Budget Statement

Lord Shipley Excerpts

Thursday 21st March 2013 Lords Chamber

[Lord Shipley]

My Lords, I was hoping for several measures to be announced in the Budget, and each has been met: initiatives to generate investment to drive growth, particularly growth that can rebalance our economy away from overdependence on financial services and London; initiatives to get Britain building again, boosting the construction industry and getting houses built; action to implement the report of the noble Lord, Lord Heseltine, No Stone Unturned; action to help small businesses to encourage them to take on more people; and raising the income tax threshold to £10,000.

On investment, we must remember that public spending and borrowing can have a positive impact on growth. I refer to transport improvements, school repairs and improvements, water infrastructure, faster broadband, power stations and infrastructure investments that produce an income. It seems to me that borrowing small amounts, particularly at today’s low interest rates, need not cause problems with financial markets. I will come back to this in a moment in relation to housing, but the message is that infrastructure projects do not have to be big national schemes to generate jobs and growth.

First, the announcement on the income tax threshold was very good news because the threshold of £10,000 will be reached a year early. Since 2010, the Government have taken almost 2.5 million people out of paying tax. In my own region of the north-east of England, 106,000 people have been taken out of paying tax. That is a huge achievement for the Government, which directly helps large numbers of people on low incomes and increases their personal spending power.

Secondly, on small businesses, I was pleased to read last night the reaction to the Budget on the part of the Federation of Small Businesses, whose national chairman said:

“The FSB asked for a budget for small businesses and this is what has been delivered”.

The decision on national insurance contributions for small businesses is particularly welcome. I note the success of the Government’s policy on apprenticeships, which has seen 86% growth since 2010. Indeed, in my own region of the north-east, the growth has been 107%: in other words, a doubling over three years. This is very encouraging because it demonstrates the importance of the private sector vis-à-vis training for sustainable employment, in which small businesses play a crucial role.

Eighty-one of the 85 recommendations in the report by the noble Lord, Lord Heseltine, No Stone Unturned, have been implemented. That is very good news because it really matters. GVA per head between 1997 and 2010 grew in London and declined across the north—that is the north-west, Yorkshire and the north-east—against the UK average. In absolute terms, GVA rose in those regions, but in comparative terms the gap widened. This Government’s job must be to empower those outside London—private and public—to do more to drive growth.

For an indication of what has happened in recent years, let us take the contribution by English region to the national non-domestic rate pool. Last year—2011-12—showed the same thing: that every region outside London, including the south-east, contributed less than its share of population, with London contributing nearly 30%. That dependency is unhealthy for our economy and demonstrates clearly why the empowerment of England’s local enterprise partnerships and local authorities through the single-pot mechanism is so important. The crucial point is that devolving power from Whitehall in such key areas as transport, skills, housing and regeneration—building on existing capacities of other organisations such as the chambers of commerce—will drive growth faster than leaving all key decisions centralised in London.

However, it is important that devolution is real. An example of my concern about the impact of centralised power is the Highways Agency. Sometimes it is claimed that planning gets delayed because councils are slow. Actually, the problem often lies with government agencies. As an example, the Highways Agency is not regionally accountable and is charged exclusively with keeping traffic flowing, regardless of wider economic or social issues. It has a power to stop planning permissions. The immediate solution, requiring no legislation, is for the Highways Agency to have to obtain the Minister’s approval before it uses its power to stop a planning application. The real solution is to give the power to localities to decide for themselves on such matters, as part of a general devolution of power.

On getting Britain building again, the help to buy scheme should boost confidence; something needs to. There were only 98,000 starts in England last year and yet 230,000 households are formed each year. The numbers on housing waiting lists, the rise in demand for temporary accommodation and high rents in the private sector also point to the social and economic benefit of building more homes at below market rates. Councils, and their arm’s-length management organisations where they exist, have the capacity to build more homes, given that council housing is now self-financing. They could raise £7 billion and build up to 60,000 more homes over five years, contributing 0.6% to GDP in the process. That could be done very simply if the Government removed the borrowing cap on housing revenue accounts, relying instead on a prudential borrowing code to guarantee that only sustainable investment got the go-ahead.

Council housing has been self-financing since April last year. That is welcomed, but the average debt on a home is just over £17,000. There is scope for additional borrowing against the asset represented by that existing stock. While I understand the need for the Government to be careful about public borrowing levels, relaxing the housing borrowing cap need not be counted as public sector borrowing any longer. The UK uses a much wider measure of public debt than other countries. Council housing is now a trading activity, and international regulations already permit this to be discounted from government borrowing levels. Unfortunately, the UK does not currently adopt such an approach, and I remain puzzled as to why not.

This Budget provides many opportunities for growth. They need to be grasped. We need to manufacture more, export more and build more on our commercial strength. That is why my noble friend Lord Heseltine’s recommendation that LEPs should produce long-term strategic plans for negotiation with government was right. Also right was the recommendation to publish by the summer sector strategies in key sectors for growth—automotive, aerospace, life sciences, agritech, professional business services, information economy, construction, education, nuclear, oil and gas, and offshore wind. Producing these strategies is very encouraging because they cover the UK as a whole and not just London, so growth will be delivered outside financial services and London. There is a vision in this Budget. It points a clear way forward for growth. For that reason it should be commended.