(7 years, 8 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
John McDonnell (Hayes and Harlington) (Lab)
I hope that the good humour continues, Mr Speaker, but we will see. I admire the hon. Member for Broxbourne (Mr Walker) for his creativity at all times in raising matters.
You and I, Mr Speaker, have watched Budget debates in this Chamber for more than 20 years now. As you probably know, I have referred to the iron law of Budgets: the louder the cheers for the Chancellor on Budget day, the greater the disappointment three days later at the weekend. I am revising that iron law—this Budget did not last three days; it lasted less than three hours.
I will address some of the main policy announcements in the Budget, but I believe that overall the Chancellor’s statement evidenced a fundamental difference between the values of our two parties. What we saw yesterday was a Conservative Chancellor boasting about tax cuts to corporations and the rich while refusing to effectively tackle the crisis in social care for the elderly, refusing to properly fund the NHS, and increasing the national insurance burden on many middle and low-income self-employed earners, while at the same time breaking a clear manifesto promise.
Our values are these: we believe in a fair taxation system, in which everybody, no matter how rich and powerful they may be, pays their way; and we believe that through a fair taxation system and collective endeavour, the elderly and the disabled should be cared for, the sick should be treated and children should be educated to develop their talents to the full. That was not what we saw in yesterday’s Budget statement. In addition, we adhere to manifesto promises.
On the state of the economy, I saw from the Chancellor’s press briefings that all the talk before the Budget was about the aim of providing a positive backdrop for Brexit. That is not the real-world experience of millions of people. Yesterday the Chancellor boasted about economic growth, but what is positive about Britain being the only large developed economy in which wages fell when economic growth returned? What is positive about rising GDP if most people are worse off? What is positive about the national living wage being revised down again? What is positive about yet more downward revisions to wage forecasts?
How can anyone describe an economy as “match fit”, as the Chancellor did, when people in that economy are seeing their standard of living fall and fall again? Wages are still worth less than they were nine years ago. The disposable incomes of non-retired households are less than they were before the financial crisis. The official forecasts are clear: working people, as a result of the Government’s choices and this year’s Budget, will be worse off. According to official forecasts, they will be £500 a year worse off in 2021 than was predicted in the autumn statement. Average earnings are expected to be £200 lower by 2022 than they were before yesterday’s Budget. According to the Resolution Foundation, average earnings are set to return to their pre-crisis peak only by 2022 at best.
The Chancellor claimed in one press release that ours is an economy built on resilience; it is, to be frank, an economy built on sand. The fact that unsecured borrowing by households has shot up to levels not seen since before the financial crisis should be a warning sign to us all. Office for Budget Responsibility forecasts show unsecured household lending rising to a shocking 47% of household income by the end of the decade. For many people, such extra borrowing will be done out of desperation—as prices rise but wages fail to keep up, many people dig themselves deeper into debt just to get by. The Chancellor says that he does not want to put the economy on a credit card, but that is exactly what he and his policies are doing—forcing ordinary people into dependence on their credit card.
There is no resilience in an economy that is failing in its fundamentals. Business investment fell over the past year for the first time since the depths of the last recession. Companies are cancelling planned investments because they are so terrified of what the future holds under this Government, particularly with the risk of Brexit. They have seen seven wasted years pass without the investment or industrial strategy that they need from the Government, and they are now fearful of the Government’s plans for Brexit.
Productivity growth—the engine of prosperity—has stagnated. We now lag far behind similar economies. A typical British worker takes five days to produce what their German or French counterpart produces in four. The Chancellor, in a moment of lucidity, recognised the scale of the problem, but he failed to provide any new funding to deal with it. Worse than that, public sector investment will be £2.3 billion less over the next five years than was planned in the autumn statement.
Yes, people celebrated International Women’s Day, but while there were calls for a Budget that works for women, they have been ignored. Women are still bearing the brunt of this Tory Government’s failed austerity agenda, with 86% of cuts falling on women—that figure is unchanged since last year—and the Government have yet again ignored the hundreds of WASPI women who turned up yesterday to lobby Parliament. Things are just as bad as ever for women under this Government. Labour calls on the Government to publish urgently an analysis of the true impact on women of their Budgets and spending announcements, and to explain how they intend to reverse this disproportionate impact. Under a Labour Government, all economic policies will be gender-audited to ensure that we have an economy that works for all.
Let me turn to some of the policy announcements in the Budget, such as on self-employment. The Chancellor’s decision to push a £2 billion tax rise on to low and middle earners who are self-employed makes little sense.
Sir Desmond Swayne (New Forest West) (Con)
I would be the first to say that we need to find new ways to reward entrepreneurs and risk takers in our tax system, but does the right hon. Gentleman accept that the difficulty is that at present there is no way of distinguishing between such a person and a professional such as a journalist who has sought an arrangement with their editor to be paid as self-employed? On the low-paid, 60% of people who are self-employed will see a reduction if we take into account the change in class 2 contributions.
John McDonnell
The right hon. Gentleman raises a valid point about bogus self-employment. We thought that the Chancellor might have mentioned that in his statement, but he never referred to it. That needs to be addressed, because many people are forced or manipulated into self-employment. Bogus self-employment needs to be tackled, and we have campaigned for that along with a number of organisations, including several trade unions and the Federation of Small Businesses.
We saw middle and low earners hit yesterday. Someone on £20,000 will lose about £250 a year, while someone on £40,000 will lose nearly £650 a year—those are the consequences. I do not think that those people are high earners; they are middle to low earners. They should be protected, particularly at a time when, to be honest, there is frailty in the economy, with consumer spending just dipping on the latest figures. Those at the forefront of the impact of the dip in consumer spending are largely existing sole traders and small traders—the window cleaners, drivers and others—and they will be hit. The policy is wrong, and this is also the wrong time to put their careers and jobs in jeopardy.
The justification for yesterday’s policy just does not stand up. The Government cannot demand more taxes from people without offering something in return. The Labour party are fully behind looking at how the labour market is changing—the right hon. Gentleman is right about that—and the shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), spoke last year about the principles that should guide such changes. We have regularly raised the problem of bogus self-employment.
Norman Lamb (North Norfolk) (LD)
Does the right hon. Gentleman share my view that a lot of the people on low pay in self-employment get no paid holiday and no paid sickness absence, and have no protection against termination of employment?
John McDonnell
I will tell a quick anecdote. I was on the tube a month ago when a worker got on and sat down next to me. He was in his overalls as he was on the night shift. He had worked for Tube Lines before the company went bust. He is a rail maintenance worker, which is a skilled job, but he is now employed by an agency and does not know whether he will have work tomorrow, the next day or whenever. He has no sick pay and no holiday pay, and if he does not turn up for work, he does not get paid. He has to pay an accountant to deal with the tax on his salary payments. At the same time, he can be exploited by being sold on from agency to agency. That is not real self-employment; that is the exploitation of someone who has been forced into self-employment. Such issues must be addressed. This insecurity is not just because of the gig economy, but because of what has happened in recent years, with people being forced into self-employment. Those issues were not even addressed yesterday. There is a problem of employers shirking their responsibilities by forcing staff into self-employment.
Yesterday, we got not a package of measures designed to address the problems of the modern world of work, but a single, unilateral tax hike for the self-employed. People earning over £8,000 will be hit. The Chancellor tried to disguise that by bundling the measure in with the re-announcement of abolishing class 2 national insurance payments, but yesterday’s Budget documents are clear that this is a tax hike of £2 billion, targeted at the self-employed. Increasing the taxes paid by self-employed people does not move them to parity with the employed, because they do not receive the same benefits as the employed. The Chancellor says that he is concerned about the gap between different contribution rates, but the Labour party does not believe that the burden of closing that gap should fall on some of the lowest paid workers who are also those in the most precarious position in our society.
Mr Steve Reed (Croydon North) (Lab)
Does my right hon. Friend agree with the Conservative Croydon councillor, James Thompson, who tweets:
“Disgusted by this so-called Conservative government hitting the self-employed”.
John McDonnell
I find it interesting that the response to yesterday’s statement has been anxiety right across the political spectrum. I hope that the Chancellor is listening. I hope that the Labour party and others in the House will combine with some Conservatives who are concerned and that we will force the Chancellor to think again.
The Chancellor says that he is concerned about the gap between different contribution rates. We do not believe that the burden of closing the gap should fall on some of the lowest paid workers, but that is the consequence of yesterday’s decision. The Government are making minicab drivers pay more. They are taxing Uber drivers while at the same time cutting the taxes of Uber itself. A hairdresser earning £15,000 a year will be £137 worse off as a result of yesterday’s measures. That cannot be fair—it just cannot be right.
And, yes, this is a manifesto betrayal. There was a promise in the manifesto and it read like this:
“This means that we can commit to no increases in VAT, Income Tax or National Insurance. Tax rises on working people would harm our economy, reduce living standards and cost jobs.”
That was not me or Labour MPs, but the Tory manifesto. The Government have been trying to muddy the waters by talking about a Bill they brought forward in 2015. That Bill sought to cap class 1 contributions—Labour supported it—but it did not even allude to the idea that any other classes would see increases. To quote the current Chief Secretary to the Treasury speaking in Committee:
“we do not have further proposals other than those that we previously set out”.––[Official Report, National Insurance Contributions (Rate Ceilings) Public Bill Committee, 27 October 2015; c. 16.]
Some have tried to portray yesterday’s announcement as progressive, but what is progressive about raising taxes for low-paid drivers while the Government go ahead with cuts to capital gains tax for a tiny few? What is progressive about raising taxes for low-paid self-employed cleaners while the wealthiest families in the country get an inheritance tax cut? What is progressive about raising taxes for plumbers while multinational corporations see their tax bills slashed year after year? What is not fair is £70 billion of tax giveaways for the wealthiest and the corporations while taxes are hiked for middle and low earners. Just because the higher paid will pay a bit more, that does not make it right for the Government to clobber those on low incomes to plug a gap in their finances.
Interestingly, the Government have promised a review, but the tax hike is already scheduled. It may be that there is jam tomorrow on benefits, if one chooses to believe the Government, but who would believe them after they have broken a clear manifesto promise? The Government could not have made their interests more clear in hiking taxes for the self-employed while slashing taxes for the corporations. I quote the Federation of Small Businesses:
“Increasing this tax burden, effectively funded by a reduction in corporation tax over the same period, is the wrong way to go”—
I agree.
Meanwhile, the Government’s small, incremental reforms to business rates fall far short of the radical long-term reform that is needed. They are just trying delaying tactics. Business rates are a ticking time bomb that threatens to destroy many of our town centres. To be frank, this is a Government of the giant corporations and tax avoiders. It is not a Government for workers, not a Government for the self-employed and not a Government for small businesses.
Let me turn to the social care system and yesterday’s announcements. Our social care system is in crisis. I have an anecdote about a constituent I visited last week. She is a young woman who looks after her father, who has had seven strokes, and a mother with dementia. She is trying to hold down a job, but cannot get the care. As a result, she has cut her hours, rendering the income into her family and for her own children extremely tight. It is a difficult situation. That one example from my constituency exemplifies what is happening right across the country. People are suffering in that way in virtually every constituency.
According to the King’s Fund, social care needs £2 billion now just to cope with the emergency. The Chancellor failed to grasp the scale of the crisis. The money announced yesterday amounts to less than a third of what is needed. What I resented yesterday was that it had been trailed in the media that £2 billion was coming, but we were not told until the last minute that it would be over three years. That is nowhere near enough to meet the crisis that people are enduring at the moment. There are now more than a million people, mainly older people and frail people, who are desperate for social care but still cannot get it as a result of the failure to address the emergency we are facing.
Mr Peter Bone (Wellingborough) (Con)
The right hon. Gentleman is, as usual, making a very clever speech. I understand that the Budget debate is a political moment, but does he think that at some time down the road both sides can work together, not on this model but on a new model for social care?
John McDonnell
I always respect the hon. Gentleman’s interventions because he seeks to find solutions.
John McDonnell
Exactly. It is exactly as my hon. Friend says from a sedentary position. The Labour party tried the bipartisan approach. Hon. Members worked in good faith to seek a long-term resolution to this matter. They looked at a range of options, but halfway through the discussions we were, to be frank, betrayed. Instead of a bipartisan approach, it became a political campaign of the worst order. That was a betrayal of confidence. It will take a lot, to be frank, to regain that confidence to enable us to take a bipartisan approach. We are willing to have discussions with anybody anywhere, but the treatment last time went beyond political knockabout. It was an undermining and a betrayal not just of the Labour party but of frail elderly people and their families who desperately need a solution.
Families are imploding as a result of the lack of social care, because of the burden they are suffering. The Women’s Budget Group conducted an analysis of the Budget last year and this year. It identified two groups of people who have been hit hardest by austerity measures: younger women with children, and older women. Initially, I could not understand why, but the WBG explained that unfortunately in our culture the burden of care still falls on women. Retired women fill the gap when social care is no longer provided. We are always willing to talk to anyone to find a practical solution, but it is against the backdrop of betrayal and bad faith in the past.
Norman Lamb
I welcome the right hon. Gentleman’s commitment to talk to anyone to try to find solutions. He may be aware that we have launched an initiative with Labour, Conservative and Liberal Democrat MPs to try to establish an NHS and care convention. Will he back that bid? It is essential that we set up a process to establish a long-term settlement.
John McDonnell
That is a process of bringing MPs together as individuals, not as party representatives—let us be absolutely clear about that. We look forward to any proposals that come forward for consideration from any source. If we can find a practical way forward, we certainly will.
The most important thing is that we have an emergency at the moment. We need £2 billion now, not over three years, because people are suffering now. Families are imploding. I felt a sense of relief when it was trailed that we were going to get £2 billion. I then felt extreme disappointment when we were then told it would be £2 billion over three years. That was never mentioned in the press releases before the announcement.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Does my right hon. Gentleman agree that the January figures for those waiting more than four hours for accident and emergency, which at 86% are the worst on record, are another example of how our health and social care systems are at crisis point?
John McDonnell
As always, my hon. Friend has pre-empted my remarks. Not only did the Government fail to address social care yesterday, but they failed to address in any way the crisis in our NHS. It was completely ignored.
Ahead of the autumn statement, Labour and others were warning that the NHS was in crisis. It was in crisis before the winter, but the Chancellor could not find a single penny for the NHS in the autumn statement. The Royal College of Nursing now says that the NHS is in its worst crisis ever. Ahead of the Budget, the British Medical Association called for another £10 billion for the NHS. As my hon. Friend has just said, A&E waiting times have today got worse again—more people are waiting longer. It is astonishing that there was a complete failure on the part of the Chancellor in the Budget to recognise the scale of the crisis that our hospitals and doctors face. It is a crisis that the Government created by cuts.
Instead, we have a £100 million fund to enable GPs to triage in accident and emergency. The capital spend will build rooms for GPs in hospitals with no GPs to staff them, because no revenue funding is associated with the proposal.
Keith Vaz (Leicester East) (Lab)
The issue is not just the immediate crisis in the NHS, but the preventable future crises that will come from long-term conditions such as diabetes. There seems to be no planning for the future. Does the shadow Chancellor agree that we have missed an opportunity to invest in prevention to save the taxpayer an enormous amount of money in future?
John McDonnell
I congratulate my right hon. Friend on his campaign, which he has stuck with for a number of years. I remember him saying that some years ago under a previous Secretary of State. Assurances were given about investment in preventive medicine and so on, but then what happened? We had an unnecessary £3 billion reorganisation imposed from the top and the money was lost. I regret that my right hon. Friend has had to continue his campaign. We need investment in preventive health, but we also need emergency funding now for the NHS.
This shows the difference in values. Labour says we need investment in the NHS, but the Government believe we need tax giveaways of £70 billion over the next five years to those who need it least. People are suffering in the NHS and they need social care. People are dying because of the Government’s decisions. They have failed to address them, but have also prioritised tax cuts for big corporations and the wealthiest few rather than investment in our NHS.
On education and skills, the Chancellor claimed in his speech that the Budget was for the young and for skills. He waxed lyrical about the need to provide decent chances in life for all. We share those sentiments—extra funding for training is welcome—but the £500 million of additional skills funding is nowhere near enough to undo the damage of seven years under this Government. Adult skills funding has fallen by 54% since 2010, which is a cut of £1.36 billion. That £500 million does not even come close to reversing the damage already done.
The Chancellor is providing £1 billion for the vanity project of free schools. That is more money for the ludicrous throwback of grammar schools. Thousands of Whitehall hours have been wasted on schemes for a tiny handful of privileged children, leaving the rest to fail. It is the same old Tories, isn’t it? There are real-terms funding cuts for the state schools that 95% of our children use. They are the first cuts since the last Conservative Government. Fifties throwbacks and fantasies are not how we should run a modern education system.
Finally, the Chancellor never spoke the word “Brexit” in his speech yesterday. Shocking. The Chancellor was silent on the greatest challenge facing this country. The word “Brexit” never passed his lips once during his speech. As Britain prepares to begin the process of leaving the European Union, the Chancellor had nothing to say on the matter. It should be clear why. I do not think he agrees with the position of his Government. The Prime Minister claims that no deal is better than a bad deal, which is absurd—no deal would be the worst possible deal. The Chancellor knows that very well. He knows it is a risk, because the warnings come not just from Labour but from manufacturers, business leaders, employers organisations, trade unions and a wide range of civil society organisations. They come from economists and international organisations as well. The Chancellor is being told from every part of our economy that to crash out of the European Union without a trade deal will be disastrous. We will be cut off from investment and our biggest trading partner. We will be cut off from the skills of EU nationals, who have made so much of a contribution to our economy and society. It is a disgrace that those EU nationals live with insecurity still because the Government will not give them the assurances they need, but that is where the Conservative party is setting its course.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Given that Brexit is the greatest economic challenge facing the country, I agree that it was shocking that there was so little mention of it in the statement and the Red Book. Does my right hon. Friend agree that it was also shocking that there was a complete absence of any commitments on regional funding, which we are set to lose in places like Wales as a result of leaving the European Union? The Government have repeatedly failed to guarantee that we will not be a penny worse off as a result of leaving the EU.
John McDonnell
In a past life, as chief executive of the Association of London Government, I was responsible for managing European funds for London, including the European regional development fund, the European social fund and a range of other funds. I know what contribution those funds make. I also know how much investment they prise in from elsewhere, what match funding is required and how to build transnational partners into the creative development of ideas. All that will be lost to us because the Government will not give the assurances we need.
Ms Angela Eagle
In the Liverpool city region, we are meant to welcome £30 million a year over the next 30 years, which is £900 million. We have lost more than £1 billion in direct funding cuts to our five local authorities. Half a billion pounds in European funding has been granted for the last two rounds, but there is no guarantee of anything in future. Does my right hon. Friend agree that that is a problem for our regional development and funding in trying to grow our economies from the bottom up?
John McDonnell
I know how hard my hon. Friend has fought on these issues, and I congratulate her. She has a grassroots understanding of the consequences of that lack of funding, and of the implications for her region and city. The consequences of the lack of investment are staggering, but it also undermines confidence in the private sector to match fund and invest. That is what we are seeing, even at the first stage, and yet, as my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) said, we heard in the Chancellor’s statement not a word of assurance to anybody, whether council leaders, business investors or workers. I found that disgraceful.
It is interesting that, prior to the Budget, the Chancellor and allies floated the idea that he was garnering a £60 billion fighting fund to deal with Brexit. It is not a fighting fund; it is a failure fund. He is having to put aside cash to deal with the consequences of what he knows will be a Tory Brexit failure. That is what the failure fund is for.
Keith Vaz
On Brexit, I wonder whether my right hon. Friend shares my concern that no provision has been given to the Home Office for processing the applications of 3.2 million EU citizens. The Home Office has suffered enormous cuts over the past few years and will simply be unable to deal with the applications that will be made. Currently, there is a seven-month wait to get a certificate to remain. Does he believe that provision should have been made for that?
John McDonnell
It is not just that provision should be made, but that the cuts have established that situation. Whatever system is introduced, that organisation will not be fit for purpose because of a lack of investment over the recent period, which my right hon. Friend has consistently pointed out.
We understand the vote in the referendum. People voted to leave, but we repeat time and again that they did not vote to trash their jobs, their livelihoods or the economy. A responsible Government would ensure that jobs and the economy were protected. A responsible Budget ahead of article 50 would have shown how the Government would protect both. The Chancellor had a responsibility and failed to deliver on it.
The Chancellor has dared to talk elsewhere about the difficult decisions he had to make. It is not he who is making the difficult decisions; it is the NHS manager in a hospital deciding whether someone will have a bed or a trolley; a police commissioner deciding which streets will be patrolled; or a council leader deciding which children’s centre will be closed. They are the ones with difficult decisions, not the Chancellor. He is passing the buck to others for his cuts.
I think that the Chancellor lives in a world in which he is completely insulated from the consequences of his decisions. He can sit in No. 11 and delete lines from his spreadsheet without a thought for the consequences. For him, it is all in a day’s work, and it is the rest of our society who must deal with the results. We have had seven long years of austerity from this Conservative Government, and the spending cuts have dragged our economy and society to the brink.
The suffering has been immense, and it is not the Chancellor or his colleagues who have been on the receiving end. It is their victims: those parents who cannot get a school place at the moment, those young people who cannot get a decent home because of a housing shortage, those families who cannot get care for their parents. We have seen public services shredded and basic standards in public life torn up, and for what? So that this Government can add three quarters of a trillion pounds to the national debt. After seven years of austerity, and two years after it was supposed to have ended, what can we look forward to? Continual cuts in public services for the rest of the decade.
This was a Budget of complacency. We need a Government who will introduce a fair taxation system, who will use public resources for long-term, patient investment in our economy, who will tackle tax evasion and avoidance at the same time, and who will grow our economy but, as we build a prosperous economy, will ensure that that prosperity is shared by all rather than being given away in tax cuts for the rich and the corporations. Yesterday’s Budget was not just complacent; it was arrogant, and it was cruel.
The Secretary of State for Communities and Local Government (Sajid Javid)
Yesterday the Leader of the Opposition gave a response that sounded as though it had been written a week ago, regardless of what was actually in the Budget, and now the shadow Chancellor has just done the same. That shows us all, once again, that the Labour party never learns.
There has been no recognition of the state in which the right hon. Gentleman’s party left the country’s finances, no awareness of the millions of lives devastated by Labour’s record-breaking recession, and absolutely no understanding of the most basic rule of any responsible Government: if you want to spend money, you have to raise it. If the right hon. Gentleman had been standing on the steps of No. 11 yesterday, holding up his little red book—I mean box—he would have come here and announced half a trillion pounds of additional borrowing, and every last penny of that, every last penny, would have had to be serviced and paid off by our children and our children’s children for decades to come. [Interruption.]
Let me explain to the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who is speaking from a sedentary position, how finance actually works. If you borrow money, you have to pay it back. Tens of millions of hard-working Britons know that. They do it every month, with their mortgages, their loans and their credit card bills. That concept, however, seems to elude the right hon. Gentleman. Well, let us hope that he learns something today: after all, I have always been a great believer in workplace learning.
Ms Angela Eagle
Obviously it is important to get the deficit down. The Government said that they would eliminate it by 2015, two years ago, and now the Budget document makes it clear that it may not be eliminated by 2025. Is that the Secretary of State’s definition of success—being 10 years late with a five-year plan?
Sajid Javid
We have heard no apology from the hon. Lady for the fact that during the 13 years in which Labour was in power, there was an almost threefold increase in the national debt and the country was left with a larger budget deficit than any other major advanced economy.
Seema Malhotra
Can the Secretary of State name a promise that the Government have actually kept in relation to the economy?
Sajid Javid
One kept promise on which the hon. Lady could have focused is the creation of 2.7 million jobs in our economy since 2010. They call themselves the Labour party, Madam Deputy Speaker, but they could not care less.
Oliver Dowden (Hertsmere) (Con)
Does my right hon. Friend think that the £500 billion-worth of additional spending proposed by the Labour party would do anything to increase or reduce the deficit?
Sajid Javid
As always, my hon. Friend makes a good point. Conservative Members know that, if implemented, Labour’s plans would result in not only more spending but more debt. Labour Members would increase the deficit and return us to another Labour record-breaking recession if they ever had the chance.
Several hon. Members rose—
Sajid Javid
I will plough on, but I will give way again shortly.
Figures released since the autumn statement have provided further evidence of the fundamental strength and resilience of the UK economy. Growth is forecast to hit 2% this year, the deficit is on course to reach its lowest level in two decades, and debt as a proportion of national income is forecast to begin falling in 2018-19 for the first time in more than 15 years.
Stephen Doughty
If we borrow money, of course we must pay it back. Why was there no mention of Brexit in the Budget, given that, according to the Office for Budget Responsibility, the cost of Brexit to the public finances could be an extra £58 billion? That is a huge sum, which we would have to repay.
Sajid Javid
My right hon. Friend the Chancellor talked about leaving the European Union. In fact, I think that that was one of the first things that he mentioned in his Budget statement. It is a shame that the hon. Gentleman was not listening.
Most important, the success that I have described is being felt in the pockets of ordinary working people, with real wages forecast to rise in every year up to 2020-21. Britain is home to more private sector businesses than ever before, and that is providing more jobs than ever before. We have gone from record-breaking recession to record levels of employment. But of course we are not complacent: there is much more to do. Going on a wild spending spree simply because of improved growth forecasts would be like going down the pub to celebrate the extension of an overdraft. Our focus on sustainable, stable public finances must continue, and the Budget provides for exactly that.
Mr Reed
The Secretary of State is lecturing the House on how finance works, but we would like to know more about how it works in his Department. He has denied offering Surrey County Council a sweetheart deal, but the BBC has now published a letter from officials in the Department for Communities and Local Government which shows that they did, in fact, offer Surrey more cash in a unique deal. Did the Secretary of State know about that letter when he issued his denial?
Sajid Javid
If the hon. Gentleman had cared to look at a written ministerial statement published on 9 February, he would have seen that it states very clearly that Surrey approached the Department, as do many other councils before a financial statement, asking for more money. It made a request for a business rates retention plan, which was firmly rejected.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. If Members want to intervene, they can stand up and intervene, but we must not have chuntering from a sedentary position; or rather—let us be honest about it—when you are sitting down, you do not speak in here. Otherwise, we cannot hear who is actually speaking. We must hear one person at a time, and now it is Mr Charles Walker.
Mr Walker
Thank you very much for that protection, Madam Deputy Speaker. It is much appreciated.
I thank my right hon. Friend the Secretary of State for visiting Broxbourne last week. May I divert him from Surrey to Hertfordshire, where a much bigger problem relates to an incinerator application? The awarding local authority, Hertfordshire, is also the planning authority in this instance, which strikes me as a conflict of interests. I suspect that my right hon. Friend cannot focus on that now, but will he take into consideration such conflicts of interest in local authorities?
Sajid Javid
I think my hon. Friend will understand that it would not be appropriate for me to comment on a particular planning application, but if he would care to furnish me with more information, I am sure that officials in the Department will take a look at it.
Sajid Javid
I will in a moment.
By maintaining a robust, growing economy, we will be well placed to make the most of the opportunities that Brexit will bring. The Budget also allows us to make additional commitments in a number of areas without putting our hard-won economic recovery at risk. The first of those areas is adult social care. The true measure of any society is how it cares for its most vulnerable citizens. Given advances in medical care and an ageing population, many councils have found it increasingly difficult to meet the costs of care in their communities.
Mr Reed
I am grateful, because social care was the subject of the correspondence with Surrey County Council. When the Secretary of State issued his denial, was he aware that his own director of local government finance, Matthew Style, had sent a letter to the council offering it a unique financial deal?
Sajid Javid
I think I have already answered that question for the hon. Gentleman: there was no deal available to Surrey that is not available to any other local authority.
I have been working on adult social care with my right hon. Friends the Secretary of State for Health and the Chancellor of the Exchequer. The result is a Budget that delivers £2 billion of additional funding for adult social care. Let me be very clear: every single council in England responsible for adult social care will benefit from this additional funding, rural or urban, north or south, Labour or Conservative. To allow councils to move fast so that they can put in place extra social care packages as soon as possible, we will publish the allocations later today. This additional money, front-loaded for 2017-18, will make an immediate difference to people in our communities who need care and support, and it will bring the total dedicated funding available for adult social care in England to £9.6 billion over the course of this Parliament.
I know that this is a novel concept for the Labour party, but more money is not the only answer. This Government are not just dedicated to sustainable economic growth; we also believe in sustainable public services. Demand for adult social care is not about to stop rising, and the challenge of paying for it is not going to go away. The £2 billion announced in this Budget will make a significant difference over the next three years, but the challenge will not suddenly vanish in 2020.
The funding model for the adult social care system is clearly in need of substantial reform and improvement; it has to be made fairer and more sustainable, and we are absolutely committed to doing just that. We are looking at all the options, and later this year we will be publishing a Green Paper setting out a long-term plan that will ensure that proper care is provided to everyone who needs it.
Bob Blackman (Harrow East) (Con)
The announcement of money now will be warmly welcomed across the country, but before my right hon. Friend announces the details of the long-term plan, which we welcome as well, the short-term issue is whether the money is new money or money being brought forward from later years, and whether it will be added to baseline budgets so that local authorities can expect to receive that funding each year, rather than being just one-off funding. Finally, the formula by which this is distributed is key, because different local authorities are under different levels of pressure.
Sajid Javid
I am pleased that my hon. Friend asks that question as it allows me to say more on this issue. First, I can confirm that the £2 billion is all new money; it is new grant from central Government. Secondly, I can confirm that it will be added to every local authority’s baseline over the next three years as that money is distributed. My hon. Friend also rightly asked about how it will be allocated. The vast majority of the money will be allocated using the improved better care formula that already exists and is transparent and open, which will mean that account can be taken of not just the needs of every local authority but of their ability to raise money through council taxes. A small portion—10%—will be allocated using the existing relative needs formula, and the purpose of that is to make sure that every local authority in the country that has responsibility for adult social care is able to access new funding.
Barbara Keeley (Worsley and Eccles South) (Lab)
The Secretary of State tells us that the vast majority of the money will be allocated via the better care fund. We know that the settlement before Christmas caused problems and that a third of councils lost out, including mine which lost out because of the adult social care bill. Will he say how the rest of the money will be allocated?
Sajid Javid
I thought I had just made that clear, but I will repeat it and be a little more specific: 90% will be allocated using the improved better care fund formula and 10% will be allocated using the relative needs formula. These are two existing formulae already in place and, as I said, further details will be published this afternoon, with the allocations and a description of those formulae. I hope that is helpful to the hon. Lady.
We also need to make sure that councils deliver the best possible local care services. There are many excellent examples of best practice around the country, but there is a big difference between the best-performing and worst-performing areas. There is clearly room for improvement across the sector, so alongside the additional funding announced in the Budget my right hon. Friend the Health Secretary and I will shortly announce measures to help ensure that those areas facing the greatest challenges can make rapid improvement.
Looking at health more widely, we are already committed to a £10 billion annual increase in NHS funding by 2020. This Budget goes further still: there is £325 million to allow the first NHS sustainability and transformation plans to go ahead, meaning more efficient and more effective healthcare for local people; and there is another £100 million to fund improvements in accident and emergency departments for next winter, including better on-site triage and GP facilities. That is enough to fund up to 100 new triage projects, taking some of the strain off our A&E departments.
Norman Lamb
The Secretary of State mentions the £325 million, but does he acknowledge that £1.2 billion was taken out of capital spending in the current financial year, and that this money will only go to about six STP areas, leaving the rest of the country without extra capital spending at all?
Sajid Javid
I know the right hon. Gentleman cares about this issue and was deeply involved in it when he was a Minister. I am sure he knows that when the Government set out their plans for the additional £10 billion per annum by 2020, the NHS five-year plan was calling for £8 billion. This goes over and above that. The announcement made in yesterday’s Budget of the additional £325 million plus the £100 million is on top of the £10 billion per annum.
Keith Vaz
Does the Secretary of State share my concern that there is not enough emphasis on prevention for long-term conditions such as diabetes? His ministerial colleague sitting on his left, the hon. Member for Battersea (Jane Ellison), was probably the best diabetes Minister we have ever had, and a lot of what she did was on prevention. Why has more money not been made available for investing in the future and cutting the taxpayers’ contribution in years to come by setting up prevention centres for conditions such as diabetes?
Sajid Javid
The right hon. Gentleman makes a good point about the importance of public health, and he is absolutely right to pay tribute to the former Health Minister, who is now the Financial Secretary to the Treasury, for the work she did. I hope he will agree with me that the work that my hon. Friend and others did shows that they have taken this issue seriously. Some of the measures that the Chancellor talked about in his Budget statement—the so-called sugar tax, for example—will help in the long term with prevention, especially in the case of diabetes.
Health and social care are not the only public services that we are investing in. The Budget funds a further 110 new free schools. It funds free school transport to include all children on free school meals who attend a selective school. It also provides an additional £216 million of investment in existing schools.
When I was a teenager, my comprehensive school refused to let me study the A-levels of my choice; the people there said that it would be a waste of time and that I should leave school and just go and get a job instead. What I did was get on the bus and go to the other side of Bristol to sign up at Filton Technical College. I am proud to call myself a graduate of FTC. The education I received there was second to none. Without Filton, I certainly would not be standing here today—so you can blame them if you wish I wasn’t.
Many opportunities were opened up by my time at Filton, but for years afterwards I would still see eyebrows raised and sneers barely supressed when I said that I had been to a technical college. For too long in this country there has simply not been parity of esteem between valuable technical education and more academic study. As Business Secretary, I began the process of changing that, including by creating the Institute of Apprenticeships. I am very pleased that the introduction of T-levels announced yesterday will continue that process.
We are following the work carried out by Lord Sainsbury, Baroness Wolf and other experts in this field to radically improve technical education, and in doing so we are investing an additional £500 million a year in our 16 to 19-year-olds. We will also be offering maintenance loans for those undertaking higher level technical qualifications at the new institutes of technology and national colleges.
Seema Malhotra
Notwithstanding the challenges Labour has posed on the Budget, I welcome the T-levels and the emphasis on technical education. I think the Secretary of State will acknowledge that Labour Members have also argued for an increase in vocational education. This sends a very important message to the young people in my constituency who I talked to yesterday that there is great value in having this alternative. The challenge will be to integrate it well enough in the workplace so that it leads to real, skilled jobs in the future.
Sajid Javid
The hon. Lady rightly points to the challenge of ensuring that employers recognise the changes. Initiatives such as the new Institute of Apprenticeships, which is employer-led, will help to set the standards for the technical training. That will make a difference in ensuring that employers welcome the new qualifications.
The measures I have talked about so far will improve lives right across the country, but we recognise that local areas across Britain want greater control of their own services and infrastructure. The Government, the Greater London Authority and London Councils have reached an agreement on further devolution for our great capital city. This includes exploring a pilot for a development rights auction model and joint work to identify what elements of the criminal justice services can be delivered locally. We will also be agreeing a second health and social care memorandum of understanding to support work on prevention, integration and estates reform.
However, there is more to this country than its capital city. I should know: I was born in the north, raised in the south-west and elected in the midlands. Today, the Chancellor is in Dudley, launching our midlands engine strategy. This follows the northern powerhouse strategy published after the autumn statement.
Richard Burden (Birmingham, Northfield) (Lab)
The Secretary of State and I are both midlands Members of Parliament. I welcome the focus on the midlands in the Budget. There are some useful initiatives in it. Would he care to comment on the strategy being brought forward today by Midlands Connect? It is charged with looking at the transport infrastructure side of delivering the midlands engine, and in particular at east-west connectivity, and it makes it clear that, for the midlands engine to work and deliver its potential, it will need a long-term perspective and investment of £1 billion per annum over a 30-year period. What confidence can we have that that long-term commitment will be given?
Sajid Javid
As a midlands MP, the hon. Gentleman will understand that the devolution deal for the region will lead to additional funding of more than £1 billion over the next 30 years, which can be invested in priorities such as transport infrastructure. I believe that the right leadership is in place, and that that is exactly what will happen. That is why I am supporting Andy Street to become the next Mayor, and I hope that the hon. Gentleman will join me in expressing his support for him. Perhaps that is what he was just doing.
The hon. Gentleman will also be pleased to hear that this morning we published details of £392 million of additional funding for the midlands, allocated through the third local growth fund. That money will further unlock the region’s potential, funding infrastructure and creating jobs. Much of it will go to Birmingham, for example. The Budget includes £90 million for the north and £23 million for the midlands from a £220 million fund that addresses pinch points on the national road network. The Chancellor has launched a £690 million competition for local authorities across England to tackle urban congestion and get local transport networks moving again. That is a serious investment in our communities that will make a real difference to the daily lives of millions of people and countless businesses. We can make that investment precisely because of the fair, progressive changes that we are making to the tax system. We are levelling the playing field between employees and the self-employed, and 60% of the self-employed—the lowest earners—will gain from these reforms. We are also continuing to reduce corporation tax on all profitable companies, large and small, so that hard-working entrepreneurs keep most of the fruits of their labours.
We are taking a number of steps to make business rates fairer. I have never made any secret of my support for business, and for small businesses in particular. Seeing my dad’s shop struggle was one of the reasons I came into politics in the first place. From the biggest cities to the smallest villages, the local high street and the local pub form the heart of countless communities across our country. That is why the Chancellor and I listened closely when concerns were raised over this year’s business rate revaluation, and why I was happy to work with colleagues across Government to secure action.
The majority of business will see no increase or even a fall in their business rates, but I know that if someone’s rates are going up, it is no consolation to hear that someone else’s will be going down. The bigger picture will not pay their bills, so the Budget introduces three new schemes that will help businesses facing steep rises. The first involves additional support aimed specifically at small and rural businesses that are losing some or all of their rate relief and are facing large percentage increases in their bills as a result. The additional relief will limit the annual increase in the bill for an eligible business to the greater of either £600 or the cap in increase for small properties in the existing transitional relief scheme. That is 5% in real terms in 2017-18. No small business losing some or all of its relief as a result of the revaluation should see its bills rise by more than £50 a month in 2017-18.
The second measure is the establishment of a £300 million discretionary fund for local authorities to use over the next four years. Each billing authority will receive a share of this funding and will be able to use it to deliver targeted support to the most hard-pressed ratepayers in its area. This will allow local authorities to more than double the amount they spend on discretionary relief in 2017-18. Finally, there is a new relief for pubs. This will provide a flat £1,000 discount in 2017-18 on bills for all pubs with a rateable value below £100,000. My Department will be publishing full details later, but up to 36,000 pubs—that is approximately 90% of them— could benefit from the relief. The cost of all three models will be met in full with new money allocated by central Government.
Recent consultations have shown little appetite for wholesale reform of the business rate system. However, there is scope to reform the revaluation process, making it smoother and more frequent to avoid the dramatic increases that the present system can deliver. We will set out our preferred approach to delivering this in due course, and will consult on it before the next revaluation is due. In the medium term, we need to find a better way of taxing the digital part of the economy so that online businesses do not enjoy an unfair advantage. This is another example of the way in which this Government deliver lasting reform alongside immediate investment. It is the difference between a sticking plaster and long-term cure.
Sir Peter Bottomley (Worthing West) (Con)
The Chancellor has announced that there is to be a Green Paper on dealing with unfair clauses and terms in consumer contracts. I do not know whether the Secretary of State has been paying attention to the difficulties that leaseholders are facing, but will he ensure that, one way or another—preferably one way and another—those are taken into account, if necessary through a super-complaint, so that unfair terms can be struck out and those who exploit leaseholders can be dealt with firmly?
Sajid Javid
I commend my hon. Friend on the work that he has done on leasehold abuses. That Green Paper is being led by my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy, and we are considering whether leasehold abuses could be included in it.
We are not just putting billions of pounds more into adult social care; we are developing a whole new strategy to safeguard it for the long term. We are not just tackling the short-term problems created by the business rates revaluation; we are looking at ways to improve the system for many years to come. We are not just continuing to invest in world-class public services; we have also asked Sir Michael Barber to look at ways of making government more efficient so that we get maximum value for taxpayers’ money.
As we debate the Budget, let us not forget that every last penny invested by any Government ultimately comes from taxpayers—from hard-working employees and fast-growing businesses—and they can succeed only if we have a strong, stable, sustainable economy. Without that, there would be no NHS, no outstanding schools, no social care for the vulnerable and no support for small businesses. We have all seen what it looks like when Governments forget that. After 13 years of Labour rule, their Chief Secretary to the Treasury said that there was no money left.
The Leader of the Opposition stood at the Dispatch Box yesterday and made promise after promise. It was fantasy economics, with billions upon billions of pounds in unfunded and unaffordable measures that would undo in an instant everything the people of this country have worked so hard to achieve over the past seven years. We are cutting the tax burden on businesses; he wants to increase it. We are reducing the deficit; he wants to raise it. We want to borrow less; he wants to saddle our children with the bill for another reckless spending spree. Government Budgets are big, complicated things, but they are simple at their heart: if we want to spend more, we have to borrow more, tax more, or cut spending elsewhere. Anyone who says otherwise is not being straight with the British people. There is no such thing as a magic money tree. Sustainable public services can be funded only by sustainable growth. This Budget delivers both. The Opposition would give us neither.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
During the heated interchanges that took place a short time ago, I was wondering whether this was merely a private fight or if anybody could join in—I will take this opportunity to join in. Let me declare first of all that my approach to understanding economics is different from that of the Front-Bench spokesmen, so if the House will forgive me, I will take a couple of minutes to set out why I see things slightly differently so that Members can better understand my critique of particular aspects of this Budget.
I am highly critical of an approach to economics that seeks to mimic the physical sciences and imagines that it can predict the future through statistical means. Great economists of the past of different traditions, ranging from Adam Smith to Karl Marx, would have rightly scoffed at that notion. When I picked up the Office for Budget Responsibility’s “Economic and fiscal outlook” yesterday, it fell open at page 45, which Members will recall contains chart 3.8, on effective exchange rate assumptions. If we look at that chart—some hon. Members are doing so—we can see that the OBR is able to accurately plot the past, which contains wild variations in the exchange rate, and that the biggest variations are often due to not economic decisions, but political ones, such as the EU referendum. The OBR’s prediction for the future, however, is a perfect straight line parallel to the horizontal. The only thing we know is that that is the least likely thing to happen to the exchange rate but, owing to that approach, built-in assumptions make us highly vulnerable to misreading the actions that need to be taken. Straight lines rarely predict human activity.
It was therefore with genuine concern that I heard the Chancellor deem it important in the opening section of yesterday’s statement to read out spreadsheets and forecasts as though they were going out of fashion while entirely failing to mention in any depth the key issues challenging the future economics of this country. As has been said, he failed adequately to address the challenges of Brexit, for example, but I will come to that in a moment.
Allow me to reflect a little on different ways of looking at the economy and to make three key observations. First, an economy is not a machine but a network of relationships among human beings. What do these networks do? They are built upon myriad individual and collective decisions that are affected by an almost infinite array of influences. Not only do we not know the future with any degree of precision, but we cannot know the future with any degree of precision, yet that is what such detailed forecasts pretend, and they are provided without even any margins of error.
We know that decisions are critical, so I thought about how I could highlight the importance of that and some of the things that the Government could do. The best example came to me yesterday when, along with many Members, I attended the WASPI women demonstration. Those people face having to make key decisions about their future, but this Government utterly disrupted the way in which they were able to make rational decisions, because they were given no proper notice about the huge changes being made to their pensions. Rather than helping to give some coherence to the economy to enable people to make as rational a decision as possible, the Government’s actions have caused disruption. The effective operation of the marketplace is being disrupted, not helped.
Secondly, we cannot ignore the influence of politics on economic activity and vice versa. By entirely ignoring the effect of Brexit in his speech, the Chancellor ignored the influence of such a political decision, but some of the effects of Brexit should have been tackled. The failure to guarantee the rights of EU citizens in this country will lead to disruption in the labour market. I am sure that I am not alone in knowing constituents who either have already left or are preparing to leave the country, including people who run small businesses, a German couple, someone in the creative sector, and one or two university researchers.
Keith Vaz
The hon. Gentleman and the SNP should be commended for raising this issue on so many occasions. It is the practicalities that worry me. EU citizens are extremely worried and distressed about their current position, so they need their applications to be processed, but there is no provision in the Budget to allow for those applications to be processed efficiently. Millions of people will have to go through the system.
Roger Mullin
I entirely agree with the right hon. Gentleman. Indeed, that is a great worry to me, as it is to him and to many others. It is about not only the system’s efficiency, but its effectiveness and ability to make the right kinds of decisions in complex individual cases. I have constituents who have been here for many years but are finding it difficult to get various applications through.
Mike Weir (Angus) (SNP)
My hon. Friend is making a good point, as did the right hon. Member for Leicester East (Keith Vaz). This is not just about individuals. There will be an impact on the local economy of areas such as mine that rely on migrant labour for fruit picking and will face great difficulties if that labour is not available. There are huge economic consequences in addition to the personal consequences.
Roger Mullin
That is precisely my point. What was seen as a political decision to exit the EU immediately has consequences for individuals whom we value in our communities. That has implications for the labour market, and the disruption of the labour market has economic consequences. We cannot get away from the fact that an array of influences are coming to bear due to Brexit, but the Chancellor thought that the sensible approach was to utterly ignore them. We also need to pay attention to other matters connected to Brexit. As far as I am aware, the Chancellor said absolutely nothing about how he was going to fill the funding gaps for rural communities, the agricultural sector or university research. Everybody is uncertain about those gaps. How will the Government address them in general? They have already said that they will fill the gap in one or two small instances, but there is no general response. That is another disruption that the Government are not addressing.
Thirdly, whereas the Treasury and the OBR can offer only snapshots of the economy at different times, people who may call themselves part of the classical economic tradition would say that an important feature of the real world is how the market economy operates, which is based on a process of incessant change and growth. Although the Government talk about some aspects of that, such as the importance of research and development and of stimulating innovation, not nearly enough regard has been paid to the importance of how we are to stimulate innovation and, through that process, stimulate growth in the economy.
There are practical implications of that view of looking at things. Policies in recent years—near-zero interest rates from central banks and austerity from Governments—have specifically protected one group of people while harming everyone else. They have boosted the asset prices of the wealthy while destroying the savings pool of those with modest amounts in the bank. The policies harm pensions and penalise savers. They represent everything that classical economists have opposed. Paradoxically, they are the antithesis of the free market and a further illustration of what David Stockman calls “crony capitalism”. It is not hard to find the human embodiment of crony capitalism in this House.
I will now comment on some of the measures. I read an article in the Financial Times by Sir Nicholas Macpherson a few days ago—[Interruption.] He is a friend of the hon. Member for Bootle (Peter Dowd). Sir Nicholas said that Budgets were supposed to be about tax. For perfectly reasonable historical reasons, the United Kingdom has developed an enormously complicated tax system over hundreds of years. When I talked to a Treasury official some weeks ago, he told me that, so far, he had found more than 1,100 tax reliefs in the system. Every tax relief provides an opportunity for a loophole, so it is perhaps not surprising that estimates of the tax gap vary between £36 billion and £70 billion.
Given the changing nature of society, should our tax system and some of our approaches to tax rely on what happened 150 years ago or more? Surely the time will soon come when we have to look systematically at the entire tax system with a view of not just simplifying it, but making it fit for purpose for the type of economy and labour market that we have today. I am therefore disappointed that there was no reference to that in the Budget.
We have already heard excellent points about the problem facing the self-employed, so I will not dwell too long on that, but there is one area in which the Government could help. For 30-odd years before I entered Parliament, I ran small research companies and the like. In the last few years before I entered Parliament, I decided that I was going to take life a bit easier—some chance—so I stopped running a limited company and simply proceeded, with associates and individuals, by picking the jobs that I found interesting and wanted to do. I applied for a job with the Government, but they said that I could not be considered for it unless I became a limited company. The UK Government’s procurement processes therefore encourage people to do what the Budget says the Government do not want them to do. If we are to move down the route of sorting out this part of the economy, as the Government would see it, might it be a good idea for them to practise what they preach by sorting out their own procurement policy?
Too often in this House we hear the Government making policy changes and announcements in which they almost assume that every labour market is like an inner city. When I heard what the Government were doing on self-employment, my thoughts did not immediately go to how labour markets operate in Glasgow or the City of London; I thought about my friend in Skye and some of my friends in the highlands who have no choice but to rely on self-employment. They cannot choose to work for corporations that do not exist. They are what might be called “necessity entrepreneurs”, and they do not work in just one sector. They have to job around and they undertake lengthy travel. They also have absolutely none of the security that people in employment have. The Government think it is a good idea to burden those people all of a sudden, but I cannot see how on earth their chosen proposal will give any support to local economies the length and breadth of this country. We need much more effective analysis of those matters.
Of course, being a Scot, I am particularly concerned about the duty on whisky. Given the state that the Government are in, and given what we face in the future, if there was ever a bad time to make it more expensive to buy whisky, this is it. Surely we do not want to start by penalising one of the most effective products produced in this land that is not only essential to the Scottish economy, but makes a massive contribution to the economy of the whole United Kingdom.
Many Members want to take part in this debate, so I will finish by returning to a group I mentioned earlier. At its heart, the economy is a collective human endeavour. We cannot understand economics abstractly; we have to understand it in terms of its effect on individuals, families and communities. If ever there was an example of how the Government have departed from the genuine concern for humanity that should be at the centre of our concerns about the economy, it is surely their malicious treatment of the WASPI women. We have a long way to go.
Rishi Sunak (Richmond (Yorks)) (Con)
It is a privilege to speak in this debate. In all the excitement from Fleet Street, it would be easy to forget who yesterday’s Budget is really about, so I will share with the House how many of my constituents will feel about it. Whether it is the schoolboy with a first-rate technical education who will now have the chance of a better job and a solid wage, the small business owner who knows that when she speaks up her Government listen, or the mother who knows there is a Conservative Chancellor at the helm making the difficult decisions so that her children have well-funded public services and a country that lives within its means, for the hard-working people of North Yorkshire this is a Budget that delivers where they need it most.
Norman Lamb
How does that schoolboy or schoolgirl feel about an 8% cut in funding per student by 2020 under this Government?
Rishi Sunak
I am not sure that I recognise the right hon. Gentleman’s figure. The schools budget has been protected, and the Government are rightly consulting on the iniquity in the current funding system which means that constituents in my rural area are worse off to the tune of hundreds of pounds per pupil compared with very similar pupils in other parts of the country. I am delighted that the Government are addressing those iniquities in their consultation.
Rishi Sunak
If the hon. Lady does not mind, I will make some progress and come back to her.
I begin with small businesses. My predecessor, Lord Hague, has a well-documented enthusiasm for beer, so it will come as no surprise to Members that pubs are a cornerstone of my rural constituency’s economy. Following in his footsteps is difficult enough, but it is impossible for me to visit a pub in my constituency without seeing a picture on the wall of William pulling a pint with the landlord. Not only is my constituency home to more than 200 pubs, but I am proud to say that it hosts the Campaign for Real Ale’s 2017 pub of the year: the community-owned George & Dragon in Hudswell. I was delighted to be in Hudswell just last Friday when the landlord Stu Miller, his family and team received their award in the loud company of everybody from the village.
In recent months I, like many other hon. Members, raised concerns that the revaluation of business rates risks penalising such small, enterprising businesses. I am delighted to say that this was the Budget of a Chancellor who, like any good barman, listens to our concerns. For the landlords who run them, the jobs that depend on them and the communities that enjoy them, this Budget’s £1,000 business rate discount will make a real difference to many pubs at a time when money is still tight.
But pubs are not the only rural businesses that the Budget will help. Auction marts and livery yards across North Yorkshire have seen particularly steep rises in their business rates because the idiosyncrasies of such companies are not well understood by officials and because the last revaluation coincided with the disastrous foot and mouth epidemic. Such idiosyncrasies are more than even the most ingenious civil servant could be expected to foresee. Auction marts, livery yards and riding schools are particularly important to the fabric of our rural community, so I thank the Chancellor for the extremely welcome creation of the new £300 million discretionary business rates fund, which will put decision making back in the hands of communities and allow businesses in constituencies such as mine to benefit from the local knowledge of councils in ensuring a smooth transition to the new schedule.
Stephen Doughty
The hon. Gentleman was talking about pubs, and he will know that I am a keen pub goer. Indeed, I was in a pub in his constituency the other day, enjoying a pint with my cousins. What does he have to say to customers in pubs, who are going to face a 3% increase in the price of a pint?
Rishi Sunak
What I say to customers and to the hon. Gentleman is that I am sure that the Minister doing the wind-up will be able to say how much better off customers are from having benefited from several years of freezes in beer duty that would otherwise have been put in place. I am sure they would also like to hear that this Government will be consulting on new duty rates for white cider and still wine to see what more could be done to help customers who drink those alcoholic beverages. Lastly, let me say that I would welcome him back to my constituency any time and will be happy to share a pint with him next time he is there.
Seema Malhotra
I have not yet been to a pub in the hon. Gentleman’s constituency, but I recognise the benefits for pubs in my constituency. May I extend the question about customers in pubs, many of whom may be self-employed? Have they reflected with him on their concerns about the proposed rise in national insurance?
Rishi Sunak
I thank the hon. Lady for raising that issue. If she will allow me, I will deal with that exact point later in my speech.
The last measure in support of local businesses that I wish to highlight is the £690 million fund available for local authorities to address urban congestion. Congestion is not something one would ordinarily associate with the rural idyll of North Yorkshire’s villages and market towns, but the residents and community of Northallerton are relentlessly frustrated by the level crossing near our vibrant and diverse high street, as its impact on local business is substantial. I have convened meetings of local authorities and Network Rail to discuss plans to alleviate the congestion, and I very much hope the Chancellor’s new fund can help us.
As the Chancellor so rightly pointed out in his Budget speech, supporting our businesses is a means to an end, not an end in itself. If our children are to benefit from the more than 2 million new jobs created since 2010, they will need the right skills. The 2.4 million apprenticeships created in the last Parliament are a momentous achievement, but we must also recognise that although most of us think of apprentices as young people, 16 to 19-year-olds—school leavers—account for less than 10% of the increase in new apprentices. That means that too many school leavers are still sticking with an inappropriate classroom education rather than a first-class technical one. The Chancellor’s announcement of new T-levels is a crucial step in redressing the balance and closing for good the gap between the classroom and the factory floor, for which our economy has paid a high price for too long. I therefore welcome the new half a billion pound investment in increasing training hours, the streamlining of technical qualifications, the provision of high-quality work placements and the introduction of maintenance loans. Taken together, that is a powerful package to help to ensure parity of esteem between technical and academic education.
Yet I also urge Ministers to continue to look carefully at my campaign, supported in the recent industrial strategy, to create a UCAS-style system for apprenticeships. This branded, one-stop-shop portal would not only end the classroom divide between those applying to university and those applying for apprenticeships, but, by bringing everything together in one place, help businesses to connect more easily with young apprentices in schools.
Turning to national insurance, I, like many Conservative Members, have always believed in low taxes as a spur to economic growth, but when a Government inherit a deficit of £100 billion the greatest priority must be returning to sound finances and doing so in a way that is fair. I believe it is right that those who benefit from public services make an appropriate contribution to paying for them, and that is what this Budget’s changes to national insurance will ensure. Sixty per cent. of self-employed workers—those earning less than £16,000—will see a decrease in their national insurance contributions as a result of the removal of the regressive class 2 band. Workers earning up to almost £33,000 will be no worse off when these changes are taken together with the increases to the personal allowance, and for those earning more the average increase in contributions will be a few hundred pounds. It is right to ask: is this fair? I believe that it is.
Historically, different rates of national insurance for the self-employed and the employed reflected significantly different benefits and access to public benefits, but that difference is no longer there. Indeed, changes to the state pension, which is partly funded by national insurance, mean that self-employed workers now benefit from an extra £1,800 annually in pension—this is something they would need to save up to £50,000 for to receive in the private sector. Similarly, self-employed couples starting a family can now benefit from almost £5,000 in tax-free childcare support.
In this House, I always hear calls for investment in public services, such as this Budget has provided for in social care, but those investments need to be paid for. Her Majesty’s Revenue and Customs has estimated that it is losing about £5 billion a year from the increasing trend of self-employment, so it is right that we make small changes to ensure that everybody contributes to the public services and benefits we value. It is important to recognise that even after these changes the tax system will still recognise the particular issues faced by self-employed workers and will favour them in its tax rates and treatment. They will benefit from a lower rate of national insurance than employees; they will still not bear the cost of employers’ national insurance, which is levied at a substantial 13.8%; they will still have the ability to offset losses and gains over years; and they will still benefit from a more generous treatment of tax-deductable expenses. I am also encouraged that in the longer term the Government are committed to looking at the whole issue of the increasing trend towards self-employment, and to ensuring that we reflect those changes in the economy in our tax system and ensure that everybody is treated fairly. This small change is thus necessary to protect the things we value, and it is fair and proportionate.
In conclusion, we have all learned to be a little cautious of economic forecasts, but if the Office for Budget Responsibility is right, the first students to sit their T-levels will do so in a country with 1 million new jobs, double today’s productivity growth and, for the first time in two decades, national debt falling as a percentage of GDP. This Budget, like the ones that came before it, is building a country where our businesses will not have to pay for the profligacy of the past and our children can look forward to a bright future. Nothing could be more important than that, so I commend this Budget to the House.
Graham Jones (Hyndburn) (Lab)
On a point of order, Madam Deputy Speaker. Yesterday in regional newspapers, there was a malicious and false report that the Labour party had somehow entered into an arrangement with the British National party in the seat of Pendle. This matter was raised in business questions by the hon. Member for Pendle (Andrew Stephenson). Having just spoken to the leader of the council in Pendle, I am absolutely assured that no such deal has taken place. In fact, the leader of the council has never spoken to the BNP in eight years, and the Labour party does not speak to the BNP in Pendle unless it is absolutely necessary to do so in committee. These reports should be corrected and I wondered how best to go about doing that, Madam Deputy Speaker.
Madam Deputy Speaker (Mrs Eleanor Laing)
I can quite understand why the hon. Gentleman wishes to make his point of order, but, as he knows and as the House appreciates, it is not a point that can be dealt with by the Chair. However, he asks how he can set the record straight, and my simple answer is: he has done so, and I am sure his setting straight of the record will be properly recorded in Hansard.
Ms Angela Eagle (Wallasey) (Lab)
It is a pleasure to follow the hon. Member for Richmond (Yorks) (Rishi Sunak), whose constituency is in my home county, Yorkshire. The last time I was in his neck of the woods, it was not to go to a pub—as many of my hon. Friends seem to have done—but to fight the by-election that his predecessor fought and won. I remember wandering forlornly through a village in the constituency, door-knocking with my much-missed colleague, Mo Mowlam. We did the entire village and found not a single Labour voter, so I think the hon. Gentleman is probably fairly safely ensconced in Richmond (Yorks), pending an electoral earthquake—although, of course, they do happen.
I was disappointed by the Chancellor’s statement yesterday. His first Budget did not rise nearly seriously enough to the challenges faced by our country in these times of great volatility and change, which we must now confront together. We needed a wider and bolder vision. We needed radical reform to rebuild our prosperity in a post-Brexit world and a sustainable plan to deal with our ageing population and all the pressure that that brings. We needed a recognition that we must recast our tax and benefit systems to deal with the world to come, rather than the world as it was when Beveridge produced his blueprint for a welfare state, 75 years ago.
Instead, we got a Budget that made no mention of the greatest challenges facing us today. There was no mention whatsoever of climate change. There was no mention of rising poverty and inequality, or of public expenditure cuts stretching to the far horizon. Perhaps most surprisingly of all, there was no serious mention of Brexit. This was an occasion on which the Chancellor ought to have set out a bold reforming vision for the UK. But he did not. He left the grimmest news unspoken; perhaps he hoped that nobody would notice.
On living standards, the Office for Budget Responsibility revealed something that millions of people in this country already know: real pay levels have not yet returned to their pre-2008 peak. The autumn statement revised down the forecast for real earnings by £1,000 by 2020, and the Budget will do nothing to change that. That means that workers are facing 13 wasted years of lost earnings and stagnating pay under this Government. To make matters worse, the Government’s flagship promise of a £9 so-called living wage, which in itself was never going to be enough, has been revised down to £8.75.
The modest growth in our economy, which is at historic lows, has translated into real earnings stagnation for the vast majority of people. The fact that more than half the 13.5 million people in this country who are now living in poverty are in work is not a problem the Chancellor was troubled enough to mention in his speech, but it is an indictment of his Government’s record, and it is one of the most serious social problems facing Britain today.
The Budget papers reveal that consumer debt is once more exceeding its pre-crisis peak; it is this unsecured debt that is driving what modest growth there is in the economy. The Bank of England is right to be worried about it, but it did not trouble our Chancellor enough for him to refer to it at all in his Budget statement. These facts alone show just how much the Prime Minister’s just about managing families are being made to shoulder the burden of a painfully slow recovery from the financial crash, yet there was simply not enough help announced for them yesterday.
On infrastructure and investment, the perfunctory re-announcement of the £23 billion in the rather grandly named national productivity investment fund is to be welcomed, although it has been announced many times before. But, at 2.6% of GDP, it remains far lower than the levels of infrastructure investment achieved by the previous Labour Government, and well below the OECD average. That is going to put us at a continuing long-term disadvantage in a global race in which we are more isolated and at risk than ever before, after the Brexit vote.
On investment generally, the OBR forecasts that Brexit and the uncertainties surrounding it are likely to depress private investment going forward, and uncertainty about trade arrangements will hit exports and inward investment, too, offsetting any beneficial trading effect of the depreciation of sterling. This is not a credible platform from which to launch any serious attempt to prepare our economy for the challenges of a post-Brexit world and enable us to secure our prosperity for the future.
This is a Budget that continues to hit the poorest the hardest. The Red Book demonstrates that the cuts to public services just go on and on into the future. We are told that the target for eliminating the deficit, which was originally meant to be achieved in 2015, might now not be accomplished until 2025—a 10-year delay on the original five-year plan. The Budget documents reveal a massive 20% cut in the funding allocated to local government next year, down from £8.2 billion to £6.5 billion. That puts at risk services for the most vulnerable and threatens to rip our social fabric apart.
There is an 8% per-head cut in education funding, which will threaten to bankrupt some schools—certainly in my constituency—while the extra funds announced for education are ring-fenced for the Prime Minister’s grammar schools vanity project. Once again, some people are being left behind while a chosen few, in certain chosen areas, get all the advantages. Also unmentioned by the Chancellor in his statement yesterday was a 6% real-terms cut in non-pension-related spending on social security, which will hit the most vulnerable the hardest.
The pressures of our changing demography make it clear that there must be urgent and radical reform of our system of social care, and in social justice more broadly. The changes to our labour market, which are happening on a global, national and local level, along with the profound implications of rapid technological change, make it imperative that we reform our tax and benefit system to make it fit for the future. We must be willing to look again at the tax base in order to guarantee real security for everyone in our society.
In both those areas, though, the Government have been caught out by their cynical electioneering attacks on Labour and their even more cynical election promises to the people. After participating in cross-party talks following the Dilnot report on adult social care and agreeing a joint approach to the challenges we face, in 2010 the Tories cynically produced propaganda posters condemning what they called “Labour’s death tax”. Thus, for short-term, cynical electoral gain, they equally cynically ruled out the changes we need to make as a nation so that social care can be put on a sustainable footing for the future.
The Tories did the same with what they called “Labour’s tax on jobs”—proposed changes to national insurance contributions. In 2015, they even produced the Tory “tax lock”, a pledge that it has since emerged was manufactured to fill a hole in the general election grid. It was described by the No. 10 adviser who thought it up as
“the dumbest economic policy that anyone could make”.
Stephen Doughty
My hon. Friend mentioned previous claims by the Conservatives. I have the advert that they put out during the last election, which made clear that any rise in national insurance would be
“costing jobs and hitting hardworking taxpayers”.
What has changed?
Ms Eagle
Exactly. My hon. Friend will agree that, with their cynical use of short-term advantage and the way they have electioneered on it, their pledges and the way they have campaigned, the Conservatives have actually made it much harder for us to make the reforms that we as a society need to make to our tax and benefit system and our social care system. That is the ultimate in irresponsibility.
Yesterday, the Chancellor tore up the tax lock. He can dance on the head of a pin and claim that the lock did not apply to class 4 national insurance contributions all he likes, but that was not on the side of the bus and no one will believe a Tory election promise ever again. The Chancellor has learned a tough lesson: if he wants to be for the just about managing, he needs all the tools of government available to him. He cannot tax-lock himself out of all his options and end up having to plug the gap in social care by taxing the self-employed. The Government have been hoist by their own cynical petard.
We are willing to work with the Government on both the challenges that I have mentioned—social care and how to arrest the alarming rise in self-employment, which brings precariousness for far too many people. Self-employment is often just apparent self-employment, and it is quite often very low paid and precarious. We need to ensure that the self-employed are properly protected and have proper access to the protections that employees take for granted.
Seema Malhotra
As usual, my hon. Friend is holding us spellbound with an excellent speech. The former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), in a sense blamed the Tory manifesto for being wrong more than he blamed the policy that the Government introduced yesterday and the way that they did so. Does she agree that those are both problems that the Government clearly need to learn from?
Ms Eagle
I agree. We saw a cynical dash from the Conservatives to make short-term promises to get elected, and we saw them campaign even more cynically on those promises in the hope that when they had to be broken nobody would notice. But the Government’s actions are making it much harder for us to have cross-party support on anything, and they have also made it very difficult for anyone to believe any single one of their manifesto pledges again. The Government have increased distrust of politics. That is the legacy of their behaviour on social reform and tax reform, which are vital if we are to prosper in the future.
Stephen Doughty
My hon. Friend is being generous in giving way. She talks about mistrust having been created. Does she agree that people out there often say to us that they do not feel that politicians in this place—the Government—actually understand the realities of life? Life for the self-employed, in particular, is often very difficult. They have many costs on top of those we would normally expect. They need increased insurance, find it difficult to get a mortgage and have to pay out for additional things. This Government simply do not understand the reality of life for self-employed people.
Ms Eagle
That may be the generous interpretation, but there are other interpretations that involve the cynicism I have talked about. This is the issue: if the Government really wanted to make a reasonable reform to the tax system and national insurance contributions to take away the current tax incentive for people to self-incorporate or real employers to force people into becoming apparently self-employed, they would not have made such a reform. They would have said, “We’re going to introduce these new benefits for the self-employed and take away the tax advantages and disadvantages of being self-employed, and finally we will bring forward a much more stable tax base and tax system.” That could be supported, but it looks like the Government have changed national insurance contributions to fill a fiscal hole in social policy. That is a grubby way to behave, and it is in breach of the Conservatives’ election manifesto. That is not the way in which the Chancellor should have made this change. He may learn, but in this Budget all we got was green Hammond rotten eggs.
Mr Dominic Raab (Esher and Walton) (Con)
It is a pleasure to follow other hon. Members. I hope that the hon. Member for Wallasey (Ms Eagle) will not be too offended if I say that I agree with more of what my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) said than what she said, but I find that the Budget debate always produces insightful contributions from both sides.
Ms Angela Eagle
Just to reassure the hon. Gentleman, I suspect that I would have been even more offended if he had agreed more with me than with his hon. Friend.
Mr Raab
It is good to at least start on a point of consensus.
When I hear the leader of the Labour party or the shadow Chancellor talking about the economy, I sometimes feel that there is a parallel universe. I listened carefully to the right hon. Member for Hayes and Harlington (John McDonnell) on “The Andrew Marr Show”. He explained that the economy was not growing fast enough. In fact, the British economy was the second fastest growing in the G7 last year, as it is this year, despite all the doom and gloom around Brexit. He needs to look at the economic facts.
The right hon. Gentleman went on to say that real wages are falling, which hon. Members have returned to on several occasions. I will talk about cost of living pressures, but the official figures are crystal clear. Real wages have been rising since September 2014 and, according to official data, are set to continue rising. [Interruption.] If the hon. Member for Heywood and Middleton (Liz McInnes) wants to intervene, I would welcome that, but otherwise she should go and check the facts. The raw truth is that employment is at a record level, real wages have been rising since 2014, income inequality—I know that she, like me, cares about that—is at its lowest in 30 years, the FTSE is at a record level, and there has been a fresh wave of investment since the referendum, including, most recently, the commitment by James Dyson.
Seema Malhotra
Does the hon. Gentleman agree that although he may be able selectively to cite headline statistics, there is a reality in our constituencies that comes through in our casework? Schools and parents tell me about people not being able to afford school uniforms, and people are relying on food banks. Does he acknowledge that we need to face that reality and that our economy and economic policy should deal with those things?
Mr Raab
I welcome the acceptance of the official figures at least, which was implicit in what the hon. Lady said. I accept that there are cost of living pressures, not least given that inflation is creeping up, but let us face it: inflation is still well below the Bank of England’s headline 2% target. I will address cost of living challenges and what we should do about them, but we live in the real world and we should not chase the Labour party leadership’s socialist pipe dreams, because they will do nothing to deal with cost of living pressures other than precipitate a lack of confidence and investment in the economy and falling living standards as a result of increasing unemployment.
I thought that the hon. Lady was going to intervene to welcome Dyson’s investment in a new 517-acre research facility in Wiltshire. Jaguar Land Rover is investing in creating the new Velar model, which will be exclusively manufactured in Solihull. The wave of investment is coming right across the country. There is a resilience and strength in the British economy, and fresh investment and enthusiasm about the opportunities that lie ahead. Having said that, I want to be careful not to allow any sense of complacency to creep in.
This Budget is all about the whole package. In what I like to think is my still relatively limited time in this place, I have never known a Budget that has not involved compromise. Trying to put together a package is the serious business of government. Hon. Members of all parties can be quite quick to allow the positive stuff that we like, whether that is taxation cuts or extra investment—I have been guilty of that in the past—but we also have to ’fess up and face up to the difficult decisions that have to be made. That is the serious business not just of politics, but of government. Look at what the leader of the Labour party said yesterday; he and his party are so unfit to govern because they are not willing to face up to those difficult decisions.
Stephen Doughty
The hon. Gentleman talks about not being positive enough about different things but, a moment ago, he tried to present quite a false impression of the inflation rate. The PriceStats indicator, which is actually a much more accurate indicator of the inflation rate, suggests that inflation has potentially risen to 3.3% in recent weeks. As my hon. Friend the Member for Wallasey (Ms Eagle) pointed out, that is certainly being reflected in the sorts of pressures that constituents come to us with. Does the hon. Gentleman not recognise that inflation is, in fact, potentially much higher than he suggests?
Mr Raab
I love to have a good haggle over stats, but the fact that the hon. Gentleman said that the situation is “potentially” worse than I indicated suggests that he does not have full confidence in his intervention. The raw truth is that I am citing the consumer prices index for inflation, which is the one that everyone uses, from economic forecasters to the Treasury and Ministers. If the hon. Gentleman wants to use a different one, it may, in fairness, be him who is trying to be selective.
Let us look at what the Government proposed and brought forward for the economy in this Budget. We continue to cut corporation tax, which is critical for encouraging businesses to come here and invest, and, from looking at the report from the Centre for Policy Studies, is also a good way of generating additional revenue because it is a dynamic tax cut. We want to create more revenue not just to spur business growth, but to pay for the precious things such as social care that we want in our society and in our public services. We need a strong economy to ensure that we remain at the most cutting edge of our competitiveness. I am afraid that the Achilles heel of the current Opposition is that they have no sense of what credible economics look like.
On top of corporation tax, I was delighted to see the Government address the issue of business rates, and to see the £400 million package to ease the transition towards reform of the wider business rates system particularly to ensure that smaller businesses on the high street are not unduly affected or penalised by the changes. I know from my own experience—particularly in a constituency such as Esher and Walton, which is really a constellation of towns and villages with a strong high street, but with a disproportionate number of smaller business—that the measures to ease the business rates transition will be well received. We want to ensure that the high street is able to compete with online businesses, and I was pleased that the Chancellor directly addressed that in the Budget yesterday.
As well as the measures to stimulate the economy and to ensure that we are at our most competitive, the Budget includes significant investment in skills. There has been a record level of investment in schools under this Government, and we have seen fresh money allocated to new schools and existing schools. I listened very carefully to the hon. Member for Wallasey. The truth is that 1.8 million more children are studying in state schools that are deemed good or outstanding than in 2010, when the last Labour Government were in office. That is probably the accomplishment of this Government of which I am most proud. The question now is not how we rest on our laurels, but how we build on that accomplishment.
Yes, we want to ensure that with a new wave of grammar schools the academically gifted—whether they come from the humble background of a council estate or a rural backwater—have the opportunity to make the very best of their talents. We also want to ensure that the bright but not necessarily bookish have a vocational route, through technical training or otherwise, so that every child who has talent, works hard, grafts and has something about them—no matter what their disposition—can make the very best of their individual abilities. That is what is so positive about the package brought forward by the Government yesterday, with T-levels as well as the new money going into grammar schools and existing schools.
Aside from schools and education, which are important for skilling up our economy, driving forward social mobility and ensuring that we build the vision of the meritocratic society as well as the enterprise economy, money has been allocated to social care because we have a Government who are willing and able to take difficult decisions. An extra £2 billion will go into social care on top of the £10 billion we will invest in the NHS by 2020. My constituency of Esher and Walton is a classic Surrey constituency in the sense that we have an ageing population, which is good news because people are living longer, but we need to ensure that we can cater for conditions and healthcare needs. Although there are many longer-term questions about financing and what model of social care we have, the extra money going into social care will be a crucial first step. I know, from looking around at the pockets of elderly poverty even in a relatively affluent constituency in Surrey, how important it is to ensure that we have that support, but that support is only there because we have a Government who are willing to make difficult decisions.
The hon. Member for Feltham and Heston (Seema Malhotra) made an intervention about the cost of living, which is a critical issue to address. The reality is that this Government are raising the national living wage to £7.50 an hour and have taken 3 million of the lowest paid out of income tax. Let us be very clear that for the average taxpayer, that is now the equivalent of £1,000 extra in their pockets each year as a result of the difficult decisions that a responsible Government are able and willing to make. Further measures in the Budget deal with tax-free childcare, and the doubling of free childcare for working parents with three and four-year-olds. I am not sure that I am eligible, but I do have a two-year-old and a four-year-old. As a member of a two-salary couple and team, I know the importance of such support, and I welcome it.
Difficult decisions are made in Budgets. There are issues and points in this Budget that I did not like much, but the truth is that we have to look at Budgets in the round and as packages. I will be honest that I struggle with the changes to national insurance for the self-employed. I am in the business of cutting taxes, not raising them, particularly for the entrepreneurial classes, but we need to know how we are going to fund everything we want to do in the Budget. That is the challenge that any responsible Government and, indeed, any credible Opposition, have to face. The advantage we have is that we will have a separate free-standing piece of national insurance legislation. The Minister, who is incredibly assiduous and very attentive to the concerns raised by hon. Members in this Chamber, will want to ensure that we get the package for national insurance right.
The Chancellor has raised the issue of the lack of parity between the way in which the employed and self-employed are treated. Of course, there are advantages and disadvantages to both statuses, and it is absolutely right to ensure the right, equitable treatment for both. I do not want us to penalise to entrepreneurial people in our society but, at the same time, I want to ensure that we have a system that is fair. Conservative Members must be extremely mindful that we satisfy not only the letter, but the spirit of our manifesto commitments. The advantage of having this free-standing legislation—I can see the Minister scribbling away—is to ensure that we get the right balance on this sensitive issue.
Mr Raab
I want to make one more point about the other aspect of the Budget that I struggled with a little bit—cutting the dividend-free income for savers. We have talked a lot in this Chamber and in the Government about the importance of encouraging people to save, given the challenges of debt, credit and household debt more generally. I want to ensure that we are not sending the wrong message with this change, when we actually want to incentivise and encourage savers.
I am therefore very honest and upfront about the challenges. The problem is that all the things we want—from the extra money for social care for the vulnerable, to the extra money for skills to drive forward social mobility, to extending the personal allowance to cut income tax—have to be paid for. I welcome, support and reinforce the Government’s inclination to face difficult decisions head-on and to make sure that we get the balance right, rather than just having a Budget that satisfies newspaper headlines but does not stand the test of time. The Government therefore have my support, and I know that they will want to look at the nuances of some of these measures.
In contrast, I was very struck by the speech from the leader of the Labour party yesterday, because it did not put forward any credible alternative. It rather felt like he was tilting at socialist windmills—like he was somehow lost in a field ranting at the wind. The tragedy for the Labour party is that, on some of these issues, where there are genuinely choices to be made, it has no credible alternative. That is what I think the public will see: a Government bracing themselves and taking difficult decisions, and a Labour party, under its current leadership, that has talked about £500 billion of extra spending that it cannot fund.
I pay tribute to the hon. Member for Nottingham East (Chris Leslie), the former shadow Chancellor, who rightly pointed out that satisfying those spending commitments would require us to double income tax, double national insurance—there was no mention of that from Labour Members—double council tax and double VAT as well. I am not sure, therefore, that Labour Members are really in a position, in the absence of a credible alternative, to start picking holes in one or another aspect of the Budget put forward by the Government.
Mr Raab
Let me give the hon. Gentleman my three points; I will look forward to hearing his intervention after that.
There is also the whole concept of people’s quantitative easing—the idea that the Bank of England should print more money to spend on some of these ivory-tower, socialist-pipedream projects. That is the Mugabe school of economics; it is deeply irresponsible. Again, if we are talking about difficult decisions, that would be far worse for savers than any of the difficult decisions that have had to be made in this Budget.
Finally on the alternatives put forward by the Labour party, the leader of the Labour party is actually on record as being amused about the possibility of raising the basic rate of income tax by 5%—I have the quote here, but I will not embarrass Labour Members by reading it. Honestly, of all the tax rises in the world to contemplate, a rise in the basic rate is deeply irresponsible, not just economically but socially.
Peter Dowd (Bootle) (Lab)
Why do you not talk about your manifesto instead of our manifesto? Why do you not talk about the promises in your manifesto that you have broken?
Madam Deputy Speaker (Natascha Engel)
Order. The hon. Gentleman should remember that he is speaking through the Chair. It is not my manifesto—it is the manifesto of the hon. Member for Esher and Walton (Mr Raab).
Mr Raab
Madam Deputy Speaker, I thought for a moment that you were going to adopt the Conservative manifesto. Fortunately, you have resisted that temptation.
The shadow Minister makes his point, but I have addressed in the round the Budget that the Government have put forward. I have explained the bits I enthusiastically embrace and talked about the difficult decisions we have had to make. However, the truth is that the Labour party is incapable of putting forward a credible package.
Several hon. Members rose—
Peter Dowd
I beg your pardon, Madam Deputy Speaker.
The bottom line is that we should be talking about the broken promises from the Conservative party manifesto. However, the national infrastructure plan involves £500 billion of expenditure—some public expenditure and some private—so I would ask how the Government are going to fund that.
Mr Raab
I am not sure that it is incumbent on me to fund the commitments that the Labour party may or may not be willing to make.
The truth is that we have a properly funded Budget in which difficult decisions have been made. Investment is being made in the right things, such as skills and social care, but—
Mr Raab
No, I will not. The hon. Gentleman has had plenty of opportunity. I have allowed him to intervene on me and I am looking forward to hearing his speech. However, the truth is that he is unable to answer the question of how it can possibly be right to raise the basic rate of income tax. I would just point out that, as a result of the extension of the personal allowance, the average taxpayer will receive £1,000 a year extra.
Mr Raab
No, these figures have been properly costed. From the Institute for Fiscal Studies to the official figures, it is clear that, by raising the personal allowance, we are putting £1,000 back into the average taxpayer’s pocket. At the same time, the Labour party—[Interruption.] Not just the uber-rich—we are used to hearing about that predictable bugbear from the Labour party.
Mr Raab
Having taken two interventions from the hon. Gentleman, I have to say that the suggestion that I am frit is a bit silly.
The truth is that the Labour party will want to put up taxes on not just the super-rich, but low and middle-income families. Frankly, that is fantasyland.
Mr Stewart Jackson (Peterborough) (Con)
Does my hon. Friend agree that the Budget statement is about not just arcane statistics and numbers, but societal change for the better? Did he notice, as I did last week, that the number of families in which no one works is at an all-time low under this Government? We have therefore delivered economic stability and positive societal change.
Mr Raab
My hon. Friend hits the nail on the head. The key thing the Government can do is to create the conditions for record levels of employment, with real wages rising, and with inflation—yes, it needs to be looked at—stable and under careful control. Even on the worst-case scenarios that have been forecast, inflation would rise above 2%, but come back down shortly thereafter.
The reality of this Budget is that we have a Chancellor and a team of Ministers grappling with difficult decisions at a sensitive time, when there is a degree of uncertainty because of the referendum result, and coming up with a sensible, measured package. We have the Labour party talking about printing money and £500 billion of spending commitments when it has no idea where it can fund them from, and we have a Government who are committed not to tilting at socialist windmills, unlike the leader of the Labour party, but to building a better Britain—not only an enterprise economy but a meritocratic society for our children—and to making sure that the most vulnerable, and particularly the elderly, have the social care they need. [Interruption.] If the hon. Member for Bootle (Peter Dowd) would like to intervene on me rather than chuntering in frustration—more in frustration at his own party, I suspect, than at me—I will give way.
Peter Dowd
The hon. Gentleman can make up as many false “facts” as he would like, but the fact of the matter is that he is making them up. He should concentrate on his own manifesto. He still has not answered the question about the £500 billion in the Government’s national infrastructure plan. Where are the Tories getting the money for that from?
Madam Deputy Speaker (Natascha Engel)
Order. We are mulling over making up false facts. I think we are starting to get quite close to language that is not really acceptable in Parliament. We should just be aware of it.
Mr Raab
As ever, Madam Deputy Speaker, I will be very mindful of your advice, and I will curtail my speech.
The truth is that Budget week is the week for difficult decisions. The Government set out their priorities—the media will always pick apart whichever bits they want to—but they have to put in place a package that strikes the right balance, and I commend them for doing so. I know the Minister will have taken on board the concerns that I and other hon. Members have raised. However, the contrast between a credible, serious Government and a leader of the Labour party and an Opposition who have abdicated responsibility for coming up with a credible alternative is palpable for all to see—everyone inside this House, but also the public at large.
Mr Steve Reed (Croydon North) (Lab)
We are here to consider the Budget that the Government have put forward for the country. I want to speak about its impact on my constituents.
Like the rest of the country, Croydon is experiencing a social care crisis. Older and disabled people regularly visit my office to say they cannot get home care and that they do not get adequate support when they leave hospital. Local charities are telling me that the funding that they need has dried up as well.
After the Chancellor ignored the social care crisis in his autumn statement, we were hoping for better this time. Although £2 billion extra over three years is a welcome start, it goes absolutely nowhere near resolving this crisis. These services have already been cut by £5 billion since 2010. Some 26% fewer people receive help today, even though there are more older people needing such help. The King’s Fund projects a £2.8 billion funding gap every year by the end of this decade, but only £2 billion is being made available over three years, so all I can say to my older constituents and the disabled people who come to ask me what the Government are doing to help them is that the Chancellor has responded to their plight by imposing yet more cuts.
It is galling to see the Department for Communities and Local Government offering Surrey County Council a sweetheart deal that is denied to Croydon and people living in every other part of the country. It is not only Surrey that has this problem to deal with, but every local authority. Every community is struggling with it. I regret immensely that the Secretary of State failed to answer my question about whether he knew in advance about the letter that was sent from his Department to Surrey County Council offering it a sweetheart deal. We need to know whether he knew about that in advance of its being withdrawn. If he was party to it, the House needs to know that that is how he is attempting to operate within his Department and, if he did not know about it, the House needs to know that he has no grip on what his officials are up to. His constant evasion of the question will not suffice. We need answers from the Secretary of State; I am sure that in time we will get them.
Particularly painful to my constituents will be the planned hike in national insurance contributions for the self-employed. Croydon North is one of the most ethnically diverse constituencies in the country. Unfortunately, unemployment is particularly high among many minority communities. Their desire to work and their strong enterprising spirit means that many people from these communities set up their own businesses. Self-employed people work as taxi drivers, van drivers, hairdressers, plumbers, decorators, childminders—all sorts of jobs. They work very long hours, often for very modest pay. In Croydon, well over one in 10 workers are self-employed. It makes no sense whatsoever to clobber them with new tax rises. They need help and support, not further barriers to work.
Mr Jackson
So what does the hon. Gentleman say to the respected Institute for Fiscal Studies and the much respected Resolution Foundation, which are today stating specifically that the measures that he identifies are progressive and ameliorate inequality in the tax system between people on pay-as-you-earn and those who are self-employed?
Mr Reed
Perhaps Conservative Members, including the hon. Gentleman himself, should have thought about that before they stood for election on a manifesto that said absolutely categorically that there would be
“no increases in...National Insurance contributions”.
It does nothing for trust in politics when politicians say one thing to persuade people to vote for them but then, once they are elected, do the polar opposite. They are helping to further break trust in this House and trust in politics. This is not down to the IFS; it is down to Tory Central Office, the Prime Minister, the Chancellor of the Exchequer and—dare I say it?—the hon. Gentleman himself, if he is going to vote for the proposal. Given all the uncertainty about Brexit—it is shocking that the Chancellor had so little to say about Brexit in his statement—small businesses and the self-employed need reassurances, not broken promises.
I now turn to those in employment, because this Budget has very little to offer them either. Low pay and stagnant wages have become endemic. Most people have seen no growth in household incomes in the 10 years since the global financial crash; indeed, many have seen a real-terms cut. The British economy might be getting richer, but British working people are getting poorer. Ours is the only advanced economy in which wages fell while the economy grew between 2007 and 2015. In Croydon, average earnings have fallen by 7.6% in real terms, and today more than one third of my constituents earn less than a real living wage. So where has the money gone? Who has taken the proceeds of that growth? It is not the vast majority of people in Croydon or across Britain who work around the clock to pay the bills and put food on the table, but the shrinkingly small number of the super-rich whose interests this Government really represent. Wages are stuck and household debt is soaring, but the Chancellor had absolutely nothing to say about any of it.
Peter Dowd
Is my hon. Friend aware of today’s Resolution Foundation report that says that the UK is set for the worst decade for pay growth in 200 years?
Mr Reed
That is absolutely shocking, but it reflects what we are seeing in our constituencies and what our constituents are telling us.
Once upon a time in this country, there was a covenant between people and Government. People gave their consent to the system in return for a fair reward for the work they put in. There was an understanding that if people worked hard, they would do well. They could expect a decent home, security for their family, and healthcare when they fell ill or grew old, and that if they could not work, they would be looked after with dignity and respect. But today that covenant is broken. The unfairness and inequality that this Government stoke has bred resentment that has catapulted us out of the European Union and over a cliff edge into uncertainty.
Mr Jackson
I cannot allow the hon. Gentleman to propagate this myth. The gap between the poorest and richest 10% of our population was the highest that it has ever been under a Labour Government. This Government, I am proud to say, have delivered something that was never delivered in 13 years of a Labour Government: a national living wage to assist the poorest members of our community who are in work.
Mr Reed
This Government have absolutely divided the country. They have divided different parts of the country and communities from each other. I will give a statistic that shows how they have done it. Since they came to power in 2010, the 10 poorest councils in the country have experienced cuts 17 times bigger than those faced by the 10 richest. If that is not divisive, I do not know what is. This is happening on top of the fact that jobs have been lost to automation, factories have moved abroad, British people are denied the investment, skills and training that they need to compete in a global economy, and wages are stagnating. The Tories have made all this worse by targeting the poorest communities for the biggest scale of cuts. They have put the greatest burden on the weakest shoulders, and they have done so as a deliberate political tactic.
Adam Afriyie (Windsor) (Con)
The picture of doom and gloom that the hon. Gentleman paints is completely disconnected from the reality for people overall. Will he at least acknowledge that those in the lowest quartile have had a bigger tax cut than those in the highest quartile?
Mr Reed
We do not need to hear anything about tax cuts from Conservative Members, given that they have just broken their solemn electoral promise not to raise taxes if elected back into government. Only yesterday we saw the Chancellor standing at the Dispatch Box proposing to raise taxes. Conservative Members will have to vote on that, and it will be very interesting to see how many follow it through and how many do not.
The truth is that the Government have divided our country. With this Budget, they are doing absolutely nothing to bring it back together again.
Bob Blackman (Harrow East) (Con)
It is a pleasure to follow the hon. Member for Croydon North (Mr Reed). First, I place on record my declaration in the Register of Members’ Financial Interests as a vice-president of the Local Government Association, given that many of my remarks will be about local government funding and the services provided.
When Chancellors stand up at the Dispatch Box, they have a real challenge on their hands to balance the books in terms of taxes to be raised and money to be spent. In looking forward to the year ahead, we must take into account not only the Budget announced yesterday but the autumn statement, which led to large elements of Government spending being brought forward. There is a Budget that is announced at the Dispatch Box, and then there is a Budget that appears in the newspapers in the days and weeks beyond.
The test of a Budget is often how long it lasts before people start to pick at the finer points. It cannot be said that the Chancellor did not address national insurance increases: he spent a large proportion of his statement speaking about national insurance and the importance of balancing the overall position. We need to look at the matter very carefully, however, because a solemn promise was made in the manifesto not to increase national insurance, and I worry that the Government could be accused of signing a contract and failing to look at the small print. Across the country, many people who have entered self-employment are on relatively low rates of pay. They are taking all the risks on themselves, and we want to encourage them to be entrepreneurs and to invest in their businesses and livelihoods.
There has been a dramatic reduction in national insurance for many low-paid people, but I think the point at which people will pay more is far too low. I trust that the Treasury will look at introducing appropriate tapers to ensure that those contributions fall on highly paid people who would appear to be abusing the opportunity to be self-employed, rather than on the lower paid.
Jim Shannon (Strangford) (DUP)
The hon. Gentleman has clearly outlined the issue concerning the Conservative party manifesto. The media—the radio, the TV and the papers—have today given many illustrations of why people are unhappy with the Government’s intention to raise national insurance contributions. It is an issue in my constituency, and many of my people are telling me that they do not want it to happen. Those people have operated under the existing system for several years, and they want it to continue. Does he feel that the Government should review their decision? I think that that is what he is saying, but will he confirm that?
Bob Blackman
The Government have to look at the matter very carefully and review the point at which someone will pay more national insurance as a result of the abolition of class 2 contributions and the increase in class 4 contributions. I do not think that the balance, as announced yesterday, is right.
Norman Lamb
The hon. Gentleman rightly highlighted the concern that this may be a case of having to look at the small print. Is the situation not worse than that, however? The small print actually came in the legislation that was introduced after the election; when the commitment was made in the manifesto, there was no small print. It was a very clear promise, which has been broken.
Bob Blackman
The right hon. Gentleman and his party are experts in broken promises. It is important that we are seen to be fair and reasonable in this process, and that we encourage people to become entrepreneurs. That is the key element.
I now move on to funding for social care. The Communities and Local Government Committee, on which I have the honour of serving, recommended that the Chancellor make available £1.5 billion to fund adult social care. I am delighted that the Chancellor announced an extra £1 billion for adult social care. I am also pleased that the Secretary of State for Communities and Local Government confirmed today at the Dispatch Box that that money will be added to local authorities’ baseline budgets, and that he confirmed the formula by which it will be distributed. I think that that will be warmly welcomed by local authorities up and down the country, and it is a continuation of much needed funding.
I hope that the Economic Secretary to the Treasury will be able to clarify in his winding-up speech one or two points in the Red Book that are slightly confusing for me and may be so for other Members, if they have looked at them. Line 9 of table 2.1 on page 26 mentions a spend of £1.2 billion on adult social care in 2017-18, which is more than the Chancellor announced yesterday in his speech. I hope that that can be clarified. However, the extra £1.2 billion does not appear to have been added to the CLG items in the table on page 21. It is not clear whether the money is ring-fenced for adult social care—I hope it is—and how the Government will ensure that it is spent in the intended manner. The funding was clearly needed, and I am delighted that it has been announced. It shows that the Chancellor and the Treasury are listening to concerns raised by hon. Members from right across the House.
I am equally pleased to see the additional funding that has been introduced for the national health service, particularly capital funding to provide much needed A&E improvements. Those improvements will take some pressure off A&E departments by allowing for the triaging of individuals who turn up at A&E when they should have gone to their GPs in the first place. That will clearly take the pressure off our health service, and it will be warmly welcomed across the country. I trust that we can get on with implementing those capital schemes as fast as possible, so that next winter A&E will not face the problems that it has experienced over the last couple of years.
I note that the Chancellor has allocated an extra £325 million of funding for sustainability and transformation plans. However, the estimated requirement is £9.5 billion. I just wonder where the extra money will come from to support that. The extra money for that in the Budget is welcome, but there seems to be rather a shortfall by comparison with the demand created by the various STPs.
On business rates, we all welcome the relief for pubs and the reinstatement of a three-year revaluation cycle. If we have learned nothing else from the process, we have learned that a seven-year revaluation period is ridiculous. Although many businesses across the country will be warmly happy about the fact that their business rates were effectively frozen for seven years, after the businesses are revalued they will almost face a cliff-edge. The implementation of a three-year revaluation period has to be the right approach.
I warmly welcome the £300 million given to local authorities to grant discretionary relief on business rates. My only concern is that we know that a large number of appeals will be lodged against the revaluations, and some local authorities may therefore be hesitant about granting relief while appeals are going on. In London and other parts of the country where 100% of business rates are devolved, that may have a huge impact on local authorities’ income. That is my one concern.
We need absolute clarity on what will happen about the billing of business rates and the reliefs that will be offered thereafter. Businesses up and down the country will receive their bills without necessarily knowing what reliefs they will get. In terms of cash flow, that will be a serious concern. The additional money to provide businesses with relief from the increase in business rates is extremely welcome, but the devil is in the detail, and we must resolve businesses’ uncertainty as quickly as possible.
Mr Jackson
My hon. Friend is, as I am, a vice-president of the Local Government Association. Does he agree that there is probably a case to be made for introducing a regional aspect to non-domestic or business rates? The potential difficulties in Greater London and the south-east are not replicated throughout the rest of the country, where bills are being reduced. That speaks to a need to look at London as a unique entity.
Bob Blackman
As we move forward, and before we get to 100% devolution of business rates across the country, we must resolve the conundrums that have arisen in relation to business rates. Equally, we have to recognise that business rates raise in the order of £25 billion a year as a tax, so changing its basis could be extremely cumbersome and might lead to hikes for some businesses, which would not be welcome, as well as reductions for others. We should look at that in the round and make sure, following the consultation that we are going to embark on, that the new policy works for all businesses and business people.
On education, the funding for the 500 free schools, including the new free schools, will be extremely welcome. Certainly in my constituency and across my borough, the reality is that we need an additional four new schools immediately. We have expanded every single primary school to its capacity and built on every piece of land available to provide new school places—all with Government funding, allocated under the coalition Government, which was extremely welcome—but we still need additional schools. I am delighted that a new faith school will be opening soon in my constituency, which will be the first state-sponsored all-through faith school in the country for the Hindu community. We will still need additional schools, however.
I have real concern about the principles of the fairer funding formula. The reality is that if the money coming into the formula is flat, then when some people are gaining, others will be losing. The current estimate is that 75% of the schools in my constituency will have not just a reduction in real terms, but a real cash-terms reduction in the funding available to them per pupil. They cannot increase the number of pupils, because the schools are full, so the only alternative is to cut staff and implement a worse service for the children in my constituency. I place it on the record right now that that is unacceptable.
I welcome the investment being made in skills and vocational studies. For far too long, academic skills have been recognised and applauded in this country, while vocational skills have not received the investment they deserve. I welcome what the Chancellor is doing to make that happen, using the funding to drive forward such a process, which must be the right way to encourage young people to develop their skills. If they have academic capabilities, that is wonderful, but if they have vocational skills, we desperately need them in the construction industry, our services industries and right across the board. This is one of the areas in which, for far too long, we have not had such investment, so I welcome the change that is taking place.
I also welcome the new deal on London devolution. I note that the Labour Mayor of London has welcomed the Chancellor’s decision to devolve such money. I have not heard that from Labour Front Benchers, but there is clearly always a disconnect between the Labour Mayor of London and his own Front Benchers in this House. We warmly welcome such a devolution. Local authorities in London, as well as in other parts of the country, will keep their business rates and have the opportunity to make local decisions for local people.
There is, however, a gap in that the Chancellor did not talk about the funding needed to replace the EU regional funding schemes. The schemes have been used for particular purposes right across the country. We clearly do not need to make such a decision now, but the Chancellor must consider this in the future, because these funds are vital right across our regions.
I welcome the provisions on alcohol duty in the main, but it would have been sensible for the Chancellor to maintain the policy of not increasing beer duty. [Interruption.] I am sure that is warmly welcomed among Conservative Members, and I declare an interest in that it is my favourite drink. The cuts in beer duty in previous Budgets have been an appropriate way to encourage people to drink lower-strength beers rather than higher-strength alcohols, which is important.
On tobacco duty, which is significant, I welcome the changes that the Chancellor has made, but I think he could have gone further. If he and my hon. Friend the Economic Secretary want to increase duties on something, let us increase them on tobacco. The fact is that there is a straightforward translation: the less people smoke, the less demand they will make on the national health service.
Adam Afriyie
My hon. Friend is making a very powerful speech, and I agree wholeheartedly with him on tobacco duty. In fact, I would go further and urge the Chancellor, as well as everyone in the House, not only to increase the duty on cigarettes significantly, but, conversely, to ensure that vaping and heat-not-burn devices get a better hearing, because switching to such devices will actually save lives and improve the health of so many millions of people.
Bob Blackman
Quite clearly, anything we can do to encourage people to give up smoking has to be good for their health and for the national health service overall.
Mr Jackson
Before my hon. Friend moves on from vices, does he agree that the Red Book shows that there is only a commitment to consult on white cider and other high-strength ciders? Given the argument that they cause disproportionate harm—with policing, health and so on—is there a case for increasing the duties on such high-strength alcoholic products?
Bob Blackman
The position is quite clear. In particular, I want the Treasury to look at the differential duties on licensed premises compared with those involving off-sales, because such an approach could make a quite massive difference.
My one concern about what is proposed for tobacco duty is the possibility of driving individuals away from normal standard cigarettes to hand-rolled tobacco. Young people might be encouraged to switch to hand-rolled tobacco, which is even more harmful to their health than smoking cigarettes. The duty on hand-rolled tobacco should be looked at, so that we can discourage that.
I was disappointed—my hon. Friend the Economic Secretary will know what I am about to say—not to see further compensation for the victims of the Equitable Life scandal. The Treasury believes that the scheme is closed. It is quite clearly closed to new applicants, but there is still the burning injustice that people who saved for their future and their future pensions have not received the full compensation due to them. I am very proud to say that the Government allocated funding in early 2010, which has helped to compensate some of the victims of the scandal, but a total of £2.8 billion or £2.5 billion—it depends which figures one looks at—is still owed to the victims of the scandal. Those individuals are getting older and more vulnerable, and if we give them any money, it will go straight into the economy because they desperately need it for their old age.
I hope my hon. Friend will look at that again in the round. I understand how difficult it is to balance the books, particularly at the moment, but this is clearly a debt of honour. As the economy recovers, we should look at increasing the compensation, not saying to individuals, “That’s it. That’s all you’re going to get.” If we do that, we will suffer the consequence of people’s mistrust.
The housing White Paper has demonstrated large elements of what we need to do to increase the volume of housing. There was a great deal of comment in the autumn statement on funds for housing, but there was no mention of that, or of the further measures we need to undertake, in the Budget yesterday.
As you will know, Madam Deputy Speaker, my private Member’s Bill is progressing through Parliament. It is in the other place at the moment and, I hope, will become law very soon. It aims to reduce homelessness in this country, but the most important impact we can have on homelessness is to build more homes. I trust that the Economic Secretary will consider measures to encourage local authorities, housing associations and private builders to build low-cost housing that is relatively easily affordable for the people of this country, so that we can combat homelessness once and for all in our civilised society.
The Budget must be looked at in the round. I have been critical of certain areas. It is our duty as Back Benchers to be critical friends of our Front Benchers to make sure that they keep abreast of what is going on, particularly when the Opposition do not seem able to critique the Budget. I welcome the overall thrust of the Budget and trust that we can look at ameliorating some of the areas I have mentioned. I commend it to the House.
Kerry McCarthy (Bristol East) (Lab)
I did not agree with everything the hon. Member for Harrow East (Bob Blackman) said, but he did make some very thoughtful points. I hope that the Economic Secretary was paying more attention than he appeared to be and has taken them on board.
I was disappointed by the lack of ambition in yesterday’s Budget. I suppose that we should take some consolation from the Chancellor’s acknowledgement that the Government still have a lot of work to do. Perhaps when we have the combined autumn statement and Budget we will see more ambition from him.
The Chancellor talked about improving productivity and ensuring that young people have the skills they need. I agree with that. He identified some of the challenges, but he singularly failed to address Brexit—the elephant in the room that is in danger of trampling everything else underfoot.
The Budget failed to offer any comfort for Bristol in terms of city governance or for my constituents. Bristol is a prosperous city with thriving industries. It is the only city outside London that makes a positive contribution to GDP. That sometimes means that we are seen as having everything sorted and having everything going for us, but not everyone in the city is able to share in its success. Our mayor, Marvin Rees, is working to make Bristol a more equal city and to share the prosperity beyond the wealthy and the recently gentrified parts of the city, so that it works for people who have lived in Bristol all their lives, as well as for people who have been attracted to move there because it is such a thriving place. I fear that yesterday’s Budget made his task that bit more difficult.
According to the Children’s Society, more than 5,000 children were living in poverty in my constituency of Bristol East last year. The Chancellor spoke yesterday of the “dignity of work”, but the majority of those children are in working families. The issue of in-work poverty has been raised frequently in this House and needs to be tackled. It is not enough simply to suggest that moving people into work from welfare is the only solution. Universal credit cuts will only make the situation worse.
There was nothing yesterday in response to the Resolution Foundation’s warning that incomes will rise for high-income households, stagnate for the middle and fall at the bottom. In my constituency of Bristol East, there are very few who fall into the high income category, but very many who fall into the middle or the bottom and who will not benefit. The Resolution Foundation said that the result will be
“the biggest rise in inequality since the late 1980s.”
I do not know how the Chancellor can lecture low-paid workers about the dignity of work, when he is watching their living standards fall.
The Chancellor is increasing the taxes of self-employed workers, despite the fact that they earn half as much as employees and have fewer rights. I grew up with a stepfather who was a self-employed demolition contractor. My sisters took over his business when he died. He was not quite a white van man—he had a lorry instead—but in all other respects he fitted that definition, as did virtually all the family friends who came round our house. They were all builders, electricians, plumbers or window cleaners. They did pretty well for themselves, but they did it by working incredibly hard.
My dad did not take a day off sick, not least because he would not have earned any money if he had done so. When we went on family holidays, he had to calculate not only the cost of taking a family of eight abroad, which was pretty extortionate, but how much he would lose in earnings and whether he would have to pay other people to keep his salvage yard open. Three of my five sisters are now self-employed. I know how they have to grapple with the fluctuations in income. It is not easy to plan, because they do not know from one moment to the next when the money will come in. They have additional burdens.
According to the FSB, 6,500 self-employed people in my constituency have to make the same calculations. They will now have the added responsibility of extra national insurance contributions, without the security of employment. I had an email from a constituent today, who wrote on behalf of her son who is a construction worker. She pointed out that he has to buy his own tools, his own work safety gear and his third-party liability insurance. He has to have something called a CSCS card and has to pay to travel to jobs. Quite often at the end of one job, there is a break when he does not know whether another job is in the pipeline. Clearly, some of that is tax deductible, but not all of it is. We have to acknowledge that self-employed people are not the same as employed workers, with the security that they have.
Stephen Doughty
My hon. Friend is making an excellent point. I, too, know many people in self-employment in the types of jobs she is talking about, including among my family and friends back home in Wales. She mentions insurance. Is it not the case that people find it difficult to get insurance against loss of earnings, as well as insurance for high-priced items such as tools? The Government have not dealt with all those additional costs that come with self-employment in this Budget.
Kerry McCarthy
As I said, we have to acknowledge that the self-employed are in a very different situation from people who have an employer who takes care of all their needs. The Chancellor has singularly failed to recognise that. He seems to be blaming the self-employed for not reading the non-existent small print in the Conservative manifesto. He cannot get away with saying that this is not a broken promise, given what the Conservatives said in 2015.
Seema Malhotra
My hon. Friend makes a point about her family. My father was self-employed when I grew up, also in a family of eight. I was in a similar situation. We never had a holiday when we grew up. Our summer holiday was a daytrip to the seaside with food that we took for ourselves. That is the reality of the struggle it can be to make ends meet when people take that risk. Does she agree that this added pressure, when there are already pressures on family budgets, could be what turns those who are just about managing into those who are no longer managing?
Kerry McCarthy
I very much agree with my hon. Friend and recognise the points she makes about the family she grew up in.
Surely we want to encourage more people to become entrepreneurs—to strike out on their own and create the thriving businesses of the future. Some of our most successful entrepreneurs started out as self-employed, then set up small and medium-sized enterprises, and went on from there. I think that this short-sighted tax grab by the Chancellor will deter people from doing that.
Bob Stewart (Beckenham) (Con)
Forgive me for not being here earlier, Madam Deputy Speaker. I thank the hon. Lady for letting me intervene on her. As I understand it, this measure will be tapered, so someone who is earning below £16,250 a year will be better off. It is only as people get to the top end of earnings that it will apply. Moreover, it will not come in until the summer, when we look at the national insurance Bill.
Kerry McCarthy
As the Bill goes through Parliament, we will have to scrutinise the detail. All I know at the moment is that I have constituents who are extremely worried about this proposal and it is making them think twice about whether they should continue as self-employed or look for jobs that are potentially less lucrative, but that have more security.
Peter Dowd
Does my hon. Friend agree that if the Government get away with this proposal, it will be a down payment on more NIC and tax increases?
Kerry McCarthy
That is certainly the concern. As has been said by several hon. Members, if people cannot trust the Government on this matter, they will think that they cannot trust the Government on anything in respect of their future economic security.
Mr Jackson
The hon. Lady is making typically lucid points, but is it not incumbent on her party, given that there is a broad consensus that we need to fund social care better—the Chancellor announced an extra £2 billion —to identify where that money would come from? If she does not want it to be raised through national insurance contributions, where else will it come from?
Kerry McCarthy
That leads me very nicely on to my next point, which is that the Chancellor claims the Government have no choice but to raise national insurance contributions. However, he has somehow managed to find £70 billion in tax cuts for the rich and for corporations, including £1 billion for the Government’s pet concern, inheritance tax. I pay tribute to my hon. Friend the Member for Leeds West (Rachel Reeves) for her work on this. From next month, the inheritance tax threshold for a couple will start to rise from the current £650,000 to £1 million. Over the past two years in my Bristol East constituency just 17 homes sold for more than £650,000, and not all of them would have been subject to inheritance tax. My constituents are paying the price for a tax cut that will benefit only 0.04% of the people, many of whom live in the far more affluent constituencies of Cabinet Ministers.
The Chancellor also managed to find funding for the Prime Minister’s grammar school project, despite a dearth of evidence to support the policy. It baffles me why he thinks this is more important than helping the schools we have at the moment, which face a £3 billion shortfall. What good will new grammar schools do for children and teachers at Bristol Met, where half of all pupils are on free school meals but their funding is being cut by 21%, or at Begbrook Primary, which has seen a 16% cut in per pupil funding between 2013-14 and 2019-20? West Town Lane academy has seen a 16% cut and Waycroft academy a 14% cut. I could go on. The Government’s chaotic approach to children’s education is emblematic of a Budget incapable of joined-up thinking or long-term planning. The funding is there when the Government want it to be, but not when people need it to be.
The Government seem incapable of looking beyond the short term and of recognising that cuts have consequences. Ministers are denying 18 to 21-year-olds housing benefit, but if just 140 young people are pushed on to the streets the policy will cost the Government more than it saves. Centrepoint estimates that about 9,000 young people will be put at risk of homelessness by the policy. That is not just short-sighted; it is—if you will permit me to say so, Madam Deputy Speaker—gross stupidity on the part of the Government. It is too high a cost for the sake of making very short-term savings.
I referred to the success of Bristol as a city, but that success comes at the price of a booming housing market that means homes are increasingly out of reach for Bristolians. On average, tenants are having to spend 64% of their disposable income on rent. Our Mayor has created a multi-disciplinary housing delivery team and a city office that has been working hard to try to get more affordable housing built and to find temporary beds for the homeless. They will not be helped by cuts to housing benefit and Ministers’ preoccupation with £1 million houses. I urge the Government to consider our Mayor’s request for the power and support necessary to tackle the housing crisis. It is not enough just to devolve the responsibility; the resources and the money have to go with that if he is to do what he is being asked to do.
On housing, just as on social care, public health, funding cuts and tax increases, the Government’s instinct is to pass the buck to local authorities. Bristol’s funding has fallen by £170 million over the past six years. Over the next five years, we face a £104 million funding gap as costs rise. The further 30% cut to the Department for Communities and Local Government’s budget suggests Ministers are oblivious to the difficult decisions councils are having to make. There is no recognition of the long-term costs of neglecting our infrastructure and key services. A temporary sticking plaster next year will not rescue our social care system or relieve the burden on council services.
The situation will only get worse with Brexit. Bristol City Council received £22 million of EU funding in the 10 years to 2015. The city’s two universities receive over £20 million a year from EU sources. I pay tribute to all the work my hon. Friend the Member for Bristol West (Thangam Debbonaire) is doing with universities on Brexit. The European Investment Bank facilitated initiatives such as Bristol Energy, the council’s energy company. Two thirds of exports from Bristol, Exeter and Plymouth go to the EU, which is far higher than the average for UK cities.
The Chancellor claimed there would be no complacency, but neither is there any strategy. The Government have no clue about what will replace that EU investment or how to guarantee our exports market. Blithely pretending everything will be fine and dandy is not a legitimate plan. Ministers are rushing headlong into a hard Brexit and abandoning the single market, ignoring how trade with the EU is a major driving force for our economy. Turning us into a bargain basement tax haven may be what some Ministers have always wanted, but it is not what Bristol or the country needs.
The Chancellor boasted of infrastructure projects, but my constituents are fed up with broken promises and bad management. We have endured disruption because of the electrification of the Great Western line and the taxpayer has had to cope with the spiralling cost. Now the programme has been delayed indefinitely—at a cost of £330 million. The people of Bristol do not know if they will ever see the benefit, but we have already paid the price.
Time and again, Ministers do not bother to consider the bigger picture. Environmental regulation, for example, is dismissed as red tape. I have given up hoping that some Conservative Members will see the environmental necessity of so-called green crap—apologies again, Madam Deputy Speaker—but I had hoped that some would see the economic potential. The Government have chosen not to engage, or to take a very half-hearted approach, with the EU’s circular economy work, despite its potential to create half a million jobs and support a genuinely forward-thinking industrial strategy that is fit for the future. The Chancellor promised us skilled jobs and meaningful training, so I hope he will go back to his colleagues at the Department for Environment, Food and Rural Affairs and look at how a genuine focus on the green economy can support that and ensure Britain really is world-leading. That would reassure me and my constituents that the Government are capable of working with cities like Bristol to help everyone to achieve their full potential.
Wes Streeting (Ilford North) (Lab)
It is a pleasure to follow my hon. Friend the Member for Bristol East (Kerry McCarthy). Given the remarks I am about to make I should declare that I am still an elected councillor in the London Borough of Redbridge, and, as seems to be the case with many other hon. Members in the Chamber, I am an honorary vice-president of the Local Government Association. Perhaps we should declare if we are not honorary vice-presidents of the LGA. I should also say that I am sorry I was not able to be here at the beginning to hear all of the speeches made by the shadow Chancellor and the Secretary of State for Business. Unfortunately, I had to attend an extraordinary meeting of the Treasury Committee. I am grateful to you, Madam Deputy Speaker, and to your predecessors in the Chair, for indulging me.
Yesterday we learned that the Chancellor has a sense of humour, but by the time he sat down my constituents and the country at large had very little to laugh about. In fact, I would wager that the Chancellor himself was not laughing when he read this morning’s newspapers. It is striking that there have been more Opposition Members than Government Members speaking in the Budget debate this afternoon. Presumably, this is because so few Tory MPs are willing to turn up to defend the Chancellor’s Budget: a Budget balanced on the backs of the self-employed; a Budget that failed to address the big challenges facing our schools and hospitals; and a Budget that failed to prepare Britain for Brexit.
This was a Budget that was bad for business: the high street business clobbered by a rise in business rates; the small businesses burdened by quarterly reporting to HMRC, even where they are not liable for VAT; and the self-employed saddled with higher national insurance, even where they earn as little as £16,250 a year. These are the people I was sent to Parliament to represent: the shopkeepers in Barkingside, Woodford, Hainault and Gants Hill who kept their businesses going even as other shops on the high streets were boarded up during the recession; and those who were brave enough to take the plunge and start a business even as the high street was still plagued by recession. I was sent to represent the family businesses wondering whether they will be able to pass on their firms to the next generation, because times are increasingly tough and they worry about the long-term future of the family trade; and the self-employed, who take the risk by taking the plunge and going it alone, taking an idea and turning it into a profit. This was a Budget that hit the traditional economy of the high street and the gig economy of the entrepreneurs. It was good for accountants and bad for small businesses. No wonder that, this morning, so many people woke to read the papers asking why on earth a Tory Chancellor would want to attack enterprise, entrepreneurialism and aspiration.
The Chancellor has said that this is an issue of fairness. Policy wonks in the Treasury and elsewhere in the world of think-tanks will argue that a class 4 national insurance increase is progressive. That is a powerful reminder of what happens when people who understand spreadsheets fail to understand the real economy.
The National Careers Service website suggests that London taxi drivers can earn between £14,000 and £20,000 a year. In a good year, if they are willing to put in excessive hours working the streets, as they often do these days, they may earn slightly more. A triple whammy of rising costs, increased congestion and unfair competition has driven down their wages. Is it progressive to ask taxi drivers, who are already struggling to pay the bills, to pay an extra £240 a year in national insurance? Is it progressive to ask the young tech entrepreneur starting out to find an extra £20, £30 or £45 a month in their early careers? Is it fair to ask people who receive no holiday pay, and who have little job security and the everyday pressures to bring home the bacon, to pay more to the Chancellor when it is small change for him and a big deal for them?
Jeremy Quin (Horsham) (Con)
Does the hon. Gentleman welcome, as I do, the improvement in the pension scenario for the people about whom he is speaking, which is worth about £1,800 a year, and which if bought could be worth about £50,000? It is not all one way.
Wes Streeting
There have been improvements at the margins, but that does not compensate for the loss of earnings that those on low to medium incomes will feel as a result of the decision taken by the Chancellor in the Budget.
Stephen Doughty
I wholeheartedly endorse my hon. Friend’s point about taxi drivers. I commend him for his work with the all-party parliamentary group on taxis and for standing up for his constituents. I have had similar experiences speaking to taxi drivers in my constituency. Does he agree that the problem is not only the costs he mentioned, but additional charges—they are often subject to differences in regulation—and the rise in the price at the pump?
Wes Streeting
I wholeheartedly agree with my hon. Friend. It is not just taxi drivers. More than 10,000 people in my constituency are self-employed. As my hon. Friend the Member for Bristol East rightly pointed out, those people do a range of trades with a range of challenges and additional costs, and very few employment rights and protections. Why have they been targeted by the Chancellor in this Budget?
While I am asking about priorities, why can a Tory Chancellor always find tax giveaways such as the cut to inheritance tax for the 26,000 wealthiest estates in the country, at the expense of the strivers, the makers, the builders and the creators, who account for Britain’s 5 million self-employed people?
Mr Jackson
While we are asking questions, is the hon. Gentleman embarrassed about the fact that a Conservative Government have brought about a situation in which 1% of taxpayers fund 27% of tax revenues? At the same time, £140 billion in uncollected taxes that the Labour Government did nothing about have been collected in the past seven years to fund our public services.
Mr Streeter
We are one of the richest economies in the world. The distributional analysis published alongside the Budget by the Treasury is embarrassing. The picture that plays out across this Parliament as a result of the tax, spending and welfare decisions made by the Chancellor and his predecessors is very clear. The poorest households and, on an unprogressive gradient, those from lower income households, are absolutely clobbered by this Government.
Only the very richest decile are worse affected than the very worst paid and the least well-off. Someone who is paying the very highest rate of tax will pay more than the very poorest as a percentage of their income, but for some of those people, a tax increase of thousands of pounds a year is relatively small change compared with a £20, £40 or £50 increase for the very poorest. What would be marginal increases for hon. Members are huge for people who are just about managing to pay the bills or, more likely, people who are among the millions turning to credit cards and fuelling a record boom in unsecured household debt. That is what Tory Chancellors always fail to understand. They have no understanding and no conception of what it is like to go without, or of having to cut corners between either heating or eating. That is why, for the past seven years of Tory Budgets, those are the people who have been most left behind.
Norman Lamb
Did the hon. Gentleman pick up the comments of Charlie Bean, formerly of the Bank of England and now of the Office for Budget Responsibility, who said that consumer spending is unsustainable and based on record debt that is going back to the levels we saw before the crash?
Wes Streeting
The right hon. Gentleman makes a powerful and important point. Unless we get to grips with that, not only will those people suffer as they fall below the line and can no longer keep their heads above water, but the economy itself will suffer. Even the sluggish growth over which the Government have presided since they took office has been driven by an increase in household debt. What happens to those families, and what happens to the economy, when the money dries up—when there can be no more lending, or when families can no longer service their debt? Of course, it is not just national insurance or, indeed, income tax that the poorest pay. Other forms of taxation have a disproportionate and regrettable impact on them: VAT, council tax, and other unprogressive tax measures are causing them to become the very worst off.
If that were not bad enough in itself, it was explicitly ruled out in the Conservative manifesto, not just once but four times. It is a bit rich for the Chancellor to come to the House and talk about the small print produced by companies, and for his Ministers to tidy up the mess the next day at the Dispatch Box by talking about the small print in the National Insurance Contributions Bill. This is a broken promise, plain and simple. Not only was it in the manifesto; it was a central line of Tory attack. The Tories were wrong to warn at the last election that a Labour Government would somehow cause chaos and instability. Look at the mess they are presiding over now, and look at what they have done to the country in the short time since that election!
Mike Gapes (Ilford South) (Lab/Co-op)
My hon. Friend has referred to the Conservative manifesto. That was the same manifesto that committed the Government to staying in the single market. The lesson, surely, is that Conservative manifestos are worth nothing, not even the paper they are written on.
Wes Streeting
I am grateful to my hon. Friend and parliamentary neighbour for making that point. He will be pleased to know that I shall return shortly to the issue of Europe and the future of our economy.
Wes Streeting
I shall return to the subject of Europe, and the hon. Gentleman may want to intervene later. I am conscious that other Members are waiting to speak. There are still a number of them on the Labour Benches, even if there are none on the other side of the House.
This is a case of all pain and no gain. If it were not bad enough that the Conservative Chancellor arrived yesterday to clobber the self-employed, he is also failing to put right the public services on which people depend. We were told that the crisis in the NHS and social care required an additional £6 billion by 2019. While the £2 billion announced yesterday may be welcome, it is wholly insufficient to meet the demands of our rising population, our ageing population, and the people who want to be able to rely on the NHS and social care when they need it most.
Having been a local councillor for nearly seven years—I will stand down next year—I have to say that the situation facing local authorities is dire. When faced with a choice between child protection and adult social care, councils will of course prioritise keeping children safe, along with keeping the elderly and disabled alive and well. However, such choices have consequences: increased council tax for people who can ill afford it, and cuts that affect the services on which people rely and for which they pay their council tax. I only wish that the Government would have the courage to accept, 75 years on from the Beveridge report, that the model for health and social care in this country is no longer fit for purpose and no longer sustainable unless it receives the funding that is so badly needed. I cannot understand why Ministers have not had the courage to ask Members on both sides of the House to help the Government come up with a plan to make the NHS sustainable for the 21st century.
Peter Dowd
Was my hon. Friend as shocked as I was to find that it was being trailed today by the Government that unless Tory MPs backed down, social care funding would be under threat?
Wes Streeting
I entirely agree. I am not sure how many experienced, wise leaders of the NHS and local councils could come forward and warn the Government about not just an impending crisis, but a crisis that is affecting hospitals and care services in each of our constituencies today. What more will it take for the Government to show the courage, and find the money, to fund social care? Imagine what a cross-party commission led by the likes of my hon. Friend the Member for Leicester West (Liz Kendall), the right hon. Member for North Norfolk (Norman Lamb) or the hon. Member for Totnes (Dr Wollaston) could do to build a health and social care model for the 21st century.
Was it not a travesty that, as schools in our constituencies faced cuts in their budgets, the Chancellor chose to arrive yesterday with a funding package that would benefit a small number of pupils at a few selective schools? What do Ministers have to say to headteachers and parents in my constituency, or to the pupils who attend the vast majority of schools in my constituency, about the fact that they face on average a funding cut of £188 per pupil per year? I do not need an opinion poll to tell me that there are a few things that people, whether they vote Labour or Conservative, expect the Government to do, and among them are to make sure that we have decent hospitals and well-funded schools. It is a scandal that so much of the educational progress made in my city and across the country, led by the last Labour Government and following on since then, is being put at risk because of swingeing budget cuts to schools. What sort of Government choose to cut education for the next generation while also cutting the tax bill for the very wealthiest?
The flimsiness of the Budget Red Book—for once it did not take long to get through—betrays the fragility of our economy. In the long list of supposed good news the Chancellor arrived with yesterday, a few facts were missing. This was the ninth Budget by a Conservative Chancellor since 2010, and what do we have to show for it? We have the only developed economy that has a growing economy but falling real wages; rising costs of living, but wages still at pre-crash levels; a widening productivity gap holding back growth and depressing wages; a weaker currency fuelling inflation that households and businesses can ill afford; a failure to meet the Tories’ own targets for debt and deficit reduction because they have never understood the need to balance spending cuts with investment for growth; and a failure to meet their own welfare cap because of their failure to tackle unemployment, under-employment, casualisation of the labour market and exploitation by unscrupulous employers, which leaves a welfare system that lacks the confidence of the majority of the public but also fails the people who need it most. That is the very worst of all worlds, and even now, in the wake of a Brexit vote driven in large part by the votes of people who have been left behind, we have a Government willing to preside over rising child poverty, public services at breaking point, and an economy ill equipped for the challenges that lie ahead.
It should not take dragging a former—Conservative—Prime Minister out of retirement to tell this Government that the way they are handling the single biggest issue facing our country, the departure from the EU, and the path they have set us on is putting the economy at risk. What John Major said was very straightforward:
“There is a choice to be made, a price to be paid; we cannot move to a radical enterprise economy without moving away from a welfare state. Such a direction of policy, once understood by the public, would never command support. It would make all previous rows over social policy seem a minor distraction.”
Sir John Major could have been reading from the Labour party script on this issue. There we have it: a former Conservative Prime Minister holding up the truth that we on the Labour Benches know, which is that unless the Government negotiate a smooth and sensible exit from the EU, they will consign this country to being a small tax haven off the north-west coast of Europe, unable to meet the needs of their people and unable to make sure that prosperity is shared.
Of course, it is not just John Major who has concerns: the former Chancellor, the right hon. Member for Tatton (Mr Osborne), told the House that this Government have chosen not to make the economy the priority. When so much of this country’s economic success relies on trade abroad, when we have the largest single market in the world on our doorstep, and when being a member of the customs union gives us access to more trade agreements than are enjoyed by any leading economy in the world, for a Government to decide not to make the economy the priority is reckless and irresponsible.
Mike Gapes
My hon. Friend is making a very powerful speech. He mentioned the former Chancellor’s remarks, and the Government’s position is clearly that immigration is the priority. The Government’s target of a reduction to 100,000 seems a bit strange, however, given that the forecasts in the Red Book are based on the assumption that 185,000 migrants will come into this country in 2021; that is the Office for Budget Responsibility statistic on which the forecasts are based. How can the Government reconcile the 100,000 and the 185,000 figures, and surely the economy will be in a worse position based on those facts?
Wes Streeting
I agree with my hon. Friend. I have lost count of the number of times I have heard calls for a real debate on immigration, but a real debate requires an argument. There are undoubtedly real sensitivities and concerns about immigration in communities across the country, not least when people feel that their own wages have been depressed because employers are able to bring in cheaper labour from abroad to undercut the pay, terms and conditions of local workers. For me, that is an issue of social injustice that Governments need to tackle. However, we have an ageing population and a shrinking working-age population, and we can barely afford the pensions bill. We need a greater working-age population to come to this country, do their work and pay their taxes. Any politician who says that immigration is a price that this country cannot afford must also come to the House and tell us how they plan to pay for the public services on which every citizen in this country relies.
We must grasp the reality of the immigration debate. If we continue to fail to address the genuine and well-founded concerns about immigration while pandering to the myths about it, we will set this country on a course that will make us poorer, and that would be the worst possible response to the EU referendum. If people went to the ballot box and voted to leave the European Union because they felt left behind by globalisation in a world that was changing around them, imagine the betrayal they would feel if, having been sold the promise of a brighter future, they found that jobs were drying up, the economy had been left behind and the public services on which they relied were being decimated. That is the real risk of a botched Brexit.
In the context of a rapidly changing global economy in which jobs are changing, huge digitalisation is taking place and a new industrial revolution is sweeping the country at a pace and scale that we have never seen before, the purpose of the Labour party has never been more relevant or more urgently needed. More than 100 years ago, the party was founded to champion the interests of labour over the interests of capital. In a future of deregulation and a loss of jobs because they no longer exist in huge sectors of the economy, it is the job of the Labour party to protect the interests of labour.
When we look at what this Budget does to the self-employed, the strivers and the people across the private sector who make up the backbone of the economy and at what it does to public services, and when we look at how the Government are botching Brexit, we can see that it is long past time for the Labour party to take this lot apart. People across the country are counting on us to be an effective Opposition and an alternative Government. That is the job that we must face up to, and we need to start doing it sooner rather than later.
Norman Lamb (North Norfolk) (LD)
Madam Deputy Speaker, I should like to make an apology straightaway. I alerted Mr Speaker earlier to the fact that I have a long-standing engagement at the University of East Anglia this evening, and I hope that it will be okay with the Front Benchers if I miss the end of the debate.
I agreed with an awful lot of what the hon. Member for Ilford North (Wes Streeting) said, other than his assertion that it was the role of the Labour party to confront the issues set out in the Budget. I shall focus on the aspects of the Budget that relate to social care and to the health service, and I want to make it clear that the £1 billion announced for social care for the next financial year is wholly inadequate to meet the needs of the social care system and the people who rely on it.
The Health Foundation has estimated that the gap in social care is in the region of £2 billion a year. That is partly due to the increase in the national minimum wage, which will cost the social care system about £900 million in the next financial year. That means that there will be no real-terms increase in the amount available to the system.
As the Care Quality Commission recently confirmed, the social care system is close to tipping point—that comes not from politicians, but from the regulator. Many providers are now considering whether to withdraw from this country’s publicly funded social care market, while other providers are at risk of going out of business. It is alarming that there is little investment, if any, in new social care facilities in the north of England because the finances simply do not stack up. The only parts of the country in which investment in new social care facilities makes sense is where providers can cross-subsidise from wealthy self-funders, who are paying for the provision of care to those who rely on the state.
We are witnessing an increasing and simply unacceptable divide across our country in the quality of social care. It is estimated that the care needs of more than a million older people are not being met, either wholly or in part, as a result of the reduction in the availability of publicly funded social care. That is disastrous for those people, but it is also stupid, because it inevitably means that in the next financial year—from April—more older people will end up in hospital unnecessarily because there is no care package available to keep them in good health at home. More people in hospital unnecessarily means more pressure on the NHS. We have seen considerable increases in the income of acute NHS hospitals over the past five or six years, but demand has increased even more due to the inadequacies of the social care system. We are lurching from one crisis to another, and there must be a better approach.
The Government say that there will be a Green Paper to address the funding of social care, but it was in 1999 that the previous Labour Government set up a royal commission to look into social care, so the issue has been pushed into the long grass for far too long. The coalition Government actually went out and sought the advice of a leading expert, Andrew Dilnot. We consulted on his advice, and then implemented through the Care Act 2014 a cap on care costs, which would have introduced greater fairness into the funding of social care. The Conservative party’s manifesto contained a commitment to introduce a cap on care costs, but it abandoned that commitment within weeks of its re-election, just as it is now abandoning the commitment not to increase tax. The Government said that the cap would be delayed until 2020, but no one believes that it will be introduced then and it has quite clearly been abandoned. A Green Paper—a discussion document—is not what is needed; we need a greater sense of urgency.
We were told about a £325 million boost for capital spending in the NHS, but capital spending has been cut in this financial year by £1.2 billion, which has been raided to fund the clearing of deficits. However, we were told that only between six and 10 pioneer sustainability and transformation plan areas will benefit from that £325 million, meaning that the rest of the country will see no increase at all in capital investment. The Health Service Journal indicates that there is likely to be another raid on capital budgets in the next financial year, making the situation even worse for the rest of the country. During the referendum campaign, those advocating Brexit argued that leaving would give this country £350 million a week to spend on the NHS. Instead of £350 million a week, the Budget offers this country £2.7 million a week in capital funding—a wholly inadequate figure. Provider deficits across the country stood at £886 million at the end of quarter 3, after the injection of £1.8 billion to clear the deficits from last year. The Institute for Government confirmed today that 90% of hospitals in this country face deficits, which are now endemic across the system.
The Budget is inadequate for social care and disastrous for the NHS. There will be a 1% increase in NHS funding in 2017-18, but that compares with an increase in demand of about 4%. In the next financial year, there will be a reduction in real-terms spend per head in the NHS. Wherever we are on the political spectrum, this makes absolutely no sense at all. At a time when demand is rising rapidly, it is nonsensical to reduce spending per head on healthcare in this country, and it amounts to a reduction in the proportion of national income that we are choosing to spend on health and social care.
James Berry (Kingston and Surbiton) (Con)
The right hon. Gentleman brings a lot of experience from his time in office. Before the Budget, his party was advocating £2 billion of immediate spending on adult social care and £2 billion of immediate spending on the NHS. The sum of £4 billion is a lot of money. I have no doubt that he has arguments for why that amount is needed, but will he enlighten the House as to how the money would be raised?
Norman Lamb
Our spring conference is approaching and we will be coming up with proposals.
Norman Lamb
I would be delighted to invite the hon. Member for Kingston and Surbiton (James Berry) to our conference—I am sure that he would have a wonderful time. He will find out more about our proposals very soon but, to take up his challenge, I share his view that we have to be responsible by arguing how spending should be paid for. We intend to be fully responsible, and I hope that that reassures him.
I will focus for a moment on the consequences for ordinary people of the state of our NHS and care system. The right hon. Member for Leicester East (Keith Vaz) has talked a lot about support for people with long-term conditions, and the NHS now has to cope with a dramatic increase in the number of people living with long-term chronic conditions. The NHS estimates that the number of people living with three or more conditions will increase by 50% over 10 years. What we are now witnessing is completely unprecedented, but failure to meet their care needs will have disastrous consequences for many of those individuals.
In the past few weeks I have taken up the case of an adult in my constituency who suffers from attention deficit hyperactivity disorder. He has been referred by his GP to an adult ADHD clinic, so I wrote to the mental health trust to ask what the waiting time for his treatment is. I was told that the current waiting time in Norfolk is two years. What on earth is that individual supposed to do in the meantime? I am afraid that there is still complete inequality between access to mental health treatment and access to physical health treatment. There is discrimination at the heart of the NHS, and we will never address it with the current inadequate levels of funding.
A nine-year-old boy in my constituency has been referred for a possible diagnosis of autism. His family was told that the waiting time for that diagnosis is up to three years. I just assumed that something appalling was happening in Norfolk, but when I asked the National Autistic Society for more information, I was told that such waiting times are very much the case across the entire country. What are we doing to our children? We know that with early help we can make a massive difference to their life chances, yet we are telling them that they are supposed to wait two to three years for a diagnosis, let alone treatment. This is scandalous. We are letting down some of the most vulnerable people in our country. The really awful thing is that people who have money can circumvent these awful waiting times—they can get a diagnosis for autism, and they can get help for their son or daughter—yet people who do not have money are just left waiting. That is unjust and unacceptable, but it is happening in this country.
Wes Streeting
Not only is this a grave injustice to young people, but it is hugely costly to the taxpayer. If we fail young people in their formative years and fail to break down the barriers that prevent them from getting a good education, we pay more in the longer term in terms of unemployment, further mental ill health and the breakdown of social life later on.
Norman Lamb
I totally agree with the hon. Gentleman—this is an absolute false economy. We know that 75% of mental ill health starts before the age of 18. In the coalition’s final Budget, we secured £1.25 billion over a five-year period for children’s and young people’s mental health, yet a YoungMinds survey from just before Christmas shows that in 50% of clinical commissioning group areas, not all that money is getting through to be spent on children’s mental health because it is being diverted to other parts of the NHS that are under impossible strain. That is scandalous. It is outrageous that children with mental ill health are being let down in this way.
Bob Stewart
I have some experience of autism in my family, and I have always thought it does not take much to diagnose autism—it is not a costly affair and it can be done quickly—so I do not understand why there is a three-year waiting list, but perhaps the right hon. Gentleman has more experience than me on this.
Norman Lamb
I am grateful to the hon. Gentleman for that point. He rightly says that through better organisation, in part, we could help to sort out this problem. An 11-year-old girl in my constituency was referred to the mental health trust, but the mental health team is not trained in the diagnosis of autism and she has been referred to another trust to go on to a waiting list for diagnosis. That shows a hopeless silo mentality in the NHS. While this is in part about a failure to invest sufficiently in good diagnostic services, it is also about a failure of organisation.
Let me give further examples of the extent to which the system is now under impossible pressure. On delayed discharges, we had 197,100 delayed days this January, which is an increase of 23% on the previous January’s figure. The delays in mental health discharges are even worse, with the number of bed days lost through delayed discharges having increased by 56% in the year to October 2016. Ambulances have a target of responding to 75% of cases in which the person’s life is at risk within eight minutes, yet that target has been missed since May 2015—for 20 months. We all know that someone’s chances of surviving a stroke and avoiding long-term disability depend on their getting to a specialist unit within 60 minutes—the “golden hour”. In the past year, only 18% of stroke patients in my constituency got to the specialist unit within that golden hour. Again, that is a scandalous failure of a health system in this day and age. Some 85% of patients attending accident and emergency were seen within four hours in January, which is way below the standard national target of 95%. In cancer services, there is a target on starting treatment within 62 days of referral, but that is being missed in too many cases. Instead of 85% of patients starting treatment within this period, the figure has gone down to 79.7%.
All that leads to a concern that if someone, or their loved one, has suspected cancer, and they are worried about whether they are going to be seen on time and start their treatment on time, if they have money, they will choose to opt out of the waiting times by getting treatment privately. The debate about privatisation often takes us into a ridiculous cul-de-sac. The actual privatisation that is happening is that increasing numbers of people with money are choosing to opt out of long waiting times and are getting their treatment privately. I find that intolerable and insidious, because it means that people who have money will get access to treatment quickly and people who do not will be left waiting.
NHS England has established the sustainability and transformation plan process. The King’s Fund takes the view that without heroic assumptions about efficiency savings between now and 2020, each STP footprint is likely to be hundreds of millions of pounds short of the money required. STPs are a good and sensible process for bringing together health and social care, but they are sadly based on a fantasy, because insufficient resources are available.
From all the examples I have given, it seems to me that failures of care are becoming endemic throughout the system, in stark contrast to the Secretary of State for Health’s commitment to make the NHS the safest healthcare system in the world. It is impossible to achieve that, given the extent to which failures of care are becoming commonplace.
There is an alternative to this sense of a Government lurching from crisis to crisis and using sticking plasters to avert total collapse in the system. The approach the Government should take is to be prepared to work with others—as suggested by other Members, including the hon. Member for Ilford North—to come up with a long-term, sustainable settlement. The NHS and the care system were designed in the 1940s, when the needs of this country were wholly different from today. There is an overwhelming need for the whole approach to be refreshed.
I got together a group of Conservative, Labour and Liberal Democrat MPs to make the case to the Prime Minister for establishing an NHS and care convention to engage with the public and NHS and care staff, so that we can have a mature debate in this country about how we can achieve a sustainable, efficient and effective health and care system to meet the needs of our loved ones in their hour of need. The Prime Minister has met the group and sanctioned the start of a dialogue about our proposal. We are due to meet her health adviser, James Kent, and I welcome that, but the fact that the Government have announced a social care Green Paper, and will thereby continue the silo mentality of looking at one side of the divide or the other, leaves me with the sense that they do not appear to be wholly serious about engaging with our group on something that is absolutely necessary.
The truth is that partisan politics has failed to come up with a solution to the country’s health and care needs. That is in part because all the solutions are rather difficult. As the hon. Member for Kingston and Surbiton indicated, it probably involves us all being prepared to pay a bit more tax to ensure that we have a health and care system that we can rely on, and one that we can be confident will respond in our hour of need.
Bob Stewart
Is the right hon. Gentleman’s group of MPs from different parties looking at other models, such as how the Germans provide healthcare through their equivalent of the NHS via a combination of private and national means? It seems to me that we are going to have to consider that seriously if we are to get a really first-class national health service.
Norman Lamb
I thank the hon. Gentleman for that intervention. Interestingly, the Germans spend about a third more than us on their health and care system, and it is effective as a result. We all acknowledge that this is a difficult issue that involves acute politics, and there is an enormous risk of people just shouting at each other. Instead of that, our group has come together—I invite him to join us—to say that we should opt for a more rational approach and all agree that we should be bound into a process, perhaps lasting up to a year, of engaging with the public in the sort of debate that he raises. We have said, “Let’s have an open discussion about how to sustain the health and care system.” I want to ensure that what emerges from that is a system that is accessible to anyone in this country, irrespective of their ability to pay. That was the founding principle of the NHS, and it remains true to this day.
As well as advocating the case for parties to work together to resolve this intractable problem, my party, the Liberal Democrats, continues to develop its own ideas. Last autumn, I established an independent expert panel to look specifically at the case for a hypothecated NHS and care tax. I was fascinated that the leading Conservative thinker Lord Finkelstein advocated in yesterday’s Times exactly what I have proposed. It seems to me that there is growing interest in that sort of solution. If we had an OBR for health—a process of making an independent assessment of the health and care system’s funding needs over a given period—that informed the level of the dedicated health and care tax that people were expected to pay, and if that was shown in their pay packets, we could rebuild trust among the public and they would have confidence that the amount they were asked to pay was what was necessary.
It is interesting that the German system, with its social insurance premiums, has actually kept pace with demand better than our tax-funded system. Having a hypothecated tax to enable people to see exactly what was going into the health and care system would allow us to achieve the benefits of the German system but stay true to our idea of a tax-funded health and care system.
People are anxious and nervous about the Government misusing their hard-earned taxes, so having an independent assessment process would make an awful lot of sense. If the Government cannot rise to the challenge of reviewing a system that was designed in the 1940s, when needs were wholly different, we in this Parliament, collectively, will badly let down the people of this country. We are the sixth largest economy in the world, yet our health and care system is on its knees and is too often dysfunctional. We are capable of better than that.
People’s faith in the ability of politics to resolve the big challenges of our age has been undermined, and if the Government simply persist in going it alone without properly addressing this issue, they will increase people’s belief that they have a hidden agenda and want to run the NHS down in order to destroy it. My plea to the Government is this: do not allow that belief to grow; engage with us, have a mature discussion with the public and demonstrate a commitment to renewing that great institution, because the people of this country depend on us meeting this challenge.
Several hon. Members rose—
Madam Deputy Speaker (Mrs Eleanor Laing)
Order Believe it or not, although we started off with a lot of time for this debate, speeches tend to expand to fill the time available. Therefore, I now ask that colleagues—being honourable and decent to other colleagues—take no more than 12 minutes each. Twelve minutes is a very long time. I know that I can rely on Mr Keith Vaz, who can count and will know when 12 minutes have expired.
Keith Vaz (Leicester East) (Lab)
Thank you, Madam Deputy Speaker, for the endorsement that I can count; I am most grateful. It is a pleasure to follow the right hon. Member for North Norfolk (Norman Lamb), who is widely respected in the House as someone who knows a huge amount about social care and the health service. His project is, I think, welcomed by all parties. We do need an independent assessment of health spending.
The Times today contains a marvellous cartoon of the Chancellor dressed up as Marilyn Monroe, showing his NICs. I do not know whether Ms Monroe could sue for that cartoon, although she has been dead for some years. I want to take the debate away from national insurance contributions, which have dominated the discussion, to other areas. It is important to remember that the Budget is about funding the whole of Government, not just one aspect, although it is, of course, important to raise the money before spending it.
I begin with the Government’s international aid commitment, which was reiterated by the Prime Minister and confirmed by the Chancellor. I was pleased to note that 0.7% of gross national income for aid remains a strong commitment of this Government, even though less time in the Budget statement was spent on international development than the Chancellor spent praising his Parliamentary Private Secretary, the very worthy hon. Member for Salisbury (John Glen). The Chancellor went past the development commitment very quickly, and, rightly, lavished praised on the hon. Gentleman for all the work he has done. However, I shall talk about the importance of maintaining and increasing the aid budget, especially at a time when there is a great deal of media pressure and scrutiny over what we do with our aid. It is right that there should be that scrutiny, although some sections of the media have an obsession with challenging every single bit of expenditure as if it in some way undermines the important principle that our Government provide aid to countries in need.
In particular, I highlight the aid given by the Treasury to Yemen through the Department for International Development. We heard only today that there is now a famine warning in Yemen. Of the aid that we give in the overall DFID budget, £100 million has been committed to the people of Yemen. However, although contributions have been made at a local level, a lot of the money can sadly not be delivered because of the current situation. My message to Treasury Ministers is to keep up with the commitment to fund DFID and to ensure it delivers to countries in need, such as Yemen. The aid should not just sit in a bank, but actually be spent. Until there is a ceasefire in Yemen, we will not be able to spend that money and therefore will not be able to alleviate that poverty.
Stephen Doughty
I concur with my right hon. Friend’s comments about the importance of DFID’s work and the support that it is providing in Yemen. That work has been praised by the Select Committee on International Development, as he well knows. Does he share my concerns that while we are providing that aid, Amnesty International has today said that there is new evidence that the Saudi-led coalition is using cluster munitions?
Keith Vaz
My hon. Friend is an amazing campaigner on these matters and has worked hard on the Yemen issue. He is right to raise this point, which is part of the overall debate and discussion. We cannot get the aid through unless the bombing stops. We need the ceasefire so that the £100 million that has been committed is spent. I bumped into the Secretary of State for International Development in Central Lobby yesterday, and she said that she is focused on and committed to increasing the amount of aid to Yemen. I am grateful for that, but that aid cannot get through, as my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) says, unless the bombing stops.
Bob Stewart
The right hon. Gentleman and I have a great interest in Yemen, both of us having lived there. My concern is that if we do not keep the aid in the bank, it might end up on some quayside in some dodgy port, where we do not want it to be and where it can be rifled by the mafia. We have to find a balance when we talk about delivering aid, particularly to somewhere like Yemen, because although we may be able to put the aid into the country, there it will sit until someone steals it.
Keith Vaz
The hon. Gentleman has served in Yemen, so he knows how lovely that country is when it is fully functioning. He is absolutely right that the aid needs to get to the people who actually need it, if they are to avoid the famine that is coming their way very shortly.
The second point I want to make is about the midlands engine. We have heard a lot about Birmingham and the west midlands—I am sure that has nothing to do with the fact that there is an election for Mayor in the area—but the Government need to remember that there is more to the midlands than Birmingham and other parts of the west midlands. There is, of course, Leicester and the east midlands. There is also Sherwood, and I see the Government Whip, the hon. Member for Sherwood (Mark Spencer), sitting on the other side of the House. I received a letter from the Secretary of State for Communities and Local Government just now on my iPad, and Sherwood is not even mentioned—I hope the hon. Gentleman will make representations about that. If we talk about the midlands engine only in respect of Birmingham and the west midlands, we will lose out in terms of a part of the midlands that has been a driving force for business. There are huge amounts of talent, enterprise and expertise, and many small businesses, in places such as Leicester, so it is important that we spread the money evenly throughout the whole of the midlands.
Earlier, I mentioned that the Financial Secretary to the Treasury, who is sitting near the Dispatch Box, was my favourite diabetes Minister, and I pay tribute to all the work she did in the years she served in the Department of Health, along with the right hon. Member for North Norfolk. Last year’s Budget gave us the sugar tax, which was resisted by some in the Government. As a result of that tax, manufacturers are now changing their formulas to ensure, yes, that the tax yields less when it comes into effect, but also that our young people in particular will be able to eat products with less sugar in them.
The latest such product—commended by me in an early-day motion—is, of course, the breakfast cereal Honey Monster Puffs, whose sugar content has been reduced by 25%. Nestlé announced yesterday, just before the Budget, that it would reduce the sugar content of KitKats and other products by 10%. Those of us who frequently have to go to the Tea Room, and who are met by all the KitKats there—I am sure you are not seduced by those who run the Tea Room, Madam Deputy Speaker—will be pleased to know that we probably will not even taste the difference once 10% of the sugar is removed.
However, it remains the case that I would have liked to see more focus on prevention—prevention, prevention, prevention. If we spend money now, we will save money in the future. As we know, £10 billion was spent last year on dealing with diabetes and diabetes-related issues. Some 80% of complications are avoidable. The only people who appear to be benefiting from that expenditure are the drugs companies.
Only two weeks ago, on my way back from Yemen, I stopped in Doha. I was taken—the Financial Secretary will be fascinated by this, because she has always wanted to create something like it—to a wellness centre. It had not just a GP, a pharmacy, a podiatrist and an ophthalmologist, but a swimming pool and a gym. When people go to see their doctor and are diagnosed with diabetes, instead of having to have their Metformin, they are prescribed a session in the gym or, if they can swim—sadly, I cannot, but if I could, I would be prescribed one—a session in the swimming pool. That is how to deal with diabetes—through prevention expenditure. I would very much like to hear a commitment from the Minister that prevention will be at the top of the health agenda.
I was surprised that the Chancellor did not suggest an increase in Home Office funding, which faces two very difficult challenges. Last week, Her Majesty’s inspectorate of constabulary released a report on British policing, stating that it is in a “potentially perilous state” due to “dangerous” and “disturbing” practices. The report is pretty damning, but unfair in that it places the burden of blame on police forces themselves. They have sustained enormous cuts to their budgets over the past few years, with the result that we have 19,000 fewer police officers on our streets today. This, together with other cuts, means that the police cannot deliver on the kind of agenda that the Government, and certainly the Opposition, want them to deliver on. We are constantly told that crime is coming down. Well, it is, but the nature of crime has changed: it has gone from the high street into cyberspace. Hundreds of thousands of crimes are now being committed on the internet. Unless we give the police more money to fund training, we will not be able to deal with the crimes that will be inherent in our system over the next few years.
The second aspect of Home Office funding is that the Government will, in the end, have to give a guarantee about the right of EU citizens to remain in this country. Some 3.2 million people will have to be processed. Someone who has been here for five years has a right to remain and become a permanent citizen, but they still have to apply and to get their letter confirming it. The current waiting time is between four and seven months. People have to fill in a huge number of documents to confirm that they have been living in this country over the past five years and record every single absence. A unit needs to be set up in the Home Office, properly funded, to deal with the registration of EU citizens. Ministers may grimace at that prospect, but I am afraid that we are going to have to spend money to make sure that this happens.
We need to get the police funding formula in place. In Essex, Madam Deputy Speaker, which is run by your chief constable, Stephen Kavanagh, and in Leicestershire, which is run superbly by my chief constable, Simon Cole, we need a definitive statement on what the police funding formula is going to be. Without it, we simply do not know how much money is available at a local level to spend on local matters. It is therefore essential to make sure that this happens.
The great feature of the previous Chancellor’s Budgets was that he always had a surprise concerning culture. On the last occasion, he funded a commitment to Hull because it had become the city of culture. I hope that the Minister will look carefully at what can be done for Leicester. Given the incredible achievement of Leicester City football club in winning the English premier league and becoming the current holders of the premier league trophy, it would be nice to see some kind of commitment from the Government to cultural and sporting achievement. The previous Chancellor has done it before, and I hope that the Minister will consider doing something for Leicester in future.
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)
I think it is fair to comment that this Budget has not met with unalloyed joy and enthusiasm across the country and in the media. It may come as a surprise to the House that I am going to demonstrate a degree of enthusiasm for one piece of the Budget that I think is highly commendable.
I am, of course, talking about paragraph 5.10 on page 48 of the Red Book, in which the Chancellor commits himself to reducing the burden on small co-operatives. I am enthusiastic about it because I have been a lifelong supporter of co-operatives, but also, and very personally, because the proposal was in the ten-minute rule Bill that I introduced on 8 November. May I put on record my appreciation to the Economic Secretary to the Treasury, who is in his place, for discussing the implications of the proposal with me afterwards, and may I say how much I welcome and appreciate its incorporation into the Budget?
I gently remind the Economic Secretary that I made a couple of other recommendations in the same ten-minute rule Bill, which have yet to appear in the Budget. I hope that following further consultation I will be able to praise him in future Budget debates for implementing them as well. As a general point, I hope that this will set a precedent for the Government, and the Treasury in particular, listening to Opposition Members and implementing some of their recommendations. I am sure that doing so will benefit future Budgets greatly.
The second thing I want to do—again, I am not being totally critical of the Government—is to put on record my appreciation for the report on the so-called midlands engine, which has been published today. Not only does it recognise the role of the west midlands in the national economy—and our phenomenal, high-quality manufacturing base, which is driving the economy and above all driving our exports—but it identifies the long-standing issues prevalent in the economy that need to be addressed if we in the west midlands are to reach our potential. Those issues are low productivity, skills, and difficulties with connectivity and transport infrastructure.
Although I welcome the proposal and the money that is being invested, may I make a couple of qualifying points? I think there is a very real danger that the potential benefit that accrues from the project will be undermined by some of the proposals in the Budget. My first point is that skills in construction, in particular, must be sustained if we are to improve our transport infrastructure. At the moment, about 10% of the construction workforce consists of employees from outside the country. If the ensuing Brexit negotiations affect their position and construction firms’ ability to employ others to sustain the policies and extra investment in the west midlands, that could undermine the ability of the midlands engine to reach its full potential. I emphasise that provision must be made in the Brexit negotiations for the construction industry to recruit the appropriate level of skilled personnel to fulfil such projects.
My second point, about education and skills, is particularly relevant in my constituency and the Black country. On 24 March, I am due to meet local headteachers to discuss funding problems in their schools, notwith-standing all the fine words that have been spoken about the pupil premium and so on. While the midlands engine will make provision for promoting skills, vocational education and science-based education, there is absolutely no point in putting in that money if we are not providing adequate funding for the original primary and secondary school education to ensure that people have the literacy, numeracy and other qualifications necessary to make the most of such money. There is a grave question mark over that at the moment.
When I meet the headteachers, I guess that one of the things annoying them—this annoys me and a lot of people in the Black country—will be the Government’s preoccupation with investing in unloved, unwanted, selective schools while they neglect to invest appropriately in our existing school estate. I would point to a National Audit Office report saying that there is a £1 billion need for investment in our existing school estate to deal with the immediate problems. There are certainly schools in my constituency that need immediate investment. If such money is used to promote new selective schools, the Government will, quite frankly, be distorting the existing state school system and estate, and failing to realise the potential of the pupils attending such schools. This is totally unacceptable. It is unwanted, and it really sticks in the craw of the people who, day in and day out, try to give our children the best possible education within the existing system.
I have worked out, on the basis of the figures in the Budget, that the £320 million going into the 110 new schools means that there is an average of £3 million for each of them, while the £210 million for the 10,000 state schools in the existing estate means that each will get an extra £21,000 over the course of three years. That huge disparity is bound to prejudice the life opportunities of the many millions of students going to our existing state schools.
Whatever fine words the Chancellor used and however well he packaged the statistics on which the Budget is based—he can, shall we say, tell a good story—the reality is that the previous Tory-led Government and this Government have so far failed. The public sector deficit, which we must remember was supposed to be eliminated by 2015, will certainly not be eliminated by 2021 and may well still be with us in 2025. Whatever happened to the long-term plan that was the mantra of the Tory-led Government up to 2015 and was used in the carefully choreographed comments made by every supporter of that Government to demonstrate the effectiveness—or otherwise—of their economic policy? The fact is that I do not recall anybody saying that the long-term plan might actually last only until 2015. It has now disappeared, or evaporated, from the political lexicon of the House. It would be laughable were it not for the fact that so many millions of people have endured cuts in their wages, cuts in their public services and, in some cases, very real hardship indeed. As a result, we face the perfect storm: the cumulative failure of austerity policies that have failed to generate the necessary tax receipts to pay off an adequate amount of our public debt; the increased demand placed on our public services—particularly social services and health, but also education—that have to be met one way or another over the next few years; and, of course, the uncertainty generated by Brexit.
I could not help but be amazed by the phraseology used by the Chancellor over his decision to waive the fiscal targets in order to make available more money for what has loosely been called a “fighting fund” or “war chest” for Brexit. My understanding of a fighting fund or a war chest is that it is money that is put away out of existing consumption to be used for problems that arise in the future; it is not about heaping debts on future generations to pay for mistakes made in the present, such as the results of Brexit arising from this Government’s policy.
I would like to have gone on, but I will try to stick to the 12-minute limit. The Government are failing to address the big issues that have arisen from their failure to deal with public spending and the economy over the past seven years. I concur with the disappointment expressed by my hon. Friend the Member for Wallasey (Ms Eagle) at the Government’s failure to recognise that and to take the necessary big steps to address it. I think that the Budget is a major failure. It is a sticking-plaster Budget that spends money just to avert a crisis, without examining the underlying crises and the policies needed to address them for the benefit of everybody in the long run.
Madam Deputy Speaker (Mrs Eleanor Laing)
I appreciate that some hon. Members have been sitting here all afternoon. There is something a little unfair about this but, c’est la vie, I am afraid that I have to limit Members to 10 minutes.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Thank you for giving me the opportunity to contribute to today’s Budget debate, Madam Deputy Speaker.
It is fair to say that today’s headlines are not what the Chancellor might have planned: “Spite Van Man”, “Tories break tax vow”, “Phil Picks a Pocket or Two”, “Rob the Builder! White Van Man gets battered by Budget”, and that is just to name a few. It is a good example of how, when one does things in a hurry, one gets things wrong. The Chancellor got it wrong yesterday. If he takes anything away from the last 24 hours, it will be that he made the wrong choice at the wrong time and in the wrong way. That is why Labour, along with many Government Members, will oppose the increase in national insurance for the self-employed. It is a broken promise and the Chancellor is rightly in for a rocky ride.
The Chancellor has used his first Budget to continue with tax giveaways to those at the top, while hitting self-employed low and middle earners for £2 billion to fill his own black hole. The Association of Independent Professionals and the Self-Employed describes this tax hike as an additional burden upon individuals who are already subjected to costly excessive bureaucracy. Anyone who is self-employed and earns more than £16,250 a year will have to pay more tax. Under the proposals, a self-employed person earning £20,000 will pay almost £100 more in national insurance from next year and a self-employed person earning £30,000 will pay almost £300 more. Up to 8,000 self-employed small businesses in my constituency could be affected by the change. For a self-employed earner bringing up a family on about £25,000, that could be about £15 to £20 a month out of money used to pay for school trips, school uniforms or putting food on the table. At the same time as inflation is going up and average wage growth is being revised down, this measure, implemented in this way, will lead to yet another squeeze on household incomes. The last thing we want is for families to be borrowing more just to make ends meet. The just about managing could become the just about managing no longer.
The self-employed are the engine of the UK economy. I have twice had periods of self-employment and I know the challenges they face. There is not the back-up and security of an employer to fund their pension, pay for a training course, cover them with another member of staff if they are off sick, or provide statutory holiday pay. It is hard and it is stressful, alongside the rewards of being independent and entrepreneurial. Due to income fluctuations, it can be harder to get a mortgage or a rental agreement.
The Budget should have been a chance for the Government to show the self-employed that they are on their side. Indeed, the biggest difference in tax take between self-employment and employment lies in the 13.8% employer national insurance, not the national insurance paid by individuals. If the Government are serious about equalising tax treatment, they should focus on how to work in partnership with the self-employed to balance and share the risk for those who are doing the right thing. The small and medium enterprise community is the backbone of our economy, and the Government should bring forward such proposals only after proper dialogue and consultation with it.
I want to focus on a few other points. Productivity growth is set to be revised down again, even after the UK productivity gap widened last year to the worst levels since records began. After seven years of Tory Government, we still lag behind Germany and the US by more than 30%. As the Chancellor said at the time of the autumn statement, the productivity gap is well known, but it is shocking none the less. The downward revision of productivity is not just due to Brexit. It is a reflection of the Government’s strategy and investment record: their lack of achievement, rather than their recycled infrastructure plans. At some point, the Government will have to take responsibility for their poor record. They now have no one else to blame.
When the Government came to power, they stopped the Building Schools for the Future programme, and two schools in my constituency were affected. We can now see the outcome of the Government’s neglect in favour of a blind ideological pursuit of, and almost exclusive support for, free schools and grammar schools. The National Audit Office calculates that £6.7 billion is needed to bring existing school buildings in England and Wales to a satisfactory standard. Ministers are choosing to give billions of pounds to fund new free schools, while existing schools are crumbling into disrepair. That is not my view, but the conclusion of the Whitehall spending watchdog. The Chair of the Public Accounts Committee called for the money to be reassigned and diverted to existing buildings, arguing that taxpayers’ money could be used to fund much-needed improvements.
Another challenge is 4G coverage. The UK is 54th out of 80 countries surveyed for 4G coverage, with levels here lower than in Bulgaria, Albania and Romania. This is the fifth time the Government have announced this highly limited roll-out of fibre broadband. Once the roll-out is complete, only 7% of homes and businesses will have benefited.
This Budget and previous Budgets have cut corporation tax, which will be 19% this year, 18% next year and 17% the year after, removing £15 billion from public finances in this Parliament. This is a direct cost to the taxpayer. The irony is that not a single business, large or small, that I have talked to, and I talk to many, has put corporation tax levels at the top of their wish list. They have raised infrastructure; affordable housing, so that employees can live and work near where they work; education and skills; and public transport and its affordability. The decision to go ahead with those corporation tax cuts is a self-dug black hole that the Government need to fill. They are plugging the gap with the earnings of the self-employed and cutting the amount spent on children’s education.
In recent weeks and months, teachers have told me about growing parental poverty, and about kids coming to school hungry or without clean school uniforms. Parents are sometimes unable to afford school trips. Schools are having to cut teaching posts and non-teaching welfare and support staff, curriculum teaching time is being reduced and the school day is being shortened. As pupil numbers increase, teachers face increasing class sizes. Increasing numbers of children face mental health conditions but are unable to get the support they need. How can the Government be proud of that record, which is the reality of what our wonderful schools face—the worst they have known in a generation?
The Government should delay or abandon their corporation tax cuts and support schools, which work hard to ensure that the children of our country get the education they need. Indeed, at a minimum, they should delay the application of the apprenticeship levy to schools.
It is worth mentioning one other lost opportunity. In the 2015 Budget, the former Chancellor announced that he had hiked the tax take on dividend income by 7.5%. That change took effect only in April 2016, meaning that people could bring their dividends forward by a year to avoid it. The OBR estimates that, once other factors are taken into account, pre-announcing the policy cost the Treasury £800 million and handed shareholders that same amount; and that each of those individuals withdrew an average of £30 million in dividends and avoided £1.1 million in tax. That is a devastating conclusion and another example of how the Government continue to give to those who already have and take away from those who need the most.
We need better than this. We need a strategy that addresses the needs and challenges that businesses and families in our constituencies face. We need a proper plan for funding public services, an economic plan that suggests a clear sense of direction, an honest assessment of the risks of Brexit, and a sensible response to those risks. What was missing from the Budget was a proper vision of our future and a pathway to get there. It was an unfair Budget, it made the wrong choices and is set to leave us poorer and less prosperous as a nation.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
After the spin around the Budget, which has not exactly gone to plan, let us look at the actual facts. According to the Resolution Foundation, we have had the worst decade for pay growth in two centuries of earnings data. GDP growth is overplayed and inflation is underplayed. GDP growth is expected to flatten as increasing inflation, which has sped up in the past few weeks according to much of the data, squeezes living standards, and as consumer spending, which as we have heard has been largely driven by a credit card boom, dries up. Again, that creates a false impression. Borrowing continues to rise and is expected to rise further. The OBR has made it absolutely clear that the
“government does not appear to be on track…to return the public finances to balance at the earliest possible date in the next parliament”
as they had promised.
On productivity, the Chancellor did a very good job of outlining what a bad job the two successive Conservative-led Governments have done. He said:
“The stats are well known: we are 35% behind Germany and 18% behind the G7 average”.—[Official Report, 8 March 2017; Vol. 622, c. 818.]
What on earth have they been doing for the past seven years if we are in that position? Small businesses are hit not only by the NICs issue, which I will come to, but by the reduction in the dividend allowance, which we have heard about, and the additional red tape and burdens of things such as quarterly reporting.
We can talk about statistics and the real things going on in the economy, but the impact I am interested in is the impact on my constituents in Cardiff, Penarth and the Vale of Glamorgan. I am proud that the Welsh Labour Government are investing in our schools and hospitals. New schools and hospitals are being built in my constituency, and more is being spent on NHS and social care together than the average spent in England. Indeed, councils in Cardiff and the Vale of Glamorgan are doing their best to invest in local services and to protect people who are suffering as a result of the policies of the Tory Government in Westminster. The fact remains, however, that by 2020, according to the Joseph Rowntree Foundation, ordinary working families will be worse off than they were in 2015. The income of a couple with two children, working full time and receiving the so-called national living wage, will fall by £1,051, while that of a lone parent with two kids, working full time on the national living wage, will fall by £3,363. My constituents tell me about the real challenges and hardships that they face, as opposed to the spin that we get from the Government.
Let me say something about self-employment and the increase in national insurance contributions. I think that the Government’s approach has been a huge mistake. It is clear that those in the self-employed sector face huge additional fixed costs and risks. I speak to many self-employed people every week in my surgeries—for example, I have spoken to a number of taxi drivers recently; I shall say more about them shortly—and I know about their lack of benefits, their higher insurance premiums, and their difficulty in obtaining mortgages. There is clearly some abuse on the margins of self-employment, and we must address the issue of bogus self-employment, but hitting a whole swathe of self-employed people is a crude measure which can have hugely differential and damaging impacts on some sectors and groups.
Peter Dowd
My hon. Friend said that the Government’s approach had been a mistake. Today, on Radio Cymru, the Under-Secretary of State for Wales, the hon. Member for Aberconwy (Guto Bebb), said:
“I believe we should apologise. I will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election.”
Well, he was the Minister, but I am not sure whether he still is. Does my hon. Friend know?
Stephen Doughty
I was not aware of those comments, but, as someone who listens to Radio Cymru occasionally, and to Newyddion, I shall listen carefully to what the Minister said, whether it was in Cymraeg or in English. I hope that his ministerial colleagues will listen as well, because it is clear that there is much disquiet on the Government Benches. Perhaps that is why so few Conservative Members are present today, and why those who have spoken have been quite critical of the decisions in the Budget.
There are 4.8 million self-employed people in the country, and nearly 5,000 in my constituency. It is all very well to say that this measure will not affect the very poorest, and, at the other end of the spectrum, that it will ensure that the very richest are brought into line. However, as we heard from my hon. Friend the Member for Ilford North (Wes Streeting), no amount of distributional analysis and charts can reflect the reality and the impact on those in the middle deciles: people who are just about managing, and the strivers who the Government were so keen to say that they were trying to support, but who have been shafted. The Government are not helping those people; they are doing exactly the opposite.
The Federation of Small Businesses has described the measure as
“a tax grab on middle-income self-employed people who are just about managing”.
The Musicians Union—I work closely with that union, and with many other unions representing the creative industries in my constituency—has said:
“This Conservative Government…have done nothing but cut funding for the arts and for music, and they are now penalising musicians further by increasing their tax contributions.”
Those are the real facts. The Federation of Small Businesses at one end of the spectrum, and representatives of those in the creative industries at the other, have decried this measure.
I want to say a little about the reality of life for one group of workers who are self-employed at present, although many of them would argue that they are actually employed, and, indeed, that is the subject of many current legal cases. I am talking about taxi drivers. As a member of the GMB, I am proud to have been working with its members locally, and hearing about the concerns of many taxi drivers in Cardiff, the Vale of Glamorgan and south Wales as a whole.
Taxi drivers are hard-working people. They work every hour that God sends. They are striving to make a difference for their families, but they are struggling with the costs that they face from the companies that engage them. There are the fines, the administration fees, the cost of fuel, and the cost of replacing windows when they do not accord with regulations which vary so much across the country. They are often trapped in low-paid account work, receiving wages that do not reflect the effort and time that they put in. They have differential insurance costs. Drivers from other local authorities, or indeed from London, where different rates are paid under different regulations, come to Cardiff and undercut the industry there. Antiquated legislation allows private hire licences to continue to rise without any cap; that is a simple matter of supply and demand. These national insurance rises will hit people who are striving on the margins. They can barely afford the additional £20, £30 or £40 that this measure is going to bring in. They are the ones who are going to be hardest hit, and they are already hit hard by many other measures.
This is just one measure hitting those in self-employment. I have been speaking to a number of companies in Cardiff that are using the self-employed in the ways I have mentioned. I am concerned that companies such as Dragon and Veezu, who operate taxi firms, are not willing to meet drivers to discuss their concerns or to meet the GMB. That is of great concern to me. Fundamentally, what are the Government doing to help such people who are striving and working hard, and who just want a level playing field and enough money to be able to support their families?
I mentioned the impact on the creative industries. We have lots of start-up creatives in my constituency, including small design, music, production and technology firms. They are also going to be hit badly by these changes. What are the Government doing to support them?
Finally, I will make a few further points. Where on earth was the mention of Brexit? That is the biggest economic challenge facing this country in generations, but it was not mentioned. There were no answers on the question of the additional debt that the OBR has predicted is going to be added to the national debt; no answers on whether Wales is going to be left a penny worse off as a result of the potential changes to regional finance and structural funds; no answers to the exchange rate volatility that is causing the prices at the pump to go up; and no answers on the single market, or the impact of tariffs if we end up in the “deal or no deal” situation that the Prime Minister seems to be leading us towards. Where was the mention of those things? That was utterly irresponsible.
We should consider what else was missing, too. Where was mention of climate change, or further support for the steel industry, or support for veterans—including younger veterans who are leaving but are struggling with their housing costs and are discriminated against in housing benefit? Where was action to right the injustices for women pensioners? The WASPI campaigners were here yesterday; thousands from across the country, including hundreds from Wales, were here speaking out. Where was the help for the Allied Steel and Wire pensioners who were let down in my constituency, and are still let down today? Where was the money to address the police cuts—the police are suffering huge pressures, as the former Chair of the Home Affairs Committee, my right hon. Friend the Member for Leicester East (Keith Vaz), pointed out? Where was the help on energy prices when people are seeing their bills go up?
This Red Book is one of the thinnest Budget books we have seen, certainly since I have been in this House. That is because there is a whole lot missing from it, and, frankly, the Chancellor is going to have to do a lot of rethinking on the bits that are in it.
Mr Stewart Jackson (Peterborough) (Con)
It is a pleasure to follow the hon. Member for Cardiff South and Penarth (Stephen Doughty).
The Labour party clearly has a rich vein of irony, as it is masquerading as the friend of the entrepreneur and the self-employed. Perhaps the white van man taskforce will be headed up by the right hon. Member for Islington South and Finsbury (Emily Thornberry), who has great affinity with white van man.
The fact of the matter is that Labour Members must be living on a different plant from the rest of us, because this Budget was actually a consolidation of seven years’ work to rescue this country’s fiscal credibility from the disastrous mess left by the Labour party, including the record peacetime debt that we had in 2010. I also have to say that in my 12 years in the House, I have rarely seen a poorer Budget response than that from the Leader of the Opposition—no wonder his own MPs had their heads in their hands.
Mr Jackson
I will not give way, if the hon. Gentleman will forgive me, as I have to make progress.
If we are talking about honesty and being upfront, even today the shadow Chancellor is quoted as saying that within 100 days of a Labour Government, we would see the end of nuclear power. That is rather different from what was being said two weeks ago in Copeland, when the Leader of the Opposition was saying that nuclear power was safe under Labour.
The Budget also consolidates this Government’s industrial strategy, which is a recognition that many people across our country, particularly outside London, felt that the benefits of globalisation were not flowing to them, and to their communities, infrastructure, towns and cities. It is right that we address that, and this Budget does so. Those people feel that some of the forces of globalisation had passed them by. That is a wider context of Brexit, but because of my departmental responsibilities, I will not go any further into that.
We have also witnessed a jobs miracle over the past seven years. In my constituency there has been record growth in private sector jobs, a drop in the number of NEETs—those not in education, employment or training—and youth unemployment, and an unemployment rate of 1.9% on the last figures, which is the lowest in eight years. We have also seen the highest increase in living standards in 14 years, and an increase in real wages over the last quarter or so. We have cut the deficit by two thirds—it was 10.1% of GDP under the previous Labour Government; it is now 4%. The Government have also tackled key issues relating to the skills agenda, with £500 million for skills. In my constituency, a university technical college is attracting new students. More money—£40 million—is being made available for reskilling and retraining the workforce. The Chancellor is also considering important issues such as infrastructure spending on roads and broadband.
Welfare is certainly an issue that transcends party politics, but I am proud that this Government have worked on the basis that the No. 1 priority for getting people out of the miserable cycle of poverty and welfare dependency is to get them into work. Taking people from workless households and giving them work is massively important if we are to change their lives. It does not help when Labour Members propagate the myth about zero-hours contracts. In any case, people who are on those contracts sometimes make the decision to work in that way themselves. That affects their lives, but it is their choice. In fact, 97.1% of people are not on zero-hours contracts, but we would not know that from listening to Labour Members.
I agree that the social care funding is vital. It builds on the precept that we have already put in place, and on the better care fund. However, in 13 years of benign economic circumstances, the Labour Government did nothing at all about social care. They sold the gold, they ruined our private pension schemes and they racked up record levels of debt.
We are spending serious money—£10 billion by the end of this Parliament—on schools improvement. Labour adopt a levelling-down approach, attacking people who are aspirational and ambitious for their children. They say that grammar schools are awful—that they are what the rich and the middle classes do. Actually, they are about equality, improving people’s lives and reducing those differences. It is about taking people from modest backgrounds and giving them a real stake in their future. Labour Members have always been against that. They have been against share ownership, against the right to buy and against grammar schools. For them, it is all about levelling down and sharing the misery among everyone. That is what socialism is all about.
We are dedicated to improving the living standards of all our people. As Disraeli said, the aim of the Conservative party is the enervation of the condition of the working class, and that is our watchword. This is about social progress. That is why 1 million people will get a £500 pay rise this year as the national living wage goes up to £7.50. The personal allowance has risen seven years in a row. We have frozen fuel duty for working people who need their cars to go to work. We have provided free childcare—[Interruption.] The hon. Member for Cardiff South and Penarth says that we have not, but we are also putting serious money into research and development, broadband and tackling traffic congestion at pinch points.
Of course we have had to make difficult choices. On the specific issue of national insurance contributions, this is about the regularisation and simplification of the tax system, but it is also about social equity and fairness. The hon. Member for Cardiff South and Penarth shakes his head, but the Resolution Foundation has not always supported a Conservative Government’s fiscal measures and yet it is doing so today, as is the Institute for Fiscal Studies. It is interesting that Labour Members should be against fiscal fairness. They are against us making the necessary changes to fund things like social care. I have asked questions to which I have not had an answer from their Front Bench, or from “continuity Blair” on the Back Benches. I like to see the dynamic duo from Ilford, the hon. Members for Ilford South (Mike Gapes) and for Ilford North (Wes Streeting). What we do not have from Labour is a coherent, comprehensive, plausible policy on tax or spending. It is just more tax, more borrowing, and more spending—more debt millstones for our children. That is the Labour party for you.
There are certain things that I would have liked to see in this Budget that I did not, such as more tax on high-strength cider and a higher tax on tobacco. I support the sugar tax. I am not a libertarian—I am a social conservative—and we should reflect the health impact caused by sugar in our diet. Like my hon. Friend the Member for Harrow East (Bob Blackman), I would like more help in the autumn statement on affordable housing to get younger people on the housing ladder. We need to do more on tax advantages for brownfield remediation. We need to put in place extra care facilities for older people, such as through real estate investment trusts. We need more smaller niche house builders to get back into the market and build more homes.
Some schools in my constituency are concerned about the impact of the new education funding formula on their baseline funding. It would be remiss of me not to say that the King’s School and Arthur Mellows Village College are worried about that, and I will be speaking quietly and privately to the Chancellor.
My party is proud of its achievements over the past seven years in turning this country around after we inherited the Labour party’s disastrous legacy. My party believes in social progress, prudent government and fiscal responsibility, and it falls to the Conservative party, as ever throughout history, to build a country that works for everyone.
Barbara Keeley (Worsley and Eccles South) (Lab)
We have heard a wide range of speeches this afternoon, including from the hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin), for Richmond (Yorks) (Rishi Sunak), for Esher and Walton (Mr Raab), for Harrow East (Bob Blackman) and for Peterborough (Mr Jackson), and from the right hon. Member for North Norfolk (Norman Lamb), who is no longer here. We also heard excellent speeches from my hon. Friends the Members for Wallasey (Ms Eagle), for Croydon North (Mr Reed), for Bristol East (Kerry McCarthy), for Ilford North (Wes Streeting), for West Bromwich West (Mr Bailey), for Feltham and Heston (Seema Malhotra) and for Cardiff South and Penarth (Stephen Doughty) and from my right hon. Friend the Member for Leicester East (Keith Vaz).
I shall mainly talk about social care, but I want to mention the absence of any Budget help for the 1950s-born women struggling without their state pensions owing to the 1995 and 2011 Pensions Acts. Their demonstration and lobbying here yesterday were wonderful. I am also sad that the Chancellor could not find £10 million for the children’s funeral fund, which was campaigned for so ably by my hon. Friend the Member for Swansea East (Carolyn Harris). Despite cuts from central Government, my local authority has recently announced that it will waive fees for child burials, but all the weight of that should not be put on councils.
I had hoped that this Budget would finally announce a Government funding commitment to start to put the social care sector on a stable footing. The Chancellor said that everyone should be able to
“enjoy security and dignity in old age.”—[Official Report, 8 March 2017; Vol. 622, c. 820.]
However, despite his rhetoric, it is clear that his Budget did not match up to that aim. As we have heard, the King’s Fund has put the current funding gap for social care at around £2 billion. Yesterday, the Chancellor announced additional funding of £2 billion over three years, of which only £1 billion will be available this year. That is half of what is needed to deal with the immediate crisis. The Care and Support Alliance commented that that the funding will
“keep the wolf from the door”
but no more. There has been much discussion about the future and what will happen to that extra funding, but we must bear it in mind that post-Budget figures for adult social care show a 2.1% cut between 2016-17 and 2019-20, showing that funding is still being cut in this Parliament.
Along with council leaders, social care providers and health leaders, the Opposition have been warning this Government for many months about the perilous state of the social care sector. Indeed, the King’s Fund recently said that adult social care is
“rapidly becoming little more than a threadbare safety net for the poorest and most needy older and disabled people.”
Last week, the care company Mitie offloaded its two homecare businesses for £2, which is a clear demonstration of the fragility of the current care market. That company, which had provided care and support to 10,000 people and employed 6,000 staff, was reduced to being worth only £2. It has taken until now for the Government to heed the many warnings, and they were wrong to wait so long to act, just as they were wrong to cut local government budgets by around 40% since 2010, which has led to cuts of £5.5 billion from adult social care budgets by the end of this financial year.
Ms Angela Eagle
Does my hon. Friend also recognise that the cuts to benefits, particularly to housing benefit, will have a huge effect on extra care? Large numbers of people are very happy, well looked after and protected in those arrangements, but they cannot pay for them if housing benefit goes. Moving those people into nursing care will cost far more a week. That is another ticking time bomb.
Barbara Keeley
My hon. Friend is right about extra care housing.
The Chancellor was wrong not to make any extra funding available for social care in the autumn statement. Instead, Ministers chose to continue putting the burden of funding social care on councils and council tax payers. The local government finance settlement compounded the mess by recycling money from the new homes bonus to create the adult social care grant. That rather inept settlement made a third of councils worse off, including my own Salford City Council, which loses an extra £2 million from budgets this year.
One council that did not lose out from the settlement was Surrey County Council, which will gain £9 million extra from the adult social care grant. Perhaps that should not surprise us, given that the settlement was made when Surrey was in the middle of a long, drawn out and clearly highly successful lobby of Ministers to get more funding for just that council’s social care.
Last night, Surrey County Council released many documents and texts revealing the extraordinary level of access that that one council enjoyed with Ministers and their advisers. My local authority recently asked for a meeting with the Secretary of State for Communities and Local Government to discuss our difficult financial situation and the loss of funding for social care. We were given a 30-minute meeting with one of the Under-Secretaries of State. However, the leader of Surrey County Council was given meetings with the Secretary of State on 12 October, 19 October and 9 January. There were a number of further meetings with the Secretary of State to discuss Surrey County Council’s funding situation involving the Chancellor, the Secretary of State for Health and other Surrey MPs. There was also a substantial stream of letters, emails and texts, some of which may make surprising reading. Some frustration was expressed about the Communities Secretary, with one Surrey MP saying:
“Sajid led me to understand before Christmas that he would be trying very hard…to help Surrey out with the worst of its (Government-dictated) financial dilemma.”
And he said that if the Secretary of State was
“imprudent enough not to have £40m hidden under the Department sofa for just this sort of emergency/problem”
and if all the Secretary of State’s local government money really is allocated, he
“still has the option of adjusting all other Council settlements down very slightly in order to accommodate the £31m needed for Surrey—and I think he should be encouraged to do this.”
In January that Surrey MP wrote that he was
“losing hope re getting help from Government this time, we still need to kick up such a fuss that Ministers and Civil Servants really do remember at the very least ‘they will need to treat us better next time.’”
I think that refers to the new funding formula. All this about a council that the Chancellor himself told in a letter in December:
“Surrey’s core spending power in 2016/17 decreased by 1% compared to an average reduction of 2% for shire counties as a whole”.
And the Chancellor said that over the lifetime of this Parliament
“Surrey’s spending power is forecast to increase by 1.5% compared to a flat cash settlement for local government as a whole”.
It seems that Ministers were not ready to listen to most council leaders, care providers, local authorities and their own regulator about the fragile state of social care funding, but it is clear from all the correspondence—I recommend that hon. Members read that correspondence, as it is very interesting—that relying on council tax and business rates to fund social care will never give us the fair and stable funding system that we need.
As I said earlier, there will still be cuts of 2.1% to social care up to 2019-20, so what we have in this Budget is a sticking plaster or a stopgap announcement that will not give older and vulnerable people the “security and dignity” in old age that the Chancellor claims. And it will not enable us to deal with the continuing demographic challenges that we face. The number of people aged 75 and over is projected to nearly double by 2039. That ought to be something to celebrate, but instead the Government have created fear and uncertainty for older people by failing to address the health and care challenges raised by those demographic changes. The Chancellor said that the Government intend to produce a Green Paper in the autumn on long-term funding options, and there has been some discussion of that in this debate, but given that we have already had the Barker review and the Dilnot commission, there are fears that the Government could be kicking this issue, once again, into the long grass.
I hope that the Government are not doing that, because cuts to social care budgets hit not only people who need care, but the 6.5 million unpaid family carers. Carers UK tells us that an estimated 1.6 million people currently provide 50 hours or more of care per week, which is an increase of a third since 2001. Some 2 million people have given up work at some point to care for loved ones, and 3 million carers have had to reduce their working hours. That is not good for their finances, with many falling into poverty as time goes on.
As people live longer with disabilities and long-term health conditions, more of us will find ourselves having to take on a caring role. Sadly, this Budget offered nothing to carers, just as it offered nothing to women born in the 1950s and nothing to families who were bereaved after losing children. There was nothing in it for carers, no extra support and no sign that this Government value the important work that they do. I say to the Minister that £120 million would deliver a three-hour respite break each week for 40,000 carers who are providing full-time care; instead, as we know, the Government have chosen to prioritise cuts to inheritance tax and corporation tax, and to ignore the increased burden on unpaid family carers.
The Government have also failed to recognise that the social care crisis is not just about older people. The Chancellor talked about the impact that the £2 billion over three years will have on delayed discharges, but, as councils have reminded us this week, other groups of people need social care, including those with learning disabilities. About a third of councils’ annual social care spending—some £5 billion—goes on supporting adults with learning disabilities. Surrey MPs must now understand that fact, after all the correspondence from their council leader, who spent a lot of time trying to make clear to them what an issue that was for councils.
We had an excellent debate in Westminster Hall earlier in the week on social care in Liverpool, when we heard that Liverpool had lost almost 60% of its grant since 2010 and that that will reach cuts of 68% by 2020. Cuts to social care there have meant that funding for care packages had to be cut, so whereas 14,000 people were receiving one now only 9,000 are—5,000 people are no longer getting a care package. Surrey, which has had so much attention, did not have cuts at that level; its cuts were only 28%. Indeed, social care spending in Surrey has increased from £273 million to £367 million.
I want to make an observation about the new allocations for the £2 billion that the Government have announced. I observe—that is all I can do, because the figures have only just arrived—that the allocations are £1 billion for year one, two thirds of a billion for year two, and one third of a billion for year three. In that, Surrey’s allocation goes up in year two; it is one of only six councils on the whole list that gets a bigger allocation out of a smaller amount of money. I do not know, and it is impossible to see here in the Chamber, what the formula is, but that position is very worrying.
Disturbingly, this important matter of funding social care has been tarnished by the offering of sweetheart deals and the making of gentlemen’s agreements. It seems, from reading the correspondence, that all of that was done to escape the political heat for some right hon. and hon. Members facing the reality of what cuts to council funding have done to social care in their local authority area. That is what this is all about: threats of what will happen to constituencies and areas if the cuts go on.
Social care should not ever be consigned to becoming a threadbare safety net. We also should not have a Communities Secretary who can hold more than seven meetings with Surrey County Council or Surrey MPs to discuss their funding, yet who will not meet a cross-party delegation from Salford City Council and has no time in his diary to meet the leader of Hull City Council. I hope the Communities Secretary will start to listen to councils other than Surrey County Council, whose leader emphasised in letters that we have seen that it has the largest Conservative group in the country. He should also listen to leaders from Hull, Croydon, Salford, Manchester, Liverpool, Durham and Newcastle. He needs to understand from them what is needed throughout the country to save social care from crisis.
The Financial Secretary to the Treasury (Jane Ellison)
We certainly have covered a lot of ground in today’s debate; indeed, we have strayed internationally, as well as covering an awful lot of domestic policy. Before I address some of the key themes, I wish to stress again the central point made by my right hon. Friend the Secretary of State for Communities and Local Government when he opened the debate. Our ability to provide public services is entirely dependent on our ability to pay for them. Indeed, the right hon. Member for Leicester East (Keith Vaz) said in his speech that before we talk about spending, it is important to talk about how we would raise the money. That is the last thing we have heard from the Opposition today.
Key to this debate is the fact that if we do not live within our means, deal with the deficit and get debt falling, we simply will not be able to continue to fund the public services that we all care about on both sides of the House; of course, the generations to follow will then suffer. We have seen how debt has been left for others to deal with, which is why at the heart of the Budget and our economic policy is our continued resolve to restore the public finances to health, increase our economic resilience and secure our public services for the future. At the heart of our aims is the work to bring down the deficit. We have made great strides, and in doing so we have been able to bring what we spend and what we raise further into line. That is how we can afford public services.
We have already cut the deficit by almost two thirds, but the work is not done. We are also on course to get debt falling as a share of GDP by 2018-19. We are, though, the first to acknowledge that there is no quick fix, no silver bullet and, contrary to assertions by Opposition Members, no magic money tree. That is why we are sticking to the spending plans we have set out and why we are taking a systematic look at how we can become ever smarter in how we spend taxpayers’ money, including by conducting an efficiency review that aims to get more value for money and to save £3.5 billion. As my right hon. Friend the Secretary of State said earlier, we are looking forward to benefiting from the insight and expertise that Sir Michael Barber can bring to bear on the process.
We all have to acknowledge that this work is part of a longer-term challenge. There are many pressures on services in advanced economies around the world, and if we do not grapple with the issue of how we pay for things, we just cannot tackle them. We heard quite a lot from the shadow Minister, the hon. Member for Worsley and Eccles South (Barbara Keeley), about social care. We made a significant announcement in the Budget statement about a £2 billion injection of extra cash—[Interruption.] Opposition Members say from a sedentary position that it is not enough; I return to my previous point: we have heard so much from them about where they would spend more, but we have heard absolutely nothing about how they would pay for it. They have a few gimmicky ideas, to which I shall come—I am going to address one of them head on—but their answer really is the magic money tree. We have made new money available, and further details have been announced today about how it will be allocated. That is real money made available very quickly—£1 billion is being made available for the new financial year starting in just a few weeks—and it is really important that we do that.
Nevertheless, we acknowledge that there is a longer-term challenge. As I said, all advanced economies face pressures as populations become older and the rise in complex and chronic conditions continues. As well as offering some kind words about me relating to my previous role, the right hon. Member for Leicester East rightly drew our attention to the Government’s work on prevention. I shall not be drawn into talking about that too much—as a former public health Minister, I could talk on that for some time—but I remind him of the national diabetes prevention fund and the related work, and the £16 billion a year from the public health budget that we give to local government.[Official Report, 13 March 2017, Vol. 623, c. 1-2MC.] All Members have acknowledged what the sugar levy and other work are doing to turn the sugar tide.
I also draw the right hon. Gentleman’s attention to page 35 of the Budget book—our consultation on the damage that white cider can do. We are consulting on the alcohol by volume duty rates because we have heard from many charities, particularly those working with the homeless, about the impact of the abuse of white cider, in particular, on the health of homeless people and many young drinkers and the increase that it provokes in the frequency of visits to A&E.
Barbara Keeley
Surely the key point is that we are almost abandoning prevention. Some 1.2 million older people live every single day with unmet care needs. There is no prevention when a frail older person who needs care does not get it, and this money goes nowhere to helping with that.
Jane Ellison
I disagree with the hon. Lady about prevention. We can do a lot on prevention, particularly with older people. With this new money, we can have more care packages. For example, falls prevention, which is delivered in the community or at home, is one of the most valuable ways to keep people out of accident and emergency. But we are not in any way downplaying the challenges of dealing with these pressures. We are not burying our heads in the sand. It is a matter not just of common sense but of responsible government that we must face up to the question of how to secure our social care system for the long term. He is not in his place, but the right hon. Member for North Norfolk (Norman Lamb), my former colleague in the Department of Health, talked about that, and there are areas of great agreement across the House about some of those challenges. That is why we announced that we will publish a Green Paper by the end of the year in which we will set out our proposals to put spending on a sustainable footing.
The hon. Member for Worsley and Eccles South said from the Opposition Front Bench that this was about the long grass. I will not embarrass her by reading out the very long list of times that the last Labour Government attempted to grapple with this issue over 13 years.
Jane Ellison
No, I am not going to take another intervention—I will take the same time that the hon. Lady took.
The list is very long. Labour said in its 1997 manifesto that it would tackle this issue; there was a royal commission in 1999, a Green Paper in 2005 and the Wanless review; it was said that the issue would be resolved by the 2007 comprehensive spending review, and there was another Green Paper in 2009—13 wasted years. I am afraid that Opposition Members provoked me to embarrass them. Their long grass was very long indeed.
We are injecting not just new money into social care but an extra £425 million into the NHS to help A&E departments triage patients more effectively and to support local NHS organisations as they reform and improve for the long term the way services are provided to patients. By putting more money into social care and those specific parts of the NHS—triage and capital for A&E—we are addressing some of the very issues that Simon Stevens has talked about recently as immediate challenges of dealing with pressures in the system.
My hon. Friend the Member for Harrow East (Bob Blackman) asked about STPs. The investment that we set out will make a real difference by supporting regions with the strongest plans that are ready now to deliver their long-term visions. We will revisit STPs in the autumn to see whether there are further areas with strong cases for investment, but the NHS obviously also has a part to play in looking at how it can, for example, dispose of unused land and reinvest that money. I give my hon. Friend that assurance.
Let me talk a little about education and skills. We have already taken action to fundamentally reform and improve school education, with the result—this is never acknowledged by the Opposition—that 1.8 million more children are in good and outstanding schools compared with 2010. The simple fact is that vastly more children are getting a good or outstanding education. In this Budget, we further galvanised our schools with £320 million of investment in new schools and £216 million for the maintenance of existing schools.
My right hon. Friend the Secretary of State for Communities and Local Government spoke compellingly about the sweeping reforms that we have introduced to put technical skills at the heart of our education system. I sense great cross-party consensus that that has been an undervalued part of our education system. That will give young adults a chance to develop new talents that will stand them and, of course, our country and economy in good stead as we work towards the high-skill, high-wage and hi-tech economy that will help us to be competitive in a global marketplace.
I have spoken about the importance of controlling our public finances, investing carefully in our public services and ensuring that our spending is sustainable. Alongside that, I want to make a few remarks about the importance of ensuring that our tax system is sustainable. We cannot talk about one side without talking about the other. The flipside of how we invest in public services is how we fund them. Let me address two issues.
First, a number of hon. Members have mentioned business rates. It is right that we update them to reflect today’s property values, but we recognise that this has meant a sudden jump for some. I thank my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) for his excellent speech. I am familiar with some of the pubs in his beautiful constituency. He mentioned the importance of supporting pubs. That was part of the £435 million package of support that the Chancellor outlined yesterday. He has been working on that with the Secretary of State for Communities and Local Government to help businesses manage the steepest increases following the business rates revaluation.
Secondly, there has been much discussion in this debate of the changes we have made to national insurance contributions, and I will respond directly to some of the points made. Let us be clear that the contributory benefits funded by national insurance contributions are very different from employment rights. Much of this debate and the public discourse has criss-crossed between those two important, but distinct, subjects. National insurance pays into a fund that pays out to the NHS and contributory benefits—principally the state pension, but also parental pay. We have announced that we are looking carefully at maternity and paternity rights.
Jane Ellison
No, we have said that it is 20% of the fund, but the vast majority of the national insurance fund pays towards the state pension, which, as has been made clear, is now available to the employed and the self-employed. That is part of an important and necessary step to level up what benefits people get. It is also important and necessary to level the playing field when it comes to what people pay in.
The Prime Minister has asked Matthew Taylor to look at the important issue of employment rights. We will get the Taylor review later this year and will return to look at those important issues. Whether people are self-employed or an employee, if they do a similar job, get a similar wage and receive similar benefits, they should pay a similar tax. That is actually recognised by Labour’s shadow Work and Pensions Secretary, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams).
I really hope that the hon. Members for Ilford North (Wes Streeting), for Bristol East (Kerry McCarthy), for Bootle (Peter Dowd), for Cardiff South and Penarth (Stephen Doughty) and for Feltham and Heston (Seema Malhotra) are not disowning the self-employment review and commission that was launched last November by the hon. Member for Oldham East and Saddleworth, who said that one of the five principles of Labour’s self-employment commission was that self-employed NICs should rise towards employee levels. She went on to say:
“We cannot expect employees to continue to pay more into the system while offering equality of entitlements across employment status.”
I realise that Labour’s Front Bench rotates with dizzying speed—[Interruption.]
Jane Ellison
Thank you, Madam Deputy Speaker. They don’t like it up ’em!
I realise that the Labour Front Benchers rotate with dizzying speed, but I suggest that Labour Members look at the self-employment commission that they launched only last November. The majority of people who are affected by the change will be better off from the combined changes to national insurance contributions. Only someone with profits of more than £16,250 will have to pay more and, as some hon. Members have remarked, the new state pension is worth an extra £1,800 of pension entitlement to those who will now be on it. That is something that the Federation of Small Businesses, among others, has campaigned for.
It is obvious from the critique we have been offered by those on the Opposition Benches that, while they have a plethora of suggestions about how to raise taxes and raise spending, they have absolutely no coherent alternative economic policy. That was clearly in evidence yesterday, in the response we heard from the Leader of the Opposition, and the fact that there are so many former Front Benchers sat behind today’s Front Benchers is also testimony to it. We need to get spending and revenue-raising in balance; that is the mark of a responsible Government, and that balance is what allows us to safeguard the services we all value for the future.