Finance Bill
Lindsay Hoyle Excerpts(9 years, 4 months ago)
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Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Wilson, have you given way or have you finished your speech? None of us is sure what has happened.
Sammy Wilson
I have given way. [Hon. Members: “Who to?”] I have given way to the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).
Mr MacNeil
And on my birthday, too. I am sure that the hon. Member for East Antrim (Sammy Wilson), the gentleman that he is, will of course give way to the Member from the Green party and to my hon. Friend the Member for Glasgow North West (Carol Monaghan).
The hon. Gentleman might find that one of the reasons why fossil fuel is so cheap is the low price of carbon, as a result of which the theory of “the polluter pays” does not apply to fossil fuels. Carbon is priced neutrally at the moment, and when that changes, the real price of fossil fuels versus renewables will become apparent. He mentions the change in the regime, but planning is a large part of that. Finally—this is my final point, Mr Deputy Speaker—the hon. Gentleman talks about the cost of energy in the UK, and the cost of the UK’s energy is actually about the highest in Europe, minus taxes.
Mr Deputy Speaker
Mr Wilson was very worried about the amount of time we are taking—we can go to any hour—and I think Mr MacNeil is trying to see whether we can get to that hour. However, as he knows, as much as I appreciate that it is his birthday, he blew out all his candles on his first intervention. We now want shorter interventions.
Sammy Wilson
Of course, the hon. Gentleman is absolutely wrong when he talks about there being no price on carbon. We are talking about the climate change levy. That is one of the costs of carbon. There is also the cost of the European trading scheme, in which carbon is traded and carbon allowances are given, so of course there is already a cost.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. We can have only one person on their feet. Mr Salmond, you know that better than anybody. If Lucy Frazer wishes to give way, she will, but we cannot have both standing on their feet. Are you giving way or not?
Budget Resolutions and Economic Situation
Lindsay Hoyle Excerpts(9 years, 4 months ago)
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Mr Deputy Speaker (Mr Lindsay Hoyle)
If we aim for speeches of up to 10 minutes, everybody should get the same amount of time.
Amanda Milling (Cannock Chase) (Con)
Does my hon. Friend agree that we need to find ways to help our high street retailers to adopt online methods of retailing so that they have many ways to reach their customer base?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. When the hon. Member for Thornbury and Yate (Luke Hall) gives way, he should sit down until the intervention has finished, and then he can stand back up. We cannot have two people on their feet at the same time. He should not worry; we are all learning. It is not a problem.
Luke Hall
Thank you, Mr Deputy Speaker.
I absolutely agree that we should do everything we can to support retailers, including the option of trading online. Removing the restrictions on Sunday trading will give consumers and families the flexibility that they need. People who work in small businesses often have Sunday as their day off, because it can be an easy day to manage stores. Current restrictions mean that their first day off—Sunday—is often the least productive and, in the modern world and the retail industry, convenience is key.
I will work closely with local shops in south Gloucestershire to ensure that their voices are heard when local authorities consult on these changes. It is vital that any consultation includes all retailers in any area, and that small shops in the catchment area of larger stores and supermarkets have a strong voice locally in any consultation.
In conclusion, I once again voice my support for the Budget, and I look forward to hearing ones like it in the future. We should support workers by ensuring that work always pays, encourage employers and free the market to provide what the public demand. The Budget delivered the Conservative promise and supports our long-term economic plan to get this country moving forward.
Mr Anderson
Does my right hon. Friend agree that Conservative Members would probably say that going to a food bank is a lifestyle choice?
Mr Deputy Speaker
I do not mind interventions, but I want to ensure that speeches come in below 10 minutes.
Mr Howarth
I shall try my best, Mr Deputy Speaker.
My hon. Friend is right; of course it is not a lifestyle choice. Who would choose a system where they have to get a voucher, turn up somewhere and give it to someone they have never met before in return for food to take home to their family? It is not a lifestyle choice. Of the 7,000-odd people—a staggering number—who have used the food bank in Knowsley, 700 are in employment. It is definitely not a lifestyle choice for them, and I do not think it is for the others either.
In conclusion, I have set out the reality for many children in Knowsley, and Knowsley is not unique—I am not making that argument—but even at the end of it all, what sort of employment opportunities are available? For many, there are zero-hours contracts under which the person does not know when they are expected to turn up for work, or even how many hours they are going to work, and in some cases—I have spoken to people for whom this is the case—the person gets a call at 11 o’clock at night telling them to go 10 miles away to do a two-hour shift in a packaging factory, the first hour’s earnings from which go on a taxi because public transport does not start until after 6 o’clock. Is that the sort of work these children should inherit? I think not. And these are often major international firms. For those not lucky enough to go into higher education, the other option is a rolling contract. That sounds great, doesn’t it? Why would anyone not want to be on a rolling contract? Actually, it means that every now and then the person gets sacked, so they do not have any continuity of employment rights. Sadly, that is the future for many young people, and this Budget does nothing to take away the fear of that future.
Barbara Keeley (Worsley and Eccles South) (Lab)
I feel the need to defend my hon. Friend the shadow Business Secretary, who is being unfairly attacked by Conservative Members. It is being said that he did not even mention business in his opening speech. [Interruption.] I am one of the people on this side of the House who does have a business background; I have a very substantial background in the IT sector, supporting manufacturing industry up and down the country. An extensive section of my hon. Friend’s speech addressed the need to do something about business rates, but there was no answer from the Secretary of State on that point. I think—
James Cleverly
I will take it that the hon. Lady misheard the opening of my speech. I did not say that the shadow Business Secretary failed to mention business; I said I was horrified by how seldom he used the words “business” and “firm” in his speech.
Kwasi Kwarteng
The broader point my hon. Friend makes is absolutely right: in the run-up to the election the Labour party gave absolutely no indication whatever that it had the faintest interest in the wealth-creating business part of this country. There was—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman has made his speech; I do not need to hear a repeat of it.
James Cleverly
It does not matter what my hon. Friend or I think, or what Labour Members think; what matters is what businesspeople think, and the feedback I had—
Mr Anderson
I certainly will, even though the hon. Gentleman has only been here for five minutes.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I think that I am the judge of how long people have been here. We have already had one intervention from Kwasi Kwarteng and I can assure the hon. Gentleman that he has been here for a lot longer than five minutes, although it might only feel like that.
Kwasi Kwarteng
I promise that my intervention will not last five minutes. Who are the dead millionaires that the hon. Gentleman is talking about?
James Cleverly
If the hon. Gentleman is so proud of his party’s credentials in relation to working people, perhaps he would like to explain why the working voter has deserted his party for mine and even for the United Kingdom Independence party?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. It might help if I remind people that this is a Budget debate, not an election debate.
Mr Anderson
Actually, less than a quarter of the people of this country voted for the Tory party, and the vast majority of them would not be traditional working people. More than 75% of the people of this country did not vote for the Tory party.
Let us acknowledge that people in the public sector have made great sacrifices. The hon. Member for Braintree (James Cleverly) told us less than five minutes ago about the 4,000 businesses in his constituency. What about the thousands of people who work in the public sector in his constituency, who he never mentioned once? They have not had a pay rise for five years and will not have one for another five years, but they are the people who pay for his businesses to make their way.
Quite frankly, this Budget stinks—it is as simple as that. It is divisive, it is dishonest, it is damaging, and people inside and outside this House know it. It will not be long before they and those of us who really care about this country stand up against it to get rid of it. We have to send a strong message from this House. On Saturday, going on for 150,000 people marched on the streets of Durham saying clearly, “You’ve got it wrong. We’ve got to stand up. We’re not taking any more of this. We’re sick to death of the poor paying for the failings of the rich.” It is time to change the tune in this country.
John Mc Nally (Falkirk) (SNP)
The hon. Gentleman will be aware that small businesses up and down the country, especially those in the construction industry, are struggling to stay afloat due to incomplete payments. Does he agree that a voluntary approach will not work and that tougher sanctions should be available so that small businesses can spend less time chasing debt and more time creating economic—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. If the hon. Gentleman has such a long list, he ought to do it in two bites, not all at once.
Paul Scully
The combination of measures—paying the lowest paid more and softening the cost to employers with the increase in employment allowance— will help businesses solve that problem themselves.
The Budget is only one part of helping to build growth and productivity. It is the Whitehall part, but we also have the town hall part. We need to look at our changing high streets and at issues such as parking. For example, Ross’s Fruiterers in Worcester Park is a real centre of the community—my hon. Friends the Members for Aldridge-Brownhills (Wendy Morton) and for Braintree (James Cleverly) made similar points—because everybody knows Ross Nelson and uses his business as their local shop. The key issue for him is parking, as it is for hundreds of shops and small businesses in Sutton and Cheam and Worcester Park. He needs stop-and-shop parking so that his delivery vans can come and go. That is a matter not for the Chancellor, but for the local authority and Transport for London, so we need to work in partnership.
The third part of the jigsaw is businesses themselves. As we heard earlier, Governments do not create jobs; businesses do. Having been a businessman for 20 years, I feel that, in becoming a politician, I am a poacher turned gamekeeper. However, I still believe that business people are far better placed than any politician to solve the problems faced by retailers dealing with changing high streets or by small businesses trying to attract more customers and grow. Members will remember Ronald Reagan’s remark that the nine most terrifying words in the English language are, “I’m from the Government and I’m here to help.”
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Pincher, you should have applied to make a speech, rather than making these long interventions. The problem for Mr Scully is that he is coming to the end of his speech, because I said that Members should speak for up to 10 minutes, not beyond.
Paul Scully
Regulation is a key issue for businesses.
I will conclude with the welcome news about the cut in corporation tax. Having inherited a rate of 28%, bringing it down to 20% and now 18% will release £6.6 billion for companies to put back into their businesses to help improve jobs, training and productivity. It is really good news for big businesses in Sutton such as HH Global and Subsea 7, and for small businesses such as Sense Communications, Press 2 Dress and Brasserie Vacherin, which is a fantastic restaurant in Sutton. Some 40% of residents in my borough commute to London, but those sorts of investments help deliver a local option to allow them to work closer to home.
Finally, I echo the Chancellor’s words, which really chime with my Conservative guiding principles, about moving from a low wage, high tax and high welfare economy towards a higher wage, lower tax and lower welfare economy. That is why I very much support the Budget.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman needs to hear a lot more of Mr Cunningham.
Simon Hoare
Thank you, Mr Deputy Speaker, but you have now put me off my stride.
Given that we have had tax credits for so long and that low pay is becoming endemic, tax credits have clearly not incentivised employers to increase pay. Why then is the hon. Gentleman opposed to their reduction to encourage employers to do just that?
Robert Flello
Absolutely. That could well be one of the motives behind it: it is certainly not about giving a genuine living wage to people, and it is certainly not about ensuring that people who work 40, 50 or 60 hours a week just to make ends meet will actually be able to secure a decent living wage. As I say, £7.20 from next April is already short of the £7.85 needed to take tax credit changes into account.
Let us move on to some of the Chancellor’s real friends in all this and consider inheritance tax and the increase to a £1 million threshold. How many people will benefit? It will be a tiny number, and that has to be set against the millions of people who are, to quote the Secretary of State’s words, “hard work rewarded”. It is nonsense, and it shows where the Chancellor’s thoughts lie and who he is really concerned about.
The reduction in corporation tax is another issue. On the face of it, it might seem very good. We already have one of the most competitive rates of corporation tax, but what about the small businesses that are not corporations or not incorporated companies? What about those small businesses that, as sole traders or partnerships, are the lifeblood of our country? What of the small businesses that do not pay corporation tax, for which it is not an issue?
Another item on this long list of measures is the introduction of a supplementary tax on banking sector profit versus the bank levy. I suspect—and I fear that I am right—that more smoke and mirrors has been going on in respect of what the levy was levied on and what profits will be subject to the supplementary tax; I suspect that this will work in favour of the banks.
The increase in insurance premium tax is another measure that will hit those on the lowest incomes. The Minister shakes his head, but there are no two ways about it. People who are already stretching their budgets to try to afford their contents insurance, for instance, will then be hit by a massive increase in insurance premium tax, from 6% to 9.5%.
As for the proposals for the Chancellor’s good friends, those with non-domiciled status, they are welcome on the face of it, but how soon will it be before someone comes up with a great ruse to get around the “15 of the previous 20 years” residence rule? How soon will it be before someone says, “That is OK; I will go abroad for a year, and then restart my clock”? How soon will it be before someone takes advantage of some scheme or other? Why not be more assertive, and take much stronger action?
I am conscious that time is beating me again, Mr Deputy Speaker, but I want to draw attention to a few more points. There are to be more apprenticeships, but the question is the quality of those apprenticeships. The ending of student maintenance grants will hit the poorest yet again—in this instance, the poorest students. I have already made my point about the public sector pay increase.
Buried among these measures is the reduction in the backdating of housing benefit from six months for working-age claimants and three months for pensioners to a maximum of four weeks. It is not really about reducing benefit; it is about saying, “If you were not quick enough to spot the benefit that you were able to claim, or if the paperwork was not processed, or if you are a pensioner who struggles with paperwork, you will lose out.” That will save £10 million, which is outrageous.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Will the hon. Gentleman speed up a bit? I shall have to impose a limit on speeches if he does not finish his speech very quickly.
Robert Flello
I thought it important to put that point on the record, Mr Deputy Speaker. As you will have noted, I have just discarded most of my speech.
Let me say just four more words. Well, eight: infrastructure spending, fuel duty, investigation of immoral or illegal economic issues such as the farming of dogs and cats, and a huge shortage of commercial drivers. Where was the Government’s help when it came to putting more drivers into the economy?
Thank you for your patience, Mr Deputy Speaker.
Mr Deputy Speaker
I do not think that I have much more. If Members aim for eight minutes from now on, everyone will have the same amount of time. I call Nia Griffith.
Nia Griffith (Llanelli) (Lab)
Thank you, Mr Deputy Speaker. Did you say 10 minutes?
Nia Griffith
In that case, let me very briefly congratulate those who have made their maiden speeches today, before turning to the subject of the steel industry.
Let me begin by thanking the Minister for Small Business, Industry and Enterprise for being so helpful last week by voting to retain anti-dumping measures for wire rod. The steel industry is being flooded out by a massive increase in imports from China, and it is important for us to work with other EU countries on anti-dumping measures. I hope that the Government will take the same approach to measures in relation to steel reinforcing bar, grain oriented electrical steels, and cold rolled steels.
Let me now say something about the EU compensation package. As we know, the Government set the carbon floor price too high, thus causing considerable difficulties to the steel industry. They have now come up with a compensation package for energy-intensive industries, but it is still a long time until April 2016. Will the Government think again about whether the date could be brought forward, and will they make absolutely certain that the package will not be cut?
As well as the problem of the carbon floor price, the steel industry faces the challenge of the EU emissions trading scheme. I firmly believe in working with the EU to create a level playing field, and I believe in the need to reduce our carbon emissions, but the energy-intensive industries need special consideration. It is important that the Government work with them so we actually achieve those goals, rather than achieving what is called carbon leakage—manufacturers going elsewhere where they are allowed to get away with higher emissions levels. There is a lot of work to be done here.
Business and industry need absolute certainty as they plan ahead and invest, and I am disappointed at the infrastructure projects that have been scrapped. The cancellation and postponement of rail projects and other infrastructure projects is very serious both to our skills base and our manufacturing industry. I am pleased that electrification is still planned for the railway line to Swansea, although I would like to see it come a lot further west, but it has still not started. I urge the Government to make sure that goes ahead with full speed.
I would like the Government to make greater efforts to maximise the UK input into the supply chains for such infrastructure, too. It is possible within EU regulations to include in tendering criteria a recognition of the benefit to the local community. Other EU countries manage that very effectively, and we should do a lot more in this regard.
Roger Evans from Schaeffler in my constituency of Llanelli is working with the Swansea tidal lagoon to maximise the proportion of supplies for the construction of the lagoon that is sourced locally in Wales and the UK. He is to be applauded for his efforts and I hope the Government will take note and do likewise, and that they will also strike the right price for the tidal lagoon to make it economically viable.
Business and industry need absolute certainty. We saw the Government cut the feed-in tariffs unexpectedly sharply without consultation, resulting in manufacturers and installers—many of whom had spent a lot of money training up as solar panel installers—going out of business, and now the Government’s sudden cut to the wind turbine incentive is again threatening manufacturers. When such decisions are made, they should not be knee-jerk, politically motivated decisions; there should be proper consultation with the industry and sensible lead-in times for any changes. There will now be a massive knock-on effect on the manufacturers and installers of wind turbines.
On the financial changes in the Budget, I welcome the national minimum wage going up to £7.20 next April, but it is, after all, a national minimum wage and it is high time it did go up to that amount—and the Chancellor promised ages ago it would go up to £7. I am very concerned, however, that it does not apply to those under 25, and I am extremely concerned about the loss of tax credits. They are an important part of our current taxation system. As has been mentioned, a couple on the current minimum wage with two children gain £1,500 but lose £2,200 in tax credits. We must raise the wages first, before scaling down any tax credits. This hits those on the lowest incomes who are often dealing with problems of insecurity, juggling more than one job to make ends meet, and working antisocial hours.
We still need a crackdown on zero-hours contracts as well. It is not enough to do what the Government did, which was say “You shouldn’t be prevented from taking another job.” They must do a lot more to try to ensure people can have proper contracts. USDAW has done a lot of work in this regard by getting annualised contracts that allow flexibility for employers and employees, but guarantee an agreed number of hours, so offering some security and chance of planning ahead for workers.
The cuts to tax credits will have a massive knock-on effect on local economies. People on low incomes out of necessity use their money immediately, putting it back into the local economy. There are wards in my constituency where Government changes over the past five years have already led to a loss in income of an average of £800 to £1,000 per person per year. Add to that the new cuts to the tax credits and we will see even more money sucked out of local economies. That is bad news for local business and could lead to further job losses.
I was shocked a fortnight ago to hear the Secretary of State for Work and Pensions say that the way for families to get out of poverty is through education and getting higher paid jobs. Of course it is, but in the meantime they need help. They cannot get that education and move into higher paid jobs in two minutes; we are talking about very long-term goals. What we are seeing in this Budget is a cut to what was a grant and has now become a loan for going into higher education for those very families on the lowest incomes.
We are also worried that the Government are removing the cap on the £9,000 fees for what are probably going to be the most sought-after and prestigious universities. Again, they are creating disincentives for people from less well-off homes to achieve the best and go to the very best universities. These are extremely worrying features of the Budget. Obviously, people want their children to do well—
Budget Resolutions and Economic Situation
Lindsay Hoyle Excerpts(9 years, 4 months ago)
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Lilian Greenwood (Nottingham South) (Lab)
Having visited my constituency, my hon. Friend knows that one thing the local authorities are doing is investing in our social housing and ensuring that it is of a decent standard. Does she share the consternation of the chief executive of my local arm’s length management organisation, Nottingham City Homes, who notes that the reduction in social rents will lead to a reduction in investment and a failure to invest in the housing standards that tenants would like?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. As we have so many Members who wish to speak, we need short interventions.
Emma Reynolds
We will look at those proposals in detail. As for what my hon. Friend has just said, we need to ensure that social housing providers are in a position to build more homes. We want housing associations and councils to build more homes, as there is, I think we can all agree, an acute shortage of affordable housing in this country. We also need to ensure that housing associations have the funding mechanisms in place to continue to invest in their stock. One of the proudest achievements of the previous Labour Government was the decent homes programme. Those homes were refurbished some 10 to 15 years ago, and there is a continual process of investing in the existing stock.
In conclusion, this Budget should have been about supporting working people and those who want to get on, rather than about punishing hard work. It should have been about tackling the long-term challenges facing our country—the productivity challenge, the balance of payments deficit, the housing crisis, the devolution agenda and so much more. Instead, this is a Budget that will hit hard-working people on low incomes, families with children, women and young people. It is a Budget that the OBR says will result in fewer homes, not more. It is a Budget that was more about politics than economics. It is more about the short-term needs of one man whose real mission is to move next door and take over the keys to No.10, rather than the long-term needs of the country.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Before I call the Scottish National party spokesperson, I warn Members that a six-minute time limit will apply after this speech.
Mr Deputy Speaker
Order. I remind Members that there is a six-minute limit on speeches.
Andrew Gwynne
On a point of order, Mr Deputy Speaker. I inform the House that today I have been contacted by a police officer from Greater Manchester police regarding correspondence between me and some of my constituents about Audenshaw school in my constituency. It is not my intention to release the information requested by the police because I consider letters between constituents and me as a Member of Parliament to be confidential unless I am instructed to release them by a court. May I place that on the record and ask you, Mr Deputy Speaker, whether that is also your understanding?
Mr Deputy Speaker (Mr Lindsay Hoyle)
The hon. Gentleman is correct in what he has said, and whether or not to release those letters is a decision that he must take, based on the information that he holds. The point is certainly on the record because we are all aware of it and people will read about it tomorrow.
Financial Statement
Lindsay Hoyle Excerpts(9 years, 4 months ago)
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Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Before I call the Chancellor of the Exchequer, I remind hon. Members that copies of the Budget resolutions will be available to them in the Vote Office at the end of the Chancellor’s speech.
I also remind hon. Members that it is the norm not to intervene on the Chancellor of the Exchequer or the Leader of the Opposition, and the same convention applies to the spokesperson for the Scottish National party.
The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)
This is a Budget that puts security first. It is a Budget that recognises the hard work and the sacrifice of the British people over the past five years and says that we will not put that at risk; we have a job to do and we are here to get on with it. This will be a Budget for working people—a Budget that sets out a plan for Britain for the next five years to keep moving us from a low wage, high tax, high welfare economy to the higher wage, lower tax, lower welfare country we intend to create.
This is the new settlement. From a one nation Government, this is a one nation Budget that takes the necessary steps and follows a sensible path for the benefit of the whole of the United Kingdom. This is a Conservative Budget that can be delivered only because the British people trusted us to finish the job, because they know that the only way to have a strong NHS, strong schools and a strong defence is to build a strong economy. That is how we were elected, and that is exactly what we are now going to do.
The British economy that I report on today is fundamentally stronger than it was five years ago. We are growing faster than any other major advanced economy. Our businesses have created 2 million more jobs. Living standards are rising strongly. Our long-term economic plan is working. But the greatest mistake this country could make would be to think all our problems are solved. We have only to look at the crisis unfolding in Greece as I speak to realise that, if a country is not in control of its borrowing, the borrowing takes control of the country. Britain still spends too much; it borrows too much, and our weak productivity shows that we do not train enough, build enough or invest enough. This we are determined to change. We will be bold in transforming education, bold in reforming welfare, bold in delivering infrastructure and bold in building the northern powerhouse. We will be bold in backing the aspirations of working people. This is a big Budget for a country with big ambitions. It is a Budget that sets the way to secure Britain’s future.
Let me turn to the latest forecasts from our independent Office for Budget Responsibility. We thank Robert Chote and his colleagues for their hard work. We now have Budgets that fit the economic forecasts, instead of economic forecasts that were fixed to fit the Budget. At the March Budget, it was thought that the British economy had grown by 2.6% last year. We now know that it grew by 3%. But the global economic risks are rising. The US economy has slowed, so too has China, and even before the Greek crisis intensified this week, the forecasts for global growth had been revised down this year to 3.2%. It is all the more reason to get our own house in order.
For 2015, the OBR forecasts growth at 2.4%. That is faster than America, faster than Germany and twice as fast as France. For the second year in a row, Britain is expected to have the strongest economic growth of any major advanced economy in the world. In 2016, the OBR has growth unchanged at 2.3%, and then it is revised up to 2.4% in the following year—a level of strong, steady growth that it predicts for the rest of the decade. This growth is driven by stronger private consumption, and by stronger private investment, too. Indeed, business investment is now 31.9% higher than it was in 2010, and is revised up again this year. Now we need to see investment at home matched by exports abroad. Our decision to become a founder member of the new Asian Infrastructure Investment Bank is driven by our determination to connect Britain to the fastest-growing parts of the world, and our decision to seek reform to the EU is driven by our determination that this part of the world shall not price itself out of a prosperous future.
Higher investment leads to more jobs, which brings me to the OBR forecasts for employment. Over 2 million more people have the security of work as a result of this Government’s long-term economic plan. The OBR forecasts that under the current economic conditions, almost 1 million more jobs will be created over the next five years. Our ambition is to go further, and create 2 million more jobs on the road to full employment. To help achieve that progressive goal, we set out today how we will make work pay.
Jobs are not created by accident. They are created when businesses have confidence—the confidence to invest, to grow and to hire; confidence that comes because Britain is getting its house in order. So we seek to create a country that can truly pay its way. The budget deficit is now less than half the 10% we inherited, and economic security is returning, but all that progress is at risk if we do not finish the job. That means more than just eliminating the deficit; it means running a surplus to get our dangerously high levels of debt down.
That brings me to the first of the key judgments in this Budget—how fast do we cut the deficit? My answer is this: we should cut the deficit at the same pace as we did in the last Parliament. We should not go faster; we should not go slower. At this pace, the national debt is lower as a share of our national income in every future year than when I presented the Budget in March, and it is achieved without a rollercoaster ride in public spending.
This is why: first, our tax receipts are stronger than forecast, showing that the recovery is firmly entrenched; secondly, as a strong majority Government, we have been able to get on with making extra savings in this financial year; and thirdly, we can make faster progress in returning our banks, including RBS, to where they belong—the private sector. Indeed, the sale of Government assets this year will deliver the largest privatisation proceeds of all time, higher than the previous record in 1987. With stronger tax receipts, more asset sales and a strong Government who are getting on with the job, we can achieve a smoother path to the same destination, with a surplus a year later in 2019-20, but the national debt lower and that same surplus higher. For this is a Budget that puts economic security first.
Many difficult but necessary decisions are required to save money, and this will be done with moderation but determination. This is a one nation Government who do the best thing for the economy and the right thing for the country. This plan is reflected in the forecasts for debt and deficit produced today by the Office for Budget Responsibility. The deficit was 10.2% of national income in 2010. This year, it is forecast to fall to 3.7%—one third of the deficit we inherited. It then falls again to 2.2% in 2016-17, down to 1.2% the year after, and then to just 0.3% in 2018-19. The following year, 2019-20, we move into a budget surplus at 0.4%, which is then maintained the year after at 0.5% of GDP. In structural terms, the OBR judges that this will be the largest surplus in at least 40 years—Britain back in the black, and in its strongest position for almost half a century.
This is, of course, all reflected in the amount of cash Britain has to borrow each year. In 2010, Britain was borrowing a staggering and unsustainable £153 billion a year. In March, the OBR forecast that we would borrow less than half of that, or £75.3 billion, this year. In this Budget, it has revised borrowing down this year to £69.5 billion. Borrowing then falls to £43.1 billion next year, £24.3 billion in 2017-18, and down to just £6.4 billion the year after. In 2019-20, we move into a surplus higher than previously forecast of £10 billion, which rises to £11.6 billion the year after—Britain finally doing the responsible thing and raising more money than it spends.
Five years ago, we inherited a situation in which our national debt as a share of our national income was soaring. This year, that national debt share is falling, bringing to an end the longest continued rise in our national debt since the 17th century. It is falling now, and it continues to fall in every year of the forecast, down from 80.3% this year to 79.1% next year, then down again to 77.2% in 2017-18, 74.7% the year after, and 71.5% the year after that, before falling again to 68.5% in 2020-21. Britain has turned a corner and left the age of irresponsibility behind.
Having come this far, there can be no turning back. We should aim for a new settlement across the political spectrum where it is accepted that, without sound public finances, there is no economic security for working people; those who suffer when Governments run unsustainable deficits are not the richest, but the poorest; and therefore in normal economic times Governments should run an overall budget surplus, so that our country is better prepared for whatever storms lie ahead. In short, we should always fix the roof while the sun is shining.
Today, I publish the new fiscal charter that commits our country to that path of budget responsibility. While we move from deficit to surplus, this charter commits us to keeping debt falling as a share of GDP each and every year and to achieving that budget surplus by 2019-20. Thereafter, Governments will be required to maintain that surplus in normal times—in other words, when there is not a recession or a marked slowdown.
Only when the OBR judges that we have real GDP growth of less than 1% a year, as measured on a rolling four-quarter basis, will that surplus no longer be required. The Chancellor of the day will have to set out their plan with clear targets to restore the nation’s finances to health and the House of Commons will test the credibility of that plan and vote on those targets. This is sensible, pragmatic and keeps Britain secure. We will put the new fiscal charter to a vote in this House this autumn, and I invite broad cross-party support for it.
To meet the new charter, further difficult decisions need to be taken to live within our means. We will take these decisions in a balanced and fair way. I can confirm that the analysis produced today shows that the richest are paying a greater share of tax than they were at the start of the last Parliament. And more than that, we are continuing to devote a greater share of state support to the most vulnerable. As I said they would, those with the broadest shoulders are bearing the greatest burden, for we are all in this together. And in the last fortnight we have seen independent statistics showing that since 2010 child poverty is down, and so is inequality. That comes on top of a record number of women in work, and the gender pay gap at an all-time low—all good news that should be welcomed on both sides of the House.
The fiscal plan set out in the Budget requires around £37 billion of further consolidation over the Parliament. Today, I set out how we will find just under half of that—£17 billion. We have found annual savings of £12 billion from welfare and £5 billion from tackling tax evasion, avoidance and planning and imbalances in the tax system. The other half will largely come from Government Departments through savings and cuts and will be set out at the spending review that the Chief Secretary and I will conduct this autumn. However, no year will see cuts as deep as those required in 2011-12 and 2012-13.
Of course, I am conscious that a huge amount has already been done to increase efficiency across Whitehall, with administrative budgets down by more than 40% in real terms, but there is still much more we can do. There is also a simple trade-off between pay and jobs in many public services. I know that there has already been a period of pay restraint, but we said last autumn that we would need to find commensurate savings in this Parliament, so to ensure that we have public services we can afford, and to protect more jobs, we will continue recent public sector pay awards with a rise of 1% per year for the next four years.
Public spending should reflect public priorities and we have to make choices. Our priority is the national health service. We will fund fully the plan the NHS has itself produced for its future, the Stevens plan. That plan requires very challenging efficiency savings across the health service, which must be found, but it also requires additional Government funding. Our balanced approach means that I can today confirm that the NHS will receive, in addition to the £2 billion we have already provided this year, a further £8 billion. That is £10 billion more a year in real terms by 2020. It is proof that you can only have a strong seven-day NHS if you have a strong economy, and it is proof that the NHS is only truly safe in Conservative hands.
I have set out the difficult choices we are going to face on Government spending and the priority we will accord to our national health service. I turn now to combating tax evasion, avoidance and aggressive tax planning. In Budget after Budget, we have done more to combat that than any Government before us. We inherited a system where bankers boasted of paying lower tax rates than their cleaners and some multinationals shifted all their profits offshore. We have stopped these blatant abuses that were allowed to flourish, and many others, but we promised the British people we would do more and find a further £5 billion a year, and I can confirm we have done so.
We are boosting HMRC’s capacity, with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders it pursues for prosecution and raising £7.2 billion in extra tax.
We are going to change the law to stop the use of losses that abuse our controlled foreign companies regime, and make sure investment fund managers pay the full capital gains tax rate on their carried interest.
We will stop corporates artificially increasing the value of stock for tax purposes, and to focus the employment allowance on employment we are restricting it so that companies where the director is the sole employee will no longer be able to claim.
We are consulting today on how to deal with the increasing abuse of the rules around disguised employment when working through a personal service company, and we are going to add tough new penalties to our general anti-abuse rule and name and shame serial users of failed avoidance schemes. These people should have nowhere to hide.
The non-domicile tax status is a long-standing feature of the UK tax system—in place since 1914—that plays an important role in allowing those from abroad to contribute to our economy before returning to their permanent home, and many countries have some version of this tax status.
Simply abolishing it altogether would, as Ed Balls correctly noted, probably cost the country money. Many of these people make a considerable contribution to our public life and to tax revenues, but there are some fundamental unfairnesses in the non-dom regime that I am putting a stop to today.
It is not fair that people who are born in the UK to parents who are domiciled here can later in life claim to be non-doms and live here. It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax. From now on they will pay the same tax as everyone else. Most fundamentally, it is not fair that people live in this country for very long periods of their lives benefit from our public services and yet operate under different tax rules from everyone else.
Non-dom status was meant to be temporary, but it became permanent for some people. Not any longer. I am today abolishing permanent non-dom tax status. Anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains. We will consult to get the detail right. All these non-dom measures will come into effect in April 2017 and they will raise £1.5 billion in extra tax for the Exchequer over this Parliament. British people should pay British taxes in Britain, and now they will.
Turning to corporate tax rules, we will also broaden the base for corporation tax by removing, for future transactions only, the annual deduction for acquired reputational value. For big companies with profits over £20 million a year, we will bring forward corporation tax payment dates so that tax is paid closer to the point at which profits are earned. That is fair and more in line with what we are doing in personal tax, and it is what almost all other G7 nations do.
Banks make a key contribution to our economy, but they also need to make a fair contribution. It is important that they help pay down the debts built up during the banking crisis, but equally important that they go on creating jobs, not just in London but in Edinburgh, Leeds, Birmingham, Bournemouth and across the country. The new remit I am issuing today for the Financial Policy Committee highlights the importance of productive investment, innovation and competition in finance.
Our bank levy was introduced to raise revenue and increase the stability of balance sheets, and it has worked, but now it risks doing harm unless we change it. So I will, over the next six years, gradually reduce the bank levy rate, and after that make sure it no longer applies to worldwide balance sheets. But to maintain a fair contribution from the banks, I will introduce a new 8% surcharge on bank profits from 1 January next year. By getting this balance right, it means we will actually raise more money from the banks this Parliament, but at the same time make our country a more competitive place to do business.
We have also taken action to make sure that consumers get a better deal from another important industry: insurance. The costs of premiums are down for families, and today we are announcing a major review of the regulation of claims management companies and we will cap the charges they can apply to their customers.
Britain’s insurance premium tax is well below tax rates in many other countries. I am therefore today raising insurance premium tax, which applies to only one fifth of all premiums, to 9.5%, effective from this November. With these measures I am putting in place an approach for taxing banks and insurers over this Parliament which is sustainable, stable and fair.
In each year, we have been able to use money from the banking fines paid by those who represent the worst of values to support those in uniform who demonstrate the best of British values. Today we announce funding for the Defence Medical Welfare Service and the Royal Commonwealth Ex-Services League. We are supporting the incredibly courageous members of our special forces who are injured, and, in the 75th anniversary of the Victoria Cross and George Cross Association, quadrupling the annual annuity we pay to those who demonstrated the highest valour and whom I had the honour of meeting yesterday.
In the week of the poignant anniversary of the 7/7 attacks, we should recognise, too, that our victims of terrorism overseas have no permanent memorial. We will now fund one, as well as a specific memorial to those murdered in Tunisia. We are committing £50 million to expand the number of cadet units in our state schools to 500, prioritising schools in less affluent areas, and we are going to support the Children’s Air Ambulance by funding an extra helicopter.
In every Budget, I also find an opportunity to fund the commemoration of famous events from our history and the buildings that symbolise them. This Budget is no exception. The RAF’s group fighter command centre in west London was the place where the battle of Britain was directed from and it badly needs repair. I want to thank the new Member my hon. Friend the Member for Uxbridge and South Ruislip (Boris Johnson) for bringing to my attention the dilapidated state of his campaign bunker. Let its renovation stand as a monument to the heroes of the battle of Britain and the days when aeroplanes flew freely over the skies of west London.
I turn now to the great economic challenge we face on productivity, for this is the key to delivering the financial security that families see when living standards rise. And it will ensure that Britain becomes what we want it to be—the most prosperous major economy in the world by the 2030s. That is within the grasp of our generation, provided we take the big decisions. On Friday we will set out our plan for productivity, to help realise this ambition. I want to thank my new Treasury colleague Jim O’Neill for his work as a world-leading economist in putting it together. Major British businesses, led by Sir Charlie Mayfield, have told me that they want to be part of the solution to this great challenge and we very much welcome that.
Let me today set out the key parts of that plan. First, on transport, four fifths of all journeys in this country are by road, yet we rank behind Puerto Rico and Namibia in the quality of our network. In the past 25 years, France has built more than 2,500 miles of motorway and we have built just 300. In the last Parliament I increased road spending, even in difficult times, and set out a plan for £15 billion of new roads for the rest of this decade, but we need a long-term solution if we are going to fix Britain’s poor roads.
Vehicle excise duty was used to fund our roads, but not any more. And because so many new cars now fall into the low carbon emission bands, by 2017 over three quarters of new cars will pay no VED at all in the first year. That is not sustainable and it is not fair. If someone can afford a brand new car, including some of the most expensive models available, they can pay no VED. If they can afford only an older, second-hand car, they have to pay more tax. Only a Labour Government could have designed something so regressive.
So this is what we will do. From 2017, for brand-new cars only, we will introduce new VED bands. The duty in the first year will be set according to emissions, like today, but updated for new technology. Thereafter there will be three duty bands: zero emission, standard and premium. For standard cars—that covers 95% of all cars sold in the UK—the charge will be £140 a year. That is less than the average £166 that motorists pay today. There will be no change to VED for existing cars: no one will pay more in tax than they do today for the car they already own. In total, we will only raise the same amount of revenue from VED in the future as we do today, but that revenue will be secure for the long term.
And I will return this tax to the use for which it was originally intended. I am creating a new roads fund. From the end of this decade, every single penny raised in vehicle excise duty in England will go into that fund to pay for the sustained investment our roads so badly need. We will engage with the devolved Administrations on how the money is allocated there. Tax paid on people’s cars will be used to improve the roads that they drive on. It is a major reform to improve the infrastructure and productivity of our economy, and deliver a fairer tax system for the motorist.
We will also consult on extending the deadline for new cars and motorbikes to have their first MOT test from three years to four years, which would save motorists over £100 million a year. I can also confirm that there will be no changes to the plans for fuel duty I set out in March: fuel duty will remain frozen this year.
Productivity means building more roads. It also means giving people the skills they need to secure a better job. It is to our national shame that we are almost the only advanced country in the world where the skills of our 16 to 24-year-olds are no better than those of our 55 to 64-year-olds. The education reforms we started in the last Parliament have begun to address this problem, and we are going further in this Parliament by tackling the coasting schools that simply are not good enough.
We have already doubled the number of apprenticeships to 2 million; now we are committed to 3 million more. To fund these apprenticeships and make sure they are of high quality we have to confront this truth: while many firms do a brilliant job training their workforces, too many large companies leave the training to others and take a free ride on the system, so we are going to take a radical and, frankly, long overdue approach.
We are going to introduce an apprenticeship levy on all large firms. Firms that offer apprenticeships can get more back than they put in. Britain’s great businesses will train up the next generation—3 million more apprenticeships with the security that will bring. The money will be directly controlled by employers, and we will work with business on how to do this. It is exactly the sort of bold step we need to take if Britain is going to raise its game.
Next, we have got to secure the success of our university sector, which is one of the jewels in the crown of the British economy. When we reformed student funding in the last Parliament, we were told by those who so opportunistically opposed us that it would put people from low-income backgrounds off going to university. Instead, we now see a record number of these students applying and succeeding. It is a triumph of progressive reform.
Now we are removing the artificial cap on student numbers, so we do not have to turn away from our universities people who want to go and who have the right grades. But we cannot afford to do this unless we tackle the cost of student maintenance grants, which is set to almost double to £3 billion over this decade. There is also a basic unfairness in asking taxpayers to fund the grants of people who are likely to earn a lot more than them.
The previous Labour Government actually abolished these grants, before reintroducing them. These grants have now become unaffordable. If we do not tackle this problem, our universities will become underfunded and our students will not get places. I am not prepared to let that happen, so from the 2016-17 academic year we will replace maintenance grants with loans for new students. The loans only have to be paid back once they earn over £21,000 a year. To ensure university is affordable to all students from all backgrounds, we will increase the maintenance loan available to £8,200, the highest amount of support ever provided.
To ensure our university system is sustainable, we will consult on freezing the loan repayment threshold for five years, and we will link the student fee cap to inflation for those institutions that can show they offer high-quality teaching. We will open the whole sector to new entrants who can deliver the highest standards. It is a major set of reforms to make sure Britain continues to have the best universities in the world. It is fair to students, fair to taxpayers and vital to secure our long-term economic future.
Britain’s weak productivity is also driven by the fact that too much of our economic strength is concentrated in this capital city. This is unhealthy and unproductive, and we must achieve a better settlement for the future, but not by pulling London down. One of the first pieces of advice I received in the Treasury was to cancel the plan for the Crick Institute, the Tate Modern extension and Crossrail, but I rejected that advice, because I have always believed it is to our nation’s great advantage that we have one of the world’s great capitals. Now we are working with the Mayor on what this city will need in the future, with projects such as Crossrail 2 and the exciting development of the Olympic village.
What really drives this Government is building up other parts of the United Kingdom as a balance to London’s strength. For Scotland, we are now delivering, as promised, major devolution of tax and welfare powers. Instead of complaining endlessly about process in Westminster, the SNP Scottish Government will soon have to answer the question, “You’ve got the powers, when are you going to use them?” In Wales, we are honouring our commitments to a funding floor and to more devolution there, and investing in important new infrastructure such as the M4 and the Great Western line. In Northern Ireland, we are working with all parties to deliver the Stormont House agreement and sustainable public finances there.
Devolution to the nations of the United Kingdom is well established. In my view, devolution within England has only just begun. Today, we go further in building the northern powerhouse. I can today announce that I have reached agreement with the leaders of the 10 councils of Greater Manchester to devolve further powers to that city. These include putting fire services under the control of the new Mayor, establishing a land commission in the city and further collaboration on children’s services and employment programmes.
The historic devolution that we have agreed with Greater Manchester in return for a directly elected Mayor is available to other cities that want to go down a similar path. I can also tell the House that we are now working towards deals with the Sheffield and Liverpool city regions and with Leeds, West Yorkshire and partner authorities on far-reaching devolution of power in return for the creation of directly elected Mayors. We have created Transport for the North, and I am now putting it on a statutory footing. I can announce £30 million of funding to this new body as it connects northern England together, with seamless Oyster-style ticketing across the region.
Next, with the Secretary of State for Business, Innovation and Skills, my right hon. Friend the Member for Bromsgrove (Sajid Javid), we are pushing for more powers and responsibility to be devolved to the midlands—that engine of growth. The massive £7.2 billion investment in transport in the south-west is under way, and in the first of our new county deals, we are making progress on a major plan to give Cornwall a greater say over local decisions.
Across England, we are launching a new round of enterprise zones for smaller towns. To celebrate the Queen’s 90th birthday, a new set of prestigious regius professorships will be created in universities right across the country. To give more power to counties and to our new Mayors, we are going to give them the power to set the Sunday trading hours in their areas. Let us invest across our country, let people decide and let us put the power into the northern powerhouse.
Another key to raising the productivity of our country is building more homes and creating a fairer property market. This is a Government that are unwavering in their support for home ownership. That is why we are introducing the new Help to Buy ISA this autumn, that is why we are giving housing association tenants the right to buy and that is why we will set out further planning reforms on Friday.
Today, I will set out three important changes that will address unfairnesses in our taxation of property and put the security of home ownership first. First, we will create a more level playing field between those buying a home to let and those buying a home to live in. Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income whereas homebuyers cannot, and the better off the landlord, the more tax relief they get. For the wealthiest, for every pound of mortgage interest costs they incur, they get 45p back from the taxpayer. All this has contributed to the rapid growth in buy-to-let properties, which now account for over 15% of new mortgages, something the Bank of England warned us last week could pose a risk to our financial stability.
So we will act, but we will act in a proportionate and gradual way, because I know that many hard-working people who have saved and invested in property depend on the rental income they get. We will retain mortgage interest relief on residential property, but we will now restrict it to the basic rate of income tax. To help people to adjust, we will phase in the withdrawal of the higher rate reliefs over a four-year period, and only start withdrawal in April 2017.
Secondly, the rent-a-room relief is designed to help homeowners who rent out a room in their home. It is a good scheme, particularly in a world where more and more people are renting out rooms online, but the relief has been frozen at £4,250 for 18 years. Next year, we will raise it to £7,500.
The third change fulfils a long-standing promise that I made, and one that I was unable to fulfil in coalition. The left will never understand this, but we on the Conservative Benches know that the wish to pass something on to your children is about the most basic, human and natural aspiration there is. Inheritance tax was designed to be paid by the very rich, yet today more families are pulled into the inheritance tax net than ever before, and the number is set to double over the next five years. It is not fair and we will act.
From 2017, we will phase in a new £175,000 allowance for someone’s home when they leave it to their children or grandchildren. That sits on top of the existing £325,000 threshold, which will be fixed until the end of 2020-21. Both allowances can be transferred to a spouse or partner. From today, we will make sure that those who choose to downsize do not lose any of the allowance from the property that they used to own, but we will taper the relief away for estates worth more than £2 million.
The result for families is this: they can pass up to £1 million on to their children free of inheritance tax. No more inheritance tax on family homes: aspiration supported, the tax paid only by the rich, the security of home ownership restored—promise made; promise delivered.
The cut in inheritance tax will be more than paid for by changes which we have set out to the pensions tax relief that we give to the highest earners. From next year, their annual allowance will be tapered away to a minimum of £10,000.
Our pension reforms have given huge freedom to people who have worked hard and saved hard all their lives. Many thousands of people are, with the free guidance service we offer, making use of those freedoms to access their savings instead of buying annuities. Now it is time that we looked at the other end of the age scale—at those who are starting to save for a pension. For the truth is that Britain is not saving enough, and that is something we need to fix in our economy too.
While we have taken important steps with our new single-tier pension and generous new ISA, I am open to further radical change. Pensions could be treated like ISAs: people pay in from taxed income, it is tax free when they take it out and in between it receives a top-up from the Government. That idea, and others like it, need careful and public consideration before we take any steps, so I am today publishing a Green Paper that asks questions, invites views and takes care not to prejudge the answer. Our goal is clear: we want to move from an economy built on debt to an economy built on the more secure and productive foundations of saving and long-term investment.
If Britain wants to produce more, it needs to invest more. Many small and medium-sized businesses have benefited from our enhanced annual investment allowance. The allowance was set at £100,000 when we came to office. It is higher now, but without action it will fall to just £25,000 at the end of the year. That would especially hit middle-sized companies in areas such as manufacturing and agriculture, which we want to do more to build up in Britain, so I can confirm that the annual investment allowance will not fall to £25,000, but will be set at £200,000 this year and in every single year. That is a major, permanent boost to the incentives for long-term investment by small and medium-sized firms in Britain.
The large reductions in tax on North sea oil and gas that I announced in March are going ahead, and today we broaden the types of investment that qualify for allowances. Now that we have a long-term framework for investment in renewable energy in place, we will remove the outdated climate change levy exemption for renewable electricity that has seen taxpayer money benefiting electricity generation abroad.
We cut corporation tax from 28% to 20% over the last Parliament—one of the biggest boosts British business has ever seen. We cannot take it lower than that while such strong incentives are created for people to self-incorporate and pay the lower rates of tax due on dividends. The dividend tax system was designed partly to offset double taxation on profits, but the system has not changed despite sharp reductions in corporation tax. Lower rates are rapidly creating opportunities for tax planning. Irreparable damage was done when a previous Chancellor abolished the payable credit and deprived pension funds of billions of pounds.
We have inherited a complex and archaic system, so I am today undertaking a major and long-overdue reform to simplify the taxation of dividends. The dividend tax credit will be replaced with a new tax-free allowance of £5,000 of dividend income for all taxpayers. The rates of dividend tax will be set at 7.5%, 32.5% and 38.1%—an increase of 7.5% where dividend income exceeds £5,000. Dividends paid within pensions and ISAs will remain tax free and unaffected by these changes. Those who either pay themselves in dividends or have large shareholdings worth typically over £140,000 will pay more tax; 85% of those who receive dividends will see no change or will be better off; and over a million people will see their tax cut.
That is an important reform. It comes into operation next year, and with our personal allowance and our new personal savings allowance, it means that from April, on top of the new ISA, people will be able to receive up to £17,000 of income a year tax free. The reforms that I have announced to dividend taxation also allow us to do something more, and go further in creating a Britain that is one of the most competitive economies in the world.
There are those in this House who said we were wrong to cut corporation tax in the last Parliament, but it created millions more jobs, brought businesses back to Britain and increased much-needed investment, so I profoundly disagree with them. Now at 20% for large and small businesses alike, we have the joint lowest rate of corporation tax in the G20, so there are those who say we do not need to do more. I profoundly disagree with them too. This country cannot afford to stand still while others rush ahead. I am not prepared to see that happen.
Today, I announce that I am cutting it again. Britain’s corporation tax rate will fall to 19% in 2017 and 18% in 2020. We are giving businesses lower taxes that they can count on, so that they can grow with confidence, invest with confidence and create jobs with confidence. A new 18% rate of corporation tax—sending out loud and clear the message around the world that Britain is open for business.
If we are to build a more productive economy, and our country is to live within its means, we have to make this fundamental change: we have to move Britain from a low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare economy. For Britain is home to 1% of the world’s population, generates 4% of the world’s income, and yet pays out 7% of the world’s welfare spending. It is not fair to the taxpayers who are paying for it, and it needs to change.
Welfare spending is not sustainable and it crowds out spending on things such as education and infrastructure that are vital to securing the real welfare of the people. We legislated for savings of over £21 billion in the last Parliament, capped benefits for out-of-work families and started to introduce universal credit. Universal credit will transform the lives of those trapped in welfare dependency and deliver real social justice. It is the result of the Herculean efforts of my right hon. Friend the Secretary of State for Work and Pensions.
However, to live within our means as a country and better protect spending on public services, we need to find at least a further £12 billion of welfare savings. Let me set out the principles that we will follow and how they will be applied. First, the welfare system should always support the elderly, the vulnerable and disabled people. We will honour the commitments that we made to uprate the state pension by the triple lock and protect the other pensioner benefits. The BBC has agreed to take on responsibility for funding free TV licences for the over-75s. In return, we are able to give our valued public broadcaster a sustainable income for the long term.
In the last Parliament, we increased payments to the most disabled people, and we will not tax or means-test disability benefits. We will increase funding for domestic abuse victims and women’s refuge centres. We are also going to use the remaining funds available in our Equitable Life payment scheme, as it closes, to double the support that we give to those policyholders on pension credit who need this extra help most.
The second principle we will apply is that those who can work will be expected to look for work and take it when it is offered. The best route out of poverty is work. Our economic plan has created a record number of jobs, and now a third of a million fewer children are being brought up in workless families.
It is not acceptable that in an economy moving towards full employment, some young people leave school and go straight on to a life on benefits, so for those aged 18 to 21 we are introducing a new youth obligation that says that they must either earn or learn. We are also abolishing the automatic entitlement to housing benefit for 18 to 21-year-olds. Exceptions will be made for vulnerable people and other hard cases, but young people in the benefits system should face the same choices as other young people who go out to work and cannot yet afford to leave home.
To make sure that work pays for parents, I confirm that from September 2017 all working parents of three and four year-olds will receive free childcare of up to 30 hours a week. Once again: a promise made; a promise delivered. As a result, we now expect parents—including lone parents—with a youngest child aged three to look for work if they want to claim universal credit. That is all part of our progressive goal of securing full employment in Britain.
We also want to increase employment among those who have health challenges but are capable of taking steps back to work. The employment and support allowance, introduced by the last Labour Government, was supposed to end some of the perverse incentives in the old incapacity benefit, but instead it has introduced new ones. One of those is that those who are placed in the work-related activity group receive more money a week than those on jobseeker’s allowance, but get nothing like the help to find suitable employment. The number of JSA claimants has fallen by 700,000 since 2010, while the number of incapacity benefits claimants has fallen by just 90,000. That is despite 61% of claimants on the ESA WRAG benefit saying that they want to work. Therefore, for future claimants only, we will align the ESA WRAG rate with the rate of jobseeker’s allowance. No current claimants will be affected by that change, and we will provide new funding for additional support to help claimants return to work.
The third principle that we apply to welfare is this: the whole working-age benefit system has to be put on a more sustainable footing. In 1980, working-age welfare accounted for 8% of all public spending. Today it is 13%. The original tax credit system, introduced by the last Labour Government, cost £1.1 billion in its first year. This year, that cost has reached £30 billion. We in Britain spend more on family benefits than Germany, France or Sweden—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Both sides of the House have been very well behaved so far, so let us not spoil it as we get towards the end. I want the same dignity to be given to other speakers.
Mr Osborne
We in Britain spend more on family benefits than Germany, France or Sweden. It is, in the words of the right hon. Member for Birkenhead (Frank Field), the new Chair of the Work and Pensions Committee, simply “not sustainable”. As Alistair Darling has said, the sheer scale of tax credits is
“subsidising lower wages in a way that was never intended.”
Those who oppose any savings to tax credits will have to explain how on earth they propose to eliminate the deficit, let alone run a surplus and pay down debt.
We will take the following steps to put working-age benefits on a more financially sustainable footing. Since the crash, average earnings have risen by 11%, but most benefits have risen by 21%. To correct that, we will legislate to freeze working-age benefits for four years. That will include tax credits and local housing allowance, and it means that earnings growth will catch up and overtake the growth in benefits. Statutory payments such as maternity pay and the disability benefits—personal independence payment, disability living allowance and employment and support allowance group—will be excluded from the freeze.
We are also going to end the ratchet of ever higher housing benefit chasing up ever higher rents in the social housing sector. Those rents have increased by a staggering 20% since 2010. Rents paid in the social housing sector will not be frozen, but reduced by 1% a year for the next four years. That will be a welcome cut in rent for those tenants who pay it, and I am confident that housing associations and other landlords in the social sector will be able to play their part and deliver the efficiency savings needed.
We also need to focus tax credits and universal credit on those on lower incomes, if we are to keep the whole system affordable and support those most in need. From next year, we will reduce the level of earnings at which a household’s tax credits and universal credit start to be withdrawn. The income threshold in tax credits will be reduced from £6,420 to £3,850. Universal credit work allowances will be similarly reduced, and will no longer be awarded to non-disabled claimants without children. The rate at which a household’s tax credit award is reduced as it earns more will be increased by raising the taper rate to 48%. The income rise disregard will be reduced from £5,000 to £2,500—the same level at which it was originally set in 2003. Taken all together, the freeze in working-age benefits, the down-rating of social rents, and the focus of tax credits and universal credit on the lowest income households will reduce the welfare bill by £9 billion a year by 2019-20.
The fourth principle that we will apply to our welfare reform is this: the benefits system should not support lifestyles and rents that are not available to the taxpayers who pay for that system—[Interruption.]
Mr Deputy Speaker
Order. This House will come to order. It may not be important to some Members, but it is to the rest of us and our constituents. I want to hear what the Chancellor says because it affects all the people we represent.
Mr Osborne
The benefits system should not support lifestyles and rents that are not available to the taxpayers who pay for that system—[Interruption.]
Mr Osborne
We have already introduced a cap on the total amount of benefits that any out-of-work family can receive at £26,000. When we introduced that, it was opposed by Labour Members who said that it would drive tens of thousands of people out of their homes. Instead it encouraged tens of thousands into work. We will now go further, and reduce the benefits cap from £26,000 to £23,000 in London, and to £20,000 in the rest of the country. We will also require those on higher incomes living in social housing to pay rents at the market rate. It is not fair that families earning over £40,000 in London, or £30,000 elsewhere, should have their rents subsidised by other working people. We will turn support for mortgage interest payments from a benefit to a loan.
Another decision that most families make is how many children they have, conscious that each extra child costs the family more. In the current tax credit system, each extra child brings an additional payment of £2,780 a year. It is important to support families, but it is also important to be fair to the many working families who do not see their budgets rise by anything like that when they have more children. This is the balance that we will strike: in future we will limit the support provided through tax credits and universal credit to two children. Families who have a third or subsequent child after April 2017 will not receive additional tax credit or UC support for that child. Support provided to families who make a new claim for universal credit—[Interruption.]
Mr Deputy Speaker
Order. We seem to have a little problem with the gang of three on the Opposition Benches. I believe that we need to hear the Chancellor. This measure will affect my constituents and yours. I want to listen—I think it important that we all listen.
Mr Osborne
Families who have a third or subsequent child after April 2017 will not receive additional tax credit or UC support for that child. Support provided to families who make a new claim to universal credit after that date will also be limited to two children, and we will make similar changes to housing benefit. There will be provisions for exceptional cases, including multiple births. In addition, those starting a family after April 2017 will no longer be eligible for the family element in tax credits, nor will new births and new claims be eligible for the first child premium in universal credit. We will make similar changes to housing benefit by removing the family premium for children born or claims made after April 2016. That approach means that no family sees a cash loss and, as promised, child benefit will be maintained. These changes to tax credits are not easy but they are fair, and they return tax credit spending to the level it was in 2007-08 in real terms.
When we came to office in 2010 this country had reached the point where a benefit that was intended to support lower income households was instead available to nine out of 10 families in this country. Now, our properly focused reformed tax credit system will provide support to five out of 10 families; a much more sustainable balance in our welfare system. Taken together, all the welfare reforms I have announced will save £12 billion by 2019-20 and will be legislated for in the year ahead, starting in the welfare reform and work Bill which will be published tomorrow.
We are moving Britain from a high welfare, high tax economy to a lower welfare, lower tax society. The best way to support working people is to let them keep more of the money they earn. We promised the British people at the election that we would introduce a tax lock to prohibit any increase in the main rates of income tax, national insurance and VAT for the next five years. We will not only keep that promise, but legislate for it in the coming weeks. Our priority is not to raise taxes on working people; it is to cut their taxes.
In the previous Parliament, we raised the tax-free personal allowance from the £6,500 left by the previous Labour Government to £10,600, taking almost 4 million of the lowest paid out of tax altogether. When we went to the British people this May, we said we would go much further. Our two commitments were these: we would raise the tax free personal allowance to £12,500, so that no one working 30 hours a week on the national minimum wage pays tax; and we would raise the threshold at which people pay the higher 40p rate of tax to £50,000. These were our priorities at the election and they are the priorities in this Budget, for we on this side deliver what we promise.
The rates of income tax in the Budget remain unchanged, but the thresholds do not. Today, I am taking the first major step towards delivering our promise: I am raising the tax-free personal allowance to £11,000 next year. That is £11,000 one can earn before paying any income tax at all, boosting wages by over £900 in total and a down payment on our goal of reaching £12,500. We will now legislate, so that after that the personal allowance will always rise in line with the minimum wage and we never ask the lowest paid in our society to pay income tax.
The higher rate threshold currently stands at £42,385. I am today raising it to £43,000 from next year. It marks a strong start to our commitment to raise the threshold to £50,000 and it will lift 130,000 people out of the higher rate of income tax altogether. A personal allowance of £11,000 and a higher rate threshold of £43,000: 29 million people paying less tax; a down payment for a country on the up.
I began this Budget statement by saying that I put security first. I have set out the steps we will take to deliver economic security for a country that lives within its means and a welfare system we can afford, but there is also the financial security of families and the national security of our country. I turn to that now.
The Prime Minister and I are not prepared to see the threats we face to both our country and our values go unchallenged. Britain has always been resolute in defence of liberty and the promotion of stability around the world. With this Government, it will always remain so. So today I commit additional resources to the defence and security of the realm. We recognise that in the modern world, the threats we face do not distinguish between different Whitehall budgets and nor should we. I will guarantee a real increase in the Defence budget every year and, on top of that, create a joint security fund of £1.5 billion a year by the end of the Parliament. Defence and intelligence services will have to demonstrate they are delivering real efficiency. The strategic defence and security review will allocate the money in the most effective way. I am also protecting our overall counter-terrorism effort, and I reaffirm our international aid budget that saves lives and supports our values around the world.
I said that this was a Budget that delivered security to the people of Britain and I said we had to choose our priorities. Well, today, this Government makes this choice: committing to our armed forces who fight to keep us free; committing to the intelligence agencies who keep us safe; committing to the values we hold dear and defend around the world; and committing today to meet the NATO pledge to spend 2% of our national income on defence, not just this year but every year of this decade. We will ensure that this commitment is properly measured, because we know that while those commitments do not come cheap the alternatives are far more costly.
Let me turn to the final measure of the Budget, which speaks to the values of this Government. We have been clear that we want Britain to move from a low wage, high tax, high welfare economy to a higher wage, lower tax, lower welfare society. I have set out my plans to move us to lower welfare and lower taxes. That leaves us with the challenge of higher wages. It cannot be right that we go on asking taxpayers to subsidise, through the tax credit system, the businesses who pay the lowest wages. Subsidised low pay contributes to our productivity problem and Conservatives are against unfair subsidies wherever we find them.
In the past five years, we have taken the tough choices to drive down our borrowing, to make our business taxes competitive and to reform welfare. It is because we have taken these difficult decisions, and overcome the opposition to them, that Britain is able to afford a pay rise. Let me be clear: Britain deserves a pay rise and Britain is getting a pay rise. I am today introducing a new national living wage. We will set it to reach £9 an hour by 2020. The new national living wage will be compulsory. Working people aged 25 and over will receive it. It will start next April at the rate of £7.20. The Low Pay Commission will recommend future rises that achieve the Government’s objective of reaching 60% of median earnings by 2020. [Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Buckland, you should know better. Don’t get carried away—there’s more to come! We’ve not quite finished yet.
Mr Osborne
Mr Deputy Speaker, let me repeat myself, because I do not think the Opposition heard it. Britain deserves a pay rise and Britain is getting a pay rise. I am today introducing a new national living wage. The Low Pay Commission will recommend future rises that achieve the Government’s objective of reaching 60% of median earnings by 2020. That is the minimum level of pay recommended in the report to the Resolution Foundation by Sir George Bain, the man the last Labour Government appointed as the first chair of the Low Pay Commission.
Let me address the impact on business and employment. The Office for Budget Responsibility today says that the new national living wage will have, in their words, only a “fractional” effect on jobs. The OBR has assessed the economic conditions of the country and all the policies in the Budget. It says that by 2020 there will be 60,000 fewer jobs as a result of the national living wage, but almost 1 million more jobs in total. It also estimates that the cost to business will amount to just 1% of corporate profits. To offset that, I have cut corporation tax to 18%. To help small firms, I will go further now and cut their national insurance contributions. From 2016, our new employment allowance will now be increased by 50% to £3,000. That means a firm will be able to employ four people full time on the national living wage and pay no national insurance at all.
Let me be clear on what this means for the low paid in our country: two and a half million people will get a direct pay rise. Those currently on the minimum wage will see their pay rise by over a third this Parliament, a cash increase for a full-time worker of over £5,000. In total, it is expected that 6 million people will see their pay increase as a consequence. Taken together with all the welfare savings and the tax cuts in this Budget, it means that a typical family, where someone is working full time on the minimum wage, will be better off.
This is the first Conservative Budget for 18 years. It was the Conservatives who first protected working people in the mills. It was the Conservatives who took great steps towards state education. It was the Conservatives who introduced equal votes for women. It was the Conservatives who gave working people the right to buy. So, of course, it is now the Conservatives who are transforming welfare and introducing the national living wage. This is the party for the working people of Britain.
The Budget today puts security first: the economic security of a country that lives within its means; the financial security of lower taxes and a new national living wage; the national security of a Britain that defends itself and its values. A plan for working people. One purpose, one policy, one nation.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I now call upon the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on this motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate on 14 July.
Tax Credits (Working Families)
Lindsay Hoyle Excerpts(9 years, 4 months ago)
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Rebecca Long Bailey (Salford and Eccles) (Lab)
The problem with the Government’s suggestion that cutting tax credits will lead to higher pay is that the labour market is weighted in favour of the employer, rather than the worker. The only way to restore wage growth across the board, especially in the private sector, is through the expansion of collective bargaining. We simply cannot have wage growth in a country where the erosion of trade union rights is right at the top of the Tory agenda. The Government are doing the exact opposite of what they intend, which is to get people back to work and on decent pay—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Order! Honestly, we must have short interventions. I want everybody to get to speak. Interventions are not meant to be speeches. We have to help each other today because a lot of people wish to speak. The shorter the interventions, the more people we will get through.
Ian Blackford
I agree with the gist of what the hon. Lady said. We need to ensure that there is proper protection for trade union rights throughout the UK.
The Resolution Foundation, which has been much commented on, has assessed the proposed plans. It found that more than two thirds of the families affected—2.7 million of them—would be in work. Working families with two children would lose up to £1,690 a year. Almost two thirds of the cut would be borne by the poorest 30% of households; almost none of the cut would fall on the richest 40% of households.
A poll by YouGov and The Sunday Times the other week found that there was opposition across the UK to cuts in tax credits, and that the opposition was highest in Scotland: 56% of Scots are opposed to the cuts and only 37% are in favour. Clearly, there is public opposition to any attempt to target tax credits, and that opposition is strongest in Scotland.
The Tory assault on the welfare system is already pushing more and more people, particularly thousands of children, into poverty. There are worrying links between welfare reform and food bank use. The Trussell Trust has reported that 117,689 people picked up a three-day supply of groceries from Scottish food banks in 2014-15, including 36,114 children. That is eight times the number of people who were helped just two years ago. Given the social harm that is already being done by Tory welfare cuts, the future damage that could be caused by gutting tax credits is unthinkable. The Tories’ plans, and the high degree of uncertainty about the future of that lifeline support, demonstrate the need for full powers over Scotland’s welfare system to be in Scottish hands, not those of the Chancellor and the Secretary of State for Work and Pensions.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Before the hon. Gentleman continues, he has spoken for quite a while now, so I am sure that he is right at the end of his speech and wants to let others in.
Julian Knight
Thank you, Mr Deputy Speaker.
My answer to the hon. Member for Bootle (Peter Dowd) is that we will find out a lot more about the future direction of tax credits and other welfare measures from the Chancellor’s Budget statement tomorrow, so we should wait on that announcement.
I am running out of time, so let me say that I completely understand why tax credits were invented. They have done a lot of good in our society. There have, however, been unintended consequences. Worst of all, they are making millions of healthy, working-age adults reliant on cash from the state. We must preserve elements of the system for those trying to get into work, but we should augment it by active programmes of raising personal allowances and enhancing childcare provision.
Kate Hollern (Blackburn) (Lab)
Let me begin, Mr Deputy Speaker, by thanking you and the House for the honour you do me by listening to my maiden speech today.
As MP for Blackburn, I follow in the footsteps of illustrious predecessors. After the war, a formidable woman, Barbara Castle, represented my constituency until 1979. When Barbara Castle made her maiden speech 70 years ago, she made a promise that in her career in this House she would be the “pineapple of politeness”, an aspiration I will seek to emulate—but with no guarantees.
Barbara was known as a fighter. She fought for fairness and equality, and she was unquestionably the most successful female politician of her generation. Barbara was somebody with immense personal and political courage. She was able to inspire others and is still remembered very fondly in Blackburn today. She campaigned tirelessly to secure pensions and benefits, particularly child benefits. She would rightly be appalled and angry at this Government’s welfare reforms. She would be outraged at the glib statements Ministers make when speaking about poverty and deprivation.
My immediate predecessor, Jack Straw, will be familiar to this House, where his parliamentary career included holding, with distinction, a number of high offices, including Home Secretary, Foreign Secretary, Lord Chancellor and Leader of the House. But in Blackburn we remember a very different Jack; we remember an extremely hard-working Member of Parliament who served our town for over 36 years. Whether it was when on his soapbox—again, I cannot guarantee to copy that; stiletto heels will go through the box—or in his walk-in surgeries, he always made time for his constituents.
I am therefore really pleased that, despite standing down as MP, Jack’s connections with Blackburn are due to continue. He is to become chair of the fantastic Youth Zone, an initiative that was led by local business. It is a great example of collaboration between the private, voluntary and public sectors. It gives young people tremendous facilities to develop as individuals and engage in positive activities right next to the new Cathedral Quarter. Jack will also continue to be a governor at Blackburn’s University Centre, another facility that is testament to his energy and commitment to bring the best to Blackburn. I am under no illusion that Jack will be a hard act to follow.
To represent Blackburn, you need to know, understand and love the town. I moved there in 1977 from the west coast of Scotland, working in a shoe factory, where, I am proud to say, I worked full-time and received family tax credits. I am also proud to say that my two daughters have always worked and, fortunately, have never been in a position where they have had to claim tax credits. In Blackburn, I learned from the best; the people were warm, welcoming and hard-working, and their passion for the place is infectious. We have a rich and diverse community who are only too pleased to play their part in improving the town, as was vividly demonstrated when thousands of volunteers came out to spring-clean the town to honour Her Majesty the Queen’s visit on Maundy Thursday last year.
We have a number of initiatives that bring people together: the Your Call campaign, where residents take responsibility for their own area; the 100 Voices initiative, which brings together people from right across the town to discuss issues; and Just Good Friends, which gets older people out to reminisce, have a dance and help tackle social isolation. The diverse communities of Blackburn are strong, and I am immensely proud they have chosen me to represent them in this place. In Blackburn, there is a strong partnership between residents, the council and local businesses. For example, the local college and the council have just, in partnership, built a new state-of-the-art leisure centre. The private sector has committed to having apprentices from more disadvantaged groups and to fund the youth facilities.
I served as a councillor for 20 years, many of which as leader of the council, and I have seen Blackburn go through good and bad times. In every case, the people of Blackburn pulled together. To know Blackburn and to understand where it is going, we have to understand its history. Blackburn was one of the key mill towns that were the driving force behind the industrial revolution. By the end of the 1840s, there were 75 cotton mills. By 1860, that number had more than doubled.
One hundred years earlier, the cotton industry was revolutionised by the invention of the spinning jenny. James Hargreaves patented his invention—[Interruption.] Blackburn led the northern powerhouse more than 100 years ago, and I am sure that it will continue to do so.
Mr Deputy Speaker
As much as I would love to let you carry on—you are my neighbour—I dare not. Chris Philp.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Lady has just come into the Chamber and we know that Members cannot just come into the Chamber and intervene. It is better for all of us if they do not, and we certainly want to get to the next maiden speech, which will be from an SNP Member.
Chris Philp
I look forward to hearing the point after the debate, perhaps.
Let me turn now to the topic before us. When Gordon Brown introduced these measures in the early 2000s, he told us that tax credits would cost perhaps a couple of billion pounds a year. The truth is that today they cost £30 billion a year, an astronomic burden on the Exchequer.
Let us think for a moment about what tax credits mean. They are a subsidy paid to top up wages because employers are not paying their staff properly. I deplore the fact that some employers are not paying their staff properly and are effectively abusing the generosity of the Government by underpaying their staff. Any reforms in tomorrow’s Budget that end that abuse will be extremely welcome.
Tax credits provide disincentives to work, as some of my colleagues have pointed out already. They are withdrawn at the same time as income tax and national insurance kick in. Effectively we have marginal tax rates at around the 75% to 80% mark, so it is no surprise that employees in the companies run by my hon. Friend the Member for South Suffolk (James Cartlidge) were reluctant to take pay rises when marginal tax rates were so high. One Member mentioned the 16-hour-a-week limit, now raised to 24 hours a week. I know people who have employed part-time staff who refused, understandably given the system, to work extra hours for fear of losing those extra tax credits. That is all wrong. The fundamental fact is that people are helped out of poverty not through Government handouts but through hard work and earning more money.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. To try to help everybody, I will drop the time limit to five minutes. Every time someone intervenes, we allow the speaker an extra minute, which is killing us for time.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Thank you, Mr Deputy Speaker. In the light of that, I shall not take any interventions.
I congratulate all the Members who made their maiden speeches this afternoon. They have been fantastic and it is a privilege to follow them.
As lovely a place as Oldham is—the place where I live and which I represent—it has a very low-wage economy. One in three of the people who work in Oldham earn less than the living wage. That is significantly above the north-west average and the UK average. Associated with that there are high rates of deprivation and child poverty— 27% overall, and in some wards it is nearer one in two. We have talked about food bank use: we used not to have a food bank in Oldham, but we have one now. I undertook a fairness commission report to look at the core issues underpinning that and to set out how we could address them. It was not unique; other boroughs and cities have done a similar analysis. One of the key truths, unfortunately, is that the UK is one of the most unequal countries in the world. In its recent report, the International Monetary Fund, which the Minister did not seem to know anything about, says:
“Widening income inequality is the defining challenge of our time”.
Forty years ago, 5% of income in the UK went to the highest 1% of earners. Today it is 15%. We should spare a thought for our cousins across the water, where the figure is even higher.
This is the IMF’s second report. In the light of the work of Joseph Stiglitz and others, it found that inequalities are a drag on growth and can make growth volatile. This supports work by the OECD, which rejected the trickle-down economics so popular with Thatcherites. That idea supposed that increasing wealth at the top would trickle down to the rest of the food chain, and that policies aimed at reducing inequality would remove incentives and slow growth. Now the evidence is clear: inequalities have slowed growth, not increased it. According to this analysis, raising the income share of the poorest 20% of the population increases growth by as much as 0.38% over five years. By contrast, increasing the income share of the richest 20% by 1% decreases it.
We have a weak, stagnant economy, and the measures proposed will only make it worse. As colleagues have mentioned, over the past five years Institute for Fiscal Studies analysis has shown that the bottom 20%—the people on the lowest income—have been disproportionately affected by both tax and benefit changes. This is compounded by the cuts to public services, skewing resources away from areas of high need, and by the impact of the disastrous housing policy on housing costs. The Government justify this by saying—we can hear the mood music—“We are far too generous with benefits.” A comparative analysis of benefits spending as a proportion of GDP shows that we are 17th among EU countries. We spent 15% of our GDP on social security. That does not support the claim that we are incredibly generous.
One of the other myths that the Government are spreading is that everyone will be fine if they are in work. Again, the evidence does not support that. We have one of the highest under-employment rates in the EU, and about 80% of the increase in employment comes from self-employment. The average income drawn by people who are self-employed is less than £10,000 a year. In Oldham 20,000 working families with nearly 30,000 children are claiming tax credits. That is two in three families and three in four children. For them, tax credits mean the difference between just about keeping their heads above water or not. The Oldham fairness commission that I run has produced strong evidence of the impact of parental income on cognitive development, behaviour and health outcomes, which will have a negative effect on those children’s life chances—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I want to call everybody. If Members aim for three minutes, everybody will get the same amount of time.
European Union Referendum Bill
Lindsay Hoyle Excerpts(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Alex Salmond (Gordon) (SNP)
On a point of order, Mr Hoyle. I could not help noticing in your excellent selection of amendments that you have selected in the second group Government amendment 55, which, as I see from my amendment paper, is a starred amendment. That is not surprising, since it was tabled, I understand, at 9.35 pm last evening in a disorganised, spatchcock, humiliating climbdown. I accept the Government’s humiliating climbdown with good grace, but how usual is it for a starred amendment to be called and, presumably, divided on in Committee of the whole House?
The Chairman
The good news is that I was in charge of selection, and it is well within order. It is unusual, but that is where we are at. We will now continue, because I know that the hon. Gentleman wants to get us under way.
Clause 1
The referendum
Alex Salmond
I beg to move amendment 16, page 1, line 4, at end insert—
‘(2) The Chief Counting Officer shall declare whether the result of the referendum is that a majority wish the United Kingdom to leave the European Union.
(3) The Chief Counting Officer may declare that a majority wish the United Kingdom to leave the European Union only if—
(a) a majority of total votes cast in the referendum in the United Kingdom are against the United Kingdom remaining a member of the European Union, and
(b) a majority of the votes cast in the referendum in each of England, Scotland, Wales and Northern Ireland are against the United Kingdom remaining a member of the European Union.”
This amendment imposes a double majority requirement for withdrawal, which would have to be supported by a majority the whole of the UK and by majorities in each of its four constituent parts.
The Chairman
With this it will be convenient to discuss the following:
Amendment 49, page 1, line 7, leave out “31 December” and insert “1 July”.
The amendment would require the referendum to take place before 1 July 2017.
Amendment 50, page 1, line 8, leave out “2017” and insert “2016”.
The amendment would require the referendum to take place before 31 December 2016.
Amendment 4, page 1, line 8, at end insert—
‘(3A) No later than ten weeks before the date on which the referendum is to be held the Secretary of State must lay before both Houses of Parliament an independent report by the Office for Budget Responsibility on the implications for the sustainability of the public finances of the United Kingdom leaving the European Union.”.
The amendment would require the Secretary of State to publish, ten weeks before the referendum, a report by the OBR on the consequences of the United Kingdom leaving the European Union.
Amendment 5, page 1, line 8, at end insert—
‘(3A) No later than ten weeks before the date on which the referendum is to be held the Secretary of State must lay before both Houses of Parliament a report on the consequences of the United Kingdom leaving the European Union for each ministerial departments’ responsibilities.”.
The amendment would require the Secretary of State to publish, ten weeks before the referendum, a report by each Secretary of State on the consequences of the United Kingdom leaving the European Union for their areas of ministerial responsibility.
Amendment 6, page 1, line 8, at end insert—
‘(3A) No later than ten weeks before the date on which the referendum is to be held the Secretary of State must ask for and lay before both Houses of Parliament any assessment made by the Bank of England on the consequences of the United Kingdom leaving the European Union.”.
The amendment would require the Secretary of State to publish, ten weeks before the referendum, any assessment by the Bank of England on the consequences of the United Kingdom leaving the European Union.
Amendment 46, page 1, line 8, at end insert—
‘(3A) No later than ten weeks before the date on which the referendum is to be held the Secretary of State must lay before both Houses of Parliament a report by the Office for Budget Responsibility on the consequences for the Transatlantic Trade and Investment Partnership of the United Kingdom leaving or remaining a member of the European Union.”
The amendment would require the Secretary of State to publish, ten weeks before the referendum, a report by the OBR on the consequences for TTIP of leaving or remaining a member of the European Union.
Amendment 47, page 1, line 8, at end insert—
‘(3A) No later than ten weeks before the date on which the referendum is to be held the Secretary of State must lay before both Houses of Parliament a report on the consequences for negotiations on the Transatlantic Trade and Investment Partnership of the United Kingdom leaving or remaining a member of the European Union.”
The amendment would require the Secretary of State to publish, ten weeks before the referendum, a report on the consequences for negotiations on TTIP of leaving or remaining a member of the European Union.
Amendment 54, page 1, line 8, at end insert—
‘(3A) Before appointing a day under subsection (2) the Secretary of State shall lay before both Houses a report on materials which any Minister of the Crown, government department or local authority or any other person or body whose expenses are defrayed wholly or mainly out of public funds or by any local authority intend or expect to publish in the period of 28 days ending with the date of the referendum that—
(a) deals with any of the issues raised by any question on which the referendum is being held;
(b) puts any argument for or against any particular answer to any such question; or
(c) is designed to encourage voting at the referendum.”
This amendment requires the Government, prior to setting a date for the Referendum by regulations subject to the affirmative procedure, to publish a report on what publications which would normally be prohibited by Section 125 of the Political Parties, Elections and Referendums Act 2000 the Government intends or expects to publish in the four weeks before the referendum.
Amendment 11, page 17, line 37, in schedule 1, leave out paragraph 25 and insert—
‘25 (1) Section 125 of the 2000 Act (restriction of publication etc of promotional material by central and local government etc) applies in relation to the referendum during the referendum period with the following modification.
(2) Section 125(2)(a) of the 2000 Act has effect for the purposes of the referendum as if, after “Crown”, there were inserted “including ministers in the Scottish Government, the Welsh Government, the Northern Ireland Executive and Her Majesty‘s Government of Gibraltar”.’
The purpose of the amendment is to apply the “purdah” arrangements that govern ministerial and official announcements, visits and publicity during general elections to the campaign period before the referendum.
Amendment (a) to Schedule 1, leave out “modification” and insert “modifications”.
Amendment (b), at end add—
‘(3) Section 125(2) of the 2000 Act has effect for the purposes of the referendum with the addition of subsection—
“(e) advocacy on any issue having a bearing on the outcome of the referendum””
New clause 3—Restriction on publications etc—
‘(1) This section applies to any material, which—
(a) provides general information about the referendum,
(b) deals with any of the issues raised by the referendum question,
(c) puts any arguments for or against any outcome, or
(d) is designed to encourage voting at the referendum.
(2) Subject to subsection (3), no material to which this section applies is to be published during the relevant period by or on behalf of—
(a) the UK government,
(b) the House of Commons or House of Lords,
(c) the devolved administrations,
(d) any local authority,
(e) public bodies, or
(f) the European Commission and European Parliament.
(3) Sub-paragraph (2) does not apply to—
(a) existing material made available to persons in response to specific requests for information or to persons specifically seeking access to it, or
(b) anything done by or on behalf of—
(i) a designated organisation,
(ii) the Electoral Commission, or
(c) the Chief Counting Officer or any other counting officer, or
(d) the publication of information relating to the holding of the poll.
(4) In this paragraph—
“publish” means make available to the public at large, or any section of the public, in whatever form and by whatever means (and “publication” is to be construed accordingly),
“the relevant period” means the period of 28 days ending with the date of the referendum.
(a) A breach of the rules set out in this section, will be an offence.
(b) A person guilty of an offence under this section, is liable—
(i) on conviction on indictment, to a fine;
(ii) on summary conviction in England and Wales, to a fine;
(iii) on summary conviction in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum;
(iv) on summary conviction in Gibraltar, to a fine note exceeding level 5 on the Gibraltar standard scale.’
The New Clause prescribes a period of “purdah” in the four weeks before the referendum.
New clause 4—Referendum Fairness Board—
‘(1) There shall be a committee of privy counsellors, to be called the Referendum Fairness Board, whose duty is to consider any alleged breach of section (Restriction on publications etc) which comes attention of any of its members.
(2) Each of the following presiding officers for the time being may appoint any privy counsellor as a member of the board—
(a) the Speaker of the House of Commons,
(b) the Lord Speaker,
(c) the Presiding Officer of the Scottish Parliament,
(d) the Speaker of the Northern Ireland Assembly, or
(e) the Presiding Officer of the National Assembly for Wales.
(3) The Board shall prescribe its own rules of procedure, which must include procedures for—
(a) instituting legal action to interdict or injunct any further breach or repetition of an alleged breach, and
(b) drawing to the attention of the relevant prosecuting authority any serious or continuing breach of section (Restriction on publications etc).’
The New Clause provides for swift enforcement of the “purdah” rules which would apply under the linked New Clause in the four weeks leading up to the referendum.
Alex Salmond
There is a link of continuity between amendment 16 and the point of order that I made—that the theme should be one of respect. There has been a great deal of talk about respect by the Prime Minister in recent years, but particularly since the result of the election of last month. He said, for example:
“Governing with respect means recognising that the different nations of our United Kingdom have their own governments, as well as the UK government.”
The amendment is about giving acknowledgment to that respect in relation to the European referendum. [Interruption.] Does the right hon. and learned Member for Beaconsfield (Mr Grieve) want to intervene? If so, then of course I will gladly allow him.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Order. We now come to another maiden speech. I call Andrea Jenkyns.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
On a point of order, Mr Hoyle. Excuse me, but I thought we were discussing amendments, not the views of certain businessmen about the EU. Surely we should stick to the amendments.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
The Chair can decide what is in order and what is out of order, but I thank the hon. Gentleman for his intervention.
Mr McFadden
Of course, some Members do not like hearing these warnings and find them unpalatable, and people are entitled to disagree with them, but there are fundamental implications for trade and investment that the Department for Business, Innovation and Skills and other Departments with an interest in investment, jobs and trade should study and make information available about.
It is not just about trade, however: what would exit mean for the employment rights that millions of people have today? I think, for example, about the right to paid leave or to be treated equally as a part-time worker, and about the TUPE rights, which apply when a company is taken over and which stem from the acquired rights directive? What would happen to those employment rights, many of which were agreed at the European level, if we left?
Then there is the important area of universities and research. We have some of the best universities in the world, and not surprisingly they do very well when bidding for EU research funds. EU funding provides an additional 15% on top of the UK Government’s own research budget. Funds for research projects requested by UK higher education institutions from the European Commission rose from £424 million in 2008 to £714 million in 2012. My local university, the University of Wolverhampton, receives £3 million a year for research work and £20 million a year for knowledge exchange and work with businesses from the EU.
The Chairman
Thank you, Mr Jenkin. We do not need any applause. We can save that for another occasion.
I was giving the right hon. Gentleman some time, but we now need to get on to the amendments. As important as Wolverhampton is to him and me, I am sure that discussion of the amendments would be more welcome in the Chamber.
Mr McFadden
The point is that right across the piece— whether trade, university research or farming and agriculture —there is a strong case for each Department producing a report on the implications of exit, as amendment 5 calls for.
Amendment 6 deals with the Bank of England assessment. As we know, the Bank is independent, but we also know, thanks to a stray finger that sent an email to a journalist rather than a Bank staff member, that the Bank has begun work on Project Bookend, its own internal assessment of the consequences of a British exit. As my hon. Friend the Member for Nottingham East (Chris Leslie), the shadow Chancellor, said a few weeks ago, we would expect the Bank to carry out an assessment, but there would be significant public interest in it, so the amendment asks that the Government publish it if they receive it from the Bank.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
May I suggest that perhaps the hon. Gentleman ought to take a seat? The last thing that I want him to do is get himself into difficulty, and take too much out of himself. Please, Sir William, do whatever you feel is necessary,
Sir William Cash
I will sit down then. I am sorry to have to make my speech in this way, but I have been in hospital for the last four days.
Our problem is this: the situation in which we now find ourselves is not necessary. I speak more in sorrow than in anger, because I have spoken to the Minister for Europe, and we had a good discussion, as we always do. I was also grateful to him for saying in a letter that he was himself grateful for the constructive way in which concerns had been raised. It must be said, however, that the Government have not allayed those concerns, and that is the real point. I shall try to explain why, but let me first congratulate the Government on having listened. They listened over the question of having a referendum at all, they listened over the question of whether we should veto the fiscal compact, and they listened over the reduction in the budget. Those are all positive steps.
Having given the matter as much thought as I could—admittedly, I had an opportunity to do so from my hospital bed—I have to say that, in this instance, I am convinced that the Government are taking a step in the wrong direction. However—I ask Ministers to listen, if they would be kind enough to do so—it is possible for them to retrieve the situation so that there need not be a vote against.
Ultimately, what is raised is a question of trust. There are extremely strong reasons for the provisions in section 125 of the Political Parties, Elections and Referendums Act 2000, but we have heard very little about those provisions. Let me briefly explain them, so that people will know what we are about to repeal. Most might assume that, given the momentous and historic nature of the EU referendum, what is good enough for a Scottish referendum, a referendum on the alternative vote, and a Welsh referendum—all of which have taken place under Conservative-led Governments in the last few years—ought to be applicable to a referendum that goes to the heart of how we are governed and who governs us.
However, it is not just about trust. We do not know what the outcome of the promised discussions and consultations will be, but we do know that conducting a referendum in a manner that is unfair on the voters is an extremely retrograde step in the kind of democracy that we uphold. The provisions in the 2000 Act were introduced for very sound reasons. I applaud the then Government for that, and, even at this late stage, I appeal to the present Government to think again.
Incidentally, this has absolutely nothing to do with Maastricht or anything like that. There was a rebellion then because we did not have a referendum. On this occasion, we merely wish to ensure that the voters are given a fair choice. That must be one of our prime duties, because we are sent here as representatives of those people. If the Bill is passed, we shall have made a decision to transfer back to those people, by means of an Act of Parliament, the right to make their own decision. Therefore, they will have an absolute right to know that the way the referendum is conducted will in no way be canted or manipulated, whether for yes or no. Taking this out and then asking us to consider on the basis of consultations yet to come seems to me quite bizarre, because if the Government were good enough to accept my amendment 11—I am grateful for the support of many Members on both sides of the House on that—nothing would change in terms of the referendum. It is not going to take place in any immediate future. All we will be doing is re-securing the status quo so that we will then have the restrictions set out in section 125. I will come on to that section in a moment, and demonstrate what we would actually be repealing this evening. This is not just a Eurosceptic argument. This is not about a Eurosceptic position, in essence. It may be that we would prefer to ensure there is a fair vote, but the real question is about our democracy. That, to me, is the main question.
Mr Kenneth Clarke
How far does my hon. Friend want to take this? In a general election, the whole government machinery closes down for four weeks and studies the potential future of alternative political masters and waits to see what the political policy of the new Government will be. In this case, however, the Government at the time of the referendum will be the Government for the next several years, and the Government, as a Government, will have been involved in producing the terms that are part of the referendum. Does my hon. Friend intend that no Minister can act as a Minister, as could be the case if we strictly applied purdah, or take advice for all those weeks on anything that might pertain to an issue in the referendum? Is the Prime Minister going to be prevented from expressing a view? Surely some compromise that is a modification of purdah is required—
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Order. The right hon. and learned Gentleman has been here longer than most Members, and he should know that interventions must be short, especially if he wants to make a speech later.
Sir William Cash
I seem to have spurred my right hon. and learned Friend to a passionate pursuit of his arguments, because he does not want what I am proposing at all. The fact is that the Electoral Commission says the proposal to remove section 125
“could mean that governments and others will be free to spend unlimited amounts of public funds promoting an outcome at the referendum right up until polling day.”
It goes on to say:
“In the Commission’s view, there is a risk that the use of significant amounts of public money for promotional activity could give an unfair advantage to one side of the argument. Unlimited government spending would also undermine the principle of having spending limits for registered campaigns.”
We have already heard about the interference in the Scottish referendum, and what the right hon. Member for Gordon (Alex Salmond) said is completely right.
Royal Bank of Scotland
Lindsay Hoyle Excerpts(9 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Deputy Speaker (Mr Lindsay Hoyle)
I remind Members that if they want to ask a question, they need to stand. I am not always sure whether Members have changed their minds when they sometimes stand and sometimes do not stand. It also helps if we have brief questions and shorter answers, which should allow everybody into the debate.
Heidi Allen (South Cambridgeshire) (Con)
It strikes me that the concern is about the process at the beginning of the sale. All the advice—from the Bank of England and Rothschild—is about phasing, which is part of the journey to return to profitability. May I suggest a rebranding exercise? Perhaps we should call this something different—I know what: a long-term economic plan!
Harriett Baldwin
The hon. Gentleman has failed to apologise for the regulatory system that allowed us to get into this position in the first place. The letter from the Governor of the Bank of England is on the record. The hon. Gentleman must accept that this is part of the improvement in the overall long-term economic outlook—[Interruption.]
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. Mr Gardiner, you must come back and wait for the next Member to speak. You know the courtesies of the House. Members must not do that. It is all about respect, and we must have tolerance as well, on all sides.
If the Minister has finished her answer, I will call David Nuttall.
Mr David Nuttall (Bury North) (Con)
The Minister experienced the singular disadvantage of being my Whip in the last Parliament. I am pleased to welcome her to her new position.
I regard this share sale as a tremendous opportunity for the Government to widen share ownership, just as the Government of the late Lady Thatcher did in the 1980s. May I urge the Minister to make as many shares as possible available to small investors, to make the application process as simple as possible, and to set the minimum level as low as reasonably possible?
The Economy
Lindsay Hoyle Excerpts(9 years, 5 months ago)
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Mr Deputy Speaker (Mr Hoyle)
Order. I am going to reduce the time limit to five minutes, so that as many Members as possible can speak.