The Economy

Andrew Gwynne Excerpts

Tuesday 11th December 2012 Commons Chamber

[Danny Alexander]

No, I do not agree with the hon. Lady’s analysis.

There are still savings to be made in day-to-day administration costs. I am confident that the civil service can continue to produce more for less and provide excellent value for money to the public.

The welfare system makes up more than £200 billion of public spending and cannot be immune from the effort to deal with the deficit. As a result of the financial pressures that we are facing, we have had to take the difficult decision that we can uprate working-age benefits by only 1% in the coming three years. That figure represents a rise each year, but it will be below the rate of inflation. It is not as high as some may have expected, but it is what the country can afford. That is a tough choice, but an even-handed one, and it avoids some of the more punitive proposals that have been floated in recent months.

Most benefit claimants would love to work and are trying their best to find a job. However, we need to recognise that in-work incomes have risen at half the rate of benefits since the financial crisis. Those who are in work will be better off thanks to our income tax cuts. When we are increasing public sector pay by only 1%, it would simply not be fair to increase the benefits of those who are out of work at a higher rate than those we employ to work for us.

Even while making those cuts, we have taken steps to protect those who are most in need. That is why disability living allowance and other benefits specifically for the most disabled and their carers will continue to increase in line with inflation. It is also why the basic state pension will increase by 2.5% next April, which is higher than either earnings or prices, honouring our commitment to the triple lock. The application of the triple lock means that there will be a better rise in the basic state pension than pensioners have seen before. Pensioners will see a cash increase of £2.70 a week in the basic state pension in 2013-14.

While we are protecting those in need, it is only right that we ask the most from those who earn the most. That is why the higher rate threshold for personal income tax will also be uprated by only 1% in 2014-15 and 2015-16. It is also why the annual allowance for pensions tax relief will be reduced from £50,000 to £40,000, and the lifetime allowance from £1.5 million to £1.25 million. That will raise more than £1 billion a year by the end of the period and is something for which I, for one, have argued for quite some time. The savings from Whitehall, welfare and the wealthy, and the targeted tax rises, are helping to cut the deficit in the medium term and to boost growth now.

Our capital spending plan will see £5 billion switched from current spending to investment in infrastructure, providing a better connected UK on roads, on rails and online. We will provide £350 million for the regional growth fund, enabling it to continue its success in creating jobs throughout the country. We are rolling out rural broadband across the country and have announced £50 million for the second wave of super-connected cities across the UK from Portsmouth to Perth, via Newport and Northern Ireland.

We have announced funding for a number of road building and maintenance projects. We will be dualling the A30 in Cornwall—an improvement that has long been campaigned for, not least by my hon. Friend the Member for North Cornwall (Dan Rogerson), who is in his place. I congratulate him on his efforts. We will also bring the A1 up to motorway standard all the way to Newcastle. I have been made aware of the need to improve that road north of Newcastle, not least by my right hon. Friend the Member for Berwick-upon-Tweed (Sir Alan Beith), and have asked my right hon. Friend the Secretary of State for Transport to work up plans for potential improvements north of Newcastle.

The capital projects will not only create jobs in the short term, but crucially will raise the quality of the country’s infrastructure and our growth potential in the medium term. Labour Members may be interested to know that during the previous Government’s time in office, we fell from eighth to 33rd in the global league table for the quality of infrastructure. That is not good enough and is why John Cridland of the CBI said last week that it is

“absolutely right to shift the focus from current to capital spending to boost jobs today and the UK’s competitiveness tomorrow.”

As colleagues will know, our plans will mean that as a share of the economy, the investment that the Government are putting forward in this Parliament is greater than the average over Labour’s period in office. These investments, not just in roads, but in schools, colleges and flood defences, can only serve to help our businesses in the future.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I am pleased by the Chief Secretary’s recent conversion to investing in capital projects, such as building new schools. Now is perhaps an opportune time for him to apologise to the schools in my constituency that had their Building Schools for the Future funding taken away. Can they expect it back?

[Danny Alexander]

I have not had a recent conversion to capital expenditure. The hon. Gentleman will remember that in the spending review in 2010, we committed over £2 billion a year more to capital expenditure than had been set out in the previous Government’s plans. In the autumn statement last year we added £5 billion and in this year’s autumn statement we added another £5 billion for a range of projects. I hope that he will recognise that the Building Schools for the Future programme was expensive and bureaucratic. The proposals that have been brought forward by the Department for Education are a better and more cost-effective way to meet at least some of the needs in the school system in this country.

--- Later in debate ---

[Rachel Reeves]

Like other countries around the world, our GDP contracted during the global financial crisis. Germany and the United States have managed to recover that growth; we have not, because our Chancellor chose a different course—austerity—when jobs and growth are needed to get the economy moving and the deficit down. Unlike this Government, we recognise that we need to take action to stimulate jobs and growth. That is why we have said there should be a national insurance holiday for small businesses taking on new workers and a bank bonus tax to fund a programme of youth jobs, and that we should genuinely bring forward infrastructure investment and temporarily cut VAT to 17.5%. Those are the policies that would get the economy moving, get jobs back in our economy and help to bring the deficit down in a sustainable way.

[Andrew Gwynne]

The Government have placed great emphasis on the views of the Office for Budget Responsibility. My hon. Friend will be aware from reports in today’s media that Robert Chote of the OBR has suggested that the UK need not fear losing its triple A rating. Does she see us losing our triple A rating as a ringing endorsement of this Government’s economic policies?

[Rachel Reeves]

Let us see what the rating agencies have to say in the new year. Of course we are on negative watch, but it was not we who said the rating agencies should be the be-all and end-all. Indeed, they were giving Lehman Brothers a triple A rating until that company crashed and almost took the global economy with it. It was the Chancellor who said that a triple A rating would be the watchword of his chancellorship, so if it were to go, it would be a damning indictment of what this Government have presided over.

What was the Government’s response to all the bad economic news last Wednesday? Let us give credit where it is due. The Chancellor now agrees with us that we should not go ahead with the fuel duty increase in January; he agrees with us that introducing regional pay in our public services would be costly and impractical; he agreed with us that we should reverse the relaxation of restrictions on pension tax relief for the very rich; he agreed with us that it was a mistake to implement deep cuts to capital programmes such as Building Schools for the Future; and he agreed with us that cutting investment allowances risked damaging incentives for long-term wealth creation. We propose the creation of a British investment bank to support small businesses, and the Chancellor has produced a pale imitation of that, but I am afraid that all these measures are too little, too late—robbing Peter to pay Paul. Smoke and mirrors will not hide the lack of a real, purposeful growth strategy.

The chief executive of British Airways summed it up yesterday when he said:

“I don’t see an agenda for growth.”

I agree, and so does the Office for Budget Responsibility. Taking into account all the Government’s measures from the autumn statement, the OBR has concluded that they will add just 0.1% to UK GDP over the next five years. The economy is shrinking this year. Growth next year—forecast at 2.9% just two years ago—is now forecast at just 1.2%. Indeed, we have seen downgrades not just this year and next, but the year after.