(10 years, 8 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Communities and Local Government (Mr Eric Pickles)
Before I start, may I say what a pleasure it is to see the right hon. Member for Leeds Central (Hilary Benn) replying to the debate? The House had an opportunity last week to express its great affection for his father. But no matter how distinguished or old a person is when they depart, to lose a parent, as those of us who have lost a parent understand, is a bitter blow. I just wanted the right hon. Gentleman to know that we express our deep condolences to him and his family at this very difficult time, and we wish him very well.
By sticking to our long-term economic plan, we have brought the deficit down by a third, we have helped a record number of people into work and we are continuing to boost Britain’s resilient economic growth. This is a Budget that literally places new pounds in the pockets of taxpayers. It is creating opportunity and putting Britain on a path to a secure future, and it will reward pensioners, savers and hard-working families. It has drawn a clear distinction between a coalition Government doing everything in their power to bolster Britain’s recovery, and a Labour party that just offers more borrowing, more debt, and more taxes, and ducks the major challenge.
We want to see a fair and fast recovery across the country. This can only be achieved by galvanising all forms of growth—whether inside a local enterprise zone or on a building site—and by firing up businesses and home builders, getting them investing, exporting and creating jobs. Local economies are providing the solid foundation for a national recovery. The economy is stronger and more resilient, and is rewarding the hard-working British public.
The Budget has recognised those who were so badly affected by poor winter weather. Some £300 million has already been announced to support the individuals, businesses and councils that were hardest hit by the flooding and storms. The Chancellor has made available an additional £140 million—money that will go towards immediate repairs to, and maintenance of, damaged flood defences across Britain. The £200 million pothole challenge fund will fill holes in the road that have already been a blight to road users.
Getting these communities back on their feet after such a devastating period of weather remains a high priority across government.
Mr John Redwood (Wokingham) (Con)
Those are very welcome announcements. Is my right hon. Friend also going to take action to stop rapacious councils making a misery of the lives of normally law-abiding motorists who slightly overstay their welcome at parking places and are then treated as if they were criminals? I am sure it would lift confidence if they were spared some of the excess.
Mr Pickles
My right hon. Friend and I are as one on that matter. He will recall that the Government have consulted on this and on other issues related to parking, and that the consultation period has recently ended. We hope to make an announcement in the very near future.
New measures in the Budget will also help to support the building of a further 200,000 new homes for hard-working people, on top of the work we have already done to kick-start house building. New house building and construction output in England is now at its highest level since 2008, and new housing construction orders are at their highest levels since 2007. More than 170,000 affordable homes have been delivered since 2010, and £20 billion has been invested in affordable housing over the spending review period.
More council housing has been built under this coalition Government than in all the 13 years of the previous Government. I honestly do not understand why Labour Governments do not build council houses. Since the last quarter of the last century, the two really big builders of houses have been the Thatcher Administration and this coalition Government.
The number of first-time buyers is at its highest since 2007, and mortgage arrears at their lowest since the Bank of England’s figures began in 2007. The number of empty homes is at its lowest rate since records began and, in the last year, new housing registrations rose by 30% in England and by a massive 60% in London. In fact, the number of new homes registered in London last year was the highest since electronic records began more than 26 years ago.
By contrast, new home registrations fell in Labour-run Wales. House builders have shifted their business across the border to England because of the Welsh Government’s anti-business policies. This is due to Labour’s extra red tape, and to its botched implementation of home ownership schemes. By contrast, thanks to this Government, more than 17,000 people have already bought a home through Help to Buy. Overwhelmingly, these are first-time buyers, and they are mainly outside London and the south-east. This shows how we are supporting all parts of the country, north and south. Help to Buy is a key part of our long-term economic plan, giving thousands more people the security and independence that comes from owning their own home.
The Budget’s pension reforms will offer freedom of choice for people who work hard. It would be helpful if the right hon. Member for Leeds Central could clarify whether the Opposition support these reforms, or whether some ambiguity still exists. Our pension reforms, such as allowing the newly retired to pay off their mortgage and be liberated from the banks, will also lead to greater security in old age. I do not agree with the doom-mongers who say that this will somehow lead to a problem with buy to let. This Government are dramatically expanding the opportunities for institutional investment in the private rented sector, through guarantees and our build to rent schemes. These offer the opportunity for savers to invest in new built rented accommodation and to receive long-term, stable returns from the property market.
Sheila Gilmore (Edinburgh East) (Lab)
I have a genuine question for the Secretary of State. If someone used their ability to draw down their pension to pay off their mortgage, have the Government considered the impact that that might have if they were to require social care assistance in the subsequent years?
Mr Pickles
We have to understand that people who save up for their retirement have worked hard to put together a nest egg and are therefore unlikely to squander it. We should trust people to put together their own schemes. This move has been widely welcomed across the industry and by pensioners groups. Indeed, it has been widely welcomed by everyone but the hon. Lady.
Mr Pickles
No, the hon. Lady has had her chance. That’s it.
We are also ensuring that small and medium-sized house builders get a share of our housing revolution. A new £525 million finance fund will deliver 15,000 houses on smaller sites. We are cutting red tape, too. Today, we have published our proposals for scaling back section 106 charges on small home builders. We are introducing an exemption from section 106 tariffs for self-builders and extensions, building on our exemptions already delivered from the community infrastructure levy. Yet again, the Labour party has not been clear about whether it supports cutting these stealth taxes on self-builders. Self-builders will also benefit from further steps to free up land for self-build; a £150 million investment fund for custom-build plots; and a new right to a plot and to build from councils. Further planning reforms will help get empty and under-used buildings back into use. Those build on the success of our “office to residential” planning reforms, measures the Labour party opposed, despite the fact that they are providing new homes on brownfield sites in our towns and cities.
We are also supporting the first garden city for a generation, at Ebbsfleet—decisive action and investment that Labour failed to deliver. The original announcement was made in John Prescott’s 2003 sustainable communities plan, but the Labour party failed to build at Ebbsfleet.
Nicholas Soames (Mid Sussex) (Con)
Does my right hon. Friend agree that the good thing about Ebbsfleet is that it commands the near unanimous support of the local community—of Members of Parliament, councillors and local citizens—which is very important for a project of this size? Does he also agree that speculative developments such as those in my constituency and in Arundel and South Downs produced by Mayfield are entirely unwelcome and command no local support at all?
Mr Pickles
My right hon. Friend has carefully, and with his customary style, signposted where developers should go, from his constituency to parts of Kent. The top-down eco-towns built nothing but resentment, but this Government are working with communities to support large-scale development. As he said, this works only if local councils are in favour, and we work with local developers and with the local community to build something together in a proper partnership.
Mr Redwood
My right hon. Friend might like to know that about a decade ago I wrote a pamphlet called “Thames Reach”, recommending a new town in the Ebbsfleet area. I recommended it to the Labour Government, as I am full of generous good ideas and thought they might want to take it up. I think they agreed with it, but they did absolutely nothing. Can he explain why?
Mr Pickles
No, I cannot explain why. I suspect that my right hon. Friend’s reputation as a scourge from the right may have put the Labour Government off. I suspect they never got further than the title page, but had they gone on they would have seen some very sensible suggestions. We are free from that prejudice and, of course, he is an inspiration to us all.
Further support will come in due course from the second round of the local infrastructure fund and a prospectus on support for locally led garden cities. Increased output, increased supply and increased jobs, with stable recovery, low interest rates, and support for firms and sites of all size—we have got Britain building again. Labour’s threats of land grabs and a new development tax on house builders would cut the level of house building and undermine investment in complex land assembly projects. Against a backdrop of anti-business sentiment, perhaps epitomised by the Labour Department for Communities and Local Government team’s campaign against free Waitrose coffee, it is no surprise that this week’s Investors Chronicle warns savers to sell their shares in house builders if Labour were to win the election. That is not going to build more homes; it is a recipe for stagnation and for unemployment. As Wales shows, Labour’s anti-business dogma will have a chilling effect on jobs and the economy.
By contrast, this Government welcome enterprise and the free market. Enterprise zones have led the way in creating jobs all over the country, as well as helping the UK to become a world leader in a range of technologies and for inward investment.
Mr Brooks Newmark (Braintree) (Con)
On the subject of jobs, my right hon. Friend might be interested to know that not a single Labour Government have left power with more jobs than when they came in. Not only have this Government created 1.7 million jobs in the past four years, but the Red Book is predicting another 1.5 million jobs in the next five years.
Mr Pickles
I am not sure whether I was aware of that. I am surprised but not shocked by the revelation. It is a good job that we have had an opportunity to make that difference to the British economy.
Enterprise zones have led the way in creating jobs all over the country as well as in helping the UK to become a world leader in a range of technologies and for inward investment. The existing 24 zones have created 7,500 jobs, and multinational companies have been tempted to the UK thanks to our business rate and simplified planning offers and other financial benefits.
To sustain that momentum, we have extended the business rate discount to 2018, offering up to £55,000 off business rates a year for five years, and extended the enhanced capital allowances incentive for those zones that have it. That includes Northern Ireland’s first enterprise zone, which is being established close to the university of Ulster campus near Coleraine. That measure comes on top of the business rates announcement in the Budget for small firms and local shops. By backing new and developing businesses and offering exclusive packages to entice new investment, we are confident that enterprise zones will carry on creating jobs and specialist local economies.
Mark Menzies (Fylde) (Con)
I thank my right hon. Friend for the work that his Department has put in on the Warton enterprise zone to ensure that there has been joined-up thinking in Government with regard to the Preston city deal. Will he assure me that Lancashire and Warton will remain at the forefront of his Department’s thoughts?
Mr Pickles
I can assure my hon. Friend that, as an ethnic Yorkshireman, Lancashire is rarely out of my thoughts. That is also true of the enterprise zone, and I look forward to visiting it very soon and seeing him there.
The Budget has ensured that areas all around the country will benefit from steady growth. The Mersey gateway bridge has been guaranteed to the tune of £270 million, the Cambridge city deal will accelerate 33,000 houses, and the second phase of city deals will bring improved transport links and employment opportunities to 15 places around the country.
The Budget will build a more resilient economy. Working through our long-term economic plan is the only way to deliver what the British people want, which is the economic security that comes with a good job and the prospect of a better future for all. That plan has delivered economic stability and low mortgage rates for hard-working families, and it has laid the foundations for a sustainable economic recovery. I commend the Budget to the House.
Hilary Benn (Leeds Central) (Lab)
Let me say how grateful I am to the Secretary of State for his very kind words of condolence, which mean a great deal to me personally and to the rest of our family.
We have a chance today to discuss the impact of the Budget on families and communities when it comes to their chances of getting a home, deciding where that home will be built and by whom and whether the policy the Government are pursuing meets the simple test of fairness. Those are the things that I want to address in my remarks.
We know that housing is at the heart of the cost of living crisis facing many of our constituents. Parents worry about whether their children will be able to afford a home. Young people who want to get a foot on the housing ladder see house prices disappearing into the distance. People who are renting worry about the impact of rents that are going up faster than their wages. As I think the whole House will acknowledge, that is the result of a housing crisis that has come upon us over many years, as successive Governments have failed to build enough homes. Let me just say before anybody jumps up that it is a fact that, despite all the words we have heard from the Secretary of State and his colleagues today and on previous occasions, housing completions were higher in every single year of the previous Labour Government than they have been in any year under this Government. That puts into context what the Secretary of State had to say. Although I recognise that the previous Labour Government and our predecessors from both parties did not do enough to build homes, I would take our record over his any day.
Jonathan Evans (Cardiff North) (Con)
The right hon. Gentleman suggests that the Government before the previous Labour Government had a similarly poor record, but in fact theirs was better.
Hilary Benn
I am very proud of the record of the previous Labour Government: 2 million new homes, including 500,000 affordable homes, and a huge number of social homes that were brought up to decency standard. One thing that the previous Conservative Government bequeathed the previous Labour Government was a lot of council houses that were in poor condition because they had not invested any money in improving them. When the Secretary of State is next having a conversation with the Prime Minister, he might point out that the next time he walks down that famous staircase in No. 10 past the photographs of his predecessors, he will have to get all the way to Stanley Baldwin to find a Prime Minister with a worse record of building houses than the current occupant of that office.
In his 2011 Budget speech, the Chancellor told us that he would deliver an economy
“carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
Although, as the Secretary of State says, housing starts are now finally up, what has happened to construction output overall? It has fallen by 4.2%. I do not know how many marches the Chancellor has been on, but the general idea of a march is that one goes forwards rather than backwards.
Although the Government’s record of building houses has been poor, they have intervened in the mortgage market through Help to Buy, and last Wednesday the Chancellor made an announcement about extending the equity loan scheme to 2020. As I have said before from this Dispatch Box, we support help for people, especially first-time buyers, to realise their dream of home ownership, but if the Government simply increase demand and do not do enough to increase supply, all that will happen is that house prices will rise further out of reach of the very people we are seeking to help. That is why the Treasury Committee and the International Monetary Fund express concerns about Help to Buy. I presume that the Chancellor has now finally acknowledged that, as he told the House last week that he has asked the Bank of England
“to be particularly vigilant against the emergence of potential risks in the housing market.”—[Official Report, 19 March 2014; Vol. 577, c. 783-84.]
That is progress, but could the Minister tell us when he replies exactly what that means in practice and how we and the public will be kept informed of how that vigilance is operating?
Alec Shelbrooke (Elmet and Rothwell) (Con)
First, I offer my condolences to the right hon. Gentleman, as a fellow Leeds MP, for the loss his family has suffered. As a fellow Leeds MP, he will know some of the pressures of development in Leeds, with some 70,000 units to be built in the city, despite talk in the Leeds core strategy. Does he agree that we must be careful about where these large-scale developments are built? If we are massively to change the shape of the village of Scholes in my constituency, say, that would have the unfortunate effect of lowering house prices and putting people into—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I think that the right hon. Gentleman, as he knows the area so well, has the message.
Hilary Benn
I am grateful to the hon. Gentleman for his kind words. If he will bear with me, I shall directly address his point about where the houses should go in a moment.
We need to build more homes. Everybody recognises that. That is why, for example, we called for a help to build fund supported by Treasury guarantees to assist small and medium-sized builders in accessing finance to build some of those homes. I welcome the fact that the Government have listened and set up a builders’ finance fund, but history teaches us that we need to do more if we are successfully to change the way in which the market works.
Let me reflect on that for a moment. In the 1930s, when we reached the highest level of private house building ever achieved in the UK, the top 10 house building companies had a market share of 6% or 7%. In 1988, firms completing fewer than 500 units a year produced about two thirds of UK housing but by 2012 that had fallen to less than a third. In other words, as the number of small and medium-sized builders has declined and the big firms have grown larger, it has become easier for the more dominant firms to buy up the land. That is why small and medium-sized builders and custom builders say that it is hard for them to get access to land, so I agree that it is about helping them with finance, but it is also about enabling them to get the soil they need to build on.
The Secretary of State spoke about self-build and the House will remember that the former Housing Minister, now the chair of the Conservative party, promised a self-build revolution and pledged to double––double––the self-build sector. But the facts show that, last year, far from doubling the size of the sector, the number of self-build homes fell to the lowest level for 30 years. That is some revolution.
Gareth Johnson (Dartford) (Con)
The right hon. Gentleman talks about the lack of house building. Will he therefore use this opportunity to support without reservation the development corporation that is being introduced to build houses in Ebbsfleet in my constituency?
Hilary Benn
I certainly support all measures that will help us to get housing supply up because that is an objective shared across the House. I shall have something more to say about Ebbsfleet in a moment.
We have also called for local authorities to have a higher proportion of small sites in their five-year land supply and to give guaranteed access to public land for small firms and custom builders, something to which the Secretary of State referred and that was also in the Budget. That is also why we have said that a proportion of homes in new towns and garden cities should be built by smaller firms and custom builders. The truth is that if we are going to make progress, we have to change the way in which the housing market and the building market work, which is something that Ministers have not yet acknowledged. Why? We know that the high cost of housing is driven by the cost of land. We know that not enough land is being released for housing development. We know that by the time that land is given planning permission, it is often prohibitively expensive and we know that this can create an incentive to bank, rather than build on, the land.
As the Planning Minister told me in a written answer earlier this year, as of January there were 538,000 units with planning permission that had not yet been completed. About half had been started and the rest were working towards a start or were on hold. He says that land banking is not an issue. He says that in many an answer to a written question, but he forgets that a 2008 Office of Fair Trading survey found that strategic land bought with options, which accounted for about 83% of land banks, was worth 14.3 years of production. That is about enough land to build 1.4 million homes.
What is more, under the current system, there is very little that local authorities can do about it, because existing compulsory purchase order powers are legalistic, expensive, time-consuming and complex. Authorities are in a weak position to try to get the land brought forward. That is why we have argued for and will deliver much greater transparency in the system by ensuring that developers register the land that they own or have options on. We will give councils the power to charge developers escalating fees for sitting on land with planning permission to incentivise them to actually build the homes they said they wanted to build.
The idea is denounced by the Secretary of State but it is supported by the International Monetary Fund and by the hon. Members for Rossendale and Darwen (Jake Berry) and for Stratford-on-Avon (Nadhim Zahawi) and indeed it was supported by the Planning Minister before he got his job. As a last resort, we will give local authorities proper compulsory purchase powers so they can, in the right circumstances, buy, assemble and grant planning permission on land that is being held back from development.
What is the purpose of this? It is to address the current imbalance in power between communities and developers. This is the point the hon. Member for Dartford (Gareth Johnson) raised. Where communities decide where new housing needs to go, which is what neighbourhood planning is all about and why I strongly support it, and when permission has been given, they should be able to do more to ensure that the houses actually get built. But there is a problem here, and it is the reason why the Planning Minister gets a lot of stick from many of his Back Benchers. When a five-year land supply has been identified, all the cards are stacked in the developers’ favour. They can look at one site and say, “That’s brownfield, too expensive to develop, there is contamination. We are not going there.” They can look at another site and say “That’s not viable.” They do not explain their measure of viability but just end the conversation by saying it is not viable. They look at a third site and say, “Okay we can do about 100 houses a year on that site”, even though, physically, it could take 250, 500, or say, 1,000 houses. Then, at the end of the process, when the numbers are added up against the council’s assessment of its annual housing need, what happens? Lo and behold, developers say, “Your five-year land supply is inadequate and therefore, we would like to build there and there and there.” That is what is going on up and down the country.
I think the deal is that communities have to take responsibility for identifying sufficient land for housing supply, but they then have to be able to ensure that the houses that are needed are built on the land that they have identified. What we have at the moment is a system in which communities and their local authorities have very little power and that is why change is required.
Sir Edward Garnier (Harborough) (Con)
What does the right hon. Gentleman mean by community? How does he identify the community in this context?
Hilary Benn
First, the community is represented by the local authority, and, secondly, I think the community has a really important part to play by joining in the process of neighbourhood planning. We have seen from some parts of the country—Thame is probably the best example—that the community took responsibility. It consulted and had a referendum and, from memory, 73% of people voted in favour of the plan. It identified sites for housing development. I think that is the right approach, because for too long, we have had a system where no one has taken responsibility and everyone has pointed the finger at somebody else when it comes to housing supply. That is why we need change.
Mary Macleod (Brentford and Isleworth) (Con)
Will the right hon. Gentleman join me in urging the Labour Hounslow council in west London, which has development sites of 900 units, to include some affordable housing?
Hilary Benn
I am very strongly in favour of affordable housing—I was not aware that we had any county councils in west London, but I think that the hon. Lady was referring to something else. We need more private housing, more housing for rent and more social housing at a price that people can afford.
We also need new towns and garden cities, so what about what I would refer to as the great mystery of the highly reclusive new towns and garden cities prospectus? Just to remind the House, two years ago, the Prime Minister announced that he would be publishing a consultation by the end of the year on garden cities—does everyone remember that?—but 2012 came to an end and it did not appear, and 2013 happened and it still did not materialise. We then read reports in the newspapers that the Prime Minister was suppressing a document and had gone cold on the whole idea. Then, in January, the Housing Minister said that he was not aware of a report that was supposed to have been published, but the Deputy Prime Minister said that there was a prospectus and that the Government should be honest about their intentions. Then the Secretary of State contradicted his Housing Minister and said that he had been told by his Department that there was a report, but not a report from the Department for Communities and Local Government—I do hope the House is keeping up.
Then, last week, the Chancellor announced that there would be a new garden city at Ebbsfleet with 15,000 homes. The only trouble is that that is 5,000 fewer homes than the 20,000-home development announced for Ebbsfleet in December 2012. Only this Chancellor could proclaim a smaller development as a triumph—backwards not forwards. We look forward to the publication of that prospectus, hopefully before Easter, and if the Secretary of State has not already seen a copy, I trust he will ask for it. After such a lengthy gestation, I hope that it does not disappoint him or the rest of us.
That episode shows that there has clearly been fighting within the Government—within the Cabinet—about what should be in it. We now know, thanks to the Yorkshire Post and the Under-Secretary of State for Communities and Local Government, the hon. Member for Bristol West (Stephen Williams), that the same thing is happening inside the Department for Communities and Local Government.
I feel very sorry for the Under-Secretary, whom I notice is not in his place today, because he does not always look entirely happy and that may be why he decided to unburden himself at the Lib Dem conference recently. He said that being compared to the Secretary of State—I think it was a joke—was
“the most grievous possible insult”
that anyone could deliver. I think that is unfair and unkind to his boss. He was complimentary about the Planning Minister but said that he was
“hated by many Tory MPs”.
That is possibly true, but I think it is also unfair, and since then, the hon. Gentleman seems to have been given all the pretty unpleasant jobs in the Department, defending the indefensible. I hope the fact that he is not here today does not mean that he is being held hostage in the Department by the Secretary of State and I hope that he retains his independent streak.
The most damning comments from the Under-Secretary were about a flagship policy of his own Department:
“The new homes bonus… I’m not a fan of. I don’t think it’s an incentive, necessarily, for local authorities to give planning permission. I don’t think it’s actually driving decision-making on the ground.”
He is in good company, because the National Audit Office agrees. As we are already aware, the Housing Minister does not seem to know what it is meant for either, because he has told the House:
“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]
We have now had it from two Ministers—it is not effective.
The new homes bonus is also profoundly unfair. It is given to councils according to the number of homes that happen to be built in their area and it is top-sliced from formula grant, which is distributed according to need. Therefore—surprise, surprise—the areas that are getting most of the money are those where the homes will probably be built anyway, which tend to be better off, while the areas that are losing funding are those where there is less demand for housing, which tend to be worse off. It is yet another example of this Government, in tough times, taking most from those who have least, and in so doing they fail that basic test of fairness.
The Government just do not get it. At a time when real wages are falling, as was confirmed by the Office for Budget Responsibility document published last week, they think that the most important thing to do is give millionaires a tax cut. They think that councils in the most deprived areas with the greatest need should face the biggest reductions, while some of the wealthiest councils get an increase in the money they have to spend.
There are 10 Members of Parliament lucky enough to have councils in their constituencies that will be better off in terms of spending power per household—the Secretary of State’s preferred measure—by 2015-16 than they were in 2010-11. Four of them are in the Cabinet. Two of them are Government Whips. Under this Secretary of State, the 25 most deprived local authorities in England will lose 10 times as much spending power per household as the 25 least deprived.
Not only are we seeing the biggest reductions in spending power in the areas with the highest need while there are increases in spending power in the wealthiest areas, but before long, the funding difference between those areas, having eroded, will in some cases be reversed. Within four years, under this Government, local spending power per household will be higher in Wokingham—I am sorry that the right hon. Member for Wokingham (Mr Redwood) is no longer in his place—than it will be in Leeds, Sheffield or Newcastle, even though those cities face far greater pressures.
Most people would say that that is extraordinary. Most people would regard it as unfair and impossible to justify. So why does the Secretary of State think that areas in greater need should actually receive less? We know what he thinks already, because in tough times for councils some services are becoming unviable, with entitlement to social care disappearing in some cases, and libraries, the arts, Sure Start centres and women’s refuges going. What does he say to councils? He says, “What’s your problem? These cuts are really quite modest. What are you complaining about?”
It is not just communities that are being hit; it is the people in the greatest need in those communities. What has the Secretary of State done? He has forced up council tax bills for people in work on the lowest incomes: carers, the disabled, injured veterans and war widows. Summonses have been issued and bailiffs are knocking on doors, because people are poor. That is why they are being affected.
The Government are forcing people to pay the hated and immoral bedroom tax, undermining community, neighbourliness and a sense of place. Once again, that hits people on the lowest incomes, most of whom are disabled. Let us consider for a moment a family receiving housing benefit, a mother and father with two children living in a three-bedroom council house. If one of the children leaves home to get a job, the Government are telling that family, “Move.” Two years later, the second child leaves home and gets a job elsewhere. What do the Government say to that family? They say, “Just move again”, leaving mum and dad in a one-bedroom property. Then, three years later, the father’s mother becomes ill and needs to come and live with them so that they can care for her. What do the Government say? “Oh, just move again.” I cannot think of a policy more calculated to undermine family life, and you know what? That family will not even have a spare bedroom so that their grandchildren can come and stay. That is why people are so angry about the bedroom tax and why, if we win in 2015, we will abolish it.
Hilary Benn
The hon. Gentleman has had a go. I am going to bring my remarks to an end, because many people want to speak.
Only last week, when the Chancellor had the nerve to get up in the House and say, “Oh, well, we are all in this together”, and the OBR confirmed that real wages were falling, what did we discover? That some Cabinet Ministers had been giving hefty pay rises—to whom? Their special advisers. The architect of and chief apologist for the bedroom tax, the Secretary of State for Work and Pensions, gave his special adviser a 36% pay increase in one year alone. If that is not proof that this Government stand up for the wrong people, I do not know what is.
This is a Budget that provides too little, too late to deal with either the chronic shortage of houses or the cost of living crisis, and the Chancellor and the Secretary of State for Communities and Local Government have shown once again that they do not really understand, and are not prepared to take the action that we need to make life better for the British people.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. There will be a six-minute limit on speeches—I have increased it by one minute.
Nicholas Soames (Mid Sussex) (Con)
May I join in the expression of condolence to the right hon. Member for Leeds Central (Hilary Benn) and say how sad I was to hear his news?
I want to welcome the Budget and reflect for a moment on the Chancellor’s considerable achievement. Fortified by a coalition and stronger for it, with the most appalling legacy left by the last Government, he has managed to turn things around so that our country is now well on the path to better days, with a growing economy, a remarkable number of new jobs emerging and an exciting future about which we can all be optimistic —in particular, I hope, our young people, many of whom are having a tough time of it.
I want especially to mention the Chancellor’s wise decision to freeze fuel duty, which is now 20p lower than it would have been under a Labour Government. Together with a well judged freeze in the council tax, on which I congratulate my right hon. Friend the Secretary of State for Communities and Local Government, that will make a real difference to hard-pressed families in Mid Sussex and elsewhere. I want particularly to congratulate the Chancellor on the welcome plans that have been set out for supporting exports, science and innovation, and of course on the game-changing package of support for savers and pensioners, which has undoubtedly commanded the broadest support possible, and rightly so.
I hope that people now realise—I truly think that they do—the profound difference between the wilful, almost grotesque irresponsibility of the last Labour Government and the steely, genuine determination of the current Administration to get on top of the serious difficulties with a long-term economic plan whose success is now quite clear for all to see. However, the new networked world in which we in this country have to make our way, and for which it must be said we are ill prepared, is manifesting every day a global flow of ideas, innovations, new collaborative possibilities and new market opportunities, not only here but all over the world. To be frank, if we get it right, the world should be our oyster.
There are plenty of businesses and people who understand that. They understand that by tapping into the global flow of new ideas and opportunities, they can become the key to something that we badly need in this country: far greater productivity. It is nowhere near good enough here, and it is the key to growth and increasing prosperity.
All of that will inevitably, and sadly, involve seismic change. I congratulate the Government on the announcement in the Budget of £42 million for the new Alan Turing institute and £74 million for the cell therapy manufacturing centre and the graphene innovation centre, all of which will greatly increase our chances of helping to export our way out of financial difficulties by accessing the fastest-growing markets around the world, particularly in the life sciences, agricultural products, science, medicine, energy and of course services.
My great anxiety is how our country will cope as we try to respond to changes in technology, globalisation and markets that have, in a very short time, made the decently waged, medium-skilled job increasingly unavailable. That is very serious for an economic model such as that in our country, and it is my firm belief that in not too short a time, most of the decently paid jobs will inevitably be those where high skills are at a premium.
I applaud the work of my right hon. Friend the Education Secretary and the Department for Business, Innovation and Skills as they try to answer those challenges, but we must now acquire a new level of political imagination, a combination of further, large education reforms, and an unprecedented collaboration among schools, businesses, universities and the Government, to change fundamentally how people are trained, and enable them to keep on training and learning throughout their working life. That will require major tax reforms and for us to consider in a more careful manner—I say this very deliberately—some of the immigration changes that are under way, in the interests of our economic growth.
Those ideas need to come from across the political spectrum. They will not be the prerogative of any one party, and there will need to be a willingness to meet people half way. We need to attract and enable the kind of talent to come to this country that can constantly spin off new ideas and start-ups, which are undoubtedly already the cause of most new, good jobs. It makes perfect sense: if we are to have more employees, we need more employers. Although that huge transformation, driven by the networked world and all that it involves, takes place—
Mr John Denham (Southampton, Itchen) (Lab)
The right hon. Member for Mid Sussex (Nicholas Soames) spoke of the importance of high skills, so let me consider the Government’s record on higher education. The Government’s approach to funding higher education is scandalously irresponsible. It is bad value for taxpayers, and wilfully makes graduates pay far too much for their degrees. By relying on unsustainable financial mechanisms, the Government threaten the long-term health of our universities.
Under their latest plans, each year the Government will borrow £14.6 billion to fund student loans, and each year they will write off, at taxpayers’ expense, £6.6 billion—a liability of £300 for every household in England, every year, and year after year. On every major judgment the Government have got their figures wrong. They said that fees above £6,000 would be exceptional, but most are at or near the maximum of £9,000. Last year the Government got their projection of student numbers in private colleges so expensively wrong that they had to step in to block recruitment. They said that debt cancellation rates would be 28%; last week they admitted that they are 45%. The public financing of higher education has been out of control since high fees were introduced for purely ideological reasons.
The immediate damage to public finances may be hidden by accounting conventions, but no public accounting convention should be allowed to disguise what is going on. As loans are not repaid in years to come, the cost of today’s higher education is put not just on graduates but on all future taxpayers, and this is from the Chancellor who said:
“We have always understood that the greatest unfairness was loading debts on to our children that our generation did not have the courage to tackle”.—[Official Report, 26 June 2013; Vol. 565, c. 303.]
A high-fee, high-debt cancellation policy forces up everyone’s fees and institutionalises waste. Of today’s public spending on higher education, £7.50 is spent on debt cancellation for every £1 spent on teaching students. If more were spent on teaching, fees would fall, as would the level of loans, the amount the Government had to borrow, the level and rate of debt cancellation, and the liability on the taxpayer. As a result of fees being lower, we would enjoy the virtuous outcome whereby all graduates would pay back less on their loans and more graduates would fully repay what they had borrowed.
There are many ways of modelling such a change. I set one out myself a few weeks ago at the Royal Society of Arts; it includes some wider changes to the delivery of higher education that are desirable. This is just an illustration of the scale of change that is possible. I am grateful to the House of Commons Library for modelling the figures that I am about to share with the House. With a different approach to higher education, whereby we spent money on teaching, not debt cancellation, Government borrowing would fall from £14.6 billion a year to £9.8 billion a year. Public sector net debt—that is, borrowing less the repayments made—would be about £10 billion lower after eight years and £30 billion lower after 20 years. The cost of debt cancellation each year would fall from £6.6 billion to £3.4 billion. The annual fees for a three-year degree could fall to £3,400 a year —pretty much the same as they were in 2010.
Mr Pat McFadden (Wolverhampton South East) (Lab)
I am very interested in the figures that my right hon. Friend is reading out. What does he think the implications are for the Government’s policy to sell the student loan book?
Mr Denham
If I may, I will come to the student loan book in a moment, because that is a serious point.
One final point from the model that I have outlined is that the average amount paid back by each graduate would fall by £5,000 in total. On this model, usable university income would rise by at least £650 million a year.
The current approach is astonishingly wasteful in terms of public money and private graduate contributions —and that is not the end of it. As he said in the autumn statement, the Chancellor wants to encourage an additional 90,000 students, funded by the sale of the income-contingent student loan book. I do not object to the principle of selling the loan book. I tried to do it myself for two years when I was a Minister, but I became convinced that value for money was impossible to achieve. Buyers face such unknown risks on future inflation, earnings and the level of evasion that either the loan book has to be sold at a massive mark-down on face value or the buyer’s income has to be guaranteed through taxpayer subsidies—the so-called synthetic hedge, which is not so much plastic privet as guaranteed private profit. Selling a capital asset to fund hypothecated revenue spending is a short-term fix that exposes higher education to unsustainable costs when the money runs out. The Public Accounts Committee has said that it has no confidence in the ability of the Department for Business, Innovation and Skills to work out what is value for money.
This cannot go on. Universities are pressing for higher fees, and Ministers have refused to rule out an increase, but the financial futility of that is now clear. Every time fees go up, the cost and rate of debt cancellation will increase. Graduate repayments will rise, yet fewer and fewer graduates will repay their debts. The Prime Minister’s former head of policy, Paul Kirby, recently suggested closing 25% to 40% of all university courses—all those where graduate incomes are not enough to repay fees. Higher education is not simply a private benefit; it is a public benefit and a private benefit. It is now clear that we can reset the system so that there is a fair partnership between the state and the student. As my modelling has shown, we could have lower fees, lower borrowing and lower debt cancellation, with higher usable incomes for universities, within the current envelope of public spending. Only the ideological dogma and blinkered embarrassment of this Government stands in the way of doing just what is needed.
Mr Charles Kennedy (Ross, Skye and Lochaber) (LD)
I wish to deliver a few remarks on the two broad themes that have been outlined for today’s Budget debate—families and communities.
May I add my condolences to those expressed to the right hon. Member for Leeds Central (Hilary Benn)? I first met his late father when I was at Glasgow university and on a train going to Bristol. He was with the late Eric Heffer. We were in the final of a debating tournament at Bristol, with Eric Heffer as the guest speaker on our side which was against proportional representation—and we won. David Steel, who was on the other side of the argument with the Bristol team, was none too happy about that. The right hon. Gentleman’s father was always very kind to me throughout the following 35 years of respect and, indeed, friendship that we enjoyed.
I have been critical of the welfare cap in the past, and I remain anxious about it. I have opposed the bedroom tax. I share the concerns expressed by the right hon. Member for Southampton, Itchen (Mr Denham) about student finance issues, and voted against such provisions earlier in this Parliament. Nevertheless, it would be churlish not to welcome the progress indicated in this Budget as regards families. Looking at the figures from my own constituency, this Budget represents an £800 tax cut for some 27,390 people—a significant achievement. The pensions overhaul is leaving pensioners £650 better off. Alongside the tax-free child care initiatives, that means that both ends of the age spectrum are being addressed. That is the mark of a society heading in the right direction. I think we would all agree that the emblem of a decent society is that it gives a sense of opportunity to people in their youth and a sense of security, dignity and comfort to people at the other end of their lifespan. All those measures are welcome.
I also welcome the measures on fuel duty, which are particularly important in my area of the highlands and islands of Scotland, which, geographically, is the largest constituency in the UK. The cost of fuel permeates everything in an area where the motor vehicle is not a luxury but an absolute necessity, and where, in days gone by, we have seen punitive increases. Fuel prices remain pitched at punitive levels in many parts of the highlands, particularly in the more remote—and therefore, by definition, more vulnerable—communities for whom access to fuel and transport is absolutely fundamental. The fuel duty freeze confirmed by the Chancellor is welcome, although, as he would expect, many of us would argue instead for a real-terms cut, which we would see as social fairness on a UK-wide basis.
When I first started out 31 years ago, the state of the Scotch whisky industry was dire. Distilleries were being mothballed and people were being made unemployed. The industry did not have a long-term, viable global future; it was losing out to the white spirits industry, in particular. An amazing turnaround has taken place, to the extent that there are now plans in progress, in my constituency alone, for the building of two new distilleries —one on the Isle of Skye and one on the Ardnamurchan peninsula. That is a remarkable development. The freezing of the duty on whisky is welcome for this industry, which is vitally important for the well-being of the whole UK economy.
My next point is about start-up support for regional airports. Transport links, and the communications arising from them, are vital to an area such as the highlands and islands. Dalcross, Inverness’s airport, is located in the constituency of my right hon. Friend the Chief Secretary to the Treasury, but it serves as the hub for us all. He has worked hard on achieving the start-up support that has been announced, which removes red tape on new routes and develops the social and commercial arteries that regional airports are. That must be welcomed, although I would go one step further and give Treasury Ministers a nudge about the developments afoot to reopen the airstrip at Broadford on the Isle of Skye, as we have gone backwards in one respect. Thirty-plus years ago, I could leave central London on a Friday morning, take the British Airways shuttle, as it then was, to Glasgow, connect to a Loganair flight, and be in Portree on the Isle of Skye ready to hold a surgery by Friday lunchtime. Thirty years later, I can no longer do that. Things have gone back in that respect, so if the Government are thinking imaginatively about our airports, I hope they will not just look at existing airports, but consider revitalising some of the airstrips and airports that previously existed and served such a good purpose.
In general I welcome the Budget. Scotland should welcome the Budget. That is a message that those of us who want to keep the United Kingdom better together will convey not just in the House, but across the whole country.
Robert Flello (Stoke-on-Trent South) (Lab)
I am grateful to the right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) for his comments on fuel, to which I, too, shall refer.
What we have seen is a Budget from a failed Chancellor reaping a growing economic reward that he did not sow—an economy that is improving despite what the Chancellor has done over the past four years. The Chancellor said that the deficit would be gone by the next general election, but there has been a reduction of only a third so far, with a year left. There was talk about pulling rabbits out of a hat, but that is quite a rabbit to pull out, with one year to go and two thirds of the deficit still to reduce. Debt has risen, and the growth that there is in the economy is based on delicate consumer spending—consumers spending their savings or money that they might have saved. Growth was stronger back in May 2010.
In the time available to me, I turn to some of the things that should have been in the Budget. As the right hon. Member for Ross, Skye and Lochaber said, what was needed was a fuel cut. FairFuelUK is one of many organisations suggesting that a 3p cut in fuel duty would kick-start businesses. Hauliers and others throughout the country were relying on some sort of cut because for them that is the difference between making a profit or a loss.
Four years on, we have heard many times, and will no doubt continue to hear, Members on the Government Benches referring to what the position would have been if Labour were still in government. What nonsense! What about the fuel duty escalator introduced by the present Minister without Portfolio, the right hon. and learned Member for Rushcliffe (Mr Clarke)? What would it have been if we had kept that going?
My right hon. Friend the Member for Leeds Central (Hilary Benn) referred to councils’ ability to assemble land. That should indeed have been possible. In my constituency, in the rest of Stoke-on-Trent and in the rest of north Staffordshire I frequently see pieces of land that have been held by one developer sold to another developer, then sold to a third and to a fourth. I think of one piece of land in particular where basic infrastructure—drainage and cabling—was put in, but that was it. Nothing moved after the economic tsunami hit, and the land has been changing hands ever since at higher and higher prices. Now the economy would have to be racing away for there to be any possibility of that land being developed. I can think of example after example where a small number of wealthy developers are sitting on land until they get their own way.
Other points should have been dealt with in the Budget. Businesses, especially in the haulage sector, have been calling for a stable view, six or seven years out, of the duty on biofuel, and ideally a reduction in that duty, so that they can make the investment and put the infrastructure in place for heavy goods vehicles that run far more efficiently on our roads.
Energy-intensive manufacturers such as the ceramic industry in Stoke-on-Trent are losing out as a result of energy speculators trading on the price of gas and speculating that what is happening in Crimea might have a negative impact on prices. Who pays? It is the manufacturers who have to buy their energy, not the speculators buying and selling.
Another of the things not in the Budget was the massive cuts to the finances of Stoke-on-Trent city council, which has been the third hardest hit for three years running. That is likely to continue for a fourth year because of the hit to our local authority, which means that services for real people are being taken away.
Of the things that were in the Budget, I shall concentrate on pensions and the removal of the annuity obligation. Giving people more choice in respect of the money they have worked hard to put aside for their pension is, on the face of it, a good thing, but around 80% of people who already do not shop around for the best annuity are losing out. People who need to buy annuities will find them far more expensive. As for the free and impartial guidance, it is advice that is needed, and who will pay for that advice or guidance? It is another mis-selling scandal being lined up to hit in a few years’ time, and, mark my words, it will come back and hit whichever Government happen to be in office at the time.
Who wins? The financial advisers might win, the Treasury will certainly win in the first few years, and insurance companies will bring out complex new products. Or, as the Pensions Minister suggested, is it Lamborghini salesmen who will benefit from the changes?
Let me end by referring to the economic hit on places such as Stoke-on-Trent from HS2. KPMG accountants identified an £80 million potential loss for Stoke-on-Trent as a result of HS2 if it happens as predicted. No Budget could make up for such massive damage to our economy.
John Howell (Henley) (Con)
I shall not follow the hon. Member for Stoke-on-Trent South (Robert Flello) in his comments about the Chancellor. Instead, I congratulate the Chancellor on a first-class Budget, for the reasons given and expounded on by my right hon. and hon. Friends in earlier debates. For reasons of time, I shall not repeat them.
I would like to comment on the new garden city planned for Ebbsfleet. That is not in my constituency, but it holds an attraction for all those who see a new garden city as a way of meeting expectations to provide the number of houses required by tomorrow’s inhabitants. It represents a good way of bridging the gap or squaring the circle between making planning and development local and providing for the future. As part of the Budget, as we have heard, the Chancellor set out an ambitious plan and up to £200 million of public investment for a major new development around the high-speed rail station in Ebbsfleet in Kent. That is only 19 minutes from central London, and the 15,000 new homes it will provide are to be welcomed.
The excellent transport links to London will make Ebbsfleet a very attractive commuter location, but development at Ebbsfleet will also provide tens of thousands of new jobs, many of which, it is expected, will be taken up by local residents. I make two points about this. The first is the involvement of local people. The Royal Town Planning Institute commented:
“The Government’s announcement of a ‘new Garden City’ in Ebbsfleet is a welcome, if limited initiative.”
The word “limited” is misguided. It fails to recognise the new localist age we are in. This is not a case of central Government imposing a solution. It must be driven by local councils.
In this context I was pleased to see the right hon. Member for Leeds Central (Hilary Benn) comment on neighbourhood plans, and particularly the neighbourhood plan in Thame in my constituency. The most important thing about that is that in the referendum that was held on the same day as the county council elections, one in 10 people went into the polling booth and voted for the neighbourhood plan, but did not vote for their county councillor. One in 10 people did that because the neighbourhood plan is a crucial way of determining the future of their town. The Government want local people to be involved in towns such as Ebbsfleet. That is crucial as part of the consultation, to make sure that it is going to be a good place for people to live, and for us to make the necessary investment to turn derelict sites that are currently local eyesores into green places to live.
The relevant local councils usually sit on the boards of development corporations. It is vital that urban development corporations are democratically accountable. It is therefore necessary to ensure that local councils are represented, including the county council, which will be crucial in providing much of the infrastructure.
Urban development corporations are designed to be time-limited local vehicles that drive major development forward, especially when the scale of change is significant. The experience since the 1980s suggests that UDCs work best when they channel their efforts into the development of specific major sites, where extensive capacity and resources are required. The Government are determined that this UDC will learn the lessons from previous ones. Therefore, it will have a clear focus on the accelerated delivery of large, strategic sites; there will be significant local buy-in, with members of the relevant local authorities playing an important role on its board; and there will be strong transparency about costs to ensure that taxpayers’ money is used effectively.
A key element of Ebbsfleet must be an emphasis on design. It is essential that it is an attractive place where people want to live. Design must play a key role because of the importance that the project will have in the minds of other people who are thinking about having a garden city. We do not just want rabbit hutches and boxes to be built. All eyes will be on this city in determining whether communities are willing to participate.
In my last few minutes, I will say a few words about the planning reforms. I encourage the Government to take a good look at the general permitted development order. The simplification of the planning system is essential, not just to support the case for development now, but for the future. It is not in anyone’s interests to have a complex system, except for the socialist antecedents of the planning system. I am glad that the Government have set out their three-tier approach to general permitted development, with permitted development for small-scale changes, prior approval rights for larger changes and planning permission when the scale is even larger. The changes that we have made to residential planning are being followed through with the proposals on warehouses and light industry. Such things are already happening in some places, which is very much to be welcomed. This is a great extension of the changes.
Mr Ronnie Campbell (Blyth Valley) (Lab)
Sometimes I get a bit sick of hearing about the mess that the last Labour Government supposedly left. [Interruption.] Wait a minute. Perhaps it is America that should apologise to my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), because when Lehman Brothers crashed, it brought down the American economy. Northern Rock and all the other banks were investing in the sub-prime market to get a fast buck, and that brought down the banks here. I looked the other day at how much that cost the British taxpayer. It cost our economy £70 billion. When Members talk about the last Labour Government—
Mr Campbell
No, we did not. When Members talk about the last Labour Government bringing down the economy, they are wrong. Let us have some truth and honesty about what happened to the economy at that time.
Robert Flello
My hon. Friend will remember as well as I do that when we were on the Government Benches, Conservative Members used to stand up and say, “Can we have a new this? Can we have a new that? Spend, spend, spend.”
Mr Campbell
According to the Conservatives, we should have wrapped the banks in red tape and nailed them to the floor. Would they have done that? Of course not. They would have done exactly what we did.
I want to get to the meat of the problem, so I will start with pensions. I am not a believer in a nanny state and never have been. If Members look at my record, they will see that I have voted against many such proposals. I looked at the pensions proposal carefully. I know a lot of pensioners who are not getting what they should be getting out of their pensions after they have bought an annuity.
The proposal reminds me of when I was a coal miner. When all the coal mines were closing, the Government decided that the miners could pull their pension out of the National Union of Mineworkers pension fund and put it into something else if they got a better deal. Of course, all the Scrooges came around, knocking at the doors of the miners. They said, “Will you organise a meeting?” Would I hell! They were there to grab the miners’ money. I am pleased that the Secretary of State for Transport is here, because he knows what I am talking about.
A lot of the men were bought. They pulled their money out of the miners’ pension scheme and put it into all sorts of finance companies that offered them a better deal. That did not last two years. Before long, they were all trying to get back into the scheme. The other schemes were a disaster. There was mis-selling on a big scale. The miners’ pension scheme had to be opened again so that the men could put their pensions back into it. They were given two years to do it. If they did not do it in that time, they were left with the company that they had gone with.
We have to be careful that that sort of mis-selling does not happen. I understand the problem. It is good that people can have control of their own money. I have no problem with that, but we might be stirring up a hornets’ nest. I do not trust the institutions one little bit.
On wages, we all know—it is a fact that is on record—that people who are working have lost out by £1,600 a year. People in two or three industries—especially those who work in local government, which we are talking about tonight—have not had a rise for three or four years. According to the latest figures that I have, £39 billion has been taken out of the economy since the austerity programme started because people have not got wage rises. It is no wonder that the economy is sluggish. If money is taken out of the economy, it will be sluggish. All that some workers have to look forward to is zero-hours contracts and food banks.
People do not realise what the welfare cap means or what it includes. Child benefit is capped. Incapacity benefit is capped. Winter fuel allowance is capped. Income support is capped. People do not realise what the cap means. There is a big figure, but people do not realise what is under it and what it means for them.
Mr Campbell
No, I do not have time.
I got hold of a letter from the Department for Work and Pensions. It says that before the austerity measures were brought in, an average of 12,530 people on jobseeker’s allowance were sanctioned each month in north-east England. Under the new arrangements brought in by this Government, that has gone up to an average of 29,000 people a month. People are being sanctioned and do not have any money. That is why the food banks are increasing. People have no money and do not know where they will get their next meal, so they have to be sent to the food bank.
Some people are sanctioned fairly and some are rightly sanctioned. Like other Members, I have had many people come to my office who have never looked for a job. I tell them that they have to go out and look for a job—that even if it is a job as a brain surgeon, they should apply for it. A lot of people are not doing that, but a lot of people are and they are being sanctioned unfairly.
The borrowing requirements are a bit of a joke. In this year alone, the Government will borrow £50 billion. Perhaps that is where all the money is going. That will leave us £111 billion in debt. That is the situation that this country is in. If that is the economy getting better and if that is the country reducing the deficit, I will eat my hat. Quite honestly, I think that we are heading for the rocks or for a car crash—one or the other.
Paul Uppal (Wolverhampton South West) (Con)
It is always a pleasure to follow the hon. Member for Blyth Valley (Mr Campbell). I was not going to make some of these points, but I cannot resist.
In 1997, some 17 years ago, many of us were not yet Members of Parliament. I remember the Labour party coming into office to the theme tune “Things Can Only Get Better”. The electorate will judge that claim in times to come. Labour likes to talk about the Conservatives’ 26 tax rises, but the inconvenient truth is that under all Labour Governments the burden of taxation increases dramatically. The sun rises in the east and sets in the west; Labour will always raise taxes and spend our money. Those are the truisms of life, and they always will be.
An increase from 10% to 11% in employees’ national insurance may not sound like much, but it amounts to an increase of 10%; in the case of the employer, the rise was a shocking 28%. No wonder Conservatives recognise national insurance contributions as a tax on jobs. Labour can talk all it wants about tax rises, but the people of Britain have long memories and will remember 13 years of a Labour Government during which the Treasury regularly raided people’s pay packets, and created a system in which businesses faced increased pressures and costs when creating jobs.
Alec Shelbrooke
Can my hon. Friend explain why some people think the banks caused all the borrowing, when Labour borrowed £80 billion in 2006?
Paul Uppal
My hon. Friend makes a reasonable point. Labour took its eye off the ball when it came to borrowing, and no one can deny that.
Thankfully, today things are different. Taxes on business were too high under Labour and corporation tax was 28% when this Government came to power. As the new tax year approaches, businesses will feel the impact of several important tax cuts. Corporation tax will fall to 21%, help on business rates will come in, and the landmark employment allowance will take up to £2,000 off employers’ national insurance bills.
Politics is always about being local, and in my constituency the Government’s changes are translating into new jobs and opportunities for my city. I have spoken regularly in the House about the positive impact that the arrival of Jaguar Land Rover will have on the city, but I have not so far spoken about the impact of the new Sainsbury’s store on Raglan street, which will create nearly 200 jobs. The sprawling Raglan street site stood empty for 10 years; it was a blight on the city and a sad symbol of our lack of progress. One of my first priorities was for that to change and, thankfully, ground was finally broken at the site last October.
This morning, it was a pleasure to welcome my right hon. Friend the Chancellor of the Exchequer to Marston’s, a valued employer and brewery in my constituency. The company, which employs around 1,000 people at its brewery and headquarters, invests in opening dozens of new pub-restaurants every year, creating hundreds of jobs nationwide. I met the chief executives of three breweries, all of whom concurred with the view that the Budget was good news for jobs and growth.
The third and final piece of good news for the city came two weeks ago, when I visited the Woodthorne development by David Wilson Homes on Wergs road in Wolverhampton. Local jobs have been created to provide new homes in the city. The Woodthorne development will provide 58 new homes over the coming months, underpinning nearly 120 jobs for local people. It is great news that new homes are being built in the city and that a local work force is being used to build them. Support for small and medium-sized developers to access development finance through the builders finance fund will provide more than £500 million for two years from 2015-16 to deliver up to 15,000 homes.
The Help to Buy loan scheme has already helped 25,000 people to buy their own homes when they could not previously afford the deposit, and it has helped to build more houses. Owning one’s own home should always be one of life’s biggest aspirations, and the Government will help even more people to achieve that dream.
People who have worked hard and saved hard all their lives will now be trusted with their own finances. The Government will completely change the tax treatment of defined contribution pensions to bring it into line with the modern world. From March 2017, the Government will cut the income requirement for flexible draw-down from £20,000 to £12,000, raise the capped draw-down limit from 120% to 150%, and almost double the total pension savings people can take as a lump sum to £30,000. I am really heartened by that initiative because it constitutes a clear blue line and political divide: we trust people with their own money.
I have been poor in my life—to be honest, I have been dirt poor. What got me and my family out of poverty was taking responsibility for myself, making my own choices and taking my own risks—not a Government body or quango. The Government will empower people by trusting them with their own money, and the changes on annuities encapsulate that sentiment.
The Budget also shows that we are on the side of manufacturers, creating a Britain that makes things again. We are cutting the cost of manufacturing by cutting the cost of energy bills for manufacturers. We are doubling the annual investment allowance to £500,000 and delivering the most competitive export finance in Europe by doubling the Government lending available to exporters to £3 billion, and cutting the typical interest rate on it by more than a third.
Boosting savings, putting the public finances on a stable footing and making it easier for companies to invest were the key themes of this year’s Budget, and I support wholeheartedly the Government’s efforts to continue to rebuild our once broken economy. It is interesting to reflect on those key themes and what we remember from 1997 onwards—golden economic rules, prudence and, more recently, “cutting too far, too fast”. We do not hear those words any more. At least this Budget will build an economic inheritance that we can pass on to our children.
Ann McKechin (Glasgow North) (Lab)
I welcome the comments made by my hon. Friend the Member for Blyth Valley (Mr Campbell), who recommended a precautionary approach to the proposed changes to pensions. They are huge changes with many unanswered questions. At the weekend, the Chief Secretary to the Treasury was quoted in the papers as saying that intuitively he did not foresee undue harm to the public purse. Rather than his personal rose-tinted view, we need hard facts and well researched analysis to allow Parliament to make an informed decision about the proposals.
Many questions arise, in particular about the level and quality of the financial advice that will be available to people to enable them to make proper decisions. How will pensioners be protected from the scams that my hon. Friend mentioned? If people choose not to take the annuity route, they will require active management of their investment over a prolonged period, at a time when many of them will experience increasing incapacity. It is vital that we have full consultation on the changes, and that any legislation is considered in draft format by the Work and Pensions Committee before it is presented to the House.
Jonathan Evans
As the hon. Lady will know, on Thursday the Government published a consultation paper and said that the consultation would be open until June. No doubt she will make her proposal as part of the consultation.
Ann McKechin
I welcome the fact that we will have a proper consultation. The depth of it, and the analysis that will be required before people can provide their opinion, will also be vital. I also expect draft legislation to be put before the Work and Pensions Committee to be considered line by line in close detail.
While the Budget focused on pensions, many significant challenges were either ignored completely or—at best—addressed only superficially. To name just a few, they include stagnating incomes; the lack of business investment compared with our international competitors, a matter addressed by the Civitas report published today; high personal debt levels; and a distorted housing market.
The Resolution Foundation’s annual report on living standards, “The State of Living Standards 2014”, points out that
“it has become harder to live a comfortable life on a modest or even typical income in modern Britain”.
The biggest increase in poverty is now among those already in work, trying to make ends meet with average wages consistently falling over the last five years. Before Conservative Members claim that the latest Office for Budget Responsibility figures show that we are coming to the end of that fall in income growth—even though the timeline keeps moving backwards—I should say that the situation is not as positive for a huge swathe of our population. The wage growth figures are based on the CPI index, which excludes housing costs. When the figures are recalibrated on an RPI-adjusted formula, as the Resolution Foundation report shows, the picture is much gloomier. For those on median earnings, there will have been barely any wage growth for more than a decade up to 2018.
Currently, the bounce we are witnessing is based primarily on increased consumer spending and greater levels of personal debt. Scottish Widows reported only last week that there are now 1 million more people than last year who have no savings at all—9 million people. Given the slow to negligible wage growth, that level of spending cannot continue forever. We risk returning to the problems that were at the root of the global collapse in 2008. Putting an extra 17p on the minimum wage rate and having approximately 1 million workers stuck on zero-hours contracts is not the way to increase incomes. That will simply push more people into a debt that will become increasingly unaffordable when interest rates start rising again.
The biggest omission in the Budget is the complete failure to tackle the causes of the housing crisis. Land prices are still far too high in comparison with average incomes and they take money away from our productive economy, yet the Government are perfectly happy to advertise in the Red Book, on page 107, that they forecast house prices to increase by 8.6% in the next year against an inflation rate of 1.8%. You would never guess, Madam Deputy Speaker, that an election was due.
Week after week, I hear from desperate young people, often with young children, about their fruitless search for stable and affordable housing. Last month, I met a young mother with two children who was looking for her fourth private tenancy in as many years. It was not that she wanted to move—either the landlords wanted their houses back to live in or to sell on, or, in the latest case, they had failed to pay their own mortgage. She is currently in overcrowded housing simply to ensure that her eldest child can remain in the same school. She faces a sector with perverse incentives, such as Help to Buy, which in its latest format is not even linked to house building. No attention has been given to reconstructing a rapidly growing but highly fragmented private rental market that could provide greater security of tenure and better service levels. The stubborn failure to boost house building, which is now at pre-war levels, is made worse by the slashing of investment in social housing, with the result that prices are kept high.
The right hon. Member for Mid Sussex (Nicholas Soames) made some very good comments on the rapid changes occurring in the manufacturing sector. If we make the right choices now, we can benefit from the revolution in manufacturing; I agree entirely with his comments. We need to invest in skills, not just for young people but for the existing work force. In too many factories across the land, we will find Jimmy and Johnny aged 69 or 70-plus, because companies have no one younger with the right skill sets. The Government continue to be complacent about the rise in inequality and about wasting talent.
Mary Macleod (Brentford and Isleworth) (Con)
It is a pleasure to follow the hon. Member for Glasgow North (Ann McKechin). Glasgow has been a European city of culture and I spent many happy years there as a student. She was much more negative than I plan to be. She forgot to mention the £63 million that Scotland will get out of the Budget, although I think we agree that Scotland is better together with the United Kingdom given the forthcoming referendum in September.
The Secretary of State laid out very clearly how the Budget will help hard-working people and put Britain on a platform to a secure future. In my few remarks, I want to concentrate on how the Budget will impact on families and local communities in London and in my constituency of Brentford and Isleworth.
I thank the Chancellor for his support for London air ambulance. In his statement, he said:
“I will also relieve VAT on fuel for our air ambulances…and provide a new air ambulance for London, all in response to huge and heartfelt public demand and the campaigns of my hon. Friends the Members for Hexham (Guy Opperman), for Brentford and Isleworth (Mary Macleod) and for Argyll and Bute (Mr Reid).” —[Official Report, 19 March 2014; Vol. 577, c. 786.]
London air ambulance is an incredibly important cause. Because of the hard work of Dr Julian Thompson, Graham Hodgkin and the team at London air ambulance, it is saving lives around London. A new helicopter was needed because there was only one helicopter in London for 10 million people. Across the rest of the country, there is one helicopter for every 1.5 million people. The service in London has treated more than 30,000 high trauma cases and it saves lives across London. The Budget will help it to save more lives.
The Budget will help brewers, such as Fuller, Smith & Turner. Its Griffin brewery is in Chiswick in my constituency. It is London’s last remaining traditional family brewer—a great brewer it is, too. The 1p duty cut on beer and the scrapping of the escalator rise in alcohol duty will benefit 4,200 pubs and the more than 50,000 people the industry employs across the country, as well, of course, as its customers. That is another benefit of the Budget.
We have not heard much mention of the increase in the personal tax allowance. The right hon. Member for Leeds Central (Hilary Benn) said that the Government were standing up for the wrong people. How wrong can he be? I believe that increasing the personal tax allowance is standing up for the right people. Increasing the personal tax allowance to £10,500 in April 2015 will lift 31,000 hard-working people across London out of income tax altogether, and 3.3 million people will see an average real-terms gain. That is what is meant by standing up for the right people and hard-working people.
Tax-free child care is helping families and hard-working people across London and elsewhere. The scheme will be extended to up to £2,000 per child and extended up to 12-year-old children more quickly. The scheme will benefit more than 500,000 London children in working families.
Housing is a big issue in London and we have already heard much about it today. I welcome the extension to 2020 of the Help to Buy scheme, which will create stability for families. It was good to see that 85% of those on the Help to Buy scheme are first-time buyers. That, too, helps hard-working people and is standing up for the right people across London and the United Kingdom.
There is a strong hub of creative industries in west London—television, film, IT and so on—and I am very proud of it. The changes to film tax relief from 1 April will make it easier for these industries to export further around the world, creating more jobs and growth for the future.
Locally, the Government are making a real difference, with record numbers of people in work, including record numbers of women in work. Some of the local achievements I have seen in my constituency include being in the top 10 for business growth, lots of new companies moving into the area, current businesses expanding and growing, the creative industries hub becoming even stronger, and a record number of apprenticeship starts. That is what this Government have done as a result of the measures we have taken. Unemployment in my constituency is at a record low of 2.6%, down by 21.3% since May 2010. Youth unemployment is down by 29.5%, which is something to be proud of. For those who are unemployed, I invite them to Aspire, the jobs and apprenticeships world skills fair at West Thames college, which, with the support of Heathrow and others, is there to help people to get work.
This is a Government who are helping hard-working families—the people who need it most. This is a Government who believe in aspiration. This is a Government who are turning the country around to growth and prosperity for the future.
Phil Wilson (Sedgefield) (Lab)
I will first touch on the housing market and the role of housing benefit, and then move on to the Government’s proposals for pension reform, because they are linked.
According to the Office for Budget Responsibility report, the largest driver in the growth of housing benefit has been a growing case load in the private rented sector. The share of housing benefit spend in the sector is projected to increase to 40% by 2018. The trend towards renting from private landlords and away from owner-occupation is accelerating. The increase in the proportion of the private renting population who claim housing benefit is a consequence of low wages and a rise in rent inflation. The recent rise in housing benefit in the private rented sector has been accounted for by people in work, and the fall in owner occupation since the recession has been particularly marked among young people. I ask Members to bear that in mind when they hear what I am about to say about the Government’s pension proposals.
I agree with the Chancellor that we should trust the people. I do not have a problem with trusting the people; I have a problem with trusting the financial services industry. I understand why the Chancellor made his announcement on Wednesday, but I feel that his proposals are treating the symptoms and not curing the disease. The Government say that they trust the people, as they rightly should, but what are they doing to ensure that the people can trust the financial services industry? What are they doing to ensure that 40% of the retirement or savings pot will not be lost in hidden fees in the future? Some savers can lose as much as £230,000 in the value of their pensions when a 1.5% fee is charged over their working lives. What are the Government going to do to ensure that those fees are transparent, and what are they going to do to ensure that the financial services industry does not come up with mis-sold financial products, as it has in the past? I say all this because we should not forget that the insurance companies that are selling annuities now will start to present what they will call “innovative and creative products” to fill the chasm left by the collapse of annuities.
There are three measurements by which these proposals should be gauged. First, when is “advice” advice, and not guidance? The Chancellor said that £20 million was to be set aside over the next two years for the right to advice, but the Treasury consultation document calls it a right to financial guidance. There is a big difference between the two: advice means telling people what is in their best interests, whereas guidance means informing them of their options and then sending them on their way. Secondly, there should be a test to ensure that those with low and middle incomes are not disadvantaged but are offered the certainty that they need in retirement, especially at a time when the average pension pot is about £36,000. Thirdly, the Government should ensure that reforms do not result in extra costs to the state as a result of, for instance, higher social care bills, and force pensioners to fall back on benefits. We should not set up a system that socialises the risk and ensures that only the private sector reaps the benefits.
The Chancellor said in his speech:
“People who have worked hard and saved hard all their lives, and done the right thing, should be trusted with their own finances”.—[Official Report, 19 March 2014; Vol. 577, c. 793.]
I agree that we should trust the people, but we should also be able to trust the financial services industry. For many people, their pension investments are not just about trust, but about faith. They want to have faith in those who look after investments, and to know that they are doing right by them.
The mis-selling of future financial products must be a big worry. It has happened time and again in the industry, which is why I have demanded, in the House, that a fiduciary duty be placed on those in the financial services industry who look after the trillions of pounds in the existing pension funds. Every practitioner must be able to put his hand on his heart and say that he acted in the best interests of those whose funds he has invested. That should be at the core of the Government’s proposals. I believe in “trust in the people”, but, in this instance, trust must be earned by the Chancellor and the financial services industry.
That brings me back to my original point. As a result of the Government’s reforms, we will see an explosion in the number of buy-to-let properties, inflating house prices and further diminishing the opportunities for young people to own their homes. The challenge for all of us is not the abandonment of the pension system, but the building of a system that actually works, under which money is given to someone who can be trusted to use those savings wisely to generate a retirement income. Holland and Denmark have private pension systems that are collectivist and large, so that risk is shared and fees are low. If a typical Briton and a typical Dutch person save the same amount, have the same life expectancy and retire on the same day, the Dutch saver’s pension will be 50% higher than that of the Briton. There is much to be said for the collectivist approach to pension provision, and it should not be deserted.
The question is not “Should we trust the people?” Of course we should. The question is “Can the people trust the Government and the industry to get this right?” Given the long history of mis-selling by the industry, I believe that the jury is still out.
Jonathan Evans (Cardiff North) (Con)
Let me begin by saying to the hon. Member for Sedgefield (Phil Wilson) that I wish to draw attention to my entry in the Register of Members’ Financial Interests, and my specific interests in the life insurance industry, because later I shall say a few words about the annuity market changes. Before that, I want to talk about the impact of the Budget on my constituency. The House will be delighted to know that I do not intend to trawl through all the provisions; I shall merely mention three specific headline issues that my constituents raised with me after the Budget, and were very pleased to raise with me.
The first of those issues, which has already been mentioned, is the increase in the personal tax allowance. That increase is significant, and I think it a mistake for any Opposition Member to talk it down. The allowance used to be £6,500, and next year it will be £10,500. That is a measure that will help the lowest paid: it will take 3 million people out of tax altogether. I am amazed that some Opposition Members are still shaking their heads over that proposition.
Secondly, my constituents were delighted by the announcement about child care costs that was made the day before the Budget. It will mean real help for people who want to get back to work. Thirdly, although this too will not be popular with Opposition Members, my constituents have told me how pleased they are that there is now petrol price stability—a stability that will be underpinned by the continual fuel duty freezes that we have seen.
Let me say something about the impact on the business community in my constituency. When I went to my constituency business club on Thursday evening, three items were mentioned specifically. The doubling of the investment allowance to £500,000 a year has been warmly welcomed, and there has been a widespread welcome in Wales for the announcement of a package for heavy users of energy. The right hon. Member for Neath (Mr Hain), who is present, will know how strongly Tata argued for that, and Celsa in Cardiff is delighted as well. There has been a universally positive response to the Government’s determination to lower corporation tax to 20% from the Welsh chambers of commerce, the Institute of Directors and the Federation of Small Businesses and others.
Let me now say something about the pension changes. The pensions landscape has changed dramatically since the 1990s. The shadow Secretary of State, the right hon. Member for Leeds Central (Hilary Benn), told us that he was very proud of the last Labour Government—the Government who scrapped dividend tax credit, which cost pensioners £5 billion each and every year from 1997 onwards. Subsequently, we have seen Government policy pursue low interest rates and quantitative easing, which have driven down the value of our pensions. No one has mentioned that so far. Annuities are on the floor in comparison with their level in the 1990s: they are down to a third of that level. The fact is that those on both Front Benches are responsible for that. Between 2009 and 2012, the Bank of England and members of the Monetary Policy Committee claimed that £375 billion of quantitative easing would have a neutral effect on annuity holders. However, in a report published two weeks ago, Ros Altmann made it clear that it was monetary policy that had driven down annuity rates.
One of the strengths of the Government’s announcement is the positive response not just from those approaching retirement, but from savers more generally. Along with the announcements of an increase in the amount that can be held in individual savings account and the National Savings & Investments pensioner bonds, it has lifted interest among savers. However, I think that we need to concentrate on two other issues. First, the Government’s changes apply only in relation to direct contribution pension schemes. They have no relevance to, for instance, direct benefit schemes in the public sector, including those applying to Members of Parliament. Currently, however, it is possible to convert one to the other, and the Government have already signalled that they intend to block that conversion. If we want pensioners to be trusted with their own money, how can we easily restrict that principle to people who have direct contribution rather than direct benefit pensions?
Secondly, there is the potential negative impact on infrastructure investment. On Thursday, the Government signalled that they were aware of it. Insurers will undoubtedly be less interested in purchasing long-dated Government gilts if the long-term liabilities of those companies are cut to the extent that has been estimated by Barclays, which has said that in 18 months’ time the annuities market in the United Kingdom will be down to a third of its present level, and by investment advisers Panmure Gordon and accountants Grant Thornton, which have predicted that it will fall to a fifth of that level. Whichever may be true, that is a significant reduction in the demand on the part of the industry for those long-term infrastructure projects that back so many of the demands that are made by Members on both sides of this House. We all want to see that public sector investment, but the reality is that the pensions landscape is being changed. It is crucial that the Government consider the impact of this in order to ensure that this reform does not produce unexpected or unanalysed impacts.
Mr Peter Hain (Neath) (Lab)
I agree with the hon. Member for Cardiff North (Jonathan Evans) over Tata, but the one thing that cannot be said about the economy under this Chancellor is that it has recovered quickly from the shock of the global financial crisis. Total output still has not reached pre-crisis 2008 levels, quite unlike in the USA and Germany, both of which passed their 2008 peak back in 2011. What took them three years to achieve is taking the British economy under this Chancellor six years, and the reason is the savage cuts since 2010, a far tighter squeeze than in the USA or the eurozone. Under Labour, recovery was already well under way in the first half of 2010 when the Chancellor came into office. It was his policies that choked it off and the British people have been paying a heavy price ever since.
Today we have an unsustainable, out-of-balance recovery. The Chancellor acknowledged that neither investment nor exports are high enough. We already knew that higher consumer spending has come out of reduced savings, not out of higher incomes, because real incomes have been stagnating for years. It is a short-term recovery that cannot last. The ex-chair of the Financial Services Authority and ex-director general of the CBI, Adair Turner, said so in January at Davos when he warned:
“We have spent the last few years talking about the need to rebalance the economy away from a focus on property and financial services and towards investment and exports. We are now back to growth without any rebalancing at all…If you chuck enough monetary stimulus at an economy something happens. It is as if we have had a cracking great hangover, had a stiff drink and off we go again.”
A second factor making the situation unsustainable is that UK productivity has been flat for years. This pushes up unit costs and keeps our export prices higher. Our export predicament is dire. On top of that, we are witnessing a housing bubble again, with property prices rocketing in London in particular. In short, nothing fundamental has changed to avoid a rerun of a financial crisis brought on by a debt-financed consumer boom and a Government-backed housing bubble that sooner or later will burst, because bubbles always do burst.
Yes, the economy is recovering faster than forecast last year, but growth is forecast to be slower next year than this. The Chancellor expects the economy to run out of steam almost as soon as it starts to grow again, yet there is plenty of scope for much faster growth, and faster growth would mean less need for spending cuts and a quicker reduction in the Budget deficit.
The austerity programme, which this Budget continues to drive forward is based upon what I call the big deceit of British politics: that Labour “overspending” left the country with the mountainous levels of debt and borrowing which the Tory-Lib Dem Government inherited after the 2010 election. [Interruption.] The idea that the global credit crunch was caused by Labour’s public investment in Britain is risible. [Interruption.] The proposition that by building new hospitals and new schools, and by recruiting tens of thousands of extra nurses, doctors, teachers and police officers in Britain, Labour caused the sub-prime mortgage defaults in the US that ricocheted throughout the world’s financial institutions is preposterous. [Interruption.]
Robert Flello
It is amazing to hear the laughter from the Government Benches. Does my right hon. Friend recall, as I do, Conservatives standing up time and again saying there was far too much regulation of the banks and that they needed to reduce it?
Mr Hain
Absolutely.
It was not Labour’s public spending that triggered Britain’s or the world’s economic crisis; it was the global inter-dependency of reckless banking that the Conservatives wanted to be less regulated that in 2008 triggered an economic meltdown in Britain and right across the globe. [Interruption.] Labour responded by boosting public spending and borrowing to offset the catastrophic collapse in private sector spending, and the £90 billion spent on bank bail-outs plunged the public sector into record annual deficits, but these were deficits that stopped a shocking slide into a fatal slump and laid the basis for recovery from the biggest shock to hit the world economy in peacetime since the 1930s great depression. [Hon. Members: “Give way.”] If I have time at the end, I will.
Contrary to right-wing free market mantras and Tory-Lib Dem history rewrites, it was the banking crisis that caused debt to rocket, the deficit to rise and borrowing to rise as well. The low yields on UK Government bonds before, during and after the credit crunch under Labour bore eloquent testimony to the fact that the international markets had full confidence in its policies, and that they were not clamouring for the right-wing dogma subsequently visited upon Britain. Indeed, so desperate was the right hon. Member for Witney (Mr Cameron) to identify with Labour’s success on spending, investment, jobs and growth that he pledged to match Labour’s spending plans for three further years in September 2007 up to 2010. [Interruption.] Members on the Government Benches shake their heads, but that is what he did. If we had spent too much—if all the charges made by the Conservatives were true—why on earth would the current Prime Minister have backed our spending plans for three years ahead? It would help the quality of this debate and the quality of assessment of the Chancellor’s Budget if the Conservatives and the Liberal Democrats had the decency to acknowledge that essential fact, including this Prime Minister’s support for our spending programmes, instead of ploughing on regardless, with no end to austerity in sight.
Mr Redwood
Why did the new and very expensive and complicated regulators the Labour Government introduced fail to control the banks when people like me were telling them they did not have enough cash for capital?
Mr Hain
I agree with the right hon. Gentleman to this extent: we did not regulate the banks well enough or carefully enough, but his party—not necessarily he, but his leadership—was saying that there should be less regulation of the banks at that time, yet now they have the temerity to attack our spending plans when we brought borrowing down. [Interruption.]
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. All other speakers have been heard in silence. The right hon. Gentleman has livened up the debate, but he also ought to be heard.
Mr Hain
It is interesting how those on the Government Benches do not like to hear the truth, Madam Deputy Speaker. The level of debt under the Labour Government before the banking crisis was lower than we inherited from the Conservatives in 1997. We brought borrowing down and we brought the deficit down compared with what we inherited, and yes we invested in repairing the desperate state of our public services—people dying on trolleys in hospitals, schools crumbling, the railways decaying. We repaired all of that and then the banking crisis came along and blew it out of the water. There was a failure by every Government right across the world to recognise the seeds of that banking crisis, but it was not caused by Labour overspending, and not caused by Labour high borrowing or high debt, because none of those things was going on prior to the banking crisis. If we had not dealt with the banking crisis in the way that we did, the whole of the economic and banking system in Britain would have collapsed. We need decency and honesty from Government Members and acknowledgement of that central fact.
Iain Stewart (Milton Keynes South) (Con)
I am very glad to contribute to the Budget debate and in particular to be following the right hon. Member for Neath (Mr Hain) because I want to pick up on a couple of the themes he introduced. Before I get on to that, however, I would just remind him that the Office for National Statistics revised downwards the depth of the recession that happened under the Government of which he was a member, which perhaps explains why it has taken us a little longer than we thought to get our economy back on track: the scale of the damage was that severe.
I want to start by welcoming a Budget measure that I hope will be applauded across the House: the Chancellor’s announcement to set up an Alan Turing institute. Thankfully, Alan Turing finally had his name cleared just before Christmas and justice was finally done. I am very proud that Bletchley Park, where he did much of his outstanding work, is in my constituency. Now that we have been able to draw a line under that injustice, it is absolutely right that we concentrate on celebrating his enormous achievements. The establishment of an institute that will further research into cyber-security, algorithms and a whole load of things I will not even pretend to begin to understand will be a wonderfully fitting tribute and legacy. If I may, I will make a gentle bid for Milton Keynes to be the host of that institute. I am sure there will be competition from Manchester, Cambridge and elsewhere, but we would make a very fitting home.
I also welcome the announcement of a new garden city at Ebbsfleet, and I invite the good people of Ebbsfleet and Kent to look at how we in Milton Keynes planned our city. I am sure they could draw many lessons from the design of Milton Keynes and the understanding that went into its creation, inspiring designs of new cities as far afield as China. We would be delighted to advise the good people of Kent.
I welcome the measure in the Budget to extend Help to Buy, a very welcome initiative that has helped many people in my constituency to get on to the housing ladder who would not otherwise have been able to do so. Reference has been made to the housing supply, and I can assure Members that in my constituency, it is growing. The number of letterboxes and doorsteps I have to campaign on is growing at a far faster rate than I am able to cope with. There has rightly been a long-established cross-party agreement in Milton Keynes that such expansion—20,000 new houses over the next couple of decades—should be balanced development consisting not just of owner-occupied houses but of affordable housing in all its forms: some council housing, some housing association properties, some shared ownership properties, some key worker housing.
However, it is not just the numbers and the tenure of housing that is important, but the type. Under previous housing targets, the only thing that was important was the number of houses or flats built, and too many of the wrong type were constructed. There was a glut of apartments, which are fine, but the balance was out of kilter; we did not build enough family-sized dwellings. I am delighted to see some of the planning reforms introduced by this Government, backed up by the neighbourhood planning process. The Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Grantham and Stamford (Nick Boles), who is in his place, has been to Milton Keynes a number of times to see the strength of the neighbourhood planning process locally. That will underpin a more balanced and sustainable approach to housing development.
Housing has to be underpinned by good infrastructure, and this Government’s investment in projects such as East West Rail will ensure that these new houses are. Most of all, housing expansion must have a solid business base. I am delighted to report that Milton Keynes is leading the country in its economic development. New business start-ups are up by 20% over the past few years. Survey after survey from independent bodies such as Experian, Centre for Cities and the Financial Times place us at or near the top of the national growth league.
Our economic growth is also balanced: it is not just in the service sector, but in high-tech research and development. Last week, I had the great privilege of visiting Red Bull Racing, the Formula 1 team, where the level of engineering research and development is enormous. Budget measures such as the investment allowance, R&D tax credits and the seed enterprise investment scheme all underpin that growth, as do the extra grants for apprenticeships. Without a strong skills base, the economic recovery will not be permanent.
The economic recovery must be soundly based, but so must our long-term financial future. That is why the measures in the Budget on savings and investment were, for me, the most welcome. For too long we have had a culture of instant gratification: if we want something, just borrow and get it. That is not sustainable, and encouraging savings and pensions will help us get back to a secure future in the long term.
Mr Pat McFadden (Wolverhampton South East) (Lab)
The Chancellor told the House last week that his policies had been vindicated. His basic case is that austerity is working so well that we need it for two Parliaments rather than one, as was planned. Of course, it is welcome that we have economic growth after so many lean years, but the inescapable fact is that the targets in the growth and spending plans set out at the beginning of this Parliament have been missed by huge margins. The cumulative effect is that cuts will last years longer than planned, and an extra £190 billion is being borrowed, compared with the figure in the plans set out after the election. If Labour had borrowed £190 billion more than was planned, I am not sure how Government Members would describe it, but I doubt whether they would be reaching for the term “success”. The return of growth cannot hide the fact that the outcome of the strategy pursued in the past four years is that one of the Government’s fiscal targets has been missed, and the other—the five-year rolling target—continues to be pushed into the future.
The increases in investment allowances are welcome, but let us be in no doubt: this is a U-turn from the Conservative manifesto and from the 2010 post-election Budget. At that time, when the Chancellor was talking about the “march of the makers”, he cut support for investment in manufacturing by £3 billion a year, and called it getting rid of complex allowances and reliefs. Rhetoric and policy were pulling in entirely different directions. I therefore welcome the U-turn, and on this point at least, rhetoric and policy are now pulling in the same direction, although needless barriers were placed in the way of investment by the policy previously pursued.
Frank Dobson (Holborn and St Pancras) (Lab)
Does my right hon. Friend agree that when the investment allowance was reduced, corporation tax was reduced, which did not benefit manufacturing but benefited the banks?
Mr McFadden
That is absolutely right: a cut in support for manufacturing was used for business as a whole.
Although it makes sense to support investment decisions through the tax system, we should not kid ourselves that investment allowances alone will be enough. The UK’s export performance has been routinely described as disappointing in report after report by the Office for Budget Responsibility. Speak to any manufacturer and they will most likely say that their key challenge is skills. If companies cannot get the right people with the right skills, they cannot innovate, they cannot meet orders in time and they cannot operate as efficiently as they want.
If the Government are really serious about supporting UK manufacturing, they should heed the call coming from their own Back Benches today to stop chasing UKIP and putting in place policies that stop the brightest students and workers from around the world coming to the UK. The Government’s arbitrary net immigration target is a barrier to our accessing the best talent in the world, and the exclusion of such talent is not in the interests of UK businesses or the economy; nor is the threat of withdrawal from our biggest export market, the EU. It is no good supporting investment decisions through the tax system with one hand, and threatening to pull away from our biggest market with the other. The stance the Government have adopted on this is a complete failure of leadership: it is party management first, and the interests of the country second. No amount of support through investment allowances would undo the damage that pulling out of our biggest market would do. I am glad that my right hon. Friend the Leader of the Opposition made the announcement he made a couple of weeks ago, exercising leadership on this issue and rejecting the option of following the Government down this path.
Perhaps enough has been said about beer and bingo in recent days. As someone whose father was a labourer and whose mother worked in a local authority children’s home, the only thing I would add is that a more serious working-class aspiration is an education system that opens up opportunity to all; social mobility that is not based on but challenges closed elites; and a path to rising living standards that has been sadly absent in recent years. I suggest to the Government that a poster based on those things might have been truer to the heart of working-class aspiration than the one that was produced.
I echo some of the sentiments expressed by my hon. Friend the Member for Sedgefield (Phil Wilson) on the pension changes. There has been an attempt to reduce this proposal to the question of whether people can be trusted with their own money. Of course people can be trusted in that way, and empowering them to make their own decisions is a good thing. It is something that we should support in politics. Choice in public services empowers people. It has worked well in the area of personal payments for social care, for example. As my hon. Friend said, however, what is in question is not trusting people but trusting the financial services sector that sells people these often complex financial products. I serve on the Treasury Select Committee, and we have seen many mis-selling scandals in recent years, ranging from endowment mortgages to payment protection insurance. We should have learned the lesson that there is often a serious information mismatch between those selling those financial products and those buying them, and that customers are not well served when things go wrong.
How do the Government propose to address that issue? Simply shouting that we should trust people with their own money is not enough, given that the PPI compensation alone has had to be set at £20 billion; and nor is it the philosophy that has been pursued on a cross-party basis for auto-enrolment into the pensions systems. If customers are to be well informed, they need good advice and alternative products in which they can trust. It is perfectly reasonable—indeed, a duty—for a responsible Opposition to ask questions about how that is to be achieved, and to point out the dangers if it is not.
The recent economic growth is welcome, but if it is being funded by consumer spending, people will rightly ask how can we ensure that it has solid foundations and is not simply the froth from another unsustainable housing boom, and how we can ensure that Britain remains engaged with the world and does not turn away from the trade and exports that we need.
Sir Edward Garnier (Harborough) (Con)
I agree with a certain amount of what the right hon. Member for Wolverhampton South East (Mr McFadden) has said. I am delighted to hear from him and other Opposition Members a gentle—or, in some cases, not so gentle—movement towards accepting that the saving public, the pensioners, should be allowed to choose their own vehicles to finance their retirement income.
I introduced a private Member’s Bill in 2003, entitled the Retirement Income Reform Bill. It was designed to lift the compulsion to purchase an annuity at the age of 75. The then Government opposed it, but it so happened that I got a majority of more than 100 on that Friday in the spring of 2003. These things happen on Fridays when Government Members are elsewhere. Eventually, however, the Government talked the Bill out. It was defeated on the basis that the public were unable to make their own decisions on the funding of their retirement. It was said that they would waste the money, or simply not do what the Government wanted them to do with their retirement funds. I happen to take the view that the Government are a poor parent, a poor business man and a poor manager of people’s old age. I was disappointed, but not surprised, that the then Government talked out my Bill. The number of private Members’ Bills that get talked out is too big to worry about.
I was interested to hear my right hon. Friend the Chancellor of the Exchequer announce in the Budget statement last week that he intended to liberalise the way in which we deal with pension income. I was even more interested when the shadow Secretary of State for Work and Pensions, the hon. Member for Leeds West (Rachel Reeves), announced that her party and her Front Bench were coming round to accepting that the public should be trusted with the management of their own financial affairs in retirement. She made that announcement rather half-heartedly, but she made it none the less. I think that that is practically and philosophically the right thing to do.
In the course of this afternoon, I have smelled the burning rubber of handbrake turns from Labour Back Benchers who are beginning to realise that they need to catch up with those on their Front Bench, who in turn are deciding that they need to catch up with those on our Front Bench and with public opinion that is in favour of greater liberalisation of the pension and retirement income system. The fact that criticism has been made of the banking system and of the financial services sector does not undermine the practical and philosophical benefits of liberalising the system.
Frank Dobson
I agree that those criticisms do not undermine the philosophical side of things, but it is the practicalities that people are bothered about. Most of the concern arises from the fact that the various institutions have been giving people a bad deal on annuities and that, unless they actually go out of business, they are likely to be offering the products that are the alternative to annuities. Does the hon. and learned Gentleman really believe that those self-same institutions will be offering people a good bargain, if they have not done so in the past?
Sir Edward Garnier
Yes, I do. I find that view deeply depressing, although not in the least surprising. The right hon. Gentleman is a good old-fashioned socialist and I respect him for that. I wish that more of his colleagues were as clear in their views as he is. I happen to take the view, however, that Mr and Mrs Retirement Person should be allowed to do what they like with their pension funds and that if the financial services sector misconducts itself, we should prosecute it or take regulatory action against it. We should not act to prevent the vast majority of individuals from doing what they think best for their financial future, either pre-retirement or post-retirement, simply because we fear that there might be one or two bad hats in the financial services sector. If those of us who are about to retire wish to invest our pension funds in property or in stocks and shares—
Sir Edward Garnier
I fear that I am limited to one free hit, and the right hon. Gentleman may not have one. Perhaps he should see his financial adviser instead.
If those of us who are about to retire wish to invest our pension funds in property or in stocks and shares—or in buying an annuity—let us do it. Let us be allowed to make informed, adult decisions. Yes of course we must build protections into the system to prevent people from being mistreated or misled, as the Chancellor made clear in his Budget statement, but we must allow them to make their decisions from a position of knowledge. For goodness’ sake, let us not imagine that Mr Whitehall Man, or even Mr Labour Cabinet Minister, is better able than anyone else to decide how I should lead my life. I really object to that form of nanny state—
Sir Edward Garnier
I used that expression in order to encourage my hon. Friend. I do not like the kind of jargon that we are forced to use in these short, time-limited debates.
If there is one thing in the Budget that we ought to appreciate, it is the liberalisation of the pension and old-age retirement income. My private Member’s Bill was defeated by the then Government. I think that Ruth Kelly was the Treasury Minister who organised its destruction. I hope that, were she here in the House now, she would welcome the statement made by my right hon. Friend the Chancellor last week. I hope, too, that Opposition Members will come to realise that they need to catch up with public opinion and to acknowledge the desire of all people, whether they vote Labour or Conservative—I dare say one or two might even vote Liberal Democrat—to support their own independence and to make their own decisions. I congratulate the Chancellor and I wish him all good speed with this measure.
Angela Smith (Penistone and Stocksbridge) (Lab)
I do not intend to reflect on the broader points about the Budget in relation to deficit reduction and borrowing figures, because my hon. Friends have articulately made those points this evening. My right hon. Friend the Member for Wolverhampton South East (Mr McFadden) did so particularly well in an excellent contribution. I wish to focus on the package of support that the Chancellor promised energy-intensive industries last week.
Before I discuss that, I wish to comment on how the Chancellor intends to balance the books in relation to his tax proposals. The Institute for Fiscal Studies has already raised that question, because the Budget is, of course, not quite as neutral as it looked at first glance. The measures on personal tax allowances and the doubling of relief for business investment, welcome as that is—I do support it—are apparently paid for by forecast savings within the budget from Whitehall itself, but they are not identified clearly in the Red Book. In addition, these things are apparently to be paid for by extra income from measures to reduce tax avoidance. Paul Johnson of the IFS has said:
“A set of definite and permanent tax cuts look to have been matched by more unspecified spending cuts, some changes in the timing of tax receipts, and our old friend tax avoidance measures.”
It is incumbent on the Government to explain to the House just how robust their plans are for reducing tax avoidance and, just as importantly, to give us clear details about exactly how these spending cuts will be made to balance the books and pay for those increases in the personal allowances. It is important that the House is made aware of exactly where the money is going to come from to pay for all this, and it is just showing respect for the House to set out those details.
I wish to discuss in detail the measures designed to help foundation industries, particularly those on the carbon floor price and the renewables obligation. The measures are welcome; my constituency is home to Tata Steel, ceramics companies, British Glass and the paper industry, in the form of SCA, so it is incredibly important to my local economy that these measures go through. However, we must put on the record the fact that the carbon floor price and its freezing from 2016 reflects changes to a policy that was introduced by the Chancellor and which became operational only a year ago. So we are, in effect, seeing a reduction in a tax that was introduced by this Government and which is already levying significant damage to manufacturing industry. It was a unilateral tax not felt anywhere else in Europe. Even when the freeze takes effect in 2016, UK manufacturing will still be paying more for carbon than is paid in any other country in the European Union. Even with the levy freeze in 2016, INEOS at Runcorn will face annual costs of £4 million as a result of the carbon floor price. With UK manufacturers facing wholesale prices for electricity 45% higher than those faced in France and 70% higher than those faced in Germany, the Government have to commit—I would like this from Ministers tonight—to ongoing support for foundation industries in this country, because of course the game is not over. The work that needs to be done to make manufacturing industry cost competitive is not finished, and we need to see much more from the Government. These industries are crucial for jobs and wealth creation in the future.
I wish to make a couple of other brief points. First, we need to hear whether the backdating of the compensation already announced for the carbon floor price will actually be decided. The decision date has already been delayed to 9 April and manufacturing deserves clarity about it. Secondly, we need to know the extent to which compensation for both the carbon floor price and the renewables obligation levies will apply: how many sectors of manufacturing industry will be included in that package? We know that the European Union state aid guidelines are restricting the number of industries that can benefit from that compensation. I want Ministers to say whether they will commit to going to the Commission to argue rigorously for an extension to the number of sectors that will be included in that compensation package. The points made about the EU were relevant; we need to see the Government batting for UK manufacturing within the EU and trying to ensure that we get as comprehensive a compensation package as possible, agreed within the Commission as soon as possible.
Stephen Mosley (City of Chester) (Con)
It is a pleasure to speak in this year’s Budget debate and a special pleasure to follow the hon. Member for Penistone and Stocksbridge (Angela Smith), who spoke with such expertise, knowledge and passion about the future of energy-intensive industries. I am delighted to hear that she welcomes the thrust of what the Chancellor is proposing in his Budget. I just wish that all Labour Members had that same attitude, because some forget what it was like four years ago, when this country was on its knees: our families were being squeezed by high unemployment and falling wages; our high streets had been devastated by the biggest dip in consumer spending in a generation; and our young people found they had the will and passion to succeed, but not the opportunities.
What a difference four years can make: unemployment is down across the country—in Chester it has fallen from 3.5% at the time of the last general election to just 2.2% now; our small businesses are reviving—locally, we have seen new business start-ups increase by 300%; and our young people are starting to get their hope back. In Chester, youth unemployment has fallen from 610 in 2009 to just 295 today—it has more than halved. We have seen a record number of apprenticeships, with 870 created in Chester in the past year alone—that is three times as many as were being created under the last Government. People know what they get with a Conservative-led Government: more jobs; great opportunities; and a better future for our country and its people. It is not just in this place that we are helping hard-working people.
Lilian Greenwood (Nottingham South) (Lab)
If the hon. Gentleman is so confident that things are so much better under this Government, can he explain why in my constituency the claimant count for over-25s has increased from 185 in May 2010 to 450 the last month and why for young people it has increased from 100 in May 2010 to 145, peaking at 205 last March?
Stephen Mosley
I would hope that the hon. Lady stands up, champions her constituency and goes to employers and investors saying, “Look this is what we have to offer. Come and invest here. Come and create jobs here. Come and employ people here. We want you.” My constituency is great—Chester is great—and I want to sell it the whole time; we have jobs fairs and business fairs, and we get the investment and the jobs— I am proud of that.
But it is not just in this place that Conservatives are doing a good job: up and down the country, in town halls and city halls, our councillors are freezing council tax, and in some cases cutting it, while protecting front-line services. My local Conservative-run Cheshire West and Chester council is doing all it can to help my constituents, and it is freezing council tax for the next two years. Over the five years of this Parliament, council tax payers in Chester will have seen just a 1.65% rise in their council tax bill, which of course compares massively favourably with what happened under the previous Government, when council tax bills more than doubled. This means that band D council tax payers in Chester are £131 a year better off. It is this Government who have given my local council the funds to freeze council tax. My council knows that it has to do more than always look to central Government for more money and that the way to improve local services is to make them more efficient. That is why it is now sharing its back-room services with other local authorities. A recent deal with Labour-run Wirral borough council will see council tax payers in West Cheshire and Wirral saving some £69 million. Management costs have been cut by 33%, saving tax payers £3.2 million. At the same time the council is improving local services, as can been seen in its fostering and adoption services. Working with two more Labour councils, Halton and Knowsley, it is sharing expertise, experience and costs to improve the services offered to children. Adoption figures are now the best in the north-west, with the time taken to place children half the national average.
By making local services more efficient, the council is making them more effective as well. It is using the savings to keep taxes low and to invest in our residents and in Chester's future. Work is currently progressing on a new £37.5 million theatre, replacing the old Gateway theatre that was shamefully closed by Labour in 2007. I was therefore delighted to hear the additional support that the Chancellor announced for regional theatre in his Budget on Wednesday. Cheshire West and Chester will be knocking on his door.
I was also delighted to hear about the new £20 million to support our cathedrals in this anniversary year of the start of the first world war. Chester cathedral stands at the heart of our beautiful city. It was recently voted by American readers of USA Today the fifth prettiest city in Europe. The cathedral also hosts memorials, and has a memorial garden, to the soldiers of the Cheshire Regiment, 8,420 of whom died serving our country between 1914 and 1918.
On 5 April, the new tourist attraction Cathedral at Height will open, allowing people to climb to the top of the cathedral tower to see the panoramic views across the city and the inside of the cathedral. The cathedral has massive plans to boost the Chester visitor offering, and it will be keen to explore the opportunities that this new money provides.
As we reflect on the Chancellor’s Budget, let us look at the reality for my constituents. A four-year transformation of our country’s economy has delivered more jobs, better services and a council tax freeze. Every step of the way, Labour has opposed our long-term economic plan that is making all that possible. What a clear choice for the people of Britain. They can have more borrowing, more taxes and more debt from the Labour party, or more pounds in their pockets with the Conservatives. Bring on the election!
Dr Alan Whitehead (Southampton, Test) (Lab)
My constituents will be very disappointed about a number of things that were not in the Budget—the lack of real support for new house-building, for young people and long-term jobs, and for small businesses in my constituency. Furthermore, there is no break in the cloud as far as the continued savage attacks on local government services are concerned.
However, I want to talk about something that clearly is in the Budget, and has been in Budgets for the past two or three years. As my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) mentioned, it is a policy that has nothing to do with what happened under the previous Labour Government; I am talking about the Chancellor’s own policy—or policy mess—on carbon price support.
When the Chancellor announced that he was freezing the carbon price support at £18 to about 2020, I was not too upset; in fact, I was interested to see this latest development in his astonishing zigzag policy. After all, in the 2011 Budget, when the Chancellor invented that particular policy, he said that the carbon price support was designed to
“encourage further investment in low-carbon generation by providing greater support and certainty to the carbon price.”
The figure was revised wildly upwards in Budget 2013, and then radically downwards in Budget 2014. The Chancellor’s steering of the carbon price support, which started last April and supposedly goes on to 2020, has been rather more “Keystone Cops” than keystone policy.
Essentially, support for energy intensive industries, which my hon. Friend the Member for Penistone and Stocksbridge mentioned, is coming out of the money raised from the policy being steered wildly upwards in Budget 2011 and onwards. I have always thought that the right thing to do is to support the EU emissions trading system and get it into good order for the long term. However, when the level was revised wildly upwards in Budget 2013, as a result of the then perceived crash and the possible long-term inertness of the EU ETS, I thought that that level of unilateral levy was likely to be unsustainable.
What this policy mess demonstrates is that we cannot do things unilaterally and in isolation without there being consequences. After all, in the Energy Bill, the carbon price floor was prayed in aid as giving out a long-term signal that would render changes in the emissions performance standard superfluous. Even at the end of the Energy Bill, when the Opposition moved an amendment to include existing coal-fired power stations in the EPS, the same argument was used—the floor price would have long-term continuity, which would mean that we could rely on it as an instrument to ensure that there would be little or no unabated coal in the system in the 2020s. We did not need any other instruments.
Now, with the freeze on carbon price support, it is likely that coal will trade allowances far further forward into 2020, and measures in the Budget to support carbon capture and storage are, ironically, less likely to be taken up as a result of that calculation. It is also likely that the reliance that gas has put on the consequences of carbon price support to make coal prices over the period less competitive will mean that advance gas investment will be dampened, which has consequences for the extent to which additional funding for the capacity payment market may also be necessary. It is an additional amount of money coming on the back of trying to make sure that there is less money available over the period of this particular policy.
Furthermore, it is not really true that, as the Red Book says, the buying power of the levy control framework, which sets out the amount of support available for low carbon and renewable investment until 2020, will be unaffected by other Budget decisions. It directly means that renewable obligation buying power, part of the levy control framework system, will be changed because the obligation was based originally on 2011 assumptions about the level of carbon price over the period. The relationship between the strike price and the reference price for contracts for difference will change, which means that we will be paying more out of a fixed fund to make up the difference between strike and reference price. The buying power of the levy control framework will certainly be reduced and there will be a smaller quantum support to go into new entrant projects for renewable energy over the period.
The Government should state to the House what they consider to be the consequences of their decision on carbon price support and set out measures that will need to go alongside it to maintain the position that they themselves had previously said was dependent on the trajectory of the carbon price. Above all, what all this shows is that non-joined-up government has consequences.
Gareth Johnson (Dartford) (Con)
I want to discuss the proposed garden city at Ebbsfleet in my constituency. Provided that certain assurances and safeguards are put in place, it will be welcomed by the local people.
Ebbsfleet is as much a concept as a place where we can build houses and development can take place. The proposal is not new; there have been other attempts to build houses in the Ebbsfleet valley. The first proposal was made back in 1996, and seven years ago Dartford council granted planning permission for thousands of homes to be built. What is new this time is the creation of the development corporation and, crucially, up to £200 million of investment in infrastructure in the area to complement the house building. The scheme is bold and forward thinking and, if implemented correctly, will enhance the local area and help ease some of the pressure on housing in the south-east.
The former Housing Minister, my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps), endeavoured to kick-start the housing project by getting all parties around the table, but to no avail. For some reason, landowners have always been reluctant to get on with building houses in the area and consequently the Ebbsfleet valley is now a muddy quarry. The Chancellor suggested in his Budget that fewer than 300 houses had been built in the area, but I would put the figure far lower. The experience has been frustrating, so I am pleased that we are witnessing the beginning of some action on the site.
The development is on a brownfield area some 20 miles from this Chamber and represents a great opportunity to bring jobs and investment to my constituency. It is next to the High Speed 1 line station at Ebbsfleet, 17 minutes from central London and less than two hours from both Paris and Brussels. It is also adjacent to some of the most beautiful countryside in Kent and to the villages of Betsham and Southfleet, which must be protected under the scheme. I am pleased that reassurance was given to my hon. Friend the Member for Gravesham (Mr Holloway) and me that the green belt area surrounding Ebbsfleet garden city will be protected from any building under the proposed development.
It is also crucial that local people form part of the decision-making process. There must be a role for Dartford council, which has proactively tried to make the development happen in recent years. There must be opportunities for local people to input their thoughts and suggestions, as the concept simply will not work if the development is imposed on local residents. The Red Book makes it clear that local residents will be involved in the consultation process for any decisions made by the development corporation, which is a welcome announcement.
The importance of infrastructure’s complementing house building has not been lost on local residents or the Government. That is why the £200 million figure cited by the Chancellor is so important. Families will not move to a muddy quarry without transport infrastructure, school places or medical provision. The development needs to work with the residents and the local council to be successful, but it must also work with the private sector. The site is adjacent to the Bluewater retail complex, which views the announcement as a positive step, and it is also next to a proposed Paramount theme park, the developers of which have also welcomed the idea.
The announcement is pro-enterprise, bold and ambitious. It will create thousands of jobs in the area, help alleviate some of the housing pressures in the south-east and kick-start a faltering project. The possibilities are endless. I have always recognised the huge potential in the area, which, in my biased opinion, adds to what makes it the area with the most exciting prospects in the country.
Roberta Blackman-Woods (City of Durham) (Lab)
I hope that the hon. Member for Dartford (Gareth Johnson) gets a genuine garden city. The 15,000 houses are welcome, although the number has reduced since the original plans, but they need to be underpinned by garden city principles if Ebbsfleet is going to be a garden city.
There are some things to be welcomed in the Budget, such as the increase in the personal tax allowance, the rise in the tax-free ISA allowance and the Government’s decision to expand the tax on residential properties worth more than £2 million to those worth more than £500,000. Overall, however, the Budget delivers very little for people in my constituency.
The key question for people across Durham and the north-east is whether they are better off than they were when the coalition came to power back in 2010. For the overwhelming majority of my constituents, the answer would be a resounding no. Julia Unwin, chief executive of the Joseph Rowntree Foundation, said:
“This is a Budget for the people who already have, not for the people who need to benefit most from the return to growth. It is a lost opportunity for the 13 million people…who need active intervention to tackle the structural barriers that keep them in poverty.
People on low incomes are unlikely to see the welcome benefits of growth unless there is targeted help with household and housing costs, with child care and with the nature of jobs and training. The expense and inefficiency of high levels of poverty continue to put a drag on growth.”
I agree with her and would emphasise that neither the Chancellor nor any Government Member today has shown any recognition of the need to rebalance growth in our economy. Significantly, there is a real need to reduce regional inequalities.
Many people in my constituency simply earn too little to benefit from the Chancellor’s tax cuts and can only dream of earning the £1,250 a month that can now be saved tax-free in ISAs, let alone being able to save that amount.
People in the north-east and my constituency hoped that the Chancellor would offer help to do something about the fact that they experience the highest unemployment levels in England. Last month, unemployment in my constituency fell by just 17. Although I welcome that fall, the Government must do more to get people back into work. I have found the Government’s rather triumphalist approach to unemployment quite disturbing. Worryingly, in my constituency youth unemployment has risen in the past two months and more than 900,000 young people are out of work across the country. That is not something to celebrate. It is clear that tens of thousands of young people are not experiencing any recovery at all.
The Government should have used last week’s Budget to introduce Labour’s compulsory jobs guarantee to get young people and the long-term unemployed off benefits and back to work. The compulsory jobs guarantee would be funded by a repeat of Labour’s successful tax on bank bonuses and by restricting pensions tax relief for people earning more than £150,000.
We know that working people are already £1,600 worse off under the coalition Government than they were before the general election, but the situation is exacerbated in the north-east by wages that are about £50 a week less than the UK average and almost £200 a week less than wages in London. Beth Farhat, regional secretary of the northern TUC, has criticised the Budget for failing to tackle the living standards crisis that is the fundamental concern of workers across our region and for the Chancellor’s failure to show any real support for the living wage or fair pay. According to the TUC, north-east workers are much worse off in real terms, and that is equivalent to about 23 average weekly shops, a year’s worth of energy bills for the average household or 88 tanks of fuel.
The regional secretary of the northern TUC has also questioned the quality of jobs being created in the region. Many are precarious and based on zero-hours contracts. She has also drawn attention to the fact that eight out of 10 private sector jobs that have been created have been in the south of England. The few jobs that are being created in the north-east are predominantly in low-paid sectors and leave many families on low incomes struggling to cope with the rising cost of living and increasingly reliant on payday loan companies or food banks. That is unacceptable and it is particularly worrying that the Government have brought forward no strategies to invest in the north-east of England.
The regional growth fund is not strategic. It is not directed towards areas of greatest need or the parts of the north-east’s economy that are most likely to grow. We need from the Government an approach that will direct funds to the areas of greatest need. To respond to the hon. Member for City of Chester (Stephen Mosley), it is not the case that we are not championing our region, because many people in my area are highly skilled and would welcome the opportunity to work, but what they need is support from the Government, for them and for industrial growth in the area.
Bill Wiggin (North Herefordshire) (Con)
I am sorry to be following the hon. Member for City of Durham (Roberta Blackman-Woods) because there are good things in the Budget. She should encourage her constituents to enjoy—responsibly, of course—cider and beer.
Wednesday’s Budget was the latest in a series of announcements from which my constituents will directly benefit. I strongly welcome the Chancellor’s measures to assist the cider industry. I was delighted by the removal of the escalator and the freezing of duty on almost all ciders, which will provide much needed relief for an industry that represents a real success story for British business. Cider production is powered by British raw materials and British workers making a product for British consumers. The average pint will now be 3p lower than under Labour’s previous proposals.
I am glad that the Chancellor recognises that this has been a testing time for the 7,500 people employed by the cider industry. The impact of heavy flooding on this year’s crop of cider apples is yet to be seen, but I know that many fear the worst because prosperous growing areas were some of the worst hit by the floods. I hope that we will see continued support for this industry, which is one of the biggest employers in my constituency and an essential contributor to the pub sector.
North Herefordshire boasts 132 pubs and 11 breweries. The pub sector is a great supporter of local communities. It invests approximately £1.1 million locally and provides various employment opportunities, including 254 direct jobs for 16 to 24-year-olds.
The fact that pubs and many other businesses in North Herefordshire are taking on new employees is a clear indication that our long-term economic plan is working. Beer is 8p a pint cheaper than it would have been under the previous Labour Government’s plans. In February, the number of unemployed claimants in North Herefordshire was 862, which is 282 fewer than in February 2013. That means that 282 people are now working thanks to the Government’s measures.
A further testament to progress is the success that the apprenticeship scheme is achieving in rural businesses. The benefit brought to local businesses by new apprentices in North Herefordshire has been a boost of more than £1.7 million in the last year. The benefits from the scheme are twofold: each business that hires an apprentice experiences an average benefit of £2,207; and youth unemployment in North Herefordshire is down, with just 250 18 to 24-year-old jobseeker’s allowance claimants.
I also welcomed the news from the Chancellor of the doubling of the annual investment allowance, which will be warmly welcomed by the farming community. Farming is a highly intensive industry that requires expensive specialist gear. I hope that the announcement will provide an incentive for investment in equipment so that British farms can remain as efficient as our competitors.
Despite those improvements, I appreciate the frustration of farmers in my constituency who still feel that they face an uphill struggle for similar funding to that enjoyed by urban businesses. Their unincorporated businesses are not able to benefit from the Chancellor’s corporation tax reduction. I have previously voiced my concerns in the House about the raw deal that rural communities receive on Government funding. Sparsity of population makes it far more expensive to provide services in areas such as North Herefordshire, yet urban areas still receive 50% more funding per head. The Government need to recognise there that is still a disparity in the calculation of local government finance but, to give credit where it is due, I am delighted that the disparity in school funding has been addressed. The change to allocating funds on the basis of individual schools’ needs and character is a common-sense measure that is greatly to be welcomed. The previous Labour Government based funding only on historical levels of spending, and the fact that that mechanism was allowed to continue for so long was detrimental to thousands of pupils in my constituency. However, our schools will now receive £2.6 million more per school year, so I thank my colleagues who have campaigned hard on this, especially my hon. Friend the Member for Worcester (Mr Walker). Unfortunately, in several other ways, rural communities still require far more Government funding to provide essential services.
Road maintenance is a key concern for all rural constituencies and I know that such areas will be delighted with the extra £200 million that has been allocated to that in the Budget. Potholes are a menace and a danger, especially to those who live in isolated areas. The extent of the damage to roads in North Herefordshire is reflected by the fact that it received the highest allocation of repair funds in the west midlands. The damage has been aggravated this winter, but the overall standard of rural roads is very poor. I hope that the Government will maintain the new funding to address widespread pothole problems. I also look forward to the publication in the near future of the Government’s guidance on council applications for more highways funding.
I have set out just a snapshot of how the Government have made positive progress for my constituents, including the Exchequer Secretary’s mother-in-law. The Budget continues the already good progress that has been made to address the imbalance between rural and urban communities. I urge the Government to continue to bear in mind the specific needs of our hard-working rural communities when they allocate future funds. We cannot afford to allow our vital countryside communities to be ignored and underfunded purely because of their rural location.
Frank Dobson (Holborn and St Pancras) (Lab)
I wish to speak about a huge sum that was not mentioned in the Budget statement, but that will loom large over Chancellors of the Exchequer in years to come: the £50 billion that is committed to the building of High Speed 2. To put that amount in perspective, it is about what we spend on our entire school system each year.
Both the Higgins and Deighton reports on HS2, which were recently produced for the Government, demonstrate that, whatever was wrong with the Government’s original plans, they were amateurish and ill thought out. Most importantly of all, they show that massive additional investment will be needed in the areas that HS2 is supposed to serve if its promised benefits are to come about. The Government have agreed to a huge saving by abandoning the preposterous proposal of a High Speed 2-High Speed 1 link. That link, which would have run through my constituency, was opposed by local people and businesses, as well as Transport for London, the rail freight industry and the Institution of Civil Engineers, but it is still included in the hybrid Bill and was supported by the House when it voted through the paving Bill. Fortunately, now that the Higgins report has said, “Dump it,” the Secretary of State has, to his credit, agreed to dump the link, but I wonder whether any of the people and businesses that spent a lot of time, effort and money opposing the idea will get any compensation.
The other proposition that affects my area involves the redevelopment of Euston station and its use as the terminus for HS2. Long before HS2 was dreamed up, there was an outline proposal to redevelop Euston station, which is awful, on its existing footprint. That proposal would have involved building more than 1,000 new homes. HS2 originally said, “We could incorporate that in our scheme and it would be 1,500 new homes,” but then the masterminds behind the proposition concluded that as the cost of the scheme had increased from £1.2 billion to £2 billion, it was unaffordable and they would drop all the planning gain and extra housing and industrial premises, and replace that with a lean-to shed approach. However, while speaking in Hong Kong, the Chancellor of the Exchequer suggested that there should be a reversion to something like the original scheme, which is what the Government now propose. The proposal is still awful, but it is better than what is included in the hybrid Bill.
Other investment will be needed beyond the budget for HS2 if its benefits are to flow. According to HS2 itself, Euston will not be able to cope with the extra passengers and it will therefore be necessary to build—God help us—Crossrail 2, at a cost of anything between £16 billion and £20 billion, but that is not included in anyone’s budget at the moment. So much for the idea that HS2 will transfer transport spending from London to the north, because although that has already been identified as necessary expenditure, similar expenditure will be necessary in Birmingham, Manchester, Sheffield, Leeds and in the east midlands if the benefits from HS2 are to flow. There is no money in the Chancellor’s Budget for that investment, nor is there money in anybody else’s budget.
My constituents’ great fear now is that, after the announcement that there will be a huge redevelopment at Euston, all sorts of property speculating vultures will descend and want to build a huge office city there and not provide the housing that people desperately need. When we consider that the biggest problem in London for Londoners is the fact that average Londoners are being priced out of the city—and average Camden dwellers are being priced out of Camden—we want to make sure that if the redevelopment of Euston goes ahead, it includes housing that ordinary people can afford and does not include a lot of speculative blocks of penthouses to be bought, but not occupied, by Russian oligarchs. They are the people who are driving up the cost of housing in this country, and as a final offer to the Government, I suggest that if they want a sanction, they should stop the oligarchs buying residential property and take back what the oligarchs have bought up to now if they are not occupying it.
Caroline Nokes (Romsey and Southampton North) (Con)
It is a pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson).
Constituents in Romsey and Southampton North have welcomed what they regard as an excellent Budget, aimed at improving the lot of doers, makers, savers and hard-working lower earners. It was a Budget that raised the income tax threshold and further shifted the burden for Government spending away from those who can afford it least and on to those who can afford it most.
The Budget also provided help to manufacturers struggling with the costs of energy, including companies in my constituency such as Michelmersh bricks, which welcomed the £7 billion support package that my right hon. Friend the Chancellor announced. Those of my constituents who enjoy a pint also noted the 1p reduction in beer duty. I join members of the all-party save the pub group and hope that cut will be passed on to the consumer, not kept by the pub companies. Those in Romsey and Southampton North who drive a car are relieved that the hated fuel duty escalator was abolished last year and that we have seen a further freeze in fuel duty, meaning a saving of 20%, given the rises that would have taken place under the Labour party.
I was delighted to hear my right hon. Friend’s announcement on changes to annuities. His proposal struck me as a policy that is as radical as the right-to-buy scheme was in the 1980s. That scheme saw the largest ever transfer of wealth from the state to the individual and enabled people to take control of their future and wealth through property ownership. This policy does exactly the same with taxed income that responsible people have chosen to save, yet are restricted from accessing because of the hand of the state. I have always believed that if someone has been responsible enough to save for their own retirement, they should have the absolute right to access their money as they wish and to reinvest or spend it as they see fit.
On the subject of pensioners, Hampshire sees 1,000 more people every year reach the age of 80, and the health and social care requirements of an ageing population are a challenge faced both by central and local Government. Local authorities such as Hampshire county council face significant challenges. The Care Bill, which I welcome, places an additional burden on local government, and estimates indicate that just assessing the eligibility of Hampshire’s residents for the new provisions of the Care Bill will run into many millions of pounds. That is not money delivered in front-line services to the elderly, but merely to assess whether they are eligible. Even for a prudent local council, that bill is large and unexpected. Counties such as Hampshire currently have a significant number of self-funders—in the region of 60%—and under the terms of the Care Bill, all of those might apply to the council to see whether they are eligible.
I am relieved that the Budget has not led to further reductions in central Government funding for local authorities, but there is no doubt that the next two years will be tough. Particularly in Romsey and Southampton North, there has been a significant problem with flooding over the past few months—perhaps not on the scale of Somerset or the Thames valley, but it is none the less devastating for the affected residents and businesses.
We know assistance is available, but what Romsey residents want to know, and quickly, is what measures will be put in place to prevent a recurrence in future. Flood defence measures do not come cheap, nor are they easily engineered and installed. We have to be as alert to inland flooding as to coastal flooding and remember that people’s lives and homes do not fall easily into mathematical equations to assess the wider benefit. I suspect that the burden of the winter’s floods will fall on local government, such as the careful, prudent Conservative authorities of Test Valley and Hampshire, and I seek reassurance from the Treasury that they will not be left to shoulder that burden alone.
That brings me to potholes. I welcome the additional funding for pothole repair, but the estimate for Hampshire’s roads is that this winter’s weather will have brought about a bill of £35 million extra, even before the water level has gone down completely and prior to any assessment of damage to bridges. I welcome the £11.5 million that the Chancellor has already committed to Hampshire and I am grateful to him for making £200 million more available in the pothole challenge fund, which local authorities are invited to bid for. I sincerely hope that he will look favourably on an application from Hampshire.
John Woodcock (Barrow and Furness) (Lab/Co-op)
What a pleasure to follow such a well delivered speech. I only wish that the hon. Member for Romsey and Southampton North (Caroline Nokes) had more time so that she could go into more detail about the reaction of pub dwellers in Romsey or Southampton North when she went in and said, “We have an amazing new offer: buy 300 pints and get one free!” I am sure they were absolutely overwhelmed.
We were told that this Budget would be for savers, and yet the Office for Budget Responsibility says that it will be followed by a sharp drop in the savings ratio. It was supposed to be a Budget for exporters, but the OBR predicts that export volume growth will be less than half what is needed by the Chancellor to meet his targets. It was also supposed to a Budget that learned lessons from the past, but estimates of household debt have now been revised up to near the levels they were at before the global crash. This is not a Budget for the long term. They are not a Government who are thinking of the country’s long-term future. They are an Administration doing, I am afraid, what Tory Administrations always do: trying to manufacture a pre-election splurge, whatever the long-term consequences, and rarely, if ever, intervening in a market, regardless of whether that market happens to be working in the interests of the country and its citizens.
This Government came to power and delayed infrastructure decisions. They told skilled manufacturing workers in sectors such as defence that Ministers were only really interested in buying off the shelf from abroad. They may have changed their tune now, but the world is moving so fast and we will rue these years of stagnation. I am afraid that the ambition remains limited and the delivery too often feeble. Where there is investment, there is little sign that the Government are willing to act to lever in the maximum possible benefit to the community.
In my constituency and in those neighbouring it in south and west Cumbria, we are about to see a scale of industrial investment in the area that will exceed that of the 2012 Olympic games. That includes new civil nuclear capacity; GlaxoSmithKline’s first factory in the UK for 40 years; and the work to enable Barrow shipyard to build the next generation of nuclear submarines. All those are extremely welcome and are a result of the consensus that we forged in government, which—thank goodness—at least one of the Government parties is now on board with taking forward.
When we saw high levels of investment in the area during the 1980s, that coincided with a time of growing divisions in our communities—wealth for a few, destitution for many others. The investment came via a Government who celebrated the concept of trickle-down economics. Yes, Barrow grew in the 1980s, but so did hardship and hopelessness. When recession and mass redundancies came to the shipyard on their watch the last time, it was truly devastating. We still bear the scars of those days.
Look at the parallel now, when rising employment sits alongside an explosion of food banks and desperation. With Olympic-scale investment coming our way, the Government should be doing so much more in Cumbria, helping us to ensure that those massive projects can be delivered simultaneously, which is a big challenge in itself, and, equally importantly, that they will lead to sustained jobs, skills and prosperity for as many people as possible. Unfortunately, there is little sign of that so far, and the expertise that would have been best placed to do much of the work—the Northwest regional development agency—is long gone.
Therefore, as the Government parties stand back, we will step in. My hon. Friend the Member for Copeland (Mr Reed) and I will work with Cumbria’s local enterprise partnership to bring together the employers, investors, schools, colleges and councils to work our how best to make this succeed for all of us for the long term, and to do better than the last time they were in charge.
The Chancellor needed to up his game on long-term infrastructure planning in this Budget, but there was precious little sign of that. He needed to show that he understood how Governments of all colours had damaged the country with stop-start infrastructure spending. Rather than being determined to micro-manage every mile of road in the Budget statement, a truly radical Chancellor would take have taken infrastructure planning off the political merry-go-round. We need a binding, independent body that can lock in a long-term infrastructure plan, making it much harder for today’s—I am sorry to have to break it to them—transient Ministers to unpick.
Instead, we have had the inevitable re-announcement of the ever-hardy perennial, the prospective garden city in Ebbsfleet, but nothing that will fundamentally solve our housing crisis. This Budget was as great a missed opportunity as much of the past four years has been. The Prime Minister can tweet the rhetoric, but he and his Chancellor are just not up to the job. It will be up to us to put that right.
Mark Pawsey (Rugby) (Con)
It is a pleasure to follow the hon. Member for Barrow and Furness (John Woodcock), although he seemed unable to find a single positive thing to say about the Budget, notwithstanding the remarks of his colleagues about the support for energy-intensive industries. That is in complete contrast to the country as a whole because, as the opinion polls published over the weekend indicate, the general public seem quite supportive of what we are doing.
Rugby is the fastest growing area in the west midlands, with a very positive attitude to growth and development. My constituents will benefit substantially from our long-term economic plan. They are keen to look at the measures in the Budget that will contribute to growth, which are very welcome. The British Chambers of Commerce stated:
“Budget 2014 passes the business test.”
The Federation of Small Businesses stated that its measures
“will maintain increasing confidence in the construction sector”.
The Home Builders Federation called it a
“Budget that builds for the future”.
The Federation of Master Builders stated:
“Government intervention to finance small house builders welcomed”.
The Building Societies Association referred to
“welcome proposals to boost house building, especially Help to Buy.”
That sounds to me like a pretty ringing endorsement for the measures the Chancellor announced last week.
Many of my constituents have already benefited from the Help to Buy equity loan scheme and will be pleased to see it being extended to 2020. It was announced today that already 17,000 people have been able to realise the dream of owning their own home. In my constituency 75 loans have already been completed and there are 77 “scheduled out” sales, meaning potential completed loans following the reservation of a property in the scheme. That is the 18th highest level in the country. It is enabling people to start on the housing ladder with a 5% deposit. Many of those buyers would otherwise still be renting.
In Rugby we are proudly building more homes, with 320 completions last year. Work is currently taking place on development sites across my constituency, the largest being Eden park, where 1,400 new homes are coming forward, with outline consent granted in the last couple of months for a sustainable urban extension on the old BT mast site. The continuation of Help to Buy will speed up the site’s development. It will not be built overnight—it is anticipated that it will take over 15 years—but it will reduce the build-out time, as well as providing many of the houses our country needs.
However, the majority of new build is now done by major-volume house builders, as smaller builders were hit hardest by the downturn, so I am rather disappointed that the Chancellor did not accept recommendations to reduce the VAT rate on improvements and extensions, which attract VAT at the standard rate while new build attracts zero VAT. That work is often carried out by smaller, family-owned building companies, which have been hardest hit over the past few years. I was therefore very pleased to see the £500 million builders finance fund, which will enable small builders to deliver 15,000 housing units. The market share of 100-unit builders has halved since 1995, from 30% to 14% of the market. This is a very welcome incentive for that sector.
I was delighted by the proposal for Ebbsfleet, and there is such support within the community there. We heard my hon. Friend the Member for Dartford (Gareth Johnson), who represents Ebbsfleet, speak about the virtues of the development site. The critical difference between that proposal and the previous Government’s eco-towns is that they failed through a lack of local support. In Ebbsfleet the development is being welcomed by local people. It is entirely right for the Government to bring forward incentives for local authorities to consider how garden city proposals, such as those in Letchworth and Welwyn garden city, can be brought forward. At a time when the national planning policy framework sets out the principle that planning is no longer something that people see as being done to them, but something in which they have a real say, it is vital that any proposals for substantial new development have real public support and consensus.
I welcome the pensions reform, which means that pensioners will finally be treated as adults, but there are those who are concerned that use of the pension pot might encourage people to invest in buy-to-let properties or to support the next generation to buy their homes, which will add upward pressure on house prices. Opposition Members talk about a bubble, but we cannot have a bubble when, as today’s BBC report reminds us, 8% of households in the UK are in negative equity, and the figure rises to 16% in the north of England. We would need a very substantial rise in house prices across the country for there to be any form of problem.
I welcome the support that the Government are bringing forward for energy-intensive industries, which of course will support manufacturing, including cement manufacturing, which is so important in my constituency. We have seen a Budget that is good for business, good for development and good for individuals across our country.
Mr Iain Wright (Hartlepool) (Lab)
It is a pleasure to follow the hon. Member for Rugby (Mark Pawsey). He mentioned negative equity. I fear that when interest rates rise, as they may well do over the next few months, there will be an awful lot more people across the country— including many of his constituents and mine—in negative equity. That is a massive concern for this country’s long-term sustainability.
I want to focus my remarks on productivity. Productivity remains the vital element of Britain’s competitiveness. If British makers and doers are to compete in world markets, our productivity has to match or better that of our rivals, yet we are falling behind our competitors. Last month the Office for National Statistics released data showing that output per hour in the UK was 21% below the average of the other G7 countries—the widest productivity gap our country has seen since 1992. Output per worker in the UK fell year on year, while it rose for the rest of the major industrialised nations. That is probably one reason why our share of exports is falling and expected to fall further, as per the Red Book, which means that we will not meet the target that the Chancellor set of doubling our exports by 2020.
Without productivity growth, Britain cannot increase its competitiveness and there will be no long-term improvement in living standards. Wage inequality will increase and in-work poverty will worsen, which will mean that my constituents in Hartlepool, who saw a year-on-year actual—not relative—fall of 6.1% in average full-time wages in 2013 will see further real falls in their wages. That is on top of the fact that Hartlepool has lost £28.9 million since 2010 as a result of public sector cuts—a drop of 24.5% since 2010. That means that spending power in Hartlepool has diminished by £680 a household since the general election. The cost of living crisis in my community will get worse if the Government do not address the issue of productivity.
The Chancellor did not mention the word “productivity” once in the financial statement. Without business investment in innovation and technology and better skills for workers, our living standards will fall over the long term. In his first Budget, the Chancellor forecast that business investment would rise by 8.1% in 2011, 10% in 2012, 10.9% in 2013, 9.5% in 2014 and 8.2% in 2015. The actual out-turn figures to date have been 3.1% in 2011 and, as this year’s Red Book shows, 3.9% in 2012. The forecast is an actual fall in business investment of 1.2% in 2013. I hope that I am wrong and that pent-up demand for investment will be unleashed in the next few months, but given the record of the past four years, the figures in this year’s Red Book suggesting business investment growth of 8% in 2014 and 9.2% in 2015 seem widely exaggerated and optimistic.
This Budget also marked the time when the Government gave up any ambition for this country’s becoming a leading player in the future of global low-carbon technology. The CBI report “The Colour of Growth” found that investment in the low-carbon economy could have accounted for more than a third of all growth in 2010-11 and had the potential to halve the UK trade deficit by 2014-15. It seems a long time since the Chancellor stated in his first Red Book in June 2010:
“The Government is committed to playing its part in moving to a low-carbon economy. The transition will change the shape of industry, growth and jobs. As part of this, the UK needs £200 billion of investment to 2020 to provide secure low-carbon energy.”
This Budget provided nothing to help realise that ambition, and in certain ways, such as the ending of the renewable energy enterprise investment scheme, it actively worked to deter investment in the low-carbon economy. That target of £200 billion of investment in a decade, which would have helped manufacturers such as those in wind turbine supply chains in my region, the north-east, and my constituency, will now be difficult to realise.
The fact that the Government will exempt from the carbon floor price fuel used in combined heat and power plants for electricity generated to supply manufacturing firms is welcome, and I have asked parliamentary questions about that. Mitigating actions for energy-intensive industries might also help manufacturing, but not immediately, because the announcement in the Budget does not kick in until 2016-17. As my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) said, it only reverses something that happened on the Chancellor’s watch last year.
Business rate reform, which would help manufacturing, was not mentioned in the Budget. Expanding capital allowances might help incentivise business investment, but again, as my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) mentioned, that measure only reverses the cut that the Chancellor made to such allowances in his first Budget. The tax relief to boost North sea oil and gas investment will only remedy the damage that he did to the sector in his Budget of 2011.
Those matters all show a wider problem in the Government’s economic and industrial policy. Businesses want long-term policy stability and a stable framework that gives them the confidence to plan and invest for the long term. Those oscillations in policy, with a measure in one year’s Budget reversed in a subsequent Budget a year or two later, do not give companies the stability and certainty that they need. It is little wonder that business investment has flatlined and our productivity has fallen behind that of our rivals. That is a real weakness of the Budget that the Chancellor shows little appetite to resolve for the long-term good of the British economy and the good of my constituents.
Annette Brooke (Mid Dorset and North Poole) (LD)
I shall aim to achieve a balance between despair and euphoria in my contribution.
There is a great deal to commend in this Budget, against a background of rising employment, falling inflation and rising economic growth, which is now expected to be 2.7% in 2014 according to the Office for Budget Responsibility. The OECD forecasts that the UK will grow faster than any other G7 economy in the first half of this year, and further forecasts show that real wages are set to rise over the years ahead. Of course, that has been accomplished with some tough decision making, which has had an impact on many people, and there is still much to do to ensure that we have both a sustained stronger economy and a fairer society.
I am particularly pleased about the increase in the income tax threshold, a key Liberal Democrat manifesto pledge. A £700 tax cut for more than 20 million people has been delivered by April 2014, with the 2.7 million lowest-paid people taken out of tax altogether. Now the threshold is set to rise to £10,500, benefiting working families, along with the increased support for child care.
I welcome greatly the measures to help pensioners—I am not sure whether I should declare an interest. I am proud to be part of a Government who will be remembered for having done so much to reform pensions—single-tier pensions, the triple lock, auto-enrolment and now the change in the Budget. The help for savers is to be welcomed, as are more measures to clamp down on tax avoidance.
I also welcome the Government’s adding to the measures that have previously been announced to support business, such as increasing tax incentives to invest in new equipment and carry out research and development, and increasing the level of financial support for exporters. As other Members have mentioned, ensuring that business has skilled labour is all-important. Some 1.5 million apprenticeships have already been created, and now there is new money to create even more.
Local government clearly has an important role to play in supporting businesses to grow and create jobs, which of course are also related to tackling our housing crisis. Many council leaders of all political colours fear that by 2015, the successive cuts to local government expenditure might result in a cliff edge, with serious further cuts to the local services that they can provide. There are also likely to be more increases in regressive charges, despite the innovative and transformative work that is taking place and the extra money that has been pledged for the integration of health and social care services.
The proposed changes to councillors’ pensions are deeply unpopular. I simply do not understand why, for example, council leaders of working age should be seen as volunteers, when in today’s world they are working full time and using many professional skills. I understand that local social fund money has been transferred from the Department for Work and Pensions to the Department for Communities and Local Government, and that it may be removed from council budgets in 2015. That would cause me great concern, as it is a vital safety net.
We are faced with a deep housing crisis, and there are heartbreaking situations, typified in my constituency mailbag, involving families in unsuitable accommodation. Although I welcome the measures to address the crisis announced in the Budget and previously, and although I acknowledge the Government’s record on building houses, particularly social houses, I have two main questions. First, will the measures be sufficient? Secondly, although I appreciate that we must have both demand and supply measures to increase the number of homes delivered each year, what monitoring will there be of the Help to Buy scheme, given the fears that it might result in undue upward pressure on house prices, particularly in London and the south-east?
I welcome the moves to allow garden cities—or perhaps towns, if we are talking about 15,000 homes—to be developed with a local trigger, providing much-needed housing and offering an alternative to filling in every space in existing urban areas. I welcome any moves to bring forward publicly owned land for development, and I wonder what progress there has been on community land auctions. We have heard further calls for “brownfield first” today, and I am sure that there is much publicly owned land that would meet that criterion. I welcome the pilot study on development benefits. The new town option provides the opportunity to capture community benefit to provide long-term facilities and infrastructure for a settlement and its surroundings, and potentially to provide affected individuals with a share in any benefits.
With any development it makes sense to include self-build and building by smaller and medium-sized companies. That introduces competition and, I hope, will stimulate good design—something much needed, as a previous speaker said. I note further measures to support social housing—again, so much is needed—and I believe that neighbourhood plans are really important, although they need more resources. Planning should be bottom up; we should be working with our communities to help tackle our housing crisis, allocating sites within our local community, and delivering when we truly understand our local community’s housing needs. Finally, I welcome the announcement of the extra money on potholes, which I believe will deliver real change very quickly.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
Yet again, this Budget benefits those on the Treasury Bench and their millionaire donors far more than the millions of ordinary people who have borne the brunt of this Government’s decisions so far. This Budget showed that although Ministers might try, they will never understand ordinary people.
The Chancellor said a lot about beer duty—it was as if he had given people a free pint. As we heard earlier, however, the trouble with saving a penny a pint is that someone has to drink around 300 pints before they get a free one—hardly a healthy message. He also said a lot about cutting tax on bingo. What he did not say is that that will benefit bingo operators, not bingo players. The Chancellor made big play of allowing people to save up to £15,000 a year tax free. He might be able to squirrel away that kind of money, but at the moment many of my constituents would consider themselves very lucky even to earn £15,000 a year, and even luckier to take home that amount, never mind being able to save £15,000 in their lifetime, let alone in a year. Should not a responsible Chancellor who wanted to build a broad-based recovery and improve living standards concentrate more on helping those people rather than wealthy savers? If he wanted to know what ordinary people wanted from the Budget, he should have read the excellent Sunderland Echo, as I do every day. A reporter went out and about in Sunderland last week to ask people exactly that question.
Thomas and Elizabeth Dunn wanted the Chancellor to do something to tackle the cost of living crisis, which is becoming difficult for them. They are not alone. Working people are on average £1,600 a year worse off in their pay packets under this Government; that is even more the case if we add in the 24 tax rises that the Government have snuck in, causing the cost of living crisis that is devastating people across the country. How many mentions of the cost of living were in the Red Book, and how many new policies were there to ease it? Absolutely none.
The Sunderland Echo reporter also spoke to new parents Chris and Lisa Mann. Lisa wants to return to her job as a community nurse after having her son, Harry, who is now eight months old, but the cost of child care is prohibitive. Chris said:
“We both want to work but the cost of child care is a problem, it really is. We have to rely on Lisa’s mum a lot.”
Parents across the country are similarly prevented from working because of the triple whammy that the Government have hit parents with. Costs are up 30% since the election, there are thousands fewer child care providers, and tax credits have been cut. Did the Budget mean that Lisa will be able to return to work at the end of her maternity leave, thanks to increased support for child care? No, it did not. Yes, there will be some support, but in 18 months’ time, not now. What about now? The fact remains that over this Parliament, the Government have cut, not increased, support for parents in accessing child care. Parents will remember that, and they will see Labour’s offer of 25 hours a week of child care free at the point of use as the biggest help to their family budgets.
Of course, the No. 1 concern in my constituency is finding decent jobs. On the face of it, there was some good news for my constituency in last week’s employment figures, but when we dig down we see that very long-term unemployment for adults is rocketing. In my constituency, there was a 76% increase in just one year, and 12 of the 20 constituencies with the biggest increases on that measure are in the north-east. Twelve out of 20 constituencies are in one small region, yet there is only one in the whole of the south—more evidence of the widening north-south divide under this Government. Those people are clearly being left behind by this Government, and by a Work programme that is worse than doing nothing. They need a way back into employment—something to give them their confidence back and to sharpen their soft skills. What did we see from the Chancellor to help those people? Absolutely nothing. Only a Labour Government would guarantee those people a job for six months, with training and intensive support to find employment afterwards.
In summary, the Chancellor should not believe his own hype or a few good headlines from his friends in the press—people who probably benefit from this Budget. Come the election, real people will be asking themselves, “Am I better off thanks to this lot?” We know who will be able to answer yes: the Chancellor, those on the Government Front Bench, the Prime Minister and all the millionaires the Government have prioritised support for. However, millions of people on low and middle incomes—those who have been hit hardest by the Government’s cost of living crisis—will answer no, and it is they who will show this lousy Government the door in 15 months’ time.
Mr Brooks Newmark (Braintree) (Con)
This was a Budget for savers, for pensioners, for businesses, and for hard-working people, and most importantly of all it ably demonstrates that our long-term economic plan is working. Only last year, we were talking about a triple-dip recession, but in fact there was no triple-dip recession, or even double-dip recession. The Office for Budget Responsibility is now forecasting growth for this year to be 2.7%—the biggest upward revision in 30 years—and the Bank of England is forecasting growth to exceed 3%.
Kwasi Kwarteng
Will my hon. Friend tell the House who exactly was predicting the triple-dip recession, and pleading with the Government to go to plan B?
Mr Newmark
My hon. Friend makes a good point, and I think it was the shadow Chancellor who predicted 1 million people unemployed—I will get to that point in a moment.
More growth means more jobs, and over 1.5 million more jobs are forecast over the next five years, on top of the 1.7 million new jobs created in the past four years. Indeed, today we have more men and women in work than ever before. In Braintree, unemployment has dropped by a third since the general election, with general unemployment down from 3.4% to 2.3%, and youth unemployment from 6.3% to 4.1%. Last Friday we had a successful jobs fair in Braintree with more than 30 businesses and 450 local people attending. I thank Braintree Freeport and Amtek for sponsoring the event, and Braintree district council and Ignite—especially Liz Storey and her team—for their support.
Getting young people back into work is vital, as Councillor Stephen Canning, the youngest councillor in Braintree, keeps reminding me. As a founder of the Million Jobs campaign, I am delighted that the Chancellor has abolished national insurance contributions for employers hiring a young person under 21.
Apprenticeships, too, have been a great success, giving over 1 million people a first step on to the jobs ladder. In particular, I congratulate Braintree district council, especially Councillor Chris Siddall, cabinet member for prosperity and growth, on its apprenticeship programme, and Essex county council on supporting over 2,700 apprentices in the past five years.
The deficit is now down by one third and is due to fall to 5.5% next year. That is 50% of what we inherited in 2010. Yes, the Government’s long-term economic plan is indeed working.
This is a Budget for savers, with the raising of the annual limit on ISAs to £15,000, the abolition of the dreaded 10p rate on savings income helping over 1.5 million lower-income savers, and the new pensioner bonds offering up to 4% return on a three-year bond. This is a Budget for pensions and pensioners, with no one being forced to buy an annuity and no punitive 55% tax rate if people try to take more of their tax-free lump sum. This Budget puts pensions back in the control of pensioners, taking them away from the diktat of Government.
This is a Budget for business. At this point, I draw the House’s attention to my entry in the Register of Members’ Financial Interests. The annual investment allowance, which increased tenfold from £25,000 to £250,000, is now doubled again to £500,000. With the business confidence index at an all-time high, I hope that this will encourage businesses, including farmers in my area, to invest more in plant and machinery and to hire more people.
James Morris (Halesowen and Rowley Regis) (Con)
Today I visited a company in my constituency, Cube Precision Engineering, with the Chancellor. We could already see the immediate impact of the raising of the investment allowance to £500,000, which is allowing that company to place an order for a new machine that will enhance its competitiveness and allow it to take on new people.
Mr Newmark
That is a fine example of exactly why raising the allowance from £25,000 to £250,000 was an important decision that created jobs. As my hon. Friend has indicated, doubling it again will create even more jobs.
This is a Budget for hard-working people, with petrol duty frozen; a penny off a pint of beer, again; and, most importantly, the personal allowance raised to £10,500, cutting taxation for over 25 million people and lifting 3.2 million people out of tax altogether.
Mr Newmark
I can give way only twice; I am sorry about that.
A typical taxpayer in my constituency of Braintree will pay £805 less in tax than they would have done before.
This Budget continues the drive to reform local public services and get value for money for local people. Braintree district council, under the leadership of Councillor Graham Butland, has reduced council taxes by 1% this year and 1% again next year, yet the council continues to invest in our town centres with initiatives such as the new jewellery village, supporting 12 new traders in Braintree town, and the pop-up shops generating four new retailers such as Chic Décor, started by Emma Jane Jarvis.
Essex county council, under the leadership of Councillor David Finch, is also to be congratulated. It has frozen its council tax for four years in a row, yet at the same time invested £3 million in flood prevention, £1 million in youth facilities, and £1.4 million to support vulnerable older people. Of course, the extra £2.7 million of funding in this Budget to address the blight of potholes on our roads throughout Essex, but especially in our rural areas, is also more than welcome.
This is indeed a Budget for hard-working people: for the makers, the doers, and the savers. Our long-term economic plan is slowly but surely beginning to pay dividends. I am delighted to support the 2014 Budget.
Paul Blomfield (Sheffield Central) (Lab)
I do not know whether you, Madam Deputy Speaker, or other Members of the House caught the recent BBC programme “Mind the Gap”. It was not about the perils of travelling on the underground but the growing problem of our country’s two economies—the way in which London and the south-east are sucking economic activity away from the rest of country. Judging by their policies over the past four years, this Government clearly do not mind the gap; indeed, they have widened it. It is not just a north-south problem; it is London versus the rest. The Chancellor’s Budget fuels the gap.
Let us spend a moment looking at two-economies Britain under this Government. Public funding has been diverted from areas where it is needed most by their local government finance settlement, as highlighted by my right hon. Friend the Member for Leeds Central (Hilary Benn). Regional development agencies were scrapped as soon as this Government got through the door.
James Morris
Can the hon. Gentleman remind us of what happened to regional inequalities when the RDAs were in existence under the previous Government?
Paul Blomfield
I would cite the extremely successful advanced manufacturing research centre, which is a pioneering collaboration between the university of Sheffield, Boeing and Rolls-Royce. It has been highlighted by the Government as a model of industrial innovation. However, it simply would not be there if it had not been for RDA investment.
London also thrives with arts and culture funding, with subsidies worth £68.99 per head, while the rest of England gets just £4.58 per head.
The Budget does not just ignore those issues; it is making them worse. Research by Sheffield political economy research institute has exposed the Chancellor’s flagship increase in the income tax personal allowance as not benefiting the lowest paid and not addressing regional inequality. In many ways, it has made that inequality worse.
This situation is not inevitable. We simply need the political will and the policies to reverse the trend. Let us build on our regional assets, such as our universities, which are uniquely positioned around the country to drive growth through innovation. Let us ensure that there is effective investment in research and development across the higher education sector.
We need an active industrial strategy that does not simply pick winners but supports growth in key sectors across the country, such as the nuclear sector. Of course, one of the early actions of the Government was to undermine that sector in my city by scrapping the loan to Sheffield Forgemasters.
We need a fairer distribution of public funding that puts need at the heart of funding allocation and that recognises the role of public investment in stimulating local economies. The Government should use the levers of public sector employment to address the regional imbalance. They should move Departments, not just minor agencies, out of London. Why can the Department for Education not move lock, stock and barrel to Sheffield? Let us move the Department of Health to Leeds. Let us take the Department for Work and Pensions to Hull.
Government Members have raised concerns about the impact of what they describe as “generous public sector pay” on private sector employers in the regions. However, we cannot accept the argument that there must be a race to the bottom on pay and conditions for there to be regional growth outside London. All regions benefit from decent, well-paid jobs. They fuel our local economies and put money in people’s pockets that will be spent in local businesses. Moving Departments out of London would be good not only for the regions, but for London. For evidence of that, we need only ask those who are struggling to rent or buy in the overheated housing market in the capital.
Moving Departments of State to the regions would not just provide economic benefits, but would ensure that policies were no longer shaped by people who live and work in London, and who see everything through the prism of the metropolis. One of my constituents, Amy Hall, who is a biophysicist, wrote to me last week and said:
“We need to be less London-centric as this seems to be blinding some of the key policy makers to the situation elsewhere.”
Amy was right. There are things that we can do to make that happen.
Moving Departments out of London is not a new idea. It was pioneered by the Labour Government in the ’70s. I remember the Manpower Services Commission coming to Sheffield as a result of a Government decision in 1976. More progress was made under the last Labour Government in moving civil service jobs out of London. According to the information I have been given by the House of Commons Library, that progress has halted under this Government.
We need to take action to achieve a one nation economy, not a one city economy.
Alec Shelbrooke (Elmet and Rothwell) (Con)
I rise in support of a Budget that really gets down to doing the job.
Let me start with a constant bugbear of my constituents: the state of the roads. The additional funding to repair the potholes and road damage that came about over the winter is hugely welcome to my constituents. The funding for my city of Leeds is £949,426—almost £1 million of extra money. Altogether, the Government will have spent £4.5 billion on road repairs in this Parliament, which is £800 million more than the last Labour Government spent in their final term in office.
We need to keep a close eye on where the Labour party on Leeds city council spends that money. It has almost revelled in making cuts to front-line services in our city, purely for politically motivated reasons. That is the only explanation for why, when cutting front-line services, it has spent £1.8 million on a website, £600,000 on furniture and hundreds of thousands of pounds on union time and facilities. We must ensure that the £1 million that goes into Leeds is spent as extra money on the roads, and is not the only money that is spent on the roads. Unfortunately, we have a Labour council in Leeds which governs in its own political interests, not in the interests of those who rely on its services. Even outside the financial issues, the council is too slow to get anything sorted out, such as housing and land supply.
It is massively welcome to cities such as Leeds and constituencies such as mine that a £500 million pot is now available for SME developers. With the inclusion of windfall—and my hon. Friend the Member for Pudsey (Stuart Andrew) and I lobbied very hard for Leeds to be included in the land supply—it means that we should be able to relieve the pressure that villages in my constituency feel to take some of the 12,500 houses that Leeds city council has designated for the area. The time taken to identify major areas of sustainable development, such as Headley Fields in the north of my constituency and Makins Farm in Garforth, is ridiculously slow, but the proactive stance that we are taking in the city is much better than the Labour policy of building 200,000 new homes and seizing the land to build them on—a frankly Stalinist policy. Labour leaflets talk proudly of that policy, but fail to tell local communities that they would effectively lose any say in the location of that development.
I am sure that my hon. Friend the Minister will be interested to hear a few other gems from Labour’s latest newsletter on economic policy. Top of the list is a pension triple lock, so that any increase would never be lower than 2.5% and would also be in line with the higher of earnings or inflation. One can only guess how Labour thought that policy up—it sounds like a winner. I would suggest that we adopt it if we had not already done so three years ago. It certainly beats the 75p rise of a few years ago. Labour also voted against our triple lock when we introduced it.
Labour also says that it will cut taxes for 24 million people by introducing a 10p rate, but in office it doubled tax on the lowest earners. We did not double that tax: we abolished it. Effectively, that is a watering down of the policy of abolishing tax for the lowest paid. Labour says that it will back small businesses by—wait for this—cutting the rates in 2015 and then freezing them. We gave £1,000 back to businesses with under £50,000 of rateable value, which had a huge impact on the SMEs and small shop owners in my villages of Wetherby, Garforth and Rothwell—a real investment after years of non-investment.
Labour also says it will strengthen the minimum wage: we are doing that. What we are not doing is chasing easy headlines on the living wage, which has already risen by 40p since the argument started a few months ago. We cannot chase wages with an inflation-led policy: we have to make sure that we cut taxes on businesses so that the money goes into the pockets of hard-working people such as my constituents. That approach is sustainable in the long run and that is what we are doing. I want to see the minimum wage reach at least £7, when we are able to afford it by cutting taxes and making sure that what businesses are not giving to the Government goes directly into the pockets of the people who are doing the work.
Compare our approach to Labour’s compulsory jobs guarantee scheme, which no firms have signed up to. It would subsidise public sector jobs and create non-jobs. There is nothing more demoralising than being sent to a workplace with nothing to do. Do not patronise my constituents: do what the Government are doing and ensure that we have strong economic growth, leading to real jobs for people. Apprenticeships in my constituency are up 63% since the election, and that is making a real difference. I have had enough Labour shadow Ministers coming to my constituency recently to hear that from people on the doorstep. Clearly they have their ears closed to them, as they seem to listen only to the Labour candidate with all her ideas from Tooting, where she lives. Perhaps those ideas work well around the dinner tables in London, but in my constituency they would not work at all. My hon. Friend the Minister should take heart from the fact that the Opposition’s economic policies have either already been put in place by the Government or have no traction outside the north London kitchen tables in the multi-million pound houses of Labour Front Benchers.
We froze council tax: that is why hard-working people have seen their taxes cut. But this year Labour has raised it by 1.99%—a disgraceful attempt to hoodwink the electorate.
Barry Gardiner (Brent North) (Lab)
Many Government Members, both this afternoon and in the preceding days of this debate, have said that it has been a Budget for savers. That is an irony, coming from a Government who have pumped more than £375 billion into the economy to buy Government bonds. That has been singularly responsible for reducing the yield to savers. The Bank of England working paper 442, on the impact of quantitative easing on the economy, states that the 8% increase in money holdings is estimated to have depressed yields by an average of 150 basis points. That was in 2012. Quantitative easing now is not £122 billion, or 8%; it is more than £375 billion.
Mr Newmark
Unless the hon. Gentleman is suffering from selective amnesia, he will know that it was the Labour Government who separated responsibility for QE from the Treasury and the Government and gave it to the Bank of England.
Barry Gardiner
I am not suffering from amnesia, selective or otherwise. I do recall that the process started in 2009 under the Labour Government, so I accept the hon. Gentleman’s point. Equally, we have to accept that the Bank of England’s own figures show the impact that that has had on savers over the lifetime of this Government. Elderly savers have had to bear the brunt of that. The Chancellor is trying to win them back with changes to the rules on individual savings accounts, and, for those approaching a decision on their pension pot, the prospect that they need not purchase an annuity. It is, however, QE that has in large part kept savings rates so low.
Government Ministers need to reflect on the changes to ISAs. They are a boost to mid-caps and the alternative investment market. Alternative investments are riskier. In the 2013 Budget, the Chancellor abolished stamp duty on AIM shares. By uniting share and cash ISAs, the Chancellor has boosted what is inevitably a riskier element of the City and is encouraging people to undertake less secure investments with their savings. It is important that that sort of incentivisation should be considered most carefully by Treasury Front Benchers. My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) spoke of it being beyond the capacity of ordinary people, who include most of Labour Members’ constituents, to accumulate £15,000 in one year to put into an ISA. That suggests that the Government, in framing the Budget, have again been out of touch with the reality for many people.
I am deeply concerned that unfettered access to pension pots undermines the whole basis for tax relief on pension contributions in the first place. We give people tax relief on pension contributions precisely because we want to ensure that they do not become more of a burden on the state in old age. We may well be seeing the birth of the next great financial mis-selling crisis. Independent financial advice is all well and good, but in the past many advisers have shown themselves to be better at ensuring that their clients’ money serves their own purposes and interests rather than the interests of the clients whom they are supposed to be advising.
I am even more worried that the ability to access one’s pension pot should not become a way for the Government to tip people over the threshold of £23,500, where they will have to start contributing to their care costs. At today’s rates, a £25,000 pension pot would generate an income from an annuity of approximately only £1,500 a year. On top of the state pension, and even a modest works pension, an elderly person in need of care would not normally be pushed over the contribution threshold in such circumstances. Previously, the pension pot could be used only to purchase an annuity. Now that it can be converted into cash, I fear that a local authority could insist, under the rules, that it is converted into cash, thereby forcing someone to contribute to their care costs. I ask the Minister to give us a clear reassurance about that. Greater freedom for savers should not be a back-door way of enabling Governments to get their hands on people’s pension pots.
Nearly one in five of our young people is now without a job. The pity—and, I hope, the shame—of this Government is that they preferred giving tax cuts of £42,500 to the very richest in our society to giving a job guarantee to the young and long-term unemployed. Do the coalition partners truly believe that the families of this country would rather see bankers keep their exorbitant bonuses than see their children assured of quality training and serious jobs?
Mr Newmark
I am listening carefully to what the hon. Gentleman is saying. He should at least give the Government credit for abolishing national insurance contributions for employers who hire people aged under 21, to give young people a chance on the jobs ladder. That has brought youth unemployment down.
Barry Gardiner
The hon. Gentleman has made a reasonable point. It would be a very strange Budget if all its measures were objectionable to the Opposition. My purpose is to flag up the areas of disagreement, and the areas that I believe will pose serious problems to the economy in the future.
The reality for my working constituents is that they are earning less, and earning less in jobs that are less secure. As their real wages have fallen, they have had to rely all the more on housing benefit. That is why the welfare bill under this Government is rising rather than falling. More people are having to claim housing benefit because their wages have simply failed to keep pace with inflation. No wonder the Government are spending £13 billion more on welfare than the Labour Government did in 2010, and no wonder they are spending £30 billion more than the Chancellor himself predicted in 2010. Is it not incredible that a coalition Government who came to power saying that borrowing was the problem have borrowed more in three years than the Labour Government did in the 13 years during which they were in office?
People do not forget that it was this Government and this Chancellor who said that they would balance the books by 2015. Now, in the Budget, the Chancellor has had to admit that in 2015 there will be a £75 billion deficit, and that, in addition, he will be borrowing £190 billion more than the amount promised in 2010.
The Government need to answer the single question that should be asked about all Budgets. Cui bono? Who benefits? We are asking about more than mere distribution. We are asking about fairness, about equality and about justice. On that question, the Government have failed.
Kwasi Kwarteng (Spelthorne) (Con)
I am much obliged to you, Madam Deputy Speaker, for calling me at this late hour to speak about what I consider to be an extremely effective Budget. I think that it is a Budget about business, about aspiration, and about savings. I also think that it recognises what everyone else has recognised in the last six months: that the country is back on its feet after a very poor period of stagnating growth, and that we have stuck to the plan and put Britain back on track.
It is particularly paradoxical to hear Opposition Members say that the recovery is unbalanced. A year ago, they complained that there was no recovery. A year ago, they were talking about triple dip. A year ago, they were talking about trying to go back to plan B and ditching the original plan. Today, when we have the strongest growth in the OECD and the strongest growth among our European partners, they complain about the nature of the growth. It is true that the growth could be more balanced, but I certainly prefer some growth to no growth whatsoever.
I want to talk about the general fiscal position of this country. We have heard a lot of arguments today, especially from the right hon. Member for Neath (Mr Hain), suggesting that Labour had nothing to do with the debt crisis and the deficit this Government inherited in 2010. Nothing could be more absurd. If we look at the fiscal position in 2001, we will see that the Budget was balanced. In fact I think the first Labour Administration were pretty good in terms of the fiscal position—I have said that publicly before, although I was not endorsed by the Whips for doing so. For those four years the Budget was either in balance or in surplus and it was a very good fiscal record.
Alec Shelbrooke
During the first four years of that Labour Government, which were fiscally very good, they were following the plans adopted by the previous Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke).
Kwasi Kwarteng
Absolutely, but I think we should, in this very partisan place, give credit where credit is due. That Labour Government ran a very good, tight ship for four years, but then of course the demons of their worst nature took over and they reverted to type, and from 2002 right through to the crisis we ran deficit after deficit after deficit. That was the inexcusable part of that Government. It was bad Gordon as opposed to good Gordon—prudent Gordon—that took over after 2001, and the previous Prime Minister himself, the then Member for Sedgefield, has suggested that they spent too much money. He has admitted that while he was Prime Minister the Government spent too much money, and that is clearly the case. In the Budgets from 2002 right up to 2007, before the banking crisis was even an issue and before Lehman Brothers went broke, the Government were continually running deficits.
Mr Newmark
Was not the flaw of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) the fact that he had never run anything? The fact is one can never beat the economic cycle, but he never put any money aside just in case things did not work out.
Kwasi Kwarteng
That is absolutely right. The right hon. Gentleman’s principal fault was that he thought he had abolished the business cycle—no more boom and bust. He essentially believed—and it is incredible to think he did believe this—that he had discovered perpetual motion and that the laws of economics and of economic gravity had been suspended or abolished. That was the problem we were in: we were borrowing money even when the economy was growing. In 2004 I recall the economy grew at 3%, yet we ran a deficit of 3%. There is no Keynesian in the world who would suggest it was a good policy to borrow 3% of GDP when the economy was growing, yet the previous Government persisted in doing that.
Kwasi Kwarteng
It is quite true that the economic and financial crisis that hit in 2007-08 was a global phenomenon, but our country was in the worst position of any in the OECD to deal with that problem because of the poor management of our public finances in the six years before the crisis hit.
Germany is not a bastion of hard right-wing fiscal conservatism, yet it managed to reduce its spending right through the first decade of this century. It started to reduce public spending in 2004 and 2005. Today the Federal Government have a balanced Budget because of the prudent housekeeping and fiscal management of the previous German Government, first under Schröder and the Social Democratic party and then continued under Merkel. By contrast, in this country at that time we saw a total dereliction of duty by the Government.
Kwasi Kwarteng
We saw an expanding public sector, big public expenditure and tax revenues which frankly could never meet the expenditure that the Government were embarked upon. So talking about what happened in 2010 can never be repeated enough times and must never be forgotten: in 2010 this coalition Government inherited the biggest deficit in our peacetime history.
Kwasi Kwarteng
I can see that Members opposite are eager to intervene and rightly so, because that was a shocking record of public financial management, and they are absolutely right to be indignant about what I am saying because it is the simple truth. They fell asleep at the wheel and left this country with an enormous deficit.
Phil Wilson
If what the hon. Gentleman is saying is true and he has the answer to everything we did wrong, why did the current Chancellor—the then shadow Chancellor—agree with our expenditure plans in 2008?
Kwasi Kwarteng
I have publicly said that I think that was a mistake. It was a mistake to stick to Labour’s spending plans when we were running six or seven years of straight deficits. I do not understand how that makes any sense in financial management terms.
Kwasi Kwarteng
No. The hon. Gentleman has had his say and I want to finish my speech, given that I have little time left.
It is very important that we remember exactly what the last Government did. In 2010, as everyone remembers, we had a deficit of £160 billion, which was the largest peacetime deficit. It is a remarkable testament to this Government that they have managed to reduce it by a third and at the same preside over economic growth. That is an extraordinary record, and I am very happy to meet my constituents and seek re-election on that basis.
I know that we should not be too obsessed with polls, but the one consistent thing emerging from the polling evidence over this whole period is that the British people consistently blame the last Government for the deficit and for the economic crisis we are in. There is an intuitive understanding that the Labour Government spent too much money, and that this coalition Government have been elected with a mandate to sort out the mess that Labour made. Intuitively, people across our constituencies get this, and that is why the Labour party, even through all these difficult times, continues to perform very poorly in the opinion polls and has yet to win the confidence of our countrymen and women.
Mike Kane (Wythenshawe and Sale East) (Lab)
It is a pleasure to follow the apolitical speech of the hon. Member for Spelthorne (Kwasi Kwarteng).
The Chancellor got it completely wrong. Ebbsfleet is not the first new garden city in 100 years: he is welcome to visit Wythenshawe, which was built in the 1930s and ’40s, any time. He should cross his border and see it in all its glory. I also say to the hon. Member for Dartford (Gareth Johnson) that there are possible twinning opportunities for us; he knows where my office is.
I give a cautious welcome to the reform in the Budget of air passenger duty. The current rules are crazy and unjust, as the Chancellor rightly said. He said that there would be support for new routes from regional airports, but we need more detail. His statement did not go far enough. The Government could go further and grant exemptions for new long-haul services from regional airports. That would make a huge difference at Manchester airport, in my constituency, attracting flights from cities such as Beijing. Eventually, that would link up with High Speed 2 and with the £800 million Chinese investment in the new airport city we are building in my constituency. It is an important measure, and I will challenge the Chancellor further on it in the weeks and months to come.
We are facing a cost of living crisis, and Labour Members will keep pointing that out. No one could have fought the by-election that I have just fought without speaking to the many people who had stories to tell in that regard. As was pointed out earlier, real wages are down by £1,600 a year compared with 2010, and the OBR has confirmed that all our constituents will be worse off in 2015 than they were in 2010. To compound the problem, people’s energy bills have risen by almost £300, on average, since the election. It is no wonder that many of my constituents are increasingly reliant on food banks such as that run by the Dandelion Community, which I visited on Friday.
I want to focus on three key things that would benefit my constituents, the first of which is freezing energy bills. I am reminded of the story of a former Member of this place, Richard Cobden, a Liberal campaigner from Manchester who was part of the Anti-Corn Law League. He stood up against the Peel Government of the time and brought working people and intellectuals together because the landed aristocracy who were running this place controlled the price of wheat bushels by not allowing external competition and free trade. He eventually won that argument, because millions of poor working people across the country were going hungry. Our energy providers are doing exactly the same thing today. The big conglomerates are controlling the markets. It is not a free market; it is not fair. The prices go up, and the energy providers never lose. The hon. Member for Spelthorne goes on about business, and he is right to do so, but those businesses take no risks. Whenever their costs go up, the prices go up. We would freeze those bills—
Kwasi Kwarteng
I will bear that in mind. I was just wondering what the hon. Gentleman thinks Richard Cobden would have thought about the proposed energy price freeze.
Barry Gardiner
My hon. Friend is making an excellent speech. May I assist him by saying that Richard Cobden might have thought the price freeze less important than the restructuring of the vertical integration in the market, which it was buying time in order to do?
Mike Kane
I agree with that, even if I do not quite understand all of it. It was very good. I am very proud that Richard Cobden ran his campaign from Manchester and changed the world. Once he had won, the campaign eventually brought down the Peel Government, so there is hope for us on these Benches.
My second point is that we should put young people back to work. Nearly 900,000 young people are out of work in this country, and many are in my constituency. Their parents are very worried about their children’s future. Nearly 1,000 young people under the age of 24 in my constituency are in that position. We could pay for measures to address that with a tax on the bankers bonuses. In 1997, the new deal did an immense amount for the estates in Wythenshawe. In my opinion, it did even more than the introduction of the national minimum wage. It transformed the estates and got people back into work, which makes a great difference to the cohesion in our communities.
Finally, it would make a real difference to the standard of living in my constituency if we were to extend free child care for working parents to 25 hours a week for their three and four-year-olds. That would help more young women to get back into the workplace. The lack of affordable child care is a real obstacle for working poor families, but we could achieve that change in the next Parliament while balancing the nation’s books in a fairer and more equitable way.
David Rutley (Macclesfield) (Con)
It is a pleasure to follow the hon. Member for Wythenshawe and Sale East (Mike Kane), a near neighbour of mine. I was pleased to hear his upbeat assessment of airport city in Manchester; I share that assessment and look forward to working with him, just as I did with his esteemed predecessor, whom many of us in this House admired and respected.
It is important that this Budget has further underlined the Government’s commitment to putting our public finances back in order. It has also highlighted the action that is being taken to address cost of living challenges, including the increase in the personal allowance to £10,500. Government Members have pointed out repeatedly that the Chancellor has gone further in this Budget by taking bold, radical steps, the better to support the aspirations of savers and pensioners. Those steps have been welcomed by many of the constituents in Macclesfield I have spoken to over the weekend, and they are popular across the country because they give power to the people. That is not something that Citizen Smith said in the 1970s; it is the Conservative way, the right way, and we welcome this approach.
Another positive theme in the Budget is the continuing action that is being taken to deliver sustainable economic growth after the boom and bust of the Labour years. The evidence is clear to see in the 2.75% growth forecast for this year and the 2.4% growth forecast for 2015. In addition, we have the 1.7 million jobs that have been created. Perhaps Labour Members could remind us who said that just could not be done—where is the right hon. Member for Morley and Outwood (Ed Balls) when you need him?
I welcome the positive progress that has been made, but clearly more needs to be done to take forward our long-term economic plan and our growth agenda, and that is what I want to say more about this evening. It is refreshing and good to see that the Federation of Small Businesses and the British Chambers of Commerce also warmly welcome this Budget. With so much new news in the Budget, it might be easy to overlook the fact that the Government have dramatically reduced corporation tax. It has fallen from 28% under the previous Government to 21% this April, and is set to fall further with a cut to 20% in 2015-16—that is the joint lowest rate in the G20.
On the employment allowance, it is crucial that we get to a lower tax environment, so that businesses have the confidence to invest, and the desire and appetite to take on more workers. I am pleased that the growth we are seeing is spread across all the regions—just about—as that is vital in our task of rebalancing the economy. In recent months, we have had positive reports about what is going on in our local economy in north-east Cheshire. In November, AstraZeneca invested £120 million in its packaging and manufacturing site in Macclesfield. The recent announcement of the sale of AstraZeneca’s Alderley Park plant to Manchester Science Parks is crucial to ensuring that there is a sustainable future at the site, which has been a centre of innovation, research and discovery for decades. This new approach means that there will be further innovation and success in decades to come. Although AstraZeneca may have decided to take its research and development facilities to Cambridge, I am pleased to be working with the company and with the Alderley Park taskforce to make sure there is a lasting legacy. The Chancellor, as a local Member of Parliament, is also championing that important start we are making. With the new owners, our aim and ambition locally is to make sure that we create a counterweight to Cambridge up in the north-west. Who knows, AstraZeneca may live to regret the day it decided to relocate—I hope it does, as that is certainly our plan.
That case study demonstrates again that the state cannot and should not seek to rebalance the economy on its own. Government Members know that making areas dependent on public sector jobs is not a panacea, despite the protestations of the hon. Member for Sheffield Central (Paul Blomfield), who is no longer in his place. The Government are right to focus on getting the economic fundamentals in place so that businesses across the regions can thrive and flourish, without the excessive competition in the labour markets from public bodies.
The Government also recognise that they have a crucial role to play in investing in infrastructure. Connectivity will be the key to rebalancing the economy, and this is not just about HS2, which I am pleased to hear will now have a hub station in Crewe six years earlier than planned; in the north-west, there are ambitious plans for the Atlantic gateway, the northern hub and, let us not forget, further rail electrification, with 800 miles planned by 2019, compared with just the nine miles put in place during the Labour years in government.
The bidding process for the £2 billion growth deal fund, involving business-led local enterprise partnerships across the country, will be another catalyst for change. I am sure I am not the only Member seeking to draw attention to major projects in their area, but in Cheshire and Warrington we are supporting an innovative cross-border science corridor, which builds on initial progress we are making at Alderley Park. So let the competition begin—just let us not forget our science corridor in Cheshire to move things forward. I support this Budget and the contribution that this Government’s long-term economic plan is making to the economy in this country.
Lilian Greenwood (Nottingham South) (Lab)
In his statement on Wednesday, the Chancellor evoked an image of Britain that thousands of my constituents will simply not recognise. This Budget ignored the 2,882 people in Nottingham, including 1,092 children, who needed to use a food bank in the past year. This Budget ignored the nearly 5,000 households in Nottingham affected by the bedroom tax, which has left thousands of my constituents with a debt they have no prospect of paying off. This Budget failed to offer any hope whatever to thousands of families in Nottingham whose living standards have plummeted. The Government are yet again making the poorest in our society bear the burden of their failures, and the Chancellor’s silence on any measures that will help young people and lift the long-term unemployed back into work has been deafening.
Nottingham is a young city, with almost a third of its residents aged 18 to 29. Many of them are students, but too few stay and obtain jobs once they graduate, even though many would like to. Long-term youth unemployment in Nottingham South is 45% higher now than in May 2010, demonstrating that the recovery is leaving too many behind. It is not just an economic cost, but a human one too. This wasted potential matters not just to those young people who are affected but to their parents, grandparents and the wider community, yet it has been glossed over by Ministers. The Government continue to betray a generation of young people who, decades after the Chancellor has left office, will be the ones who continue to pay the price for his misguided policies. The slowest recovery for 100 years is hitting those new to the jobs market more than most, and many of my younger constituents feel that they are not even being given a fair chance right at the start of their working lives.
Cities such as Nottingham simply cannot afford a lost generation of unskilled and under-developed employees. We cannot afford to see residents demoralised and humiliated by unemployment. Something must be done, but the Government continue to dismiss Labour’s jobs guarantee that would use revenue from a tax on bankers’ bonuses to ensure that there is a paid job for every young person who has been out of work for a year.
Instead of setting aside additional funding for our cities, which are struggling to deal with the fall-out from a global recession, the Government have made places such as Nottingham bear the brunt of their cuts. Our city is the 20th most deprived local authority area in England, yet it has been targeted for some of the deepest cuts. It has been estimated that by 2017-18 Nottingham city council will have lost £848 per person as a result of Government funding cuts and welfare reform, compared with a loss of £117 per person in wealthier Windsor and Maidenhead.
Alongside the cuts, people in Nottingham continue to deal with the greatest cost of living crisis in a generation. They face soaring gas and electricity bills, real wages that have fallen by 5.6% and, of course, the housing crisis. The Chancellor’s unbalanced economic recovery means little to those struggling to make ends meet in places such as Clifton in my constituency, which has already seen its energy company obligation-funded solid wall insulation programme scrapped after this Government, panicked by Labour’s plans to freeze energy prices, did a deal with the energy companies.
We have already heard during this debate that one of the major causes of the current cost of living crisis is the housing shortage. The Government are doing too little, too late to tackle the chronic shortage of homes being built and are presiding over the lowest levels of house building in peacetime since the 1920s.
In Nottingham, 70% fewer homes are being developed since the coalition came to power, despite new affordable homes being built by our local arm’s length management organisation, Nottingham City Homes. Demand for housing is increasing, but the Government are doing nothing to address supply and the banks continue to withhold finance from smaller construction companies that know the local market and could make a huge difference. The Government seem to be passively reliant on developers to bring forward planning proposals, even in inappropriate locations, when too many brownfield sites lie empty. It is an abdication of responsibility.
The Government’s failure on housing means that an entire generation in Nottingham could be locked out of home ownership entirely, left to cope with the insecurity offered by the private rented sector and facing rents that are expected to soar by an average of 39% by 2020. It is shameful that homelessness has risen every year under this Government. According to local homelessness charity Framework, around 40% of its service users are between the ages of 16 and 25. Despite the increased demand for homelessness intervention services, councils hit by this Government’s unfair cuts have been forced to cut tenancy support services. Yet again it is younger, vulnerable members of society who bear the burden of this Government’s ideologically driven cuts agenda.
We need real action to tackle the housing crisis. My constituents need a Government who are on their side, but, instead, people in Nottingham feel let down—let down by a Prime Minister who is happy to hand a tax cut to those at the top while doing nothing to ease the cost of living crisis that leaves everyone else worse off than they were in 2010.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
The shortage of housing, particularly affordable housing, about which many of my hon. Friends have spoken affects Scotland as much as it does the rest of the UK. We, too, have seen a reduction in house building. Indeed, the figures for last year show a 46% drop in house building in Scotland since its peak in 2004-05. There is a great shortage of affordable housing, as I know from experience, particularly in my constituency.
Much of the responsibility for housing in Scotland is, of course, devolved. It says something about the priorities of the Scottish Government that, since the Scottish National party took power, there has been a 29% drop in the capital housing budget, but the problem is not all the responsibility of the Scottish Government. The Help to Buy scheme operates in Scotland as it does in England and Wales, and although the limit on the value of houses eligible for support under the scheme in Scotland is £400,000 rather than £600,000, it has the same fundamental deficiency in that it benefits those on higher incomes more than those on whom it should be targeted—that is, those on more average incomes, particularly first-time buyers. The other drawback of the Help to Buy scheme, as many people have pointed out, is that it is likely to stimulate another property price boom. We all know the damage that such booms have done in the past and there is every indication that the scheme is having such an effect in London at the moment.
I welcome the commitment from Labour to build 200,000 houses a year across the UK. Such a policy provides a real answer to the housing shortage, an answer that can certainly not be found in the bedroom tax, as the Government seemed to suggest today. Members who were in the Chamber earlier will have heard the Minister of State, Department for Work and Pensions, the right hon. Member for Wirral West (Esther McVey), saying that 1 million people were in social housing that was too big for their needs. Of course, many of those who are in social housing that the Government say is too big for them have no possibility of moving into smaller housing. In Edinburgh, for example, demand for one-bedroom social housing, depending on availability from week to week, can sometimes be 100 times larger than supply. That is typical of many cities across the country.
The Government know that the bedroom tax is not working. They desperately argue that the fact that there has not yet been a 100% take-up of the discretionary housing payment in some areas is evidence that the policy is working, but we all know that in many cases it has not been taken up because the addition of extra funds during the year has made it difficult to get funding out to the people who need it. I am glad that the Scottish Government, after a lot of pressure from Labour, have agreed to provide cash from their own resources effectively to end the bedroom tax in Scotland. I wish they had done so earlier, but better late than never.
If the Government want to reduce the cost of housing benefit, they should be putting the effort into providing new housing so that people do not have to depend so much on the more expensive rented sector. It is also important that the housing benefit system and the provision of housing should be integrally linked as far as possible. That is why I welcome the Scottish Labour party’s commitment, through our devolution commission, to devolve housing benefit as part of our proposals for further devolution to Scotland.
I want to spend a couple of minutes discussing the abolition of the requirement for 75% of the private pension pot to be spent on annuities or similar arrangements. As many of my colleagues have pointed out, Labour recognises the need for reform of the annuity system, but although the principle that people should have more control over the allocation of their pensions is fair, a responsible Government should recognise difficulties and problems as well. My hon. Friend the Member for Brent North (Barry Gardiner) highlighted some of them in his speech, so I shall simply observe the contrast between the Government’s proposal to remove any requirement for people to spend a certain amount of their pension fund on long-term pension provision and their approach to contributions to private pensions. All parties, including those in government, have supported auto-enrolment into pension schemes—not compulsory enrolment, of course, but a pretty strong nudge towards it—but there appears to be no wish to encourage people, other than through that device, to take steps to assure their long-term security. As proposals for changes to private pension schemes are developed, it is vital to implement measures to encourage people to ensure that they provide for their long-term security in retirement because if they do not, as many Members have pointed out, we are merely building up problems that will be faced by future Governments and will seriously affect the living standards of many who retire in years to come.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Our passionate and wide-ranging debate was excellently opened for the Opposition by my right hon. Friend the Member for Leeds Central (Hilary Benn), whom I commend for the deeply moving and insightful tribute that he paid to his father in the House last week. Tony Benn had close links with the north-east, not least through his regular appearances at the Durham miners gala. His loss is felt keenly by many people of all ages throughout the region and, of course, by hon. Members on both sides of the House.
The many excellent speeches that we have heard today have served to illustrate once again which side of the House is in touch with the reality of the lives of people up and down the country. Labour Members know that, despite the Chancellor’s continued complacency, for most people in Britain living standards are not rising but falling year on year. Indeed, the Institute for Fiscal Studies makes it clear that working people will be worse off in 2015 than they were in 2010—and little wonder with average real-terms earnings more than £600 a year lower than in May 2010, and with households having faced 24 Tory tax rises since then, including the increase in VAT. Labour Members believe that the Chancellor should have used his Budget to take urgent action to support families through the cost of living crisis now, not after the general election.
I pay tribute to the contributions made by Labour Members: my right hon. Friends the Members for Southampton, Itchen (Mr Denham), for Neath (Mr Hain), for Wolverhampton South East (Mr McFadden) and for Holborn and St Pancras (Frank Dobson); and my hon. Friends the Members for Stoke-on-Trent South (Robert Flello), for Blyth Valley (Mr Campbell), for Glasgow North (Ann McKechin), for Sedgefield (Phil Wilson), for Penistone and Stocksbridge (Angela Smith), for Southampton, Test (Dr Whitehead), for City of Durham (Roberta Blackman-Woods), for Barrow and Furness (John Woodcock), for Hartlepool (Mr Wright), for Sheffield Central (Paul Blomfield), for Washington and Sunderland West (Mrs Hodgson), for Brent North (Barry Gardiner), for Wythenshawe and Sale East (Mike Kane), for Nottingham South (Lilian Greenwood) and for Edinburgh North and Leith (Mark Lazarowicz). They all spoke about concerns on behalf of their constituents—yes, those people who live in the real world out there—and businesses throughout the country.
Despite the pressing nature of the cost of living crisis that my right hon. and hon. Friends carefully articulated in the debate, what mention was there of that critical issue in last week’s statement by the Chancellor or any of the Budget documents? Absolutely none. What urgent measures were announced for parents facing child care costs that have increased by 30% on this Government’s watch while the value of their wages has fallen? Absolutely none at all. What extra support will be available now to parents struggling with those costs and to pensioners struggling with the cost of heating their homes? Not a penny. What help will the Budget provide for the millions of small firms whose business rates will increase by an average of £430 next month? Zero. What about the tens of thousands of young people who have been out of work for 12 months or more? The number has doubled under this Government, but they did not even receive a mention.
Just as we thought that the Chancellor might have completely lost touch with the lives of people up and down the country, however, we learned this weekend that he actually is on the side of the working man and woman. It is now clear that he knows what the ordinary working people of this country—very occasionally, he even gets to speak to them—want out of life: a game of bingo; and, if they buy 300 pints, to get one free.
We were all under the impression that it was the Chancellor’s right hon. Friend, the right hon. Member for Welwyn Hatfield (Grant Shapps), the chair of the Conservative party, who was the one with the common touch, but we were wrong. Who needs lower energy bills, lower child care costs or lower business rates, higher wages or even a job when people can spend their time being patronised by the Chancellor and his hapless colleagues instead? Who cares that women are being hit four times harder than men as a result of the Chancellor’s tax and benefit changes since 2010, when the move on bingo taxation, welcome as it is, has been spun in this Budget as a woman-friendly measure?
I am sure that Britain’s women will be thrilled to know that the Chancellor failed to take up the Opposition’s proposal of scrapping the discredited marriage tax allowance—84% of the benefit of which will go to men—in order to introduce the 10p rate of tax that would benefit 24 million low and middle-income households up and down the country. I am sure that they will be delighted that the Chancellor continues to defend his £3 billion tax cut for the top 1% of earners in this country—85% of whom just happen to be men—rather than adopting our proposal to reverse it in order to ensure that those with the broadest shoulders bear the greatest burden of deficit reduction.
So what did the Budget have to offer? Let us take a moment to remember the Chancellor’s record. His 2012 Budget was going to raise billions of pounds through tackling tax avoidance, yet his flagship Swiss tax deal had more holes than Swiss cheese and has brought in just a fraction of the amount that was originally promised. His 2011 Budget was a Budget for growth, yet he has had to revise his growth figures down. Of course, there was his 2010 Budget—the one in which he first made the decision to slash Labour’s annual investment allowance from £100,000 to just £25,000 from April 2012, on the grounds that 95% of firms would not be affected. He continued down that path, despite being warned widely of the hugely detrimental effect that it would have on businesses and job creation. We then had two autumn statements and two Budgets before, lo and behold, the Chancellor announced in the 2012 autumn statement that he was going to increase the allowance temporarily—the one he had cut to £25,000—to £250,000 from January 2013. On making that announcement, he described it as
“a huge boost to all those who run a business and who aspire to grow, expand and create jobs.”—[Official Report, 5 December 2012; Vol. 554, c. 881.]
That would imply to anyone that his decision to slash it just two and half years earlier was entirely the opposite.
Mr Newmark
Notwithstanding the hon. Lady’s criticisms, it was her shadow Chancellor who predicted that 1 million more people would be unemployed. There are now 1.7 million more people in jobs today than there were in 2010. We have taken 3.2 million people out of tax altogether by raising the personal allowance. Those are the achievements of the Government.
Catherine McKinnell
I caution the hon. Gentleman, given that long-term youth unemployment in his constituency has gone up 125% under this Government; he should check the figures.
However, back to the annual investment allowance, the slashing of which has cost jobs. Cutting the allowance from £100,000 to £25,000, then announcing a temporary increase to £250,000 with the expectation that it would then fall again to £25,000, before then increasing it to £500,000 in last week’s Budget, although welcome, does not really inspire confidence in the Government’s long-term strategy for supporting business growth and investment—businesses that desperately need stability and certainty, rather than continual chopping and changing over the years.
David Rutley
On that point, does economic growth of 2.7% inspire confidence in the hon. Lady?
Catherine McKinnell
The growth figures are a fraction of what the Chancellor promised back in 2010. I urge caution on the hon. Gentleman, who has seen long-term unemployment in his constituency go up 600% under this Government.
Indeed, that whole sorry saga just about sums up the Government’s haphazard and cavalier approach to backing economic growth and job creation. Clearly, it is welcome news that the economy is growing again—undoubtedly, after three years of flatlining—but as we all know, in 2010 the Chancellor predicted that our economy would have grown by 8.4% by now. Instead, we have seen growth of just 3.8%, lower than the US and lower than Germany. Indeed, GDP growth this year is still expected to be lower than the OBR forecast in 2010. This is now the slowest UK recovery for 100 years, with our economy still 1.4% behind its pre-crisis peak.
How many more businesses could have grown, and how many more jobs could have been created, had the Chancellor not slashed the annual investment allowance at the first opportunity? How many jobs and how much new investment have been lost as a result of his carbon price floor, about which the Opposition have consistently raised concerns and on which he finally used last week’s Budget to take some action?
Had the Chancellor acted before last week’s Budget, how many firms could have been given the support and finance they need to export, thereby helping to ensure that any economic recovery is driven not just by consumer spending? It is little wonder that he is so unlikely to achieve his target of doubling UK exports to £1 trillion by 2020, given that the Government’s export enterprise finance guarantee scheme helped just five firms before folding, and their export refinancing facility is still not operational, despite being announced back in July 2012.
Of course, three years of a flatlining economy have meant that the Chancellor’s much hailed deficit reduction plan has been an abject failure, with the coalition now set to borrow £190 billion more than originally planned. Indeed, the Government have borrowed more in three years than Labour borrowed in 13 years. The Prime Minister and the Chancellor previously promised to eliminate the deficit and balance the books by 2015, but now they will not be able to do that until 2018. As a result of their failed policies, the Government, who like to talk tough on welfare spending, will actually spend £1 billion more on welfare this year and next than Ministers were planning only last December to spend. They will spend £13 billion more than they planned.
David Rutley
It is interesting to hear the hon. Lady’s comments on the debt, the deficit and so on. Does she agree with the IFS that the Labour party would be spending £29 billion more under the plans it has in place?
Catherine McKinnell
I agree with the IFS that families are, on average, £891 worse off as a result of this Government’s tax and benefit changes. Once again, Government Members want to ignore the cost of living crisis that households are facing up and down the country as a direct result of this Government’s failure to deal with the deficit and help ordinary families.
Last week was the Chancellor’s final opportunity to introduce policies to provide the real help that people need now and to cement the recovery after choking it off when the Government first came to office. The key question that people across the UK will be asking is whether they are better off now and in the coming months than they were when the coalition came to power in 2010. With the exception of a very few of the Chancellor’s friends at the top, for most the answer is a resounding no. Last week’s Budget did absolutely nothing to reverse that.
The Economic Secretary to the Treasury (Nicky Morgan)
Let me begin by thanking hon. Members on both sides of the Chamber for their contributions this evening. I will do my best to respond to as many of the points raised as I can.
I will start by saying this: of course the Government, and everyone in the Chamber, want to see our economy growing and our living standards rising. The best way to achieve that is by ensuring that more people are going to work every morning and that those people are keeping more of the money they earn. That is exactly what last week’s Budget will help everyone to achieve.
Let me turn to the comments made in this wide-ranging debate. My right hon. Friend the Member for Mid Sussex (Nicholas Soames), in setting out his support for the Budget, mentioned the fact that we need more productivity. He also mentioned the need for investment in skills, as did other hon. Members. The right hon. Member for Ross, Skye and Lochaber (Mr Kennedy) talked about a sense of opportunity for the youth of this country and a sense of security for older people. He welcomed the freezing of whisky duty. My hon. Friend the Member for Henley (John Howell) set out his support for the development at Ebbsfleet and mentioned neighbourhood plans, which he said were key, explaining that it was Thame in his constituency that launched the neighbourhood plan.
My hon. Friend the Member for Wolverhampton South West (Paul Uppal) talked about Labour always raising taxes—how very observant he is—and set out the help for businesses that the Chancellor announced last week and the successes in his constituency.
My hon. Friend the Member for Brentford and Isleworth (Mary Macleod) talked about the support that the Government are giving air ambulances, as well as the support for tax-free child care, for which 1.9 million families will be eligible. She also mentioned the record numbers of people in work, including women.
My hon. Friend the Member for Cardiff North (Jonathan Evans) talked, as other Members did, about the support that the Government are giving energy-intensive industries, and my hon. Friend the Member for Milton Keynes South (Iain Stewart) made a bid for the Alan Turing institute to be based in Milton Keynes. I am sure that my right hon. Friend the Minister for Universities and Science will have noted that plea. My hon. and learned Friend the Member for Harborough (Sir Edward Garnier) said that he was in favour of freedom for those with pensions to make decisions that are right for them, which was a key cornerstone of last week’s budget.
My hon. Friend the Member for City of Chester (Stephen Mosley) made a terrific speech about falling unemployment in his constituency and the great work that he has done on jobs fairs. My hon. Friend the Member for Dartford (Gareth Johnson) welcomed the Chancellor’s announcements about Ebbsfleet, of which I know he will be a great champion.
My hon. Friend the Member for North Herefordshire (Bill Wiggin) talked about the cuts in cider and beer duty, which he rightly said were good news for pubs and brewers. He also mentioned that the mother-in-law of my hon. Friend the Exchequer Secretary to the Treasury lives in his constituency. I am not sure whether there is any connection with cider and beer, but perhaps that is how those in Herefordshire like to spend their time.
My hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) mentioned funding for flood defences and the repairing of potholes. The Government have introduced a £6.5 million severe weather recovery scheme to support local authorities, including for highway infrastructure repairs. The scheme is now paying 100% of local authority costs above the threshold, rather than the usual 85%, and the threshold has been reduced for all county councils and unitary authorities to make it easier for them to claim support. Of course, we have also provided a further £140 million to help repair roads hit by weather damage and, in the Budget, £200 million for repairing potholes.
My hon. Friend the Member for Rugby (Mark Pawsey) talked about the importance of new homes and, like other Members, rightly pointed out that the rise in house prices is not universal across the United Kingdom. There is a particular impact in London and the south-east. My hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) mentioned the rise in the personal allowance, which the Government are proud to have delivered, and financial support for exporters.
My hon. Friend the Member for Braintree (Mr Newmark), the founder of the Million Jobs campaign, talked about the work that he has done, including on the Braintree jobs fair, and said that more growth needs more jobs. My hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) mentioned the Labour newsletter put out in his constituency about Labour’s economic policy. I wonder whether he would like to share it with Opposition Members, particularly the shadow Treasury team, because we did not hear much about that today.
My hon. Friend the Member for Spelthorne (Kwasi Kwarteng) mentioned the recovery, as the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) just has. He reminded us that a year ago the Opposition said that there was no recovery. Now, of course, it is the wrong kind of recovery. To say that it is hard to please them would be an understatement. My hon. Friend the Member for Macclesfield (David Rutley) talked about the important reductions in corporation tax and employment allowances.
I turn to the speeches that Opposition Members made. I must congratulate them on one thing—at least most of them talked about the Budget. That is remarkable given last week’s Budget response speech by the Leader of the Opposition, in which I think he failed to mention a single Budget measure. I have to say that listening to Opposition Members is like watching arsonists making a call after they have started a fire and saying, “Please, the fire’s not being put out quick enough.”
The right hon. Member for Leeds Central (Hilary Benn) asked various questions. I probably do not have time to go through all of them, but it is interesting to note that Tower Hamlets, one of the poorest boroughs in London, has received £49 million from the new homes bonus, compared with £6 million for Wokingham, so he is not entirely right to say that money has been taken from the poorest authorities in the country. He also asked about the Financial Policy Committee’s remit on monitoring the housing market. The latest remit was published last week, on 19 March, and, as the FPC has said, it will monitor in particular developments in house prices,
“relative to indicators of affordability and sustainability.”
The right hon. Member for Southampton, Itchen (Mr Denham) talked about student loans and debt. I do not think he is in his place now, but—[Hon. Members: “Yes, he is.”] I am sorry, I missed him. I ask him just what Labour’s policy is on student loans. I represent a large university in Loughborough, and the vice-chancellor would like to know.
The hon. Member for Stoke-on-Trent South (Robert Flello) spoke about fuel price cuts. Average pump prices under this Government’s policies will be 16p per litre lower than under the plans of the previous Government. The hon. Member for Blyth Valley (Mr Campbell), who sadly is not in his place, blamed the entire financial crash on Lehman Brothers, but I point out to him that Northern Rock collapsed before Lehman Brothers.
The hon. Members for Glasgow North (Ann McKechin), for Edinburgh North and Leith (Mark Lazarowicz), and for Sedgefield (Phil Wilson), talked about protecting pensioners from themselves, which I think is deeply patronising.
Nicky Morgan
No, I will make some progress. The right hon. Member for Neath (Mr Hain) talked about exports. Exports to countries outside the EU continue to grow, rising by 23% since 2010. The right hon. Member for Wolverhampton South East (Mr McFadden) talked about the referendum on the EU damaging investment. That is a common theme on the Labour Benches, but the Government believe it is time to trust the people and ask them about important issues. Labour Members clearly do not.
The hon. Member for Penistone and Stocksbridge (Angela Smith) talked about support for energy-intensive industries, which she and I have discussed before. She encouraged us to make strong representations to the European Commission for the extension of compensation, and I take those points on board. The hon. Member for Southampton, Test (Dr Whitehead) spoke about the carbon price floor, and the hon. Member for City of Durham (Roberta Blackman-Woods) talked about the north-east needing more support. The right hon. Member for Holborn and St Pancras (Frank Dobson) talked about Euston station.
The hon. Member for Barrow and Furness (John Woodcock) talked about Olympic-scale investment under this Government, and the hon. Member for Hartlepool (Mr Wright) mentioned productivity. He is right; the job is not yet done. That is why we do not think that anyone should entrust the keys to those who crashed the car. The hon. Member for Washington and Sunderland West (Mrs Hodgson) missed the fact that this Government are already spending £5 billion on child care, before we get to tax free child care.
I welcome the hon. Member for Wythenshawe and Sale East (Mike Kane) to the House. I know this was not his maiden speech, but if he can raise a laugh after five hours of a Budget debate he is a welcome addition to the House. He mentioned reform of air passenger duty. That is what I was discussing with his predecessor just before Christmas, and I look forward to continued discussions on that.
My hon. Friends the Members for Wolverhampton South West and for Brentford and Isleworth said that we need greater business investment, and they are right. Investment has been too low for too long, and it has held back growth. Had business investment increased by just 10% in 2012, the level of GDP would be £12 billion higher. We must create an environment that encourages business to invest.
Barry Gardiner
Will the Minister answer the question that I put to her in my speech about whether local authorities will be able to insist that pension pots are converted into cash to put people over the threshold for care costs?
Nicky Morgan
I am sure we do not want to see that, but we will look at it in more detail as we go through the scheme. The Government have set out a clear intention to help people with their care costs, and nothing in last week’s announcement should diminish the fact that we want people to have affordable care costs, and not to be worried about getting older and being able to afford their care.
The most important point about business investment was the extension and expansion of the annual investment allowance, which means that from next month 99.8% of businesses will get a 100% investment allowance. Almost every business in Britain will pay no upfront tax when it invests. We have already mentioned the policies on pensions and savings, and the Government believe that we will give people the opportunity to save now, and to control their finances better in the future. The Government believe that responsible people who have worked hard and saved sensibly all their lives should have the freedom to decide how to use their own savings. The changes we announced last week recognise that, and act on it.
My right hon. Friend the Secretary for Communities and Local Government spoke earlier about some of the other Budget measures that will boost our communities. He spoke about Ebbsfleet, the enterprise zone in Coleraine, and the Cambridge city deal. I wish to put on record how pleased I was to be at the launch of the Leicester and Leicestershire city deal this morning. Many hon. Members will already have seen the difference those schemes can make in their areas, and I pay tribute to all those in Leicester and Leicestershire who worked so hard to secure that deal. It will boost the economy of our city and county.
This Budget will ensure that more people have jobs to go to at the start of the day and can return to their own homes at the end of the day. It will give people a greater amount of their earnings at the end of the month, and greater access to their savings at the end of their careers. Of course there is more work to do, but this Budget represents another sensible step to get our country back on its feet, and I commend it wholeheartedly to the House.
Ordered, That the debate be now adjourned.—(Harriett Baldwin.)
Debate to be resumed tomorrow.