Amendment of the Law
(9 years, 8 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
Ed Balls (Morley and Outwood) (Lab/Co-op)
It is an honour to open today’s Budget debate. Less than 24 hours after the Budget statement, the truth is becoming clear. For all the Chancellor’s hubris, yesterday’s Budget has changed nothing for working people in our country. He spent an hour telling people that they have never had it so good, but working people are still, on average, £1,600 a year worse off after five years of the Tories. Our national health service is still in crisis, but he had nothing to say about the NHS.
The Chancellor started the day with plans for extreme spending cuts, and he ended the day with plans for extreme spending cuts: cuts to spending even bigger in the three years after the election than those of the past five years; deep cuts that go way beyond balancing the books; and deep cuts that can be delivered only by another Tory rise in VAT or by putting our NHS at risk. It was a Tory Budget from a Tory Chancellor who gives with one hand and takes much more with the other—an out-of-touch Budget that made twice as many references to Agincourt as it did to our NHS.
I will examine all the Chancellor’s claims and set out the truth behind the spin and hubris, but first I want to set him straight on one issue. I applaud the £1 million he announced to commemorate the battle of Agincourt, but before he goes any further with those plans I have to correct his rather shaky understanding of the battle. I know he has a degree in history, and that I have a mere A-level in mediaeval history, but I suggest he stick to the period he knows. For a start, the Chancellor should be aware that not a single Scottish soldier fought on the French side at Agincourt. Indeed, if he reads Shakespeare’s version of the battle, he will see that there were representatives of Scotland, Wales and Ireland, all fighting as captains in King Henry’s army.
The story of Agincourt was one of an arrogant and complacent king who, rather than fight the battle himself, sent his weak and ineffective right-hand man to defend an impossible situation. He got his tactics wrong, he lost control of the situation, and he became bogged down in mud. He was no match for the stout yeomen on the other side. They may have lacked money, horses and noble blood, but they outfought their opponents on the battlefield. We stout yeomen will be happy to join in the commemorations of Agincourt. As fans of hand gestures, if anyone can think of any famous hand gestures traditionally associated with Agincourt, we will be happy to use them towards the Chancellor again and again at every stage of this debate.
It was fitting that the Chancellor chose to invoke Shakespeare in his Budget speech. He has, after all, been a poor player these last five years. Yesterday he strutted and fretted his final hour upon this stage, and after May he will be heard no more. Yesterday was a Budget full of sound and fury, ultimately signifying nothing.
Julian Smith
On the subject of sound and fury, will the shadow Chancellor clarify what he would do to stick to the commitments he made when he signed up to the charter for budget responsibility only a few weeks ago?
Ed Balls
People say that empty vessels make the loudest noise. I will set out clearly our approach to deficit reduction, but before I do let us go back to the ineffective right-hand man, who apparently is now standing in front of Downing street holding a yellow Budget box—less reality, more “Midsummer Night’s Dream”. What a shambles! Yesterday we had the Budget, today we had the farce of the alternative Budget from the Chief Secretary, the Liberal Democrats’ new economic spokesman, and now, with the Business Secretary shortly to come to the Dispatch Box, I presume we are to get the alternative alternative Budget from the man the Chief Secretary displaced from the job.
One has to feel sorry for the Business Secretary. He lost a job and still has to turn up to give the speech, sitting there beside one of his Treasury nemeses, with the other outside Downing street. Another Shakespeare quote comes to mind:
“Misery acquaints a man with strange bedfellows.”
How true. Let us not forget that the Business Secretary and the Chief Secretary served with the Chancellor in the Cabinet for five years. Together all three of them voted to put up VAT. The Liberal Democrats voted with the Tories to raise tuition fees to £9,000. They voted with the Tories for the hated and iniquitous bedroom tax. The fault is not in their stars, but in themselves, and the British people will not let them forget it.
Mr Brian Binley (Northampton South) (Con)
Will this ploy of much ado about nothing delivered in a tempest form continue for the whole of the right hon. Gentleman’s soliloquy, or will he come to some points of import shortly?
Mr Richard Bacon (South Norfolk) (Con)
“Drest in a little brief authority,
Most ignorant of what he’s most assur’d,
His glassy essence, like an angry ape,
Plays such fantastic tricks before high heaven
As make the angels weep”—
When is the right hon. Gentleman going to get on with it?
Ed Balls
I don’t know. That was all Greek to me.
Let us stop wasting time with the ridiculous Liberal Democrats and return to the Chancellor’s Budget. The Chancellor claimed, first, that working people are better off than they were in 2010. How out of touch can you get? No wonder Conservative Back Benchers were so muted in the House of Commons yesterday. They know, as we know, the reality of people’s lives. Unlike the Chancellor, they hear it on the doorstep. They know that with wage growth stagnant over the past few years, energy bills rising, and 1.8 million zero-hours contracts, when the Chancellor says there is a recovery, most people say, “Where is the recovery for me? It is not a recovery for me, our family and our community.”
The Chancellor tried to invent a new measure of living standards yesterday. It was a flawed measure because it includes income to universities and charities, but, compared with the first quarter of 2010, in the first quarter of 2015 the Chancellor’s measure has not gone up; it has gone down. Even on his own measure, people are worse off than they were in 2010. We know from the independent Institute for Fiscal Studies and the Resolution Foundation that on more sensible measures confirmed by the IFS two weeks ago, household incomes are down compared with 2010, and wages after inflation are down by more than £1,600 a year since 2010. This is the first Parliament since the early 1920s when the average person in work will be worse off at the end of the Parliament than they were at the beginning. In answer to the famous Reagan question, “Are you better off than you were five years ago?”, the answer is a resounding no.
We welcome the action to help savers and increase thresholds, but where was the action to help working people? Why did the Chancellor not announce an ambition to raise the national minimum wage to £8 an hour? Why did he not commit to expanding free child care for working parents to 25 hours? Why not cut business rates for small companies? Why not ban exploitative zero-hours contracts? Why not repeat the bank bonus tax and have a compulsory starter job for our young people? Why not scrap his absurd married couples allowance, which he barely mentioned yesterday, because it goes to only a third of married couples, and instead use the money to cut the taxes of working people? That is what he should have done. That is what a Labour Budget will deliver.
The Chancellor’s second claim is that he is rebalancing the economy. We all remember his claim of
“a Britain carried aloft by the march of the makers”—[Official Report, 22 March 2011; Vol. 525, c. 966.]
but the independent Office for Budget Responsibility said yesterday that growth is still lower than was forecast in 2010. Growth is set to be slower this year and next year than last year. The OBR confirmed that the Chancellor is on course to miss his 2010 target to double exports to £1 trillion—off course by more than £600 billion, and business investment has been revised down this year. The OBR says that “the growth of potential productivity per hour remains below its historical average throughout the forecast” and that “actual hourly productivity growth has again been weaker than expected”. The only thing it has revised up is its forecast for net migration.
Why did the Chancellor not act to deal with the housing crisis by committing to build 200,000 more homes a year by 2020? Why did he not establish a proper British investment bank for small and medium-sized businesses? Why did he not take up our idea, now the subject of consensus across our country, and establish an independent national infrastructure commission to stop long-term decisions being kicked into the long grass? Why did he not go further and devolve powers, including the uplift on business rates, to all areas in our country, rather than just to some? Why did he not commit to securing Britain’s place in a reformed European Union?
Sir Edward Leigh (Gainsborough) (Con)
I would not want the right hon. Gentleman to forget to mention the deficit, so can we get back to that? It is quite important. When we came to power, following the Labour Government, the annual budget deficit was £141 billion a year. It is now £93 billion a year—still far too much. Will the right hon. Gentleman explain his plans for matching our plans to keep that budget deficit under control and preferably get rid of it by 2020?
Ed Balls
I understand the hon. Gentleman’s concerns. I know from reading Hansard that he said to the House a year ago that
“for all the huff and puff, when it comes to what it actually puts into and takes out of the economy, the Budget represents a 0.3% change . . . That is somewhat worrying when we consider the very big challenge we face on deficit reduction”.—[Official Report, 20 March 2014; Vol. 577, c. 993.]
I share his concerns about the Chancellor’s track record, and I am going to set out our alternatives in a moment.
Before I do that, let us go back to the Chancellor’s claims yesterday. He seems to have been telling the media this morning that he has retreated from his commitment to austerity, but the OBR’s document sets out the truth. Its verdict on the Budget is that it represents
“a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years.”
It goes on to give the details on page 130, where it sets out in graphical form the cuts in public spending that we shall see from the Chancellor. Paragraph 4.108 states:
“One implication of the Government’s spending policy assumptions is a sharp acceleration in the pace of implied real cuts to day-to-day spending on public services and administration in 2016-17”.
I am going to set out a better way to do this, but first I will highlight what the Chancellor is actually doing. The reason he has to set out such deep cuts to public spending—deeper in the next Parliament than in this Parliament—is that, as the OBR confirms, and as the hon. Member for Gainsborough (Sir Edward Leigh) knows very well, in this Parliament he has failed to balance the books. Yesterday’s numbers confirm, according to the OBR, that the Government are borrowing £200 billion more than they planned in 2010. The deficit is set to be not balanced, but £75 billion. For all this Chancellor’s boasts about national debt falling, public net debt in 2015-16 is £217 billion higher than he was forecasting in 2010. He now claims that the national debt is going to be falling. That is based on his forecasts of short-term, one-off money coming in from the sale of bank shares. In 2014-15, he was planning on the national debt falling from 69.4% to 67.4%. In fact, his forecast yesterday has the national debt in 2015 at 80.4%, falling to 80.2%. It takes some hubris for a Chancellor to borrow over £200 billion more and then claim he has succeeded. That is the reality, and we know why. As the OBR confirmed yesterday, income tax and national insurance receipts have come in short of the 2010 forecasts by £97 billion cumulatively across the Parliament.
The result is the deeper spending cuts that the Chancellor had to set out yesterday. The IFS said back in the autumn that these were colossal cuts; they are still colossal cuts. The OBR said in the autumn that this would take spending on day-to-day public services back to the level of the 1930s. The Treasury tried to tell us yesterday that that was no longer the case. Its special advisers tweeted that they are only the deepest cuts since 1964. It comes to something when they have to boast that we are cutting our public spending to a level not seen for 50 years. In fact, the small print of the OBR tables reveals that 2018 spending, on the historical comparative measure that the OBR uses—day-to-day spending on public services—falls to its lowest level since not 1964 but 1938.
The Chancellor claimed that he had changed the position, but he has confirmed the reality—even deeper cuts in the next three years than in the past five years. That is the truth. These are, in my view, cuts that will be impossible for our police services, our defence and armed forces and our social care to bear. Even this Chancellor cannot make this scale of cuts to our armed forces, our police forces or our social care, so he is going to have to end up doing what he always has to do—raise VAT and cut the NHS. That is the reality.
The Chancellor wants us to believe that this does not have to happen. He says that he can instead cut welfare and tackle tax avoidance. The problem is that his record on both is miserable. He is promising £12 billion more cuts to welfare, but he cannot tell us where they are going to come from. We know he has brought in the bedroom tax, but he cannot tell us what else he has in store. In this Parliament, he has overspent on his welfare plans by £25 billion.
Apparently the Chancellor is now going to crack down on tax avoidance. This is the Chancellor who has seen the tax gap—uncollected tax—rise by £3 billion. This is the Chancellor who, with the Prime Minister, appointed Lord Green—who, it turns out, had presided over HSBC’s industrial-scale tax avoidance. Despite repeated questioning, the Chancellor still cannot tell us whether he actually talked to Lord Green about tax avoidance. Why will he not, between now and the general election, come clean and tell us whether he had conversations with Lord Green about tax avoidance? No wonder the Chancellor did not come to Treasury questions a couple of weeks ago. No wonder he does not want a head-to-head debate. We now know why. One member of the Tory Cabinet does not want to talk about Michael Green, and another member of the Tory Cabinet does not want to talk about Lord Green. One is a deluded fantasist who has great problems with the truth, and the other is the chairman of the Conservative party. To be fair, only the chairman of the Conservative party changed his name—although, then again, perhaps the Chancellor did too.
This is the truth: the Chancellor promised to make people better off, and they are worse off. He promised to balance the books in this Parliament; that pledge lies in tatters. He promised, “We’re all in this together”, and then cut taxes for millionaires. Now he is forced to confirm extreme and risky cuts to public spending in the next Parliament, bigger than in this Parliament.
We need a fairer, more balanced approach to the deficit and living standards. That is why Labour is now the only centre-ground party in British politics. We will cut the deficit every year and balance the books, with a surplus on the current budget and the national debt falling, as soon as possible in the next Parliament. Unlike the Conservatives, we have no unfunded commitments on welfare or on taxes. We were the party that wanted the independent OBR to audit all our manifestos—blocked by this Chancellor.
Andrew Gwynne (Denton and Reddish) (Lab)
I am glad that my right hon. Friend mentions the OBR. I do not know whether he has had a chance to look at the online version of the Liberal Democrats’ document “An alternative fiscal path beyond 2016-17”, table 2.A of which is entitled, “Scenario input assumptions”. Can he guess who the source is? It is not the OBR, it is not the IFS: it is the Chief Secretary to the Treasury.
Ed Balls
We know from the autumn statement that the OBR confirmed that the scale of these spending cuts was agreed by the Prime Minister, the Chancellor, the Deputy Prime Minister and the Chief Secretary, and the same thing is clear about this Budget document. The OBR says:
“This profile is driven by a medium-term fiscal assumption that the Treasury has confirmed ‘represents the Government’s agreed position for Budget 2015’ and that was ‘discussed by the Quad and agreed by both parties in the Coalition.’”
The Liberal Democrats now come along and say that they were not really in favour of the bedroom tax, and not really in favour of these fiscal plans, but we know the truth. That is why we need a fairer and more balanced approach.
We will have sensible spending cuts in non-protected areas. We will cut winter fuel payments for the richest 5% of pensioners. We will cap child benefit at 1% for two years. The shadow Chief Secretary has been setting out in our zero-based review of every pound spent by Government cuts from rooting out waste and inefficiency in policing, in local government, in defence, and in schools. We are going to get rid of the police and crime commissioner elections. We are going to get rid of the free schools. We are going to stop the overpayment of housing benefit. We are going to deal with the issue of—[Interruption.] I meant new free schools. The shadow Chief Secretary has set out ways in which we can make those sensible cuts in non-protected areas.
We will also make fairer choices. We will reverse—[Interruption.] If the Chancellor wants to intervene, I will happily give way.
Ed Balls
I am sorry, but I thought the Chancellor was about to stand up and tell us whether he talked to Lord Green about tax avoidance. He knows very well that our policy is to not have any more new free schools, and our £230 million saving is based on that.
We will make fairer choices, reversing this Government’s £3 billion a year tax cut—[Interruption.] Does the Chancellor want to intervene? The fact is that he cannot give us a yes or no answer about whether he talked to Lord Green about tax avoidance.
We will reverse this Government’s £3 billion a year top-rate tax cut for the 1% earning more than £150,000. We will introduce a mansion tax on properties worth more than £2 million, to help save and transform our national health service.
Our plan will deliver the rise in living standards and stronger growth needed to balance the books. It is a better plan for more good jobs and more balanced growth, because we know that if we can get our economy not to slow down, but to keep growing 0.5% a year faster than forecast, Government borrowing would be more than £32 billion lower in the next Parliament.
After this Budget, it is clear that Britain needs a better plan, not a Budget flop from a Chancellor whose failing plan is not working for working people. The choice is now clear: a tough but balanced and fair plan to deliver rising living standards, save the NHS and get the deficit down with Labour, or an extreme and risky plan under the Tories for bigger spending cuts in the next four years than the past five, which would cause huge damage to our public services and put our NHS at risk.
If they ever write a play about this Chancellor, it will be a tragedy of hubris, fantasy and thwarted ambition: the ruthless prince whose desire to be king has blinded him to reality and made him reach too far. Nothing will better reflect his time in office than the leaving of it: a final Budget built on sand and smoke—a Budget signifying nothing. He has run out of lines, and it is time he left the stage.
The Secretary of State for Business, Innovation and Skills (Vince Cable)
It is a privilege to respond to the Budget. I have calculated that, if we include emergency Budgets, this is the 20th successive Budget to which I have responded. I have begun to recognise some common traits, one of which is that the shadow Chancellor, whoever it is, has to adopt a tone of outrage. The current shadow Chancellor does outrage very well—I will concede that—but what he does not do so well is memory. He has the same problem as his party leader of forgetting important things.
The shadow Chancellor seems, for example, to have had problems remembering his own version of the millionaires’ tax cut, when throughout almost all the period of Labour Government the top rate of tax for millionaires was 40% rather than the 45% it is today. I think he has forgotten his authorship of that famous phrase, “No more boom and bust,” and his own role in boosting the banking sector such that it became overweight, toppled over and caused much of the damage and hurt we are still living with today. I think he has forgotten his record as a forecaster: we all remember his triple-dip recession—there was no triple and there was not even a recession.
There is help at hand, however, because one of the genuinely good legacies of the previous Labour Government is the Crick Institute, which will open shortly and will do medical research. I understand it will be taking forward some of the excellent work of University college London on neural pathways. That will open the door to a cure for amnesia, which seems to be the shadow Chancellor’s main problem.
Kelvin Hopkins (Luton North) (Lab)
Does the Secretary of State not accept that the real change took place when Mrs Thatcher and Geoffrey Howe abolished exchange controls, raised interest rates, raised the value of the pound, destroyed manufacturing and shifted power to the City?
Vince Cable
From what I remember of the facts, the biggest decline in manufacturing took place when the hon. Gentleman and his colleagues were in government. I will come back to that later.
Chris Bryant (Rhondda) (Lab)
I am genuinely flabbergasted that the Secretary of State is accusing others of suffering from amnesia. He seems to have forgotten all the speeches I remember him making from the Opposition Benches in support of our spending plans. In fact, the Chancellor, who is sitting beside him, made exactly the same sorts of speeches in support of our spending plans all the way up to the eve of the recession. If some of us are a little sceptical it is because the Secretary of State is forgetting his own amnesia.
Vince Cable
We will come in a moment to my own and my party’s distinctive approach to spending and taxation, which offers a very sensible middle way between the two extremes on offer.
Let me deal with the shadow Chancellor’s various critiques of Government policy, including whether we have made the numbers add up, inequality and living standards, and the balanced recovery. I will start with his accusation that we have failed to balance the books. The shadow Chancellor is a very clever man, but there is a great deal of intellectual confusion about what Labour is accusing us of. The Government started with the objective of trying to deal with the structural deficit—in jargon, the cyclically adjusted current deficit—within four to five years. We are now spanning that over seven years.
What is the problem? If the Government had pressed ahead dogmatically with the timetable, we would have been accused of being inflexible and causing undue economic harm, and there would have been righteous indignation from Labour. In the event, however, the Chancellor was flexible and responded to changing circumstances, not least the effect on the UK economy of rising world commodity prices and the slowdown in Europe.
The Chancellor is a learned man. He is familiar with Keynes’s “General Theory”—I am sure he had read it several times from cover to cover—and he understands that, in periods of economic slowdown, counter-cyclical stabilisers should be used, which is what we did, alongside the use of monetary policy, to stabilise the economy. It is greatly to his credit that he did that, and that accounts for the fact that we are taking longer than was planned to deal with the deficit. None the less, having done that, the deficit is clearly now being reduced. We have got to the single point that debt as a share of the economy is starting to decline. There is a strong recovery—the strongest in the G7—and we have extraordinary employment figures, with the largest number of people in employment in history.
On the shadow Chancellor’s reference to the balanced recovery, I want to focus on one important development, namely what is happening with business investment, which is what drives sustainable recovery. Let me cite for the shadow Chancellor an interesting contrast. Between 2000 and 2007, 3% of the contribution to British growth came from business investment. That was a period when the British economy was being driven by consumption, household borrowing and a boom in house prices. There was very little business investment. Since the crisis—since this Government have been in office—30% of growth has been driven by business investment.
It is possible to break that figure down even further as to where that investment came from. In the period of Labour Government running up to the financial crisis, the contribution made to investment by property—overwhelmingly commercial property speculation—was 80%, and 4% of that investment was in the form of plant and equipment, which is why we had rapid de-industrialisation of the kind referred to by the hon. Member for Luton North (Kelvin Hopkins). Under this Government, the share of property investment has fallen to 30%, and 50% of all business investment is now plant and equipment—real factories making things and a revival of manufacturing industry.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Is it not the truth that the deficit today is where it would have been under the plans of my right hon. Friend the Member for Edinburgh South West (Mr Darling), and that until this moment not a single Government Member has admitted that the Chancellor was talking nonsense in 2010 when he claimed that he would wipe it out by the end of this Parliament?
Vince Cable
The Chancellor was not talking nonsense. It was perfectly sensible to aim to remove the structural deficit as quickly as possible. The fact that we have taken longer over it is a reflection of common sense.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
The Business Secretary will know that manufacturing has hardly shifted as a percentage of GDP in a period when Tata Steel is potentially selling off half its UK operations to a gentleman with a spurious background in that industry. Is he really saying that the march of the makers and manufacturing is doing so well when 20,000 to 30,000 jobs might be at risk because of de-investment in British and European markets, particularly in the steel industry?
Vince Cable
We do not know what will happen in relation to Tata Steel, but I and my Department are talking to the parties involved, including the trade unions, and we are very concerned about the situation. The hon. Gentleman may, however, have overlooked one thing in the Budget. We had a very emotional debate in the House about the future of the steel industry a couple of months ago, and there is a lot of genuine concern, which I share, about the future of steel. Many of its problems derive from relatively high energy costs, but one element of the Budget was to bring forward the compensation to help steel producers—whether in south Wales, the midlands or the north—to deal with the pressures on their costs. I would have hoped that, at the very least, there would be a little acknowledgment of that.
Tom Blenkinsop
Yes, the Chancellor announced that, but he had said that the compensation scheme would come in much earlier than next year. The Tata long products division is still operating under the existing conditions and, may I add, with a carbon floor price brought in unilaterally by this Government—without any discussion with the industry—which is jeopardising all those jobs. Will the Secretary of State at least talk to the Chancellor about speeding up the compensation package, which is much needed for energy-intensive industries?
Vince Cable
The industry has already received a certain amount of compensation. The constraint on bringing it forward is not the reluctance of the Chancellor, but the problem of getting state aid approval. Once that approval has been given, the compensation can and will be brought forward.
Adam Afriyie (Windsor) (Con)
Does the right hon. Gentleman share my bemusement at the fact that Labour Members are complaining about our rate of economic growth and the low levels of unemployment? This country is respected around the entire world for its position on all such matters, which affect the livelihoods of our constituents across the country. I am surprised that Labour Members will not acknowledge even one point when it comes to this Government’s great, solid, sensible economic management.
Vince Cable
The hon. Gentleman is right. I do not think that the shadow Chancellor mentioned the word “employment”, which is interesting because when we first entered office we heard nothing other than the threat of mass unemployment.
Let me pursue the argument about how we will deal with the deficit in the future. It is perfectly right to say that the parties could debate our actual priorities. To be fair to my Conservative colleagues, they are quite explicit about how they wish to deal with the deficit by relying on reductions in public spending. They recognise, as we do, that there is still a significant problem left. This morning, my right hon. Friend the Chief Secretary set out a different way of achieving the same objective. We all have a responsibility to deal with the problem, and we suggest going about it through a different mixture of taxation and spending. The Conservative approach is to deal with it through spending cuts, and given where they come from politically, that is perfectly understandable. Our approach is different: it is a mixed approach, with a ratio of 55% spending increases to 45% tax increases.
With that different balance, we could do more for the NHS. We have talked to Simon Stevens about the finances required to sustain services, including the extra £8 billion and the commitment on mental health. As far as my Department and its work in supporting growth is concerned, I can say—I do not know what my shadow can say, because he is not in the Chamber—that, on such a trajectory, we could sustain spending on the Budget headings that support growth. Those headings cover the industrial strategy and business support; financial interventions, such as the business bank, the green investment bank and the regional growth fund; innovation, which we need to double by the end of this decade if we are to be competitive internationally; science and research, which we plan to grow in real terms, and which the Chancellor has shown a particular interest in and whose budget he supports; adult skills, further education colleges and apprenticeships; and higher education teaching, research and student support. Those are my priorities, and I am very interested to hear what the Opposition’s are. I think their priority is tuition fees, and I will make a little analysis of how that will be done in a moment.
Sir William Cash (Stone) (Con)
My right hon. Friend made a very important speech relating to banks, particularly in rural areas. Will he be kind enough to give us a few extra thoughts on that question? For example, the last bank in Eccleshall in my constituency has been closed. Does he not regard that as a very retrograde step? It is very important to maintain facilities for banking in rural areas.
Vince Cable
The hon. Gentleman is absolutely right to say that that is a very retrograde step. The Economic Secretary and I have had discussions with the banks about how to deal with that problem, and about how to mobilise the post office network—under this Government, it has been saved and stabilised—to provide an alternative. I am not absolutely certain, but I hope that an announcement will be made within the next few days to protect the position of the last bank in the village.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
There was a £30 billion unanswered question in yesterday’s Budget. We know that there will be £12 billion of cuts in welfare, but will the Secretary of State outline to the House where the axe will fall for the remainder?
Vince Cable
If the hon. Lady read the document that the Chief Secretary introduced this morning, she would get a very clear picture. I have explained the 55% to 45% split, which is quite explicit, and I am very happy to defend it.
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
I am very pleased by the announcement in the Budget of additional support for British businesses exporting to China, but will my right hon. Friend continue to press the case for ever-greater investment in UK Trade & Investment, and for its reform, so that we can start to help small and medium-sized enterprises to export to important emerging countries, such as Brazil, Argentina and India?
Vince Cable
The hon. Gentleman is absolutely right. Indeed, UKTI’s work these days concentrates on supporting SMEs. As a country, we underperform on the contribution of the SME sector to exports, compared with countries such as Germany, and that is the focus of UKTI’s work. I would also emphasise his other point on the need to build up our relationship with China. We have worked very hard on that, and the Prime Minister and the Chancellor have led from the front on our relations with China, which are good. The establishment of the new financial institution, in which Britain is a co-investor, is a signal of the importance we attach to our relations with China, and that will continue.
Sir Edward Leigh
My right hon. Friend is making a very thoughtful speech, in marked contrast to that of the shadow Chancellor, who was more Henry VI than Henry V. Will he comment on the staggering paucity of the cuts the shadow Chancellor will make? They appear to have been dreamed up on the back of a plain-packaged fag packet. How will the shadow Chancellor get rid of the deficit just by abolishing police and crime commissioners and by not opening a few more free schools? I still do not understand how he is going to solve the problem of the deficit.
Vince Cable
The hon. Gentleman is absolutely right. I thought it might be useful to take one element of the Opposition’s policies to see how utterly incoherent it is. I want to home in on the particular issue of how they would fund a reduction in tuition fees. To be frank, this is a tricky subject for all parties. All parties, including the Labour party, have gone back on their commitments. My party has done so, and I know that the Conservatives had some embarrassment in 2005. I would have thought that common sense suggested we ought to draw a line under this episode. I know from the feedback I get from the shadow Cabinet that the shadow Chancellor has been a voice of sanity in this debate, but his leader has not listened to him. Clearly, I am parti pris on this matter, but let me read a comment made yesterday by a man who describes himself as having been
“responsible for delivery in Downing Street under Tony Blair”.
I am not sure that I would want that on my CV, but he is very happy about it. Referring specifically to this proposal, he said:
“The result would be to spend almost £3bn to subsidise high earners of the future. The present system is attracting more students than ever, especially from low-income families. In 2004, before fees were introduced”—
by the previous Government—
“14 per cent of the lowest socio-economic fifth…went to university; last year 21 per cent did. Labour’s proposal therefore offers not ‘more for less’ but ‘less for more’.”
The position is actually worse than that, because we do not understand how it will all be paid for. A £2.6 billion gap needs to be filled to pay for the cap. The original idea was that there would be some kind of granny tax, with grannies paying extra into their pensions. That comes down to the proposal about the pension pot. The proposals that the Chancellor made yesterday diminished considerably the resource available from that source, so where will the money come from? Even if the Labour party can identify where the money will come from, how can it guarantee to universities that the money will get from the grannies to the Treasury to the universities? How exactly will that be sustained in the years ahead?
This is not just a debating point; these issues really matter. The feedback that we are getting from universities is that they have stopped investing because there is a political risk—although it may not be high—of a Labour Government. Universities have stopped investing and are having to fall back on their reserves. Some universities, such as Cambridge, have said that if this policy were to happen, they would drastically reduce the number of students they admitted and cut back on their supervision. The quality of education would suffer.
It requires a particular kind of genius to dream up a proposal of such transcendental stupidity. I was going to ask the person responsible to stand up and tell us what it is all about, but the shadow universities Minister is not here. He is the same guy who left the note saying that there was no money left. What he is now proposing is that universities should experience precisely the same treatment.
Vince Cable
We did not promise to abolish the VAT bombshell. We did make the promise on tuition fees and that was a mistake. We have regretted it and apologised for it.
I just wish that the Labour party would have the same wisdom, because if it ever gets into office, it will go down this road and it will do severe damage to the budget and to universities. The worst thing about this policy is that the primary beneficiaries will be the investment bankers of the future. The shadow Chancellor has been going around complaining about millionaires’ tax cuts. What he is now advocating is a millionaires’ debt-relief scheme.
Mr George Howarth (Knowsley) (Lab)
To use the right hon. Gentleman’s own words, would he describe the promise to abolish tuition fees at the last election as transcendentally stupid?
Vince Cable
The promise was not to abolish tuition fees, but to not increase them. We did increase them and that was a matter of regret.
Mr Mike Weir (Angus) (SNP)
I speak as a representative of the one party in this House that has not gone back on its promise on tuition fees. There are no tuition fees in Scotland. The Secretary of State talks about the costs of the policy, but was not one of the difficulties in the recession the huge amount of personal borrowing? Students are now leaving university owing a fortune because of tuition fees and the other costs of their studies. How will that work through the economy in the future?
Vince Cable
I was hoping that we would have an intervention from the Scottish nationalists, because they illustrate better than anybody else the stupidity of this policy. There have not been tuition fees in Scotland and the quality of university education is declining because there is less resource. The worst thing of all in Scotland is that in order to maintain this policy, they have raided the budgets of further education colleges, taking money from working-class children in Scotland to finance middle-class undergraduates. That is a very retrograde policy. If anybody wants to see where Labour’s policy will lead, they should indeed go to Scotland.
Let me turn to the bigger question of inequality, because many of the accusations that are made by the Opposition relate to the question of whether we have become a more unequal society. It is certainly true that if we talk about the top 1%, there is extreme wealth. Some of it—that created by entrepreneurs and risk takers—is totally understandable in a free-enterprise society, but much of it is not. That problem is shared across the world. It is true of the top 1% in social democratic Scandinavia and in communist China. These people can move, and they can move in and out of our country. It is to the credit of the Chancellor that he was able to say yesterday that the share of income tax that is paid by the top 1% has risen under this Government from 25% to 27%.
Of course, there is one way in which the ultra-rich in society can be made to pay that they cannot run away from, and that is by targeting high-value property. That is one area where my party has common ground with the Labour party.
If we take the wider issue of income distribution and the effects of austerity, the evidence is clear. People in the top 10% or 20% have contributed more than average in cash or percentage terms to the austerity programme and deficit reduction. For an objective measure of inequality, we should look to bodies such as the Institute for Fiscal Studies, which is totally independent and has been a thorn in the side of successive Governments. It has done an analysis of income inequality before and after this Government, looking at the basic Gini coefficient, and found that inequality in income is lower today than in 2007-08. If one digs into the figures a little further, one finds that the numbers depend on which consumer index is applied. However, even if one applies different consumer indices, the IFS analysis shows that, at the very worst, income inequality is no worse under this Government than it was under the Labour Government. I hope that when we hear the righteous indignation in future, the basic facts about this matter will be properly understood.
Ed Balls
Will the Business Secretary confirm that because of measures such as the bedroom tax and what has happened to tax credits—things that have happened only because of Liberal Democrat votes—the quintile that has made the second biggest contribution is the poorest 20% of families in our country? Does he feel proud of that?
Vince Cable
It depends entirely on how we look at the combination of tax and tax credit. The simple point is that the top quintile—the top 20%—has paid four times as much in deficit reduction as the group to which the right hon. Gentleman referred.
Alex Cunningham (Stockton North) (Lab)
Of course, the poorest in our society are the people who are on benefits. The Chief Secretary to the Treasury has ruled out support for the £12 billion of cuts to the welfare budget, which would make income inequality even greater for the poorest people in our society. If the Secretary of State does not support those cuts, what cuts does he support to fill the gap?
Vince Cable
Let me deal with one of the points of righteous indignation that is made about welfare cuts—the point about the so-called bedroom tax. The problem with it is that the idea of relating housing benefit to the size of accommodation did not start under this Government; it was a long-standing policy in relation to people in private rented accommodation. Where we have disagreed with our Conservative colleagues—we have made this explicit—is in saying that the so-called bedroom tax should not apply retrospectively. If people are given an offer of accommodation in the council house sector and they turn it down, they should pay it, but if they do not receive a satisfactory offer, they should not. That is a point of difference. The sheer righteous indignation bears absolutely no relation to the history of this problem.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Will the Secretary of State give way?
Vince Cable
I will take the hon. Lady’s intervention later.
Let me turn to the broader issue of living standards. It is blindingly obvious that in all the western countries that were hit by the financial crisis, there has been a fall in real wages. That has happened everywhere. Countries—including ours—were made poorer, production fell, productivity fell and, although we got more people back into work, real wages fell with it. I am putting this in terms of basic economics. Unless real wages had been kept “sticky”, as Keynes termed it, they were bound to fall, and they have fallen. The alternative was what has happened in France, Spain and Italy, where real wages were maintained, but where there has been mass unemployment as a result, particularly among younger workers. That has not happened here, which is a blessing.
The figure that the Chancellor produced yesterday is highly relevant, because what matters to households is not just wages but people’s take-home pay and disposable income. Disposable income involves not just wages but tax credits and taxation, and families are now better off then when we came to office. That is a result of several interventions, the most crucial of which was lifting the tax threshold. We made the radical, massive change of lifting the income tax threshold from £6,700 to £10,800, and that has brought a great deal of relief at a time of economic crisis to 27 million people. Three million people have been lifted out of tax altogether—mainly women on part-time earnings—and that has benefited workers by the equivalent of £800 a year. That has cushioned working people from the effects of the crisis, and there should be some acknowledgement of that from the Opposition Benches.
Debbie Abrahams
I must challenge the Business Secretary on what he has said about the impact of this Government, which includes the Liberal Democrats and their policies. The Institute for Fiscal Studies clearly states that as a result of tax and spending changes, low-income families, particularly those with children, are proportionately worse off, and incomes have reduced by £1,100. We cannot avoid those facts.
Vince Cable
As I said, the whole of society was hit by the economic crisis, but it is clear that the poorest in society have not been proportionately badly hit, and the people at the top have paid proportionately more. I remind the hon. Lady of what the IFS data said, which was that if we take into account inequality in all its aspects—that includes tax, tax credits and earnings—in income terms Britain is more equal, or as equal now as it was under a Labour Government. Labour Members may need to explain why the economy got into that position when they were in office, but that is what the independent sources tell us.
In addition to the tax allowance, the other key step has been protection of the minimum wage and the Low Pay Commission. I was alarmed by comments made yesterday by the Leader of the Opposition about the minimum wage. I am not one of the people who wants to trash everything that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) did when in office. There were some mistakes but also some good things, not least making the setting of interest rates independent through the central Bank—a very positive step. Supporting science was another positive step, as was the establishment of the Low Pay Commission as a mechanism for deciding what is in the national interest as far as the minimum wage is concerned, and how we balance the perfectly natural wish of working people to see their wages rise with the overall interests of the economy and employment.
What was alarming about the comments of the Leader of the Opposition yesterday was that he now wishes to turn that valuable inheritance into a political football. I think he originally said that he would determine politically that there should be an £8 minimum wage, regardless of the conditions of the economy. Yesterday it was “at least £8”, but why not £8.50, £9 or £10? We could all bid in a Dutch auction on the minimum wage, but it would be ruinous for the economy.
Vince Cable
The Chancellor did not announce that as a goal; he made a projection about what, under certain assumptions, the minimum wage would be. He has agreed with me and we have a combined view that we should accept the advice of the Low Pay Commission, which is what we have done. We have maintained a valuable institution, and I am seriously worried about the irresponsibility that has crept in as a result of that simple populist gesture by the Leader of the Opposition. That is not just damaging to the economy in the future, but it undermines a valuable institution that his predecessor brought in.
Tom Blenkinsop
At least the Secretary of State is being consistent on this issue. Will he confirm that in 2012 the Government froze the national minimum wage for those under 21?
Vince Cable
We have always made a clear distinction between the basic recommendation on the minimum wage, which every Minister in my position has accepted, and some of the second-order questions. We have changed the recommendation on apprenticeships, and indeed others, but the recommendation on the basic minimum wage is fundamental and something that Ministers of both Governments have honoured. The Leader of the Opposition—for reasons that are unclear beyond anything other than political populism—now proposes to destroy that tradition, and that is very retrograde.
Mr Kenneth Clarke (Rushcliffe) (Con)
I share the right hon. Gentleman’s experience of having opposed the minimum wage when it was proposed by the previous Government, although I now realise that was a mistake and have been converted to the value of it, given how it has worked. Does he agree that if the political debate follows what the shadow Chancellor wants, and each of the parties—all seven of them, no doubt—says what it would tell employers to pay as a minimum wage, we go back to the danger that I initially feared of unemployment being caused by bidding up, for vote-catching reasons, the basic pay of people trying to get into work?
Madam Deputy Speaker (Dame Dawn Primarolo)
Order. Before the Secretary of State replies, may I gently say that 23 Members wish to take part in this debate, and he has been speaking for nearly 35 minutes. I understand that he has generously taken lots of interventions, but will he perhaps think about all his colleagues who still wish to speak?
Vince Cable
I will certainly respond as you wish, Madam Deputy Speaker. I think I have taken at least 23 interventions, but I am happy to cruise to a conclusion on that note.
If we are going to lift real wages and living standards, that must be done through the growth of productivity. That is the only way it can happen. A whole set of measures in the Budget suggest how that can happen in the long term. It must come through skills and innovation, and there was a series of constructive initiatives—catapults, science capital investment, driverless cars, the internet of things, the energy research institution, and other things—in the Budget. Cumulatively, those will drive up productivity in British industry.
One announcement that perhaps did not receive as much attention as it should have done was about trying to improve the way funding flows through apprenticeships and a voucher system that enables employers—particularly small companies—to acquire the skills they need. The key, however, will be business investment, and I have already pointed to improving trends in that respect. One lesson of our period in office is that under the difficult conditions we have had, by investing judiciously through bodies such as the regional growth fund, the Green Investment Bank, and the British Business Bank, the Government can stimulate significant amounts of additional private investment.
I will finish with an announcement in response to a question that the Leader of the Opposition threw out yesterday about the Green Investment Bank. We have agreed that that is a successful initiative that stimulates private investment, and for £2 billion from Government there has been £3 billion extra from the private sector. We want to build on that success and are looking at a range of options for bringing private capital into the Green Investment Bank, and to give it greater operational freedom and enable it to borrow in capital markets. That will provide it with an alternative channel of funding, and ensure its future as a lasting and enduring institution.
There was a great deal of excitement earlier this morning about the alternative route to fiscal policy that my party was advocating, and it is right that in the run-up to the general election we should have a different approach to how we balance the budget. However, there was a lot of common ground, and this was a joint coalition Budget that we are proud to have been associated with. It was about economic growth—we are now the most successful in the industrial world having been in the worst crisis—and about rising business investment, exceptional levels of employment, and rapidly falling unemployment. All that is taking place at a time when the public finances have been approved, and we have moved from being a basket case to a successful economy.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I have to apply an eight-minute time limit to ensure that everybody gets eight minutes.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I shall confine my remarks to the Chancellor’s speech yesterday. According to him, Britain is now walking tall and basking in the glow of economic recovery. From my constituency perspective, those words will ring hollow to many. It is difficult to feel pride or walk tall when going to a food bank, which is the reality for an increasing number of people desperate for alleviation of the policies that the Government have implemented over the past five years. Talk of walking tall and the sun shining rings hollow in their ears.
This is not just about those at the sharpest end of the Government’s policies, however; it also applies to the average family. Indeed, we have already debated income levels for average families over the past five years, and the overwhelming consensus of opinion and analysis is that there has been a considerable reduction in average incomes over those years. That is certainly the day-to-day experience of most MPs, either in their surgeries or knocking on doors. We cannot blame the public for being so cynical. If they hear the litany of Government achievements, they cannot help comparing it with their day-to-day lives.
Then there is the fear. The Government tell us that in spite of all this success more cuts need to follow and that those cuts will be sharper over the next few years than in the last. We cannot blame people for wondering, if we are doing so well and have suffered so much, why we have to have another round of cuts. It is because the so-called long-term economic plan is in reality just an extension of the Government’s failed short-term economic plan. They failed to reach their target on deficit reduction because, in spite of the headline economic fears, they have driven us in the direction of a low-income, low-productivity economy, resulting in a reduction of the tax receipts necessary to reduce the deficit.
Presented with the conundrum of how to get economic growth with lower tax receipts, all the Government have to offer is more of the same. They have outlined another £30 billion-worth of cuts to come, with £13 billion coming from departmental spending—I shall address the implications of that in a minute—and £12 billion from welfare. Can we blame the public for being cynical, given that the Government have been promising welfare cuts for the last couple of years but welfare spending has in fact increased?
The Government also say they will protect pensions. What does that mean for the balance of welfare provision for other people? It implies huge cuts. We cannot blame the public for being concerned. The Government say that £5 billion will come from blocking tax avoidance and evasion. Given their rather dubious record on securing money from that source so far, we cannot blame the public for being cynical.
There has been an improvement in manufacturing—part of the Government’s so-called rebalancing exercise—but it has been very modest. Indeed, in January, it actually declined. We were told that we had a £1 trillion export target for 2020, but we are less than halfway there. Research and development, which is key to keeping Britain’s advanced technology advantage over other countries, has been falling behind other developed and developing countries, and according to the OBR projection it is going to fall further. Bank lending to business—essential to get the investment needed to expand our economy—has lagged throughout.
One element that bothers me in particular about the headline £13 billion cut to departmental spending is this: if some Departments are protected, others will not be and will have to take a disproportionate spending cut, and one of those will be the Department for Business, Innovation and Skills. Notwithstanding our occasional differences, I recognise that the Secretary of State has been a doughty champion of business interests in this country, and to have a disproportionate amount of those cuts focused on his Department could have the most profound long-term implications for the so-called long-term economic plan. I fear for the future of BIS and the policies it promotes, which are vital to getting the sort of economic growth we need.
I want to conclude with a couple of remarks about a potential gaping hole in the figures. We have already debated student loans, tuition fees and so on, but I find it astonishing that the Secretary of State did not refer to the resource accounting and budgeting charge—the cost of the non-repayment of student loans and its future implications for the budget. It is now reaching about 50% and is estimated to be about £30 billion by 2030. The implications are enormous. Labour’s policies would address at least part of the problem. The Government can accuse Labour of being irresponsible, but they have failed to demonstrate how it is responsible to introduce a system that will leave a legacy financial black hole on the scale they are talking about.
According to the OBR, the Government are going to sell the student loan book after all—I praise the Secretary of State for blocking it. When we heard evidence on that point, experts told us that if they wished to sell it, they would have to offer sweeteners or sell it at a hugely discounted rate. I would like to know whether the Chancellor has factored in the cost of selling the student loan book and whether the sum involved will meet the Government’s financial projections.
Mark Simmonds (Boston and Skegness) (Con)
It is a pleasure to follow the hon. Member for West Bromwich West (Mr Bailey), but he will not be surprised to hear that I did not agree with his analysis at all. I gently ask him to reflect on how he will explain to his constituents during the election campaign his party’s plans to reduce the deficit, because we got none of that detail during the shadow Chancellor’s contribution.
It is a pleasure to support the Budget, against the backdrop of the fastest-growing economy in the G7, a record number of jobs having been created, with employment at a record high, the deficit down, the national debt starting to fall as a share of the economy, GDP up 7.8% since 2010 and more than 750,000 new businesses having been created. That is in stark contrast to the contribution from the shadow Chancellor, whose extraordinary strategy is both shallow and hollow, as articulated earlier. There is seemingly no policy framework and no detail, which is why he and the shadow Treasury team are focused purely on trying to scare the electorate into believing there are going to be VAT increases and NHS cuts, neither of which is true.
In 2010, I made a contribution in the House urging the Chancellor and the Government to do four things. The first was to control public expenditure to improve the UK’s credit rating and to reduce yields on Government bonds and gilts to allow more of taxpayers’ money to be spent in the UK, rather than being sent abroad. The second was to encourage the Chancellor to dismiss the scaremongering that fiscal consolidation and public expenditure control lead to economic slowdown: they do not. Instead, we will have an expansionary fiscal consolidation. The third was that once expansionary fiscal consolidation delivers greater consumer confidence, the tax burden should be revised down. Fourthly, as expansionary fiscal consolidation delivers, businesses should be encouraged to invest as confidence returns. All those facets have been delivered by this coalition Government, to the benefit of all our constituents throughout the United Kingdom.
These strategic macro-economic achievements have led to real, lasting, positive impacts on people’s lives in my Boston and Skegness constituency. There has been a 23% drop in jobseeker’s allowance claimants since 2010, while 3,500 new apprenticeships have started in my constituency over the same period. Approximately, 5,400 people have been taken out of paying tax altogether, and thousands have had their income tax bills reduced by the raising of the income tax thresholds. In addition, freezing fuel duty has been an important lifeline for many of my rural communities.
The driving force behind the economic recovery is inevitably the private sector—businesses. That is why I warmly welcome some of the announcements in the Budget: supporting the digital infrastructure strategy; supporting farmers by extending the averaging period, which is a huge and important change for farming communities such as mine in Lincolnshire; simplifying the tax system, including the abolition of class 2 national insurance for the self-employed—a huge simplification that will benefit up to 5 million people; the much needed review of the anachronistic workings of the business rate system. Those all provide further evidence that Government Members are on the side of business and Labour Members are hostile to business.
I have three specific requests for the Treasury team. The first is to continue to assess and make sure that there is fairness in the public sector funding formulas. Rural areas such as Lincolnshire still do not get their fair share of resources, particularly in education and police funding. Neither do they reflect the speed of population change in some parts of the country.
Secondly, in his immigration speech in Derby, the Prime Minister announced a fund to alleviate some of the pressures on towns such as Boston that have seen significant inward economic migration. Will the Exchequer Secretary say a little more in her response about when the details of this fund will be announced, the scale of support that will be available and the criteria that will have to be met for the distribution of the funds?
My third request is for an assurance from the Treasury of its continued commitment to flood defences. I was pleased to see that 47 new projects are being added to the six-year programme and pleased about the acceleration of some programmes, such as Lade Bank pumping station and the North Forty Foot drain, in my constituency. This is vital for the protection not just of people and property, but of valuable agricultural land on which we all rely as we purchase food in our United Kingdom supermarkets. I was pleased, as I am sure you were, Mr Deputy Speaker, to see on page 84 of the Red Book that business contributions to flood defence projects are now tax-deductible expenditure—a huge and welcome addition to the armoury for financing flood defences.
In conclusion, it is clear to me that significant progress has been made by this Government in rebuilding the shattered economy we inherited from the Labour party. Debt is down; borrowing is revised down; growth is revised up; employment is up. The Chancellor and his team are effervescing with innovation: personal saving allowances and Help to Buy ISAs have been strongly welcomed by hard-pressed savers and young aspiring home owners. This Budget evidences and demonstrates not only that the long-term economic plan is working, but that the short-term plan is working, too.
Derek Twigg (Halton) (Lab)
I congratulate the right hon. Member for Boston and Skegness (Mark Simmonds) on making a strong speech, but I have quite a few differences with it, as I shall explain. What we had yesterday was a Budget that does not meet the challenges of the future, as we are living in an increasingly uncertain world and this Budget does not provide a proper plan to deal with that.
The Business Secretary talked about memory. While we have already heard today that the Liberal Democrats backed the bedroom tax and supported an increase in tuition fees, we should remember, too, that they supported getting rid of the education maintenance allowance and agreed to scrap the Building Schools for the Future project, which affected many schools in my constituency. The Liberal Democrats’ greatest crime, however, is giving cover to the Tory Government to allow them to implement austerity, which has impacted disproportionately and negatively on constituencies such as mine. This gives the lie to the view that the recession and the financial crisis were Labour’s fault. We all know it was down to the banks, and we all know that when Labour left office in 2010 growth was up and unemployment was down. That is the reality.
This Government failed to keep their promises, failed to meet their target on reducing the deficit and failed on borrowing. Their austerity measures in the early part of this Parliament strangled the recovery that had started under the last Labour Government. I could go on about a number of measures, but we should never forget VAT policy, because a Tory Government always raise VAT.
Whatever gloss the Chancellor tried yesterday to put on his economic record and the prospects for the future, the fact remains that the recovery is fragile. The International Monetary Fund says that our real gross domestic product per head is below that of the US and well below that of Germany and France. The productivity problem has not been addressed by this Chancellor or this Government, and we have seen no sign yet that the large cash reserves held by businesses are being released for investment. That is another interesting sign. Many of the jobs created are, of course, insecure, temporary or fixed-hours-contract jobs. Insecurity presents a real problem; many of my constituents are finding that insecurity stops them planning for their future—whether it be in buying a house, picking a holiday or deciding on some of the most basic things in life.
This Government could have done much more on investment in infrastructure and capital projects, and I am sorry that the Chancellor did not say more about them yesterday, rather than making promises of jam tomorrow. Many road and rail projects that the Government have previously announced and trumpeted were planned or started under Labour. We need to do more on investing in our infrastructure. Given the cheap rates of borrowing available to the Government, they should have done more with investment, allowing them to provide many more quality jobs.
Lots of schemes could have been taken forward in every constituency. Let me mention the campaign to restore a lock and open up the Bridgewater canal to the Manchester Ship canal in Runcorn. This was a brilliant scheme put forward by the Runcorn locks restoration society, and it would also help Runcorn town centre. This is a typical example of where money could be found, and I hope that the next Government will do so.
Businesses, and especially small businesses, are still having problems borrowing money, which clearly is stunting further growth. The inability to get banks to lend to small businesses is one of the biggest failures of this Government. I am pleased that a Labour Government will do more to help small businesses. In particular, we will cut business rates for 1.5 million small businesses and then freeze them the following year. A Labour Government will do more.
Of course we have to attract businesses to constituencies such as mine. We do attract them. Halton council has done very well in that respect, but we need more help. Unemployment remains stubbornly high, particularly among the young, and there is a real problem with those not in employment, education or training with an above-average number of our young people in that category. The minimum wage will be important for providing better security, as well as helping people with their pay.
A couple of areas have not been dwelt on sufficiently in the debate so far. If this Government get back in, we will see cuts falling badly on local government, to which I shall return, and on defence, which has seen significant cuts already and no guarantees about the future. The police have been cut significantly, as well.
I find the way in which austerity cuts have been imposed on local government appalling. Local government has important responsibilities, not least for child protection and care and provision for the elderly, yet we have seen massive cuts. My local council, Halton, is considered to be a good and well-managed authority, but between 2010-11 and 2015-16 its Government grant will have been reduced by £46 million, or £365 per head. That is a substantial cut, and the £11 million reduction in next year’s grant represents a further cut of £87 for every man, woman and child. By contrast, the cuts per head in east Cheshire—which is in the Chancellor’s constituency—and West Oxfordshire will be £23 and £32 respectively. Scandalous, unfair cuts are hitting the most socially deprived areas in the country, and putting services in serious danger by lessening councils’ ability to fund and run them. The future Government must address that important issue.
Another big problem in Halton is housing, especially the supply of housing, including social housing, and the inability of young people to get on to the housing ladder. In response to the Chancellor’s announcement of Help to Buy ISAs, today’s edition of Inside Housing states:
“David Orr, chief executive of the National Housing Federation dismissed the move ‘as another short-term initiative for first-time buyers, not a Budget to end the housing crisis.’…The Chartered Institute of Housing has also criticised the move… ‘While the help to buy ISA may help some first time buyers to overcome barriers to home ownership, it fails to address the fundamental problem—that we are simply not building enough homes.”
Derek Twigg
As the hon. Gentleman will know, we have promised that if we win the election in a few weeks’ time, we will build 200,000 houses a year. That is a significant improvement on what the present Government have done. They simply have not done enough, and the fact is that there is a major problem with the supply of not just private but social housing. There are nearly 1,350 people on the housing waiting list in Halton, which is one of the smallest boroughs in the country, and the average waiting time is nine years. Housing represents a large part of all MPs’ casework, and a future Government must do something about it. I have already said what Labour will do.
The Chancellor did not say anything about the crisis in the NHS. We know that waiting time targets have been missed, that accident and emergency departments are crowded, and that access to GPs is a problem. We know that people are experiencing real difficulties as a result of waiting times, involving not just A and E services but some other procedures. We have clearly stated that we want to improve access, and to save and transform our NHS with a “time to care” fund worth £2.5 billion, which will pay for 20,000 more nurses, 8,000 more GPs, and a guarantee of cancer tests within one week. The NHS is a fundamental part of our society, and it is appalling that the Chancellor did not refer to it yesterday.
In Halton, the reality of what has happened under this Government—which the Chancellor failed to address yesterday—is that many people are in poverty and experiencing a cost-of-living crisis. People are unable to heat their homes properly, and there has been a massive increase in the use of food banks. Hundreds of families in Halton have suffered as a result of the bedroom tax. Many are struggling to find jobs, and, as I said earlier, a large number of those jobs are insecure and part time. Security is a key issue for my constituents and others, and it must be addressed.
Chris Kelly (Dudley South) (Con)
Thank you, Mr Deputy Speaker, for allowing me to make my final speech in the House. I shall not speak for too long, because I know that many other Members want to contribute to the debate.
The Chancellor’s stated goal is for Britain to become the most prosperous major economy in the world, and for that prosperity to be shared throughout the nation. As a fellow Member whose constituency is outside London and the south-east, I wholeheartedly agree with him, and, indeed, that is what we are starting to see.
The Chancellor was also right to say that no short-term giveaway could benefit people as much as a long-term recovery. That is why there were no pre-election gimmicks yesterday. Instead of short-term gimmicks, we have seen action: action on job creation and growth. Under this Government, 1,000 more jobs have been created every single day, and the Office for Budget Responsibility has confirmed that in the past year we grew faster than any other major advanced economy—50% faster than Germany, and a staggering seven times faster than France.
Dudley South is full of hard-working and enterprising people, many of whom take the plunge and set up their own small businesses. I am delighted that we will be supporting them—and the 5 million self-employed people in the country—by abolishing their class 2 national insurance contributions entirely, thus making tax simpler for those hard-working people and enabling them to get on with making a living, serving their customers, and building their businesses.
The news is also good for larger employers in my constituency. In two weeks’ time corporation tax will be cut to 20%, which is one of the lowest rates in any major economy. We are backing businesses such as Petford Tools, Boss Design and Pressvess, which are in my constituency, so that they can create jobs. Mike Wood, the excellent Conservative candidate for Dudley South, brought representatives of those companies to No. 11 recently to meet the Chancellor. By contrast, Labour’s plan for the first corporation tax rise since 1973 would put jobs at risk rather than helping to create more of them.
Business rates have not kept pace with the needs of a modern economy. Businesses in Dudley and the black country have called for a review, and will join me in welcoming the news that one is to take place. Ninder Johal of the Black Country chamber of commerce has said that, all too often, good local businesses
“have to scale back their growth ambitions because of out of control rates bills”,
and called business rates an “iniquitous tax”. I agree with him.
Labour left manufacturing halved as a share of the economy, and a bigger gap between north and south in our country. The OBR has confirmed that growth is now broadly based, and that manufacturing has grown 4.5 times faster than it did in the pre-crisis decade. In manufacturing areas like Dudley and the black country, the evidence is all around us.
It is clear that the Conservative party has a plan that is working. Thanks to this Government’s long-term economic plan, Britain is walking tall again. We have a growing economy, a record number of jobs and rising living standards. The deficit is down, and yesterday it was confirmed that our national debt is starting to fall as a share of the economy. However, the country now faces a critical choice. Do we return to the chaos of the past, or do we keep on working through the long-term economic plan that is delivering for this country? Let us back stability for households and businesses by committing ourselves to running a budget surplus and ensuring that our debt share continues to fall. Let us support job creators by backing business and skills that will create full employment, and by cancelling the planned rise in fuel duty that is as much a tax on industry as a tax on households. Let us choose the whole nation by investing in a truly national recovery, so that areas such as Dudley and the black country do not miss out.
Tim Yorke, finance director of Ultra Furniture, one of the largest private sector manufacturing employers in Dudley South—whom I have had the pleasure of visiting— told Dudley News yesterday:
“The announcements about minimum wage and apprenticeships were welcome, as are the opportunities to give people more disposable income through increased personal allowances and more opportunities to buy homes through the help to buy ISA.”
This is a positive Budget, and much progress has been made in five years. The simple choice that voters will face on 7 May is between the chaos of Labour, propped up by the Scottish National party, and the Conservatives—including Mike Wood in Dudley South—with their long-term economic plan, which is working. Let us stay the course.
Kelvin Hopkins (Luton North) (Lab)
I shall be sorry to see the hon. Member for Dudley South (Chris Kelly) leave us. I have greatly enjoyed his company as a fellow member of the European Scrutiny Committee. Although we disagree about politics and I want Dudley South to become a Labour seat, I shall miss him.
The Budget statement was a process of glib window-dressing for election purposes: let us not kid ourselves about that. It was full of holes, and it failed to mention the harsh realities of the ongoing cuts agenda—an agenda that is really about reducing the role of the state on a road to the Hayekian nightmare of a world governed by private markets rather than democratic government.
My right hon. Friend the Leader of the Opposition spoke trenchantly and, I think, very intelligently yesterday in criticising the Chancellor, and my right hon. Friend the shadow Chancellor did the same today. My hon. Friend the Member for Halton (Derek Twigg) spoke very well about the effects of the cuts agenda on local government, and on child protection and adult and elderly care. We are already seeing vulnerable people being left at risk. There are crises of child abuse and insufficient child protection, and more elderly people are suffering from dementia. All those people depend on local government, which is being cut. We need more resources for local government, not less, and quality care for those who need it.
Millions of people are also in need of decent homes, as my hon. Friend the Member for Halton mentioned. In Luton, we have 8,000 on the waiting list. The only real solution is to recreate and restore the council housing sector. It was first attacked in 1972 with the then Housing Finance Act, which I well remember as a councillor at that time. Subsequently, we have had forced council house sales, which have left millions on waiting lists unable to get into a decent home, and a high proportion of those council homes sold did not end up in owner-occupation; they are now being let out as private rents.
The NHS is also threatened with deep cuts and creeping privatisation, inexorably driven by Government policies. It is substantially under-resourced now. Germany and France spend about 2% more of their GDP on health than we do, and that would amount to about £60 million per constituency per year. I would like my £60 million for Luton North now. It would make a tremendous difference.
The police have had savage cuts already, with more to follow, yet at the same time they are being asked to deal with terrorism threats and child abuse, looking at historical as well as current cases. They cannot do that unless they have the resources to do it, and they need more, not less.
On the subject of the deficit, the Government have refused to take the tax gap seriously, which is in reality £120 billion a year, not the £30 billion or so that they claim. What have the Government done? The Chancellor has decided to let another several million people not fill in tax returns, which is inevitably going to reduce the income to the Exchequer and make the tax gap, and the deficit, worse. Thousands of Her Majesty’s Revenue and Customs staff have been sacked already or lost their jobs, with more to follow, yet it is estimated that senior HMRC staff collect 20 times their own salary and junior staff 10 times their own salary, so more staff means getting in many more times the cost of those staff and helps to bring income to the Treasury. It is income that is the problem, not expenditure. The Chancellor’s biggest mistake, however, which I think he may come to regret, is abolishing tax returns for many people.
Today’s debate is really about business, however. I and many others are concerned about manufacturing. What the Chancellor has failed to recognise, despite pressure from me and others, is the crucial role of the exchange rate. After 1931, we had recovery after a big devaluation; after 1992 and the collapse of the exchange rate mechanism, we had a devaluation that drove recovery; after the 2008 crisis, we had a very substantial depreciation against both the euro and the dollar. We depreciated sterling by 27% against the euro and 31% against the dollar, which saved Britain from becoming another Greece, but writ large. We have survived simply because of the ability to devalue and the Government should thank my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) for keeping us out of the euro, which will be the case indefinitely now. That devaluation has saved us from a worse fate. It has still been difficult, but nothing like as bad as it would have been if we had not been able to devalue.
However, despite that depreciation we are still overvalued. We still have a massive trade deficit, with the EU in particular, amounting to about £1 billion a week, which is about 1 million jobs that we have exported to the continent of Europe. We must get an appropriate exchange rate for our economy that is considerably lower than it is now. Because the euro is depreciating, the pound is appreciating, which is going to make things worse. We therefore have what is called the J-curve effect: things seem to get better initially, but will get much worse later on when our competitiveness is seriously damaged by a depreciating euro. We therefore ought to be addressing the exchange rate, seeking to manage it down to an appropriate value, which will give us long-term protection for our manufacturing. As a result of consistent over-valuation over decades, manufacturing has fallen to half the size of that of Germany. Germany manages its exchange rate; it cemented it against all its competitor countries in the EU, which has protected it. We must do something similar, not by joining a fixed currency, but by managing our exchange rate. Our balance of trade is a serious problem that has to be addressed.
If competiveness is damaged by a poor exchange rate, investment is less likely. We still have a low level of investment compared with the average for the rest of the world, and it is a tiny fraction of China’s investment. We therefore still have low productivity. We have the second lowest productivity in the G7, above only Japan. All these factors are affected by the exchange rate. I hope the next Government—it should be a Labour Government—will address the exchange rate and ensure that we have a long-term appropriate exchange rate to make sure our industries survive and prosper.
Dan Byles (North Warwickshire) (Con)
I warmly welcome the Budget, and welcome the fact that the Chancellor resisted the urge, which all Chancellors face, to pull a pre-election rabbit out of a hat. Instead, we saw a competent Budget by a competent Chancellor that continues the excellent work of rebuilding Britain’s battered economy.
The headline figures are very welcome: the deficit is falling; national debt as a percentage of GDP is falling; growth for 2015 has been revised up to 2.5%; youth employment is rising by more than that of the rest of the EU put together; and 1,000 new jobs are being created for every day this Government have been in office. National figures can sometimes seem a bit dry, however. I am generally more interested in how the work we have done to rebuild our economy has had a direct impact on my constituents in North Warwickshire and Bedworth, and that record is one that I am proud of.
Our economy is genuinely working for local people. Just in the last month we saw a further expansion of the MIRA technology park enterprise zone on the A5, with £300 million of ongoing investment creating high-quality jobs and securing our position as the leading transport and automotive region in the UK. We also saw local employer Brose announce a £35 million investment package in Bedworth—private sector money—creating hundreds of new jobs there, too. These announcements of growth and new jobs have followed similar announcements over the last few years from a string of companies from a wide variety of sectors including Sertec, ADV Manufacturing, Aldi, Euro Car Parts, Ocado, Premier Group, Loades EcoParc, the Coventry building society, Leekes, the Rolton Group and Energetics UK. Thousands of new jobs for local people have been created since 2010.
Our economy in North Warwickshire and Bedworth suffered badly in the great recession of 2008, which saw local unemployment rocket by more than 1,500 in the last two years of the previous Labour Government alone, with more than 2,500 people claiming unemployment benefit. The number of jobseekers has now fallen by around 1,800 since the start of 2010—an incredible 70% drop. There are fewer people unemployed in North Warwickshire and Bedworth now than at any time in the entire 13 years of the previous Labour Government. That has not happened by accident; it is the result of five years of tough but essential economic policies designed to grip the deficit, get control of the economy, support employers and businesses, and rebalance the economy back towards manufacturing and exports.
In fact, the entire local economy is being rebalanced, with fewer people working in warehousing and transport than in 2009, and the number of people working in the manufacturing sector up by 20%. That amounts to more than 1,400 new manufacturing jobs in the constituency. This is essential for ensuring that we have high-quality and sustainable jobs going forward.
Helping people back into work is a fundamental moral priority, and I am proud of the work my team and I have done to help support local employers. I am also proud of the annual jobs fairs that my hon. Friend the Member for Nuneaton (Mr Jones) and I instigated in our local area, which each year has seen more and more real jobs available for local people.
Having a sound economy is the bedrock on which we can build stronger public services. Our local public services in North Warwickshire and Bedworth have faced the challenges of reform, and have risen to that challenge magnificently. Crime locally has fallen consistently over the last five years—down 10% last year alone—and is considerably below 2010 levels.
The George Eliot hospital is now out of special measures, after being driven there by the same Labour Health Ministers who refused repeatedly to hold a public inquiry into the Mid Staffordshire scandal, and has been rated “good” by the Care Quality Commission. Clinical staff numbers are rising: there are 39 more doctors and 86 more nurses than in 2010.
A number of our primary and secondary schools in North Warwickshire and Bedworth have taken advantage of the academy scheme in order to take control of their own destinies. In North Warwickshire, the number of schools rated as “needing improvement” has halved, from 20 to 10, while the number rated “good” or “outstanding” is up from 24 to 30.
All these developments rely on a strong economy underpinning the nation. But we are not there yet. We still face significant challenges both nationally and locally, but I am absolutely clear that the people of North Warwickshire and Bedworth are better off following five years of the Chancellor’s deft handling of the economy. They will be better off as a result of yesterday’s solid Budget, and with local small business man Craig Tracey as the new Conservative MP from May, they will continue to be better off in the years to come.
Susan Elan Jones (Clwyd South) (Lab)
It is a great privilege to speak in this Budget debate and to follow all the previous speakers, who have passionately expressed their views. I want to pay particular tribute to my right hon. Friends the shadow Chancellor and the Leader of the Opposition, who spoke thoughtfully and in great depth, sharing their vision of how our country can and should be better, and describing how this Government have failed working families. That is the real debate of this Budget—the one the Conservatives do not want to have.
I suspect it is even the reason why the Prime Minister is refusing my right hon. Friend the courtesy of a one-to-one television debate. The Americans have been doing this since Nixon and Kennedy, and at the last election the Prime Minister said that his predecessor would show that he was “out of touch” if he did not agree to such a debate. This is not like the Bullingdon club photograph that the Prime Minister has done everything in his power to stop media outlets showing: he cannot airbrush out a television debate. He can hide and refuse to debate, but he cannot stop the real debate taking place in households, workplaces, communities and families the length and breadth of the country.
We well remember the debate about “broken Britain”, thoughtfully expressed in the research of the Centre for Social Justice, which the Conservative party often trumpeted. However, that now demonstrates itself in the nightmare of the anti-family, debt-inducing curse of zero-hours contracts. It is a debate we hear in community groups, charities, churches and other faith organisations.
As we debate this Budget, it is worth noting that the 2014 National Church and Social Action survey reports that food distribution tops the list of church community activities. It is above parent and toddler groups; above community festivals and fun days; it is even above school assemblies and religious education. As someone who worked for charities for 15 years before becoming a Member of this House, I do not just welcome voluntary endeavours, I consider them vital. However, the Government have shown where their priorities lie—and it is certainly not with people facing zero-hours contracts. A lady in my constituency whose church collects food regularly for the Oswestry food bank just over the border, put it memorably:
“We’re used to collecting, but it used to be for Romanian orphans, not for people in our country without enough to eat.”
That is not to say that everything the Government do is bad. There were some positives in the Budget and I want to mention two I particularly liked. I welcome the increase in personal allowances, and in the gift aid-like payment in the Small Charitable Donations Bill, not least because a number of Labour Members worked on that Bill Committee to increase the threshold. The details need to be worked out, but there are some real positives. However, the Government need to increase support for the self-employed. I am very much of the view that if we as a nation handle this right, the potential for private sector-led regeneration in rural and semi-rural communities is great.
Let me tell the House about the kind of enterprise in my area that I am talking about. Recently, Alice Murray, who lives in Overton in my constituency, visited me here in the Houses of Parliament. Alice is responsible for setting up the company Giggles and Games, and last year she won the prestigious “Entrepreneur of the Year” award at the Free2Network business awards. Alice had not worked outside the home during the 17 years she brought up her four children. By her own admission, she was too nervous to attend an open day at Glyndwr university in Wrexham five years ago. But she grew in confidence while studying. Having organised a major event as part of a college module in entrepreneurship, Alice, after graduating in 2012, established Giggles and Games - The Giant Game People, a company that has achieved great acclaim for its games for parties, weddings and corporates. Based in north Wales, it covers Shropshire and Cheshire, but its staff are more than willing to travel further afield. The Giant Games include Giant 5ft Buzzers, Giant Connect Four, Giant Chess, Giant Snakes and Ladders—3 metres by 3 metres—and, best of the lot, Giant Stocks. The company is innovative, different and appealing, and it employs people and brings money into our local economy. I appreciate that Giant Space Hoppers are not everyone’s thing, but the business is thriving because it is innovative.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
My hon. Friend is making some very good points—and I am tempted to suggest some people who could be put in the stocks to which she refers. However, if such businesses are to be successful, they need universal superfast broadband that is accessible to all. Does she agree, and share my hope that the Government will take that issue up with even more vigour?
Susan Elan Jones
I agree with my hon. Friend that that is a hugely important issue. In my area there are many businesses waiting to be born that will never even reach gestation, simply because we do not give enough practical help to would-be entrepreneurs. The more than 5 million working people in our country who are self-employed face huge problems. Two thirds have no pension, and one in five cannot get a mortgage. My right hon. Friend the Leader of the Opposition spoke powerfully last autumn when he declared that the next Labour Government will ensure equal rights for the self-employed. That is a very important issue.
Finally, I want to use this Budget debate to seek clarity about a particular concern I have. There has been a great deal of interesting debate about the effectiveness of the new allowances for those who are married or in civil partnerships. That issue has been debated before in the House, and I am sure it will be in future. Both halves of the pantomime horse that seem to make up the coalition appear to have differing views on that issue. However, according to a written reply I received from the House of Commons Library, those who wish to claim the new transferable tax allowance for married couples and civil partners may only register for it over the internet. Given that 18% of adults in the UK cannot use the internet, the lack of options is quite surprising. Whatever our views on the efficacy and effectiveness of this allowance, it has no validity whatsoever if it is not available to those who cannot access the internet, many of whom are likely to be elderly and/or on lower incomes. Wherever we stand on this subject, there is a very real question for the Government to answer and I look forward to a response.
Mr Richard Bacon (South Norfolk) (Con)
I greatly welcome the Budget and particularly the announcements on housing. I make no apology for talking about housing in a debate opened by the Business Secretary. As the representative of the CBI said at the Homes for Britain rally in Methodist Central Hall earlier this week, housing is a business issue. If employees cannot find somewhere to live that is relatively near work, it affects the way they work, because they spend too long commuting. Housing is central to all our lives, so I welcome the measures the Government have taken on housing in the Budget.
The hon. Member for Halton (Derek Twigg), who, sadly, is not in his place, referred to the Chartered Institute of Housing’s comment on Help to Buy ISAs—that they would make no difference because they do not address the fundamental problem. I, too, have read that quote, but I thought it was slightly unfair, which is why I intervened on him. The Budget also addresses the supply side through the doubling of the number of housing zones, and I shall concentrate on that subject in my speech. It proposes to create 20 new housing zones which, according to the deputy mayor of London, Richard Blakeway, will provide a “framework for focused engagement” in particular geographical areas, create “planning certainty” and, most importantly, provide funding that is committed to essential infrastructure. I want to concentrate on that last aspect.
A number of endeavours have made an enormous difference over the past few years, in which the Government have engaged with the public and private sectors to provide a focused environment in which huge amounts of activity can occur. The most obvious example is the London Docklands development corporation, which transformed the docklands a generation ago. We can now see the extraordinary development that simply was not there 25 years ago. I have seen something similar in Northern Ireland, in the Laganside development, where the investment of £130 million of public money led to about £1 billion of investment from the private sector. This has transformed the nature of Belfast city centre completely.
The approach that has been adopted in the commercial sector can also be applied in the residential sector, and that is what housing zones are all about. I am pleased about the provision for them in the Budget. If we are to unlock finance for schemes in the residential space, the most important thing is to get rid of the blockages that are making that so difficult to achieve. We have to ask ourselves why housing supply does not rise to meet demand in the way that happens in most other markets. The truth is that people who would like to get involved in the housing market have very limited choices.
The volume house builders do a reasonably good job for the people who want to buy their product, but 75% of the people polled in a YouGov survey said that they did not want to buy the volume house builders’ product. In a well-functioning market, other providers would come in and the range of supply to meet that latent demand, which is not being satisfied, would naturally enter the market. That does not happen in the housing space, however, simply because it is so difficult to get into the market because of problems with access to land and access to finance. The Government’s proposals for housing zones start to address that, and I hope that their announcement in yesterday’s Budget will be the harbinger of a new direction that will solve the housing problem.
The hon. Member for Halton said earlier that Labour would build 200,000 houses if it got into government. I remember, half a generation ago, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he was Chancellor, appointing Kate Barker to undertake a review and subsequently announcing the building of 240,000 houses. Announcements do not actually make a difference, however, because it is not Governments or Oppositions who build houses. It is house builders who build houses, and if we took more notice of customers and their preferences, we would get more houses built.
Meg Hillier
The hon. Gentleman might have had a different experience in Norfolk, but in my constituency of Hackney South and Shoreditch, many of those “customers” are non-domiciled overseas landlords who never interact with the people who end up living in their homes. There is often a desire among those developers to get a quick, easy sale over a weekend in places such as Hong Kong and Dubai, rather than putting out to market properties that would benefit local people. Does the hon. Gentleman not agree that this really needs to be tackled?
Mr Bacon
The hon. Lady makes a valid point. I have listened to economists saying that this has not been a problem in London and that the wall of money that has come in to support investment was simply replacing investment that did not happen after the crash, but I am not sure that I agree with them. We see flats in London being exchanged time and again without anyone ever living in them, and there comes a point at which this becomes a moral issue. There is developed property with nobody living in it, and I think that we should be thinking first about our own people. That fundamentally describes the planning problem, and we need to decide how to do these things.
My Self-build and Custom Housebuilding Bill, which I am pleased to say is now going to become an Act, will give people in every area an opportunity to go to their local council and say, “Where is your register? I want to put my name down as someone who wants to acquire a serviced plot.” The council will have a statutory obligation to keep a register of such people and to have regard to it when drawing up its housing plans, whether for planning and housing, for regeneration or for the disposal of land. In visits overseas, I have seen that such space can also encompass housing for affordable rent through housing co-operatives as well as housing for private purchase. The point about serviced plots is key. This goes back to what I was saying about infrastructure and about removing the blockages to further development. This is about funding the essential infrastructure that is needed before further development can take place.
In the Government’s Budget last year, they announced the provision of £150 million towards serviced plots, and I interpret the creation of 20 housing zones that was announced yesterday as a further step in the right direction towards making the providing of the necessary infrastructure much easier. If a customer wants to come into the marketplace and take advantage of the opportunity to build a house that meets their own needs, the blockages that they meet can prove terminal. They might be trying to find a site, to acquire a piece of land or to obtain the necessary finance, for example. They might be told by the local authority to do an archaeological survey that they did not realise they would need, or a service supplier might tell them that the cost of supplying electricity or water, say, to the site would be prohibitive.
Going back to what Mr Blakeway, the deputy mayor of London, has said about planning certainty, removing all those blockages would create a focused environment in which we know that houses would be built. Housing zones are part of the way to make that happen. The underlying infrastructure being funded by the Government would create the possibility for much more housing being developed more quickly. There is also the possibility of recouping some of that cost through the tax revenues, including council tax revenues, that would flow once the housing was in place.
We need a housing market that works. We need to make the supply work in a way that it is currently not doing. We need to unlock the power of potential customers who do not yet have an opportunity to turn their latent demand into something real. The National Custom and Self-build Association commissioned Ipsos MORI to carry out a survey, which found that 1 million people would like to build their own dwelling or get someone to build it for them in the next 12 months, and that 7 million people would like to do that at some point in their lives. I hope that this Budget will be the harbinger of an important turn of direction towards emphasising the importance of getting underlying infrastructure in place so that the energy and vision of our own people can be deployed in providing the housing that we need.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I should like to draw Members’ attention to my entry in the Register of Members’ Financial Interests. I have an interest in housing.
I represent a constituency that is now often described as “achingly cool”, but it is also one of the poorest parts of the country. Those achingly cool young hipsters with their beards and pink hair who populate the coffee bars and watering holes of Hackney and who make the creative industries there the great success that they are—even they face challenges.
In yesterday’s Budget debate, and since then, we have heard so much huff and puff that anyone would think that the Budget had been written by the big bad wolf. In my constituency, that will be its effect on many people. This Government have left a £30 billion bombshell that will hit us after the general election. We know that there will be £12 billion of welfare cuts, and the rest will come from public services, but the Government have so far remained silent on where the axe will fall.
I know for a fact that Hackney council is looking to make £28 million-worth of cuts, and we have already seen 24% cuts to further education colleges, including my own excellent Hackney community college. These public services matter massively in areas such as Hackney, where about 36% of children live in poverty. That is the third highest rate in London. Many of those children live in households that are poor but ambitious. Their parents are working on zero-hours contracts in low-wage jobs while having to meet the costs of child care and high private rents. Many poor families cannot now get housing in the social sector. That means that many of them are trapped on benefits or tax credits. Talking about tax and welfare cuts sounds appealing, but it actually traps people who have the ambition to break out of benefits and into work and to be self-supporting. It stops them in their tracks. The routes to self-advancement are shrinking. Another cut like the 24% cut to FE would have a devastating effect, particularly on women stuck at home who do not speak English and who need English for speakers of other languages courses just to get into the initial job market.
At my surgery, a man came to see me in tears. He was a kitchen porter on minimum wage and had been asked by the jobcentre to seek jobs in zones 5 and 6, which is not an unreasonable request, but his wife had a part-time minimum wage job and they looked after two children between them, and the cost of child care and the extra travel combined meant that even in a council property he could not make ends meet. The Government are once again threatening to squeeze people in Hackney until the pips really squeak. In fact, I am not sure that there are any pips left to squeak for many people in my constituency.
A key issue that was not fully addressed yesterday is housing and I am glad that the hon. Member for South Norfolk (Mr Bacon) has mentioned it. I am fed up with the mantra from the Government about building brownfield land as though that is a great solution, because every experience I have in Hackney and across London shows how empty those words are. Huge publicly owned sites are being sold in my constituency to the highest bidder and not for local affordable homes.
I have some shocking examples. St Leonard’s hospital was taken from the local NHS and is now held by NHS Property Services Ltd, or PropCo. We do not know what will happen to that site but, in a horrible twist of irony, it was formerly Hackney's workhouse. In my view and that of the council and of others locally it should be used for affordable housing for local families when it is eventually redeveloped. That would do more for public health locally than the private housing that is likely to appear there.
Mr Binley
Does the hon. Lady recognise that Northampton especially will take on much of the burden of the problem of housing in London and the south-east and that the answer to the burden will be to build on brownfield sites? Outside London, brownfield sites are a massive opportunity.
Meg Hillier
I do not doubt that some are, but my particular issue is brownfield sites that are owned by the public—the taxpayer. They are part of Government departments and are being sold off to the highest bidder rather than adding value to the local community. With all due respect, I am sure that Northampton is a lovely place to be, but my constituents want to live in Hackney South and Shoreditch and Hoxton and Homerton. They do not want to be living out of London, facing long commutes to work. When people are on the minimum wage, that is just not an option. In fact, even if they are on much more than the minimum wage it is not an option, as commuting costs make it unsustainable.
Kingsland fire station was not only rashly closed by our Tory Mayor of London but has now been sold off for a rumoured £28 million. That clearly cannot be for affordable housing, but the situation is still shrouded in secrecy and we are waiting for final information. Another example, neighbouring my constituency, is the Mount Pleasant sorting office in Islington, which my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) has rightly championed. That huge publicly owned former sorting office site is being sold mostly for luxury homes. It is time that the Treasury rules changed and, instead of the highest cash bid winning, the welfare and benefits of local people were taken into account.
What do the Government offer on housing? They offer Help to Buy and now the ISA for homebuyers, with up to £3,000 for young savers. They are great for those people, but it fuels the house price increases we have seen in my constituency. Let me give Members the flavour of that. In 2005, the average house price was £269,000. Today, the average house price—it might have gone up since I looked at it this morning—is £606,000. That is a staggering 124.9% increase in 10 years.
Rents are also rising sky high and there is nothing in the Budget for renters. The median private rent in Hackney is £330 a week and median full-time earnings in Hackney are £608 a week. More than half of people’s earnings are going on rent and many are trapped sharing bedrooms with strangers, using living rooms as bedrooms and not having the option of moving. It is impossible to be sure that one can raise a family in most private sector accommodation, as there is no security. I am glad that my Front Benchers are considering this, but we need to go further. Hackney is an example of what will face other parts of the country in future.
I was staggered to hear the Business Secretary defend the bedroom tax. In the Hackney Homes homes alone—the former council properties—2,160 tenants have been hit by the bedroom tax. It sums up the Government’s approach, because it does not work. There are no homes for people to move to and it is costing the taxpayer. Let me give an example. One woman was living in a three-bedroom property. Her teenager moved out and she was temporarily not working, so she was encouraged to move to a smaller two-bedroom property. She did so, but even though it was a social housing property, the rent was higher than that for her three-bedroom property. She faces a terrible struggle to find work that will pay the higher rent and she has lost the home that had been the family home. It is mean-spirited, it undermines the stability of secure tenancies and it is wrong. It must go. No ifs, no buts—if there is a Labour Government, the bedroom tax will be abolished.
The Chancellor talked about tax avoidance, and aggressive tax avoidance must be tackled. As a member of the Public Accounts Committee I have been playing a role, along with the hon. Member for South Norfolk, in ensuring that that happens. We know that uncollected tax has risen by £3 billion under this Government and all parties want to see more investment in HMRC’s ability to tackle companies that are running rings around Revenue officials to pay as little tax as they possibly can. Let us consider businesses up and down the country. Businesses in my constituency tell me that not only is it difficult to borrow money, despite the Government’s raft of lending schemes, but overdrafts are a big issue. I see that the Economic Secretary, who is the Minister responsible for banking, is in her place. Why do we let the high street banks off the hook every time we discuss these issues? They should be lending to local businesses. They are best placed to make a decision about what works for those businesses, but they do not do it.
I am delighted that the Minister is in her place, because I know she has a genuine passion for change in the banking sector. In the Budget and the document “Banking for the 21st Century”, there is no mention of real-time data on credit records. We currently have to wait 30 to 60 days for our data on lending to be available on a credit record. That encourages irresponsible lending. We have had a lot of debate about payday lending, but real-time data on credit records would have ensured that such lending applied only to those who could afford to pay back the loans. If the Minister can give me any indication of the Government's latest thinking on that and how fast they could move towards what seems to me to be a sensible measure, I would very much welcome that.
The Budget does nothing for my constituents. It screws the poorest down into a very difficult situation. They are feeling trapped, unable to escape from a situation that is not of their making. Their incomes have gone down and they are caught in a benefits trap, despite the fact that many of them want to get out of it. The Government are rewarding people they believe will vote for their party but not delivering for my constituents.
Mary Macleod (Brentford and Isleworth) (Con)
It is a privilege to speak in the debate and to welcome the Budget. We have a plan that is working in a Budget that works for people in our constituencies, unlike the hon. Member for Hackney South and Shoreditch (Meg Hillier). In my constituency, I have a growing economy, a record number of jobs and rising living standards. The deficit is down across the country and our national debt is starting to fall as a share of the economy. Great Britain is becoming great again and in 49 days’ time, hopefully, under a Conservative Government, Great Britain will become even more great.
Why is the Budget good for people in Chiswick, Brentford, Isleworth, Osterley and Hounslow? We have helped to transform their lives. My constituents want stability, jobs, a national recovery and aspiration in their lives. They also want to make work pay, which is why we heard yesterday about the increase in the personal tax allowance to £10,800 in 2016 and £11,000 in 2017. That is taking 3.7 million of the lowest paid out of tax all together. In my constituency, more than 53,000 people have seen their taxes cut since 2010 and nearly 6,000 have been taken out of tax altogether.
Business and jobs are critical to the recovery of this country and employment is at a record high, with 1,000 more jobs created every day under this Government. I will repeat that: 1,000 more jobs per day are created under this Government. We have 9,400 more businesses in my constituency since 2010. My Plumber, which my hon. Friend the Economic Secretary visited in Brentford, is one example of the many businesses that have been set up in my constituency in the past five years. The claimant count is down to 2% in my constituency, which represents a fall of 36%, and youth unemployment is down by 45%. We are also continuing to cut corporation tax.
I fought hard, along with my local Chiswick traders, to get a review of business rates, and we have seen that happen. The Chancellor confirmed that the reform of business rates will be “far-reaching”, which is great to hear. We do have to raise the £27 billion that business rates raise, but there are different and fairer ways of doing it. Businesses want to pay their fair share of tax, but they want to do so in a way that is fair to everyone. My right hon. Friend has already cut £1,000 off so many business rates on the high street, benefiting about 500 businesses in my constituency.
We also talked about supporting small businesses and abolishing class 2 national insurance contributions for the self-employed. That represents a massive simplification for about 5 million people, with about 8,000 of them being in my constituency. The Chancellor has also raised the annual investment allowance for firms to £500,000, which is part of the reason why business investment is four times higher than it was in the last Parliament. He is committed to looking at that again in the autumn statement, which I know local businesses will welcome.
We also heard yesterday about the creative industries. I have created a west London creative industries hub, and we have a massive sector there. The sector is booming, with so much growth and opportunity in it. It is worth £76 billion to the UK plc economy as a whole, and there is much more that we can do. We heard yesterday about the TV and film tax credits, which will be more generous, and about expanding support for video games. That is great news for businesses in my constituency.
Several hon. Members have mentioned superfast broadband, and I ask the Minister to take this away and look it a bit further, because small businesses in London face a real issue on superfast broadband—I would like it if we just had fast broadband. Perhaps one day we will get to superfast broadband, but this issue is deterring growth in some of our small businesses in this great capital. We need to examine the digital infrastructure for London to make sure we are doing all we can to support small businesses and the growth we need from them.
We also heard yesterday about the support for the brewing industry; we are cutting beer duty for the third year running and taking another penny off a pint, helping companies such as Fuller’s and its brewery in my constituency. That move is great for the local economy. We heard about the freezing of fuel duty, helping small businesses, as well as families. Having that strong economy, which is growing faster than any other advanced economy, is fundamental to the investment for the future that we need.
Secondly, I wish to touch on housing, which has been discussed by some hon. Members, including my hon. Friend the Member for South Norfolk (Mr Bacon), who spoke eloquently about it. This is the No. 1 issue for Londoners, according to the Mayor’s recent annual survey. Some 45,000 homes on brownfield sites in London have been announced, and my area will have a new Hounslow town centre housing zone, containing 3,500 new homes, including nearly 1,400 affordable homes. We do, in London, need to push for those affordable homes, because it is difficult for people to get on the housing ladder. I was pleased to hear yesterday about the Help to Buy ISA to help people save for their first deposit. For every £200 saved, the Government will add £50—in effect, this is a tax cut—for first-time buyers, up to a value of £3,000. That will be very welcome across London.
Thirdly, I wish to touch on education, because four new schools have been confirmed in my constituency under this Government. That is a huge investment, and I thank the Prime Minister, the Chancellor and the Education Secretary for it. London has had such a large population growth, with my borough being the fourth-fastest growing borough in London. School places are one of my biggest issues. This Government have delivered two new primary schools and announced two new secondary schools only last week. They will make a massive difference to families across my constituency, whether we are talking about the Nishkam school, which has already opened, the Floreat Brentford school, which is opening in September, or the two announced recently, the Green school for boys and the Hounslow improvement partnership school. This is exactly what we need for the people in west London.
I was also pleased to hear about the news on skills for London, with more power for the Mayor over skills funding to support apprenticeships and the commissioning role in the National Careers Service. In London, crime has fallen by 16%, and we have had £10 million for domestic abuse refuges from the Home Secretary and £5 million from the Mayor of London. We have been given the Piccadilly line upgrade, with trains stopping at Turnham Green once that upgrade takes place—that is another achievement. If the Government want to make some savings, I suggest that they opt to expand Gatwick rather than Heathrow, because the expansion of Gatwick is simpler, easier and better and it will cost the taxpayer nothing, whereas Heathrow’s expansion will require billions of pounds of taxpayers’ money.
In conclusion, over the next 49 days I will perhaps be focused on a tough fight I have in west London where every vote counts, but I hope residents will judge me on my record of what I have done and what I still want to do. If I am fortunate enough to be re-elected, I will make sure I go about implementing the approach of more schools, more apprenticeships and more businesses, and transforming lives in my communities.
Alex Cunningham (Stockton North) (Lab)
I worry about the poorest people in society, including the working poor, in places such as Stockton-on-Tees, because this outgoing Government have failed, even at the last opportunity, to do anything to help them. The Government have done nothing to boost their incomes or provide them with the jobs they would love to have. The Budget will bring no benefit to tens of thousands of people across Teesside, and more across the country, who hold low-paid jobs, with wages of no more than £5,000 or £6,000 a year. While the Chancellor maintains huge tax cuts for millionaires and increases tax-free allowances for people paying higher-rate tax, very few low-paid workers gain anything from changes to the tax system. These people can only dream about saving some money.
This is another Budget for the better off to be better off still and the poor to be poorer. The Chancellor even failed to deliver the promised minimum wage of £7 an hour—Labour will do much better. In his very first Budget speech, the Chancellor pledged that under his economic management the coalition Government would build
“an economy where prosperity is shared among all sections of society and all parts of the country.”—[Official Report, 22 June 2010; Vol. 512, c. 167.]
Many of the people I represent have not benefited from even the low inflation rate. Instead they have been stung by above-inflation increases in the cost of things such as energy and other utility bills. The Chancellor might be in it with his rich pals from the hedge funds who bankroll the Tory party, but I do not see much evidence on Teesside of everyone sharing in that prosperity.
Perhaps more worryingly, we have seen the repeated pattern of the poorest being hit the hardest, and nowhere are the effects of this more starkly illustrated than in the jobs market. For too long, unemployment has been higher in the north-east than anywhere else in the UK and that has been the case in every quarter since April to June 2011. Hon. Members will not be surprised to learn, then, that the claimant count in the north-east is also the highest in the country, and in my constituency the numbers are higher still. The 4.1% we have claiming support related to unemployment is more than three times higher than the rate in the south-east, and almost seven times higher than the rate in the Chancellor’s seat in Tatton.
Are Government figures an honest reflection of the numbers of people who ceased claiming this allowance? They are not. According to research by the House of Commons Library, of those who have ceased claiming jobseeker’s allowance in my constituency, only just over one third did so because they had found work. Conversely, more than half were recorded as doing it “for other reasons”. Not a single person has done so as a result of upping their hours to more than 16 a week. So, where have they gone? We know that they do not have jobs. Although a few may have gone abroad, into education, or even died, that has not happened to the hundreds of people who have disappeared from the Government’s statistics.
It is also a sad fact that too many people feel insecure and powerless at work. Record numbers of people are working fewer hours than they would like, and there is an increasing reliance on zero-hours contracts. The result is that more people worry about having enough money to pay their way. More than 5 million people are in low-paid jobs, while a quarter of a million people earn below the national minimum wage.
Meg Hillier
My hon. Friend sums up the challenges well. People may be in jobs, but what is the quality of those jobs and what prospects do they have? Does he agree that that is an issue not just in his constituency but in many other constituencies, including mine?
Alex Cunningham
Certainly, it is an issue across the entire country. I hear from people who are told at 6 o’clock in the morning that they are required for work, or, worse still, that they are not required for work. That is nonsense. What surety of income does that give them as they go into the week ahead?
The value of the national minimum wage has dropped by 5% since 2010, which is why the amount spent on in-work benefits and tax credits has risen 18%. Why cannot this outgoing Government recognise that people want to earn their money and look after their families rather than exist in a dead end, low-paid role that leaves them dependent on the state? What of those who, through no fault of their own, are dependent on the state? I fear what the Chancellor is planning to do to them next. Why is the Chancellor so coy about spelling out where the £12 billion cut in welfare spending will fall? Is it because he knows that decent people will baulk at his plans to devalue further the incomes of our most vulnerable?
Has the Minister seen the report that came overnight from Herriot-Watt university for Centrepoint, which shows that more young people will be homeless as a result of Government policies, and that many in work could lose their jobs if their housing benefit is removed and they are forced to return to live with their parents? We should not forget that this Government’s policies have seen these young people shoulder a disproportionate share of austerity and its worst effects.
Karl Turner (Kingston upon Hull East) (Lab)
Before my hon. Friend moves on, will he estimate the number of people in his constituency who are living with their parents because they are unable to buy their own home? How many of them could afford to save £200 to get the advantage of the individual savings account?
Alex Cunningham
I may not have the exact statistics, but I do know that large numbers of young people are in such a position. When I go to local colleges, I hear the anxieties of young people. They say that they want to live independent lives, go to university, and develop their plan for their own home, but they cannot do any of that.
The education maintenance allowance has been removed, support from the access to learning fund and student opportunity fund has been cut, housing benefit for under-25s has been reduced, higher education tuition fees have been trebled, and careers services have been slashed. On top of that, youth services have been hit by funding cuts of £60 million since 2012. I saw nothing in the Budget to address those issues, just a prediction of many more cuts to come.
In the north-east, 11 of the 12 councils suffered higher than average reductions in spending power for 2014-15 along with a 5% funding reduction. That is 10 times higher than cuts in the south-east, and almost four times higher in percentage terms. Our front-line emergency services are suffering more than most, too. It is no secret that A and E departments up and down the country are having a torrid time as a result of this Government’s wanton neglect of the NHS. We have £3 billion wasted on a reorganisation that has increased bureaucracy and allowed confusion to reign; fewer nurses than in 2010; and a GP work force in crisis. But much less well publicised has been the net loss of 293 officers from Cleveland police force since 2010, with more to go as the police and crime commissioner faces another 5.1% budget cut. Cleveland police are £35 million worse off than they were in 2010-11.
That picture is repeated in the fire service, with many brigades struggling to budget for the coming year while having to maintain confidence in the speed and efficiency of their emergency response services. Despite being a centre for the petrochemicals industry and posing one of the biggest fire risks in Europe, Cleveland is facing one of the biggest hits to its spending, with additional cuts this year of 10.4%.
Would the Chancellor still have the temerity to suggest that the quality of public services has gone up, not down, if he could see that services such as Cleveland are having to replace trained, full-time firefighters with retained firefighters just to make ends meet? Would he also do so if he knew that his cuts had spurred the service to close the marine fire station at the centre of our industrial complex?
Energy intensive industries form a large part of the economy on Teesside and across the north-east. The Chancellor mentioned the steel and chemical industries, but he has done little to help them. Although it was announced that the feed-in tariff element of renewable compensation for energy intensive industries will be brought forward to the point of state aid approval, renewables obligation compensation will not be introduced until 2016. That means yet another year of struggling in highly competitive global markets against international competition, which has more favourable conditions, thereby risking jobs and growth in Teesside, as companies are undercut and the jobs moved elsewhere.
With energy prices being business critical, it is possible for these industries to operate only in countries with competitive prices. If we continue in that manner, the UK will fall off the list, and it is areas such as Teesside and the north-east that will again be hit the hardest. That represents yet another missed opportunity to stimulate growth and create jobs.
With working people worse off than they were in 2010, millionaires receiving tax cuts while VAT has been bumped up to 20%, public services being decimated and front-line emergency services slashed, and at the same time that employment is insecure and those on low pay are struggling just to make ends meet, it is little wonder that people in the north-east, and indeed across the country, feel no connection at all with the two parties in government.
Angie Bray (Ealing Central and Acton) (Con)
The Chancellor’s Budget yesterday has been warmly welcomed by business organisations up and down the country. The British Chambers of Commerce, for example, has said:
“The Chancellor’s focus on business growth and prosperity will receive a warm welcome from businesses of all sizes”.
It is certainly the kind of Budget that businesses in my constituency wanted to see, and what is good for businesses is good for our constituents and the communities in which they operate—something that Opposition Members do not always appear to understand.
Despite the strong growth we have seen under this Government, there is no denying that things have been challenging for smaller businesses. Things are getting better, but at my most recent business breakfast club last week, several local businessmen and women raised their No. 1 concern: there is still more that could be done to support businesses, especially smaller businesses and the high street more generally. I expect that they welcomed what they heard yesterday.
In particular, they will have liked the Chancellor’s big announcement that the major review of business rates will report back in time for the 2016 Budget, which is just one year away. It sounds to me like the Government need to be getting on with that, as there is a massive amount of work to do. As he said, business rates have not kept pace with the needs of the modern economy and the whole structure needs rethinking. The advent of online businesses, both commercial and retail, has thrown the whole system out of kilter. When one considers the massive retail giants such as Amazon, one realises that it cannot be right that the businesses on our high streets that continue to trade out of bricks and mortar, in shops and other premises, should have to pay tax on the space they occupy while their online competitors do not. There is no longer the same relationship between the size and location of premises and the contribution businesses make through business rates. As I have said, that cannot be right, so I welcome the decision to have a root-and-branch review.
It is great news that corporation tax is to be reduced again to 20%, which sends an important signal that Britain is really open to business, with
“one of the lowest rates of a major economy in the world.”—[Official Report, 18 March 2015; Vol. 594, c. 776.]
It is to be regretted that the Labour party wants to raise the tax, were it ever to get a chance—what a retrograde step that would be.
Another measure that will surely benefit business is the announcement that fuel tax will be frozen again, making that the longest duty freeze in 20 years. Many small businesses that depend on a van or some other vehicle will continue to benefit from the freeze as well as from the much lower petrol prices at the pump, which we are all enjoying at the moment.
I very much welcome the Chancellor’s continuing commitment to supporting our creative industries. As the Member of Parliament for Ealing Central and Acton, which of course contains the world-famous Ealing film studios, the world’s longest continually running studios, I am delighted that he proposes to make TV and film tax credits more generous, along with expanding support for video games and a new tax credit for orchestras. As a member of the Culture, Media and Sport Committee, I participated in our report on growing our creative industries, which make an increasingly important contribution to Treasury revenues. On a visit to Los Angeles to find out whether the UK is seen as a good place to film and do business, we were given a resounding yes, and our film tax credits were singled out as a major reason for more studios choosing to shoot films over here. I was delighted to learn recently that Ealing Studios is fully booked for the whole of this year. That is a tax credit that earns far more than it costs.
I also welcome the Chancellor’s plans to provide more support for our digital infrastructure, funding work to improve mobile networks, funding free wi-fi in our public libraries and continuing to roll out ultra-fast broadband to nearly every home, which is vital in a world where people work on the move and at home. However, I still make the point that many smaller businesses, as my hon. Friend the Member for Brentford and Isleworth (Mary Macleod) said, continue to get a poor deal when it comes to superfast broadband. In Park Royal in Acton, many businesses complain that they keep being promised that it is just around the corner, but it never actually happens. That is crazy. Park Royal is less than 15 miles from one of the busiest international airports in the world. We need all our businesses to be properly and speedily plugged in. To be fair, I have had an assurance from the Secretary of State for Culture, Media and Sport that this issue is being looked at, but we need it to happen fast if we are not to leave our small businesses in places such as Park Royal at a disadvantage.
Business will benefit from the good news on tax cuts for hard-working people, families and savers. The more comfortable and secure we feel financially, the more likely we are to feel able to spend a little more, so it is great news that yet again the personal tax allowance will be raised. Next month we will see it go up to £10,600, and it will go up again next year to £10,800 and then £11,000. According to the Office for Budget Responsibility, the average taxpayer in 2015 will be better off by £900 a year, compared with 2010. The best news for the low paid is the raising of the minimum wage to £6.70 an hour in October, the largest real-terms increase since 2008. Apprentices will get a pay rise, too—up to £3.30 an hour.
Basic rate taxpayers with savings will be able to enjoy the first £1,000 of the interest they earn on savings tax free. Higher rate payers will benefit from the first £500. From this autumn, savers will be free to take money out of an ISA and put it back in later in the year without losing their tax-free entitlement. These measures are all about freeing up people’s earned and saved money, which can only help businesses.
I welcome this Budget because it does what Conservatives do best—trust the people. We trust the people to make investments in their businesses and to drive growth, and they have. We trust the people to invest in their employees and bring on apprentices, and they do. We trust the people to spend their own hard-earned money in retirement in a way that best suits them, and they will. Put simply, and unlike the Labour party, we trust the people to do the right thing—and it is paying off, with the fastest growth of any major economy in the world. More people are in work than ever before, paying down the deficit and taking more people out of tax. The Opposition may not like it, but the plan is working. As Government Members know, we cannot invest in proper public services, including the NHS, unless we have a strong economy to pay for it. If we cannot get the economy right, we cannot make the investments we all want to see. This Budget puts Britain firmly back in business and I support it.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I have been in this place 18 years and I can think of few events that make it clearer why people have lost faith in our politics than yesterday’s Budget—little effort to address the main issues, just shameless grandstanding by a man more concerned with fitting his policies to scriptwriters’ gags than addressing the needs of our communities. Just days before the end of this Parliament he delivered a Budget which he knows cannot get proper parliamentary scrutiny and where the measures actually implemented will be largely dependent on the support and agreement of the Opposition. It is a political ploy and people can see straight through it. It may have improved on the chaos of the man who gave us the pasty tax, the granny tax and the omnishambles, but I doubt whether history will judge yesterday’s little show as a particularly competent moment.
There are measures that deserve support. Who could object to a penny off a pint? That is not exactly original, like much else to do with this Chancellor, although I believe there is currently a vacancy for a baron of Bexley. Anything that helps jobs in the whisky industry is welcome. If there was ever any likelihood of an increase in petrol duty, thank goodness somebody has persuaded him to drop it. However, yesterday’s Budget certainly will not go into the history books as a great radical or reforming Budget.
I welcome the decision to allow Greater Manchester and Cambridgeshire to retain their business rates. I welcome it because it is Labour policy, but of course I would like to see the same opportunity given to Birmingham. Voters in Birmingham must be asking what the Government have against them. Why is our police service subject to the largest cuts in the country? Why are our council services being decimated? Why is there no extra support for our small businesses? Just what has this Chancellor got against our city?
I support the plan to raise the starting point at which people pay higher-rate tax, but I wonder why the Chancellor did that and left the cut-off for losing child benefit unchanged. That is not a very family-friendly policy, because under his plans the number of households losing child benefit is now set to double. While the increase in the personal allowance is welcome, it does nothing for the 4.6 million people who do not earn enough to pay tax in the first place, and, as we have heard, any gains will be wiped out overnight if he makes it back to the Treasury and promptly raises VAT, just like he did last time.
I was bothered by the fact that the Chancellor completely ignored the NHS. In my constituency, a walk-in centre at Katie road has been under threat ever since this Government came to power, and nothing he did yesterday makes it any more secure. The Bournbrook Varsity practice, which caters for a large number of our student population, is set to lose substantial funds through the abolition of the minimum practice guarantee and other cuts that will lead to redundancies and a loss of services. Our wonderful Queen Elizabeth hospital is set to lose about 11% of its budget as a result of punitive measures that attack its success as a regional specialist centre. Labour has a plan to grow the NHS. Under this Chancellor, we are already experiencing NHS cuts, and most people feel that there is more to come. Yesterday’s Budget largely confirmed these fears.
My constituency has an unemployment rate of 4.4%. It is now in the top 17% of constituencies for unemployment —110th out of 650. Try telling my constituents that the sun is shining. What they experience is insecure employment, zero-hours contracts, and people working all hours to make ends meet and still having to resort to food banks to feed their kids. Try telling them about the Chancellor’s economic plan. What we need is action to support start-ups, with Government money to match initiatives like Entrepreneurial Spark, a cut in business rates and taxes for small and micro businesses, an improvement in the minimum wage that amounts to more than 70p over a Parliament, and action to enforce the minimum wage so that unscrupulous employers cannot exploit those desperate for work.
As the hon. Member for Stone (Sir William Cash) said, instead of a headlong rush to offload Lloyds bank, perhaps the Chancellor should encourage it to show a greater sense of social responsibility and more respect for local business people in places like Bournville, where its high-handed closure programme shows contempt for the local community and taxpayers. It is a joke for the Business Secretary to come here and say that he will protect the last bank in the village. It is the last bank in the village, there is a massive public stake in it, and he cannot lift a hand to do anything about it.
Where are the measures in this Budget that people in my constituency really care about? They are absent. The Chancellor says that the sun is shining as he strives to paint a rosy picture in the face of the misery endured by so many. It is a Budget where he simply ignored his broken promises and inaccurate predictions—a Budget where the threat of more suffering is ever present. It is less “Here Comes the Sun” and more like here comes the “Sun King”: a man who has lost touch with reality, with vanity crowding out the ability to speak or hear the truth; who is not interested in the lives of real people; and who is armed with an economic soundbite rather than a plan. His assurances are as reliable as those of the party chairman, and his integrity is as intact as that of the former party treasurer. We deserve better, and the country needs a lot, lot more.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Let me say to Members that we have more time than expected because of some withdrawals, so I can lift the time limit to 12 minutes. I call Brian Binley.
Mr Brian Binley (Northampton South) (Con)
As ever, I am most grateful to you, Mr Deputy Speaker. It has been an honour to serve under you. This will be my last speech in a major debate and I am delighted that you are in the Chair.
Let me continue to be nice by telling the Economic Secretary how much I welcome this Budget for growth. It is based on five years of careful management, the provision of affordable services and the gradual reduction of a massive budget deficit. I pay tribute to my hon. Friend and the Chancellor for creating this opportunity for growth, which I believe many businesses and taxpayers up and down the country will welcome enormously.
Some years ago, I said that my grandmother would have told this place, “You have only two options when you’re in financial difficulties: earn more or spend less.” Listening to the Opposition’s arguments, it seems to me that they believe that, while earning more has some merit, spending less has no merit at all. My grandmother would have said that they were foolish. I would not dare say that in this place, but I know that she would have been pleased with the Budget this Government have produced.
It does no harm to recognise the inheritance this Government were dealt by a Labour Government who had themselves inherited a golden legacy that they frittered away. [Interruption.] It certainly was a golden legacy and was said to be so by pretty much every economist in the country, except, of course, for those affiliated to the Labour party. The Labour Government engineered a growing structural deficit from 2002 onwards. That is totally irrefutable. The deficit they left was not, as has been said, £140 billion; in their last Budget, they left a deficit of £163 billion.
If we consider that 1 billion seconds is 32 and a half years, we may get an idea of what £1 billion looks like. What a massive, massive sum.
Debbie Abrahams
The hon. Gentleman is as charming as ever and I am grateful to him for giving way. I want to correct the record. I am sure he will acknowledge that there was a global economic crisis in 2007-08 and that we reduced the deficit from 47% to 37% of GDP.
Mr Binley
The deficit was reduced because you spent more money—of course that would reduce the deficit.
I thank the hon. Lady for her intervention, because it leads me on to the next part of my speech. You failed to mend the roof while the sun was shining. You failed to recognise the fact that there was a global storm approaching. You massively increased borrowing when every business in the land was doing just the opposite—I can tell you that as a business man. Indeed, you almost broke the country.
Mr Deputy Speaker
I think you need to sit down for a second. Once was fine, but I think that was your fifth “you”. I am being accused of a lot of things that I know you will not want me to take responsibility for.
Mr Deputy Speaker
Order. I can assure the hon. Gentleman that there will not be a lax approach. I will allow him to get on with his speech without any more “yous”.
Mr Binley
I am most grateful, Mr Deputy Speaker. I will remember that.
This Government need no lessons from the Opposition, even if they had lessons to give, which I have failed to hear during this Budget debate. The Minister will not be surprised to know that I will again bang the drum for business, as I have in this place for the past 10 years. In many respects, I am sorry that this place does not have more business entrepreneurs, and often fails to appreciate their needs or the sort of economic atmosphere in which they work best. Thankfully, this Chancellor has had a plan. It is a plan that is working, and business confidence continues to rise. The Budget will frame our prosperity for the entirety of the next Parliament. I have no doubt that there will come a time when, if the Opposition ever again assume the seat of government—pray the Lord that it will never happen—they will recognise the reality of the situation, instead of talking in Shakespearian fairy tales, as the shadow Chancellor did.
The Chancellor has introduced Budget measures that business will welcome: the reduction of the rate of corporation tax to 20%; the abolition of national insurance contributions for those employing under-21s, and indeed young apprentices, which will come into effect in April next year; the extension of small business rate relief and the much welcomed employment allowance; and especially the promise of a major review of business rates. Business will be delighted by the abolition of class 2 national insurance contributions for the self-employed, which will follow in the next Parliament, and by the abolition of annual tax returns. On behalf of small businesses up and down the country and of the independent operators—it is so important for this nation that those single men and women plough their own furrow—I thank you.
Chris Heaton-Harris
It will be a great loss not to have my hon. Friend in the House after the general election, because he is a worthy champion of the wealth creators of this country. In his valedictory speech to this place, will he share with us some of his great expertise on why small businesses are the bedrock of British society, and how they employ so many people to the benefit of our tax system?
Mr Binley
I would be delighted to do so. Small businesses are the bedrock of the growth in the number of businesses overall because, first, they welcome the Government’s approach, and secondly, they have the courage to go out, put their own money on the line and add to the number of jobs available in this country. I am delighted to say that that is exactly what I did 25 years ago, and the companies I founded now employ 300 people —that is what entrepreneurialism is about—and to say that that is a part of my record and always has been.
The Chancellor has acknowledged that the success of the Budget will not be calculated by the accumulation of individual measures. I will therefore speak about the economic architecture that will help to achieve his ambitions. I want to comment on how his efforts to rebalance the economy are taking off, something which requires a bold and strong local infrastructure that supports businesses.
In particular, I want to speak about the importance of local enterprise partnerships. I am delighted to say—here is a compliment—that I understand that the Opposition have welcomed LEPs and will continue to use them. That is sensible, and we should give the Opposition credit when they agree with sensible measures. LEPs are critical to the rebalancing of a successful economy in every part of the UK. As some of my colleagues know, I am the vice-chairman of the Northamptonshire LEP. I may be the only Member of the House to be so intimately involved in an LEP. I believe that it is important for hon. Members to take an active interest in their LEPs and be associated with them with a view not to running them or overpowering their potential, but to being involved because they can be a great help. I hope that the Opposition spokesman, the hon. Member for Hartlepool (Mr Wright)—to be fair, he is a great supporter of small business—will take that message on board.
Northamptonshire had the vision to create the Northamptonshire enterprise partnership before LEPs were mooted. I pay tribute to the leaders of the county council for their foresight. The pressures on local government funding will increasingly restrict the ability of local authorities to sustain their support for LEPs. If we are to make them work, they need to be owned by the entirety of the local economic community, and not just by one sector.
Why has the performance of LEPs across the country been so patchy? I believe that it is because many of them, particularly many of the smaller ones, are not in receipt of the support that they need to create the sort of administration that will produce the growth that we are seeking. The original design for LEPs envisaged local businesses as the main source of income for the administrative costs. However, in areas where small businesses are the main engine of economic growth, that is an optimistic expectation. In Northamptonshire, some 94% of those working in the private sector work in SMEs. SMEs simply do not have the spare cash fully to support the LEPs in the way the Government originally envisaged.
I would like to see a system whereby a proportion of the finance that is available for the projects that LEPs handle is allocated to sustain their administration. I hope that the Economic Secretary will recognise that I am not asking for more money, but for some of the money that is devoted to local growth to be redirected to the administration of LEPs so that they can achieve the objective of growth.
This Budget must be seen as the prelude to prosperity in the next five years. Frankly, the Chancellor will need the support of LEPs after the election. That support will have to be strong and sensible. Consequently, the Government will have to give careful thought to how best to organise and manage the structure of LEPs. I appeal to the Economic Secretary to recognise that, in view of the Government’s policies that were expressed by the Chancellor, LEPs will need a little more financial help if they are to do their job correctly on behalf of the Government.
I am happy to offer an exemplar for what can be achieved by a LEP. I refer to my own LEP in Northamptonshire —there’s nothing like blowing your own trumpet! The economy in Northamptonshire is recovering well from the great recession. The food and drink sector is the largest sector in our county in terms of employment and turnover. We are building a new food and drink academy at one of the important colleges just outside Northampton. More than 40,000 people are employed in the auto sport and aerospace industry. They are grateful for the help that has been given to the industry, but they want it to continue. Our craft industry, which makes the best boots and shoes in the world, has received help from the LEP. Church’s, which is one of the best-known brands, has had help to extend its manufacturing facility. Northamptonshire’s enterprise zone has created more than 1,000 jobs.
Finally, Northamptonshire’s Challenge 2016 project, which aimed to achieve a massive reduction in youth unemployment, has far exceeded our expectations. Two years ago, we had more than 5,600 young people not in education, employment or training; there are now a little under 1,500. That is the success of this Government—giving people opportunity and aspiration. I say to those who tell me that young people do not have aspiration that it is amazing how aspirational young people become when they have a job.
If we are to put ourselves in the premier league of economic growth, the measures in the Budget must be combined with an effective local economic framework. I am confident that Northamptonshire will continue to provide an example of how best to drive regeneration and economic growth, but it will need more help, as will many LEPs across the country. I beg that you consider that factor—you being the Economic Secretary, Mr Deputy Speaker—
Mr Mike Weir (Angus) (SNP)
I am pleased to follow the hon. Member for Northampton South (Mr Binley) who is the authentic voice of Conservatism in this place, and blue in tooth and claw. He will be sorely missed, and I wish him well in whatever he chooses to do in the future—somehow I cannot see him retiring quietly to a rocking chair.
When I listened to the Business Secretary introducing this debate, at times I wondered which Budget he was talking about since he seemed to flip between the Budget presented by the Chancellor yesterday, and the fantasy Budget presented by the Chief Secretary to the Treasury this morning, and it was a bit difficult to follow his line of thinking. In response to a question from the hon. Member for Stone (Sir William Cash), he spoke about possible changes in banking and protection for the “last bank in the village”, as he put it, but I am afraid that in many communities that ship has long since sailed.
Banks have been pulling out of rural communities for many years, and substantial communities in my constituency no longer have a bank. Indeed, the Royal Bank of Scotland recently closed a branch and when questioned about it said, “Well you can use the post office”. Unfortunately, the Post Office is also undergoing a procedure at the moment. There may no longer be closure programmes, but many post offices are “changing”—or rather closing—and business is being transferred to other local businesses. In many ways I see the logic of that from its point of view, but it means that many businesses are now running the “post office local model”, which is a much reduced service. In many communities in my constituency, including substantial communities, that is the only post office service left—a counter in another business, which is a small shop or, as in one case, a card and paper shop. That does not give confidence in the service—notwithstanding the service that such shops can provide and the extent they go to—especially for business banking, and that needs to be looked at.
If we contact any of our major banks, they will try to get us to go online and work through the computer. That is fine, but many of our elderly people cannot do that, and many people with small businesses do not want to invest in the extra equipment. To pick up the point made by the hon. Member for Ealing Central and Acton (Angie Bray), there is also a serious problem with broadband provision in many parts of our country.
In my constituency many of the towns now have a good broadband service that has been upgraded, but one does not have to go far outside the town for it to disappear altogether. Part of the reason for that is that many small exchanges that serve the country in village areas desperately need upgrading and can no longer take any more broadband lines. I have had situations where people have moved house, cancelled their broadband contract, and when they went to get a contract for their new house they were told they could not get one any more because the line they used had been allocated to someone else.
The Budget has missed a huge opportunity to invest in that infrastructure for the future. If we are to be a successful nation and increase business, we need the infrastructure to do that. I have talked often in the House about a rural area such as mine where many businesses are taking advantage of the internet where they can. It is not always a bad thing. A business in a rural area can get a niche market, survive on the internet and have quite a good business, but it needs an internet connection, good broadband, and a good postal service to deliver the goods to the rest of the country.
Since the privatisation of Royal Mail we have seen an erosion of that service in some parts of the country. In some parts of Scotland, as I am sure is the case in other parts of the country, it has announced that it will not be picking up so often from post boxes—there might be one pick-up first thing in the morning, but nothing else for the rest of the day. That is hopeless for a business. Furthermore, many of the new post office locals do not have sufficient room for proper business mail to be left for Royal Mail to pick up. Again, that was a missed opportunity in the Budget.
Unfortunately, the real message of the Budget is that massive cuts are coming our way, which will have a terrible impact on many of our local communities and businesses. The OBR has described the coming years as a rollercoaster for public expenditure and said it will return the level of Government expenditure to that of 1964. This morning, the Chief Secretary to the Treasury, who presumably had a hand in writing the Budget, as well as his alternative Budget, said it would take us back to the era of “Cathy Come Home”. That film brought home to many people the extent of the housing crisis in the 1960s, but that housing crisis is coming back to haunt many of our communities.
Many Members have talked about the need to build more houses, and I entirely agree, but I was concerned that the only specific announcement about this in the Budget was the new ISA to help get younger people on the housing ladder. That is good news for those who can afford to put money into an ISA, and I am sure that well-off parents around the country will be preparing to open such accounts for their children, but it is just another variation on the bank of mum and dad and does nothing to help the many young people who can only dream of renting their own home, let alone owning one.
The only boost to local businesses is likely to be for estate agents, as this measure fuels a housing bubble in our cities and communities—houses are expensive all over the country. If we are to tackle the housing crisis, we need a boost to build new affordable homes and homes for rent. Not only would that give young people a real chance to get a home of their own without needing well-off parents to finance it, but it would give a boost to local economies by providing work for those who build the homes and the businesses supplying the needs of new home owners.
The hon. Member for Luton North (Kelvin Hopkins) commented on why we had reached this situation. In Scotland, we are now building new homes and have removed the right to buy introduced by the last Tory Government. Whatever people thought of the policy at the time, it is no longer appropriate for the current market because it acts as a disincentive to councils to build new houses—because they might have to sell them off fairly quickly at reduced rates. In Scotland, new houses for rent are being built for the first time in many years. When I read the leaks of the proposed Budget, I was concerned at the suggestion that the Chancellor would introduce a new right to buy for housing associations. I think we should all be grateful that he did not do that, although it would not have applied in Scotland anyway, since we have taken a different route.
Many of the cuts, however, will make things much worse for our young people. Many people, particularly under-25s, will no longer be able to get housing benefit and will be forced to continue to live with their parents, but in many cases, either that will not be practical or for some other reason they will not be able to do it, and they will end up sofa surfing with friends and relatives. It is all very easy, as Government all too often seem to do, to announce crackdowns on welfare and go for cheap headlines in the more rabid tabloids. As we all know, however, in reality many of those in receipt of benefits are working, and the benefits are not their income but top up the income they receive from their employment. In my constituency, on the latest figures, the unemployment rate is 2.5%. On the face of it, that is excellent news, but it is also a low-wage economy, and that is the difficulty. Many people rely on benefits to top up their income and enable them to live.
Many of us will be spending more hours than is healthy over the next few weeks knocking on constituents’ doors, and I am sure that many have had the same experience as me of finding it difficult to find people in, mainly because so many work long hours, split shifts or more than one job to make ends meet. That is the reality of modern Britain, with so many people still relying on food banks to feed their families.
The assault on the welfare state has a dramatic effect on our local businesses. Those who are less well off will tend to spend their money—and to spend it in local businesses. Cuts not only attack those on benefits, but remove a substantial amount of money from local economies, hitting businesses. Is it any wonder that so many businesses on our high streets are closing?
In Scotland, the Government have made determined efforts to halt the decline in small businesses with policies such as the business bonus scheme, which has abolished or reduced business rates for many small businesses. The Chancellor announced a scheme for business rates retention, but the Scottish Government introduced such a scheme in Scotland back in 2011. These schemes help, but more needs to be done to boost local businesses.
We already know that some of the poorest in society will bear the brunt of the misery of the austerity programme. The proportion of tax cuts to tax rises has moved from 4:1 to 9:1, and this will have a dramatic effect on many households. As others have said, we do not yet know the details of the coming cuts and benefits, but this is all money being sucked out of our local economies and will impact directly on our local businesses.
Before I finish, let me say that it is not all bad news. I welcome the Government’s changes to North sea oil taxation. I called for it, the Scottish Government called for it, and there is widespread support for it across all parties. This industry is going through a downturn at the moment—not for the first time, and I dare say it will not be for the last. It is worth noting that the reduction in the supplementary charge will take us back to the position in 2011, when the decision to increase it, taken without consultation with the industry, was hugely damaging.
On a more positive note, the Bank of Scotland did an oil survey last week, showing that 90% of firms are optimistic about the future. Many of them were looking to diversify into such things as renewables. Here, again, however, the Government have missed the chance—
Mr Robert Walter (North Dorset) (Con)
It is a pleasure to follow the hon. Member for Angus (Mr Weir). If he had his way, he would not be in this House to benefit from our long-term economic plan.
When I made a speech last week I said that it would probably be my last, so this one can be regarded as an encore. I am delighted to speak in support of my right hon. Friend the Chancellor’s Budget, which I think is superb. I shall not comment on the Liberal Democrat alternative budget that we heard this morning. After 18 years in this House, I have been elected and subsequently re-elected three times despite the Liberal Democrats. I ought to be an expert on Liberal Democrat policy, but I cannot remember ever having much of a policy debate with them during any of those elections. I do remember the slogan “Winning Here!” on every roadside poster, but I do not think that will be true in the next election either.
I shall not indulge myself for long in commenting on the two kitchens of the Leader of the Opposition. I attest that I am convinced he has only one principal family kitchen, and it is clear to me that the room in which he was photographed, adjacent to his drawing room, is his butler’s pantry. We should always remember that whenever he is connecting with the ordinary people of Britain.
This Budget has suffered once or twice from facetious comments from the Opposition about “the long-term economic plan”. We have had five years of robust policy from my right hon. Friend the Chancellor and the Treasury team—I see the Economic Secretary in her place on the Front Bench—and this plan continues for another five years. I always thought that a week was a long time in politics, but 10 years certainly is. This is a long-term plan, and it is working.
The headlines in the Budget are clear. We are cutting income tax for 27 million hard-working people, cancelling the planned rise in fuel duty, and, not least, taking a penny off a pint of beer or lager and freezing the tax on wine. The new Help to Buy ISA is a superb way of tackling the problem that first-time buyers still have. I think that it is sometimes exaggerated, but it is none the less welcome that if a first-time buyer saves up to £12,000 towards a deposit on a home through an ISA, the Government will contribute an extra £3,000. The help for savers through the abolition of tax on the first £1,000 of savings will benefit some 17 million people.
The commitment to run a budget surplus and keep our debt share falling is particularly important, as is backing the business and skills that will create full employment. As the Chancellor said, we must invest throughout Britain. I know that his pet scheme, if I may call it that—the northern powerhouse—is an exemplar for other parts of the country, including my own in Dorset. The Budget shows our commitment—the Conservative commitment—to a long-term economic plan. Perhaps I am being partisan, but I believe that the only way in which we will deliver on that commitment is to elect a Conservative Government on 7 May, because otherwise we shall put all this at risk.
Let us look at the plan, and at how it is working. Debt as a share of the economy will start to fall in 2015-16, thus meeting our debt target. The deficit is down by more than half as a share of the economy, and is forecast to fall to 5% of GDP in 2014-15, down from 10.2% in 2009-10. The economy is growing, and the growth forecast for 2015 has been revised upwards to 2.5%. The OBR’s forecast was upgraded for the second time after Britain’s economy grew faster than any other advanced economy in 2014. That growth has been balanced, with manufacturing growing 4.5 times faster than it did in the pre-crisis decade.
Employment is going up, and unemployment is very much down. There are more people in work than ever before, and 1.9 million more than there were in 2010. In my constituency, unemployment is down to 0.7%. We heard yesterday that the year-on-year figure was down again, by a further 145, and youth unemployment is down as well. I should like to say that I could count the number of unemployed people on the fingers of two hands, but the figure is a little higher than that, and I do not know everyone who is on the register. However, I do know that we have a turnover of labour in my constituency because we have a vibrant economy, and that the big complaint from employers is that they cannot get the work force that they are looking for.
I think that the Opposition are not entirely sure what they would do differently from the Budget, but the electorate are aware of their record and the legacy that they left us five years ago. The note from the former Chief Secretary, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), read, classically, “There is no money left”, which speaks for itself. The Government’s record, however, has been very positive. It is a positive story: of growth, the best in the G7; of employment, the best in the industrialised world and an exemplar for most of Europe; of debt, which is now falling significantly; of a deficit that is coming down; and, most importantly, of business confidence, which is up.
This contrasts with the nightmare scenario of the possibility—no more than that—of a minority Labour Government kept in office, or held to ransom, by the Scottish National party. That really would be a nightmare scenario for Britain. So the question is clear, and I believe that the answer is obvious. I only regret that I will not be here in this House to support the next Conservative Government, but I believe that the nation, and particularly the nation’s economy and finances, is very safe in our hands.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I am grateful to the hon. Member for North Dorset (Mr Walter) for delivering his speech in reasonable time and for not taking the allotted 12 minutes. I am afraid that the arithmetic does not allow 12 minutes per person from now on and I must reduce the time limit to nine minutes, thereby allowing everyone who has indicated they wish to speak the opportunity to do so.
Mr George Howarth (Knowsley) (Lab)
The hon. Member for North Dorset (Mr Walter) said that he was still waiting to hear what Labour’s proposals were, but if he had taken the trouble to attend the opening of the debate, he would have heard from my right hon. Friend the shadow Chancellor precisely what we intend to do.
The shadow Chancellor’s opening speech contained many quotes from Shakespeare. It is a little known fact that there is a strong connection between Shakespeare and Knowsley. The sixth Earl of Derby was a patron of William Shakespeare, and “A Midsummer Night’s Dream” was written for his wedding and performed before Elizabeth I in Knowsley hall, so I thought a quote from “A Midsummer Night’s Dream” might be appropriate. Earlier today the Chief Secretary to the Treasury sought to put some distance between the Liberal Democrats and their coalition partners, and I think the quote might sum that up:
“So we grew together,
Like to a double cherry, seeming parted,
But yet an union in partition,
Two lovely berries molded on one stem”.
That perfectly sums up how the Liberal Democrats cannot realistically distance themselves from everything that has gone on over the last five years.
My hon. Friend the Member for Halton (Derek Twigg) made a very good speech, including a passionate plea on local government finance and how that has affected his constituents during this Government’s time in office. He made some important points that bear repetition.
Derek Twigg
I am grateful to my right hon. Friend for his reference to my speech and the issue of local government finance. Does he agree that the scale and viciousness of the cuts to the most deprived authorities in England beggars belief? Merseyside has suffered particularly badly.
Mr Howarth
My hon. Friend is absolutely right. Knowsley has had the worst cuts in Government grant this year, and over the period of this Government the amount of Government grant per household in Knowsley will have been reduced by £1,500, yet it is one of the poorest, most deprived local authorities in the area.
The main point I want to make is to do with economic growth and the structural problems in our economy. The key point is that we have an unbalanced economy; economic growth is overly dependent on asset inflation and consumer demand. As a consequence, over recent decades the balance has shifted away from manufacturing and towards the service and retail sectors. This is well illustrated by the decline in manufacturing as a proportion of gross domestic product. In 1970, manufacturing accounted for about 30% of GDP, but in the intervening period it has declined to some 10%. For an area such as Knowsley, which has a strong manufacturing base, that is bad news.
There is of course a complex set of reasons for that, but two factors are specifically relevant, the first of which is housing policy and our national obsession with owner-occupation, which distorts any attempt to have a rational housing policy. In the north-west, between 1997 and 2013, average house prices increased from £51,000 to £109,000, yet in the same period wages increased from £309 a week to just £460 a week. In the same period, local authority waiting lists have grown by more than 90%. So, despite the various incentives for owner-occupiers, saving for a deposit and securing a mortgage is becoming an increasingly impossible goal.
I welcome the Chancellor’s introduction in the Budget statement of a new Help to Buy ISA, which will help people to save towards a deposit. Superficially, that is an attractive way to help them get a foot on the property ladder, but the real problem is that it will not help those on lower incomes. A first-time buyer currently needs an income of about £36,000 a year, which is way beyond what many of my constituents earn, so even with that scheme, they will not be able to get on the property ladder.
I am pleased that my party is committed to working towards a goal of building 200,000 homes a year over the next five years. Welcome though that is, it still will not make up the shortfall. Although the sale of council houses—the hon. Member for Angus (Mr Weir) referred to this; I may have misunderstood him—is a good thing from the point of view of the individual buyer, is it good public policy? The National Housing Federation has called for a review of that policy, which I support. We need to know how that policy will contribute to the building of more properties, which needs to happen if we are to bring prices down.
Mr Weir
For the avoidance of doubt, I was making the point that the right to buy caused the sale of many council houses and new ones were not being built to replace them. The removal of the right to buy in Scotland has meant that we are now building new houses for the first time in many years.
Mr Howarth
The hon. Gentleman is quite right, but my point is that, even if we are substituting those houses with new ones, we are still not building enough additional properties, net, to solve the problem.
The Chancellor sees himself as the champion of devolution and the northern powerhouse, and that is a fair claim for him to make. I am very much in favour of greater devolution and the development of city regions, and there are many problems in our city region that need to be addressed. Time forbids me to go into them all, but, for example, we need to get 42,000 more people into employment and an increase in income of about £1,700 per head if we are to close the gap between us and the UK average. The Chancellor said that in his view there is no one-size-fits-all solution to leadership for city regions, yet the evidence of Manchester suggests that there is a favoured option—an elected mayor.
The key to unlocking more resources and powers appears to involve agreeing to have an elected mayor. Regardless of my views on elected mayors, there is no consensus on this on Merseyside. I do not think it should be for the Government to insist on people having one thing before they can get another. There should be a referendum so that the people can have their say on the matter. I hope that progress on devolution to city regions will not be sacrificed purely on the basis that there is no consensus on an elected mayor for the Liverpool city region.
Annette Brooke (Mid Dorset and North Poole) (LD)
May I start by apologising for my absence during part of the debate? I am pleased to be here now to make a short contribution. I have been following Budgets for decades, because my former occupation was that of an economics teacher and I always liked to use real-world examples in my lessons. I remember the first time I sat in the House to listen to a Budget speech; it was absolutely awesome. It was such an honour and privilege to be right here listening to it after so many years of just following it on the television.
I was teaching economics on black Wednesday, 16 September 1992. In my role as a teacher, I found that day incredibly exciting, because it provided illustrations for many of the chapters of the economics textbooks. Members might remember that that was the day on which we fell out of the exchange rate mechanism in a big way and interest rates went up rapidly before our eyes, with the threat of their going up to 15% at one point. I can remember the mortgage interest rate that I had to pay in those days; it was at a staggeringly high level. My colleagues recall my being on top of the world on that day. I was terribly excited while they were all desperately worried about how they were going to manage their budgets and pay their mortgages.
This is relevant to the reason that the coalition was formed. I genuinely believed that we were on the edge of a precipice at that time, and that we faced a major decline in the financial markets. I felt that achieving financial stability was the most important thing to do. It is well known that I have had difficulties with many aspects of coalition policy, but I remain convinced that we did the right thing in this regard, and there are many aspects of this Budget that I am proud to stand up and defend. I shall touch on just a few of them.
People would probably expect a Liberal Democrat to start by commenting on the increase in the income tax allowances. That policy was on the front page of our manifesto, and I am pleased that we in the coalition have now gone beyond that amount and are proposing that the threshold should be raised even higher. It is important to take 26 million workers to the point at which they pay less tax, and to take 3 million people out of tax altogether. That clearly benefits lower earners. My hon. Friend the Member for North Dorset (Mr Walter) and I will probably benefit a little bit from the Budget as well, because pensioners will now be brought into the increased allowances. That will be really appreciated by the many constituents who have written to me to say how unfair it was that their income tax allowance was fixed.
I should also like to comment on the savings income allowance. This represents a really important and interesting principle. It might not initially make a lot of difference financially to people, but it is not a good principle to tax someone a second time when they have saved all their life and paid tax before putting their money into savings. That is a great disincentive to saving, and the change in the rules will be an important concept in the future.
I would also particularly like to comment on the increased expenditure proposed for children’s mental health services. I have drawn the House’s attention to the fact that in Dorset we have no intensive psychiatric care units whatsoever for young women and that they have to travel afar. We have enormously long waiting lists for children’s mental health services and I have argued many times in this House that when, for example, a child is suffering from abuse, it is vital that they can access treatment quickly. I have made many proposals in education and children’s Bills that there should be an absolute duty to provide mental health support in such circumstances. I have never managed to achieve that legislatively, although we now have a clear policy framework in which the Department of Health and the Department for Education work together. Delivering the service needs money, however, and that is very important for our young people.
I welcome the new proposals to tackle tax avoidance and would like to refer to the statement made by my right hon. Friend the Chief Secretary this morning. I thought that some important points were made while this House was less than attentive. Let me give two of them. First, for offshore evaders, following consultation we will introduce a new strict liability criminal offence so that people can no longer plead ignorance in an attempt to avoid criminal prosecution. Secondly, we will introduce a new offence of corporate failure to prevent tax evasion or the facilitation of tax evasion. They are very important and I personally find the idea of a tax dodging Bill very attractive for any future Government. It is important to appreciate that by raising billions in such a way we can help fight poverty in the UK and in developing countries.
In my maiden speech, I focused in particular on the underfunding of the two education authorities that I represent, Poole and Dorset, which are both in the 40 lowest-funded education authorities. I argued long and hard against the previous Government’s not tackling that and I was really pleased that this year we had some extra money to acknowledge that gross underfunding. The future Government must introduce a fair funding formula. It is all ready to run and I hope that the next Government will do that so that children in my constituency and across Dorset will get a fair deal.
My constituency is diverse. I have farmers who will benefit from yesterday's proposed change to tax. Businesses have been well supported by various measures that have been introduced. It is a constituency that, proportionately, has very little public sector employment and it is very strong in employment and business terms because it is a mixed economy. It has a sustainable future, but even so I welcome the contribution that the Dorset local enterprise partnership has made, with successful bids supporting new industries, such as the creative digital industries.
I believe that working within the coalition we have achieved a strong economy, but for me the future must be about tackling the fairness side of things. I therefore welcome the fact that the Liberal Democrats have a different approach for the future. Finally, I want to thank all the staff of the House who have been so supportive in the time that I have been here.
Grahame M. Morris (Easington) (Lab)
It is an absolute pleasure to follow the right hon. Member for Mid Dorset and North Poole (Annette Brooke), who has represented her constituency with great distinction. She will be sadly missed.
I want to make a number of points and challenge some of the things that have been said by various Members on the Government Benches and by the Business Secretary.
I was underwhelmed by the Budget because it makes no real or practical difference to the lives and living standards of the people I represent in the north-east and east Durham. Various figures were bandied around, but when I checked, the one I was drawn to was that over the past decade—pre-recession to current times—the richest 20% have become 64% richer than they were before the recession whereas the poorest 20% have become 57% poorer. I find it very difficult to accept Government Members’ narrative that the rich are shouldering a greater share of the burden of austerity and balancing the books, as the poor seem to be the ones who are suffering. That is certainly the case in my constituency, and the figures seem to back that up.
The Chancellor seems to have demanded more of the same, with deeper and more extreme cuts in public spending. That will certainly damage every service we value—education, policing and the NHS. No figures have been given, but I have seen suggestions that the cuts likely to fall on the police budget are of the order of 30,000 police and 6,700 community support officers. That is a colossal reduction in the number of officers, and suggesting that it will not diminish services, response times and public safety is incredible. The Chancellor’s own OBR warned that his Budget would mean
“a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything seen over the past five years”.
That is a huge warning to the electorate and the general public.
My right hon. Friend the Member for Knowsley (Mr Howarth) treated us to a further rendition of Shakespeare and “A Midsummer Night’s Dream”, making reference to the coalition and the partnership between the Conservatives and the Lib Dems. I was thinking more of “Midsomer Murders”, because we know what a promise means from this Government. Much though I respect Government Members individually, let us not forget the promises that were made on tuition fees, on protecting the poorest—we then saw the introduction of the bedroom tax—on making work pay and on balancing the budget within a single Parliament. I have not got amnesia and I do not think the Chancellor will be able to erase the memory of the past five years. His claim was that he would make work pay, and the Prime Minister told the House and the nation that
“the best route out of poverty is work.”—[Official Report, 11 June 2014; Vol. 582, c. 543.]
I suggest that those words are meaningless to the two thirds of children in poverty who live in working households.
There are more than 5 million low-paid workers in the UK earning less than the living wage, which is an increase from 3.4 million in 2009. I thought it was ironic when I put the news on early this morning and saw the Chancellor in a luminous jacket visiting the port of Tilbury and extolling the virtues of the Budget, because no mention has ever been made of the insecurity of employment and the fact that 1.8 million workers are on zero-hours contracts, 1,400 of them at the port of Tilbury. Surely the right thing to do, particularly in that location, is to offer those people, who are working, in effect, full time, proper contracts on decent rates of pay. That would be an indication that the Chancellor is serious about making work pay.
I wish to say a few words about the northern powerhouse because not only have the Government hit people directly through spending cuts and tax rises, but they are failing to deliver the investment needed to grow our economy in the north-east. After the Business Secretary’s remarks, I was drawn to the table on page 45 of the Red Book. The section on the northern powerhouse lists 12 projects that are highlighted. The northern powerhouse does not seem to extend any further north than Leeds or Manchester, so of the 12 projects only two and a bit of them are linked to the north-east. One of them that is being trumpeted concerns the publishing of an interim report on transport. Another one—point 7—has £1 million going to the Centre for Process Innovation on the north-east chemical sector. Point 9 talks about welcoming talks—I know that this is very important for stimulating jobs and investment—to reinstate the ferry from Norway to Newcastle. That seems rather thin to me for a commitment.
In fact, the whole thing is a huge disappointment. This much vaunted northern powerhouse is just empty rhetoric for my people. Where is the definite action that we were promised? What the Government have done over the past five years is abolish our successful regional development agency and take away our voice by removing the post of Minister for the north-east.
For every £1 spent in the north-east, the Chancellor spends £24.33 in London. How can we create a northern powerhouse when the Chancellor inflicts disproportionate cuts on northern councils? Durham county council, my local authority, has had cuts of £250 million. In response, the council produced an ambitious programme to deliver jobs and growth, but it was rejected by the Government and the Planning Inspectorate.
In what scenario does the Chancellor believe that the decisions announced in the Budget will rebalance the economy and promote growth in the north-east? What does the northern powerhouse mean when there is a lack major infrastructure projects of national importance in our region? High Speed 2, for example, does not include our region, as it stops at Leeds. To benefit my constituents, Network Rail has suggested a cut in journey times from Durham to London of 11 minutes by 2033, at the potential cost of direct services to London and slower journey times to major cities in Scotland.
I cannot think of a policy that costs so much, with estimates ranging from £50 billion to £80 billion, but that delivers so little to my communities. I would like priority to be given to improving our connectivity to major lines, and to increasing rail services as we continue to work towards a new rail stop at Horden, on the Seaview estate. I want the Government to show some commitment, and a sense of urgency, to my constituency and get behind these plans, which are a tiny fraction of the cost of some of the major commitments that have been made.
The Budget delivered nothing for east Durham except more of the same policies of austerity and more damaging cuts for our communities. The simple question that everyone should ask is: can they afford another five years of policies crafted in Witney and Tatton?
Chris Heaton-Harris (Daventry) (Con)
It is a privilege to speak in this debate not just because it follows a sensible and wise Budget but because I have been able to benefit from the wisdom of a number of retiring Members. I am talking about my hon. Friend the Member for North Dorset (Mr Walter), my right hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke), my hon. Friends the Members for Dudley South (Chris Kelly), for North Warwickshire (Dan Byles) and, not least, for Northampton South (Mr Binley). It is a true privilege to follow some great speeches with some very wise words. Indeed, the hon. Member for Easington (Grahame M. Morris) also delivered a great speech. I would love to disagree with him on every single point that he raised, and probably will do in my speech, but he is such a nice man that it is very difficult to do that.
It is also good to see Front Benchers wearing their team colours. The Economic Secretary to the Treasury, my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) and my next door neighbour, is adorned with a jacket that is the Northampton Saints strip. I know that the shadow Minister, the hon. Member for Hartlepool (Mr Wright), would be wearing his Hartlepool kit if he had the opportunity. I have heard him speak before, so I know it would not be as the mascot.
I listened to the speeches from the shadow Chancellor and others, and I really wanted to follow a Labour Member I did not like, because there is a brilliant Shakespearian insult that I wanted to use:
“O, he is as tedious
As a tired horse, a railing wife;
Worse than a smoky house: I had rather live
With cheese and garlic in a windmill”.
But unfortunately I followed the hon. Member for Easington, so I could not use any of that.
It is a pleasure to stand here today, only a week before Dissolution, and reflect upon the Chancellor’s remarkable economic achievement in picking Britain’s economy up off its knees after it was left in tatters by the Labour party. I would like to focus today on the businesses up and down the county without which this economic recovery would not have been possible. They are the meat on the bone of our long-term economic plan. It is they who have helped to get record numbers of people into employment, they who have helped grow our economy by 2.6% in the past year alone, and they who have taken the risks to help Britain succeed, now and in the future.
The economic news is good not only at a national level, but in my constituency of Daventry. Unemployment there is now running at the extraordinarily low rate of around 1%, with only 600 constituents on jobseeker’s allowance, which is down 42% since a year ago. Youth unemployment is down 40% since 2010, and long-term unemployment has been halved. Those figures are quite miraculous. They are a testament both to those who work in the jobcentre and help find work for my unemployed constituents and to the businesses in my constituency that created the jobs in the first place.
In fact, the midlands are having quite an economic renaissance. We are seeing a job created there every 10 minutes, with employment rising faster there over the past than even in London. Those are amazing statistics, especially when we consider that 80% of the jobs being created are full time and in high-skilled occupations. Over the past two years, Daventry has seen 1,700 people begin apprenticeships. I am proud of the legacy that we will be able to look back on in that area. The Prime Minister has outlined his ambition to see 3 million apprenticeships in the next Parliament, and I know that in only a few weeks’ time that ambition will start to become a reality when the British people rightly vote Conservative across the country and deliver a Conservative Government.
Another proud achievement of this Government has been the creation of and support for university technical colleges, one of which is in my constituency. There are now 40 UTCs thanks to this Government, and there are more to come. Daventry university technical college, under the wise stewardship of Dave Edmondson, is performing great things. With the Daventry international rail freight terminal in my constituency, the UTC focuses on sustainable and related new technologies in engineering, construction and environmental sustainability. That reflects the growing demand for well-qualified technical specialists in my constituency. It is now building the skills sets of students going through the UTC so that they can walk into jobs that are right on their doorstep.
There are many good points that got only a brief mention in the Budget statement. I echo yesterday’s statement from the Federation of Small Businesses, which said that giving stand-alone guidance for research and development tax credits for small businesses will
“drive further investment by innovative companies”.
In fact, I recently met a representative of an accounting firm who works with small businesses in order to discuss tax credits. Jane Ollis, managing director of RIFT, pointed out that in 2013 only 13,000 of the millions of small businesses in the UK claimed back the cash they were entitled to from the Government under research and development tax credits, so there is a lot of work to be done in that area. If a business has spent time and resources carrying out new product development, or if it is working on some innovative solutions, it should be able to reduce its tax bill or secure a cash injection of up to 25% of what it has spent. RIFT has identified that the average R and D tax refund claimed back from HMRC is £55,000, which is an invaluable injection of cash for any small business.
We have also taken 360,000 small businesses out of business rates over this Parliament by extending small business rate relief. We have thrown our weight behind businesses by cutting corporation tax, which in two weeks’ time will fall to 20%, the joint lowest rate in the G20 and a far cry from the legacy of the previous Labour Government—it stood at 28% in 2010. Now, we will go further. Realising that business rates have not kept pace with the needs of the modern economy, the Chancellor has announced a review of the structure of this system. That is welcomed by everybody in business.
We have argued in this place about whether people are feeling the benefits of the economic recovery. The IFS said today:
“Average household incomes have just about regained their pre-recession levels. They are finally rising and probably will be higher in 2015 than they were in 2010, and possibly higher than their 2009 peak.”
Families are, on average, about £900 a year better off under this Government.
On my next point, I should declare an interest. I do not receive any payment but I am the chairman of two regional theatres and a cinema. Arts, heritage and sport have received a great deal of money from this Government —£300 million extra in the past four years, compared with the preceding four years, because the Government changed the funding formula with the lottery. This is opposed by the Labour party, which has still not decided whether it would go back to the funding system that it previously operated, meaning a huge cut for the arts. I hope the hon. Member for Hartlepool will pick up this point and say how arts would be funded in the future.
We must never forget Labour’s great recession, its mismanagement of the economy and its economic illiteracy. The Leader of the Opposition and the shadow Chancellor fail to disguise their disdain for business, trotting out the same tired lines and failed policies, such as rent controls, threatening businessmen who criticise their policies, proposing punitive taxes on wealth creators and refusing to commit to deregulation. I have numerous photographs of many Opposition Members, including the one who is, I believe, next to speak, standing next to a huge ice cube, trumpeting their proposed energy price freeze, only to abandon it as energy prices are decreased by market forces. This literal political meltdown shows their utter incompetence. They have no economic plan, let alone a long-term one like the Conservative party and this Government.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I will deal with the closing remarks of the hon. Member for Daventry (Chris Heaton-Harris) later in my speech.
The rhetoric from both parties in the Government has been breathtaking. It certainly has not matched the reality for my constituents in Oldham East and Saddleworth and for constituents across the country. For them, all is not rosy. As we have already heard, most working people on average earnings are £1,600 a year worse off than they were in 2010. According to the Institute for Fiscal Studies, families are on average £1,100 worse off if we take into account tax and benefit changes. That is important to consider. We know that our NHS is at breaking point, with A and E targets and cancer targets all being missed on this Government’s watch. Trying to get access to a GP is a challenge, and frail older people have to fend for themselves after being isolated and left alone because of the £2.7 billion cuts to social care.
The sick and disabled are vilified for needing support from the state, and are made to go through dehumanising assessments and told to take up their bed and walk, as this Government will have cut £24 billion in support for them by 2018. Food banks provide subsistence to people left poverty-stricken through benefits sanctions and from just being in a low-paid job. Young people feel as though they have been thrown on the scrapheap even before their working lives have started. This is just as I remember it in the 1980s, when my first job was with community groups and I worked specifically with unemployed young people. Small businesses struggling with late payments from contractors and cash-flow issues are being driven to the brink, with the Government doing little to help them. This is Britain in the 21st century, the sixth wealthiest country in the world, under this Tory and Liberal Democrat Government.
After what has been said by Government Members crowing about their economic performance, let me take them back to an economy that was growing at the end of 2010. It then flatlined for three years, and, yes, we have seen a little bit of growth, and every bit is welcome, but we know from the International Monetary Fund that it is all going downhill from now, despite what the Government have said. We have had the worst recovery in 100 years, and they have squandered the growth that was given to them at the end of 2010. We have the second lowest level of productivity in the G7 and we are 19th lowest in terms of average productivity—the worst figure since 1992. The total annual value of UK exports decreased by 3.9% in the year ending 2014. As we have heard, the Government are borrowing £219 billion more than they estimated in 2010. How about that for economic incompetence? Just this year, they will be borrowing £91 billion as opposed to the £37 billion they said they would be borrowing.
On unemployment, the jobseeker’s allowance figures look positive, but evidence from eminent academics has shown the effects of benefit sanctions on JSA claimants. One in five JSA claimants will be sanctioned, and 43% of them will leave JSA, 80% without getting a job. What is being reported in official statistics is not reflected in what is really going on. We have had the biggest rise in self-employment in 40 years—an increase of 15%. For many, that is a positive thing and a good way of working, but the average income of self-employed people is £10,000. We have already heard about zero-hours contracts and the levels of under-employment. The picture is not all rosy.
On the inequalities that this Tory and Liberal Democrat Government have presided over, according to the IFS, families on low incomes, particularly families with children, have lost proportionately more of their income than any other group as a result of tax and benefit changes. There is clear evidence that parental income affects a child’s cognitive and social development as well as their health. This Government are condemning another generation before they have even got started. House of Commons Library figures show that after housing costs have been taken into account, 4.1 million children are living in absolute poverty—half a million more than in 2010, a figure that will increase to about 1.1 million by 2020, according to the Institute for Fiscal Studies.
The net effect of the Government’s fiscal policies has been to favour the rich at the expense of the poor. It does not stop at family incomes. Shockingly, as many hon. Members have said, the evidence shows that the link between public spending and life expectancy is not being recognised, and the Government have decided to cut resources allocated to the public sector in the most deprived areas. One can only draw the conclusion that the Chancellor is on some kind of evangelical mission. The Secretary of State for Work and Pensions wants to restrict child benefit to the first two children in a family to instigate what he calls behaviour change, which is code for wanting poor families to have just two children, and perhaps the Chancellor is of a similar mind.
We are already seeing the effects of these cuts in the dire circumstances that people are finding themselves in. We have seen a surge in the number of food banks, with nearly 1 million food parcels delivered last year. In my home town of Oldham, we never had a food bank until 2012. Last year, it delivered meals to 5,000 people, including 1,500 children. We have a level of malnutrition that we have not seen since the ’30s, as well as increases in rickets and scurvy—and this is 2015. After decades of decline, suicide rates are going up, with more than 4,500 male suicides in the UK in 2012—three and half times the figure for women. Again, this is exactly what happened in the 1980s.
At the same time, we have more billionaires per capita than anywhere else in the world. The wealth of five families is equivalent to that of the poorest 20%—in other words, 13 million people—and boardroom pay has rocketed. According to the High Pay Commission, FTSE 100 chief executive officers earn 185 times the salary of their average employee, and that does not reflect performance. As I have said, incomes have fallen by £1,600. In my own town, one in three people are paid below the living wage.
The Government have done nothing about those damaging inequalities. I am sure that some Government Members still believe the discredited theory that inequalities are good for motivation, but that and the theory of trickle-down economics have been disproved. Overwhelming evidence now shows how bad inequality is for the economy and for society as a whole. The IMF has come out in support of Joseph Stiglitz’s analysis that inequality is a drag on growth and can also make growth more volatile. The OECD has also rejected trickle-down economics and said that the resulting inequality has slowed growth, not increased it, through negative effects on human capital. The Equality Trust estimates that the UK loses £39 billion a year as a result of inequalities, and the work of Richard Wilkinson and Kate Pickett has described how reducing the gap between rich and poor can increase not only life expectancy, but social mobility, educational attainment and happiness, while reducing crime.
Mr Iain Wright (Hartlepool) (Lab)
I think you will agree, Madam Deputy Speaker, that this has been an excellent and often revealing debate on the impact of the Budget. I thank hon. Members for making excellent contributions.
The Chair of the Business, Innovation and Skills Committee rightly criticised the Chancellor’s use of the words “walking tall”, which ring hollow when people are walking to a food bank. My hon. Friend the Member for Halton (Derek Twigg) reminded us of memory, particularly with regard to the Lib Dems helping to stop the education maintenance allowance and how the Government have also failed to meet their policy objectives on deficit reduction and debt, which I will return to later.
My hon. Friend the Member for Luton North (Kelvin Hopkins) rightly mentioned how the NHS, local government and housing are in crisis, threatened still further by the proposed sharp acceleration of cuts to public spending.
I was particularly pleased to hear the contribution of my hon. Friend the Member for Clwyd South (Susan Elan Jones), who rightly talked about the importance of entrepreneurs and the self-employed in the British economy. She praised Alice Murray, founder of Giggles and Games. I thought that the Liberal Democrats’ yellow toytown box was by Fisher Price, but I wonder whether Giggles and Games might have produced it for that toytown and busted flush of a political party.
My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) mentioned the £30 billion post-election bombshell if these plans go through. She also talked about the pressure on working families in her constituency with regard to child care, so I think she welcomes Labour’s plan to provide 25 hours of free child care for working parents of three and four-year-olds.
My parliamentary neighbours, my hon. Friends the Members for Stockton North (Alex Cunningham) and for Easington (Grahame M. Morris), made excellent contributions. They rightly said that there is nothing in this Budget for people in Teesside, east Durham or, indeed, the whole of the north-east. My hon. Friend the Member for Stockton North mentioned the disproportionate cuts in our area—they are far worse than those in any other area—to police, fire and local government. My hon. Friend the Member for Easington said that he was underwhelmed by the Budget and talked about the pressure on his constituents. They will know that the Chancellor mentioned Agincourt more times than the north-east, but they will not be surprised, because the Government’s record shows that he has neglected the north-east for the whole of the past five years.
My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) argued for his own city to be given similar freedoms on business rates to those given to Greater Manchester. I particularly liked his subtle references to Beatles songs: he quoted lyrics from two songs on “Abbey Road” when he said that the Chancellor was more like the “Sun King” than “Here Comes the Sun”. My right hon. Friend the Member for Knowsley (Mr Howarth) mentioned the importance of manufacturing to a modern, innovative and resilient economy, and I fully agree with him.
In an at times warm speech, the hon. Member for Daventry (Chris Heaton-Harris) was kind enough to mention Hartlepool United. I think he was being kind, but we are bottom of the Football League at the moment.
Mr Wright
As the shadow Chancellor says, the only way is up. We have just won two games on the trot, which is unusual for us. We are only four points away from the next team up, so we have everything to play for.
My hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) told us that this Government’s tax and benefit changes mean that families are on average £1,127 a year worse off. She has been a fantastic champion of the NHS, and she mentioned how A and E and the rest of the NHS is at breaking point. She said that Oldham never had a food bank until 2012, which is very similar to my experience in Hartlepool and to the experience elsewhere around the country. I particularly pay tribute to her for being a champion in tackling late payments to contractors, which can be a blight on small businesses trying to pay their way in the economy.
Several hon. Members who spoke are leaving the House voluntarily; I imagine that several others will leave involuntarily. I pay tribute to the hon. Members for Dudley South (Chris Kelly) and for North Warwickshire (Dan Byles). I am genuinely sorry that they have decided not to stand again, but I look forward to welcoming the excellent Natasha Millward to the House, and to Mike O’Brien coming back. I also pay tribute to the right hon. Member for Mid Dorset and North Poole (Annette Brooke), who has been a fantastic champion for park homes, on which we have worked closely together.
I want to single out the hon. Member for Northampton South (Mr Binley), who has just walked into the Chamber. I consider him a real friend to me and to business in this country, as he is very knowledgeable. Before he leaves this place, I hope that we can have a pint and celebrate the great work that he has done, and the great work he will continue to do.
Mr Wright
It’s a date—and perhaps I can bring along the hon. Gentleman’s successor in his seat, Kevin McKeever.
The hon. Member for North Dorset (Mr Walter) made a weak joke, frankly, about how the Leader of the Opposition’s kitchen must be a butler’s pantry. That was particularly welcome from the hon. Gentleman, who I know has serious and relevant credentials for talking about the experiences of ordinary working families in this country. As an alumnus of Warminster boarding school, a former international banker and a freeman of the City of London, his comments were very relevant.
The Chancellor should have focused on the country’s long-term prosperity and competitiveness, using the Budget to do more to strengthen productivity, investment and trade, yet that did not happen. Today’s Financial Times stated:
“This was a Budget that offered little to business”.
It was revealing that the Chancellor did not once utter the word “productivity” in his statement, but tackling the productivity gap is the single biggest means by which Britain can improve competitiveness, raise living standards for all and ensure that the deficit is brought down. UK output per hour has fallen to 17% below the rest of the G7, the largest gap since 1991. It takes British workers until the end of Friday to produce what a German or American worker has produced by Thursday. The OBR reports that actual growth in productivity per hour has again been weaker than expected, with a fall in the final quarter of 2014. It states that productivity growth
“remains the most important and uncertain judgement in our forecast”.
Failing to act on productivity during the next Parliament will make the difference between the austerity well into the future that the Conservatives will provide and the better plan for business and rising living standards that Labour is preparing. We need to restore the link between economic growth and higher living standards for all. To do that, our economy needs more high-skill, high-pay jobs in the high-productivity sectors in which Britain has an advantage. That will require a proper, co-ordinated and focused industrial strategy, but Ernst and Young said yesterday that the Chancellor’s “scatter-gun approach” to UK industry will not help to deliver a proper industrial strategy, or to achieve the 300,000 additional jobs that a sector-focused strategy could produce.
Higher productivity would be boosted by higher investment, but spending on infrastructure has fallen by a third under this Government. The Red Book shows that there will be a planned reduction in capital spending over the five years to 2019-20. The OBR has said that business investment fell by 1.4% in the last quarter of 2014, following a fall of 1.2% in the third quarter. The failure of the Chancellor to announce future plans for the annual investment allowance disappointed business, has increased uncertainty and delay, and almost certainly postponed investment in new equipment and jobs.
Why did the Government not set up an independent national infrastructure commission to stop long-term decisions about the performance of our economy being kicked into the long grass? Why did the Chancellor not announce a boost to the investment in low-carbon technologies? Why did he not ensure that Britain is a world leader in green technology? The Business Secretary mentioned in passing, almost in embarrassment, changes to the green investment bank. Will the Economic Secretary put a little more meat on the bones of that proposal? The Chancellor put in place measures that will increase the demand for homes, but there was nothing to help the construction industry and the supply of new homes—things that are vital for the future of this country. Why did he not introduce a long-term innovation strategy for science and research, with a stable and secure funding framework, to improve the UK’s record on R and D?
Throughout his time in office, the Chancellor has made much of an export-led recovery. He said yesterday:
“Out of the red and into the black—Britain is back paying its way in the world today.”—[Official Report, 18 March 2015; Vol. 594, c. 770.]
He sounded less like Shakespeare and more like an episode of “Bullseye”. What he said was simply untrue. He will not achieve his objective of doubling exports by 2020. He is certainly not going to win Bully’s special prize of the keys to No. 10. I can hear the voice of Jim Bowen talking to the Chancellor: “Look at what you could’ve won.”
The OBR said yesterday:
“The current account deficit remains wide by historical standards.”
In the third quarter of 2014, the deficit was at 6% of GDP, which it said was
“the second largest quarterly deficit in National Accounts data stretching back to 1955.”
The contribution to GDP growth that is made by Britain selling things around the world is falling. Page 108 of the Red Book shows that in every one of the six years from 2014 to 2019, the percentage growth in imports of goods and services will exceed that in exports of goods and services. Our trade position is forecast to worsen in every single year. The Chancellor has failed to produce an export-led recovery.
In a very complacent and out-of-touch speech that was soaked in hubris and arrogance, the Chancellor said that people have never had it so good. After five years, he has failed. He has failed on debt, he has failed on deficit reduction and he has failed working families, who are on average £1,600 a year worse off. The Budget has shown what a further five years of Conservative rule would inflict on this country: a sharp acceleration in the cuts to public spending; a rollercoaster approach to managing the public finances; threats to our NHS and other valued aspects of British life; uncertainty for business that will lead to reduced investment; and, ultimately, poorer living standards for all. The British people will deliver their verdict on this Government in 48 days’ time. They deserve a better plan for Britain’s future, and that can be achieved only with a Labour Government.
The Economic Secretary to the Treasury (Andrea Leadsom)
I thank hon. Members on both sides of the Chamber for their contributions this afternoon. For some, it will have been their last contribution in the Chamber. I congratulate them on choosing such an important final debate.
The truth is that everybody wants economic growth and greater employment. No Government in the world say that they want less growth and fewer jobs. However, there is a big difference between talking about something and achieving it. This Government are proud of our achievements: the fastest growth of any major advanced economy in the world, employment at a record high, unemployment at a record low, rising living standards, a falling deficit and the return of national optimism. And we have done all that within five years of the worst ever peacetime recession, which was caused not only by the financial crisis, but by the spending of the Labour party from 2001 onwards.
There have been some very good contributions this afternoon. The hon. Member for West Bromwich West (Mr Bailey) raised the sale of the student loan book. I can tell him that the first tranche is expected to be sold by the end of 2015-16 and that over a five-year period the sales are expected to generate between £10 billion and £15 billion in revenues.
The hon. Member for Halton (Derek Twigg) spoke about living standards. Perhaps I can lay his concerns to rest by telling him what Paul Johnson of the Institute for Fiscal Studies said was
“the difference between Mr Osborne’s £900 better off and Mr Miliband’s £1,600 worse off”.
He said:
“In part the difference arises because Mr Miliband is talking about gross earnings, not net incomes. The latter allows the fuller description of what has happened to household living standards.”
It is important for all Members to understand the reality of how our economy is performing.
Andrea Leadsom
The right hon. Gentleman will realise that I have just quoted Paul Johnson of the IFS. I stand by what the IFS has said, which is that, from 2010 to 2015, the average household is £900 better off.
My right hon. Friend the Member for Boston and Skegness (Mark Simmonds) welcomed the fall in unemployment, the many who have been taken out of tax, and the fuel duty freeze, which has been great for his constituents. My hon. Friend the Member for Dudley South (Chris Kelly) spoke about the fact that Dudley is full of hard-working people, and said how our support for businesses has helped them. He will certainly be missed in this place.
The hon. Member for Luton North (Kelvin Hopkins) criticised many of the coalition’s cuts but did not say how he would sort out the huge financial mess left by the Labour party in 2010. My hon. Friend the Member for North Warwickshire (Dan Byles) gave impressive figures for improvements in his constituency, not just to the local economy but also to local public services. As he pointed out, a strong economy means that we can pay for excellent public services. I wish him every success in his career when he leaves this place.
The hon. Member for Clwyd South (Susan Elan Jones) welcomed the increase in personal allowances and the rise in gift aid for charity cash collections. I join her in congratulating Giggles and Games in her constituency on its prize for a thriving business. My hon. Friend the Member for South Norfolk (Mr Bacon) raised the important issue of housing. He welcomed the Budget creating 20 housing zones, and made important suggestions about the need to improve housing supply, including through self-build. The hon. Member for Hackney South and Shoreditch (Meg Hillier) talked about problems of poverty in her constituency, but acknowledged that the route out of poverty is work. She should welcome the fact that the total claimant count in her constituency is down by 39% since 2010. She also raised the issue of real-time data for credit reference agencies. The FCA is continuing to focus on achieving real-time data sharing, and significant progress is being made.
My hon. Friend the Member for Brentford and Isleworth (Mary Macleod) pointed out the economic benefits to her constituency of regeneration and making work pay, as well as the business rate reliefs for her high street and support for the creative industries. She highlights the urgent need for faster broadband and more new housing, and I agree with her about that. The hon. Member for Stockton North (Alex Cunningham) challenged the quality of the jobs available, so I am sure he will be pleased to know that since Q1 2010, more than 70% of the increase in employment has come from full-time workers, two thirds of whom have been in high-skilled occupations, and that the claimant count in his constituency is down by 25% since May 2010.
Alex Cunningham
I welcome any jobs that are created in my constituency, but the statistics I referred to showed that hundreds of people have disappeared from the jobseeker’s allowance lists. Nobody knows where they have gone and whether they have died, left the country or something else. Is there any explanation for where those hundreds of people missing from the JSA lists have gone?
Andrea Leadsom
That is an extremely interesting question and the hon. Gentleman may well want to follow it up as the representative for his constituency. It is not something that I can answer at the Dispatch Box.
My hon. Friend the Member for Ealing Central and Acton (Angie Bray) welcomed the review of business rates and pointed out their importance, particularly for businesses in her constituency that are competing with online companies. She also pointed out the need for urgent action on superfast broadband for business, and welcomed the measures in the Budget.
The hon. Member for Birmingham, Selly Oak (Steve McCabe) welcomed the penny off a pint and the freeze in fuel duty, but said that the Chancellor ignored the NHS. In truth, the Government have chosen to protect the NHS through this tough period and have now committed to much greater support for mentally ill people. I would dearly love to hear the Opposition just once welcome this vital investment, which will do so much to help people struggling with poor mental health, rather than just ignoring it. My hon. Friend the Member for Northampton South (Mr Binley) told us about the choices that his grandmother gave us all—either earn more or spend less when in difficulty—and I am delighted to hear she would have been pleased with the Budget. I congratulate him on his long-standing support for small and medium-sized businesses and put on the record how much I have enjoyed being his constituency neighbour in the lovely country of Northamptonshire.
The hon. Member for Angus (Mr Weir) talked about the problem of the last bank in town, which I am very sympathetic to, but he might be reassured to know that I have held round tables, including with the Secretary of State for Business, Innovation and Skills, talking to banks about the need for smart ATMs that take in, as well as give out, cash and discussing improvements to post offices, including longer hours and upgrading security at counters for business banking, and we hope there will be a protocol for bank closures in the future. I am happy to talk to him separately about the matter. My hon. Friend the Member for North Dorset (Mr Walter), in his encore speech as a retiring Member, warmly supported the Budget and gave a considered assessment of the measures in it. It was an excellent swansong, and I wish him a successful and peaceful retirement.
Mr Bacon
Before my hon. Friend moves on entirely from the point about bank closures, will she accept that it is not just about protocol but about sharing resources, possibly between commercial banks and institutions such as the Post Office, so that instead of closures we have facilities that work for local people in very rural areas such as South Norfolk?
Andrea Leadsom
I agree absolutely with my hon. Friend and assure him that that is precisely the point that the Secretary of State and I have been taking up with the banks.
The right hon. Member for Knowsley (Mr Howarth) might recall that I had the privilege of standing as a candidate in 2005 for Knowsley South against Eddie O’Hara. I am delighted that he welcomed the Help to Buy ISA and urge him to promote it to his local first-time buyers. It will be flexible for those on low incomes and will give a Government contribution of up to £3,000 towards a deposit for a new home.
Mr George Howarth
The Minister has quoted me out of context. I was making the point that we keep trying to subsidise owner-occupation by one means or another, none of which contributes to building new houses.
Andrea Leadsom
I apologise if I misunderstood the right hon. Gentleman’s comment. Nevertheless, Help to Buy will provide support for young people in his constituency looking to get on the housing ladder.
My right hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) gave an interesting insight into her experience as an economics teacher, particularly in respect of the terrible time of our exit from the ERM. I was working in a dealing room then, and like her I have always thought that financial stability is key to our security, our jobs and our future. As she knows, I agree totally with her about the vital importance of interventions to support the mental health of children, mums and babies in the perinatal period, and I thoroughly congratulate her on her work in that area.
On the hon. Member for Easington (Grahame M. Morris), the best I can say is that I agree with my hon. Friend the Member for Daventry (Chris Heaton-Harris). Although I disagree with what the hon. Gentleman said, he is too courteous for me to pick a fight with him about it. I agree with my hon. Friend the Member for Daventry on two other points—first, that Northampton Saints are an excellent rugby team, and secondly, that it is people and businesses across the UK that, through their hard work and aspiration, deserve the credit for our economic recovery.
Finally, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) talked about the biggest increase in self-employment in 40 years, and then somehow suggested it was a bad thing. I hope her aspiring new business owners were listening. In truth, under this Government, the richest 20% of households are contributing in cash terms over four times more than the poorest 20%.
Debbie Abrahams
For clarity, I said that although some people might want to adopt the lifestyle, it had to be recognised that the average salary of people who are self-employed is about £10,000.
Andrea Leadsom
I am glad that the hon. Lady has clarified what she meant.
I would like to tackle head-on the lazy idea held by many Labour Members that when a country grows, it is the Government who do the running. It is not the Government; it is businesses and hard-working individuals.
In this Budget, as in all previous fiscal statements, this Government have demonstrated our pro-business, pro-growth credentials. That means more tax credits for key sectors, whether they be energy-intensive heavy industries or creative industries maintaining Britain’s status as a cultural centre of the world. It means further action to stimulate investment in the North sea through investments and tax cuts, and a long-term strategy for superfast broadband, enabling the next step in the technological revolution.
Yesterday, my right hon. Friend the Chancellor announced that next April we will abolish national insurance altogether for employing a young apprentice. We will be holding a major review of business rates, reflecting the fact that the old system needs to be reviewed so that it works better to support aspiring business owners in our country. He announced the abolition of class 2 national insurance contributions for the self- employed, and the abolition of the annual tax return altogether. I can tell you, Madam Deputy Speaker, that I had phone calls to my office from two constituents, one of whom said that the Government’s Help to Buy ISA will persuade them to vote for me, while the other said that the abolition of the annual tax return will encourage them to do the same. On the basis of my own small opinion poll, this is already making a difference.
Meg Hillier
The Minister raises the important issue of national insurance contributions. Will she highlight for many of the self-employed people in my constituency what that will mean for their pensions?
Andrea Leadsom
We are consulting on that, and further information will come out in due course.
To help the food, drink and hospitality industry, we are freezing wine duty, cutting beer duty by a penny a pint, and cutting duty on cider, Scotch whisky and other spirits by 2%. To help any business that depends on a car, a truck or a van—or even a pink bus—we are cancelling the fuel duty increase scheduled for September. This is the longest duty freeze in over 20 years, saving someone filling up a Ford transit van £15 at the pumps every time they fill the tank. To help our businesses expand internationally, we are putting ourselves forward to be a founding member of the Asian Infrastructure Investment Bank, and we are doubling our support for British exporters to China. These are all vital steps to improve Britain’s ability to export and to support those businesses that are returning Britain’s economy to health.
This is a Budget that helps businesses from a Government who understand businesses. This is a Budget that will help secure Britain’s economic future for years to come. This is a Budget that will deliver prosperity for all, and I commend it to the House.
Ordered, That the debate be now adjourned.—(Mr Vara.)
Debate to be resumed tomorrow.