the workplace; and because another 30% of such claimants will end up in the work-related activity group of employment and support allowance. Huge numbers of people are expected to go into the workplace. It is difficult to get figures on how many more people will be looking for work because the Department for Work and Pensions could not give them to us, but on top of those, the raising of the state pension age means that even more people will be looking for work.

[Mr Kevan Jones]

The Chancellor trumpeted the extension of support for mortgage interest, but has my hon. Friend seen page 42 of the Red Book, which says that that will continue for 2012-13, but decrease in 2013-14 to £15 million and then to zero in 2014-15?

[Dame Anne Begg]

I was going to talk about housing, but I could speak for another three hours if I go down that route, so if my hon. Friend will forgive me, I shall resist.

Will older people who have not reached state pension age be in work or not? At the moment, only 30% of men are still in work aged 65—not only because of early retirement and other things, but because people lose their jobs towards the end of their working lives—but they will be expected to work another year. Only 47% of women aged 60 are still in work, but they will be expected to work for another six years. Those people will not necessarily get anything under the universal credit, because they will probably have saved a nice little nest egg—a nest egg of just over £16,000—to see them through retirement. They will not get jobseeker’s allowance—or rather, they might get it for six months, but that is all they will get through the contributory principle. If they have fallen out of work because of ill health, the most that they might get is a year of employment and support allowance before then getting nothing. Those are big figures, and that is where a lot of the welfare reform savings in the Red Book will come from.

Indeed, it is perhaps worth alerting the House to the fact that the big savings in welfare reform do not come from getting “shirkers” back into work; they come from taking money from those who would normally have got contributory incapacity benefit, but will now get only contributory employment and support allowance for a year. That means that around £80 a week will come out of those people’s incomes. They will get nothing else if they live in a household with someone in work or with any other source of income, or if they have a small pension or savings of more £16,000. Therefore, there will be a new group of people struggling, and they will not be old-age pensioners; they will be pre-old-age pensioners, as it were. They are people who have fallen out of work, but not been able to work to 66 and get their state pension. They have been left with little—in fact, in some cases nothing—from the safety net that we think the welfare state is there to provide.

There is a lot more that I could say; indeed, I am sorry that I have spoken for longer than I intended. Over the coming days I will go through Red Book in a lot more detail than I have managed to today. However, from what I have seen already, there is a great deal for people to be concerned about in what the Chancellor has announced today.

15:36

[Stephen Williams (Bristol West) (LD)]

This is, of course, the second Budget of the Liberal Democrat-Conservative coalition Government. The first Budget was put together in the extraordinary circumstances that followed the 2010 general election, when the two parties came together to co-operate in government and clear up the mess left by the Labour Government. In that Budget we dealt with the emergency, and set out a plan to restore fiscal credibility and put Britain back on track. Today we begin the next phase of this coalition Government. Over the next four years we will build a stable economic future, with growth in our economy that is regionally balanced, encourages innovation, and is green and sustainable. We have moved from the rescue stage. We are now on to recovery, and we look forward to reform.

[Sheila Gilmore (Edinburgh East) (Lab)]

When the hon. Gentleman stood for election last year and his leader said that making deep and fast cuts in public services would be dangerous, did he believe it? If he did, but then came to a different view, what made him change his mind?

[Stephen Williams]

I would remind the hon. Lady that we can all be selective with quotations from different party leaders or finance spokesmen in the general election. Indeed, we could do that all round the Chamber. I well remember the leader of my party saying that there would need to be “savage cuts” in public expenditure to deal with the desperate circumstances that whoever won the general election would have to deal with. He was heavily criticised for using the phrase “savage cuts”; none the less, he gave a stark warning that was also timely and well made.

Despite those circumstances, we—and in particular the Liberal Democrats in the coalition—have endeavoured to ensure that all the measures that we put in place, whether in the emergency Budget, the spending review or the Budgets to come, are underpinned by fairness. It is important that we recognise people’s concerns about the cost of living and the pressures on their household budgets. That is why today Liberal Democrats in particular welcome the further step taken towards our main manifesto commitment of ensuring that nobody on an income of less than £10,000 should face an income tax bill. From April this year, almost 900,000 people will be taken out of income tax altogether, with all average earners getting a tax cut of £200. In a year’s time, 1.1 million lower-paid people will be taken out of the income tax net altogether, leading to a tax cut for everyone on average earnings of £326 a year. This measure will, as we always pledged, help the poor and reward work.

[Mr Stewart Jackson]

I warmly endorse my hon. Friend’s comments about taking low-paid people out of tax. Does he agree that it ill behoves the Opposition to criticise these measures, given that Labour’s contribution was to get rid of the 10p tax rate and import more than 1 million unskilled, low-wage workers from eastern Europe over 13 years to undercut the pay and conditions of the poorest people in this country?

[Stephen Williams]

I well remember sitting on the Opposition Benches during the final Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), and being one of those who spotted the fact that the tax cut being given to higher-rate taxpayers and the cut in capital gains tax, which were cheered by Labour Members at the time, were effectively being funded by a tax rise for the poorest people in society that doubled their rate of income tax from 10p in the pound to 20p.

People are also rightly concerned about their household budgets as a result of high fuel prices. You and I will know, Madam Deputy Speaker, that it is difficult now to find petrol or diesel costing less than 130p a litre anywhere in the city of Bristol. Even the local fuel station in my constituency is now charging 140p for diesel. I therefore welcome the measures to address those concerns by reducing fuel duty by 1p and by stopping Labour’s planned further increases, leading to a further 5p reduction in fuel duty. This will be welcomed by people not only in cities, such as those I represent, but in the rural areas around Britain represented by my colleagues.

[Mr Alan Reid (Argyll and Bute) (LD)]

I also welcome the fact that the rate of fuel duty on the islands will be cut by 5p a litre, starting from April 2012. That will put an extra £5 million into the economy of our islands.

[Stephen Williams]

My hon. Friend is of course referring to the derogation from the European Commission that has been applied for in order to ensure that the coalition Government’s Budget promise is deliverable under Community law, unlike the undeliverable measure to reduce VAT proposed by Labour.

Fuel duty is, however, a blunt instrument for taxing the motorist. I welcome the measures put forward today to stabilise the prices in between the oil companies and the consumer, but in the medium term, we must look for a much better way of developing a market mechanism for taxing the use of our roads.

A further issue of fairness relates to tax avoidance. Whether practised by large companies or by rich individuals, tax avoidance is an affront to fairness, when ordinary people around the country are going out to work, paying their taxes on time and making their contribution. It is an affront to them that some companies are using the tax system unfairly to avoid tax. Some rich people in society—including sportsmen whom people admire—are also using those schemes. It is therefore right that the Government should take further measures today to close down some of those avoidance schemes and introduce an increased levy on non-domiciled individuals.

Right across the age scale, from pensioners who will benefit from the triple lock, guaranteeing that their pension will go up each year, to children from the poorest families, whose schools will receive the pupil premium, this Government are delivering for all sectors of society. These are fair measures that meet the concerns of ordinary Britons, the people who, according to the term that my party leader, the Deputy Prime Minister, has recently injected into the political debate, wake up to alarm clock Britain. [Laughter.] I knew people would like that, but those are the ordinary families around the country whom all hon. Members represent, and we should not laugh. They are the people who get up and go out to work. They work hard, they want their children to do well and they want their parents to be secure in old age.

Another major element of the Budget, along with fairness, is the plan for growth in the green book that has been launched today. It is important that the plan should be regionally balanced. One of the unfortunate legacies of the last Labour Government was the overheated economy in London and the south-east of England, and the credit bubble which, as we know, eventually burst. We cannot allow that to happen again. This Government are determined that growth should be shared fairly right across the nations and regions of the United Kingdom. That is why I particularly welcome the announcement today of 21 enterprise zones and I look forward tomorrow to hearing confirmation from the Prime Minister and the Deputy Prime Minister of where they will be based. I hope that one of them will be in the Greater Bristol local enterprise partnership.

[Mr Kevan Jones]

I suggest that the hon. Gentleman read the Red Book. If he looks at the figures for the local enterprise zones, he will see that they add up to about £900,000 for each one. That needs to be compared with the funding for the regional development agencies in the last year of the Labour Government, which was more than £2 billion.

[Stephen Williams]

We will have to wait and see the detail on the local enterprise zones. What we know from the detail we have had today is that there will be a year’s tax holiday from business rates for people locating in those zones. They will also be equipped with superfast broadband and, I am sure, other measures of support and advice. This issue is bound up with other announcements already made this week about the technology innovation centres and the Manufacturing Advisory Service. There is a whole package of measures that I suggest the hon. Gentleman looks at.

[Dr Julian Huppert (Cambridge) (LD)]

Does my hon. Friend agree that the test of how well a Government policy works is not how much money is spent on it, but the benefits it has? That is why I hope my hon. Friend will join me in welcoming the steps taken to help entrepreneurs and scientific research in areas such as Babraham near my constituency.

[Stephen Williams]

I thank my hon. Friend for that intervention, and he is, of course, quite right. The question from Labour Members when they were in government was always, “How much money can we possibly spend on this situation?” rather than “What works?” That is the difference between this coalition Government and Labour. I commend my hon. Friend for the measures he has recently published on entrepreneurship.

Another aspect of growth that I want to see in the future that we have not had in the past is green and sustainable growth. I particularly support the confirmation that a green investment bank will be set up with initial capital not of £1 billion, but of £3 billion, to incentivise investment in the low-carbon economy of the future. The Red Book, quoted so much already, suggests that this will leverage into the low-carbon economy a further £18 billion-worth of investment. Before the end of this Parliament, once our finances are stabilised, that bank will be able to borrow in order to make further investments.

[Zac Goldsmith (Richmond Park) (Con)]

Does my hon. Friend share my concern that the downgrading of the Government’s flagship policy, the green investment bank, from what should have been and would have been a bank able to issue bonds from day one to what amounts to a fund for the next five years effectively reduces the prospects of our country becoming a world leader in green innovation? Does he also agree that by failing properly to back our fledgling green economy, we will find it harder to cut our emissions and harder to achieve or boost energy sovereignty, and we will be missing out on one of the greatest economic opportunities of all time?

[Stephen Williams]

I am sure that the hon. Gentleman has been making that case in private to his well-connected friends. I and my colleagues have also been making the case for a green investment bank, not a green investment fund. It has been confirmed as a green investment bank today and it will have £3 billion of seedcorn capital to get it off to a flying start. It is going to start a year earlier than originally suggested. By the end of this Parliament, it will be able to issue bonds so that if we wish, we could all deposit our funds with that bank to invest in our green future.

I also welcome the investment made in innovation and skills, particularly in technology innovation centres. I talked a lot in the last Parliament about the skilling of our young people and how we needed to get more people to take up apprenticeship places, so the confirmation of 50,000 more places today means that there will be 250,000 more in this Parliament than we were left by the last Government.

Speaking as someone who before entering this House spent 17 years in a career in the private sector, advising small businesses on how to set up and take off, I welcome the confirmation or enhancement in the Budget of many reliefs designed to help new and innovative businesses to take off and the fact that by 2014 we will have the lowest rate of corporate tax in the G7. We now look forward to a further period of reform.

The hon. Member for Aberdeen South (Dame Anne Begg) rightly mentioned the integration of the income tax and national insurance schemes, on which there is to be consultation after the Budget. It is, of course, 100 years since Lloyd George, my political hero, introduced the national insurance scheme. During the slump of the 1920s, however—this deals with the point made by the hon. Lady—the actuarial soundness of that scheme was essentially undermined, and ever since then the fiction has been maintained by Governments of all hues that it is a separate fund. In fact, it is a second income tax in all but name, and the time has come to reform it. I am very glad that the Government are going to do that; and because they are going to consult on how it should be done, all the issues raised by the hon. Lady about contributions-based benefits are likely to be dealt with.

The other reform to which I look forward is the move to a system based more on sustainability, involving a tax on carbon. I am delighted that the Chancellor has confirmed the introduction of a new carbon floor price. On behalf of the Liberal Democrats, I will shortly produce a paper fleshing out how that can work during the rest of the current Parliament.

It is disappointing that we have not been able to agree internationally on further taxes on aviation—both coalition parties wanted an aeroplane tax rather than air passenger duty—and I hope that international agreement will be secured so that that can be achieved. However, I welcome the confirmation that we are to end the absurd anomaly whereby the jets that most of us use when travelling abroad are subject to air passenger duty while private jets are not. Under the existing law, a plane full of football fans going off to watch their heroes must pay tax, while the team itself takes off in a private plane and pays none.

The measures that have already been outlined, and the reforms to which we look forward, reward hard work, incentivise enterprise, and make progress towards a low-carbon economy.

Let me deal finally with the issue of the banks. I welcome the fact that the Government have introduced a levy that will be permanent, throughout the life of this Parliament. It has been confirmed today that the banks will not benefit from the reduction in corporation tax, and that the levy will be increased in future. We shall have to wait for the results of the Vickers review to find out whether there are proposals to break up the banks.

[Helen Goodman]

How can the hon. Gentleman say what he has just said about the banks, given that the bank levy is falling from £600 million to £100 million within three years? That is patently ridiculous.

[Stephen Williams (Bristol West) (LD)]

I understand that the bank levy is about £2.5 billion a year. The Chancellor announced recently that the levy, which was £1.8 billion in its first year, would be increased to £2.5 billion, and today it has been confirmed that the banks will not benefit from the reduction in corporation tax and that the levy will be increased.

Another issue connected with the banks is what we should do with our ownership, as taxpayers, of Lloyds Banking Group and the Royal Bank of Scotland. That is an issue with which the Government will have to deal at some point in the next few years. A couple of weeks ago I published a pamphlet, with CentreForum, which suggested that the shares should be given to the people so that the state could recover the £67 billion that was invested in the banks bail-out in 2008. The citizen should enjoy the upside: the citizen should enjoy the growth in those shares in the future. I hope that my Treasury colleagues will look favourably on that proposal as they decide what to do with the legacy from the last Government.

The Liberal Democrat-Conservative coalition Government have dealt with Labour’s toxic legacy, but Labour Members seem to be still in denial about the problem. They have not acknowledged its existence, let alone shown any sign of contrition for their role in the deficit. The Leader of the Opposition produced some very good jokes today—I will give him that—but he could at least have made an apology. We have started to clear up the mess. Today’s Budget sets in train a plan for a Britain that is fairer, with a stable economy and a low-carbon future. It recognises the need to help households with their budgets now, and to give them confidence that the economy and their country are back on track.

Several hon. Members rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Before we move on, I have to announce the result of a Division deferred from a previous day. On the question relating to a stability mechanism for member states whose currency is the euro, the Ayes were 310 and the Noes were 29. Therefore, the Ayes have it.

[The Division list is published at the end of today’s debates.]

I shall call Mr Dan Jarvis next, who will be making his maiden speech, and I remind hon. Members of the normal courtesies that should be extended when hearing a maiden speech.

15:55

[Dan Jarvis (Barnsley Central) (Lab)]

I am grateful for the opportunity to make my maiden speech in this Budget debate. The first time I remember feeling like this was when I was being summoned by an RAF instructor to make my first parachute jump—a leap of faith into the unknown. Today, however, as I rise to make my maiden speech in this Chamber, I am reassured by knowing that the hon. Members who have gone before me—most of them—have landed without incurring permanent injury.

The people of Barnsley Central have a long history of electing good people to serve as their Member of Parliament. Only time will tell whether I extend that record, but it is a great privilege to pay tribute to my predecessors. It is truly humbling to think that I follow in the footsteps of the former Barnsley MP, Roy Mason, a coal miner at the age of 14. Lord Mason went on to serve the town as its MP for 34 years. During that time, he served in a number of Governments and held a number of high offices.

I also have the great privilege of representing wards that were previously in the Barnsley, West and Penistone constituency. Before being abolished, the constituency was represented by the formidable Michael Clapham. As an MP, Mick did tremendous work to support other former miners, securing compensation for those who had been injured through their work and for the families of those miners who had been killed.

As it was for Roy and Mick, so it was for Barnsley: coal mining was at the heart of the community. Barnsley is a town with a proud history of linen, wire and glass making, but coal mining once accounted for more than 30,000 jobs. It was a community built on coal. In good times and bad, in war and in peace, places such as Barnsley kept this economy and this country going. As is said in Barnsley: “We dug the coal.”

I would also like to pay tribute to my immediate predecessor, Eric Illsley. It is acknowledged that Eric made mistakes—mistakes that cast a shadow across his good work for the people of Barnsley—but we should not forget that Eric chose to dedicate his life to the betterment of the lives of working people. Like Mick and Roy, Eric served the community and spent 10 years as a National Union of Mineworkers official, including during the miners’ strike. Many people have told me that Eric was a very hard-working and conscientious constituency MP with a strong record of supporting and representing working men and women in Barnsley.

Having served two tours in Afghanistan, I was relieved to fight a—relatively, at least—peaceful by-election campaign in Barnsley, but I was ably supported by some brilliant local campaigners: people such as Anita Cherryhome and Tracey Cheetham, to name just two among the many to whom I owe a great debt of gratitude. My transition from the Army to civilian life has been made a pleasure because of the people of Barnsley and their support. I remember the warmth of the welcome I received at the New Lodge working men’s club while having a pint with Roy Butterwood, and from the fantastic people working in Barnsley hospital. Both institutions are, in different ways, at the heart of the community.

I met hundreds of amazing people during the by-election, including teachers, NHS workers, police officers, business owners and volunteers: remarkable people working hard and achieving remarkable things in Barnsley, in Yorkshire and beyond.

My constituents are proud people. People such as Len Picken and Jenny Platts are proud of their industrial heritage, proud of who they are today and proud of what Barnsley can continue to be in the future. There is no question but that the people of my constituency have the energy, skill and dedication to make our community a better place. The question today is whether Barnsley’s future is safe under this Government or whether it will be savaged by spending cuts and by a failure to protect jobs and opportunities for the young, as it was in the 1980s.

The people of Barnsley were looking for today’s Budget to pass two clear tests. Did it deliver for families who are finding times hard as pay freezes hit, world prices rise and the VAT increase takes up to £450 a year out of a family’s household spending; and did it demonstrate that the Government have a plan to generate jobs and the growth that would create jobs? The Barnsley of today, after more than a decade of investment and reform to our public services and our infrastructure, is not the Barnsley of the 1980s. Barnsley and our country can and should thrive. Indeed, a year ago, growth in this country was rising, and unemployment and inflation were falling. We had hoped that the mistakes of the past were forgotten and that communities such as Barnsley would not be abandoned as they were then, leaving a generation scarred.

The 1980s and 1990s were a dark chapter for the town, as the then Government closed down the mines which were the heart and soul of our community and stood back and let unemployment and misery linger for a generation. In recent years, Councillor Steve Houghton, the outstanding leader of Barnsley council, was instrumental in working with the Department for Work and Pensions in devising the future jobs fund, which helped more than 600 people find jobs in Barnsley. But the future jobs fund ends this month and Barnsley is facing some of the deepest cuts in the country. The council has to find £26 million this year and £46 million in total, and jobs will inevitably be lost. The truth is that today South Yorkshire police are losing 400 police officers and facing deeper cuts than many other forces. The increase in VAT on fuel is costing people in Yorkshire £53 million in extra fuel tax this year. The education maintenance allowance was helping more than 3,500 of Barnsley’s young people to afford to stay in education. This September, some of the poorest young people going into education will be £30 a week worse off and, even on the Government’s own figures, one in 10 of them will drop out of education as a result.

The Government told us that we were out of the danger zone, that their plan was working and that they should be judged on the figures. Today, inflation is rising, partly as a result of the VAT rise, unemployment is rising and growth has stalled. Barnsley urgently needs an alternative: a plan to get jobs and to help families feeling the squeeze. The Government could have chosen to repeat the bank bonus tax—a tax on those on whose shoulders much of the responsibility for our predicament should fall. That money could have funded a plan—a plan to build houses, to invest in infrastructure and to get young people in work—but they chose not take that approach. The real test of this Budget was whether the voice of the country had been heard, whether the evidence had been heeded and whether the Government had listened on jobs and on the cost of living. They have failed this test.

The previous Labour Government, whatever their faults, did their bit to invest in the future, and their investment in education and training was particularly important. In Barnsley, the Building Schools for the Future project has successfully provided new schools such as Darton college, the Dearne advanced learning centre and the Carlton community college, with six more in the pipeline, to sit alongside the inspirational Barnsley college, rated as “outstanding” in Ofsted’s last inspection.

My service in the Parachute Regiment has taught me that so much can be achieved when people are given the right tools, the right skills and the right training—when they are given the support and funding to be the best. I know from fighting in Iraq and Afghanistan that the men and women of our armed forces are the best. I have had the privilege of serving with some amazing people, but, above all, it has been a pleasure to serve with the soldiers and NCOs—the backbone of our armed forces. Today, I particularly remember Corporal Bryan Budd VC and Corporal Mark Wright GC, both of the Parachute Regiment, who lost their lives while serving our country with the most outstanding valour. I pay the highest tribute to them and to all those men and women who have fallen in the pursuit of maintaining the security of our country. We must never forget their families who are left behind to grieve, but it is not enough just to praise the armed forces. They must be supported with the best training and equipment, and the military covenant is not an optional extra but an essential piece of kit.

The strategic defence and security review may come to be remembered as the Fox review, but only in the future will we know whether it is as cunning as its name might suggest or if it is, as Professor Paul Cornish states in his recent Chatham House report, merely an attempt to “muddle through”. This is no time to muddle through. Clear policy and decisive action are a must, and we must move the debate on to determining the desired strategic outputs rather than merely considering defence inputs.

Although there is rightly much focus on Libya and events in the middle east, in Afghanistan the efforts of our armed forces are nothing short of heroic, and they are buying space and time for the Afghan Government, but the question remains of how we should use that time. In the end, the true measure of progress is how far Afghanistan has advanced towards a political settlement capable of providing enduring stability, because that is the safest way of securing both our interests and those of the Afghans. We and our American allies should not wait to push forward a serious dialogue for reconciliation. Ultimately, politics is always the solution. Whatever the progress with that effort, it is critical to address not only the external and regional elements of the conflict, but its internal cause: the issues of legitimacy, the rule of law and grievance that push people to support the Taliban and to which my right hon. Friend the Member for East Renfrewshire (Mr Murphy)referred in his recent speech to the Royal United Services Institute.

I must thank hon. Members on both sides of the House who, through their advice and kindness, have ensured my safe landing in this place. It is with my deepest thanks to them that I now feel a little more able to live up to my old regimental motto, “Utrinque paratus”, or “Ready for anything”.

Finally, if I have learnt nothing else during the by-election campaign, I have learnt this: the spirit and aspiration of the people of Barnsley cannot be trodden down and I, as their Member of Parliament, will do all I can to stand up for them. It is their hard work, their pride in themselves and their compassion for others that makes me so very proud to represent them here today.

16:08

[Mr David Amess (Southend West) (Con)]

It is an honour and privilege to follow any maiden speech, but it is particularly so in this case. I know I speak for the whole House when I congratulate the hon. Member for Barnsley Central (Dan Jarvis) on a magnificent performance. He spoke with command, it was a measured speech and in every sense—whether it was the humorous side or the remarks he made about his predecessors—it was an absolute example of how an hon. Member should make a maiden speech. When I made my maiden speech at the end of 1983, it was an ordeal not only for me but for the House that had to listen to me.

The hon. Gentleman performed splendidly. I also held his predecessor in high regard as a parliamentarian and I much regret the way he left this House. Colleagues listening to the hon. Gentleman’s speech will have come to the conclusion that he brings unique experience to this place that will greatly enrich our deliberations in the future. I certainly would not willingly jump out of an aeroplane, you would have to push me and that would be the end of it. I speak for the whole House—I do not think we get much Conservative support in Barnsley Central—when I wish him a long and successful career.

Turning to the Budget, there is no doubt that this has been the most difficult and gloomy time I have known for people in business—until today. I congratulate my right hon. Friend the Chancellor on his well-crafted and clever Budget, which will cheer up the country. It has already cheered up Government Members and, as colleagues will have observed from the general atmosphere among Opposition Members three or four hours ago, it has absolutely cheesed off the Opposition. I am getting sick to death with Members on the Conservative and, dare I say, Liberal Benches being castigated for the absolute mess that the country is in. One party alone is responsible for that—Labour. It is because of the Labour party that we are facing debt interest of £120 million a day and because of the Labour party that we have the biggest structural debt in the G7.

I want to share with colleagues who were elected last year what the past 13 years have been like. As hon. Members will know, the last Prime Minister was previously the Chancellor of the Exchequer. I had the experience of listening to 10 of his Budgets, which he greatly enjoyed delivering. He used to come to the Dispatch Box and two thirds of the way through his speech he would wind Conservative Members up. Then he would make what he thought would be the headline-grabbing news item that would cheer everyone up. But then we would all go away and people would read the Red Book and within a few weeks we would find out that what he had told us was not in any sense accurate. So I congratulate the Chancellor on the new Red Book, because unlike the previous one it is not big enough to use as a doorstop, which is all that one was fit for.

Labour Members seem to think that Government Members relish making cuts.

[Mr Kevan Jones]

You do!

[Mr Amess]

We do not, and I find it hypocritical that although Labour Members used to speak about cuts before the general election—I can only talk about those who were here before the election—we no longer hear about the cuts they were going to make. It is as though the Conservatives and Liberals rejoice in making cuts. If anyone wants to know why the country is in a mess, I can tell them it is because the Labour party took away regulation from the Bank of England and gave it to an organisation that was not fit for purpose. Also, as one of my colleagues said during Prime Minister’s questions, Labour stupidly sold off our gold reserves.

I will go further: in all his Budgets the then Chancellor of the Exchequer would make announcements about spending in terms not of millions but billions, and we in opposition used to wonder how it could be funded. We now know that it could not be funded and that we were spending money we never had. I will never forgive Tony Blair—[Interruption.] Hon. Members might huff and puff, but I am entitled to say this because it was Tony Blair who got me to vote for the war in Iraq and I will never forgive him for having told us a pack of lies at the Dispatch Box.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I know that the hon. Gentleman feels very passionately about the subject, but perhaps he would like to temper his language and, in particular, withdraw the accusation of lying.

[Mr Amess]

I entirely accept your ruling, Madam Deputy Speaker. I thought we could make remarks about people who were no longer Members of Parliament.

[Madam Deputy Speaker]

The hon. Gentleman can make remarks about people who are not Members of Parliament. I am touching on his language, and the convention in this House on the moderate use of language and on allegations against people who are unable to correct what has been said.

[Mr Amess]

I hope that Tony Blair will correct what I have said when he again gives evidence, but I blame him for the way he completely misled the country on any number of issues. Not the least part of his lasting legacy is the fact that he destroyed the House of Commons, because this is certainly not the place that I entered in 1983. I further blame the last Prime Minister, who was Chancellor of the Exchequer. New Labour Members come into the Chamber and castigate Government Members for what is going on; what on earth were they standing for in the general election campaign in May?

[Mr Kevan Jones]

Having listened to the hon. Gentleman’s speech, I wish he was in an aeroplane so that we could push him out. He feels that he has been duped on Iraq and on spending, but why, then, did he and the leader of his party say right up to 2008, including in a speech by the leader of his party in July 2008 to the CBI conference, that the Conservatives would match the Labour Government’s spending?

[Mr Amess]

I believe that the only commitment that we gave was to match spending on the health service.

[Kate Green (Stretford and Urmston) (Lab)]

I wanted to check whether the hon. Gentleman’s position of not relishing cuts—I am sure that he does not relish them—reflects the position of his party generally, given that the Chair of the Treasury Committee said this morning that he believed that public spending should be reduced, even if we were not in deficit.

[Mr Amess]

I was not at the Select Committee this morning—[Interruption.] I am afraid that I missed the speech that my hon. Friend the Member for Chichester (Mr Tyrie) made on the Budget. I will have to discuss the issue with him later.

[Mr Stewart Jackson]

Does my hon. Friend not agree that it takes an enormous degree of mismanagement and incompetence, after 12 years of economic growth, to leave 5 million people on out-of-work benefits, languishing in a half-life on the edge of society? That is the legacy of the Labour Government.

[Mr Amess]

Of course I agree with my hon. Friend, but I would just say that if Labour Members feel that they were absolutely spot on in their judgment on the economy, why was Labour not re-elected last year? We had a general election last year, and the Conservative party was overwhelmingly the largest party returned; in any case, the Labour party was defeated. I am afraid that the Labour party’s reaction to the Budget today—they were absolutely cheesed off—says it all.

Before the Budget, I had representations from all manner of organisations, including the Association for Consultancy and Engineering and others in a conglomeration of engineering companies, and Essex chambers of commerce. I have to say that the Budget was much brighter and more positive than I expected, so whatever demands have been made, I think that the Chancellor has met them completely. I am delighted that at long last something is being done about regulation. I am absolutely delighted that we are looking at how we deal with income tax and national insurance. I am delighted about the cut in corporation tax. I am absolutely delighted with what we are doing about fuel duty; one could see from Labour Members’ glum faces that they were very disappointed with that. I am glad that in the east of England, 106,000 people are being taken out of a tax band, and I am very pleased with what has happened about gift aid.

I hope that Conservative Members will become a little more robust when Opposition Members have the temerity to castigate them after nine months for the mess that the country is in. Conservative and Liberal Democrat Members are looking at the party that is entirely responsible for meltdown Britain. I congratulate the Chancellor on his Budget today and on cheering up the country.

16:20

[Stewart Hosie (Dundee East) (SNP)]

I would love to say that it was a pleasure to follow the hon. Member for Southend West (Mr Amess), but instead I will restrict myself to saying that I agree with him entirely that the hon. Member for Barnsley Central (Dan Jarvis) made a very good maiden speech indeed. It is certainly a pleasure to follow him, if not the hon. Member for Southend West. [Interruption.] The Economic Secretary to the Treasury says from a sedentary position that that is harsh. It is only a little harsh.

The Budget was billed as a Budget for growth, and by goodness, we need it, so let us test that. In his statement and in the Red Book the Chancellor gave us a great deal of information. Our national debt for 2010-11 was expected last year to be £932 billion. It is now forecast to be £909 billion for that year. It was expected to be £1.6 trillion next year, but it is coming in at £1.46 trillion. The deficit was expected to be £149 billion for last year. That seems to be coming in at £146 billion. But the figure for 2011-12 was forecast to be £116 billion and that is now up to £122 billion, if the numbers are to be believed. That tells us that the Chancellor may have had a little room for manoeuvre, but growth is essential if the figures are to remain on target and if we are to have any chance at all of protecting jobs and services.

I welcome the direction of travel on corporation tax but, because the Budget was so thin and fiscally neutral—the entire Budget barely shifted £10 million in total—it effectively confirms that the cuts, which were forecast last year at £99 billion and revised down to £81 billion in the comprehensive spending review, are still there. It confirms that £29 billion of tax rises announced last year are effectively still there. It confirms the swingeing benefit cuts of £11 billion announced last year and confirmed in the CSR. It also confirms the changes in some of the pension component, particularly the RPI-CPI switch, which will yield the Exchequer £1.2 billion this year, rising to nearly £6 billion in 2014-15.

On pensions, the Chancellor spoke about a single-tier pension. That is similar to the citizens pension concept that many of us support, but to deliver that with savings predicated on changing not just the state pension, but all public sector pensions, which are contracted and paid into, in some cases, for many, many years, cannot be right. He also said in relation to pensions that he would accept all the Hutton recommendations. It may well be that all of us have to save a little more a little longer for the pension that we expect at the end, but let the Government be in no doubt that a 3% hike in pension contributions now will put some of our constituents—indeed, many of our constituents—in serious financial difficulties in the short term. I hope that the implementation of that is carefully considered.

On PFI—the Labour party’s worst legacy—the figures are truly frightening. The value of the capital projects is some £56 billion. The cost of the outstanding repayment liability is £214 billion. The average repayment each year until 2047-48 will be £6 billion, and that will peak at more than £9 billion in 2017-18. The Chancellor said nothing about that, or about how we would replace the PFI system. Throughout his speech he spoke of encouraging private investment, and some of that is to be welcomed, but he said nothing about how we would replace PFI by means of public capital investment. We know how vital that is, given that the economic impact multiplier for capital expenditure is 1:1. It is the most significant thing we can invest in and, more dangerously, the worse possible thing we can cut.

The Chancellor had a great deal to say about oil, which is not surprising given that the forecast for 2011-12 shows that the North sea will generate an additional £4 billion. He is right to take immediate action because households and businesses are struggling. The price of a gallon of petrol in rural Scotland is routinely £6.50, and we know that in the past four or five weeks the price increase in diesel has added £1,000 to the annual cost of running a truck. That is unsustainable and inflationary. I welcome the 1p cut and the fact that the proposed increase has been stopped, but the Government said that they had introduced a stabiliser, and I have re-read his speech any number of times. The stabiliser seems to me to suggest that when the barrel price increases it is merely the escalator that is cancelled, leaving the indexed rise in place. I always understood that the stabiliser would reduce the duty level when the price rose so that we could temper out some of spikes in rising prices. By only including the escalator, we do not have a stabiliser at all and will still see many of the spikes that we have been trying to smooth out to bring some stability back into the economy, particularly in the haulage sector.

The Chancellor said surprisingly little about the banks, so I will go back to what he said in February. He announced that the banks would lend more, especially to small businesses, pay more taxes, bring responsibility and restraint to the sector, pay less in bonuses, be more transparent and make a greater contribution to the regional economy. That is all fine, but in order to thrive and grow companies need access to affordable and flexible funding, and they need it now. That remains a huge hurdle for many of our businesses.

The lack of new lending in particular is continuing to have an adverse impact on individual companies as well as on the economy as a whole. Business investment, as the Minister knows, will remain some 20% below pre-recession levels. Indeed, there was a 0.5% fall in gross fixed capital formation in the last quarter of 2010, which is extremely worrying, given that this is supposed to be a business growth and export-driven recovery.

All the evidence I have seen highlights the importance of expanding sustainable lending. Although we welcome the lending commitments agreed between the Government and the banks, it is important to ensure that they move quickly on the issue. I would have thought that the Chancellor had much more to say today about how the banking community would increase even gross lending to businesses across the country. Instead, although he did increase enterprise investment scheme limits to encourage private investment, which I welcome, he said nothing about bank lending. It is the retail banks on the high street that most of our small businesses depend upon for both capital and cash flow.

The two key issues of oil and access to finance are not just about economic recovery, but about fairness, as is alcohol duty, and there were a few changes on that today. However, the Government brought forward no measure whatsoever to tax alcoholic drinks by alcohol content. Whisky is still penalised and we still have the ludicrous situation where 4% beer is taxed more heavily than 7.5% cider, which does nothing to promote public health or address the wider social and economic consequences of excessive drinking. Picking up the tab for those costs is estimated to equate to a tax of some £3.5 billion in Scotland alone. I am surprised that the Chancellor did not use the Budget to take measures to deal with that problem.

There are also huge dangers in the Budget, as it confirms the cut to the Scottish budget and threatens recovery there. I am sure that the whole House will welcome the recent reduction in unemployment. The figures for March show that unemployment in Scotland has fallen by 16,000 and employment has risen by 8,000, the eighth consecutive reported rise in employment. That is all good news, and we have to drive it forward, but cutting the Scottish budget, particularly £800 million from the capital budget, will have a huge impact on the Scottish Parliament’s ability to drive forward many of the initiatives that were making a difference as we came out of the recession.

Given the economic backdrop, particularly the fourth quarter figures for the whole UK and the need to continue to support growth, the Scottish Government and, indeed, the UK Government need a Budget that supports clear, targeted resources. Given also that the Chancellor had some flexibility, I am surprised that he did not offer up a targeted measure to increase capital expenditure, because it has the most significant impact of any public spending.

What the Chancellor did talk about was enterprise zones, of course, and we certainly welcome those as a concept. They could be used in Moray, for example, given the closure of RAF Kinloss, but the Budget offered little detail beyond suggesting some business rate reductions and streamlined planning measures, both of which the Chancellor rightly said are devolved. For enterprise zones to work properly, they should revert to the old form, which included the significant use of capital resources, but, given that there is only £80 million in four years’ time, or £4 million per site, much of which I suspect will be used to offset business rates for local authorities, it strikes me as inconceivable that the Government have planned and prepared for the significant use of capital allowances to deliver their potential.

[Mr Kevan Jones]

The amount is actually less than that to which the hon. Gentleman refers, because, although page 42 of the Red Book cites £80 million in year four, over the period, if we spread the amount across the 21 proposed enterprise zones, we find that it works out at less than £1 million per zone.

[Stewart Hosie]

I am glad that the hon. Gentleman has done the four-year forecast and the average for me, but the point is the same: there is very little money in what ought to be an initiative with the potential, at least, to deliver some significant economic investment.

We need targeted measures, and one measure that the Chancellor could have introduced today was targeted help for the computer games industry. A targeted tax break was suggested previously but pulled from the previous Budget. Debates in the Scottish Parliament have backed it, and debates in Westminster have had all-party support, but he rejected the idea in 2010 and rejected it today. He did say, however, that he would improve the intellectual property regime and increase the small companies R and D tax credit, and I look to understand from the Government at some point whether there is a specific way in which the video games industry and other growing high-tech industries might access it, and access it in an appropriate way that protects them and grows them in future.

In terms of targeted measures, we also believe that there was a compelling case for the Scottish Government to be given responsibility for the administration and revenues of the Crown Estate in Scotland, given the focus in Scotland and the UK on driving a low-carbon economy and the existing responsibilities for marine planning and economic development. This Budget provided the Chancellor with the opportunity to indicate that he was prepared to do that through Government amendments to the Scotland Bill, but no commitment was made.

The Chancellor could also have demonstrated—another small targeted measure—that he was prepared to adjust the tax treatment of participants and sponsors at the Commonwealth games in Glasgow in 2014 so that there was equality of treatment with participants and sponsors at the Olympic games in 2012. I know that the Scottish Government and others have contacted him on the matter, because it is important to the overall success of the 2014 games and to the economic regeneration of the east end of Glasgow, so I am deeply disappointed that, in a Budget when he had the opportunity to talk about parity of tax treatment, he did not take it.

I know also that, following the abolition of the end-year flexibility agreements with the devolved Administrations, a new system was to be introduced and the Chancellor intended to set out details in this Budget. They might be tucked away in a document I have not read, but there was no mention made of that at all, or of whether a new end-year cash reserve could be established so that end-year flexibility was maintained in a way that was beneficial not just to the Scottish Administration, but to Wales and to Northern Ireland.

The Chancellor spoke a lot about the green economy and about several measures that he intends to take, and, as the Economic Secretary and the Chancellor know, there is still accrued £195 million of fossil fuel levy that only the Scottish Government can use. It ought to be released, but under the current rules it cannot without a comparable claw-back from the block grant. This was the opportunity for the Chancellor to release those funds, but he missed it.

That is particularly disappointing in relation to the announcement about the green investment bank, which was supposed to be the alternative. In November 2010, in the Treasury Committee, I asked the Chancellor what the timing was for its establishment, and he said that he wanted to get it up and running as soon as possible. He said that he hoped to come forward with proposals on how it was going to be structured between now and Christmas and that he would have set aside money to go into the bank in the comprehensive spending review. It is therefore hugely depressing that we have to wait another year, until 2012, before it can start to function. Given the press coverage that I am sure we have all seen, it looks as though it will be 2015 before it is fully operational.

A further green disappointment is that there was no mention whatsoever of green individual savings accounts—a key Tory policy to be introduced within two years as a way of helping savers to benefit from the growth of the green economy, because the billions raised from their sale would fund the state-backed green investment bank. Yet it seems that because of objections they are to be dropped, choking off a funding stream that would have channelled an estimated £2 billion a year into green technologies. I do not know if the shutdown of green ISAs is part of a wider move to curtail the potential operations of the green bank before it is even set up, but it is extremely worrying. Finally on green issues, the carbon floor price was mentioned. I understand from those who know more about that than I do that it is, in effect, a secret subsidy to the nuclear industry, which is anything but green.

The Chancellor said that this was a Budget for growth, but growth will be stifled if the banks do not lend, and if he takes no action on alcohol duty. Growth will be restricted by his failure to reassess the cuts in capital expenditure, and the opportunity of enterprise zones will be squandered without the proper application of capital allowances. Growth sectors such as the games industry will be damaged by the refusal to introduce tax breaks. Growth in the green economy will be slowed because of the refusal to release funds from the fossil fuel levy, and investment in our green future will be reduced because of delays in setting up the green bank. The Chancellor took an hour to shuffle £10 million. It was a profoundly wasted opportunity when he could have done so much more.

16:37

[Joseph Johnson (Orpington) (Con)]

It is an honour to follow in the slipstream of the new Member for Barnsley Central (Dan Jarvis), who has executed an elegant parachute jump into the Chamber. His forceful and powerful speech was a reminder of how important it is, at a time when the country is making ever greater demands on its armed forces, that we hear the voices of our servicemen and women from all parts of the Chamber.

Thus far we have touched several times on the critical role that the bond markets are playing in framing the budgetary policy of this coalition Government. The hon. Member for Middlesbrough (Sir Stuart Bell), who is no longer in the Chamber, asked when it was that bond markets acquired this pivotal role in our national economic policy making. If I may venture an answer, I think that the views of rating agencies became impossible to ignore when towards the middle of the previous decade—before the onset of the financial crisis—the British Government

“lost control of public spending”

in three key Government Departments: Health, Education and Defence. Those are not my words or views but those of Sir Nicholas Macpherson, the permanent secretary of Her Majesty’s Treasury, as expressed in a hearing of the Public Accounts Committee not so long ago; they are available in the Committee report if people wish to have a look.

It is also important for the hon. Member for Middlesbrough to realise that we live in a globalised financial market, and if one cannot fund one’s borrowing requirements from captive domestic sources, inevitably one is forced upon the mercies of the international capital markets, and that is exactly where we find ourselves today.

[Mr Kevan Jones]

I know that the Conservatives are peddling the line that we are in hock to foreign banks, but does the hon. Gentleman not realise that only about 35% of our gilts and debts are held abroad? Greece is always held up as the big pariah, and its figure is nearly 70%. The hon. Gentleman’s argument is frankly complete nonsense.

[Joseph Johnson]

I thank the hon. Gentleman for that elegantly expressed critique. It is a significant proportion of our borrowing. It is not the totality, and I never said that it was. However, if our marginal investor, whom we need to supply that additional pound of borrowing, is setting the price for our borrowing, that determines the rate at which we finance ourselves. It is as simple as that. That is straightforward marginal pricing through supply and demand.

[Mr Jones]

Will the hon. Gentleman give way?

[Joseph Johnson]

No, I will carry on for a little.

In my view, it is only thanks to the resolve and determination of this Government that we have sufficient credibility with the bond markets to have delivered a Budget for growth. The Budget includes an acceleration of the plans to cut corporation tax, which will give a much-needed boost to Britain’s international competitiveness. I am particularly pleased by that because at a time when countries need to compete ever more aggressively to attract highly skilled labour, the UK is increasingly being seen not just as a high-tax economy, but as one with a highly complex and unwieldy tax system. The World Economic Forum’s global competitiveness report for 2011 ranked the UK tax regime the 95th most competitive out of 135 countries—almost at the bottom of the world rankings. That sends out a terrible signal to global business.

The UK tax regime was once viewed as an asset and I am glad that the Government are proceeding with plans to make it an asset once again. I fully support the Chancellor’s plans to give Britain the most competitive business tax regime of any major western economy, and to reverse our slide down the global competitiveness rankings. Already, the coalition Government have reversed planned increases in payroll taxes and lowered small business rates. As we heard from the Chancellor this afternoon, they will accelerate reductions in corporation tax so that by 2014, the rate falls to 23%—the lowest ever rate in this country and the lowest in the G7. That is something that we should celebrate if we are serious about enterprise and entrepreneurialism in this country.

I also welcome the Chancellor’s decision to analyse closely whether the top rate of tax is yield positive or negative for the British economy. It is worth considering whether it is deterring investment, thereby losing us more revenue than it is bringing in. A more competitive, simpler and more stable tax regime is an essential precondition for growth and will ultimately be better for everybody in this country, rich and poor alike.

When countries that had public finances in a comparable state to ours last May are still fighting off the terrible spectre of sovereign debt default, it would be terrible folly to slow the pace of what is widely regarded as a necessary fiscal consolidation. Our policies are under intense scrutiny by the international bond markets, to which we are paying £120 million in interest daily. We cannot afford for our borrowing costs to rise, as they have elsewhere. We are paying 3.6% in the gilt markets on our staggering public debt. Other countries are paying rates closer to 8% or 9%, and Greece is paying a staggering 12.6%. We simply cannot afford to be complacent, as the Governor of the Bank of England made clear in a recent hearing of the Treasury Committee, at which he stated firmly that UK gilt rates would rise by three percentage points if we backtracked from the course of fiscal consolidation that we have outlined.

[Mr Jones]

I wish the hon. Gentleman would do some homework before he makes accusations, and not just swallow the central office lines on such things. He does not tell the House that less than 20% of our debt needs to be repaid in the next three years, whereas Greece and other countries need to repay 36% or 37% of their debt in the next three years. The idea that we have an instant crisis is wrong. Can he tell me when a UK Government have ever defaulted on a gilt payment?

[Joseph Johnson]

There are problems when a country has a stock of debt as massive as ours. Even with the Government’s plans for fiscal consolidation, it will not start declining for some years to come. Under the Labour Government our stock of debt would have peaked at about 80% of gross domestic product, but under the current Government’s plans it will peak somewhere below 70%—69%, I think I recall. [Hon. Members: “71%.”] Either 69% or 71%. Such a massive stock of debt means that every year, we have to refinance several hundred billion pounds of Government debt. Even if it is not all the debt, that is still a very substantial amount of money.

[Richard Fuller]

Perhaps my hon. Friend will be interested to read on page 25 of the debt and reserves management report issued today that the gap in the five-year forward rate on debt borrowing is at its highest point for 10 years. That reflects the fact that the market is buying only short-term debt. One of the few assets of this country that the last Government did not sell down the river was the long-dated debt that we have compared with other countries. If we had carried on with their policies, even that would have been lost as a result of their profligacy and waste.

[Joseph Johnson]

That is a very good point. Markets can turn on a dime if they detect backsliding, and that is not what they are getting from this Government.

[Chris Bryant (Rhondda) (Lab)]

The Conservatives spend all their time suggesting that this is just a national problem. The hon. Gentleman cited the possibility of our debt being 71% of GDP, but in Germany the figure is 79%, in France it is 75%, in Italy it is 116% and in Japan it is 194%. These problems came to every country in the world, and my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) was not responsible for all of them.

[Joseph Johnson]

Markets can turn on a dime if they detect backsliding. Recovering lost confidence would require much bigger cuts to public spending than the credible ones that the Government have outlined. Evidence for that is in abundant supply in countries on the periphery of the eurozone. Despite the agreement on the post-2013 European stability mechanism, concerns about the underlying solvency of the most vulnerable countries—Portugal, Ireland and Greece—are growing.

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

I am terribly sorry to interrupt the hon. Gentleman, but will he respond later in his speech to the question that my hon. Friend the Member for Rhondda (Chris Bryant) asked him?

[Joseph Johnson]

I did not touch on it directly because the reply is obvious. Yes, other countries have large debts, but that does not mean that we do not have an urgent need to reduce the scope of our borrowing and our national interest payments.

[Sajid Javid]

The hon. Member for Rhondda (Chris Bryant) should recognise that every country’s situation is different. He mentions Japan, whose debt might be about 190% of GDP, but it is also the largest creditor nation in the world. Only about 5% of its total debt stock is held by foreign investors. The situation is quite different in our case.

[Joseph Johnson]

That is an excellent point.

As my right hon. Friend the Member for Wokingham (Mr Redwood) said earlier, Portugal’s position is particularly precarious at the moment because opposition parties there, much like here, have refused to back the austerity measures needed to help the country avoid a bail-out. That could force Portugal further down the international bail-out route that was first trodden by Greece last spring and then by Ireland at the end of last year. Portugal’s 10-year Government bond yields rose comfortably above 8% yesterday, for the first time since the start of the crisis, reflecting plunging market confidence in the resolve of that country’s political class. That cannot be said of the occupants of Nos. 10 and 11 Downing street.

[Mr Kevan Jones]

The hon. Gentleman uses Greece, but my hon. Friend the Member for Rhondda (Chris Bryant) makes a very good point: we must look at countries individually. Our economy is larger than Portugal’s or Greece’s and completely different in other ways. In addition, countries such as those have a tradition of being unable to implement fiscal reductions, unlike ours. The basic, simple point is this: £5,000 is a lot to owe for someone earning £10,000, but it is a completely different thing for the hon. Member for Richmond Park (Zac Goldsmith) or other such people to owe that much.

[Joseph Johnson]

I am not sure which of those many points to focus on. Greece’s economy is of course very different from ours, and we have a history of repaying our creditors in full, on time and when we say we will. We do not want to lose that reputation, which is why it is so important that the Government stick to their plans to bring our public finances back on to a sustainable path. We cannot compromise or jeopardise our standing in the international financial markets.

[Jacob Rees-Mogg (North East Somerset) (Con)]

Does not the fact that £332 billion needs to be raised on the gilt market over the next two years, which at an extra 3% would be £9 billion a year of extra interest, show the utterly cavalier approach of Opposition Members in their recent interventions?

[Joseph Johnson]

Absolutely—their way of looking at our borrowing requirements is completely irresponsible. To think that we should pay more than £120 million a day in interest, which we are currently paying, is utterly absurd.

[Chris Bryant]

Incidentally, it is interesting to hear the hon. Member for North East Somerset (Jacob Rees-Mogg) condemn cavaliers. I thought he was one in the 17th century.

Many countries whose debt is a higher share of gross domestic product than the UK’s are not cutting anywhere near as fast as we are. Of all 29 major industrialised countries, only one is cutting faster than us: Greece.

[Joseph Johnson]

The hon. Gentleman may be a great economic expert, but he might find that the world’s foremost economists and international financial organisations, from the International Monetary Fund to the OECD—the entire gamut of respected economic thought—see this fiscal consolidation as necessary. There is no backsliding, which I applaud.

Before those interventions, I was saying that Portugal is moving ever closer to becoming the third eurozone periphery country to need a bail-out. Borrowing costs are again rising to a new euro-era high in Ireland, which desperately needs eurozone members at tomorrow’s summit to reach a political compromise on revised lending terms.

By contrast, Britain is a different story, thanks to the credible policies in the emergency Budget last June and the policies announced in October’s spending review. There is no sign whatever of any funding problems in the gilts market—quite the opposite—and we must prize that achievement. We have saved our triple A credit rating, which was under threat of downgrade in the last months of the previous Government, and kept our borrowing costs close to historic lows.

The coalition Government have earned the respect of the international capital markets and have their confidence, because the combination of a tight fiscal and a loose monetary policy remains the best chance of avoiding a sovereign debt crisis while ensuring acceptable increases in GDP. Britain simply could not for long run a budget deficit of 11% of GDP—the second highest in the OECD—without taking the unacceptable risk of losing the confidence of the bond markets. Almost a year on, the wisdom of taking decisive action to reduce the risk of sovereign debt crisis is obvious to all except perhaps Labour Members. Even Gavyn Davies, the Labour-supporting economist, conceded in yesterday’s Financial Times that getting the deficit down was a “defensible decision”.

A debt crisis would have been disastrous for growth and unemployment, as many European nations are now discovering. Furthermore, unlike those countries, Britain can, and is, using monetary and exchange rate policy to offset the fiscal tightening, as my right hon. Friend the Member for Wokingham said. I hope that that will keep the economy recovering.

As I have said, all manner of international bodies, from the IMF to the OECD, are unanimous in urging the Chancellor to stay the fiscal course that he has so consistently outlined for this country. Yes, real GDP growth may have dipped temporarily as consumers’ expenditure has been weakened, and today’s growth forecasts for 2011 from the Office for Budget Responsibility may be a little lower than we would have liked. However—

[Alison McGovern (Wirral South) (Lab)]

rose—

[Joseph Johnson]

I will continue, if I may.

However, business surveys have been much stronger than the official data, and the Institute for Fiscal Studies says that the chances of a double-dip recession are no more than 20%. Even Gavyn Davies, the great Labour-supporting economist, admits that this figure is

“not high enough to jettison the government’s main strategy, with the loss of credibility which that would imply.”

Mr Davies is, of course, completely right. Maintaining the current policy remains the best bet for Britain in the medium to long term, and that is what matters most.

16:55

[Diana Johnson (Kingston upon Hull North) (Lab)]

Let me start by paying tribute to my hon. Friend the Member for Barnsley Central (Dan Jarvis) on making an excellent maiden speech. He talked about the spirit and aspiration of the people of Barnsley. I know that he will make a very good Member of Parliament and will certainly bring that spirit and aspiration to the House of Commons. Let me also say what pleasure I took in the election result in Barnsley. Seeing the good people of Yorkshire give the Liberal Democrats a real pasting—they put them in sixth place and made them lose their deposit—was enormously pleasurable.

The Chancellor talked about the necessity for growth across sectors and across the country. He also said that growth should be properly shared across all parts of the country. I want to talk about growth and the impact on the regions, and particularly the Yorkshire region and the sub-region in the Humber. We recently had some good news in Hull, which is that Siemens will hopefully set up a manufacturing site in east Hull to build wind turbines. That will result in about 10,000 jobs, which is excellent news for Hull and the Humber region. Like all Members across the House, I want a growing economy, high-skilled jobs for all the people in this country, and a well-educated and well-skilled work force. We have a history in Hull, having lost the fishing industry in years gone by, and other historic employment issues that we still need to address, so growth is important for my constituents and my city.

However, it is important that we take an economic reality check and ask what the Budget will actually deliver. The key thing—this has been mentioned by many hon. Members across the Chamber—is that the growth forecast was down last year, it was down this year and it is down the year after. The hopes and aspirations of all my constituents have been dashed by what has happened since this coalition Government came into power.

I want to set this debate in the context of what it means for my city of Hull. Since last May, £20 million has disappeared from Hull’s local economy because of the coalition’s council cuts. We will see £25 million leaving the NHS in Hull, while £160 million has already gone because plans for the regeneration project in Orchard Park have been axed. Hull’s housing pathfinder funding has gone. There is zero decent homes funding for the next three years. Some £21 million has been cut from Hull’s Building Schools for the Future programme, and the university of Hull is getting a 5% funding cut.

There are major cuts to services across the piece in the public sector in Hull, which has a direct impact on the private sector. I fail to understand why the coalition does not see that cutting the public sector to the extent that it is will not help growth, but produce even more problems.

[Richard Fuller]

Does the hon. Lady acknowledge that the country has record debts, and if so, which public expenditure cuts would she make?

[Diana Johnson]

I am concerned that our economy should grow, and I am trying to set into context—

[Richard Fuller]

rose—

[Diana Johnson]

Will the hon. Gentleman just let me finish? I paid him the respect of listening to his question; I would appreciate it if he would listen to what I have to say.

One way of getting out of the problems that we have experienced as a result of the bankers’ problems—not the Labour Government’s problems, as the hon. Member for Southend West (Mr Amess) tried to suggest—is to grow the economy. I am with the coalition Government on the need for a growth strategy for the economy, but the measures that have been taken so far will not help to grow the economy in Hull and the Humber.

[Richard Fuller]

Will the hon. Lady give way?

[Diana Johnson]

No, I want to carry on making the point about why there is a real need in Yorkshire and, in particular, the Humber to grow the economy. The measures that have been taken are not helping. The result of all that money being taken out of my city is that construction jobs are going and we shall not have the training or the apprenticeships that the Chancellor has talked about. For the first time, we have seen compulsory redundancies at BAE Systems, a major private sector employer just outside Hull on which many of my constituents rely for skilled jobs. It is a place where people want to work, but private sector jobs are being lost there.

The abolition of the regional development agency, Yorkshire Forward, is a huge loss to the region and to the building up of the regional economy. The coalition has introduced local enterprise partnerships to assist regeneration. We all agree that we need to regenerate areas such as East Yorkshire and the Humber, and Yorkshire Forward was doing a very good job of building up the economy. The Government’s answer was to remove the RDA and create a regional growth fund. Now, whenever a question is raised about where funding can be accessed, we are told to go to the regional growth fund. The housing pathfinder has been scrapped, and the Prime Minister told my hon. Friend the Member for Kingston upon Hull East (Karl Turner) to go to the regional growth fund for money. It seems to me that the fund must already have been spent about 100 times over. It is just ridiculous.

[Alison McGovern]

Does my hon. Friend acknowledge, as I do, that the impact of these policies is borne out by the numbers, as the growth forecasts are downgraded?

[Diana Johnson]

That is absolutely clear.

The proposal for a business-led solution to deal with economic growth in the regions appears sensible. In my area, however, local authority politicians on Conservative-led East Yorkshire council and Liberal Democrat-led Hull council have been squabbling among themselves. The business leaders have made it clear that they want a pan-Humber LEP that will bring the economy together on the north and south banks of the Humber. As I said, we have had the wonderful announcement from Siemens on the future of renewable energy in our area, but because of the way in which the local councils in East Riding and Hull are behaving, the business community has been left without an LEP; the Business Secretary would not agree to one because it did not have the support of the business community.

This just shows that the Government’s approach is flawed. My area desperately needs economic growth, yet it has been left with no LEP and with the council in Hull squabbling with the councils on the south bank of the Humber. We have great potential for growth in the renewable energy sector, but there is no co-ordinating force. The idea is that LEPs will lead us into the growth strategy that we all want to see, but that is not going to happen in my area.

[Mr Stewart Jackson]

I fear that the hon. Lady might be suffering from selective amnesia. My recollection is that, in 13 years of a Labour Government, the per capita public expenditure for the people of Hull was significantly higher than for most parts of the UK—it was certainly in the top quartile—yet educational attainment, housing, skills and health outcomes were all in the bottom quartile. Why does she think that was?

[Diana Johnson]

I am sure the hon. Gentleman will be delighted to know that, because of the additional funding that the Labour Government put in from 1997, huge strides were made in education in my city, with more children achieving at GCSE level and more young people going on to college and university. That is important because it links into the growth strategy. Unless we have an educated, skilled work force, employers will not be attracted into the area. I disagree with the hon. Gentleman.

What the Chancellor announced today is a return to the 1980s. As mentioned earlier, the detail on the enterprise zones is very sketchy and it looks like only limited resources will be available to the 21 areas granted this status. Hull, however, is not in the initial 10 announced today, which is very disappointing because Hull and the Humber is one area where I would have hoped the Government would see the need to invest in and support the economy for it to grow.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

I am delighted that the hon. Lady is so supportive of our policy on enterprise zones. Perhaps she can encourage her local LEP to bid in the next round for one of them to be based in Humber and then to make a compelling case for the Humber to benefit from the policy.

[Diana Johnson]

With the greatest respect, if the Minister had listened to what I said, he would know that the Conservatives and Liberal Democrats who run the local authorities in my region cannot agree on an LEP, so there is not one. There is no procedure whereby anyone can lobby the Government for an enterprise zone. I question what will be delivered for local communities through an enterprise zone, and I also question how this policy fits with the localism agenda that the coalition is so keen to promote, whereby local areas are supposed to decide for themselves what they want to do and what best fits their particular needs. I question the announcement today, what it will mean and how it will help areas like the Humber.

I am also intrigued by this start-up Britain initiative. How is that going to help Yorkshire businesses? How is it going to help businesses in the Hull area? This start-up business sounds like a roadshow; I understand that the Prime Minister is going to tour around the country with some business leaders. If that is part of the growth strategy, then we have a long way to go.

Is this really a Budget for growth? I am concerned about some of the announcements that roll back people’s rights at work. A race to the bottom is not part of a sensible progressive growth strategy for our economy. We want high-skill jobs; we want a highly trained work force; and we want people treated properly in the workplace. Under the Labour Government, we married up social justice and economic efficiency from 1997 up until 2008, when we had the crisis with the bankers.

I am also concerned that women will lose out in this Budget. I was disturbed at Treasury questions yesterday when one of my hon. Friends raised the issue of how measures taken by the Treasury team were affecting women, only to have it dismissed along the lines of “We cannot possibly provide that information. We can only drill down to a household level. We can’t be gender specific.” In this day and age, the Treasury can be gender specific and should come clean on what these measures will mean for women and families.

Young people in Hull is another important issue. We are seeing a lost generation of NEETS—those not in education, employment or training. The coalition policies to remove education maintenance allowance and treble university fees will mean more and more young people deciding not to get the skills and the education that we all want them to have. It is a retrograde step when the Government pursue such an agenda against our young people.

[Mr Sam Gyimah (East Surrey) (Con)]

I am listening to what the hon. Lady says about young people not being given the skills they need and about NEETs. I do not know whether she was here earlier this afternoon when the Chancellor announced £200 million for 50,000 extra apprenticeships, which are targeted specifically at those young people who need training and skills to be able to get on the employment ladder.

[Diana Johnson]

Like all hon. Members, I think apprenticeships are an excellent idea. Employers in Hull, however, will tell anyone that the new criteria that have to be fulfilled to take on an apprentice mean that many of the young people cannot get into the workplace. They may be with a training provider, but actually finding an apprenticeship with a business is proving very difficult. I do not know where these 250,000 apprenticeships are going to come from. If the Government can do this, I say “Excellent, we are all supportive,” but to be honest, you are in la-la land—[Interruption.]—or, indeed, in the land of green ginger, which is another very good example.

[Mr Deputy Speaker (Mr Nigel Evans)]

When the hon. Lady said “you are in la-la land”, she was, of course, referring to me!

[Diana Johnson]

I meant no disrespect to you, Mr Deputy Speaker. Of course, I did not mean that.

Let me bring my remarks to a conclusion.

[Mr Marcus Jones (Nuneaton) (Con)]

The hon. Lady said that employers did not seem to want to take up the offer of apprenticeships. She is entirely wrong. The Government’s current scheme, which will generate a further 40,000 apprenticeships over the next couple of years, is over-subscribed. How can she square that with what she said?

[Diana Johnson]

With respect to the hon. Gentleman, that is not what I said. Employers in Hull tell me that the opportunities available to their businesses are limited because growth is so restricted, and that they therefore cannot take on apprentices. Meanwhile, providers tell me that they bring young people into the training centres, but then cannot find the apprenticeship places that would enable them to do their training.

There have been a good many academic debates today about what the Budget means—about bond markets and so forth—but in practical terms, for our constituents up and down the country, the real issues are connected with the cost of living. The rate of inflation in this country is now the highest in western Europe, people are worried about whether they will have jobs in the coming months, and there are problems with fuel duty. I am glad that the Government have been able to reduce fuel duty by 1p, but I find it rather ironic that the Conservatives are not able to challenge the European Union on VAT and derogation. Surely this is an opportunity for a party that is for ever wanting to take pot shots at the EU to do something constructive.

I believe that the deep cuts that are being made now will lead to social costs in the long term. It is dreadful that the coalition Government are targeting their cuts at communities in some of the most deprived areas, and at the most deprived and vulnerable groups in those communities. For instance, Hull city council’s early years service is being scrapped. We shall have no officers, no support for our nurseries, and no support for children in nurseries who have special educational needs, because the early intervention grant that the Government said would cover the cost of children’s centres and support for children under five does not do what it says on the tin. We shall end up with buildings that are open, with caretakers and receptionists, but with no children in them.

As I have said, the coalition Government’s cuts will store up a great many problems for the future. They utter plenty of fine words about the need for early intervention and support for families and communities, but they do not deliver the finance.

The Government strike me as a group of deficit deceivers and growth deniers who are making our country a less fair and secure place in which to live. Until 2008, the spending commitments of the right hon. Member for Tatton (Mr Osborne) matched those of the Labour Government across the board. Only when the banking crisis arrived did the then Opposition take a different approach. The Liberal Democrat council in Hull took the view that the Labour Government should be spending far more on Hull, but now Kingston upon Hull council is losing 9% of its budget, while Kingston upon Thames is losing 3%. That is not fair. The Chancellor may stand up and talk about a fair Budget, but this is not a fair Budget; neither is it a Budget for growth.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. By convention, there are no time limits on speeches on Budget day, but many Members still want to take part in the debate. Any Member who speaks at excessive length—for more than about eight minutes, that is—will prevent others from contributing. I ask Members please to show some restraint. There will be other opportunities for them to speak during subsequent Budget debates.

17:14

[Richard Harrington (Watford) (Con)]

I assure you, Mr Deputy Speaker, that I will stick to the guidelines you have given. In fact, uniquely both in this House and in life generally, I find that I am speechless after listening to the hon. Member for Kingston upon Hull North (Diana Johnson). There is a holiday attraction somewhere called la-la land. I cannot remember who mentioned it but, obviously, it is nothing to do with Kingston upon Hull North. The picture the hon. Lady painted forgets who has been in power for the last 13 years and who has been responsible for a bloated public sector and a starved private sector, as well as for unemployment and all the other problems that many people, including the Chancellor, have spoken about today.

[Matthew Hancock (West Suffolk) (Con)]

Is my hon. Friend as confused as I am given that the previous speaker started her speech by saying there are new jobs at Siemens in Hull, thereby showing that manufacturing is expanding under this new Government?

[Richard Harrington]

My hon. Friend makes a good point, but we heard about Siemens so long ago that it had slipped my mind.

I shall restrict my comments to my experiences in business of dealing with the economy, and the experiences of my constituents and their businesses in Watford. Watford is not dissimilar to Kingston upon Hull. It has significant unemployment and shares all the same problems as many other parts of the country. Notwithstanding the Chancellor’s commendable statement today, the most significant factor in encouraging businesses to invest is the general macro-economic situation. Therefore, the most important aspects of this Budget and the last Budget are the measures for reducing the deficit.

[Alison McGovern]

The hon. Gentleman is making his speech in his usual eloquent style. Will he comment on why the growth forecasts have been revised downwards?

[Richard Harrington]

The comments that the hon. Lady somewhat generously applied to my erudition can also be applied to hers. To respond to her question on growth forecasts, we cannot select one figure and say that it makes a fundamental difference, because assessments of growth must be made over a period of time. In my experience, the most important factor for growth is the confidence people have in the economy, and that will definitely come about because of the Government’s sensible approach, as opposed to the reckless irresponsibility of their predecessor.

[Angie Bray (Ealing Central and Acton) (Con)]

Is it not the case that in almost every recession that this country has had to fight its way out of, there have been choppy times and there has never been a smooth upward trajectory? It is always the case that some quarters are better than others.

[Richard Harrington]

With the possible exception of the la-la land factor, my hon. Friend is absolutely right.

I want to talk about some specific factors that are important to business people, and therefore important to growth. There is a lot of talk about banks and the availability of capital, and about what the Government should do and what they have not done. Again, I want to comment based on my experiences in the constituency. The bank lending situation is getting better; there is no doubt about that, as the loans are beginning to come through. In Watford alone, under the enterprise finance guarantee loan scheme, 23 companies have already borrowed money amounting to £4 million. That is a comparatively small sample and it reassures me for the future that this scheme, which is to be expanded, does work, and that it does so in a comparatively short period of time.

It is very fortunate for us that interest rates are low, but the decisions made by businesses do not change when fluctuations are minor, such as 1% up or 2% down. Their decisions do change when the situation reaches a ludicrous point; I was once left with a loan on which I was paying 2% over base when the base rate was 15%. Variations such as 1%, 3% or 5% make little difference. Again, what matters is confidence in the economy and confidence that the Chancellor has done the right thing today. So I must encourage what the Government are doing on the fundamentals, because people and businesses will want to borrow money only when there is confidence in the future and confidence that we are doing the right thing.

My next point relates to the availability of skilled staff. Despite the fact that 3.7% of people in Watford—more than 2,000 people—are on jobseeker’s allowance and 700 or 800 young people there are not in education, employment or training, I visit factories and businesses that cannot recruit staff of the right calibre every week. A few weeks ago, I visited Davin Optronics, a manufacturing company that uses skilled labour to make lenses—it deals with complicated stuff. Its fear was that its work force were getting older and younger people did not want to join manufacturing businesses. That is a fundamental issue and we have to change attitudes.

[Helen Goodman]

How does the hon. Gentleman reconcile that situation with his Government’s policy on tuition fees and the fact that this week children in this country are being told that they cannot take three sciences at GCSE because of the cuts to school budgets?

[Richard Harrington]

The hon. Lady and I were at university at broadly the same time, so we were very privileged. We could debate tuition fees for hours, but no matter what one’s arguments on that, the new regime has not changed the current situation and we are, thus, dealing with Labour’s policy on tuition fees at the moment. I would be happy to debate tuition fees with her on another occasion, but the real issue is that we have young people and older people who are unemployed, and we have vacancies in jobs that people will not go into. The Government’s efforts on work experience for young people—today’s announcement on that was tremendous—and on expanding the apprenticeships scheme are very important, as are the technical universities. I commend those efforts because we must have a work force who have the right skills. That is not solely about graduates; it is also about people who are leaving school and are doing apprenticeships and further education courses. What the Government are doing to help will change the availability of staff.

[Mr Kevan Jones]

Will the hon. Gentleman give way?

[Richard Harrington]

No, I must make progress.

I normally agree with everything said by my right hon. Friend the Member for Wokingham (Mr Redwood), who is not in his place, and one might think that, as a Conservative Member, I would have an overwhelming interest in bureaucracy, labour laws, red tape and obstacles to business and that dealing with those things would be my top priority. However, important though they are, I think that they are secondary to the macro-economic factors—they are secondary to stability and the feeling of confidence. Germany is a classic example of that, because despite its labour laws and the fact that it has lots of regulation, manufacturing industry works well there. So I am very pleased that we are concentrating on the other issues.

I am keeping in mind your earlier comments, Mr Deputy Speaker, but I just wish to remind hon. Members that Watford is an average kind of constituency and so has 3,000 businesses, with eight being roughly the average number of people employed in them—these are predominantly small businesses. I believe that this Budget will help the long-term confidence for them, despite short-term growth forecasts, and so it is a Budget very much for the small business. It is also a Budget for the larger business, given the corporation tax measures. However, more importantly, it is a Budget for ordinary people and for their prospects. I believe that it is the best Budget that we could have, given the mess that the Government were left.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Gentleman for his time restraint.

17:23

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to speak in the same debate as my hon. Friend the Member for Barnsley Central (Dan Jarvis)—the new Member for that constituency—who will be a credit both to his constituents and to this House. We should listen carefully to his words and his warnings.

Today’s Budget is equally noticeable for what it does and does not include, because the Chancellor has not heeded the many warnings showing that the Government’s economic policies are not working. Gross domestic product figures for the last quarter of 2010 showed that our economy contracted by 0.6%. Government Members blamed the snow, but it snowed in Germany, yet its economy grew by 0.4%, and it snowed in the United States of America, yet its economy grew by 0.7%. The difference is that we are cutting too fast and too deep and they are not.

Another warning can be found in last week’s unemployment figures, which showed that unemployment is the highest it has been for 17 years and that youth unemployment is the highest on record. The OBR today showed that unemployment is set to rise to 8.2% this year and 8.1% next year—higher than it was even at the height of the recession. House prices continue to fall and yesterday we learned that the consumer prices index has increased to 4.4% and the retail prices index to 5.5%. There are many warnings that the Government’s policies are not working.

[Mr Stewart Jackson]

I have a quick question for the hon. Lady. Why, on the “Daily Politics” show approximately three hours ago, was she unable to name one measure in this Budget that Labour Front Benchers would vote against?

[Rachel Reeves]

We would like to vote, for example, on the bank bonus levy and other components of the Budget. My right hon. Friend the Member for Doncaster North (Edward Miliband) set out today that we will consider areas of growth in “The Plan for Growth” green book. There are areas where we want to work with the Government but also areas where we disagree with what they are doing.

Given the warnings I have mentioned, it is hardly surprising that the independent OBR has today downgraded its growth forecast for 2011 to 1.7% and has revised growth for next year to 2.5%. Let us put that in context. Before the Chancellor’s first Budget last year, the OBR predicted growth in 2011 of 2.6%. That forecast has now been downgraded three times—to 2.3%, 2.1% and today to 1.7%. Every time the Chancellor gets to the Dispatch Box, the OBR has to downgrade its growth forecasts.

The Government will say that the only way to get growth back on track is to reduce the deficit, but we have also seen today that the OBR’s borrowing forecast is expected to be £44.5 billion higher over this Parliament as a result of lower growth and higher unemployment. Despite today’s opportunity to think again, however, the Chancellor will still not accept that plan A is not going to plan.

Although the Chancellor has no plan for growth, his implicit plan B, I think, was looser monetary policy, yet today’s Monetary Policy Committee minutes show a further split over whether to increase rates and yesterday’s inflation data show more pressure for a rate rise. Plan B is looking as forlorn as plan A, with householders likely to see a mortgage rate rise by the summer.

We have heard many times today that the Government cannot change course, but that is a fallacy. Jonathan Portes, the new director of the National Institute of Economic and Social Research, recently said that that intransigence

“relies on an odd view of market psychology, one that says markets have more confidence in governments that never adjust policy, even when it is sensible…history suggests the opposite: that the real hit to credibility comes from sticking to unsustainable policies”.

He is right. Now is the time—more than ever—for the Government to rethink their plan, which is sapping jobs and growth out of the economy.

We need to begin to build the Britain of the future, because confidence in UK plc requires a belief that we have a competitive economy that productively employs its resources, draws on our strengths across the sectors and regions and invests in science, skills, technology and infrastructure. Today’s Budget, however, does nothing to foster investment or hope. Although I welcome “The Plan for Growth”, which has been published today, and the announcements to relieve us of a further increase in fuel prices and to provide help for first-time buyers, the Chancellor could and should have done more.

Most of all, although the Chancellor has said repeatedly that he will be tough on the banks, page 103 of the Red Book shows that the bank bonus tax brought in £3.5 billion in 2010 whereas the bank levy will bring in just £1.9 billion this year. There is no guarantee that the banks will lend any more to small businesses because the Government agreed gross lending targets and no net lending targets. No wonder the Treasury spokesperson for the Liberal Democrats in the Lords, Lord Oakeshott, resigned, saying that if this was tough action, his name was Bob Diamond. The Government have washed their hands of any responsibility to help small businesses, which are being hit hard by the banks’ actions.

There are other areas where the Chancellor could have acted today. We need a plan for green jobs and there is still the potential for Britain to be a world leader, as my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) pointed out earlier, in the green technologies of the future, but the market requires certainty and we are losing the initiative to countries that are willing to provide it. We need action, not just words, on the green investment bank, yet today we found out that it will not be fully operational until 2015.

We need regional economic strategies. The regional growth fund is estimated to be 10 times over-subscribed, and with a two-thirds cut to regional economic investment, cities and towns across Britain are missing out on opportunities to grow and diversify their economies. We risk another overheating in London and the south-east while the potential powerhouses of the north of England are being left behind. Although I welcome the enterprise zones, the evidence from the 1980s shows that such approaches move, rather than create, jobs. Of course, the funding for enterprise zones is a fraction of what the regional development agencies had to spend.

[Mr Kevan Jones]

Does my hon. Friend agree that because the enterprise zones are being imposed on regions, unlike in London where the Mayor will decide where they are, entire areas of the north-east such as Northumberland and Durham will be completely excluded from them and the little help they will bring?

[Rachel Reeves]

I do agree. Of course, only half the plans were announced today, which was disappointing.

We need an approach to business taxation that fosters growth. Although the Government have trumpeted the cut in corporation tax, it has so far been funded at the expense of investment and manufacturing allowances, so while big businesses have benefited from a tax cut, start-up and investment-intensive firms have seen their taxes rise. If we are to create the jobs of the future, we need today’s entrepreneurs to innovate and that is where the limited funds should be targeted.

We also need greater investment in skills and education. Last year, 8 million people graduated from universities in China and India. No other country is cutting investment in universities, reducing the teaching grant by 80% and cancelling partnerships between business and universities, but that is what the Government are doing.

Last week, we heard that the youth unemployment figure is approaching 1 million and it beggars belief that the future jobs fund is closing its doors in the same month that youth unemployment has risen yet again. One in five young people—more in my constituency—now claims unemployment benefit. Today’s unemployment figures are likely to rise further and today’s Budget is bad news for young people up and down the country.

The public recognise the need for austerity, but they also want to know that the Government have learnt lessons from the crisis and are determined to build a fairer and more sustainable economic future. Britain could be a world leader in the jobs, technologies and industries of the future but only if the Government support growth. Today was the Chancellor’s opportunity to show that he understands the needs of businesses and families, but the OBR’s verdict was to downgrade growth for the third time in 2011 and for next year as well. The Government have ignored the wake-up calls. This Budget is a missed opportunity and I urge the Chancellor and his colleagues to think again about what is really needed to ensure that we emerge from this recession with a stronger, fairer economy for everyone in the country.

[Mr Deputy Speaker (Mr Nigel Evans)]

Thank you for your time restraint.

17:32

[Mr Stewart Jackson (Peterborough) (Con)]

It is a pleasure to follow the hon. Member for Leeds West (Rachel Reeves), but I am tempted to say that hers was a bit of a Blue Peter speech—here is one I prepared earlier. I am not sure that she has done anything other than regurgitate the line from the Whips Office.

[Rachel Reeves]

The main thrust of my speech was to point out that growth had been downgraded and we did not know that until today. It was only when we heard the Budget that we knew that growth had been downgraded, for the third time in a row, to 1.7%, so I could not have written it earlier.

[Mr Jackson]

I know that the hon. Lady has some expertise on these issues. She can rest assured that my criticism will be confined mainly to the Leader of the Opposition, who delivered a master class in opportunism and vacuity. His loquacity was in inverse proportion to his intellectual insight. In his 15 minutes of speaking, no policy whatever was articulated.

The Budget is supported by the OECD, the International Monetary Fund and business leaders such as the deputy director of the CBI, John Cridland, and David Frost of the British Chambers of Commerce. It is about the Government putting in place the conditions for sustainable, balanced economic growth. Let us remember that the Institute for Fiscal Studies still says that public finances remain in a critical condition, but we have had no alternative whatever from Her Majesty’s Opposition. Indeed, we might have to call in Professor Brian Cox, the noted cosmologist, to search for the black hole where the Labour economic policy should be.

[Helen Goodman]

Will the hon. Gentleman give way?

[Mr Jackson]

I will make some progress; I am sure that I can let the hon. Lady in a bit later. The priorities of the Budget are primarily to reduce the deficit; rebalance the economy, which was left out of kilter by the Labour Government, with an over-concentration on financial services, the housing market and public expenditure; reform public services; and grow, via initiatives such as the green investment bank, green expertise, knowledge, skills and jobs. If I may give a plug, yesterday a collaboration was announced between Peterborough city council and Cranfield university on a centre for renewable energy and biofuels, to be based in Peterborough.

We need to move towards a high-wage, low-taxation economy with less pressure on household incomes, and the Budget provides a road map for that. No one denies that we have had to make some very tough decisions in the comprehensive spending review and in last year’s emergency Budget. There were real-terms cuts in departmental expenditure; the cut to departmental expenditure will be, on average, 11%. However, we should remember that between 1998 and 2010, there was a real-terms increase in budgets in each Department of anything between 2% and 8%. The fiscal tightening between now and 2015-16 will mean that we have to reduce public expenditure and put taxes up, with capital gains tax, tobacco, fuel, the bank levy, consumer prices indexation and child benefit affected. Contrary to received wisdom among Opposition Members, the richest 2% will be hit hardest by the tax benefit and other changes.

What choice do we have? Labour’s poisonous legacy and debt millstone left us with simply no alternative. In 2010-11, we had to borrow about £140 billion—perhaps around £10 billion less than expected. Only Ireland has a bigger cyclically adjusted deficit. Labour ran a structural deficit some seven years before the banking crisis in 2007-08, and we entered the financial crisis with the largest structural deficit in the G7. The national debt doubled between 1997 and 2010. In May last year, we were at significant risk of a downgrading in our international credit rating, with a catastrophic impact on public services, business and consumer confidence, a long period of stagflation, and a contraction in the economy.

[Rachel Reeves]

I want to enlighten the hon. Gentleman with two facts. First, in 1996, just before the Labour Government came into power, there was a structural budget deficit of 4%, whereas it was 2.5% in 2007. Secondly, he compares the UK economy with that of Greece, but does he recognise the figures that show that although bond yields in Greece increased from 7% to 12% between January and May 2010, in the UK, before the Conservatives came to power, they were falling?

[Mr Jackson]

The hon. Lady will know that the markets have recognised that the fiscal consolidation that the Government had to put in place as part of a policy of growth in the private sector and consolidation in the public sector has resulted in a lessening of the pressures in the gilt markets, with gilt yields down to 3.53% since May last year, and every 1% is £1 billion of interest payment. Of course, that is change in the pocket to Labour Members; we are spending £120 million on debt every day.

[Helen Goodman]

Will the hon. Gentleman give way?

[Mr Jackson]

No, not at this moment.

To put that in context, £95 million could have been spent on schools each day, but we are servicing Labour’s debt, and we could be spending £35 million on police, £25 million on social care, and £90 million on defence. The entire budget deficit that the Labour party ran up in government is £42.7 billion. That is 40 Type 45 destroyers, 33 Astute class submarines, 42,700 MRI scans, or 1.3 million nurses. That is the reality of the appalling profligacy and mismanagement of the Labour Government. We do not hear alternatives. We hear a policy that is dishonest, incoherent and irresponsible. The right hon. Member for Morley and Outwood (Ed Balls) shares very few values, I imagine, with the former US President Ronald Reagan, who once said, “I am not worried about the deficit. It is big enough to take care of itself.” That sums up the Labour party’s attitude in government, and the deficit denial on the Opposition Benches now.

Even some sensible and pragmatic Labour supporters are troubled by the incoherence and the substitution of political opportunism for a realistic alternative policy. The erstwhile Cabinet member, the right hon. Member for Salford and Eccles (Hazel Blears), said at the weekend:

“The public expects us to at least give a broad direction—but I think they are worried that we haven’t been as clear as we ought to be.”

She is absolutely right.

The former general secretary of the Labour party, Peter Watt, went further. In a rebuke to the institutionalised deficit denial of the shadow Chancellor, Mr Watt said on the labour-uncut website that Labour

“is . . . a highly toxic brand. . . we are still opposing every cut . . .It might make us feel better and win some short term popularity. But it isn’t an answer to the charge that we had become economically illiterate and had allowed massive overspending.”

If there is one lesson that I can offer the Labour party from our long period in opposition, it is this: rarely is it enough to be populist to win the respect of the electorate. That rarely forms the basis of a credible election strategy.

[Helen Goodman]

Is the hon. Gentleman satisfied with a Budget to which the oil and gas industry responded this afternoon by expressing its shock and stating that the investment climate has been seriously damaged and the Budget will drive jobs away from this country?

[Mr Jackson]

That is one viewpoint from one group of people. Others, such as Baker Tilly, the tax accountants, say that it is an excellent Budget. So do the CBI, the OECD, other industry groups, house builders and others. [Interruption.] I am glad the hon. Lady thinks it is humorous that people are supporting my right hon. Friend’s Budget.

[Gareth Johnson (Dartford) (Con)]

One group of people who will welcome the measures in the Budget today is motorists. Does my hon. Friend agree that the measures cutting fuel prices ensure that petrol prices will not only not affect motorists directly, but will not have an impact on the price of goods in the shop, which in turn will assist middle England?

[Mr Jackson]

My hon. Friend makes an apposite point. I lobbied the Chancellor myself, I campaigned for the policy and I am glad that he has listened to the views of people, many of whom rely on the car to travel to work. It is a matter of public record that had Labour been re-elected in May last year, petrol prices would have been going up an extra 6p. That would be the price of Labour’s profligacy.

I am delighted that we are taking more poor working people out of tax, and that we are creating local enterprise zones to drive regeneration in some of the more difficult economic areas of Britain. I am delighted, too, that we are tackling corporation tax and creating conditions in which business wants to relocate to the UK and create jobs.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

But does the hon. Gentleman not realise the great damage the Budget has done by saying to investors, “You come to the United Kingdom, you invest in success, you employ 450,000 people, you make 20% of the Exchequer’s corporation tax, and then, once you have made all that investment, the Government move the goalposts and whack up a huge extra tax on your industry”?

[Mr Jackson]

I fully understand and respect the hon. Gentleman’s constituency interests. Were I in his position, I would make the same points. Clearly, when we are in a less than benign financial situation, clearing up the abysmal mess left by the Labour Government, we have to make difficult value judgments. To govern is to choose, and sometimes the choices made will not please everyone. I understand and respect the hon. Gentleman’s views, and I am sure the Chancellor and the Treasury Front-Bench team have heard his views.

[Dame Anne Begg]

Will the hon. Gentleman give way?

[Mr Jackson]

No, I do not have time. Although other Members spoke for much longer, I will have to finish quickly.

I am delighted about the permissive nature of the reforms to the planning system and about the desperately needed initiatives for first-time buyers. It was extremely important that the mortgage market review of the Financial Services Authority was not going to choke off first-time buyers. Some figures show that 37 is now the average age at which young—less young—men and women buy their first homes. We had a significant housing boom in the 1990s and 2000s and need to encourage the house building industry to build more homes without choking off house prices or the capacity of young people to own houses and flats.

I am also delighted that residential estate investment trusts will be looked at. We need to clarify the regulations relating to brownfield remediation, which is an important part of bringing back into use residential and commercial sites. In future Budgets we need to think carefully about giving tax incentives for saving to first-time buyers so that they can build up moneys for a deposit in preparation for buying a home. We also need to look at stamp duty land tax. I am pleased that we are beginning to look at self-invested personal pensions in relation to people’s capacity to invest in the housing market.

In conclusion, the Government have had the courage and determination to take tough decisions and to prepare the ground for economic recovery. A credible plan to deal with our record budget deficit is an absolute precondition for growth. The Chancellor is right to strive for a balanced Budget and a firm and consistent strategy that will deliver for ordinary families in my constituency and across the country lower taxes, more jobs, better living standards and a renaissance in our international competitiveness. That is the only way to achieve future prosperity, which is why on Tuesday I will be supporting the Budget.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The debate will finish promptly at 7 pm.

17:45

[Mr Kevan Jones (North Durham) (Lab)]

I was going to say that it was a pleasure to follow the hon. Member for Peterborough (Mr Jackson), but we have heard a succession of speeches from Government Members that were not only economically illiterate, but stuck to the rhetoric pumped out during the general election. They seem unable to get away from that rhetoric even when the reality of what this country is facing hits them. We heard a rant from the hon. Member for Southend West (Mr Amess) and, frankly, a very strange speech from the hon. Member for Orpington (Joseph Johnson), who clearly had read something about the gilt market but did not quite understand how it works.

I congratulate my hon. Friend the Member for Barnsley Central (Dan Jarvis) on an excellent maiden speech. I think he will be a great asset to the House. He is a man of great courage in both his private and personal life and in the service of this country. I look forward to many more contributions of the standard he gave today.

I would like to focus on two issues: the lack of a policy for growth in the Budget and how that will not affect positively the economy of the north-east of England. Growth figures for the last quarter of 2010 show that the economy contracted by 0.6%, as was mentioned by my hon. Friend the Member for Leeds West (Rachel Reeves). The Government blamed snow for that, but she eloquently pointed out some great examples of economies that grew despite having weather that was far worse than it was in this country.

On top of that, last week we saw a 17-year high in unemployment, set against a continuing fall in house prices and an increase in inflation to 4.4%. It would not take an astrologer, as was mentioned earlier, or a genius to work out that the OBR was going to have to downgrade its growth forecast today. Initially, it said that growth would be 2.6%; then, that it would be 2.1%; and today, that it will be 1.7%. The lack of growth is the main risk to our economy, and let us be honest, the Budget was spun so much that we could have read or predicted most of it before the Chancellor even stood up at the Dispatch Box today to announce it.

The Government also say that the key thing they have to do is to reduce borrowing, but borrowing is now going up, so even by their standards the economic pill is clearly not working. What is happening now is both risky and dangerous to the UK economy, and, although history cannot be repeated precisely, we need to look back, because one of the key lessons we have learned from the 1920s and ’30s is that recovery from large financial crises is delicate, slow and stuttering. Now, as a precise result of this Government’s policies since May, growth is down and unemployment, borrowing and inflation are up.

[Rachel Reeves]

Does my hon. Friend agree with me and the chief economist of the International Monetary Fund, Olivier Blanchard, who says:

“Unless advanced countries can count on stronger private demand, both domestic and foreign, they will find it difficult to achieve fiscal consolidation”?

[Mr Jones]

Yes. That is the entire flaw in the Government’s policy: the idea that they can cut public expenditure as deeply and savagely as they are going to, and that somehow jobs will be created in the private sector—something that will just not happen. It might happen in parts of the economy, but there is certainly no indication that it will happen in my region. In fact, the situation is even worse, because Durham university’s model shows that taking out 20% of the public services will lead to 50,000 jobs going in the north-east, with 20,000 of them actually in the private sector. Replacing those jobs, in addition to the 30,000 in the public sector, is going to be very difficult.

[Sammy Wilson]

Does the hon. Gentleman accept that, if the growth figures are wrong, the impact will be magnified and multiplied the further one moves away from the south-east of England? The impact on regions of the United Kingdom will be much more severe if the Chancellor has got it wrong.

[Mr Jones]

The hon. Gentleman makes a very good point, but do the Conservatives care? No, I do not think they do. We saw that in the 1980s and early 1990s in the north-east of England. His constituents will face similar problems to constituents in the north-east, given the contraction of public sector jobs, which will have a direct impact on the private sector. Trying to attract business and growth to those areas will be very difficult, and I fear that we could have a two-speed Britain: a reasonably prosperous south-east of England, but stagnant or even declining regions, such as the north-east and Northern Ireland. Does the Conservative party care about that? No, I do not think it does.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

How does the hon. Gentleman deal with the fact that, even with Labour’s slower rate of deficit reduction, he could not have avoided a significant decrease in the number of public sector jobs to meet his party’s own projections of how it would reduce the deficit?

[Mr Jones]

I find that hard to stomach, coming from the right hon. Gentleman, because he is giving succour to the proposals before us, which could damage the north-east economy more severely than even those in Thatcher’s day. He is looking both ways, as a Liberal saying one thing in the region, and then coming here and supporting and voting for a Conservative Government who are putting the proposals forward. [Interruption.] I will tell him exactly why. What we would not have done is put forward his and his party’s ludicrous proposal to abolish the regional development agency, One North East.

The right hon. Gentleman now has to defend his ludicrous policy on local enterprise partnerships, which I shall come to later. He struggled to get re-elected this time; I doubt whether the voters of Berwick will re-elect him if he stands next time. It is important to remember that none of this could have happened without the Liberal Democrats blindly going along and supporting those savage cuts, which will have a terrible effect on a region I know he actually cares deeply about.

Another major aspect of the current economic situation is inflation. The Bank of England is stuck between a rock and hard place. Interest rates are as low as they can go, and quantitative easing is continuing, yet the inflation target is way above where it should be. It is difficult to know what the Bank will do.

We continue to hear, as we have heard several times this afternoon, that there is no alternative to this approach. I am sorry, but there is a definite alternative. We also hear that the fact that we are in this mess is all down to a Labour Government—that only Britain went through the recession in 2008, while the rest of the world did not, and that we got into the position we did only because of Labour’s reckless spending and financial management. I want to put some facts on the record. Conservative Members use a lot of rhetoric and soundbites; the famous one from the Prime Minister was that Labour did not mend the roof while the sun was shining. In fact, we did, because when we came to power in 1997, the level of debt was nearly 50% and we reduced it. I remember the tremendous debate within my party when we sold off the 3G licences. People said that we should use that money to fund public expenditure, but the then Chancellor took the very good decision to drive down the level of debt. That left us, going into the economic downturn, in the strong position of having the lowest debt, unemployment and inflation in the G7, and the highest investment from overseas.

Was it right to transform and invest in our public services over those 13 years? Yes, it was. They have been transformed in many parts of this country, certainly in my constituency. When I was first elected in 2001, the hospital in Chester-le-Street was in the old workhouse. We now have a brand-new hospital in Chester-le-street, as well as three others in the area. We have six or seven new primary care centres in County Durham. That is a direct result of public investment. When the economic crisis hit, did we have to respond to that by borrowing? Yes, we did. Was it the right thing to do? Yes, it was.

At the time of the crisis at Northern Rock, if we had followed what the Conservatives, including the current Chancellor of the Exchequer, wanted to do, which was basically to let it fold, we would have had a far worse situation, with a banking crisis that would have devastated not only Northern Rock but every other bank. The then Chancellor put in place a package to support banks, subsidise mortgages, cut VAT, fund apprenticeships, and give people money to buy new cars and stimulate the economy—and it worked. If people want to look for the evidence for that, there is the growth of the economy in the months prior to, and just after, the general election.

Contrast that with what we have now—a Government who do not have a growth strategy and are wedded to a strategy that they feel it would be politically weak to go away from, repeating time and again that there is no alternative. I ask Conservative Members to reflect on what they would have done at that time. Last weekend, the Chancellor said that we were in this financial state because of a decade of over-expenditure by the Labour party. Well, the Conservatives supported our spending targets right up until 2008, so they cannot have it both ways. I ask them to look at the facts rather than what central office spun during the election campaign, which, unfortunately, some of them are continuing to repeat.

[Sajid Javid]

I am glad that the hon. Gentleman said that one should look at the facts. Is he aware that the spending cuts over this parliamentary period are only 3.7%—0.9% a year—in real terms, which is lower than the spending cuts that were implemented by Denis Healey, a former Chancellor? On that basis, would he still describe them as swingeing, drastic or tough cuts?

[Mr Jones]

I am sorry, but yes I would. If hon. Members are going to make comparisons, they should compare like with like. Whoever writes the central office briefings does one thing all the time. They compare our economy with that of Greece or, as the hon. Gentleman just did, they compare the British economy today with that of the 1970s. That is complete nonsense.

The central point—some Liberal Democrats are starting to wake up to this, including the Deputy Prime Minister—is that although there is a need and a desire to reduce the deficit, there is also an ideological drive to have a smaller state and to put into practice the ideological prejudices that the Conservatives have yearned to implement for many years. The people of this country will suffer from that. Is there an alternative? Yes, there certainly is.

[Mr Greg Knight (East Yorkshire) (Con)]

This trip down memory lane is very interesting, but, if he does not support the expenditure cuts, will the hon. Gentleman tell us how much more he thinks we as a nation should be borrowing?

[Mr Jones]

Something that the central office spin machine does very well, and which Thatcher did, is somehow to compare the national economy to somebody’s personal expenditure. Can we afford to borrow at the moment? Yes, we can. Borrowing to invest in infrastructure and other things is the right thing to do, and is exactly what we were doing in government. We are increasingly borrowing not to invest in the economy and infrastructure and to add to the country’s economic power, but to support unemployment. That is exactly what the Major Government found in their dying days.

It is important to recognise that unemployment in the north-east has reached 10.2%, and that is before the real effects of the public expenditure cuts work their way through. The idea of economic zones or business development zones, or whatever they are called, was announced in the Budget, along with the local enterprise partnerships. One North East was very successful in regenerating the north-east economy. It actually moved the economy away from the public sector and grew the private sector. It had real money. It had £180 million a year, and worked with the local university sector and local authorities to spend European regional development funding. The LEPs have no money attached and the regional growth fund has £1.4 billion to be competed for around the country. Today, we have the enterprise zones.

[Mrs Mary Glindon (North Tyneside) (Lab)]

The Government have said that they want enterprise zones to support real growth and long-term sustainability. Does my hon. Friend agree that the announcement of an enterprise zone for Tyneside means little for growth or sustainability when the Transport Secretary has said that he will not provide funding for the much-needed upgrade of the A19 Silverlink interchange, which businesses have told politicians is essential for the economic development of Tyneside and the wider region?

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The interventions are becoming very long. I have said that we are under real time constraints, as Mr Jones knows as well.

[Mr Jones]

I do know that, Mr Deputy Speaker, but it is important to get these things on the record.

My hon. Friend the Member for North Tyneside (Mrs Glindon) makes a good point. The two enterprise zones for the north-east will be in Tyneside and the Tees valley. That important piece of infrastructure is somehow supposed to be funded by the private sector, but that is exactly the kind of public expenditure that should be going into the region to create jobs and regenerate infrastructure. My concern about the enterprise zones is that places such as Durham and Northumberland have been left out. If we look back at the old enterprise zones, we see that all we got from them was a shovelling around of businesses and artificial borders. The zones will make it very difficult to attract inward investment to Durham and Northumberland.

As has been said, page 42 of the Red Book shows that funding for the 22 enterprise zones will add up to about £1 million each over their lifetime, which will not in any way help the regeneration of either Tyneside or Teesside. We will have the talking shops of the local enterprise partnerships, but no real money to do anything. The disastrous situation at the moment is that we have £106 million of European regional development fund but no money for One North East, local authorities or universities to match fund projects. The Government’s regional strategy is in a complete and utter mess, and the Budget will do nothing to assist.

One issue that has already been raised is—

[Mr Gyimah]

So why raise it again?

[Mr Jones]

Does the hon. Gentleman want to intervene?

[Mr Gyimah]

The hon. Gentleman said that the point he was about to make had already been raised a number of times, so I was asking why he was raising it again.

[Mr Jones]

If the hon. Gentleman continues, I might go on for a bit longer, so he must be clever and not do so.

As my hon. Friend the Member for Aberdeen South (Dame Anne Begg) said, it has been billed that the Government have somehow saved the motorist by reducing tax by 1p, but the effects of paying for that will be disastrous for the oil industry in this country, including Scotland. They will be disastrous for the north-east, as it relies heavily on Teesside and Tyneside to supply the expanding gas and oil fields, which need long-term investment. It is completely and utterly irresponsible to throw a spanner into the works of the investment in developing some of the most difficult oil and gas fields in the North sea.

[Dame Anne Begg]

Does my hon. Friend agree that the danger of today’s proposals is that they might fatally undermine the whole North sea offshore sector, which is fragile anyway because the geology makes it difficult to get the oil out? As a result, the country may lose even more money, because the sector is a huge taxpayer. As my neighbouring MP, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), said, 20% of all corporation tax is paid by the industry. What is being done today could put that in jeopardy.

[Mr Jones]

I agree, and there will also be a direct impact on jobs in oil exploration and in the booming oil supply business in Tyneside and Teesside. The short-term measure to try to get the Government out of a political fix on petrol prices will cause deep and long-term damage to jobs in the north-east and in my hon. Friend’s constituency.

The first-time buyer scheme, which the Red Book states will cost £250 million for just one year, will not help the north-east in any great way, because it will clearly be concentrated where a large number of houses are being built—the south-east and other areas. Because the Government have removed housing targets and affected social landlords’ ability to build new houses through the ham-fisted way in which they have structured the financing of social house building, I doubt whether there will be much effect on the north-east.

I also note that none of the £200 million additional investment in regional railways will go further than Leeds. Investment schemes for railways in the north-east—I have been calling for extra capacity for people to commute into Tyneside from Chester-le-Street and other places—will clearly not be forthcoming.

Finally, I wish to mention armed forces pay. The Chancellor said that there would be a £250 uplift for those in the armed forces earning less than £21,000. I remind the House that that is from the same Government who have frozen armed forces pay for the next two years. In addition, they have changed the calculation from RPI to CPI, which will cost many thousands of servicemen and women huge sums of money over the coming years. The Government should not be proud of that. I get rather annoyed because if the previous Government had done that, when I was a Defence Minister, the Conservatives and Liberal Democrats would have howled us down and called us a disgrace.

Is this a Budget for growth? No, it is not. Will it help the north-east of England? No, it will not. Under the confused regional policy that is proposed, which is supported by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and his Liberal Democrat colleagues in the north-east, we will find that as the country’s economy declines and contracts, regions such as ours will go from the very bad position that they are in now to an even worse one.

18:10

[Mr Marcus Jones (Nuneaton) (Con)]

I will be a Jones who shows some brevity out of courtesy for his colleagues on both sides of the House.

I welcome the Chancellor’s Budget and congratulate him on it, because this is a difficult time to be a Chancellor and to deliver a Budget, as it will be for the rest of this Parliament. As much as Opposition Members like to deny it, the Chancellor is constrained by the straitjacket of the deficit and the debt left behind by Labour. We must view the Budget in context. We are paying £120 million a day in interest alone on our debt—£43 billion this year, which is more than we spend on the armed forces, the Foreign Office and the Department for International Development combined—which is a scandal.

I therefore commend the Chancellor for what is, in the circumstances, a first-rate Budget. It goes some way to recognising the financial pain that is being felt in the country, and serves to set a clear tone for the business community. This Government take businesses far more seriously. They recognise that people and businesses and not the state create jobs—sustainable jobs—and that if we are not serious about business, the country cannot sustain in a settled fashion the important public services on which we all rely.

There are positives in the Budget for individuals and businesses, but I shall also respectfully mention one or two concerns about it. I welcome the announcement on fuel, which is currently the biggest issue for my constituents. People will tonight breathe a sigh of relief that the 5p a litre increase programmed into the Budget by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), has been deferred. I am delighted that that has happened. People will also breathe a sigh of relief that the Government recognised the importance of that, and decided to get off the escalator at the right time, unlike the previous Government, who did not know when to get off, as we saw in 2000 when our fuel depots were blockaded by truckers and angry motorists, which I hope will not happen now.

[Mr David Hanson (Delyn) (Lab)]

Will the hon. Gentleman give way?

[Mr Jones]

I am not giving way, I am afraid, because certain Members have taken far too long in the debate, thereby stifling others.

I am delighted that the personal tax allowance has been increased to more than £8,000 this coming year. It is vital that we free people from the shackles of tax, particularly those on lower incomes. It is excellent that 1.1 million people will be lifted out of income tax altogether—[Interruption.] The hon. Member for Stretford and Urmston (Kate Green) does not understand. The previous Government shackled people to income tax. They increased the minimum wage way above inflation year on year, but they did not increase the personal allowance, which meant that more and more people were sucked into income tax.

[Kate Green]

Will the hon. Gentleman give way?

[Mr Jones]

No. I am not giving way to the hon. Lady.

Moving on, I welcome the help that we are giving first-time buyers, although I would ask those on the Front Bench to consider a couple of issues. Can we build the properties that we need to sustain the scheme quickly enough? Would it be better to extend the scheme to older properties, as well as new-build properties? First-time buyers are the lifeblood of the property market and of any chain. I acknowledge that the policy will do a lot of good for the building industry, but we also need to put in place measures to ensure that the property market can sustain itself. Currently it is under intense pressure. Expanding the policy to cover the property market as a whole will do a lot of good and improve the situation for the industries that rely on it.

I make a plea for the Chancellor to look at stamp duty land tax in his next couple of Budgets, because it is quite punitive in terms of the slab rate, particularly up at the £250,000 threshold. Over this Parliament, if not during the next one, we need to look at putting in place changes to stamp duty land tax that result in more marginal rates, just as we have different levels of income tax.

I also make a plea for anything that is done in the property market to be implemented as quickly as is practically possible. Back in 2008, the Labour Government introduced a stamp duty holiday, but if I recall rightly, they suggested in the press that they were doing so about six or eight weeks before it was actually implemented. That had a dramatic and devastating effect on the property market and those involved in it during that interim period. Therefore, we need to ensure that we are expeditious in implementing policies.

This has been a great Budget for business, within the constraints that the Government face. I would like to mention fuel again. Many small and medium-sized hauliers in my constituency are struggling to cope with increases in the price of fuel. In the main, they have to pay for fuel at the pump, but they are not paid by those for whom they work for 60 to 90 days. I am sure that they will welcome the Chancellor’s announcement today.

Regulation is one of the biggest banes of business, particularly small and medium-sized businesses, and costs them £80 billion a year, so they will welcome a reduction in red tape and regulation. They will also welcome the fact that the Prime Minister is looking to reduce regulation in the European Union to make it more competitive as a whole, which is vital. I hope that Government Members will continue to press the Chancellor and the Prime Minister to ensure that those plans bear fruit, because they are important to freeing up our businesses and allowing them to expand and employ more people.

I want to mention the beer and pub industry. I am slightly disappointed that in today’s Budget we have not sought to do anything about the beer duty escalator introduced by the previous Government. Since 2008, beer duty has increased by 26%. Unfortunately, we have not looked to soften that blow today. However, I hope that those on the Front Bench will listen to what I am saying and look to soften the blow for both the brewing industry and the pub industry. We have hundreds of thousands of pubs closing every year. Our great British pub is under pressure, and we should look to support it. I hope those on the Front Bench will take that on board.

Finally, I want to mention the advances that we are making on skills, which are vital to ensuring that our work force can sustain the jobs that we will hopefully help to create in the economy with the additional measures that the Chancellor has mentioned this afternoon. It is fantastic that we will have another 250,000 apprenticeships over the next four years. I am heartened by that, because young people have for so long been cast adrift, and this will help to bring them into employment and training in a sustainable way, and also in a way that will perhaps enable them to garner the knowledge to create their own businesses one day and employ others, which is what we have seen over many years.

I welcome the university training colleges, and I am sure that the large industrial companies in the west midlands will welcome that approach. I hope that it will help people to acquire the skills to fill what those companies are describing at the moment as a void. Companies such as Jaguar Land Rover want to expand greatly, and they need a supply of skills to sustain any such expansion. They need skills from local people in the west midlands. We do not want to bring in people from other countries to fill that void.

Given the constraints that the Government are having to work under—it was far from a golden legacy that we inherited from Labour—this is a positive Budget with good intentions for business and for creating jobs with substance. It also contains measures to bring back to this country the prosperity that has been badly needed for many years.

18:21

[Alison McGovern (Wirral South) (Lab)]

It is an honour to participate in the debate in which my hon. Friend the Member for Barnsley Central (Dan Jarvis) made his maiden speech. He made a really excellent contribution.

I want to comment on two aspects of the Chancellor’s statement: first, on inflation and the cost of living that people in Wirral and elsewhere are facing; secondly, on young people and employment. On inflation and the cost of living, we all need to acknowledge the global pressures that are causing price increases in the shops. Those pressures, including what is happening in the middle east and the price of food and other basic materials, make it more important that we get our policy right domestically. We have recently seen CPI inflation rise to 4.4% and RPI inflation rise to 5.5% in the UK, yet inflation for the EU as a whole is 2.8%. This picture of increased prices must also be taken into consideration in the context of our constituents whose wages are being held down. People have not seen an increase in their pay packets, but they are seeing price increases in the shops.

What is causing this inflation? I am well aware of the structure for setting interest rates and controlling price increases, and I look to the Governor of the Bank of England for an explanation as to why inflation has moved away from the targets. He says that

“three factors can account for the current high level of inflation: the rise in VAT relative to a year ago, the continuing consequences of the fall in sterling in late 2007 and 2008, and recent increases in commodity prices”.

He cites the Tory tax hike as having played a part in building inflation. My worry is not just about inflation this year, however; it is about people’s expectations of building inflation and the permanent hit that they will have on families.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

Will the hon. Lady give way?

[Alison McGovern]

I will not, if the hon. Gentleman does not mind; I am conscious that other Members want to speak.

Labour rightly instigated a temporary reduction in the rate of VAT to help us through the downturn, but I am now worried because the Tory-led Government have implemented a permanent hike in the prices that ordinary people in my constituency face in the shops. That is clearly having a huge impact on our economy and threatening future growth, as has been illustrated by the reduction in the growth forecast.

On the increase in commodity prices which has also caused inflation, the Chancellor said in his statement that the UK would seek to have an impact on those prices through the G20. It is therefore incumbent on Ministers to explain how they are going to engage with our international partners to achieve that. There is no doubt that those worldwide events are having an impact on the streets of Bromborough, Bebbington, Heswall and New Ferry in my constituency, and I would like to know what action the Government are going to take in that regard.

I shall deal briefly with young people and employment. I know that Members across the House care about the issue, but we need to bring some words of caution to the debate. The Chancellor rightly reserved extra funds for the future training of apprentices, but money reserved does not equal apprentices hired. Other factors are necessary for getting young people into employment. The first, business confidence, is vital: businesses must have the confidence to invest. I refer hon. Members to what I said about the in-built inflationary expectations in the economy and what they might do to investment. It is a matter of great concern. A second necessary factor is growth, and it is worrying to see growth forecasts revised downwards. The Chancellor might have said that this was a Budget for growth, but I feel that it was all words and very little action. A final necessary factor is a change in culture, whereby businesses feel that it is their role to bring on the next generation. The current generation at work should be allowed to share their skills in the informal setting of the workplace to bring on the next generation.

I highlight, as always, the role of my own local authority. Wirral has shown great leadership in the sphere of encouraging small and medium-sized businesses to take on apprentices. However, the local authority cuts, which have been much greater in our area than in others, have put Wirral’s ability to play this role in jeopardy. The Government need to think about how they will bring about this change of culture in practice rather than simply reserve the funds and say they are there if business wants to take them.

Finally, I fear that Britain is seeing the end of any interventionist role for the Government. I feel strongly that the future jobs fund was an excellent answer to youth unemployment, but the Government have withdrawn from it. They say they are reserving funds for apprentices, but they are doing little more than that to encourage businesses to invest. We are also seeing inflationary pressures on the cost of living, which the Governor of the Bank of England relates to the rise in VAT. This is a price hike that hard-pressed families in Wirral and elsewhere can little afford. On those two issues that I have prioritised, I would like to see Ministers taking much more action.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Lady for her time restraint.

18:27

[Richard Fuller (Bedford) (Con)]

May I draw your attention, Mr Deputy Speaker, and that of other hon. Members to the Register of Members’ Financial Interests and to my interests in venture capital and small businesses? I would also like to join others in praising the hon. Member for Barnsley Central (Dan Jarvis) for his maiden speech, which I thought was eloquent, relevant and insightful.

Unfortunately, I cannot apply those three adjectives to the speech of the Leader of the Opposition, which is a great shame. When I listened to the right hon. Member for Doncaster North (Edward Miliband) during Monday’s debate on the UN resolution, I thought he spoke as a serious statesman on behalf of not only his own party, but the whole country. Today, however, I am afraid that his speech was more like a pantomime act than a serious contribution. I hope that the shadow Chancellor will provide a better and more insightful response tomorrow. It is a shame because the people of Bedford and Kempston want to hear not what is not going to be done, but what is going to be done. They heard very clearly from the Chancellor what he was going to do.

It is not my job to tell Opposition Members to do their job, but I think it is time that we heard from them what they would do, which I did not hear. Up until the last speech by the hon. Member for Wirral South (Alison McGovern), I had not heard that at all. If Members are challenged and accept that there is a deficit, it is important for them honestly to come forward and say what steps and measures they would cut. They should not just throw out the next unfunded commitment in response. That does not help achieve consensus in what are very difficult times.

In addition, we are done a disservice because Labour Members’ failure to atone makes their constant outcries sound like a masquerade of keening by discredited professional mourners of the past. It would be much more insightful if they were able credibly to engage in the issue of how to get the deficit back under control. As their own unofficial website, labour uncut says, their current strategy of

“Hang on, I haven’t decided”

does not answer the needs of the time.

[Mr Gyimah]

I think that Labour has a plan. As we discovered from its press conference last week, the plan is to repeat last year’s bank bonus tax and spend the £2 billion that it raises in 10 different ways.

[Richard Fuller]

I shall be interested to see how Opposition Members respond to what my hon. Friend has said.

I would subject the Budget to the tests specified by the hon. Member for Barnsley Central: the impact that it will have on the most vulnerable, and what it will do for growth. It is difficult to introduce deficit reduction measures that do not disadvantage the poorest. What the hon. Member for Wirral South said about the impact of rising prices on people who were not receiving increases in their pay packets was absolutely right. I say to Ministers that—not necessarily for the purposes of the current year, but certainly as we look forward to next year and the year after that—we must think very carefully about what we will do for public sector workers who have experienced a pay freeze in at least one year, and in some cases in a number of years. Members on both sides of the House will want to hear a little more about that.

As I said earlier when I intervened on the hon. Member for Aberdeen South (Dame Anne Begg), the issue of the mobility component of disability living allowance is also of vital interest to Members in all parts of the House. We must ensure that we protect the most vulnerable people in our care homes. I have met the Minister responsible for the disabled—the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller)—on many occasions, and I know that she shares my passionate interest in that subject.

In the context of protecting the most vulnerable, let me first urge Ministers to continue to give full support to the welfare reform measures that are being pushed through by the Secretary of State for Work and Pensions. The universal credit will be of major, long-term, significant and beneficial advantage to low-paid and poor people in our country, and it is a measure that those on the Treasury Bench should support in the years ahead.

Secondly, I should have liked to hear a little more about support for our charities. I was very pleased to hear about the £550 million of support that the Chancellor was offering to them in the form of various benefits, but I should have liked him to be more radical. There are many steps that we can take to ease the rules and regulations and break down some of the barriers that prevent social investment from various sources. We should be a bit more open in relation to the way in which money can flow from social investment to outcomes and social impact bonds. I should have liked to hear about personal tax deductions for charitable donations, and I should very much like the Treasury—either directly or through the big society bank—to help charities to procure local government services. They need that support to arm them in their continuing battles with bureaucracies.

The Budget expresses strong support for those who wish to invest in our small businesses. It strongly supports angel investment and mentoring. Small businesses and entrepreneurs want support from people—from local people who may have started up their own businesses—and we will seek to provide it in Bedford and Kempston. We will seek to bring together successful local business people who can provide financial support through the advantages offered by the Budget in terms of angel investment, and through mentoring to provide guidance and advice so that small businesses can grow.

The Budget challenges us. As many other Members have said, we are about to be tested, and to go through very difficult times. It is important for Members on both sides of the House to argue constructively, but we should also rest on the great creativity and ingenuity of our small business people and entrepreneurs, because they offer the future that will achieve growth in this country.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Gentleman for exercising time restraint.

18:33

[Barry Gardiner (Brent North) (Lab)]

I shall try to honour the time constraints that you have imposed Mr Deputy Speaker.

Today the United Kingdom has the highest inflation since the days of Margaret Thatcher. The RPI stands at 5.5% and the CPI at 4.4%. Today the United Kingdom has seen the Chancellor announce a lowering of the growth forecast from the 2.6% predicted by the Office for Budget Responsibility last year and the 2.3% in the last Budget to 1.7% today. Today the United Kingdom has the highest unemployment since 1984, when John Major had just taken over from Margaret Thatcher. This is not a Budget for growth into the future. It is a Budget that will take us back to the future of Margaret Thatcher and John Major.

Inflation at 5.5% has a devastating impact on families in the UK, as £1 in every £20 that they earn is now lost. For example, the Secretary of State for Environment, Food and Rural Affairs gave up an enormous 24% of her departmental budget to the Treasury over this spending period, but inflation has now turned that into a real-terms cut of 31%. Have Treasury Ministers commissioned, or do they intend to commission, any research into the capacity of Departments to deliver on their performance indicators, given the effects of rising inflation on the departmental spending cuts that have already been incurred?

It is risible that this Budget has been delivered by a Government who style themselves the greenest ever. The establishment of the green investment bank has been delayed until 2012, and it is still unclear whether it can fully function as a bank or whether it will simply be a glorified fund. The carbon reduction commitment has already outraged the CBI and British business. Instead of rewarding energy-efficient businesses and returning £1 billion to business, as the Labour Government proposed when we introduced the scheme, the Treasury has shifted the goalposts and taken all of the money to itself. I had thought that the implementation of the scheme had been delayed until 2012-13, and that was certainly what was announced to business, but I see from measure O in table 2.2 on page 44 of the Red Book that the Government are now forecasting £715 million of revenue to the Treasury in 2011-12 from that scheme that only goes live in 2012-13. I ask Treasury Ministers to reconcile that anomaly.

The carbon floor price appears on the face of it to be a positive green measure, but in fact it betrays the lack of coherence in Government thinking on this area. The Government’s electricity market reform recognises the need to incentivise 18 GWe of new generation capacity in the UK by 2024. That is the equivalent of £200 billion of investment between now and 2020. As Ministers know, much of this generation capacity will come from gas. At a stroke, the Government have pushed away the very investors they sought to attract. They are now likely to encourage more imports and external dependency. Why should European generators generate in the UK when they can generate abroad with no such tax upon them, and then benefit from higher UK prices by use of the interconnectors? One element of the Government’s energy market reform strategy has been to increase the use of interconnectors. As a result of this step, investment will be pushed into France, Belgium and the Netherlands. There is incoherence at the heart of the Government’s thinking on this matter.

I did not support the Government in the Lobby on Monday night in the vote on military action in Libya. I pay tribute to our armed services, and to their valour and the work they do, but I cannot support the cost of the military escapade taking place in Libya, and I look to what could have been achieved if the funds being expended there were instead being expended around the rest of our country.

[Mr Kevan Jones]

Will my hon. Friend give way?

[Barry Gardiner]

No, I will not.

One Tomahawk missile costs £350,000, and 140 of them were launched in the first 48 hours of the attack, which amounts to a cost of £50 million. It is estimated that the cost of prosecuting this military conflict is £6 million each day. The cost of one day of action in Libya could restore in its entirety the £2.25 million of cuts in children’s services forced on my community in Brent by this Liberal-Conservative coalition Government. One month in Libya could protect children’s services across the whole of London. Nine months in Libya could protect children’s services across the entire UK. Aneurin Bevan once said that priorities is the language of socialism. Those are my priorities and that is why I will oppose this Budget.

18:40

[Sajid Javid (Bromsgrove) (Con)]

I congratulate the hon. and gallant Member for Barnsley Central (Dan Jarvis) on an excellent maiden speech.

I would describe this Budget as healthily underwhelming. I say “healthily” because it recognises that private sector growth is crucial to our future prosperity. I say “underwhelming” because it reiterates the need to continue our fiscal consolidation, and I congratulate the Chancellor on keeping on course with that. The Budget recognises the terrible economic inheritance that this Government were given. Our first Budget was a rescue mission, whereas this Budget is about a desire to build on the foundations for economic growth. Our budget deficit was 11% of GDP—it still is, because the cuts have not yet really begun—and the largest of any major country. Our national debt grew by 150% over the 13 years of the Labour Government to £893 billion by the time they left office. If we add the costs of the banking interventions to that, we find that our national debt is more than £2.1 trillion, according to the Office for National Statistics. That means that our debt as a percentage of GDP is on a par with that of both Lebanon and Jamaica. Our interest rate costs are £120 million a day and £43 billion in total this year, and they will rise each and every year in this Parliament to £66.8 billion. Although Labour Members may be in denial, I am glad to see that the International Monetary Fund, the OECD, the CBI and the Institute for Fiscal Studies are not.

What compounds our problems and the need for this continued fiscal consolidation is the very uncertain global outlook. The eurozone is still in trouble, as I found when I checked the bond market yields of some eurozone countries this morning. Despite the bail-outs, Greece’s yields are more than 13% and Ireland’s are more than 10%. Portugal is going through a parliamentary test today, and its yields are more than 7.85%. Our five-year bond yields are at 2.37%, despite our having the largest budget deficit of all the countries that I just mentioned. The emerging markets are also causing particular problems for our growth prospects, with things slowing down in China, India, Brazil and Russia—China has hiked rates twice in the past few months. We have relied on economic growth in that country to help our own export industry, so we need to keep an eye on the situation.

Lastly, as has been mentioned, in particular by the hon. Member for Wirral South (Alison McGovern), there is concern about global inflation. Clearly inflation has been caused primarily by rises in the price of oil, metals and food, but in the UK, in particular, devaluation has had an impact. It has had a positive impact on exports, but it tends to import inflation too. What has not been mentioned today is the potential impact of quantitative easing—the policy of buying up to £200 billion of both corporate bonds and gilts. That has an impact on the money supply in this country and it is doubtless having an impact on inflation.

With RPI inflation at 5.5%—the figure was published yesterday—and our gilt rate at 2.37%, the real rate of return is negative on our bond markets and that is a very fragile situation for the markets. To put that into context, the last time that RPI inflation was at that level was in 1991. At that time, our five-year gilt rate was at 10.09%. Clearly if the markets woke up one day and decided that they were not going to accept such low negative interest rates any more, we would be in a much worse predicament. That underlines the need for continued fiscal consolidation.

On the Budget itself, I note that the Red Book shows that spending continues to increase in cash terms from £694 billion to £744 billion by the end of this Parliament and that in real terms the actual fall in public spending is 3.7%. I do not want to belittle such a decline in real terms, but it is certainly not the type of savage cut that has been mentioned by certain commentators and by Opposition Members. In fact, it is about 0.9% a year, less than the cuts made by Denis Healey when he was Chancellor.

I particularly welcome the Chancellor’s announcement that he will consider merging the operation of national insurance and income tax. National insurance was introduced by David Lloyd George 100 years ago on the contributory principle, which hardly applies to national insurance today. It makes absolute sense to consider merging its operation with that of income tax so that we can reduce administration and compliance costs and increase transparency. Many times in the past, a Chancellor has stood at the Dispatch Box on Budget day and said that he is not increasing income taxes but has gone on to increase national insurance. That transparency will be welcome and in future it might lead to greater downward pressure from the general public on personal tax levels.

That measure would also add to the simplification of our tax code, which is critical, especially when it comes to helping businesses. Our tax code has doubled in size since 1997, with a guide almost 2,000 pages long, and it is equivalent to 10 copies of Tolstoy’s novel, “War and Peace”.

Last year, I welcomed the Chancellor’s commitment that the 50p income tax rate will not be a permanent feature of the tax system and I urge him, when he reviews the tax rate, to consider it in the same way as he considered capital gains tax when it was raised from 18% to 28%. A dynamic analysis was carried out at that time and perhaps such an analysis could be done of the 50p rate to show that it does not bring in any extra tax from richer members of society. Perhaps if it is cut back down to 40%, the rich will pay more in tax.

The Chancellor made a number of excellent announcements on growth. Time limits me from mentioning them all, but I want to highlight a few, particularly the moratorium for small businesses with fewer than 10 employees. I hope that we can consider ways to deal with regulations from the EU more constructively. I note that the EU agency workers directive, if and when it comes into force, will cost businesses in Britain almost £1.5 billion a year. Although the Government have a one-in, one-out policy, if that is successful it will only keep regulation at current levels. I hope that it will become a one-in, two-out policy. I welcome the enterprise zones and the decision to speed up planning decisions and ensure that they are made within one year. I also welcome the decision to increase the enterprise investment scheme allowance from 20% to 30% as well as the increase in entrepreneurs’ relief and the cut in corporation tax.

The policies that will truly promote growth are those that the Government have started to implement in some of their key plans in other Departments. In education, we will get young people to focus once again on core subjects and, in the context of reskilling our young people, I welcome the announcement that we will increase the number of apprenticeships and build on the good work done by the Minister for Further Education, Skills and Lifelong Learning by adding another 50,000 apprenticeship places by the end of the Parliament. So, 250,000 new apprenticeships will have been created by this Government by the end of the Parliament. I welcome the decision in the context of welfare to introduce the universal credit, which will ensure that it will always pay anyone on out-of-work benefits to be in work rather than out of work.

In conclusion, the Budget deals with our fiscal overstretch and promotes growth in tandem with other Government policies. I commend it to the House.

18:49

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I share other Members’ pleasure in talking in a debate that has had so much heat and also the light of the maiden speech made by my hon. Friend the Member for Barnsley Central (Dan Jarvis).

I want to speak about a question that has been puzzling me for some time. How can the Government be so keen to show that they are tough on the national debt yet so blind to the growing crisis of personal debt that their policies are stoking? Families across Britain today will have listened to the Chancellor and wondered if he really understands the financial pressures they face—if he really has, as he said, done all he can to help them—because of the perfect storm of challenges hitting millions of homes across the country. Thanks to the VAT rise that he introduced, average families will pay an extra £300 to £450 a year in VAT and pensioners will pay an extra £275. Also, the benefits that help many families, such as tax credits and child benefit, are no longer there for them. That is a key concern for many of my constituents who have large families and who just tip into the higher tax bracket because of the London weighting on their wages.

Thanks to the Chancellor’s cuts, our economic recovery is stalling, which is why 8% of our working-age population is now unemployed. That is the highest level since 1994 and is set to rise further. Those people are in a job market in which 10 people are chasing every job and the situation is worse in London, with nearly 13 people chasing every job in my constituency. As a result of the cuts in the public sector, 130,000 people lost their job last year and another 170,000 families have members who are on redundancy notices. Buried in today’s papers are predictions that another 130,000 people will be made unemployed next year. Even those who are managing to stay in work are getting less because of the public sector pay freeze. The consumer prices index and the retail prices index are rising, reflecting the growing cost of living as clothes, food, energy and travel all cost more.

We are already seeing the impact of those problems. According to the Consumer Credit Counselling Service, London has the highest demand in the country for debt advice. Nationally, half of its clients gave unemployment or reduced income as the reason for their debt problems. In 2008-09 there were twice as many crisis loan applications as in 2006-07 and half of those applicants made two or more applications. Barnardo’s has reported a rise of 20% in the number of applications for its emergency loans for families and the UK now has one of the highest levels of personal debt of any country in the world.

There are 60 million credit cards in circulation in our country, for 14% of which customers can afford to make only the minimum payment. We should be extremely alarmed by what some people are using their credit cards to pay for. Shelter has highlighted the fact that one in 12 households in London is using credit cards to pay for mortgage or rent. Across Britain, the figure is one in 20 families. In the face of the changes the Government are making to our economy, families across Britain are struggling to make ends meet. That is vital to our economic recovery because, as we all know, credit is key to that recovery. Recently released figures show how consumer confidence is falling. People are not buying and spending in the way that our economy needs them to if it is to recover, but we should care about that and about personal debt not only because of the figures and the economic conditions but because millions of families now live with the fear of debt.

Half of all British households are worried about their debts and how they are going to pay them. Some 44% of households find that there is too much month at the end of their money and try as they might they cannot make what they earn cover what they need to spend. The problem is only going to get worse. In a recent survey, 43% of people said that they expected their personal financial situation to deteriorate over the next six months. This is not about buying new TVs or fancy holidays—it is about families struggling to feed their kids, pay their bus fares or keep their car going so they can get to work. It is about people having to cut corners or shift money from one credit card to another, chasing deals. It is about people worrying about paying their mortgage, affording school uniforms, arguing about debt and suffering sleepless nights. It is about people wasting time applying for jobs when so many jobs no longer exist.

I judge today’s Budget by what it will do to address those problems and to help families across Britain to make ends meet, not least because 20% of those who say they are struggling blame the recent tax rises for that. As the Institute for Fiscal Studies has said today, the Budget is giving with one hand and taking away lots with the other. The crippling impact of the rise in VAT will more than cancel out any change in the income tax threshold. Rather than offering corporation tax cuts to big business, we need to do more to get jobs and growth back into our economy. We need to put the needs of those families first but instead the Government are privatising personal debt.

At a time when people need help accessing credit to keep a roof over their head, the Government are taking away their options for help, with potentially disastrous consequences. They are taking away the social fund and capping the number of crisis loans for living expenses to just three a year, at a time when even more families are struggling.

I welcome the support that the Government have given for credit unions, but it will take a generation for them to become regarded as a serious, mainstream way for families across the country to access credit. As we all know from our surgeries and our conversations on the street, in these difficult economic circumstances, our banks are refusing to lend to businesses and individuals. The truth is that, with no real help in the Budget, there is very little option for many in our communities apart from the high-cost credit market, one of the few areas of our economy that is growing under this Government. Legal loan sharks are profiting from the perfect storm of rising living costs and falling wage packets for families across the country. Those people need our help now, not in the future.

Already, a quarter of payday loan customers cannot borrow from anyone else. They are sitting targets for such companies, whose business models rely on locking people into borrowing at an extortionate yet legal rate, so that what seems like a short-term solution to financial problems quickly becomes a long-term debt. We know that there has been a fourfold increase in payday lending since the recession began, and that due to a lack of regulation in the market in the UK, The Money Shop, Wonga, Provident, BrightHouse and other companies are expanding across the country at an alarming rate. Indeed, they have already pointed to the Government’s policies as increasing their customer base.

The problem will only get worse, as the Institute for Fiscal Studies predicts that households’ real incomes will be lower than they would have been without the recession. The Governor of the Bank of England predicts that real incomes will stagnate because of the weak condition of the labour market. That means that there are likely to be more and more families in the year ahead finding that they cannot keep their heads above water financially, but the Government have yet to lift a finger to help them. Even if the Government will not do anything that the Office for Budget Responsibility says will increase growth in the economy—we know that the plans put forward today have already been factored into the OBR’s growth predictions—they could at least take action on the cost of credit.

Back in February, I warned of the problem, as Members across the House called for a cap on the cost of credit. The Government sought to do what they could to delay taking action. Today, I am giving notice that I will be seeking support for a similar measure in response to the Budget. We can learn the lessons of windfall taxes that targeted the behaviours of particular companies. I want the Budget to review whether the set of companies that I am talking about ought to have their tax systems changed to discourage them from behaving as they do. If the Government will not regulate them, perhaps it is time to use the tax system to deal with legal loan sharks, just as we do with cigarettes and their toxic impact on our communities.

I hope to secure support from across the House for making such a measure part of the Budget, and to challenge the Government not to continue to sit on their hands when there are growing levels of personal debt crippling families in our communities. Introducing such a measure in the Budget could, for some families, be the difference between getting into hundreds of pounds of debt and thousands of pounds of debt. That could be a massively welcome relief for the families who are looking at today’s Budget and finding little to help them to make ends meet, and who are therefore having to turn to such companies.

We know that debt in itself can become a barrier to finding employment, as the emotional consequences and financial penalties become too much to bear. If we do not act to protect the poorest communities from unaffordable credit measures, we will all pay through higher welfare bills, lower spending and a lack of growth in the economy. I hope that the Chancellor and his Treasury team are listening to the needs of those families, and I hope that the Government will finally act to end legal loan sharking, so that we can at least get some good news out of today. I do not believe that they have done all that they can to help families who are struggling with the cost of living. If they will not listen to me, perhaps they will listen to a famous lady who I know has been an inspiration to many Government Members. She once argued that if a person could understand the problems of running a home, they were closer to understanding the problems of running a country. The Budget shows that the Government understand neither, and the British people will suffer all the more for it.

[Chris Williamson (Derby North) (Lab)]

Does my hon. Friend agree that at a time when so many more people in society will face huge debts, it is wrong for Derby city council to cut the welfare rights and debt advice provision for local people in my city?

[Stella Creasy]

My hon. Friend makes an important point. There are families struggling to understand what options are open to them. It is vital to support debt advocacy services. That is why I proposed that in my Consumer Credit (Regulation and Advice) Bill and why it is all the more pity that the Government sought to delay action on that measure—

19:00

The debate stood adjourned (Standing Order No. 9(3)).

Ordered, That the debate be resumed tomorrow.

Business without Debate

Wednesday 23rd March 2011 Commons Chamber

private members’ bills

Motion made,

That, notwithstanding the provisions of Standing Order No. 14(4), Private Members’ Bills shall have precedence over Government business on 9 September 2011, 21 October 2011, 25 November 2011 and 20 January 2012.—(Bill Wiggin.)

[Hon. Members]

Object.

petitions

Wednesday 23rd March 2011 Commons Chamber

19:01

[Andrea Leadsom (South Northamptonshire) (Con)]

The petition states:

The Petition of Staff and Pupils of Hackleton Church of England Primary School,

Declares that just over eight million children die every year before their fifth birthday, mostly from preventable causes like diarrhoea and pneumonia; that ensuring that proven, cost-effective, preventative measures such as immunisation and breastfeeding are available at family and community level can save millions of these lives; that, where child health is prioritised, in countries such as Malawi, there are real and long-lasting results, showing that change is possible; and notes that the petitioners believe that global leaders must prioritise child health and end these unnecessary deaths.

The Petitioners therefore request that the House of Commons urges the Secretary of State for International Development to widen the Government’s approach on maternal and newborn health in the developing world to include child health.

And the Petitioners remain, etc.

[P000906]

19:02

[Glyn Davies (Montgomeryshire) (Con)]

I bring to the Floor of the House of Commons today a petition in the names of Donna Benbow and Helen Jervis, both young mothers, both constituents and both concerned about the movement of maternity and other services from the Royal Shrewsbury hospital to the Princess Royal hospital at Telford.

By way of background, I should explain that the Shrewsbury and Telford Hospital NHS Trust which serves Shropshire and mid-Wales proposes a reconfiguration of the service that it currently provides. The petition is supported by 3,745 names. The case is also supported by more than 800 people who attended public meetings. Another constituent, Sally Jones, has contributed thousands of names to a petition that is to be presented by my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski).

The petition states:

The Petition of residents of Montgomeryshire,

Declares that the petitioners oppose plans to move the Special Care Baby Unit, the Children’s Ward and some maternity services from Shrewsbury to Telford.

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to prevent these services being moved from Shrewsbury to Telford.

And the Petitioners remain, etc.

[P000907]

19:03

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

Like the petition of my hon. Friend the Member for Montgomeryshire (Glyn Davies), my petition revolves around the concerns of local constituents about the move of maternity and paediatric services from the Royal Shrewsbury hospital to Telford. In the six years that I have been the Member of Parliament, I have never received such a large number of signatures—more than 29,000—which reflects the huge objection to the proposals, in conjunction with the opposition of paediatric consultants. For the board to try to move maternity and paediatric services away from Shrewsbury to Telford would be highly flawed and would fly in the face of all Government guidelines.

The petition states:

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to prevent these services being moved from Shrewsbury to Telford.

Following is the full text of the petition:

[The Petition of residents of Shrewsbury and Atcham,

Declares that the petitioners oppose plans to move the Special Care Baby Unit, the Children’s Ward and some maternity services from Shrewsbury to Telford.

The Petitioners therefore request that the House of Commons urges the Government to take all possible steps to prevent these services being moved from Shrewsbury to Telford.

And the Petitioners remain, etc.]

[P000908]

Cheshunt Urgent Care Centre

Wednesday 23rd March 2011 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Stephen Crabb.)

19:05

[Mr Charles Walker (Broxbourne) (Con)]

It is a great honour to speak on the Adjournment this evening—we have had the Budget today, so the eyes of the nation are upon this place.

Two years ago, I was involved in a fantastic community campaign to bring an urgent care centre to Cheshunt. I was joined by more than 3,000 constituents in a letter-writing campaign to the primary care trust. We had a number of public meetings, with the car parks overflowing and many hundreds of constituents making their views known. The campaign culminated when I, along with the chief executive and the leader of the council, visited the then Secretary of State for Health, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), at the Department of Health. It was a true community campaign. If the big society means anything, that is its basis: people coming together from across a community and joining in one voice to bring a much-needed facility to the constituency.

Since the centre arrived in October 2009, it has been fabulously well received. It is estimated that 400 people a week would use it at most, but in some weeks we have had 700 people voting with their feet by coming to that GP-led urgent care centre. It really is at the heart of the community. The reason so many people choose to use the facility is that it is open 12 hours a day, seven days a week, from 8 in the morning to 8 at night. Unlike many GP surgeries, it does not close for lunch and is open on Saturdays and Sundays, when people can use a medical facility because they are not at work in London.

Despite that enormous success, I was horrified to learn a few months ago that the PCT was not happy with the centre’s performance. I do not need to tell you, Madam Deputy Speaker, that being a Member of Parliament over the past three years has been fairly challenging, but one of the bright spots of my career has been walking around my constituency and being stopped by people saying, “Charles, we are so pleased we have the urgent care centre. It was so much needed in this part of the borough. Thank you so much for the campaign you led.” It has been enormously gratifying and satisfying to get that level of feedback.

The PCT came to the House to meet Hertfordshire Members and I had my turn to chat with them about the issues relevant to Broxbourne. After 10 minutes of pleasantries I asked, almost off the cuff, “Of course, you’re not thinking of closing the urgent care centre, are you?” The reply was, “I’m afraid, Charles, that that is one of the options on the table.” I am normally a mild-mannered Member, but I am afraid that on that occasion I blew up. I think that I swore. Indeed, I know that I swore. I am ashamed of my behaviour, but it demonstrates how passionately I feel about the centre.

[Mr David Burrowes (Enfield, Southgate) (Con)]

I pay tribute to my hon. Friend for his passion and commitment to the urgent care centre and for the joint campaign run in Cheshunt and Enfield for the retention of a fully functioning accident and emergency department at Chase Farm hospital. Does what has happened to the urgent care centre not highlight the importance of the Secretary of State’s decision to encourage us all to think again about options other than the Barnet, Enfield and Haringey strategy, which would lead to the downgrading of not only Chase Farm hospital in Enfield, but, as predicated, an urgent care centre there?

[Mr Walker]

My hon. Friend makes an excellent point. He is at the forefront, along with my hon. Friend the Member for Enfield North (Nick de Bois), of the campaign to save Chase Farm hospital’s A and E, and I am always proud to join him outside those gates, making the argument for a fully functioning A and E service there.

The PCT has told me that it believes that the GP-led urgent care centre is treating inappropriate cases—whatever those are—and that people going there should be going to their GPs. It asks why it should have to pay for that treatment twice. Of course, they should not pay for it twice, but I always believed that the money should follow the patient, not the GP who does not deliver the service. My constituents use the urgent care centre so fully, because many—not all, but many—GP practices in my constituency do not deliver on their promise, or live up to their end of the deal, to provide a full GP service to them. So my constituents vote with their feet.

GP surgeries close for lunch, early in the evening and at weekends. If people want an appointment, they have to call up on the morning that they want it, only to be told, “We haven’t got any today, but if you want to come and see us tomorrow try calling us tomorrow.” That is not acceptable, and my constituents are not going to sit at home and wait to be treated like that day after day; they are going to walk to the urgent care centre and get treated there. What really upsets me is that the beacon of success in our constituency—the one that sees up to 700 people a week—now faces closure, while the GPs are not facing the necessary censure for some of their practices in delivering services to my constituents.

I discovered in a PCT board paper that many GP practices in my constituency are in the NHS version of special measures, meaning that they are in the bottom 10% of GP practices in the country. That leads me to ask again, “Why does the urgent care centre, which delivers a high level of service, face closure?” while GPs, as I said earlier, are not delivering the service that they are paid to deliver.

The PCT says that there was a unanimous decision on behalf of a steering committee to change the use of the urgent care centre—at best to make it a minor injuries unit, or perhaps even to close it. It says that the decision came about as a result of a meeting with various stakeholders and some research—independent research, I was told—by an organisation called Opinion Research Services. Of course, it was not independent research, because it was commissioned by the PCT: it paid the bills of Opinion Research Service. I do not know what went on at that meeting, but I am fairly sure of what did not, which is that those there did not get a full picture of how successfully the urgent care centre meets the needs of local constituents.

What I did learn is that the GP services in the area leave a lot to be desired. On page 8, the board report states:

“A quarterly patient access survey carried out nationally has highlighted perceived problems with access and satisfaction with primary care in the area served by Cheshunt UCC.”

On page 8, it goes on to state:

“In addition, perceived poor access to primary care in and around the area served by Cheshunt must be addressed.”

Notice the emphasis on “perceived”. It is not perceived poor access, however; it is real poor access. If it was perceived, hundreds of my constituents would not go to the urgent care centre.

On pages 11 and 12, the report states:

“The need to improve access to primary care in the Cheshunt area has been recognised and steps are being taken in conjunction with the Clinical Executive Committee (CEC) to support and performance manage those practices”—

not a practice, but those practices—

“in the bottom 10% nationally in terms of patient’s perceived access.”

Quite frankly, that is not good enough.

I became even more concerned about the situation when I went on to read that it is local GP commissioners who are putting pressure on the PCT to close our successful GP-led urgent care centre.

On page 9, the report states:

“Local GP commissioners do not support the configuration and have confirmed that they would not wish to commission UCCs as currently configured at...Cheshunt in the future."

On page 12, it states:

“The view of the GP Practice-Based Commissioning leads in the localities is that these needs are best addressed directly with the practices rather than by way of additional services.”

But why are the practices not addressing those needs now?

The PCT has said, with great fanfare, that it is providing additional services and support to GPs to help them to improve. Of course, that is very welcome. However, given that it is providing new telephone systems, automated self-check-in screens, waiting room plasma screens, web-based online appointments systems and electronic document management systems, my constituents and I want to know what on earth has been going on in these practices for the past 10 years. One thing that GPs have not been short of is money, so how have they not placed these absolutely critical tools for managing patient load in their surgeries, with the PCT now having to fund them?

If services in my constituency are to improve, we need competition. We need the urgent care centre to set new standards of treatment. If the urgent care centre, which is driving ever-higher levels of patient care, is shut, what incentive will there be for GPs to improve their service levels? It is incumbent on my local GPs, who are falling behind, either to deliver or surpass that level of care, or perhaps to make way and allow practices to come into the borough that are willing to take up the challenge of opening 12 hours a day and providing weekend services. Until we reach that stage, the PCT has absolutely no excuse for closing down this urgent care centre.

Earlier today, the PCT had a meeting where it decided to downgrade the urgent care centre to a minor injuries unit; it thinks it will get away with that. However, that is not good enough and it will not satisfy my constituents, because closing down the urgent care centre and removing the GPs from it removes the incentive for practices in and around the centre that are not delivering to their patients to improve their services.

As you can see, Madam Deputy Speaker, I am really very annoyed about this. I thought that I would come here and manage to smile my way through it and be magnanimous, but I simply cannot. For my whole life, I have believed that good practice and success should be rewarded. I thought that that was just the way things were—that an organisation that saw an urgent care centre that was delivering not 400 patient outcomes a week, as envisaged, but 600 or 700, would feel that it was a success story that deserved to be built on. By accident or design, our PCT has stumbled on a formula that works and meets the needs of the local community, but instead of building on that, it is pulling the rug from underneath it, and I believe that it is being pressured by some GP practices in my constituency and future GP commissioners to do so.

I will conclude, after my 15 minutes, by saying that there is only one set of vested interests that I represent in this place. It is not the PCT’s interests or the GPs’ interests—it is the interests of my constituents, more than 520 of whom turned up, at about nine days’ notice, at a public meeting that I held last Thursday to say to the PCT: “No, we want to keep our urgent care centre.” The PCT has got it wrong, it needs to listen, and we need that urgent care centre in Cheshunt.

19:18

[The Minister of State, Department of Health (Mr Simon Burns)]

I begin by congratulating my hon. Friend the Member for Broxbourne (Mr Walker) on securing what is a very important debate for him and his constituents. I commend him for the commitment that he has shown, as illustrated during his high-powered speech, in campaigning on health issues for his constituents to ensure that they get first-class, quality care. I also take this opportunity to recognise the hard work and dedication shown by NHS staff in his constituency. Their dedication, expertise and drive do so much to improve the health and well-being of his and other hon. Members’ constituents on a daily basis. This Government will support and empower them to provide his constituents with health outcomes that are consistently among the very best in the world.

As part of the Government’s commitment to the NHS, we are consistently increasing the amount of money we provide to local organisations. Total revenue investment in the NHS in 2011-12 will grow to more than £102 billion. The allocations announced on 15 December will provide primary care trusts with £89 billion to spend on the local front-line services that matter most. That is an overall increase of £2.6 billion, or 3%. Of that, Hertfordshire PCT will receive £1.7 billion—a cash increase of £47.7 million, or 2.9%.

Before turning to the specific issue of the Cheshunt urgent care centre, I will set out the context of our plans to modernise the NHS and bring considerable improvements to the health care experienced by my hon. Friend’s constituents. We believe that local NHS services should be centred around the patient, led by local clinicians and free from political interference, either from this House or from the various levels of NHS bureaucracy. To this purpose, we have set out our proposals to liberate the NHS from central control. We will set front-line professionals free to innovate and to make decisions based on their clinical judgment and the needs of their patients, with the sole aim of improving the quality of care given and the outcomes achieved.

Responsibility for budgets and commissioning care will transfer from managers within the PCTs to clinicians in general practice-led consortia. Patients will receive health care that is tailored to their community and their personal circumstances. Our plans will radically simplify the NHS. Two layers of management—strategic health authorities and PCTs—will no longer be necessary. We anticipate a one-third reduction in administration costs, saving the NHS £5 billion by the next election and £1.7 billion in every year after that. Every single penny of those billions of pounds will be reinvested in front-line services.

There are now 177 pathfinder consortia across England, covering 35 million people—more than two thirds of the population. Those consortia are taking a lead in rejuvenating local services, cutting out waste and putting the needs of patients before the needs of the system. There are now three pathfinder consortia in Hertfordshire. The East and North Hertfordshire GP commissioning consortium covers part of my hon. Friend’s constituency.

Clinical leadership will go hand in hand with greater local democratic accountability. Under “any willing provider”, an increasing number of independent sector and social enterprise organisations will deliver NHS services. Unlike now, local authorities will have the power to scrutinise all providers of NHS-funded services. Local authorities will be able to require the provider to present information and to appear at scrutiny meetings to hold them to account.

Already, 143 local authorities—almost 90% of those in England—have signed up to be health and wellbeing board early implementers, including Hertfordshire county council. The make-up of health and wellbeing boards will be left to their own discretion, but will include representatives of GP consortia, directors of public health, adult and children’s services, representatives of HealthWatch, representatives of the NHS commissioning board and locally elected councillors. As well as preparing a joint strategic needs assessment, they will have to draw up a strategy to deliver the requirements set out in that assessment. In short, health and wellbeing boards will promote integrated working across the NHS, public health and social care, and will hold NHS services to account. That will lead to better, more accountable services for local people.

The Government are clear that in a patient-led NHS, any changes to services must begin and end with what patients and local communities want and need. Until the new system is in place, we expect PCTs to follow best practice in ensuring that local communities are fully engaged in such decisions. When it comes to urgent care, it is vital that local services are coherent and easily accessible around the clock. However, we have again been clear that decisions on the form that they should take are best made locally, in the light of local needs.

In the Broxbourne area, there are 12 GP surgeries, four of which are in Cheshunt. The area also has an out-of-hours GP service provided by Herts Urgent Care, based at the Cheshunt community hospital. The community hospital also provides out-patient clinics and a range of community services. There are 22 pharmacies in the borough, nine of which are in Cheshunt and one of which opens for extended hours.

On the specific matters that my hon. Friend raised regarding the Cheshunt urgent care centre, I understand that in 2007, the former two Hertfordshire PCTs, in partnership with the two Hertfordshire acute trusts, held public consultations on a health strategy, “Delivering quality healthcare for Hertfordshire”. The strategy was intended to improve access to urgent care services in Hertfordshire, so that people with urgent but not life-threatening conditions could be redirected from hospital accident and emergency departments to receive more appropriate treatment more quickly and closer to home.

In response to the public consultation, the PCTs agreed to piloting urgent care centres at both Cheshunt and Hertford, on the basis that they would be evaluated before longer-term decisions were made about their future. It is crucial to remember that they were pilot schemes, and it was always understood that after a period of time had passed, so that experience could be gained, they would be evaluated before those longer-term decisions were taken.

The urgent care centres were established as part of a 12-month pilot project between January and December 2010, with the specific objective of relieving pressure on local accident and emergency services. The primary purpose and objective was to reduce the number of patients seen at A and E by 20,000 a year, by providing local people with direct access to urgent care centres. The purpose of those centres is to see and treat people with urgent, but not life-threatening, illnesses such as sprains, strains, broken bones, and minor burns and scalds in a local community setting, allowing A and E departments to concentrate on life-threatening emergencies.

Hertfordshire PCT commissioned an independent research organisation, Opinion Research Services, to evaluate the success of the pilot centres at Cheshunt and Hertford, the latter in the constituency of my hon. Friend the Member for Hertford and Stortford (Mr Prisk). I understand that during the evaluation process, the views of the general public, NHS staff and local GPs were taken into account. Evidence was then submitted to an evaluation panel consisting of local GPs, local councillors, staff from local authorities and representatives of the PCT.

When the evaluation panel met on 17 January this year, it came to the unanimous view that urgent care centres were not achieving their aim of diverting significant numbers of patients from A and E. I remind the House that that, of course, was the primary purpose of the pilot scheme when it was started at the beginning of January 2010. Instead, considerable numbers of those using the urgent care service were seeking advice and treatment usually provided by GPs, for conditions such as raised temperatures, sore throats and headaches. It was never the intention that the urgent care centres would have a primary care focus. They were established to relieve pressure on local A and E services and to treat people with urgent but not life-threatening illnesses.

The evaluation panel recommended that the pilot centres should not continue in their current format. Instead, it recommended that the PCT should consider recommissioning activity through one or two minor injuries units. It also recommended that the PCT consider how it could improve access to high-quality primary care, to compensate for the loss of the urgent care centre.

As my hon. Friend the Member for Broxbourne is aware, Hertfordshire PCT published its board papers on the issue on 18 March. I understand that the PCT met earlier today to consider the recommendations and has decided to uphold them and not recommission the urgent care centres in their current form. Instead, it will consider recommissioning a minor injuries unit at Cheshunt.

I accept, as my hon. Friend made clear, that the Cheshunt urgent care centre is well regarded by local people. However, the provision of services is a matter for the local NHS. As he understands, it is not for Ministers to interfere and micromanage the day-to-day business of the NHS.

My hon. Friend mentioned access to general practitioners in the Cheshunt area. To reiterate what he said, the evaluation panel recommends that the PCT considers how it can improve access to high-quality primary care to compensate for the loss of the Cheshunt urgent care centre. The PCT has upheld that recommendation. I understand that the PCT has a programme of measures to improve access to general practice, to which he referred. I am sure he will agree that it is important to pursue and achieve that.

[Mr Walker]

I would argue that the PCT ought to have been improving the performance of GPs in my constituency for the past decade. It has arrived a little late at the party.

[Mr Burns]

My hon. Friend makes an extremely valid point. It is sad that only in the last few months have this Government been able to come to grips with some of the previous Government’s failings in making the local health service more accountable to the needs, wishes and requirements of local people. He and I will be totally in agreement on that. That is why I believe that the core of our health service modernisation programme— putting patients at the heart of the delivery of care—is so important. I am sure that he and I agree that that is an appealing principle from which to work.

As my hon. Friend said, the PCT has established a funding initiative for GP practices to support the Improving Access programme, which includes funding for new telephone systems, improved appointments and check-in systems, and medical equipment. The programme continues to be a key area of work for PCT staff, who will work closely with GPs to ensure that it is implemented, and that local people see improvements.

I have been advised—I hope this reassures my hon. Friend—that the latest GP patient survey results show that four GP surgeries in his constituency scored 91% or above in terms of satisfaction with care. Two of those practices—the Cromwell medical centre, which achieved a 92% rating, and the Warden Lodge medical practice, which achieved 93%—are in the Cheshunt area.

I am assured that the PCT will hold discussions with East and North Hertfordshire GP consortium and involve it fully as it conducts that further investigation. I am also assured that the PCT will have conversations with the public and other stakeholders, including my hon. Friend if he wishes, to gain further understanding of the needs of the local population, and to explain to potential users of the services what a minor injuries unit can provide. In addition, I am advised that the PCT will strengthen its performance management of GP practices to address the problems that some local people have experienced. I fully understand my hon. Friend’s concerns, but the board has decided that the PCT needs to explore further the possibilities of setting up a minor injuries unit. I understand that the PCT will test the feasibility of the new unit with providers.

Question put and agreed to.

19:33

House adjourned.

Deferred Divisions

Wednesday 23rd March 2011 Commons Chamber

Division 236

Ayes: 310

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Conservative: 247
Liberal Democrat: 51
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Independent: 2
Scottish National Party: 2
Alliance: 1
Green Party: 1

Noes: 29

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Conservative: 15
Democratic Unionist Party: 8
Labour: 6