Oral Answers to Questions
Greg Hands Excerpts(9 years, 4 months ago)
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Tom Pursglove (Corby) (Con)
4. What steps he is taking to support the creation of new enterprise zones.
The Chief Secretary to the Treasury (Greg Hands)
In the summer Budget we announced the opening of the bidding round for a new wave of enterprise zones throughout England. This round will focus on ensuring that all places in England can benefit from the programme, including rural areas where appropriate, and the Government encourage towns and districts to work with local enterprise partnerships to develop bids. Details of the application process will be released in due course.
Tom Pursglove
I thank the Chief Secretary for his answer. I can advise that, in Corby, we are busily getting together to put in a bid. Corby is also taking in very considerable housing growth. Does he agree that areas that are taking in such growth should also receive the benefit of new jobs and new infrastructure?
Greg Hands
I thank my hon. Friend for his question. He is of course right. During the course of the previous Parliament, the performance of the programme improved, and it was absolutely right to create strong incentives for local areas to take part. That was consistent with our long-term economic plan. We are looking forward to examining his case for an enterprise zone in his Corby constituency in due course.
Mr Gregory Campbell (East Londonderry) (DUP)
When the Government come to review the success of enterprise zones, especially those in the last wave, which includes one in my own constituency, will the Chief Secretary undertake to ensure that job creation becomes a major focus of enterprise zones as they are rolled out across the United Kingdom?
Greg Hands
The hon. Gentleman is absolutely right. Job creation is vital in the enterprise zone programme. Over the course of the previous Parliament, the programme supported more than 15,000 jobs, which brought in £2.1 billion of private investment.
Michael Fabricant (Lichfield) (Con)
19. My right hon. Friend will know that there is already a successful local enterprise zone within the Greater Birmingham and Solihull LEP, of which Lichfield is a member. Will the Government now accept invitations from LEPs, which already have zones, for further zones?
Greg Hands
I thank my hon. Friend for that question. The Government have opened up the bidding round for new enterprise zones, and are encouraging LEPs to work with towns and rural areas to develop new sites. The bidding round is open to all LEPs across England, but only those sites with strong commercial propositions and value-for-money cases will be accepted.
Teresa Pearce (Erith and Thamesmead) (Lab)
5. What estimate he has made of the number of people who will receive a net reduction in income as a result of the policies on tax credits announced in the summer Budget 2015.
Dawn Butler (Brent Central) (Lab)
8. What discussions he has had with the Secretary of State for Work and Pensions on the effect of proposed changes to employment support allowance on levels of employment.
The Chief Secretary to the Treasury (Greg Hands)
We created 2 million jobs in the previous Parliament, and our objective is to create a further 2 million in this Parliament. A crucial part of that is the welfare reforms that we have introduced to help make work pay, which is consistent with our long-term economic plan.
Dawn Butler
Of course we all want to see work pay, but a large section of the community are sometimes unable to work for short periods of time because of illnesses such as sickle cell disease. The Minister seems to have overlooked that group of people.
Greg Hands
I thank the hon. Lady for her question. Our welfare reforms are based on the principle of fairness; fair on those who receive the benefits and fair on those who pay the tax. With regard to a specific group, there is clearly a difference between the work-related activity group and the support group, and we are happy to look at those differences. She is clearly not satisfied with what we are doing, but she is also one of the 48 Labour Members who rebelled last night on welfare, so I do not think that she is satisfied with her Front Benchers’ position either.
William Wragg (Hazel Grove) (Con)
9. What fiscal steps he is taking to support small businesses.
Rishi Sunak (Richmond (Yorks)) (Con)
10. What progress he has made on his deficit reduction plans.
The Chief Secretary to the Treasury (Greg Hands)
Since 2010, the Government’s long-term economic plan has halved the deficit as a share of GDP, but the job is not yet done. At 4.9%, the deficit remains too high. The summer Budget set out the action that the Government will take to eliminate the deficit and run an overall surplus and start paying down debt. The Government will reduce the deficit at the same rate as over the last Parliament, to reach an overall surplus of £10 billion in 2019-20, according to the forecast from the Office for Budget Responsibility.
Rishi Sunak
Future Governments need flexibility to respond to economic shocks. Does my right hon. Friend agree with me that the Charter for Budget Responsibility and plans to run a fiscal surplus are sensible measures that will provide that flexibility?
Greg Hands
I thank my hon. Friend for that question and he is absolutely right. The reliable way to reduce debt effectively over time is to run a surplus in normal time. Public sector net debt as a share of GDP reached 80.8% last year and the Government are committed to getting debt falling as a share of GDP from here on.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
I note that the hon. Member for Richmond (Yorks) (Rishi Sunak) is a new Member. Perhaps he might have forgotten that before 2015, the Chancellor said that he would eradicate the deficit by this election. May I ask the Minister to confirm that due to the recent fiscal changes in his July Budget, the OBR forecast that an additional £26.8 billion would be borrowed by the public sector between 2016 and 2017, and is it not the case that the Government have missed every single one of their deficit reduction targets?
Greg Hands
What I can confirm is that the surplus will be higher at the end of the Parliament and debt will be lower. But the hon. Lady was a Member in the last Parliament and she voted against every single one of the spending reductions and other measures that we took to deal with the deficit, and all the time she wanted higher deficits, higher debt and higher spending.
Steve McCabe (Birmingham, Selly Oak) (Lab)
11. What estimate he has made of the net change in revenue to the public purse that will arise from tax changes announced in the summer Budget 2015.
Budget Resolutions and Economic Situation
Greg Hands Excerpts(9 years, 4 months ago)
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Mr Umunna
I will come on to that right now.
The Prime Minister said in a speech to the CBI in 2010:
“In five years’ time, we will have balanced the books.”
The Government have failed to do that. It is worth revisiting the promises made then before giving the Chancellor the congratulations he seeks now for this 2015 Budget. In June 2010 they set a forward-looking fiscal mandate to achieve a cyclically adjusted current balance by this financial year. It was a rolling target, but no one took the rolling nature of it very seriously, so let us put that to one side. In short, they were saying they would eliminate the deficit by this financial year. In 2010, by their own measure, we were told they would do this, achieving a surplus of 0.3% last year and 0.8% this year. That is what we were told would happen. In the event, the Chancellor completely failed to meet that goal. The deficit came in at 2.4% last year, is forecast to be 1.7% of GDP this year and does not move into a surplus until 2017-18, some three years later than planned on their own measures.
There was also a supplementary target for public sector net debt as a proportion of GDP to be falling by 2015-16. The Chancellor managed to achieve that through some jiggery-pokery with the numbers, namely rapid asset sales in the last Parliament to pay down enough of the debt for his supplementary target to be met. But rushed asset sales mean poor value for the taxpayer, as the disastrous sale of Royal Mail illustrated in technicolour.
It is also worth reflecting on what we were told the debt-to-GDP ratio would be in 2010. It was supposed to fall from 61.9% of GDP in 2010 to 69.4% and 67.4% last year and this year, but debt as a proportion of GDP was 80.8% last year and is forecast to be 80.3% this year.
Mr Umunna
The truth is—I say this to the Chief Secretary—the Government borrowed over £200 billion more than they planned in the last five years. That is more in five years than the last Labour Government borrowed in 13 years. Now they want us to pat them on the back for their failure. I will not do it.
The Chief Secretary to the Treasury (Greg Hands)
I am very pleased to be closing the debate on this historic Budget as the first Conservative Chief Secretary on behalf of the first Conservative-only Government since 1997.
We have had a good debate. Indeed, we have had four good days of debate. For me, the most remarkable parts were the commanding speech from my right hon. Friend the Chancellor on day one and the real passion from my right hon. Friend the Work and Pensions Secretary. Almost as remarkable were the opening exchanges on Thursday; for the last five years of the Budget, day two saw set pieces between Ed Balls and Vince Cable, but not this year, as we, the Conservatives, took both of their seats on 7 May.
Today we have had five high-quality maiden speeches from the three great nations of England, Scotland and Wales. It was a particular pleasure to hear from my constituency neighbour, my hon. Friend the Member for Kensington (Victoria Borwick). She made a marvellous maiden speech, with a great tribute to her predecessor Sir Malcolm Rifkind, who is actually my predecessor as well. We have another common predecessor; she told us how she appeared in the index of Alan Clark’s “Diaries” and the concern that had caused her husband.
Equally impressive was the maiden speech of the hon. Member for Paisley and Renfrewshire South (Mhairi Black), who spoke with great poise, engagement and passion, although I have to say that most of her speech seemed to be directed at the Labour party. She said that Labour had left her family, not the other way round. I congratulate her on a memorable maiden speech and on her first-class honours degree.
From Wales, we heard from my new colleague my hon. Friend the Member for Brecon and Radnorshire (Chris Davies). In what was a very entertaining speech he took us through his first day here—how he saw the mosaic of St David in the Central Lobby and his pride at being both Welsh and a Unionist, and how the Whips approached him sternly, with one Whip reminding him somewhat of his wife back home. I am wondering which member of the Whips Office that might have been. His speech was also peppered with references to all kinds of other battles and heroism.
Also from Scotland, we heard from the hon. Member for Airdrie and Shotts (Neil Gray). He made a very competent maiden speech and talked about life in Westminster and missing his family back in Scotland. I can tell him that that is not unique to those travelling from Scotland; it can happen to those of us who are MPs for London constituencies as well. He was generous about his predecessor, Pamela Nash, and talked about being the first Orcadian for 200 years to be an MP.
Again from Scotland, the hon. Member for Linlithgow and East Falkirk (Martyn Day) was generous to his predecessor, Michael Connarty, whom I knew well and served under on the European Scrutiny Committee, and gave us a radical, passionate and humorous speech. I wish him well.
A number of other Members also contributed to the debate, but I will not go into their speeches in detail. I was struck, however, by the fact that, although some Labour Members raised interesting points, so many of their speeches sounded like they were cut and pasted directly from their election hustings speeches and showed no recognition of what had happened on 7 May or what happened last week.
Let me now conclude the Budget debate. This is the Budget that gives Britain a pay rise and that cuts taxes for 29 million people. It is the Budget that protects our national security and that gives Britain the security of living within its means. To be fair, not all Labour Members ignored the results of the election or the Budget last week. The acting Leader of the Opposition, the right hon. and learned Member for Camberwell and Peckham (Ms Harman)—[Hon. Members: “Where is she?”] That is a very good question. She might be in hiding. She reprimanded the shadow Health Secretary over the benefit cap, reminding him:
“You may have noticed that we lost the election”.
It is remarkable that he or anyone else could possibly have missed that fact. It is equally remarkable that she now appears to be on the right of her party. I do not think that she moved; I think the party has moved to the left. We have heard from the right hon. Member for Birkenhead (Frank Field), who is so enthusiastic about our new national living wage that he wants it to be brought forward and to start sooner. It is resoundingly clear from this Budget debate that Labour has made no progress in economic policy since May.
Geraint Davies
Is not this a Sheriff of Nottingham Budget? Is not the Chief Secretary to the Treasury robbing the poor by removing their tax credits and giving to the rich by increasing the inheritance tax threshold? This Budget stinks, and his grubby hands are all over it.
Greg Hands
There you have it, Madam Deputy Speaker. The hon. Gentleman’s remarks epitomise everything that we have all been suspecting about the Labour party over the past 10 weeks—namely, that it has learned nothing from its defeat right across the UK on 7 May. It looks as though it intends to start this Parliament as it started the last one: in disarray, denying the deficit and failing to apologise for its past mistakes.
The right hon. Member for Doncaster North (Edward Miliband) lost the election, and the turning point was surely that moment in the TV debate when he denied that the Labour Government had spent too much. If they had not spent too much, how come there was no money left? Labour’s economic credibility was so bad that, at the election, it even lost the constituency of its own shadow Chancellor as well as those of half its Treasury team.
There was one senior Labour figure who avoided losing his seat, but he did so only by standing down voluntarily. That was the last Labour Chancellor, Alistair Darling. He is reported to have said something very interesting the day after the Budget, which was that Labour was “in disarray” and that it was
“paying the price of not having a credible economic policy.”
He hit the nail on the head. Labour’s response to the Budget has been totally incoherent. Who would have thought that a Labour Opposition could attack a policy to bring the minimum wage for workers from £6.50 up to a national living wage of £9 in the course of a Parliament? I invite the other parties to consider their positions. By the way, only the Labour party could have a leadership crisis without actually having a leader. If Labour Members vote against the Budget in a few minutes’ time, they will be voting against a national living wage, against dealing with the deficit and against meeting the UK’s NATO defence commitments. They will also be voting against £10 billion of extra investment in the NHS.
This is not a Government who shy from the tough decisions. It is right that higher wages, not welfare subsidies, should raise the standard of living of working families. It is right that those with the broadest shoulders should bear the biggest burden. It is right that we should help and support our businesses to bring prosperity to this nation and it is right that we should build ourselves strong, stable and secure public finances. We are doing that. This has been a landmark Budget, delivering for the entire country a bright and prosperous future. There are still tough choices ahead, but I commend the Budget to the House.
Question put, That the amendment be made.
Productivity Plan
Greg Hands Excerpts(9 years, 4 months ago)
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The Chief Secretary to the Treasury (Greg Hands)
HM Treasury has laid a command paper before Parliament titled “Fixing the foundations: creating a more prosperous nation CM 9098”, setting out a 15-point plan with concrete policy measures for productivity growth in the UK over the next decade.
The UK is set to be the fastest growing G7 economy in both 2014 and 2015. However, while rising employment has been a major source of recent growth in the UK, productivity is as essential an ingredient over the longer term. There has been a slowdown in productivity growth in the UK since the onset of the financial crisis, and there is a large and long-standing productivity gap between the UK and some other leading advanced economies. The Government are committed to boosting productivity growth and narrowing this gap in order to enhance living standards and quality of life in the UK.
Building on measures announced in last week’s Budget that will boost productivity, this plan is built on two pillars: encouraging long-term investment in economic capital, and promoting a dynamic economy. It includes measures to reform the planning system and further education; sharpen incentives to provide excellent teaching in universities and open up higher education to new providers; build stronger trading links with emerging markets; cut red tape; support the adoption of digital technologies; and promote competition and consumer choice.
The measures in this plan address both the slowdown of productivity growth in the UK since the financial crisis and the longer-term productivity gap with other countries. The document is available on the www.gov.uk website.
[HCWS94]
Productivity
Greg Hands Excerpts(9 years, 5 months ago)
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Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move,
That this House notes that UK economic productivity has been stagnating for several years with productivity growth the second worst of the G7 countries; recognises that supporting business to improve output efficiency and enhanced productivity is the best route to higher living standards and in turn is crucial for the health of the public finances; regrets that the Chancellor failed to address productivity in his March Budget speech; urges the Government to ask the Office for Budget Responsibility to report on the impact on productivity of the options likely to be considered in the forthcoming Spending Review; and believes that decisions on reducing public service expenditure must take into account their impact on productivity performance.
The productivity of our economy and of businesses, the workforce and the resources of our country is critical for our recovery and for our future prosperity. There should be a cross-party consensus that productivity is the key challenge facing Britain today, which is why I was very disappointed by the Chancellor’s attitude at Treasury questions yesterday and at his point-blank refusal to engage with this crucial debate in the House of Commons today. We have learned that when it comes to dealing with issues that he does not want to attend to, the Chancellor either blames someone else or sends someone else. In that growing tradition, I welcome the new Chief Secretary to the Treasury to his new role.
Greg Hands
Surely the hon. Gentleman must admit that, given that the Chancellor was here yesterday at Treasury questions, and able to answer questions on productivity, and that he was here again today as First Secretary for Prime Minister’s questions, and able to answer questions on productivity, he has been available in this House to answer questions.
Chris Leslie
I am sure the Chancellor is very much focused on being the Prime Minister in waiting. He is, of course, the eminent First Secretary of State, and I hope his junior Ministers occasionally manage to peek round his door and get the odd minute of his very busy time on these matters.
The mark of a Chancellor focused on our economic challenges would have been to engage a bit more thoughtfully in considering how best we can tackle Britain’s productivity problems, but he could not bring himself to mention productivity once during his 8,000-word Budget speech three months ago.
The Chief Secretary to the Treasury (Greg Hands)
I am delighted to respond to this debate on productivity, because it is absolutely central to our long-term plan to fix the economy. My ministerial colleagues at the Treasury have been candid about the scale of the productivity challenge, so in some ways I agree with a great deal of what the hon. Member for Nottingham East (Chris Leslie) has said, but this is a challenge that the UK has faced for decades, not “several years” as the motion suggests.
We have been very clear that increasing productivity is a key challenge in this Parliament for this Government: it will be a key focus of ours over the next five years. Indeed, the Chancellor noted as early as August 2010—very early on in the last Government—that our relatively low productivity was a drag to economic recovery, when he spoke at Bloomberg about the economy of the future.
The hon. Gentleman has said that productivity was not mentioned in the Budget, but I refer him to page 1—the very first page—of the Budget document.
Greg Hands
No, first of all I am going to tell the hon. Gentleman what it says:
“The deficit remains too high and productivity too low, there are still long-standing structural weaknesses in the economy, and the gap between the economic performance of London and the rest of the UK remains too wide.”
Chris Leslie
The key thing is the difference between the Budget document and the Budget speech. The Budget speech was more than an hour long, so why did the Chancellor not mention that very paragraph?
Greg Hands
Surely the most important thing is the delivery of the Budget, not just the speech. The delivery of the Budget was all about things such as digital communications infrastructure, housing, science, innovation, freezing fuel duty, doing something for the oil and gas regime, the sharing economy and backing business by launching a comprehensive review of business rates. The most important thing in government is what is delivered.
The Chancellor announced four weeks ago—way before the hon. Gentleman tabled a motion or wrote an article—that we will publish a productivity plan: a plan to make Britain work better. I will remind the hon. Gentleman of that speech, because he was there with various Labour leadership contenders, minus the hon. Member for Islington North (Jeremy Corbyn). Curiously, he seemed to have been missed off the CBI invitation list, but he may be up for an invitation in the future. The Chancellor said:
“Let me be clear”—
perhaps he was not clear enough for the hon. Member for Nottingham East—
“improving the productivity of our country is the route to raising standards of living for everyone in this country.”
I am sure the shadow Chancellor will recall that, because he was there.
It speaks volumes that the Treasury ministerial team announced in May by the Prime Minister includes Jim O’Neill, one of the most respected economists in the country and an authority on productivity. His input is more about deeds than words and it will be vital as we put in place the policies that will turbo-charge our economy.
Our productivity plan will build on the significant supply-side reforms we have put in place over the past five years. It will be wide-ranging and ambitious. It will look to the long term. It will help rebalance the economy and build the northern powerhouse. It will improve our infrastructure and reduce burdens on businesses; increase our support for childcare; ensure that many more affordable homes are built; expand apprenticeships and equip us with the skills we need for the 21st century; and make a bold next step in this country’s remarkable economic recovery.
Andrew Gwynne
Can the Chief Secretary confirm whether the success or otherwise of his productivity plan will be assessed by the Office for Budget Responsibility? Will it cut across all Government Departments to ensure that some of the regional imbalances that he has mentioned will be tackled across Government?
Greg Hands
The hon. Gentleman makes an important point. Of course the OBR looks at all Government proposals at the appropriate time, and I do not think that there will be any exception for this.
John Redwood
Does the Chief Secretary recall that Labour took into public ownership Network Rail, a crucial industry for our country, and that the previous Government commissioned the McNulty report, which discovered that that big organisation was way behind its continental comparators when it came to productivity and efficiency and that their system of managing it had fallen short? Is that something he can help remedy?
Greg Hands
I thank my right hon. Friend for that intervention. Infrastructure will be a key part of the productivity plan, so we must study which are the productive and which the less productive areas of our infrastructure.
Gareth Johnson (Dartford) (Con)
Productivity is vital for the British economy, and the way to achieve good productivity is by having a strong economy. Does the Chief Secretary agree that we need a pro-enterprise, low-taxation and low-regulation economy, as opposed to what the Labour party is proposing?
Greg Hands
My hon. Friend is quite right. Labour seems not to be learning the lessons of the general election five weeks ago. Encouraging enterprise and promoting sound public finances by dealing with the deficit are extremely important, so I entirely agree.
Andrew Bridgen
At least twice during his opening speech the shadow Chancellor said that we are now seeing highly skilled employees replaced by low-skilled employees. Does my right hon. Friend agree that the shadow Chancellor should not talk himself down like that?
Greg Hands
Yes, my hon. Friend is here, unlike half the shadow Treasury team who went into the election and were wiped out by either the Conservatives or the Scottish National party—and that includes the hon. Gentleman’s former leader.
Greg Hands
I shall give way shortly. I think I have awakened the hon. Gentleman’s interest with my reference to the SNP.
I thought that it would be helpful to start by setting out the productivity question in relation to the UK’s general economic competitiveness, setting the scene for the problems we face. Hon. Members will of course be aware that, thanks to our long-term economic plan, we can be proud of having the highest growth of the major advanced economies in 2014, and we are predicted to repeat that in 2015. We are highly competitive, and that is linked to productivity. We are ranked ninth of 144 countries globally for competitiveness, we enjoy the lowest corporation tax in the G7, and we are seen as being well governed, as we are in the top 20 of 102 countries on all eight factors of the World Justice Project’s Rule of Law index for 2015. London remains a world-leading international financial centre. British universities are by far the best in the world outside the US. For those who complain that we no longer make things, within two years we expect the UK to match its all-time car production record, which was set back in the 1970s. The city of Sunderland now produces more cars than the whole of Italy put together. We are extremely competitive.
George Kerevan (East Lothian) (SNP)
Is the Chief Secretary aware that the high productivity in British automotive products is an optical illusion because only 37% of the spend in the value chain relates to this country, whereas two thirds of it relates to the imported content of those cars, most of which comes from Europe—the Europe that you are trying to take us out of?
Greg Hands
It is a bit churlish to debate the precise details like that. The fact remains that car production in this country is extremely impressive. We should celebrate that throughout the UK, including in Scotland.
Greg Hands
Let me make a bit of progress.
The high productivity that I have mentioned is very good, but we need to be equally honest about the areas where we can do better. We need to improve our literacy and numeracy skills, and our OECD position for intermediate skills needs to rise. To match the highest rate of female participation in the workforce in the G7, which is in Canada, or in the OECD, which is in Iceland, we would need over 500,000 or 2.5 million more women to enter the labour force respectively. Our gross value added growth is still too reliant on London and the south-east. We are not building enough housing, and our investment in roads and rail has not yet undone the effects of the decades in which we under-invested. All that means that our economy needs to find an extra gear.
We should view this debate in the context of the broad decreases in productivity growth across the OECD over the past few years. We are not unique in this regard. Other G7 countries, including Germany and Italy, have seen their measured productivity per worker fall since 2007. We have to accept that productivity is a major challenge, but it is not a new challenge—it has been around for decades. To meet that challenge, we must look calmly and seriously at the variety of factors that affect productivity, and put in place wide and ambitious long-term reforms.
Importantly—the hon. Member for Nottingham East needs to engage with this point—those reforms must not jeopardise other elements of our economic growth. That is the approach that the Government will take in our productivity plan, because productivity is not an end in itself, but a means to an end. It is all about prosperity. When we publish our productivity plan, I hope that the Labour party will see fit to support it, because we agree that improved productivity will be good for living standards across the country and help us to meet our fiscal commitments, which is a point that he raised.
Ian Blackford
What the Chief Secretary is saying does not meet the reality of what has been happening for the past seven years. Productivity in the UK has fallen and the Government have failed to deliver prosperity. The root of that has been the failure of macroeconomic policy. Your big idea was quantitative easing, with £375 billion of new assets being created, but none of that has fed through to bank lending. That is why we have not seen the underlying investment in our economy that is required. You need to address that and make sure that we see investment in infrastructure, industrial investment and a plan for growth, not some meaningless productivity, which is just hot air and words, but no reality.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Several people this afternoon, not just the hon. Gentleman who has just spoken, have used the word “you”. When one uses the word “you” in this Chamber, it refers to the Chair. I have not done any of the things I have been accused of this afternoon. I do not want to pick on individual Members at this early stage of the Parliament, but please let us use the correct language.
Greg Hands
I dispute the premise of the hon. Gentleman’s question. Productivity in this country is rising, albeit at a relatively low level. We would like it to be higher. It has risen by 0.9% this year. The OBR’s projection is that productivity will increase by between 2.1% and 2.5% per annum in the coming years. We need it to increase by even more than that, but it is certainly not the case that productivity has collapsed over the past couple of years.
Greg Hands
Okay, I hear the hon. Gentleman.
To answer the point raised by hon. Member for Nottingham East about the OBR, the OBR already produces forecasts and commentary on productivity, and will continue to do so independently and impartially as it always has done.
Chris Leslie
We are looking for the right hon. Gentleman’s support in commissioning the OBR to look at the spending choices the Chancellor has before him. He will have to acknowledge that certain decisions on reducing public expenditure could have more of an adverse effect on productivity than others. We want to make sure that we have a proper analysis of the impact of those decisions. That would be a better, more sensible way to think about how we spend. It is not just a debate about how much we spend.
Greg Hands
The OBR remit is pretty clear on this kind of thing. Let me just say that I have listened to the hon. Gentleman a great deal in the past five years. Coming from a party that never set up the OBR, or any equivalent to it, he seems now to be rather over-fascinated in what its operations should be. He might have thought of some of those questions during the 13 years of the Labour Government.
The hon. Gentleman said that employment growth had been of poor quality. I would dispute that. I think we will find that in the five years since the first quarter of 2010, more than 60% of the increase in employment has been in high skilled occupations. Some 75% of the increase has been in full-time employment and, after the excellent results this week, wages growth now exceeds inflation for the eighth consecutive month.
I am going now to make a bit of progress, because I am conscious that we have one or two maiden speeches coming up and a highly subscribed debate. Let us look at what we did in the previous Parliament. In 2010, the priority clearly for the Prime Minister and the Chancellor was to put in place a jobs-based recovery. We all know the result: 1,000 jobs created every day, with three quarters of them full time. The employment rate is now at its highest on record at 73.5% and around the highest level on record at 31.1 million. We make no apology for prioritising job growth in the past five years. It is the best way to make people’s lives better, as the nearly 12,000 people who found employment in the shadow Chancellor’s constituency will surely agree.
At the same time, we put in place important supply side measures to improve our national productivity. We increased average public and private infrastructure investment to about £47 billion a year between 2011 and 2014, which is more than a sixth higher than it was in the previous Parliament. We have completed 15 major schemes on the strategic road network, worth £3.4 billion, with a further 17 schemes, worth £2.5 billion, under way. We have completed more than 2,650 infrastructure projects and extended access to superfast broadband to more than 2.5 million more premises. We have accelerated the academies programme, with more than 4,600 academies now opened, and we have set the path for high-speed rail to unleash the full potential of our northern cities. We have protected the science budget in cash terms and set out a long-term capital commitment on the science budget as well, ensuring that it will rise in line with inflation for the duration of the Parliament.
Peter Kyle (Hove) (Lab)
Does the Chief Secretary recognise that in constituencies such as mine 90% of all businesses employ fewer than eight people? The skills and productivity challenge we have is on the softer, entrepreneurial side. He mentions the skills challenge and the setting up of academies. Does he acknowledge that we need to invest more in the soft, communication and entrepreneurial skills that young people need in an economy such as mine?
Greg Hands
I welcome the hon. Gentleman to this place and thank him for his intervention. I do not necessarily disagree with anything he says. Equally, I am sure that he would welcome what has been done in Hove in the past five years. Unemployment has fallen by, I think, almost 1,200 in his constituency—a 53% fall in joblessness. We will consider what he proposes, but he must recognise what has been delivered for his constituency.
We have raised the annual budget of Innovate UK, the core innovation support mechanism for businesses in the UK, from £360 million in 2011 to more than £500 million in 2015-16. I am sure the hon. Gentleman will also be delighted to learn that we have put a premium on apprenticeships, of which more than 2.2 million have been created, and that we have pledged to deliver 3 million this Parliament.
As I said, productivity began to rise last year, although we are still below our pre-crisis peak. We agree on the extent of the problem. The OBR expects productivity to pick up in 2015 and to grow at a reasonable rate afterwards in every year of the forecast period, which is good news for businesses and individuals and has undoubtedly contributed to our economic recovery.
I want to say a few words about the next five years, because, although a lot has been done, now is the time to redouble our efforts. My right hon. Friend the Chancellor told the CBI last month that we had a once-in-a-generation opportunity to find an extra gear for the British economy. Our productivity plan will set out how we will do that, and I will not, and cannot be expected to, pre-empt that plan. Let me remind hon. Members, however, of our manifesto commitments to boost productivity. We said we would invest in infrastructure, on which previous Governments failed to take the decisions that other countries did, meaning we fell behind in the ’90s and in the time of the last Labour Government.
Can you imagine, Madam Deputy Speaker, that in 2010 we did not even have a national infrastructure plan? I appreciate that the hon. Member for Nottingham East was not here between 2005 and 2010, having lost his seat in Shipley, but he was a Minister for part of the time Labour was in government, so he could have raised some of these points when he was sitting around the table. We have caught up a lot since, but our historical stop-start approach has meant that our physical infrastructure is not nearly as good as it should be. Now is our opportunity to fix that.
Greg Hands
No, I am going to make a bit more progress.
We will invest more than £100 billion in infrastructure over the next Parliament, including more than £70 billion in transport alone, of which £15 billion will be spent on our roads.
Greg Hands
I will come back to the hon. Gentleman in a moment.
We are investing in broadband and home building, with a commitment to build 200,000 starter homes to be sold at a 20% discount exclusively to first-time buyers under the age of 40.
Greg Hands
I give way to my hon. Friend the Member for Weaver Vale (Graham Evans) and welcome him back to the House after his fantastic election result last month.
Graham Evans
I am grateful to my right hon. Friend. Will he remind the House of the previous Labour Government’s record over 13 years? In 1997, 20% of GDP was from manufacturing, but by 2010 that had dropped to less than 10%.
Greg Hands
My hon. Friend is right that the previous Labour Government had a dreadful record on manufacturing, and that is one of the key challenges—this reads through to productivity—facing us this Parliament.
Greg Hands
I have allowed the shadow Chancellor quite a bit of time already, so I will give way to the Member for Washington.
Tom Blenkinsop
I am the Member for Middlesbrough South and East Cleveland. I welcome the Minister to his new role. Of course, in the past five years, under the coalition Government, manufacturing shrank by 1%. In terms of productivity, the north-east is probably the lead region in the country, mainly because of its chemical and pharmaceutical sectors, but they have seen the largest slump over the past five years, due mainly to the lack of investment. Does he agree that one problem is that the Government imposed the unilateral carbon floor price tax on energy-intensive industries, and did not the Chancellor promise to bring in a compensation mechanism? Will he speak about that, because it would not pre-empt the Chancellor’s emergency Budget in July?
Greg Hands
I thank the hon. Gentleman for that series of questions, but his use of statistics was highly selective. I am sure he will join me in celebrating the fact that the two regions in which employment is rising the fastest are the north-west and the north-east. Of all regions, the north-east leads the way in export growth. I am sure he will also join me in welcoming the fall of 1,518 in unemployment in his constituency under the last Government—again, just shy of a 50% fall.
Chris Leslie
I thank the Member for Fulham for giving way. Would he be so good as to look at the point he was making on transport infrastructure? I asked about the Davies commission on airport capacity, which he knows is an issue affecting Britain’s productivity as a whole. Will he give us an assurance that the Government will make a swift decision when presented with the final conclusions of the commission’s report, and not kick it into the long grass until the end of the year or beyond?
Greg Hands
The position is unchanged. It is as set out in our manifesto. We await the publication of the Davies report, and we will act accordingly. However, we recognise that airport capacity is an issue, which is why we commissioned the report in the first place.
Greg Hands
I am going to make some more progress, because I know that others wish to speak.
Marcus Fysh
I thank my right hon. Friend.
The A358 runs from my constituency up to the M5 and all the new jobs that will come on stream at Hinkley Point. Before the election, the Labour party planned to cancel the dualling of the road. Will my right hon. Friend confirm that that will not happen under this Government?
Greg Hands
I congratulate my hon. Friend on his amazing election result. It was a fantastic achievement. Indeed, I think that he unseated one of my predecessors as Chief Secretary.
Of course we are still committed to delivering the A358. I believe that the Labour party produced only two proposals for reducing the deficit during the election campaign, both of which were highly misguided, including the proposal for cuts in the A358 programme.
It is, in many ways, a vindication of what we have achieved since 2010 that we are debating the issue of productivity today. Over the last five years—[Interruption.] The hon. Member for Nottingham East says that he has been raising the issue. I have gone through all the speeches—well, not all of then, because I could not find them all, but most of them—that he made when he was leading the “Gordon Brown for leader” campaign in 2007. I have also gone through the speeches that he made when he was backing Ed Balls in 2010. I must say that I found scant reference to the word “productivity”.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
Will the Minister give way?
Greg Hands
No. I am going to finish now.
As I was saying, it is, in so many ways, a vindication of our record of the last five years that we are debating the issue of productivity. Many of us will remember our debates—led by the hon. Member for Nottingham East—on mass unemployment, the cost of living crisis, and “too far, too fast”. In all those respects, the hon. Gentleman’s approach turned out to be absolutely wrong. We now have financial stability, unemployment is down to historic lows, and living standards this year are predicted to grow at their fastest rate since 2001. All that is thanks to the tough decisions that we have made.
We now have a great opportunity to step things up a gear, and to solve a challenge that has been a drag on the United Kingdom’s economy for decades. The wind is blowing in the right direction. We have a falling deficit, a growing economy, an historic mandate, and a firm resolve to tackle this issue, along with the right team to do it. That is how we deliver for the people of the United Kingdom, and that is what this Government will do.
Oral Answers to Questions
Greg Hands Excerpts(9 years, 5 months ago)
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Mr Ranil Jayawardena (North East Hampshire) (Con)
10. What recent progress he has made in reducing the deficit.
The Chief Secretary to the Treasury (Greg Hands)
Thanks to our long-term economic plan, the deficit has more than halved as a share of GDP from its post-war peak of 10.2% in 2009-10 to 4.8% by the end of last year, but the job of fixing the public finances is not yet complete.
Craig Mackinlay
Will my right hon. Friend confirm that competitive procurement continues across all Government Departments to ensure value for money for taxpayers in all that we do?
Greg Hands
I congratulate my hon. Friend on his stellar victory in demolishing both the UK Independence party and Labour. I made a number of visits to his constituency, and I can say that he is truly one of the party’s finest campaigners. The Government remain committed to improving value for money in public procurement, building on the significant progress made in the previous Parliament. The Minister for the Cabinet Office and Paymaster General and I meet regularly to discuss this, continuing the excellent work of Francis Maude.
Mr Jayawardena
Despite being left a note by one of his predecessors saying that there was no money, will my right hon. Friend confirm that he will continue to focus on cutting taxes for low and middle-income earners in North East Hampshire while working to eliminate the deficit, so that my constituents pay less tax and less debt interest in the future?
Greg Hands
I congratulate my hon. Friend on taking his seat and on his fine maiden speech last week. He told us then:
“Our best days lie ahead.”—[Official Report, 3 June 2015; Vol. 596, c. 646.]
He is right, but only if we continue to get our deficit, and therefore our debts, under control. Thanks to the plans we have set out, we are set to eliminate the deficit altogether and deliver the tax cuts outlined in our manifesto. We are doing it with the strong endorsement last month of the British people.
Geraint Davies (Swansea West) (Lab/Co-op)
There are 800,000 fewer people earning more than £20,000 than there were in 2010. Is that why the Government have borrowed more in five years than Labour did in 13 years?
Greg Hands
The hon. Gentleman ignores the overall employment picture over the last Parliament, in which 2 million new jobs were created and unemployment fell by 1 million. It sounds to me as if the Labour party is starting this Parliament as it started the last one: in a mode of deficit denial and failing to face up to Britain’s problems.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Despite the Chancellor telling us last week he was going to get our economy into surplus, we are still £75 billion in the red. Will the Chief Secretary set out in detail how he will eliminate the deficit, specifically on the £12 billion of welfare cuts?
Greg Hands
To be fair to the hon. Lady, at least she has remembered the deficit today. I have one question for her. During the election campaign, Labour was denying—
Mr Speaker
Order. Let me make something clear, as I know the right hon. Gentleman is a new Minister. The Chief Secretary has no questions for the Opposition—that is not the constitutional position. [Interruption.] I am glad he is getting a bit of advice from the Chancellor. He needs to be clear about that at the start of the Parliament.
Greg Hands
I thank you, Mr Speaker. Welfare savings will be set out in due course. I remind the hon. Lady that we all need to confront the deficit and do something about it, and I hope that creates cross-party support.
Neil Carmichael (Stroud) (Con)
Does the Chief Secretary agree that the key part of reducing the deficit is the long-term economic plan, and that it rests on the provision of additional skills for our manufacturing sector, which in turn will drive up opportunities for young people?
Greg Hands
My hon. Friend is absolutely right, which is why the Government have, and will continue to have, an excellent record on the skills agenda. I look forward to looking at the funding for the further education sector as part of the spending review this autumn.
John Healey (Wentworth and Dearne) (Lab)
Among all 20 of the world’s most advanced economies, why have only France, Italy and Japan grown more slowly than the UK in the five years the Chancellor has been in the Treasury? Is not weak growth, not the deficit, the real problem for the UK economy?
Greg Hands
The right hon. Gentleman, as a Treasury Minister in the last Labour Government, will know that the size of the deficit we inherited—which, at more than 10%, was one of the highest—made our job difficult in the first couple of years. However, the UK is now growing faster in 2014 and 2015 than any other EU or G7 country.
David T. C. Davies (Monmouth) (Con)
6. What steps he is taking to reduce the tax gap.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
14. What his policy is on the future ring-fencing of the science budget.
The Chief Secretary to the Treasury (Greg Hands)
We committed in our manifesto to protect the science capital budget of £6.9 billion up to 2021. Decisions on the wider science budget will take place in the spending review.
Stephen Metcalfe
I was grateful to my right hon. Friend the Chancellor of the Exchequer for protecting the science budget during the last Parliament, but the flat cash settlement agreed in 2010 is now worth 15% less than it was then. Will the Minister agree to look at that and at least make good that loss when preparing the Budget and going into the spending review, so that our excellent science base can play its full part in delivering our long-term economic plan?
Greg Hands
I once again congratulate my hon. Friend on his excellent election result in Basildon. I note that, to date, he has served five years on the Science and Technology Committee, so there cannot be many in the House who take a stronger interest in the matter. He will know that our capital funding for science almost doubled in the last Parliament, and that we take science very seriously. Wider decisions on science funding will be dealt with in the spending review.
Helen Goodman (Bishop Auckland) (Lab)
Traditionally, Britain has been absolutely brilliant at basic science, but less good at translating that into innovation for industry. What are the Government going to do to address that issue?
Greg Hands
The hon. Lady makes a reasonable point, but that is why in the previous Parliament we increased spending on innovation, including on the new catapult centres and on a whole host of other projects, and we look forward to doing more in this Parliament.
Christian Matheson (City of Chester) (Lab)
15. What assessment he has made of the level of productivity in the economy.
Fiscal Sustainability Report
Greg Hands Excerpts(9 years, 5 months ago)
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The Chief Secretary to the Treasury (Greg Hands)
Today the independent Office for Budget Responsibility (OBR) published its fifth fiscal sustainability report (FSR). This document meets its requirement to annually prepare an analysis of the sustainability of the public finances, and provides an important insight into the state of the public finances and the impact that demographic change will have.
The OBR also published the second welfare trends report (WTR). This report provides a transparent and independent analysis of welfare spending, in line with a request from the Chancellor in December 2013 to publish information on trends and drivers of welfare spending, and sources of error compared to the previous forecast.
The FSR was laid before Parliament earlier today and copies of both reports are available in the Vote Office and Printed Paper Office.
Changes since last year’s fiscal sustainability report do not change significantly the path of the long-term projections, with the FSR’s key conclusion reiterating that:
“longer-term spending pressures, if unaddressed, would put the public finances on an unsustainable path.”
As the OBR notes in its analysis, this is due to the spending pressure generated by an ageing population, which is projected to increase age-related spending by 3.9% of GDP from 2019-20 to 2064-65. Without additional policy change, the overall budget surpluses that are assumed to continue after this Parliament bring debt down to a low of 54% in the early 2030s, before being outweighed by age-related pressures that put debt back onto an upward trajectory. Debt reaches 87% of GDP in 2064-65 and is expected to continue rising thereafter. The report projects that tax revenues will remain at a relatively constant share of GDP from 2019-20 onwards, although in its detailed analysis of oil and gas revenues, it highlights the sharp scale of the decline in tax receipts from the North sea.
The Government take the sustainability challenge seriously. As life expectancy continues to increase, there is a need for a regular and structured way in which to consider changes to the state pension age in future. That is why the Government will carry out a regular review of state pension age every six years, starting in this Parliament. Details of the core principle to guide that review were set out alongside autumn statement 2013, including that people should expect to spend on average up to a third of their adult life in receipt of the state pension. The OBR projects that this would have a substantial positive impact on long-term fiscal sustainability, with state pension spending projected to be 0.8% of GDP lower by 2064-65 than if the state pension age had risen with currently legislated changes.
Reforms to the state pension come alongside the Government’s reforms to public service pensions, which will rebalance taxpayer and member contributions in the short term while ensuring costs are sustainable and fair in the long term. The previous Government implemented reforms to rebalance contribution costs between the taxpayer and the member, to change the uprating measure to CPI, and to reform the schemes’ designs in line with Lord Hutton’s recommendations. HM Treasury has estimated that these reforms will save more than £430 billion by 2061-62.
Spending on health rises from 6.2% of GDP in 2019-20 to 8.0% in 2064-65, as the population ages, with spending on social care rising from 1.2% to 2.2% over the same period. Given the particular spending pressures that arise in health and social care, including non-demographic factors, the Government are committed to ensuring that care services are as efficient and effective as possible. This includes funding the NHS’s own plan to deliver a modern, efficient and sustainable NHS and continuing to integrate health and social care services through policies such as the pooling of around £6 billion of health and care funding in Greater Manchester and the £5.3 billion Better Care Fund.
On the revenues side, the OBR have revised their oil and gas forecast down to £2.1 billion between 2020-21 and 2040-41 with companies’ net revenues expected to be low over the period. The OBR’s analysis clearly demonstrates the impact of falling production and cost escalation on the profitability of the sector—the onus is now on industry to make real improvements in these areas to improve their competitiveness. At Budget, the Chancellor introduced a radical package of reforms to support the sector, worth £1.3 billion, including reducing the headline tax rates and introducing a new investment allowance to reward companies investing in the UK continental shelf. This package is expected to lead to £4 billion of additional investment and an increase in production by 15% by 2019-20.
Recognising the scale of the long-term challenge, the Government are committed to ensuring that our public finances are put on, and remain on, a sustainable path for the long term. The OBR analysis makes it very clear that the Government’s medium-term fiscal consolidation plan is a vital step towards achieving long-term fiscal sustainability. This includes Government reforms to change the welfare system to ensure it promotes work and personal responsibility, while putting expenditure on a more sustainable footing.
Over the last Parliament, the Government halved the deficit from its post-war peak, but the deficit remains one of the highest in the developed world. This Parliament, the Government will complete the task of getting the public finances into surplus, so that we bear down on our excessive national debt, and begin to address the long-term challenges that we face.
The fiscal sustainability report and the welfare trends report published today are key examples of the great strides the OBR have taken in delivering greater transparency and credibility to our fiscal forecasts since its creation, five years ago. This Government remain committed to supporting the OBR in its role to provide independent and authoritative analysis of the UK’s public finances. The Chancellor has therefore asked Sir David Ramsden, Chief Economic Advisor to the Treasury, to complete a Treasury review on the existing regime and framework of the OBR including a focus on its role in enhancing UK fiscal credibility. The outcomes of the review will be published in the summer.
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