Finance Bill

Baroness Keeley Excerpts

Monday 1st July 2013 Commons Chamber

[Cathy Jamieson]

I note that the hon. Gentleman showed no inclination to explain to that two-earner couple with children in his constituency why it is right for a millionaire to receive a tax cut at a time when they are set to lose a significant amount of money.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I wonder whether my hon. Friend remembers two things. She may remember that, an hour before the beginning of the debate, we witnessed a lamentable performance by Ministers who failed to answer question after question about the Work programme, which is one of the worst and least successful programmes for the unemployed that we have seen for years; and I am sure that she remembers the future jobs fund, which was hugely successful in my constituency and returned hundreds of people to work. I think constantly about the people—nearly 1,000, including 195 young people—who have been unemployed for more than a year, and I fervently wish that we still had the future jobs fund, which was not only a successful programme but returned more than it cost.

[Cathy Jamieson]

My hon. Friend is right to mention the success of the future jobs fund. I still believe that, as we said at the time, the Government made a huge error in abolishing the future jobs fund. As I know from my own constituency, it gave young people an opportunity to get into the habit of going to work and learning skills, and gave the voluntary sector, the social economy, the third sector, call it what you like, an opportunity—

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[Cathy Jamieson]

I do not think that my constituents in Kilmarnock and Loudoun who are out of work and desperate to get jobs—including the 400 or so people across East Ayrshire and into neighbouring Lanarkshire who lost their jobs as a result of the collapse of Scottish Coal, the people who lost their jobs when Diageo moved out of the town of Kilmarnock and closed the historic bottling plant, which bottled Johnnie Walker whisky, and all the people who are out of work as a result of the squeeze on small local businesses—would believe that it is fatuous to suggest that a tax cut for millionaires is the wrong priority when cuts have also been made to working tax credit and when other things could be done to support people into work.

[Barbara Keeley]

I want to follow up on the points made by the hon. Member for Bedford (Richard Fuller) about the future jobs fund and to hark back to an impact analysis of the fund done for the Department for Work and Pensions, which found that society gained £7,750 per participant through wages, increased tax receipts and reduced benefit payments. Participants were calculated to have gained £4,000 and employers to have gained £6,850, with the cost to the Exchequer calculated at £3,100 a job. The figures the hon. Gentleman cited would cover the cost. Even better, two years after the start of their time with the fund, those former jobseekers were much less likely to go back to being on benefits. Is that not something we should be re-exploring?

[Cathy Jamieson]

My hon. Friend has made her point extremely succinctly and has put on the record why we feel that the future jobs fund was not only important but a successful initiative. I say again to Government Members who think that the proposal has no impact on the lives of ordinary people that all those who went through the future jobs fund programmes and who worked on them say that the fund was a valuable way of getting young people back into work. People in my area would certainly have liked it to continue.

Let me come back to the points about the new clause. As I said, the Government should be tackling tax avoidance—we will debate that further later—but that does not mean that we should compensate the wealthiest at the expense of those on middle and low incomes. I would have hoped, in the light of everything the Government proclaimed around the time of the spending review about fairness and ensuring that growth came back into the economy, that even at this stage they might have dropped the plan for a millionaires tax cut. That is a forlorn hope, however.

The decision to create that tax cut goes to the heart of the coalition’s political vision and beliefs—and by that I mean both sides of the coalition. We face a period of national upheaval at a time when resources are stretched. The Government criticise the Opposition when we take responsible decisions to think about the way forward while failing to explain their positions. At a time when resources are stretched, when people up and down the country are working harder and harder than ever before for less in their pockets and when public services are being cut so drastically, it is even more crucial that our Government should be a uniting force rather than a dividing one. In that context, I must ask again why on earth this is the time for a tax cut for the richest.

The Government try to talk a good game, but as I said at the outset, reality does not match their rhetoric. They do not seem to understand the need for a one nation approach to politics and they are not able to encourage a sense of national mission, no matter how much they talk about being “all in it together”. This Government will go down in history as the most divisive.

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[Barbara Keeley]

rose—

[Sir Edward Leigh]

Perhaps the hon. Lady also recognises it, but I fear not.

[Barbara Keeley]

I am surprised that the hon. Gentleman is not including the most obvious millionaires in this country. Does he really think that the risk-takers, the entrepreneurs and the wealth creators do not include football players, many of whom are earning multi-millions of pounds? Frankly, the notion that we need all these wealth creators—these people earning fantastic amounts in football—does not hold up.

[Sir Edward Leigh]

That is an absurd argument. I watched the Brazil match yesterday—did the hon. Lady? Millions of our constituents were watching it and enjoying it. I agree that these people are ludicrously overpaid, but they are men of 21 who have an amazing skill. What does it matter if they earn £1,000, £2,000, £3,000 or £100,000 a week or a month? It is none of our business; it does not matter. To claim that my argument is defeated because a few millionaires earn ridiculous sums of money and because there are footballers’ wives is such a ludicrous argument economically that it is barely worth answering.

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[Chris Evans]

Surprisingly, I agree with the hon. Gentleman on his last comment—work does pay. At the end of the day, we can have any Government scheme we want to bring people out of poverty, but there is only one way out, and that is work. The only way out of the current difficulty is for people in work to pay their taxes. If there are even more cuts to the public sector, there will be even more people out of work and the welfare bill will go up, defeating the object of the exercise. It will lead to a high welfare bill, which will have to be paid for, and a low tax yield because of people being out of work.

I say to the hon. Gentleman that we have to wake up to the fact that the social benefits that we want to enjoy will come only from businesses being successful. We must do all we can to ensure that we have a fair, simple and transparent tax regime. How can we stimulate the economy when it seems that those in the middle are being squeezed?

The hon. Gentleman asks whether I talk to my constituents. I do, and those in social housing or council housing are concerned about the so-called bedroom tax. Some 80% of social tenants in Caerphilly county borough are in two or three-bedroom houses. That is not their fault, because no one-bedroom flats or houses are being built. After the war, when Aneurin Bevan invested in social housing, he invested in family homes so that people could bring up children and go to work.

We have heard from the Government, and from hon. Members today, about how much the cut in tax from 50p to 45p will raise. Everybody seems to be able to predict the future—every Government Member who has spoken today has done so, and even the Exchequer Secretary will be guilty of it. They seem to think that they are some sort of latter-day seer, guru or wise man who can see that in future, it will be wonderful under the Tories whereas it would be terrible under the Labour party. However, we do not know what is next. We might be lucky—we might find gas, or we might find oil off the Pembrokeshire coast or more oil in the North sea, which will stimulate the economy. On the other hand, we might have another financial crisis. We do not know. When we talk about what the tax cut will raise, we are basically licking our finger, putting it in the air and wondering which way the wind is going to blow.

To get back to the new clause, it is important that we have a review of the tax cut.

[Barbara Keeley]

One thing that is predictable is that the bedroom tax, which my hon. Friend mentioned, is going to lead to a hit of about £4 million in Salford, which will be one of the worst hit places in the country. That money will be taken out of pockets and shop tills in our local communities. It is now predicted that the arrears that will be run up as a result will also run into the millions. In fact, it looks like it may well get to the point where it is not worth having made the change, because those arrears will not be counteracted and because of the £4 million taken out of our local economy. That situation is becoming evident as the weeks go by, and we can predict what the result will be in a few months.

[Chris Evans]

I thank my hon. Friend for that wise intervention. Welfare reform is a warm and nice thing to say, especially for those of a right-wing bent who want to take out the scroungers and make them pay. But when benefits start to be cut and people are kicked out of their houses, it is a serious concern—I do not want to be melodramatic—that we could see the return of the workhouse.

In constituencies such as mine and those of my hon. Friends, I am fearful that we will see homelessness on a wide scale. The Government may have thought it was a good idea at the time to cap benefits and introduce the bedroom tax, but when we have a huge homeless population and emergency schemes need to be introduced to sort that out, I am afraid that it will be the taxpayer who picks up the bill.

Does the squeeze on benefits motivate anybody to go to work? If someone has arrears or debt and is seeing more of their pay go down the drain, why would they go to work? The Government should be motivating people to go to work; they should be tackling worklessness. Instead of cutting welfare, they should be stepping in to stimulate people to go to work, and talking to those people individually.

We talk about economics all the time, but it is not a scientific discipline—it is about people and how they react to certain circumstances. If I found myself out of work, my needs would be different from those of someone with a lower educational attainment or problems with reading and writing. However, we should be able to say to that person, “What is stopping you going to work? What are the barriers?” What can we provide to get people into work? Yes, that will cost money up front, but in the long term the country will win because of it.

Let me return to my point about putting a finger in the air and wondering which way the wind will blow. It has been estimated that 267,000 people who earn more than £150,000—including 13,000 people who earn more than £1 million—will receive an average tax cut of £100,000, according to figures from HMRC. In contrast, child benefit will be frozen for a third year, and tax credits and other working-age benefits will increase by just 1%, and these real-terms cuts will affect a shocking 9.7 million households. Can we understand that? My constituency has 56,000 electors, but 9.7 million households will be affected by this measure and each person will have an individual story and will have struggled.

The figure of 9.7 million in relation to benefits might conjure up an image of worklessness, but 7.3 million of those households—75% of all households claiming benefits—are in work. That is the crux of the problem we face. We talk about welfare reform and so-called scroungers, but the people suffering most are those we are trying to encourage—those who work hard and play by the rules but who are locked in an economic theory that has clearly failed. Some 2.4 million families will pay on average £138 more in council tax in 2013 as a result of cuts to council tax benefit. That is the ultimate failure of Government—six in 10 working people are claiming benefits. For all the talk of work paying, for many people work is not paying.

Let me return to what I said about the new clause. We need a report. I sat on the Finance Bill Committee with the Minister—I feel sorry for him, as I would for anybody who sat through that. Every day he felt as if he was batting off different reviews. However, this is such an important issue, and the coalition Government have made it such a cornerstone policy, that it needs to be reviewed. We have heard so much about it being wonderful, but we must test the theory: is it stimulating the economy, bringing money through and making work pay? We will not know unless we have a review. That is why it is so important.

I hope the Minister listens. I have a lot of time for him. As I have said, I was in Committee with him: he is sensible and takes a rational view of these matters—[Interruption.] That is the problem—we judge a man by his friends. This is such a cornerstone policy that I hope the Minister will give us some prospect of monitoring it.

I do not want to go into the history of the 1980s and tax cuts again, because I have touched on it already. But I am deeply concerned that we again face a Government who believe in an economic theory that ultimately failed the country. It was not just that we lost heavy industry in the valleys: I think of all the people in the 1980s who were motivated by the dream of starting a business or buying their own homes. By the end, their businesses went bust or they were forced into rented accommodation because they could no longer afford the mortgage. For all that Government’s lauding of their control of inflation, it was through the roof and interest rates hit 15%. We have heard recently from the Governor of the Bank of England that interest rates will go up next year, and I am deeply concerned that this Government will blindly follow the theory of supply-side economics, of Karl Popper and of leaving everything to the market.

Governments have responsibilities. They have a responsibility to create the environment for businesses to flourish and for people to achieve their dreams. I came into politics because I wanted people to aspire to something better, but the Government are giving the very rich a tax cut and everybody else is losing out—660,000 people will lose an average £728 a year under the bedroom tax. Why are the people at the bottom—the people we should be helping—feeling the pain?

I have said before many times that I do not want to knock the bankers. I worked in banking myself and I know how difficult the industry is. I have met my fair share of bankers and they are not all bad, and banking is the cornerstone of this economy, so I always tread carefully when we talk about bankers, but any industry has people who are guilty of criminal activity. In this case, the guilty have not been punished for their criminal activity. It is the Government’s failure that has allowed people to walk away.

Finance (No. 2) Bill

Baroness Keeley Excerpts

Wednesday 17th April 2013 Commons Chamber

[Geraint Davies]

In Swansea West jobseeker’s allowance numbers have grown by 40%. We have heard of employment levels going up and we have seen that overall output has not gone up, so there is the productivity puzzle, which is a kind way of saying that productivity—production per head—has gone down. All I am saying is that we should look at ways of giving people the tools to do the job, be it skills, building houses, or super-connectivity.

In the run-up to the Budget I got the business community in Swansea together to lobby the Chancellor to invest in a wi-fi cloud and super-connectivity for Swansea. Why should an inward investor come to the congestion and cost of London when they could hook up to the worldwide web in superfast time overlooking the wonderful Gower and the sun and sands of Swansea? That was worth while doing. We were not successful, and subsequently the biggest company in Wales, Admiral, wrote to the Chancellor pointing out that it is a global company and wants super-connectivity on a global basis to its clients and suppliers. That is the sort of investment that we want to make from the extraction from the excess profiteering of certain individuals in the banking community. The modest amendment would enable us to continue that dialogue with a view to taking action to deliver positive change for people who currently do not have enough opportunity.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Is my hon. Friend as concerned as I am—I hope that Government Members are concerned—about the increase in the number of people who have been unemployed for 12 months? In my constituency, the figures today show that the number of those unemployed for more than 12 months has gone up by 17%. Tragically, the number of young people unemployed for more than 12 months has gone up by 40%. Having talked to other hon. Members here this afternoon, I know that they have similar if not higher figures. That is the real tragedy. Here is a generation of young people who will be scarred by unemployment. We need, and we need soon, proper measures, which the amendment addresses— innovative and different measures, not the Work programme, which is not working for people. That generation will be scarred if we do not find them work soon.

[Geraint Davies]

That is completely right. Clearly, the economic model that must work is to have people making a contribution by being in work. There has been some debate about tax thresholds—with everyone saying how great they were—versus working families tax credit. Let us put ourselves in the position of someone starting a business who can only afford to employ someone for £10,000—£15,000 would not be viable; that is just the way that business works. Along comes working families tax credit, and a single mother, for example, can afford to work for £15,000, but not for £10,000. If the state makes up that difference, we end up with someone who can afford to work and make a contribution, and a business that is now viable. That is good. If that is simply stripped away and the tax threshold is increased to make it more worth while, it does not add up. That is one explanation for why we had such considerable job growth under the Labour party from 1997 to 2008.

Most people do not really understand working families tax credit. It is a way of integrating tax and benefits so that we cannot divide people into those in receipt of benefit and the workers, which is what Conservatives want to do for political reasons. They want to say that there are the workers and the shirkers and they are for the workers and the Labour party simply wants to support people sitting at home. That is the opposite of the truth. The Labour party is about enabling people to have pathways to prosperity through jobs. We should be using the fruits of engaging with the banking community, who make obscene amounts of money, and investing in skills and in communications, whether it be electrification of the railways or high speed rail, in wi-fi clouds, or in creating a global infrastructure in terms of R and D and our universities.

We have heard a lot of talk about the reduction in corporation tax from 21% to 20%, but that makes no difference to multinationals if the comparators are France at 33%, Germany at 29% and the USA at 40%. We are already competitive. But that 1% reduction is a 5% reduction in our tax yield from corporation tax. Would it not be better to spend that on helping universities to grow with industry? There is a good example of that in Swansea, which could be the fruits of what we are talking about today, where the second campus is being underpinned by £250 million from the European Investment Bank, and where Tata Steel, BP, other multinationals and the Welsh Government are engaged. Research shows that that sort of cluster of R and D attracts more and more big business and jobs, rather than just a marginal bit of corporation tax. We need to think cleverly about how to generate R and D engines. Brazil, for example, is spending £5.3 billion from development banks on getting into the global field of biotech. China and other countries are making similar investments. That is the way to organise ourselves in a joined-up way, rather than the laissez faire social and economic Darwinism of the Tories, where we see the weakest die and the greediest become more bloated as they exploit the world.

Finance (No. 2) Bill

Baroness Keeley Excerpts

Monday 15th April 2013 Commons Chamber

[David Rutley]

In a spirit of co-operation I suggest that for a change the hon. Gentleman leaves Croydon—[Hon. Members: “ It is Corby.”] Wherever it may be —beginning with a C. The hon. Gentleman should come up to Macclesfield and see what we are doing with apprenticeships and our local college to encourage young people to get into work. It is about human endeavour and getting on with the job, not moaning and groaning as the Opposition are doing.

The Forum of Private Business speak of the Chancellor being “spot-on” with his “basic common sense” decision to freeze fuel duty. I hope Opposition Members at least welcome that. The Association of Convenience Stores welcomes measures that

“will benefit consumers and reduce some of the pressure on local shops.”

[Barbara Keeley (Worsley and Eccles South) (Lab)]

What would the hon. Gentleman say to the convenience stores in my constituency who are going to lose £4 million from our economy in Salford when the bedroom tax hits? That is £4 million less that people will have to spend in convenience stores and local shops. That is the real hit.

[David Rutley]

We have to tackle the deficit that faces this country. We know that welfare payments have spiralled out of control and we recognise that there is huge demand for scarce rooms. We have to address those things. I will give the hon. Lady a chance to say what she would do to tackle the welfare budget, but I have heard nothing. Does she want to stand up and tell us what Opposition policy will be?

[Barbara Keeley]

I will happily respond. We would actually bring some growth to the economy and get some of our young people back to work. We would use a levy on bankers, not in the way that the Government propose in the Bill, but to build houses and to get young people back to work. We would guarantee work for young people who have been unemployed for 12 months or more. Going back a few years—I do not think the hon. Gentleman had been elected at that point—we had the future jobs fund in my constituency and in Salford. That gave hundreds of jobs for young people. Then there was a future and they had hope; now they have nothing.

[David Rutley]

Much as I enjoy going to Salford and the hon. Lady’s constituency, some honesty is required about how growth should be funded in the north-west. I am sure Mr Deputy Speaker has a view on that too, but he cannot express it in the Chamber. Under the previous Government, in the 10-year period to 2010, 100,000 jobs were created in the public sector in the north-west. During the same period, there was a net reduction of 25,000 jobs in the private sector. That is completely unsustainable. What we are trying to do in the north-west and throughout the whole economy is to have a more sustainable approach to job creation, which has led to the creation of more than 1 million jobs in the private sector. That is a far better record than anything from Labour when it was in power.

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[Julie Hilling (Bolton West) (Lab)]

It has felt like a very long four weeks since the Chancellor delivered the Budget, not least because of the terrible tragedy of the death of Jade Lomas-Anderson by a dog attack in my constituency, so when I came to write my speech today, I had to wrack my brains to remember what the Budget was all about. My overwhelming memory is of the Chancellor sitting on the Front Bench looking like a little boy lost, with no idea what to do about the flatlining economy, no idea what to do to stop a triple-dip recession, what to do about the loss of our triple A status, or what to do about the level of borrowing, and no idea how to balance the books. So he delivered a Budget that did none of those things, sitting on his hands, hoping that things will just happen.

Of course, things are just happening. Unemployment in my constituency, Bolton West, is up. One in 10 people in Greater Manchester skip meals so that other family members can eat. Nationally, homelessness and rough sleeping are up by a third. Shelter says that every 15 minutes another family is made homeless. The economy may be flatlining, but people’s income and spending are not. The OBR has said that in 2015 people will be worse off than they were in 2010. Wages are £1,200 lower than in May 2010. This year a family with two children and one earner earning £20,000 a year will be at least £381 worse off, and next year will be £600 worse off. Inflation, of course, is still running at 2.8%. Behind those figures are real people having a desperately hard time—people who are losing their homes, having to choose between heating and eating and relying on food banks to feed themselves and their children.

Tinkering at the edges will not solve the problem, and neither will blaming the poor for the situation they find themselves in. According to the Joseph Rowntree Foundation, 6.1 million people living in poverty are in working households, 6.4 million people lack the paid work they want and 1.4 million part-time workers want full-time work, the highest figure in 20 years, and 100,000 of the so-called new jobs pay no wages whatsoever. The churn of people in poverty or out of work is substantial. While 18% of people are on a low income at any one time, 33%—one in three of us—experience at least one period on a low income in a four-year period, and 11% of people are on a low income for more than half of those four years.

In 2012, 1.6 million people were claiming jobseeker’s allowance at any one time and 4.8 million had claimed it at least once in the previous two years. Those figures show that the Government’s desperate efforts to categorise people as skivers or strivers are a travesty of the truth. Some 2.5 million people, including 1 million young people, are not shirkers or skivers; they are people who need the Government to take action to create jobs. But there was no mention in the Chancellor’s Budget speech of what he would do and there has been no action; he simply hopes that something will happen.

What do we get from the Government parties? We get a tax cut for millionaires, paid for by the poor. What excuse have they given for cutting tax for millionaires? They say that the millionaires were not paying it. If only we could all get a tax cut just because we did not want to pay tax. The Government failed to tell people that they do not actually know how much money the 50% tax rate would raise, because in the first year people brought forward their income and this year people will delay it, but HMRC has said that it could raise £1 billion. If people are avoiding paying tax, surely we need to shut down the avoidance schemes, not cut the tax rate in the hope that they will stop using the schemes now that they have found them. It is a shame that the Government have not shown the same concern for people earning £41,000, who, without any pay rise, will now find themselves in the 40% tax bracket. Hundreds of thousands of hard-pressed families will now be paying more tax, without a thought from the Government.

There were one or two promises of jam tomorrow, such as help with child care in two years’ time, a single-tier pension in 2016 and capped care costs in 2016. I was interested to read Age UK’s briefing after the Budget. It welcomed the earlier implementation of the care costs cap and the higher upper means-tested threshold from April 2016, but it said that that would do nothing to help the 800,000 older people who need help with everyday tasks but receive no formal state support. Since the Government came to power, £700 million in real terms has been cut from social care funding.

Age UK also stated:

“The Chancellor may have confused”—

people—

“in his speech by referring to raising ‘the threshold of the means test on residential care from just over £23,000 to £118,000’. He was in fact referring to the upper means test threshold and older people will have to make contributions based on a sliding scale towards the cost of their social care if they have assets between the two amounts.”

It went on to say that the Budget offered no proposals to improve pensions for current pensioners or to reduce pensioner poverty, which currently stands at 1.7 million people. It was also disappointed that the Government are not doing nearly enough to help tens of thousands of older people whose income, health and well-being are being affected by the cold weather.

[Barbara Keeley]

My hon. Friend is making some great points about social care. Before she moves on, would she like to comment on the fact that, according to Carers UK, 1 million people in this country have given up work or cut the hours they work because of their caring responsibilities, which can have a real impact on the economy? She has laid out that social care has been cut and that that means a real struggle for many older people, with 800,000 people not even having enough care, but it is also a real hit for the economy. Some carers might still be struggling to keep employed, but does she agree that, as services disappear, life is getting much harder for them, too.

[Julie Hilling]

I absolutely agree. On Saturday, I met a couple; the husband was the carer, looking after his wife. They, of course, are about to be hit by the bedroom tax as well. He said to me on the street, “I’d love to be working. I gave up my job to look after my wife.” If he had not done that, the cost to the economy of residential care would have been far higher than the benefits that that couple are getting. We have to do much more for carers rather than keeping on punishing them as the Government seem to.

I go back to Age UK’s response to the Budget. It had much more to say, but on the question of whether the Chancellor had delivered for older people, its answer seemed to be a resounding no.

The Government did reduce tax on beer by 1p, which, of course, is welcome for the pub industry, although it probably would have preferred action on the tie, which the Government appear to have shelved. The Government’s increase in VAT actually put 5p on a pint, and I hope it will take a long time for beer drinkers to sup the 300-odd pints before they get their free one.

It is also good that the Government cancelled the planned rise in fuel duty, but again the VAT increase wiped out any benefit that that may bring. I get annoyed when Government Members talk about how much they have “saved” the motorist, given that fuel has gone up by at least 10% on their watch. They also ignore the truth that the previous Labour Government cancelled or postponed planned fuel duty rises on 13 occasions, depending on the cost of fuel at the time. They also cancelled any rises at the height of the global financial crash—note that it was a “global” financial crash, not one made in Downing street where recessions now appear to be made.

However, tinkering at the edges will not give my constituents a job or increase their incomes. The Government made great claims about their proposals to help people buy a home and the Prime Minister claimed last year that their NewBuy scheme would assist 100,000 people to buy their own homes. What happened? Instead of 100,000 people, just 1,500 people benefited.

What about this year’s proposals? Instead of welcoming them, experts believe that they will simply lead to house price inflation. The Government cannot say whether people will be able to use the scheme to buy a second home. Someone in social housing with a so-called spare room will pay the bedroom tax, but the state will help someone who wants a spare house to buy one—not a cheap one either, but one costing up to £600,000. I do not see too many people on the minimum wage being able to service that sort of loan, even with the paltry increase announced today.

Why do the Government not get on and build homes? House building would do more for the economy than any of the gimmicks that they announced in their so-called Budget. Even their grandly announced increase in infrastructure spending of £2.5 billion does nothing to restore the cut of £7.7 billion to infrastructure spending that they have made over the past three years. Let us hope that they make progress this time by building something rather than making announcements that never seem to come to fruition.

The people of Bolton West are struggling. Many are more than struggling; they are finding it hard to survive day to day. The Government blame them and are hellbent on making the situation worse. They say that they have to cut the welfare budget but neglect to say that the majority of that budget is made up of pensions and in-work benefits. That does not fit the picture that they try to portray of the skivers who are ruining the economy. They forget to say that jobseeker’s allowance accounts for less than 5% of the budget and to tell us that cutting benefit not only forces people to food banks but harms the economy. They forget to tell us that the private rented sector is far more costly than social housing. They will do nothing to introduce fair rents and nothing to curb the cost of private rented accommodation—they simply cap benefits in the hope that that might just bring down those rents.

I am no economist, but even I know that if we cut jobs and benefits, we get into a downward spiral of more business failure, more people out of work and less money in the economy—on and on downwards. The only way to reverse that spiral is to invest in jobs and pay a living wage, to build houses for people to live in, and to take action to rebuild our economy. Instead, what do we get? A double-dip—thank heavens for the Olympics, because otherwise it would have been a triple-dip—recession, a doubling of debt, and a deficit that is not reducing. Instead of blaming the poor and giving a tax cut to millionaires, this Government—instead of sitting on their hands—should take action and not give us the non-Budget that they have given us this time.

Budget Resolutions and Economic Situation

Baroness Keeley Excerpts

Thursday 21st March 2013 Commons Chamber

[George Freeman (Mid Norfolk) (Con)]

I congratulate the Chancellor and his Treasury team on the work they have done on the historic and disgraceful debt legacy that this generation, this Parliament and this Government are having to deal with. The lack of any apology from Labour in the nearly three years in which I have had the honour to be a Member of this place is deeply shaming—[Interruption.] For the record, the Opposition’s barracking of my point serves simply to highlight their lack of ability to deal with the truth, difficult though it may be.

We are still trying to deal with a legacy of debt that we and future generations inherited from the Labour party—a legacy that hangs over the economy and this country. The Budget has been warmly and widely welcomed by all serious commentators: the International Monetary Fund, the OECD, the Bank of England, the CBI, the Institute of Directors and the British Chambers of Commerce. I urge the Chancellor to stay the course and not to be lured by the siren voices of Opposition Front Benchers calling for more borrowing, or of those calling for borrowing-funded tax cuts.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Will the hon. Gentleman give way?

[George Freeman]

I will develop my argument a little further, if I may, as time is limited.

We need a credible programme for deficit reduction, a fair burden of taxation and a long-term vision for the British economy, and that is what the Budget delivered. Simon Walker of the Institute of Directors said yesterday:

“We applaud this Budget. The Chancellor has stuck to his guns and held his nerve—which is exactly what we wanted to see. Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it.”

Plan A is right for three central reasons. First, it tackles the appalling structural debt legacy that we were bequeathed by the Opposition. Secondly, it does so in a way that is fair in allocating the burden of taxation that must be paid. Thirdly, it is bold in setting out the platform at the base of an industrial policy for a sustainable economic recovery in which future generations—particularly the current young generation, who will have to deal with the debt crisis—can have confidence.

Let me remind the House, particularly Opposition Front Benchers, of the nature of the debt legacy we inherited. We started with the worst debt to GDP ratio of any country in the western world, worse than that of Greece and other economies that have been put into special measures by the IMF. The annual deficit when we started was running at 11% of GDP and is now 7%—that, for the benefit of Opposition Front Benchers, is a reduction.

In the situation we inherited, the interest on our debts was set to rise, if we had not acted, to £76 billion a year. We were spending £1 on interest for every £4 the Government were spending on public services. The national debt was just short of £1 trillion—roughly £15,000 for every man, woman and child in this country. As 1 trillion is a big number and people are baffled by big numbers, let me try to break it down. If it took 11 days to pay off £1 million, how long would it take to pay off £1 billion? Thirty-two years—[Interruption.] Opposition Members might think that it is funny, but I can assure them I do not, my constituents do not and the young people who will have to claw their way out of the crisis do not. If it takes 11 days to pay off £1 million and 32 years to pay off £1 billion, it takes 32,000 years to pay off £1 trillion at the same rate.

The truth is that we inherited not just an annual deficit but a structural deficit. For the benefit of Opposition Members who are not aware of the difference, the structural deficit is that bit of the Budget which, even when the economy is growing, continues to haemorrhage money. The biggest drivers of our structural deficit are pensions, benefits and the NHS. The IFS pre-Budget briefing yesterday, which was made available to all parties, makes it clear that the structural deficit continues to put a black hole at the heart of our public finances. The IFS forecasts that between 2011 and 2018 we will be spending an extra £5 billion on pensions, £20 billion on benefits and £15 billion on the NHS. That is after the sensible and pragmatic reforms we have introduced. It is a legacy the Opposition should be ashamed of.

Plan A sets out three key ways of dealing with that—tackling the deficit, a fair burden of tax and a sustainable long-term platform for growth. We have cut the deficit by 30%, from 11% of GDP to 7%, although the shadow Chancellor seemed unable this morning to accept that that is indeed a reduction. The IFS has made it clear that under the Labour party’s plan B we would incur £201 billion more debt by 2016-17. Who on earth could think that borrowing another £200 billion, given that legacy, is the answer?

On the second part of plan A, the fairness of the burden of taxation, the Opposition have been scaremongering about it and need to understand it. First, the Chancellor has decided, rightly, to pay off 80% of the debt through public spending reductions and 20% through taxation. The burden of taxation is powerfully shifted towards those with the broadest shoulders. I remind the House that 1% of taxpayers in this country pay 25% of all tax, and 50% of our income tax is paid by the top 20%. We have taken 2 million people out of tax altogether. The £130 billion funding to help new homeowners is the largest package of support—far larger than anything the Opposition were asking for. The £6 billion relief on fuel duty is a massive support for hard-working families, and coming from a rural constituency I particularly welcome its effect on the rural economy. The beer duty measure, too, is a substantial one for rural communities where pubs are at the very heart of rural life; substantial help is also being provided with child care.

This is a Budget to help the working poor. Taken alongside the universal credit and the welfare reforms, it will have a substantial impact on those who are striving to get on. In the remaining seconds, I want to pay tribute to the Government’s work in laying the foundations for a sustainable economic recovery. We cannot borrow our way out of this crisis. We will have to trade our way out.

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[Barbara Keeley (Worsley and Eccles South) (Lab)]

People in my constituency must have hoped that the Budget could provide some light at the end of the tunnel created by austerity and cuts, but they will have been disappointed. Thousands of them are being hit this year by the coalition Government’s fiscal and welfare reform measures, to be implemented after 1 April. After so many Government U-turns there could have been action in the Budget to soften the blow of these changes. The Chancellor could have done that, instead of the tax cut for millionaires he is going ahead with.

Manchester and Salford are cities hardest hit by the bedroom tax. More than 2,600 families in my constituency will be hit by that policy, and many will have to pay between £500 and £900 extra to continue to rent their homes. If they cannot pay, they are expected to move, but the catch is that there are very few smaller properties available for those trying to move. City West housing trust told me that some 460 families have asked to downsize. However, it expects to have re-housed only 43 families by April, and 260 more in 2013-14. The trust believes that some 80 households might find a mutual exchange. So, the total number of households that can be helped to move is less than 400, leaving more than 2,000 to find between £500 and £900 extra in rent. It is estimated that the bedroom tax will cost our local economy £1.9 million in my constituency and almost twice that in Salford, because tenants will have so much less to spend.

This year, pensioners in my constituency lost more than £80 because the personal allowance was frozen, and people who turn 65 this year will lose much more—£320—owing to the change in age-related allowances. Parents in my constituency have lost out on child benefit. Constituents who lost this previously universal benefit felt deep resentment at that. A survey carried out by the Child Poverty Action Group found that child benefit is overwhelmingly spent on clothes, books, education and food—so that is a further loss to our local economy. The hon. Member for Mid Norfolk (George Freeman) spoke about serious commentators. The Child Poverty Action Group did not welcome yesterday’s Budget, for obvious reasons.

Unemployment rose yesterday in my constituency— 3,477 people are now unemployed, an increase on the previous month’s figure. As a result of the Government’s failure on growth and jobs, borrowing is set to be billions higher. To pay for this failure, the Chancellor is taking billions from working-age benefits and tax credits by uprating them, as we know, by only 1% over the next three years, a real-terms cut.

[Sheila Gilmore]

One thing that has not been discussed much is that, on top of that 1% cut, the Government appear to want to cap the type of expenditure that has always been demand-led. That will presumably require further cuts to benefits; otherwise, it will not happen.

[Barbara Keeley]

It is frightening both in extent and in scale. In Worsley and Eccles South, 7,500 people are in work and receiving tax credits. They are the ones who will lose out over the next three years. Most of the savings the Government are making are not from out-of-work benefits, as we have discussed in previous debates, but from tax credits, maternity allowance, maternity pay, sick pay and housing benefit, all of which are claimed by working people—the strivers whom David Cameron promised to stand up for and who are now being hit by Government cuts.

As my right hon. Friend the shadow Chancellor said earlier, the 1% benefits uprating, along with all the other changes that keep being trumpeted, such as the tax allowances, will mean that a one-earner family on £20,000 with two children will lose £380 a year. A family on that level of income is also likely to be hit further by the bedroom tax and the cut to council tax benefit. Indeed, 20,000 households in Salford will be affected by the 10% cut to council tax benefits that the Government are leaving it to the city council to implement.

On new announcements, it is disappointing for families with children that the Government are pledging to help with child care costs in a scheme due to start in autumn 2015. Families on middle and low incomes have already lost up to £1,500 through earlier Government cuts to child care support. They need help now, not in two and a half years’ time.

[Seema Malhotra]

Does my hon. Friend agree that that is yet another example of delaying giving people the resources and support they need, which in turn will delay the recovery and people’s ability to go back to work?

[Barbara Keeley]

I very much agree, particularly in the case of child care support. Families with a couple of children will now have to wait two and a half years before they can get help with child care, which is very expensive. That delay is bad enough, but, worse still, the proposed child care scheme will give a tax break to families earning up to £300,000 a year but offer no help to families on tax credits, whose incomes are already squeezed. Once again, the coalition Government are giving more help to higher earners and less to those on low and modest incomes, the people with the greatest need of child care support.

The Government propose to set the cap for social care at £72,000. Although we welcome the fact that a cap is finally being set, having waited more than a year for the announcement, we must remember that the Dilnot commission recommended a cap of £35,000. Setting the cap at that level would have offered the best protection to people on lower and middle incomes. It is very disappointing, to say the least, that the Government have ignored the advice of the experts whom they put together in the commission, and set the cap at a much higher level while also—this point tends to be ignored—making people pay accommodation costs of £12,000 a year, the very top end of what Dilnot recommended. People who need care when they are elderly, frail or ill will continue to face the shock of large care bills. Examples I have seen of the cap being set at such a high level show that the reality is that often, people will have to pay for their care for four or five years before getting any state help. Many fewer people will be helped by the Government’s proposals.

The final hit on my constituency, which I was disturbed to hear about, is the damage that will be caused to the value of homes as a result of exploration for shale gas. The Government have already caused confusion and uncertainty through their drastic overhaul of the planning system, yet the Red Book states:

“As the shale gas industry develops the Government will ensure an effective planning system is in place”.

That does not inspire confidence, because exploration for shale gas is going ahead in my constituency and, worryingly, it appears we do not have an effective planning system in place to deal with that. Drilling and fracking operations have been known to bring down house prices in an area by as much as 20%. People of course do not want to live in areas where fracking is planned, particularly after the disturbing events that took place when exploration first went ahead in other parts of the north-west. Exploration for shale gas could have a long-lasting adverse impact on the quality of life of people in my constituency. I am strongly opposed to it.

Mr Deputy Speaker, you know the geography of my constituency, so you will know that it is ringed by motorways; I am sure they are very useful in getting you home in the evening. A final aspect of the damage that the Budget will do to my constituency is that it goes ahead with an ill-advised widening of the M60 motorway, which will bring absolute chaos to 800 households in my constituency. When the motorway was built through my constituency, it was called the Stretford bypass. Now, the plan is to widen it by using the hard shoulders. “Hard shoulder running” will bring the M60—and you, Mr Deputy Speaker, if you are motoring—right next to the homes, windows and gardens of my constituents. Those 800 homes will be blighted by that ill-advised scheme, which I will continue to oppose to the best of my ability.

The Budget is a huge disappointment and will be seen as such in my constituency, because it is a massive missed opportunity and is damaging in so many different ways.

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[Andrew Gwynne]

I very much doubt it; we can but hope. There are some good ideas that build on the many regional initiatives that the last Labour Government left in place in May 2010. The strategy almost reinvents the wheel, but I do not care who reinvents the wheel; the fact is that the wheel should never have been smashed up in the first place.

My Denton and Reddish constituency has been badly affected by unemployment. The figures that were released yesterday showed an increase in those claiming jobseeker’s allowance over the past 12 months. There are now 2,642 unemployed claimants in my constituency, which is 6% of the economically active population. The longer-term picture is far worse. The number of those claiming jobseeker’s allowance over the past 12 months has now gone up 32%. The figure has gone up 44% for young people and, staggeringly, for people over 25 claiming jobseeker’s allowance, the figure has gone up 70% in the past year.

[Barbara Keeley]

Is my hon. Friend as concerned as I am to learn from the OBR forecasts that unemployment has not peaked? It will peak later this year or early next year, so the figures that he and I have quoted will get worse.

[Andrew Gwynne]

My hon. Friend is absolutely right. She may have read the Manchester Evening News research, which showed that Tameside, which is part of my constituency, is the worst place in the north-west of England for young people to access job opportunities. There are real issues here that need to be resolved by Government.

Some good local initiatives are being pushed through by my two local authorities. One is Tameside, a Labour local authority, and the other is Stockport, a Liberal Democrat authority. They are doing their best in very tight circumstances, not least because every man, woman and child in Tameside is losing the equivalent of £163 in central Government grant to the local authority and Stockport is losing £94 per head of population.

We are seeing initiatives such as the introduction of town teams in Denton—I am proud that my office is represented on the Denton town team—and a pooled apprenticeship scheme in Tameside, which enables firms to reduce the risk in taking on apprentices. That initiative has been ably led by the leader of Tameside council, Councillor Kieran Quinn, who set out an ambition to have every young person in work or training by 2020. Tameside council has done a deal with New Charter Housing, the local registered social landlord, to ensure that one affordable house is built per week for the next three years. Stockport has the Stockport Boost initiative, its town centre is a Portas pilot, and there are huge opportunities along the M60 corridor with its close proximity to the airport city enterprise zone and the Grand Central redevelopment. That initiative is being pushed forward by the Greater Manchester combined authority and the Association of Greater Manchester Authorities—a Labour-led, city region initiative.

Lord Heseltine talks about combined authorities and giving more responsibility to local enterprise partnerships, and that is where Greater Manchester takes a lead. He also mentions local leadership, which is a thorny issue. I personally support the idea of a Greater Manchester-wide mayor, and although I realise that others in the city region are not convinced, I at least welcome the debate started by Lord Heseltine in his report.

My final point—which I have already touched on—is about housing, which continues to be a big problem in my constituency. The new homes bonus announced by the Government in 2010 was supposed to unleash growth and help build at least 400,000 additional homes, but it has failed to deliver.

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[Damian Collins (Folkestone and Hythe) (Con)]

Following the speech by the hon. Member for Denton and Reddish (Andrew Gwynne) I feel I should point out that the Government do welcome Lord Heseltine’s report, which is why they have adopted the vast majority of his recommendations. I was also pleased to hear the hon. Gentleman mention the success of town teams and the Portas pilots, although he failed to mention that those initiatives were introduced by this Government.

I am sure, Mr Deputy Speaker, as a bit of context for this debate, that you will be familiar with the novel by Chris Mullin, a former Member of this House, called “A Very British Coup”—many Members will have read it; I think it was almost a manifesto for certain Opposition Members at one point. It tells the story of a left-wing Labour Government who run out of money and go cap in hand to the International Monetary Fund, but they cannot accept the terms that the IMF offers, so instead they go cap in hand to the Russians.

That scenario has, thankfully, been avoided here, but it is the meat and drink of a member of the eurozone and a European country, albeit a small country: Cyprus. It has lost control of its debts and spending and is in the awful position—as countries are when they get to this point—where the cuts it is being asked to make at this late stage are much worse than those it might have made earlier, at the right time. Countries find that they cannot go on borrowing for ever because one day the people lending the money will not lend it any more, or only at a rate so punitive that it cannot be accepted. That warning is live. It is affecting a member of the eurozone and may soon affect other countries. The Labour party ignore that peril, but the Chancellor of the Exchequer is steering this country away from it.

Throughout this debate Opposition Members, just as the shadow Chancellor and Leader of the Opposition did yesterday, have pointed out how much the country is borrowing and said that we are borrowing more than was forecast—a perfectly legitimate point. They are, however, much more reluctant to be drawn on whether they would borrow even more. The shadow Chancellor seems to be very happy when he is touring the news studios and sitting on the sofas to be a bit more frank and open about this, but he was asked about it twice in the debate and refused to answer both times. Last week, he was asked by Gavin Esler on “Newsnight” whether his plans would mean that the Labour party would borrow more, and his answer was, “Of course it would.” He is right. His plans do not come out of thin air. He must borrow the money to put in place the stimulus he wants. The reason he is not forthcoming is that he knows that that is not what the country wants. He knows that people are genuinely concerned about the high level of debt we have and about the costs we will put on future generations if we do not get on top of it now. He knows that people are looking at countries such as Cyprus and thinking, “That could happen here if we do not get a grip of our debts.”

[Barbara Keeley]

The hon. Gentleman does not hear what I hear from the shadow Chancellor. I heard him say, first, that we want a cut to VAT to stimulate the economy—the economy has been badly affected by the VAT increase—and, secondly, that we would use the proceeds from the 4G spectrum auction to build 100,000 houses, which would also stimulate the economy and the construction sector. My right hon. Friend the shadow Chancellor does answer those questions; the hon. Gentleman should listen to him.

[Damian Collins]

I hear the shadow Chancellor tell us how he will spend the same money a number of times. A VAT holiday could not be paid for, and would be only a temporary measure—the rate would go back up again. It would be an artificial stimulus, and the country cannot afford any more of those. Why will Labour Members not have the courage of their convictions and say, “Yes, of course borrowing would go up. That is the truth of the matter.” That is what the shadow Chancellor said on “Newsnight”. When they challenge the Chancellor, it is like a sumo wrestler giving unsolicited advice on dieting. Their prescription is worse. They want to borrow more than we have borrowed. People need to understand that. I do not understand why Labour Members will not be up front about it.

What can we do to get our economy going? Labour Members do not like to talk about the growth in jobs, because the recovery of the private sector economy and its response to the measures put in place by the Chancellor of the Exchequer in his series of Budgets is an inconvenient fact.

I was recently at the London launch of the campaign to market the east Kent regional growth fund. Doug Richard, the entrepreneur and former dragon on “Dragons’ Den”, was there to support the event. He is a great supporter of start-up businesses, particularly in the tech and digital sectors. He said that now is a great time not only to start a business—that is why we have a record number of private sector businesses in this country—but to go to the market to look for finance to set up a business. He highlighted, as have many entrepreneurs—particularly in the tech, creative and digital sectors, which are so important to the future growth of our economy—that initiatives such as the seed enterprise investment scheme, which the Chancellor mentioned in his Budget, provide great incentives to bring private sector money into start-up business, and to encourage individual investors to support the growth in those businesses.

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[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to follow the hon. Member for Hexham (Guy Opperman), who was hyperactive and animated in his contribution. On balance, I feel that he protesteth too much about most things on this particular occasion.

The Chancellor can certainly talk the talk. The question the country is asking is whether he can walk the walk. In his Mais lecture on 24 February 2010, the then shadow Chancellor argued that there were a series of benchmarks for the policies of the next Parliament

“against which you will be able to judge whether a Conservative Government is delivering on this new economic model.”

He also said:

“I have set out the benchmarks against which we can be held accountable”;

that

“we will maintain Britain’s AAA credit rating”;

and:

“We have to deal with our debts”.

We can mark the Chancellor against his own benchmarks. He has lost the UK’s triple A credit rating because he has failed to deliver growth and to reduce the deficit. The lack of growth has resulted in more, not less, borrowing. It is up £254 billion. Today’s Financial Times has a graph that demonstrates that the deficit is getting wider and that debt is going up. The headline says, “Things are worse and Plan A is off course.” It is now forecast that national debt as a percentage of GDP will not start falling until 2017-18.

In a sense, the Chancellor has supervised his own deficit expansion programme. Nice work by the Chancellor! But it was all too predictable. At least one learned commentator gave a warning in 2010—the Business Secretary who spoke from the Dispatch Box earlier. He said:

“Slashing spending now could push the economy back into recession and inflict further structural damage on the UK that will make it harder to sustain our credit rating.”

He said of the then shadow Chancellor:

“He…fails to appreciate that what the markets are looking for is a credible plan to reduce the deficit, not a willingness to slash regardless of economic conditions. In the current climate, it is essential that decisions about the speed and timing of tackling the deficit are based on the state of the economy, not political dogma.”

There we have it: decisions made from millionaires’ row and in yesterday’s Budget are affecting ordinary, hard-working people in my Scunthorpe constituency, and they are not making a difference for the better.

People are suffering from the removal of the education maintenance allowance, tuition fees, the rise in VAT, short-term working, tax credits being taken away, rising energy bills, fuel bills still going up despite the welcome move in the Budget, and the bedroom tax; and they are £381 a year worse off than they were in 2010. This Budget prefers a bedroom tax to a mansion tax, and it prefers giving a second home subsidy to those who can take advantage of it to building homes for those who need them. This is a Budget for millionaires, not hard-working people. It is a Budget of desperation and exasperation rather than aspiration, and another omnishambles.

[Barbara Keeley]

On a point of order, Mr Deputy Speaker. There has been lot of confusion over the last few hours about the Government’s new mortgage guarantee scheme, and while we have the opportunity I would like to ask those on the Treasury Bench to clarify whether second home owners are eligible for the scheme. Can the scheme, which can be used for new builds and other types of housing, be used in that way?

[Mr Deputy Speaker (Mr Nigel Evans)]

That is not a point of order for the Chair. As the hon. Lady knows, we still have another half hour of this debate and two full days on the financial statement. No doubt I will be in the Chair at times during those two days, and I know that her point will be raised, and that the Government will respond, probably in a way similar to the responses we have heard during this debate. I am absolutely certain that it will be part of the debate.

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[Sheila Gilmore]

As a result of the stimulus provided by the previous Government, all those measurements were turning in the right direction at that time—[Interruption.] Perhaps the Minister who is laughing ought to look, as I did last weekend, at the OBR report on the June 2010 pre-Budget report. He might not be laughing quite so hard then. The Government fail to analyse the problem correctly, so it is not surprising that they do not arrive at the right decision.

On jobs, it is not surprising that the Chancellor did not want to dwell on unemployment and this week’s increase. All we hear about is the increased number in employment. For once, I will not dwell on the statistics—others have done so, and I mentioned them in an intervention, but I want to highlight what the jobs situation means in the real world.

Last Saturday, I was out knocking on doors in my constituency. Within half an hour, I had met two people who were good examples of what the jobs situation means for them. One man had a 15-hour a week job in a local supermarket. No doubt these flexible short-term jobs are quite useful for the employer in meeting peak demand, and, of course, a person working 15 hours for the minimum wage will be below the national insurance threshold, which is another advantage for the employer. He had asked for more hours because he will be hit by the bedroom tax, but he was told that extra hours were not available.

Even if the hours were available, whom would they be taken from? My constituent might be given more hours, but unless there is a need for extra hours to be done in that job, another employee will get fewer hours, or another person would not get a job. Counting low-hour part-time jobs—we should remember that some so-called full-time jobs involve low hours—and saying, “Aren’t they wonderful?” is to forget that we are talking about real people. What effect does that have on them? The man is working and wants to work. More work in future would be good for his well-being, but he remains in poverty, like so many others.

[Barbara Keeley]

My hon. Friend makes some excellent points. Does she agree that, although people want those jobs, taking them often means they are denied the chance of further training and other opportunities? They would rather stick in the jobs they have than take the risk of going for those opportunities.

[Sheila Gilmore]

I know from work by single parent organisations that that is a problem for single parents who want to re-skill so that they can get jobs that will help them to bring up their children.

In the situation I have described, the individual stays poor, and the economy stagnates. That is the reality of the so-called jobs miracle. It is time the Government got real about what is happening.

On the housing measures, if the Government want to help the housing crisis and stimulate the economy, the best way would be through direct investment, which could be done very quickly. There are lots of sites with planning permission that could be used to build affordable homes. To say that 15,000 additional so-called affordable homes will be built as a result of the Budget is so far away from helping the problem that I do not know where to begin. As I said in an intervention, those are not really affordable homes—homes at 80% of market value are not affordable to most people. If they become affordable for people on low incomes, the housing benefit bill will be ratcheted up, when the Government have told us for so long that they are trying to reduce it. One part of the Government is ensuring that many of my constituents suffer a substantial cut in their income from the bedroom tax to cut the housing benefit bill, but another part is busily putting the housing benefit bill up. The policy does not make sense. Last year, we were told that 100,000 people will benefit from the Help to Buy scheme. The reality is that only 1,5000 have benefited. It is not enough to talk about all those plans and say how wonderful they will be when none of them results in anything.

Frankly, an athlete who became slower after their trainer told them they had only to diet to get faster would sack the trainer. That is what we need to do.

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[Barbara Keeley]

Does the Minister not think it is time to stop living in the past? Will he give an answer to the point of order I raised about the new Help to Buy scheme? Can it be used for second mortgages? The information about it states that a borrower could be remortgaging an existing property with a new lending institution. It is a very confusing scheme.

[Sajid Javid]

I shall come to the Help to Buy scheme in a moment. I was hoping the hon. Lady would offer an apology, but no such luck.

As my right hon. Friend the Business Secretary stated, yesterday’s Budget had economic growth at its heart. The economy is still feeling the impact of Labour’s disastrous policies, but we continue to find practical ways to turn the economy around and to restore growth. Through the private sector, we have created 1.25 million new jobs since we came into power—more new jobs in three years than were created under the last 10 years of Labour. Under this Government, private sector employment has been growing more quickly in the north-east, the north-west and Yorkshire than across the country as a whole. There are more people in employment today than at any other time in our history. We did not hear a single Opposition Member mention that fact.

We might think that Labour Members would have welcomed that development, but they did not. Instead, we heard cheap political talk. They asked about employment, which of course we all want to fall, but they avoided the facts.

On their behalf, I have looked at the change in youth unemployment in the constituencies represented by virtually every Opposition Member who spoke today and mentioned unemployment. Let us look at the facts. This is what happened to youth unemployment during the last term of the Labour Government in those constituencies. In Paisley and Renfrewshire North it was up 150%; in Clwyd South up 103%; in Feltham and Heston up 77%; in Worsley and Eccles South up 124%; in Luton South up 45%; in Birmingham, Selly Oak up 96%; in Edinburgh North and Leith up 60%; in Scunthorpe up 135%; in Edinburgh East up 87%; and in Denton and Reddish up a record 148%. In each of those constituencies, youth unemployment rocketed during the last term of the Labour Government and in every one of them it is down under this Government.

Let me turn to the employment allowance, which a number of hon. Members mentioned. We are proud to be introducing the £2,000 employer national insurance contributions allowance, which will benefit 1.5 million companies throughout the country and take almost a third—450,000 of the smallest businesses—out of NICs altogether. Cutting this payroll tax will be a boost for employment, but our tax changes do not stop there. We are overseeing a system of competitive tax rates that will be strictly enforced—a system that encourages companies to invest and employ here. That is why we are reducing the main corporation tax rate by April 2015 by an additional 1% to 20%, making it the lowest in the G7 and the joint lowest in the G20.

Let me turn briefly to Lord Heseltine and his report, “No Stone Unturned”. As hon. Members are aware, this week the Government published their full response to the report. I am sure that hon. Members have seen the impact Lord Heseltine made on the docklands and in Merseyside. We all know that he is a man with a vision for cities. I am sure that Members will join me in wishing Lord Heseltine, who turns 80 today, a very happy birthday. To help to celebrate, the Government have accepted, in full or in part, 81 of the 89 recommendations he made in his excellent report.

While I have time, I want to turn to aspiration. We know that businesses, buildings and companies start with the vision of individuals. Yesterday’s Budget was for an aspiration nation. It is a Budget that will support people who want to work hard and get on, by preventing higher costs of child care and disincentives to work, creating a simpler system for retirement and giving people a real opportunity to buy their homes, through the help to buy scheme, the extension of the right to buy scheme and our further investment in affordable homes.

Lastly, I want to turn to the cost of living. This Budget also recognises the pressures on the cost of living, as my hon. Friends the Members for North Swindon (Justin Tomlinson), for Harrow East (Bob Blackman), for Henley (John Howell), for Tiverton and Honiton (Neil Parish) and for Hexham (Guy Opperman) all outlined. We have cancelled September’s planned fuel duty rise. Fuel duty will no longer be 10p a litre lower than the previous Government had intended; it will be 13p a litre lower from April this year. We have also cancelled Labour’s hated beer duty escalator and gone one step further by taking a penny off beer duty. I thank my hon. Friends the Members for Burton (Andrew Griffiths) and for North Swindon for raising the issue and campaigning on it so hard.

We have also achieved our commitment to take the personal allowance to £10,000 by April 2014, a year ahead of schedule, which will be a further tax cut for 24 million people up and down the country. Together, these tax allowance changes have taken 2.7 million people out of taxation altogether. Someone working full time on the minimum wage would see their tax bill more than halve because of the measures this Government have taken. As we heard from my right hon. Friend the Chancellor yesterday, every individual who was benefiting from the 10p tax rate under the previous Government is now on a zero per cent tax rate.

Yesterday’s Budget put faith in hard-working people. It was a Budget that told businesses that they are welcome to set up here and encouraged to employ people here. It was a Budget that told individuals up and down the country that if they want to work hard, they will be rewarded in our aspiration nation. I commend these Budget resolutions to the House.

Ordered, That the debate be now adjourned.—(Greg Hands.)

Debate to be resumed tomorrow.

Child Benefit

Baroness Keeley Excerpts

Tuesday 22nd May 2012 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Streeter. I thank Gingerbread, the Child Poverty Action Group, the Institute of Chartered Accountants in England and Wales and the House of Commons Library for producing excellent briefings for today’s debate.

Eleanor Rathbone, the great advocate for family allowances, which we now know as child benefit, entered politics in 1909. It is extraordinary that, more than a century later, we have once again had to secure a debate in Parliament to champion the basic principles of child benefit. There have been threats to child benefit before, but since 1945 when family allowances legislation was introduced—a watered-down version of the child support that Eleanor Rathbone and others had campaigned for—only the coalition Government have introduced legislation for the demise of the principle of universality that underpins child benefit.

Not everyone on the Government side is happy with the proposed changes, as demonstrated by the lack, bar one or two, of any Back Benchers on the Government side who wish to take part in this debate. In an earlier debate, the hon. Member for Christchurch (Mr Chope) pointed out that the Government’s proposals ask those on higher incomes with families to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair. I do not usually quote from the hon. Gentleman, especially in agreement, but he has hit the nail on the head.

I would like to concentrate on two issues: the destruction by the Government of the universal principle, and the unfairness and unworkability of the proposed changes. The principle long established and supported on a cross-party basis is that society as a whole should contribute towards the upbringing of children, because we all share in the benefits of a properly supported future generation. Arguing for family allowances, Eleanor Rathbone captured that exactly:

“Children are not simply a private luxury. They are an asset to the community”.

The logic of accepting that view is that in a properly functioning society transfers are made to families with children—not away from them to pay for tax cuts to millionaires.

Her Majesty’s Revenue and Customs recently put out a press statement on the proposed changes, which told us that the Government’s plans for changing child benefit are legal. I have been in the House for a number of years and I am not familiar with Government Departments telling us that policy changes are legal. I can only imagine that it must reflect a measure of concern about the Government’s incompetence that Departments have taken to doing so. My concern, however, is not about the legality of the proposed changes, but that they are wrong and should not happen.

The CPAG has summarised the benefits of child allowances. They achieve horizontal distribution between families, from those without children to those with children, life-cycle redistribution—most people have children at some point and we want to help whenever families are most pressed—and intergenerational redistribution, and they place a value on all children. For those reasons and many others, the benefit should be kept in its universal form. The changes are grossly unfair and probably unworkable.

The ICAEW has branded the legislation seriously flawed in principle and in practice. It points to many problems and I will highlight a few. HMRC will be using the tax system to claw back from one individual a benefit paid to the other, which could be extremely difficult as families in similar situations will be treated differently. Despite the introduction of the taper, the changes could still lead to a huge disincentive for individuals to earn more. The worst aspect of the proposed changes is that a family with a single earner who has an income of more than £60,000 is significantly worse off through the withdrawal of the benefit, while two-earner couples with incomes of up to £50,000 each will not lose the benefit.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

My hon. Friend is making a great start to the debate. When meeting people in her constituency during the local elections, was my hon. Friend struck by how hard that unfair and unworkable aspect of the change is hitting them? One voter I met, who voted Conservative at the last election, said that he will never vote Conservative again because of the unfair nature of the changes. I spent a long time talking to him and he just could not believe that they were going to be introduced.

[Roberta Blackman-Woods]

My hon. Friend has made an excellent intervention. The unfairness of the changes goes to the heart of the debate. I suspect that as more and more people wake up to what will happen to their child benefit next January, we will see an even greater public outcry.

The changes disadvantage single parents, and partnerships where one person has decided to stay at home. With changed family circumstances, it may be very difficult to claw back payments or decide who should pay them. Taxpayers could be penalised for failing to submit information that they have no access to, particularly if the relationship breaks down. The extra administration involved could place huge burdens on HMRC at a time of budget restraint, and particularly at a time of cuts in staffing levels. We are therefore left with a number of questions.

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[Mr Chope]

I am grateful to the hon. Lady. On such issues, there is a slow fuse as far as members of the general public are concerned. They do not realise what the implications are until quite a long period has elapsed. We must look to people from outside the House—third parties, perhaps—to try to alert our constituents more to the full implications.

[Barbara Keeley]

Has the hon. Gentleman seen the Asda Mumdex index—a panel of 4,000 mums—sent to Members of Parliament yesterday? The optimism figure on the future of their family finances dropped from zero to minus eight in February, and the latest research found that it has dropped to minus 16. The issue may be on a slow fuse, but people out there—certainly, women in families—are starting to understand that the future looks rather bleak.

[Mr Chope]

I have not seen those figures, but they obviously speak for themselves. Despite that, I am not receiving as many angry letters from constituents as when, for example, I was the junior Minister dealing with the community charge. Let us recall that in 1987 the Government were elected with a specific manifesto commitment to introduce the community charge on the back of its success in Scotland. The proposal on child benefit that we are discussing today was not even in our manifesto. Indeed, it was expressly ruled out by comments made by both the Prime Minister and the Chancellor of the Exchequer in their shadow positions before the general election.

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[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

It is a pleasure to serve under your chairmanship this morning, Mr Streeter. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing this important debate and on her excellent speech. If the Minister was not already worried, he should be by now because, as anyone familiar with my hon. Friend knows, she is a tireless campaigner for her constituents and against injustice generally. I am sure that this debate will not be the last we hear from her on this issue.

I am also pleased to follow the hon. Member for Christchurch (Mr Chope), who gave an excellent speech. It is great to see him on the right side, even if he was not on for the poll tax. That shows that with age comes wisdom; I am pleased that the wisdom of his longevity has brought him to the right side on this issue.

We are discussing a complete mess, created by the omnishambles of a Budget, that has been allowed by Ministers to carry on for way too long. If we were being generous, we might suggest that the idea had been sitting on Whitehall shelves for some years, repeatedly pitched by numerous Sir Humphreys and batted away by successive Ministers until a particularly out-of-touch set of Ministers was easily convinced. Once the idea was out there, those same Ministers were too afraid to perform yet another 180° U-turn, so they turned only 150° instead. That would be the scenario if we were being kind.

If we were being less generous, we might wonder whether those out-of-touch Ministers were driving the idea through themselves, despite officials briefing them fully on how ludicrously complex it would be to implement and on the unfairness it would create. Perhaps the Minister will tell us which of those scenarios is the more accurate.

Either way, the high-income child benefit charge—that is what it is called—is a ridiculously complicated idea that fails the basic test of fairness. It is ridiculously complicated because the proposal is to introduce a tax in January 2013 that will not be collected until the following financial year, meaning an affected family with three children will be landed with a bill of more than £600 in additional tax during that following tax year.

If the Government are so determined to drive the charge through, why can they not at least marry up its introduction with the start of collection? The situation is ridiculously complicated; the charge will create hundreds of thousands of new self-assessed taxpayers while HMRC centres around the country, including some in my area, are being thinned out or closed entirely. Can the Minister tell us how many more staff HMRC will need to cope effectively with the increased flurry of returns over the Christmas and new year period as a result of the change? The charge is ridiculously complicated because it seeks to claw back tax from individuals for a benefit paid to other individuals who are separate in the eyes of the taxman, leaving the system open to both fraud and genuine errors.

Worse than all those complications is the fact that the measure fails the test of fairness because, for hundreds of thousands of families, it will take away a benefit that is supposed to be universal, as we heard from my hon. Friend the Member for City of Durham; when the benefit was brought in by Eleanor Rathbone, the principle was that it should be universal.

The evidence shows overwhelmingly that the benefit is used to meet the costs of looking after children, such as ensuring that they are well fed and have the clothes and uniforms that they need for school and the bus fare that they need to get there. Such things apply to all families. The charge fails the test of fairness because it will penalise children in single-earner families, as we heard from the hon. Member for Christchurch, while many in double-earner families who are much better off will continue to receive the benefit. It fails the test of fairness because it is yet another policy from this Tory-led Government, whose leader claimed he wanted to create the most family-friendly Government in history, that will directly hurt children and families. Among many other changes, the policy comes on top of huge cuts to Sure Start and early-years provision, the scrapping of extended free school meal eligibility and child trust funds, and a hike in VAT.

In addition, the proposed measure will take even more money out of our local economies when demand for goods and services is at rock bottom. The Treasury aims to claw back £1.5 billion from 1.2 million households, or an average of more than £1,200 from every family affected, just in the first year, with more families becoming liable as incomes creep up and the threshold remains static. That is £1.5 billion a year that will not be being spent in local shops and businesses on our struggling high streets.

[Barbara Keeley]

My hon. Friend’s figures are useful, but apparently the vast bulk of child benefit is spent on clothes, books and food, which shows the areas where the measure will have an effect.

[Mrs Hodgson]

As I highlighted myself, those are the findings. That money is spent on our high street—on books, clothes and food; it is not put into trust funds or saved up. The majority of people, whether in two-earner or single-earner families, will be hurt by the proposal because they use the money for daily necessities and not for luxuries. That is £1.5 billion a year that will not be put to work improving the quality of life of any of the children in the affected families or preserving and creating jobs in my constituency or the constituencies of any other hon. Members.

Children did not cause the financial and economic situation, yet the Government seem intent on making them pay for it. At the same time, high fliers in the City, who might well have played a part in that situation, are rubbing their hands together in glee at the cuts to the top rate of tax. Those are not the actions of a Government who have their policies straight, or who understand the lives of hard-working families; the more the public see of the coalition Government’s choices, the more they realise how out of touch they are.

The Government will regret this ridiculous decision, just as our country will regret voting this incompetent shower of a Government into power. Thankfully, there will be a chance to undo that decision at the next election, and policies such as the child benefit charge will ensure that this incompetent Government serve no more than one term.

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[Kate Green]

I am grateful to my hon. Friend. Her point about universality is fundamentally about the social glue, integration and the sense of communal interest in our children that universal benefits bring.

As others have said, these proposals are unjustifiable as a matter of principle, and unworkable in practice. Hon. Members have alluded to the difficulties of coping, both for families and for the Revenue, when family circumstances change. It may be complicated to pick out who has been a member of a household over the course of a year, or to state at what point they became one, so it may be difficult to assess at what point that should result in a tax liability.

[Barbara Keeley]

Does my hon. Friend intend to refer to the breach of confidentiality in an individual’s tax affairs? That is a serious issue with couples. Years ago, my first piece of casework as a councillor involved a constituent who was being chased by bailiffs for his wife’s community charge. At the time, there were rules on joint liability for the community charge, and that caused huge problems between couples. It seems to me that we are back in the same territory.

[Kate Green]

I have no doubt that if one member of a household is liable for another household member’s income—which is what will happen—that will distort the balance of power, and in some cases compromise the safety of women in that relationship and lead to something that feels fundamentally irrational and unjust. Why is one member of the household being taxed for a benefit that is paid to another member of the household for the benefit of the children? If Ministers want a fairer and more justifiable taxation system, I suggest that they look at having a more progressive system overall. If they want to take more from the rich and have a more progressive system, they should not have begun by reducing the top rate of income tax, which seems to be the Chancellor’s preferred route.

I will conclude with a couple of questions for the Minister. Has he made an assessment of whether couples are likely to continue receiving child benefit and sweep it up at the end of the year in their tax return, or whether they are they more likely to forgo child benefit at the point of payment? In the latter case, what assessment has he made of the impact that that will have on children’s well-being and on family stability? May we see that impact assessment before any further steps are taken to introduce the proposed policy?

Will this measure be reversible? The Opposition are committed to universal child benefit, and I hope that the Government will consider this change as temporary. Will the changes to IT and the taxation system be reversible? What is the IT plan for this development? Could this policy be unwound, or are we stepping towards a major change in attitude to universal benefits from which it will be impossible to retreat? What advice has the Minister received—this is the point touched on by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley)—on individual confidentiality in relation to tax affairs? How will one member of the household be advised about tax liability on a confidential basis without understanding the income of another member of the household, and can that be reconciled with the principle of tax confidentiality? Ministers seem confident that it can be reconciled, but Opposition Members have their doubts.

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[Cathy Jamieson]

That is an important point.

[Barbara Keeley]

I have a further serious example. I have a constituent who from time to time works with his firm in Afghanistan. His firm pays him a bonus because of the difficulties of working in a theatre like that. There must be hundreds, if not thousands, of people who get that sort of payment.

[Cathy Jamieson]

My hon. Friends have given very practical, real-life examples of the kind of circumstances in which people may feel penalised for doing particular types of work or for taking on additional risks and responsibilities. A thing that we hoped that we could persuade the Government to do, if nothing else, was not to implement the changes straight away, and perhaps the Minister could come back on that point. If they are intent on doing this—the Opposition believe that they would be wrong to do so, and I hope that they will pull back—at the very least would they be prepared to pause, produce a report and look at the circumstances in which people would be adversely affected?

My hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Stretford and Urmston raised the tax implications, and my hon. Friend the Member for East Lothian (Fiona O’Donnell) mentioned national insurance contributions. The main concern around those is that when organisations such as the Institute of Chartered Accountants and others that deal with tax issues day to day say that the principles are wrong, it is of serious concern. The Minister has to say whether taxing an individual in respect of money that was paid to someone else is not a fundamental change in how individual taxation is dealt with. I will give him the opportunity to intervene if he wishes, but perhaps he prefers to answer in his speech. Such organisations have looked at the proposals and raised serious concerns. It is a shift and could open opportunities in other ways for similar proposals to be brought in, which would be extremely concerning for the reasons that other hon. Members have set out.

Until I heard the Minister’s earlier comment, I was not aware that his wife was a lawyer. I am sure that she has some views about how, rather than defending the policy, the Government now seem to be relying on describing it as absolutely legal, as was identified earlier. None the less, there are questions about how they arrived at that position. When the regulations to justify the legality of this were introduced in Parliament, were they discussed in relation to child benefit or any other benefit issues? Was it ever anticipated that those regulations would be used in such a context? Could he deal with that issue in his response? If he cannot answer today, I have tabled a parliamentary question that I hope he will answer in due course.

I want to give the Minister time to respond, so I will speed up. I have made those points because the report from the Institute of Chartered Accountants identified the issue of HMRC using the tax system to claw back a benefit from one individual that was paid to another. The tax system is based on individuals and the benefit system is based on households, so that undermines the principle of taxation. I have not seen anything from the Minister that describes how a household will be interpreted in the tax regulations. Families in similar financial situations could be treated quite differently, which undermines the policy of fairness. Changed family circumstances could, as we have heard, make it difficult or impossible to calculate the clawback, or determine who should pay it; and, indeed, we have heard examples showing that if family circumstances change during the year someone will be presented with a tax bill at the end of it, leading to greater uncertainty about family budgets.

There has also been concern about collecting the charge through PAYE coding. The report by the Institute of Chartered Accountants in England and Wales states that it could lead to delays of up to three years, and undermine the efficiency of the whole system, because any coding adjustment is an estimate, and it would be necessary to re-estimate the code repeatedly. We are no longer just dealing with the principle of child benefit; we are dealing with a fundamental change to the taxation system. That should be scrutinised further. I hope that the Minister will be able to give some responses to the issues that have been raised this morning. Will he also address the point made by my hon. Friend the Member for East Lothian—she raised, it, indeed, on the Floor of the House—and others about women who might forgo the opportunity to claim child benefit, but would not receive credits for their national insurance contributions? That is a serious matter that has not been addressed.

Summer Adjournment

Baroness Keeley Excerpts

Tuesday 19th July 2011 Commons Chamber

[Barbara Keeley (Worsley and Eccles South) (Lab)]

NHS changes and the drive to achieve efficiency savings are causing a diminution in health services in my constituency. Salford has fewer GPs than the national average, and the Little Hulton ward is in the most deprived 3% of areas for health, yet the Little Hulton walk-in centre, which has served 2,000 people a month, is set to be closed by the primary care trust—a real blow to local people.

Salford PCT has also consulted on ending active case management for people with long-term conditions. Active case management is aimed at co-ordinating health and social care interventions to prevent deterioration, enable the patient to stay at home and avoid an emergency admission. It has had positive benefits for my constituents, and the loss of that support is another blow. Health Ministers say that they are protecting NHS budgets, so can the Minister tell me why my constituents in Salford are losing those vital health services?

GPs in Salford are also in the final year of moving on to practice-based commissioning budgets, which are based on the Department of Health’s fair shares toolkit. Two local GPs have alerted me to a problem with the way budgets are calculated. Their practice had 70% of its patients from the most deprived categories, whereas another practice had only 58%, yet the toolkit weighting applied to list size gave an uplift of 9% to the more deprived population’s practice but a 21% uplift to the less deprived. We could call that a lottery within a postcode. That calculation means that the practice in the more deprived area is faced with an apparent overspend of £200,000, and that GPs have to re-examine referrals and cancel activity for patients, giving them an increased work load and potentially having an impact on treatment for patients. Will the Minister find out why the toolkit gives a smaller uplift in weighting to a practice serving a more deprived area? As GP practices move on to real budgets, getting those calculations right is vital, as is dealing with the anomaly that I have outlined.

On social care, I welcome the report of the Dilnot commission and the opportunity to deliver a settlement on the funding of care and support. We need to work together across parties to agree a solution based on the report’s recommendations, and that work has already started in Parliament. I feel that it must include an acceptance of the report’s clear finding that additional public funding is required now for social care. As the Dilnot commission says,

“the impact of the wider local government settlement appears to have meant that additional resources have not found their way to social care budgets”,

and

“the current social care system is inadequately funded. People are not receiving the care and support they need and quality of services is likely to suffer”.

Social care provision is suffering as councils struggle with the Government’s front-loaded cuts of 27% over four years, and research by Age UK has highlighted cuts of 8.4% this year in council spending on older people’s social care. The social policy research unit has projected that spending cuts of 6% to 7% would mean that 250,000 older people would lose their services, so cuts greater than that would mean more than 250,000 losing services.

Back in 2005-06, half of all councils provided support to people with “moderate” care needs, but now only 22 councils provide that level of support. In its document “Care in Crisis”, Age UK states that there are

“huge discrepancies in the quantity and quality of support offered to older people by different local authorities”.

We have to deal with the current crisis as well as working to carry forward the reforms in the Dilnot report.

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[Barbara Keeley]

On a point of order, Madam Deputy Speaker. The Minister has just replied to the debate very fully, and I thank him for responding to my points and those raised by other Members. A while ago, however, his hon. Friend the Under-Secretary of State for Health, the hon. Member for Guildford (Anne Milton), was answering a debate in Westminster Hall, ran out of time, and said what Ministers frequently say: “I will respond later to the points with which I have not managed to deal today.” I have received no replies to the questions that I raised on that occasion, and I wonder if you can advise me, Madam Deputy Speaker, on what we can do when Ministers make pledges of that kind and do not follow them up.

[Madam Deputy Speaker (Dawn Primarolo)]

That is not a point of order for the Chair. However, the hon. Lady has taken the opportunity to make the point directly to the Minister. I am sure that he has heard what she has said, and that he fully intends to reply to the points that have not been dealt with today.

Oral Answers to Questions

Baroness Keeley Excerpts

Tuesday 22nd March 2011 Commons Chamber

[Mr Osborne]

I do not know why Opposition Members want to talk down the British economy. What the chief economist at the CBI said contrasts with the hon. Gentleman’s remarks about manufacturing. The chief economist said:

“The outlook for UK manufacturing output growth is very encouraging.”

We are going to support manufacturing. We have the corporation tax cut that I announced in last June’s Budget, and we have the new centres for innovation and manufacturing. We are going to help manufacturing, whereas Labour shrank manufacturing.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

Talking of making things, a small manufacturing firm in my constituency is investing in the development of a new engine. If it moved into production, hundreds of jobs would be created in the 15th most deprived area in the country. Will the Chancellor tell us why the Government have cut Labour’s investment allowances, which would be just the thing to help and support a small and vital manufacturer like the one in my constituency?

[Mr Osborne]

Manufacturers, including the one to which the hon. Lady has referred, benefit to the tune of £250 million from the reductions in corporation tax that we announced in the June Budget. That is what we have done to support British industry. As I have said, under the Labour Government British industry shrank: while the share of the economy taken by financial services grew by a third, the manufacturing share halved.

Fuel Prices and the Cost of Living

Baroness Keeley Excerpts

Wednesday 16th March 2011 Commons Chamber

[Fiona O’Donnell (East Lothian) (Lab)]

I am genuinely grateful for the opportunity to speak in this debate. The increase in VAT has been a matter of great concern to my constituents and I am unashamedly going to concentrate on how it is affecting them.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I thank my hon. Friend for giving way, as the Minister did not. The Minister talked about living in the real world, but I am sure that we on the Opposition Benches know more about that than she does. I am sure that my hon. Friend’s constituents will be struggling with the £450 a year increase—

[Justine Greening]

On a point of order, Mr Deputy Speaker. The hon. Lady has just made an accusation about what I do or do not know about living in the real world. That goes beyond what I think is a personal comment. She has no understanding of what I do or do not understand. I can assure her that I get on the District line every day to come into work and I know exactly what is going on in the real world. I only wish that the Opposition did.

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[Ian Murray]

I would like to make some progress.

My constituents wrote to ask me to bring their stories to the House and put them directly to the Chancellor and the Chief Secretary to the Treasury, so I am disappointed that neither of them is in their place. It shows a real disregard for this place when those two senior Ministers are not present to debate such an important issue. Of course the two Ministers on the Treasury Bench are among my favourites, but it would have been nice for my constituents to have had a response directly from the horse’s mouth.

Let us examine what fuel price rises are doing to the cost of living. I shall start with the case of a constituent in Edinburgh South who runs a small business. Let us look at what these particular fuel increases are doing to growth in the economy; in so doing, I shall echo some of the points made by the hon. Member for Worcester. My constituent runs a business in the service sector, so she uses a lot of suppliers. However, suppliers’ price increases are going through the roof, mainly because of additional fuel costs. She told me that some of her suppliers were charging as much as an additional £5 per delivery to cover their own increased fuel charges. My constituent faces a dilemma of what to do about that £5 increase. Should she pass it on to her customers? She finds doing so difficult. Why? Her problem is compounded by the fact that VAT has increased from 17.5% to 20%, which has also impacted directly on prices to her customers.

[Barbara Keeley]

My hon. Friend makes the important point that this debate is about the cost of living, as well as about fuel prices. He also rightly raises the problem faced by businesses in deciding whether to pass the increases on to their customers. My constituents live in one of the 15 most deprived areas in the country. They have an appalling bus service after the network was privatised by the Conservatives. People in that situation, like my hon. Friend’s constituents, will suffer both from increased costs from fuel charges and from having to pay £450 a year in increased VAT. Does he agree that our constituents are suffering heinously from that?

[Ian Murray]

Of course. The poorest suffer disproportionately because they have to use public transport and face the increased costs, while also having to pay more in VAT for all the supplies they buy. Prices are going up because small business issues, such as the one I am highlighting from my constituency, further compound the problem. I noticed that the Economic Secretary was upset when my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) suggested that she did not live in the real world, but we are talking about what is happening in the real world and I do not think that the Minister’s 40-minute contribution dealt with any of the real issues for our constituents that are happening at the coal face.

The owner of the small business that I mentioned is faced with a dilemma, but it seems that she must increase prices at a time when consumer confidence is at its lowest. People are worried about their jobs, they are worried about prices going through the roof, they are worried about commodity prices, and they are worried about how they are to fill up the family car. It is a quadruple whammy for businesses, which, as I have explained, face increased core costs as well as increased supplier costs, increased prices owing to the VAT rise, and increased borrowing costs. All that is creating unstable consumer demand, which, I am told by small firms in my constituency, is depressing their businesses.

On Friday I was visited by someone who works as a middle manager at Her Majesty’s Revenue and Customs. He has two small children, he is not a high earner by any means, and he and his wife live in my constituency. He described to me plainly how he has been affected by what the Government have done in the past 10 months. It is clear that he is being squeezed from all angles because of this Government, and fuel and the cost of living are part of that. Let me go through the list. He faces increased national insurance contributions, the increase in VAT to 20%, and the fact that his pension will be linked to the consumer prices index rather than the retail prices index, along with the additional pension contributions that he must make. He faces tuition fees for his children, he has lost his child benefit because he is the sole earner in the relevant bracket, and he faces record commodity prices.

Oral Answers to Questions

Baroness Keeley Excerpts

Tuesday 8th February 2011 Commons Chamber

[Mr Gauke]

My hon. Friend has a great deal of expertise in the business world. In the longer term, it is vital that we get the fundamentals right and have sustainable public finances, and the Government are pursuing policies that will favour growth. In the short term, obviously her constituents have our sympathy. Jobcentre Plus is able to provide a rapid response service in those areas, and I am sure that it will be acting closely with her constituents.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

A firm in my constituency manufactures parts for motorbikes, and it plans to move into the full production of motorbikes, so why have the Government decided to cut investment allowance, which will hit firms that are trying to make such moves? How can there be growth with policies that undermine manufacturing?

[Mr Gauke]

We announced in the June Budget corporation tax reductions that will benefit all sectors, including manufacturing. As we can see, so far manufacturing is doing well. Of course, we cannot be complacent, but the early signs are that our policies are helping.

Oral Answers to Questions

Baroness Keeley Excerpts

Tuesday 21st December 2010 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point. We recognise the benefits that a sovereign sukuk could bring to improving liquidity in the sector, but significant costs would arise from sovereign sukuk issuance. However, I am sure that my noble Friend Lord Sassoon, who leads on this matter, will happily meet him and his colleagues.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

9. What assessment his Department has made of the effects of the outcome of the comprehensive spending review on the provision of local services in deprived areas.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is for Departments to decide how best to prioritise resources within their departmental expenditure limits. The consequences in particular locations will become apparent only once these decisions have been made. However, the Secretary of State for Communities and Local Government announced the provisional local government finance settlement on Monday, and the balance of the settlement is more heavily weighted towards councils that are more dependent on central Government grants and have greater relative needs.

[Barbara Keeley]

Salford is ranked 15th in average scores for the 50 most deprived districts in England. The front-loaded grant cuts announced in the spending review mean that next year Salford council is faced with making budget cuts of 15%, or £40 million, which will have an impact on services such as social care for frail older or disabled people. How does the Minister square that reality with the Government’s pledge in the spending review to limit the impact of spending reductions on the most vulnerable in our society?

[Mr Gauke]

Had we proceeded with the spending formula that existed under the previous Government, some of the deprived areas that are most dependent on central Government grant would have faced a greater cut than the one in the proposals announced by my right hon. Friend the Secretary of State for Communities and Local Government.