Budget Resolutions and Economic Situation

Debate between Simon Hoare and Jim Cunningham

Tuesday 14th July 2015 Commons Chamber

[Mr Cunningham]

I am sure you will remember, Mr Deputy Speaker, that when we were on the Trade and Industry Committee, we discovered that the Americans were using their defence budget for research and development. The private sector benefited from that because it did not carry that overhead of research and development, which can be at least 50% of any company’s budget and even more than wages. I agree with my hon. Friend, therefore, that the Government should be looking at that.

The Chancellor’s boast—if you want to put it like that—about the living wage is, when we actually analyse it, a con. The living wage as proposed by the Living Wage Foundation is 60p an hour higher than the Chancellor’s proposed amount, and much more inside London—although I do not have the exact figure for London. His proposals have even been criticised by the Living Wage Foundation. The cost of living varies between regions, and for those on low pay, each penny matters. We can only assume that he is rebranding the national minimum wage to muddy the waters. It is political smoke and mirrors to avoid comparisons with the recommendations of that independent charity and to avoid criticism of his low-pay economy. Once again, he has also ignored young people by excluding under-25s from the proposals.

The massive cuts to tax credits will utterly undermine any positive outcomes from the increase to the minimum wage and leave 13 million families worse off, according to the independent Institute for Fiscal Studies analysis, which has also shown that the poorest will be negatively impacted far more than the well-off. Once again, the low-paid suffer. Much is paid in tax credits because of the Chancellor’s low-pay economy, but slashing tax credits will not make the problem of low pay go away.

[Simon Hoare (North Dorset) (Con)]

rose—

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[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?

[Mr Cunningham]

The hon. Gentleman is entitled to his opinions. I do not think tax credits are endemic. Most people I have ever come across prefer to work for a decent wage. They do not want a subsidised wage, but the employer is never going to pay that decent wage on the basis of the Government’s proposals. If they really believe that, they are deluding themselves, because quite frankly employers do not like spending money.

The Chancellor has announced plans to scrap maintenance grants and replace them with repayable loans. These grants are offered only to the poorest students, so that will saddle more debt on those who already get the least help and support, while well-off students remain unaffected. This, along with the under-25s not receiving the new minimum wage and the under-21s not receiving housing benefit even if they have no parental support, shows that the Chancellor is not interested in helping young people to succeed and get on in life.

The Budget shows, once again, the Chancellor’s contempt for the west midlands. He mentioned the northern powerhouse three times in his Budget speech and the north more generally seven times, yet he mentioned the midlands only once, with no distinction made between east and west and no mention of the vital infrastructure investments required to ensure a balanced economy across the UK. Once again, the west midlands has been overlooked in favour of the Chancellor’s pet projects. This is a Chancellor who cares more about press headlines than pressing need. A future west midlands combined authority would represent the second biggest economic area after London, yet the Chancellor ignores it at every turn.

The rise in the minimum wage is welcome, but the fall in tax credits will leave millions worse off. The Chancellor’s changes to inheritance tax also benefit the wealthy few at the top of society, not those at the bottom. He has made scant proposals to remedy the housing crisis. The number of homes and the cost of rent and mortgages have been ignored. Rent has become a very big issue in this country.

This is a Budget that ultimately fails young people. Once again, the Chancellor has failed to give the west midlands either the time or support it deserves. All his changes are an attempt to paper over the cracks of a low-pay economy that only works for the few.