The Commercial Secretary to the Treasury (Lord Deighton) (Con)
My Lords, it is a privilege to open this debate following Her Majesty’s gracious Speech. The measures set out yesterday demonstrate this Government’s commitment to securing the UK’s economic success by creating a stronger, more competitive economy for the longer term. Through the British people’s hard work and the effective policies of this Government, we find ourselves in a far superior economic position than this time last year, when some were expressing concern regarding the prospects for recovery.
No major advanced economy grew faster than the UK over the past year or in the first quarter of this year. Employment is at record levels. Last month’s inflation of 1.8% was below target. We are seeing competition in the supermarkets, which is pushing food prices down. Wages are rising at a similar pace to prices and real take-home pay is increasing. We are completing major infrastructure projects: for example, a dramatically improved King’s Cross station, smart motorways to relieve congestion across the country and, yesterday, a new Queen’s Terminal at Heathrow airport to enhance our international connectivity.
The fiscal challenge facing this Government in 2010 required urgent action. This meant not just committing to reducing the deficit, which is on course to halve this year from that 2010 level, but doing it in a way that gave markets confidence and helped keep interest rates low. The Government’s decision to deliver the majority of consolidation through reduced spending was the only credible option for our country. As a result, the independent Office for Budget Responsibility now predicts that in 2018-19 the UK will have a surplus for the first time in 18 years.
By almost all measures, the performance of the UK employment market is excellent and improving. One way, however, of getting more people into work is by addressing the high cost of childcare. This issue particularly affects women. Even though female participation in the workforce is at an all time high, if we could equalise their labour force participation to that of men the UK could increase growth by 0.5% per year. We are therefore introducing legislation that will further support working families with the cost of childcare. This is beyond the existing £5 billion invested every year in early education and childcare. The Childcare Payments Bill will implement a new tax-free childcare scheme providing up to 1.9 million families with 20% support towards their childcare costs of up to £10,000 per year per child—£2,000 credit per child. This will be available from autumn 2015. This Bill replaces employer-supported childcare with a new, fairer scheme that will be easy to access online, open to working parents irrespective of who they work for, and available, for the first time, to the self-employed.
The quality of a nation’s infrastructure is a key driver of its economic growth. That is why this Government have put investment in transport, energy, telecommunications, flood defences, water, waste and intellectual capital at the heart of our economic strategy. We are making significant progress. Over 2,000 infrastructure projects and improvements have been completed over the past four years. In this financial year alone, over 200 new projects are due to start and another 200 are due to complete, which will directly support over 150,000 jobs in the construction industry. These are part of the £36 billion of investment planned for 2014-15.
These projects form part of our national infrastructure plan, which it is my pleasure to oversee at the Treasury. That plan not only sets out the Government’s decisions about what infrastructure our country needs over the next decade and beyond, it also sets out our strategy for how it will be delivered. It lays out the action that we will take on financing, which builds on both the innovative long-term public funding settlements that we have already announced—£100 billion of capital investment in projects over the next Parliament—and the steps that we have already taken to support private-sector investment, for example through the UK infrastructure guarantee scheme. A significant portion of the UK’s infrastructure investment takes place through corporate financing by our utility companies in the capital markets. This is an extremely efficient way of getting things done because of the confidence that investors, both domestic and international, have in the integrity and independence of our regulation of these sectors. We should hold on to that independence dearly.
The national infrastructure plan also lays out the action that we will take on strengthening planning, where a number of improvements have helped to take planning approvals to a 13-year high. The new specialist planning court for infrastructure, which opened in April, and the additional measures published in the Infrastructure Bill that we have introduced will further streamline the regime for major infrastructure and speed up the discharge of planning conditions. These reforms to planning will further support our efforts to generate a faster, much needed, increase in the housing supply.
In last year’s spending round, the Government committed to the largest programme of roads investment since the 1970s. Between 2010 and 2021, the Government will invest more than £24 billion in our roads. By committing this significant amount of long-term capital and by reforming the Highways Agency so that this capital is deployed efficiently, we intend to address the stop-start cycle of investment previously seen in roads and to ensure that our road network can continue to support the economy and its growth.
On rail, legislation for the first phase of a new north-south high-speed railway is progressing through this Parliament. It is 120 years since we built a mainline railway north of London and it is absolutely imperative that we seize the opportunities that this presents. The new railway complements this Government’s transformational investment in our existing railways. Between 2014 and 2019, Network Rail will spend over £35 billion, continuing a substantial programme of expansion and renewal. We are building the Northern Hub, a programme of rail upgrades across the north of England that will allow up to 700 more trains to run each day and provide space for about 40 million extra passengers a year, and we are delivering an unprecedented programme of electrification across the country.
Passengers on the great western and the east coast main lines will benefit from £6 billion of investment in fast new electric trains, and of course we are transforming rail capacity in the south-east by completing—on time and on budget—Crossrail and Thameslink. That includes rebuilding London Bridge Station, which is being done quite dramatically by keeping it operating at the same time for the benefit of customers. HS2 will connect eight of Britain’s 10 largest cities and more than double capacity on some of our busiest routes. It will directly employ nearly 25,000 people in construction, and the regeneration around stations will support up to 100,000 further jobs. I chaired a task force that examined how to maximise the benefits from this project, and I was persuaded that it can be truly transformational, particularly for our cities in the Midlands and the north, if we approach it strategically and collaboratively so that we capture its full economic potential. I am now working across government to make sure that we do just that.
I was delighted by the overwhelming cross-party support shown for the HS2 phase one Bill during the recent Second Reading debate in the other place, but there remains a long way to go until this legislation receives Royal Assent. I urge Members of both Houses to make this happen quickly, because I believe it is crucial that the scheme’s huge benefits are felt by people and by businesses up and down the country as soon as possible.
Finally on infrastructure, through the reform of the electricity market we have established a framework that will drive investment in energy infrastructure, deliver renewable energy and make sure that we have secure supplies for the future. We have already seen more than £45 billion of investment in electricity infrastructure since 2010. We have agreed the terms for a new nuclear power station at Hinkley Point, the first in a generation. We have set aside more than £1 billion to drive innovation in carbon capture and storage, and that is one of the best offers to develop this technology in the world. We have also increased the share of our electricity that comes from renewables to almost 15% in 2013, up from under 6% at the start of 2010.
It is also important that we get the most from our existing oil and gas reserves in the North Sea. Three months ago the Government accepted Sir Ian Wood’s recommendations on this subject, and we are introducing measures in the Infrastructure Bill to put the principle of maximising economic recovery of petroleum in the UK into statute. Shale gas has significant potential for boosting economic growth and competitiveness, and the Government are creating the most competitive tax regime in Europe to encourage its development, but more still needs to be done. The Government want to put in place the right regulatory framework to support a shale gas industry while ensuring that we protect the environment.
Moving on to local government, we believe that the local enterprise partnerships are best placed to identify local priorities for growth and drive forward local economic development. The Government are currently implementing the recommendations set out by my noble friend Lord Heseltine in his review of UK growth entitled No Stone Unturned in Pursuit of Growth. So far, we have agreed 24 city deals across the country, which have successfully devolved resources to local areas. We are going further. The Government are currently negotiating a growth deal with each of the 39 LEPs that will see them receive a share of the Local Growth Fund, which will total £2 billion in 2015-16 and will be at least £2 billion in each year of the next Parliament. These growth deals demonstrate the Government’s commitment to empowering local areas to take control of the growth agenda in their local economy.
I would like to close my remarks by reviewing how we are making sure that our policies impact people in the fairest way possible. Tax avoidance not only deprives the UK of the money it needs to fund public services, it also undermines public and business confidence in the fairness of our tax system. The National Insurance Contributions Bill includes measures to strengthen the robust stance that this Government are taking in tackling all forms of avoidance. Our approach here is simple: in return for offering a competitive tax system that promotes economic growth, we expect everyone to pay their taxes, and the anti-avoidance measures included in the Bill will reinforce this principle. In addition to tackling those who do not pay their fair share, the Bill will also simplify the collection of national insurance from 5 million self-employed individuals by implementing the self-assessment scheme recommended by the Office of Tax Simplification.
The other main thrust of our fairness policies is quite simply to reduce the tax burden on the millions of working people in the country. In this respect, noble Lords should note that the personal allowance will increase again to £10,500 from April next year, and fuel duty has been frozen until the end of this Parliament. We have helped local authorities to freeze council tax in every year of this Parliament. We are reducing the impact of government policies on energy bills by £50 for average households—a way in which we can sensibly control energy bills. We have also made it easier to save and easier for people to access their pensions. But the best way of getting money into people’s pockets, and the best way of helping them to raise their living standards, is from the jobs and opportunities that are created and sustained by a dynamic, growing economy. I believe that the measures set out by Her Majesty yesterday will achieve this.
The Minister of State, Department for Transport (Baroness Kramer) (LD)
My Lords, it is a pleasure and an honour to welcome the right reverend Prelate the Bishop of Rochester and congratulate him on making a maiden speech; to do so on the Queen’s Speech takes exceptional courage. He said that he has hard work ahead of him to achieve the goal of women bishops, and asked if there was enthusiastic support in this House. I assure him that there are many who will provide him with such support; indeed, he may regret asking the question.
The noble Lord, Lord Davies of Oldham, was right to say that the better the debate, the worse the wind-up. I realise that I have an extraordinary challenge in the wind-up today; there were so many speeches today across such a wide range of issues that I realise that in the time available it is going to be absolutely impossible to respond to all the points that have been made. Where there are questions that I have been unable to answer by the end of the debate, and there will be many, we will try to follow them up.
I start by putting today’s discussion in some sort of context. Four years ago we gathered in this Chamber to debate the first Queen’s Speech since the formation of the new Government. It was also the first time that Britain had a full coalition for more than half a century. However, we were also in the middle of the biggest economic crisis for decades. It was crucial that in that first Queen’s Speech we sent out a strong message of intent to reassure the country. Indeed, Her Majesty’s opening words in that Queen’s Speech of May 2010 made absolutely clear our top priorities: to reduce the deficit, restore economic growth and govern with fairness and responsibility. We know that those are the yardsticks against which this coalition Government’s performance will be measured.
I do not intend to reiterate the speech made by my noble friend and colleague Lord Deighton at the beginning of this debate, which listed the successes and achievements on the economic front. They were echoed by my noble friend Lord Flight, who predicted 3% GDP this year—I hope he will give me some good horseracing predictions, because that requires true courage and acuity. My noble friend Lord Razzall talked of the animal spirits that are pushing forward the economy. My noble friends Lord Northbrook and Lady Noakes pointed out how manufacturing is on an upward trend. That was a real challenge for us to achieve, and we are achieving it. My noble friend Lord Wrigglesworth talked about the achievement of reducing the structural deficit and achieving confidence in the markets at the same time as real fairness in the ways in which we have had to make cuts in order to manage the deficit. My noble friend Lord Shipley talked about the robust contribution of small businesses, as did quite a number of other noble Lords. When you listen to that list, you recognise that this is very far from a zombie Government. This Government are alive and kicking. I take the point that zombies are immortal. Now there is a prospect.
In fact, if anyone is looking a little pale on this occasion, it has to be the Opposition and their speeches today. I am just astonished at the level of amnesia. When I listened to the speeches made by the noble Lords, Lord Adonis, Lord Giddens, Lord Lea of Crondall and, to an extent, Lord Davies, they all seemed to have forgotten the state of the economy that they handed to us. I say to the noble Lord, Lord Lea of Crondall, and this is crucial, that, yes, there was a financial crisis, but the Government had run this economy in such a way with such overspending that there was no resilience to come back from it, and it is because of that that we faced the crisis that we did, which was so much worse than that in other developed countries. It is from that base that we have moved forward.
I say to the noble Lord, Lord Adonis, that many of the issues that he raised and criticised this Government for were actions that his own Government had not taken. Although this is slightly out of the range of the economy, one of the things that shocks me most is that as I go up and down the country and talk to young people who are now just getting into employment, they came through education during the Labour years when they did not get the skills they needed, when there were no apprenticeships, respect for vocational education or opportunity. It is those changes, including 2 million apprenticeships by the end of this Parliament, that are beginning to make a real change and eat into the figure for long-term youth unemployment. I agree that we must focus on that relentlessly, but that is just one of the many issues on which I wanted to challenge.
The noble Lords, Lord Giddens, Lord Lea of Crondall and Lord Davies, and the noble Baroness, Lady Thornton, all raised the issue of inequality. We have been in a period of real austerity. We are beginning to recover. We are now seeing wages begin to recover, which is crucial, but we also made sure that people kept their jobs. To have been through the period of recession that we have been in and to have managed to keep down unemployment, which is now down to 6.8%—which is not where we want it, we want it much lower—has been a very significant achievement. What more could you do to tackle inequality than to start to take people at the bottom of the earnings scale out of income tax? That is something that Labour never conceived of doing. Labour may now be on board—everybody is on board—but my party led on this issue and has been crucial in making those kinds of changes, along with apprenticeships and the kinds of opportunity that are offered.
The noble Baroness, Lady Thornton, mentioned women. Since the coalition Government came to power in May 2010, there are 446,000 more women in employment. Between 2011 and 2012 the gender pay gap reduced for all employees. Even if you look only at full-time employees, it also reduced. We are not where we need to be but, my goodness, we are on the path. There are not many who could have said that, certainly not coming through the kind of economic period through which we have been. We must not relent.
I will try quickly to cover some of the key issues. On the issue of women, the tax-free childcare that we are now putting into place, something that has never been done before, as well as the improvements that we are making in the support to parents on universal credit, are great breakthroughs. They will be very important in the lives of people, especially in the lives of many women.
Quite a number of noble Lords raised the issues of social housing; I am trying to watch the time as best as I can. Social housing was the focus of speeches by the noble Baroness, Lady Andrews, and the noble Lord, Lord Sawyer; it was covered by the right reverend Prelates the Bishops of Leicester and of Rochester; and the noble Lord, Lord Shipley, talked extensively about it, as did the noble Lords, Lord McKenzie of Luton, Lord MacGregor of Pulham Market, Lord Wrigglesworth and Lord Harrison. They fell into two groups. There was discussion of affordable housing and housebuilding. When we came into government in the financial crisis, obviously the consequence of that financial crisis was that housebuilding had largely collapsed. It is one of the first industries that gives way in that kind of financial crisis. We have been coming back from that, but the impact of the crash was huge. Housebuilding is now at its highest since 2007. Over 445,000 homes have been built since April 2010; 170,000 affordable homes will be built between 2011 and 2015—we have got to 99,000 so far; and £23 billion of public and private finance will help to ensure another 165,000 more affordable homes between 2015 and 2018, which will be the fastest annual rate for 20 years.
We need to keep absolutely focused, which is one of the reasons why the Bills that were announced in the Queen’s Speech were so important. The ability now to transfer unused land held by agencies from those agencies to the HCA to turn into housing projects much more quickly will be one of the many things that will help, along with the changes in planning law which, as many have said, is not a protection in many cases but an obstacle. We need to change that dynamic.
The other issue that was raised was concern about the house price bubble in London. Hopefully, that is now mitigated against as we look at the most recent figures. I want to be absolutely clear that, as some said on the Floor of the House, Help to Buy does not appear to have been a contributor to that: Help to Buy has been helping people outside the London area. Mark Carney’s name has been taken in vain on quite a number of occasions, but what is really important is that the Bank of England is now looking at macroprudential tools rather than interest rates only to try and manage the housing market. It is now becoming tougher, for example, to qualify for a loan in London for high-priced houses. Mechanisms like that can help us deal with those bubbles without the necessary resort, which will have to happen at some point, to interest rates.
Somebody raised the question of foreign buyers. Noble Lords will know that Boris Johnson now has an agreement with builders in London that they will market first in London rather than overseas. There are other measures like that which we can manage to achieve. Others mentioned some of the tax steps that have been taken to try and contain that.
I move on quickly from that issue to the issue of energy, which obviously plays a big part in the Queen’s Speech. Again, I am under tight time pressure, so I will focus fairly heavily on the issues of extraction of oil and gas from shale, and geothermal. I want to provide some reassurances—I am desperately looking to find out exactly what the question was—that the report of the Economic Affairs Committee, discussed by its chair, the noble Lord, Lord MacGregor, my noble friend Lord Teverson and the noble Baronesses, Lady Noakes and Lady Jones, and others, will be responded to before the summer recess.
There is a consultation at present on the Government’s proposals for underground access. I say to the noble Baroness, Lady Jones, that this concerns access below 300 metres. Many of the people who oppose the headline that they see on this measure have no idea that we are talking about levels below 300 metres. It does not apply to surface access. It is very much to the credit of this country that we have a very tough regime of approval for the kind of exploration that would be necessary for shale oil and gas extraction. They are internationally recognised and there is no attempt to break down those protections, which are essential for the confidence of the community. Others have talked about the importance of sharing the benefits with the community, and a number of programmes deal with that. I will gladly write to noble Lords with more detail because I can see that time is racing away from me.
There were a number of questions on devolution and local government from the right reverend Prelates the Bishops of Leicester and of St Albans, the noble Lord, Lord McKenzie of Luton, and my noble friends Lord Tope and Lord Shipley. Devolution is absolutely critical and the Government have taken it forward in a way that no one has for a generation. I work with the Local Growth Fund. Local enterprise partnerships are obviously working closely and are deeply engaged with their local authorities and other stakeholders in the community and are coming forward with strategic plans for economic growth in their areas, bringing in new kinds of thinking and breaking down the old silos, which is critical. It means that the Government are handing over the motivation for and the design of those strategic economic plans to local areas, which is a crucial piece of devolution.
I look at simple things in the transport world where we transferred significant parts of the support that we give to buses, including the bus service operators grant, back to local authorities. There is very much a pattern. I recognise that these are hard times, but the good local authorities have looked at the harder financial profiles they face and have managed them very effectively. I take on board the warning of my noble friend Lord Tope; we have had that same concern virtually every year. Really good authorities have found ways to deliver for local people—and, ironically, the approval ratings for local authorities have gone up significantly: they are now at 77%. So there are ways, and we must demand that at a time when every penny is important.
Infrastructure forms a significant part of the nature of this Bill and a number of people raised it. The noble Lord, Lord Birt, said we did not have a plan; we certainly have a plan by any definition of a plan that I know in the national infrastructure plan. As the noble Lord, Lord Deighton, is sitting here, I asked him to confirm what I am saying. The plan sets out what the Government want to achieve, the approach in each sector, and the action they will take to ensure delivery, including identifying key priority investments.
That has been crucial, and sometimes the numbers used to describe investment in the UK and to compare it with other countries fail to recognise that essentially road and rail are public investments in this country, but nearly every other kind of investment in infrastructure comes from the private sector. I was recently in the United States, where they are now trying desperately to copy what we are doing because one’s ability to leverage in that kind of private money significantly increases the amount of investment in infrastructure and creates so many possibilities that could never come from just using the public purse. So we need to stop using distorted figures when we look at these numbers.
Noble Lords talked of their concern over the new status of the Highways Agency—the noble Lord, Lord Davies of Oldham, mentioned it.
Baroness Kramer
I will have to come to the noble Lord with that number, because I do not have it to hand. I would be quite interested in seeing it myself, as I have not seen it expressed in that way—but I would be delighted to.
Something that is very important about the Highways Agency, which encapsulates the real change that this Government are bringing to infrastructure, is that it will sit as the delivery implementing agency, in effect, for future roads investment. Sitting outside it is the roads investment strategy, which remains entirely the responsibility of the Secretary of State. I should say that the Highways Agency is also wholly owned by the Government—it is definitely an agency. For the first time, we will have long-term certainty of funding for roads and a programme over a Parliament in the same way that we have had for rail. Many in this House have pointed out that the problem in project after project has been that investment has been subject to a stop-start set of decisions, which have disrupted long-term investment. Now we can begin to have that kind of assurance. Bringing into the Highways Agency people with the skills to deliver that efficiency, just as we are doing in the rail sector, is absolutely crucial. With the scale of investment that we are undertaking, we have to make sure that every penny is well spent. That means that we need that specialised expertise and we will have it going forward—we hope, if this House and the other place agree to the kinds of proposals being put forward in the Queen’s Speech.
I have less than two minutes, so I close by reiterating my thanks to everybody who is here. I recognise that there are very significant areas that I have not covered, but I shall try to do so in writing in response to questions. Finally, it has been an absolute privilege to be in the Department for Transport at this time. I look back at previous Ministers, and many in this House who had to deal with cuts and decline. We are at a time when this Government are taking a completely different approach towards infrastructure. It is part of the growth, because it becomes the framework for important economic growth. We are building Crossrail, we are completing the Northern Hub, and there will be £70 billion of capital investment in transport over the next Parliament. We are trebling the budget for major road schemes. Network Rail will spend £38 billion over the next five years. We have doubled the investment in cycling and we are investing £500 million to position Britain at the forefront of ultra low-carbon motoring. As the demand for travel rises, we are meeting that challenge.
Busy arteries such as the west coast main line will be overwhelmed in the next decade if we do not build new capacity between our cities in the form of new rail, which is why we need the new north-south rail High Speed 2. I can tell the noble Lord, Lord Horam, that it is of course our intention that eventually there will be an HS1-HS2 link. The scheme in the programme was simply inappropriate and unworkable. It is something we want but we recognise that it will need to be looked at in the future.
However, the most important thing about HS2—this goes back to the discussion on the economy and equality—is that it offers so much opportunity to the Midlands and the north, which they deserve. We must take connectivity along with it. That goes back to the devolution issue. The noble Lord, Lord Deighton, has led that work and worked closely with the communities in the Midlands and the north. They have told us what connectivity is needed to maximise the benefits of HS2. That line offers a future in which once again, as has always been the case traditionally, the Midlands and the north can balance out London and we achieve growth all across our nation so there are no areas to which we have to transfer payment, as it were. Rather, there will be great generation of wealth, income, jobs and new business all across the country.
I thank noble Lords for their contributions and wish there had been time to respond to more of the questions.