Budget Resolutions and Economic Situation

Angus Brendan MacNeil Excerpts

Wednesday 19th March 2014 Commons Chamber

[Stewart Hosie]

It is extremely convenient that, once again, we have a “North sea oil price crash” story on Budget day, some six months before the referendum. If the right hon. Gentleman keeps saying it, I am sure someone somewhere will finally believe him. I am not dreadfully convinced.

The bottom line is that—just like the right hon. Gentleman’s intervention—the Chancellor’s speech was hugely political. He did not tell us about recovery; he did not tell us that he is trying to lift the burden from hard-working families; he did not apologise for trying to rebalance the economy on the backs of the poor. This Budget speech was a political platform for the next election, and if it was supposed to be a vindication of his policies, then it failed, because the policies have failed.

The Chancellor did of course have a deal to say about tax. He is right to increase the basic rate threshold to £10,000, and then to £10,500. Raising the threshold from £6,500 to £10,000, resulting in savings this year of £700 for the average person, is sensible, but of course, that is only part of the personal tax story. This Government have pushed ahead with a tax cut for millionaires and have continued to squeeze the middle—the genuine middle class. The threshold for those paying the 40% rate of tax has come down from £37,500 to under £32,000, so for every penny saved at the bottom, they have had to pay more than a penny at 40%. I therefore welcome the fact that the 40% threshold is going to be increased, but that is not until 2014-15. It will not change the fact that the proportion of people paying the 40% tax rate has doubled over the past two decades, and there are now 2.1 million more people paying a rate of tax that was previously only for the rich.

It is not just the middle: it is the poorest in society who have been hit hardest. We know—the right hon. Member for Wokingham (Mr Redwood) told us—that the proportion of tax cuts to tax rises is 4:1. We knew from previous Budgets that the impact of the discretionary consolidation would be £155 billion. Interestingly, the Government have removed that figure from the Red Book: they have removed the year 2016-17 from the forecast, and are now telling us that the discretionary consolidation will be only £126 billion. However, that forecast goes only to 2015-16, and I am concerned that they are not making a longer forecast, so we can see the real scale of the damage they are trying to do.

We in the SNP know where the pain of this Budget and of this Government’s policy direction will be felt. It will be the 144,000 households in Scotland who are losing some £3,500 each through changes to incapacity benefit. It will be the 372,000 Scottish households who have seen tax credits reduced to the tune of £800 a year. It will be the 620,000 families hit by changes to child benefit, who have lost an average of £360 a year. It will be felt by the 55,000 people who are losing an average of £3,000 a year as disability living allowance is removed. Those are the people whom we should be thinking about and who should be helped. Instead, the Government continue to try to balance the books on the back of the poor.

I welcome the fact that the Budget forecast at least says that there will be some growth, but it is once again heavily predicated on business investment growth. In Budget after Budget, the Government have produced five-year growth forecasts. In 2010, growth was predicted to be between 8% and 10% a year, but by the time we got to 2011 it had turned negative and they had to set yet more ambitious targets for the next five years. So it went on, and we find in the Red Book that the forecast business investment growth for last year turned negative again. I am desperate to see positive business investment growth, and the jobs that come with it, but we keep seeing the same story from the Government. They keep failing.

What should the Government have done? There are any number of policies that they might have adopted. Instead of tinkering with air passenger duty, they might have cut it properly or acted sensibly to boost international connectivity. Instead of simply freezing fuel duty, they might have introduced a real fuel duty regulator to smooth out future spikes. They might have cancelled some of their austerity measures, or at least removed the cap on discretionary housing payments to help the poorest. There are so many things that they might have done.

In the North sea, the Government announced that they would implement the Wood review in full. That will save the industry some £45 million, and it is to be welcomed. However, they are keeping the offshore chartering regime that they announced last year, which will cost the industry £600 million. They keep getting it wrong every single time.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Should the Government not acknowledge that the North sea is booming, and that the drop in revenues is due to investment being tax deductible? What we are seeing is a healthy North sea for the years to come.

[Stewart Hosie]

I am sure that we all support £14 billion-worth of investment this year and £100 billion in the plans, and the drilling of 133 oil and gas wells to invest for the future. We would all be far less happy if that investment was not taking place. The problem is that all the good things that the Government could and should have done would have required them to change their policy fundamentally, away from billions more in austerity cuts and away from the policies that have stifled growth and recovery over the past few years.

I am not at all convinced that this was a Budget for recovery. It was a political Budget from an all-too-political Chancellor. I saw Tory Back Benchers waving their Order Papers not only after the Budget statement but before it was even made, and I suspect that such hubris will come back to haunt them. I hope that with a yes vote in this year’s referendum, this will be the last Tory Budget ever to affect Scotland.

--- Later in debate ---

[Mr MacNeil]

The hon. Lady says that no Members complained when schools were built in their constituencies, but they did. I remember writing long letters about the private finance initiative and the false comparison with the public sector, which was based on a false equation. I think they were built expensively under the Labour Government. I am sorry to have to bring that up after she was so generous in giving way.

[Yasmin Qureshi]

I agree that there were some problems with PFI. I am not one of those who say that everything was perfect. However, to suggest that spending on our country’s infrastructure, which created jobs, made people better off and led to between £80 billion and £90 billion being spent on the national health service, was somehow a waste of money is, I think, a real insult to the people of this country.

If my memory serves me correctly, the Opposition at the time agreed fully with the Government’s spending analysis. They did not object to any of it and said that they would carry on spending at the same rate. Therefore, to try to suggest that somehow money was spent recklessly is absolute rubbish. The myths that Government Members have been peddling for the past four years should stop. The Government parties should recognise that they have been in power for four years and should start thinking about what they have done.

We know that on average families are £1,600 worse off. Energy prices have gone up and up. We have said that there should be an energy price freeze until 2017. If the Government really want to help ordinary people, why do they not do that and reform the energy sector? The education maintenance allowance, which helped 16 to 18-year-olds from poor families to stay in school, was abolished, which again hit the poorest in our society the hardest. The Chancellor today announced a new garden city, but it has taken him four years. We have been arguing for four years that more house building projects are needed. It is great that something is now happening, but we have had to wait too long for it.

I would like the Chancellor to have frozen energy bills until 2017, which would have been really helpful. Young people should have been put back to work with a jobs guarantee scheme, which we have said would be funded by a tax on bankers’ bonuses. Free child care should be extended to 24 hours for three to four-year-olds, and we should also cut taxes for 24 million people on lower incomes, with a lower 10p starting rate of income tax. That would help a lot of ordinary working people. The Government should also cut business rates for small firms so that we can create more jobs. That, too, would help ordinary people and small businesses.

Finally, we should consider the issue of equality, pay gaps and wealth distribution. It is said that things are better now than 28 years ago, but recently there have been various articles and a lot of discussion about the fact that the pay gap is too large. Even the International Monetary Fund, hardly a hotbed of communism, has said that countries with a great deal of inequality have economic as well as social problems as a result. Steps should be taken to narrow the gap even more. There should have been real measures to tax the really wealthy in our society, especially their homes, so that we can reduce the gap.

Even Her Majesty, who is not known for getting involved in the political issues of the day, has expressed concern about the level of poverty and the situation of the poor. If the Queen starts getting involved in these issues, that is a wake-up call for everybody—not just for the Government, but for my party. However, the coalition is in power and it should be looking at the issue of inequality.

Apart from the fact that it is only right that society should be more equal and fair, addressing inequality makes economic sense. Problems with mental and physical health often arise from financial difficulties and cost the economy about £40 billion. Addressing inequality makes sense, but there was nothing in the Chancellor’s speech that helps the ordinary working poor person.

--- Later in debate ---

[George Freeman]

I am delighted that the Chancellor has been able to support the Cambridge city deal, which will play a key part in our innovation economy.

We should take time to remember the mess that we inherited four years ago, and the causes of it. The truth is that between 1997 and 2010, we saw the largest increase in public spending as a percentage of national income of any industrialised country. During that period, we rose from 22nd to sixth in the world league table for public spending as a percentage of national income. Before Opposition Members try to argue that that was a result of the global crash—indeed, after they have tried to do that—I should say that if we take the date of 2007, before the crash, we see that our position on the table had risen from 22nd to 10th. That is the second largest increase in history.

That legacy was created by a wilful overspend by the Labour party. It left us, in 2010, with the biggest peacetime budget deficit in our history—a £157 billion deficit and a £1 trillion debt. If we pay off that debt at £1 million a minute, it will take us 30 years. The truth is that everybody in this country is now paying for that. We inherited a situation in which debt interest alone was set to rise to £70 billion a year. When we started, debt interest alone was, in effect, the fourth biggest Department of State, and we were borrowing £1 for every £4 spent. It was an absolute disgrace for the outgoing Labour Government’s Chief Secretary to have left a note with an exclamation mark saying that he thought it was funny that there was no money left. We should remember that. I do not think it is a joke, because we are all paying the price.

That is why I welcome the Chancellor’s announcement of the OBR’s reporting on the progress that we are making in our deficit reduction plan through the 80:20 rule—80% from spending and 20% from tax. These were tough decisions—all of which, we should remember, were opposed by Labour—and they are now beginning to lead to sustained long-term growth. Growth is up to its highest level for 30 years, and we are now the fastest growing economy in the G8. Some 1.5 million private sector jobs have been created—three for every one regrettably lost in the public sector. There has been a 24% fall in unemployment, with the fastest fall in youth unemployment for 20 years. As a result, we are now on track to eradicate the deficit by 2018 and we are paying off debt quicker than any other western economy. That is a record of which we should be proud and a record to which this Budget stands testament.

I want to highlight the important work that the Government are doing from that platform to support our innovation economy. Today’s announcements on science and technology and the knowledge economy included £42 million for a new Alan Turing institute of big data, in which Britain is leading the world; £74 million for the cell therapy manufacturing centre and the graphene innovation centre, putting Britain at the cutting edge of new technologies that will turbo-charge new industries and new business creation; and £106 million for 20 doctoral training centres across the country.

We have an enormous opportunity to trade our way out of the debt crisis by plugging into the fastest growing emerging markets around the world, particularly in the life sciences, in food, in medicine, and in energy. In 30 years, those economies will go through the same industrial and agricultural revolution that we started and went through in 300 years. They represent vast markets for our knowledge economy. That is why I particularly welcome the support for export finance. As a trade envoy and a former business man myself, I know how important it is to support our small companies. We are starting from a woefully and shamefully low base. After 13 years, Labour left us very weakly linked into those emerging markets. We still export more to Luxembourg and Belgium than we do to China. I am delighted that the Government are making such progress.

You do not need to take this from me, Mr Speaker—take it from the business community. The Institute of Directors has said:

“This is a responsible and imaginative budget which should promote growth, exports and investment. It will be widely welcomed.”

The British Chambers of Commerce said this afternoon that the Budget was

“disciplined, focused, and geared toward the creation of wealth and jobs”

and that it “passes the business test”. The CBI has said:

“The Budget will put wind in the sails of business investment, especially for manufacturers.”

I turn to the historic announcements on savings and pensions, with the pensioner bond, the new ISA, the abolition of the 10p rate on savings, the child trust fund, and the increase in the amount that can be invested in the junior ISA.

[Mr MacNeil]

There is often a problem with the governance of ISAs when the banks attract savers into ISAs and then change their rules and boundaries so that within a year they are no longer selling that ISA but have moved on to the next ISA pot. Sometimes savers may be ripped off by banks that have not been responsible in managing their ISAs properly in moving the vehicle that the money is in and lowering the interest rate after a year or two.

[George Freeman]

The hon. Gentleman makes an interesting point. The bigger point is that in the 1980s the Conservative party launched a historic renaissance of saving and wealth creation whereby more and more people, through ISAs and PEPs, were able to own shares and save. That was wilfully destroyed by the former Labour Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), through his stealth taxes. It has long been necessary for us to restore a culture and a set of incentives for a genuine renaissance in savings, and that is key to the resilience that the Chancellor set out today. That was the most important set of measures in today’s Budget, and it will stand the test of time.

What did we hear from Labour Members? I came here genuinely wanting to hear the Opposition’s response to this package. I wanted to hear the alternative economic policy that Labour is going to put to the British people next spring. For all the noise we hear on the Government side of the House, the real test, as we know, is the silence from the Opposition Benches. What we heard today was an embarrassing descent into business bashing and class war. If that is what the Leader of the Opposition defines as his “new socialism”, I wish him luck. I will be sending a copy of his speech to all the businesses in my constituency, because it fails the business test in spades, and it is the business test that will drive the growth and investment on which the public sector always depends.