Budget Resolutions and Economic Situation

Brooks Newmark Excerpts

Friday 22nd March 2013 Commons Chamber

[Mr Duncan Smith]

I am going to make some progress. The right hon. Gentleman will have plenty of time to contribute and I want to finish responding to the intervention from the hon. Member for North Durham (Mr Jones). Capital spending was set to fall. The plan that Labour left was to lower capital spending and there is no way around that. He cannot talk about capital spending rising because it was set to fall. We are bringing borrowing down. Labour has no plans at all for that and would raise borrowing.

[Mr Brooks Newmark (Braintree) (Con)]

Does my right hon. Friend agree that the bottom line is that today more men are in work than ever before, and more women are in work than ever before? That is the most important thing for our constituents.

[Mr Duncan Smith]

I was going to come on to that. I agree with my hon. Friend, and our employment levels put us in a better position than almost everybody else in Europe. We have more people in work and lower levels of unemployment. To be honest, people in Spain or France would give their eye teeth for the figures that we have today. Labour would push the cost of borrowing higher and higher, the deficit would spiral and the world community would not lend to us except at the highest rates possible. We would be rather like Spain or, in some senses, Italy.

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[Mr Brooks Newmark (Braintree) (Con)]

I almost choked on my cornflakes this morning when reading Jonathan Portes’s blog. We have to remember that Mr Portes, like Mr Blanchflower, is an arch-Keynsian and proponent of plan B—borrowing more money in a debt crisis. Referring to Robert Chote and the Office for Budget Responsibility, he observed that the OBR has shown

“that, as a percentage of GDP, the deficit has indeed fallen by a third. The Chancellor is correct.”

He went on to say:

“The UK’s underlying economic strengths remain, as the current health of the labour market illustrates.”

The Budget and, indeed, the performance of the Chancellor and his team at the Treasury have much to commend them. If we remember, three years ago, UK plc was on the verge of economic collapse. We were living far beyond our means, and the Chancellor’s emergency Budget in 2010 sought to address that problem. Two and a half years later, where are we and what progress has been made? First, the deficit is indeed down by a third. Annual borrowing has come down from £159 billion and is almost under £120 billion. We have more men in work than ever before, and we have more women in work than ever before. Indeed, the amount claimed in jobseeker’s allowance in Braintree, my constituency, has dropped by 11%. We have created more than 1.25 million jobs in the private sector. We have created 250,000 new businesses, so the Chancellor, the Treasury and the Government have much of which to be proud.

It is true, however, that growth has not been as robust as we would like, and neither has the pace of Government debt reduction been as fast as we would like. The reason is a combination of the crisis in the eurozone, which has become worse since the emergency Budget, and the inflationary impact of energy costs—a fact acknowledged by Mr Chote and the OBR. The bottom line for many of our constituents is a record level of employment. In other words, more people are in work than ever before. We have record low interest rates, which means that more homeowners have low mortgages and businesses have low interest payments.

This week’s Budget seeks to build on the strong foundation established by the original emergency Budget, addressing the need to help those who aspire to work hard, as the Chancellor said. It is a Budget to help families. Indeed, as we have heard, the personal allowance, which has been raised to £10,000, will help, as there will be a tax cut for more than 24 million families—or, in my constituency, 38,391 families. Families, in fact, will pay roughly £700 less than they did in 2010—2.7 million families will be taken out of tax altogether, or, in my constituency, 3,905 families. Fuel duty will be frozen, saving people, particularly in rural areas in my constituency, £7 every time they fill up the tank, compared with what would have been under Labour.

We will help a typical family with two children under 12 with child tax credit to the tune of £2,400— 2.5 million families will benefit from that. There is help, too, to enable people to get on the housing ladder, with the shared equity scheme that the Government have proposed, as well as the mortgage guarantee scheme. It is a Budget to help businesses. The new £2,000 employment allowance will help the average business to hire an extra person for £22,400 or, hopefully, four young people on the minimum wage. I pay tribute to Lottie Dexter and the Million Jobs campaign, which tries to help young people to get back into work.

Some 450,000 small businesses and a third of employees will pay no jobs tax at all. Corporation tax will be driven down from 28% to 20% by 2015, which will make it the lowest such tax in any G20 country. Help to Buy will help the building industry which, we all know, has been struggling. In my constituency—the constituency of white van man and Essex man—I have many entrepreneurs such as electricians and plumbers, and the scheme will help them to secure much-needed work. There is help, too, for angel investors and entrepreneurs. I have been plugging the seed enterprise investment scheme, and on capital gains tax for reinvestment in qualifying schemes there will be another holiday for another year. I commend that measure.

[James Duddridge]

I recall that in the Budget, the Chancellor praised my hon. Friend in relation to that work. What advice can he give me and other hon. Members on how best to promote those schemes in our constituencies, as that seems to be a really good way to drive growth?

[Mr Newmark]

This is an important scheme, because it will help angel investors and people starting businesses. There is a gap in the market, and funding has been lacking. The tax scheme is highly attractive, and offers 50% off income tax. For example, for a £10,000 investment, people will get £5,000. If they hold the investment for three years, it is capital gains tax-free, so it is highly attractive.

Labour got us into this mess. Having listened to the responses from the Leader of the Opposition and the shadow Chancellor, I do not think they have a solution to the country’s problems other than plan B, to borrow more. That would cost up to £200 billion more, according to the Institute for Fiscal Studies. We have already had a debt crisis. Labour’s plan would cost an average family £2,000 more.

The Chancellor has set out a Budget for those who work hard and want to get on. This Budget backs families; this Budget backs jobseekers; this Budget backs drivers; this Budget backs home buyers; and this Budget backs businesses. The Government are clearing up Labour’s mess, they are backing those who want to work hard and want to get on, and they are moving Britain forward. I commend the Budget to the House.

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[Mr Newmark]

I might be able to help my hon. Friend and the hon. Member for Glasgow North East (Mr Bain). The IFS says that the Labour pathway would cost the country another £200 billion in debt.

[Mr Gauke]

My hon. Friend is absolutely right to point that out. That would be the consequence of pursuing the policies advocated by Labour. That does not take into account the concerns about what going down that route would do for international confidence and the price we pay for our borrowing—interest rates. Such borrowing would jeopardise the economy.

We have made progress on, for example, unemployment. Since the first quarter of 2010, the private sector has increased by 1.25 million jobs and total employment is up by 890,000 in the period. A number of hon. Members, including the hon. Member for Houghton and Sunderland South (Bridget Phillipson), described the conditions in their constituencies. It is worth pointing out that, in the north-east of England, employment has risen by 1.4% and unemployment has fallen by 1.5% in the past year.

We are therefore making progress, but I will not deny that we, like most major economies in western Europe, do not have the level of growth we would like. Two big challenges face all of us. First, how do we get growth when there is no money left, and secondly, how do we live within our means—what do we do to get the deficit down? To deal with that question, we must first acknowledge that the problem essentially is that spending is too high, and not that taxes are too low.

We must take steps to address that, which means taking difficult decisions, as the Government have done, on departmental spending. Our decisions have, by and large, been opposed by Labour. We have had support on one element of departmental spending—the public sector pay freeze. We have announced that we have had to extend that for a further year into 2015-16, but I am not sure whether Labour supports that policy. I believe that freeze is essential if we are to meet our targets.

We have also had to take steps to reform welfare. I congratulate my right hon. Friend the Secretary of State for Work and Pensions on the leadership he has shown and on his bold vision for reforming welfare. We must address welfare. In the decade before the financial crisis, and despite a growing economy, welfare spending increased by 40% and has continued to rise—it went from 11% of GDP in 2008 to 13% of GDP in 2012. Put simply, welfare spending still costs the UK taxpayer more than £200 billion a year, which is almost £1 in every £3 raised in taxes, and more than the budgets for health, education and defence combined. We need to find savings across the government. Inevitably, savings on welfare need to be part of that. If we are to spend more money on other services, we need to tackle our growing welfare budgets.

As my right hon. Friend the Chancellor explained on Wednesday, the previous public spending framework divided Government spending into two halves: fixed department budgets and annually managed expenditure. We decided in the Budget to introduce a new limit on a significant proportion of the latter. That will be set in a way that allows the automatic stabilisers to operate, but brings control to areas of public spending that have been beyond our control. My right hon. Friend the Chief Secretary to the Treasury will provide an update on that at the spending round.

We must recognise that we are in a global race. There will be economies that succeed and those that fail. We must ensure that we are competitive. That is why we have cut the corporation tax rate again to 20%—the lowest rate in the G20. It is striking how the UK is now recognised as having a very competitive tax system. That is also why we are making it easier for start-ups. I have touched on the seed enterprise investment schemes and the measures on stamp duty on AIM shares.

From April 2014, every business and charity in the UK will be entitled to a £2,000 employment allowance each year to reduce their employer’s national insurance contributions. I can tell the House that we have set up a website to help businesses understand how that will work, with an online calculator to illustrate the effect of the allowance on the employer’s national insurance bill in 2014-15. It can be found at www.employmentallowance.com. The employment allowance will benefit up to 1.25 million employers, with 98% of the benefit going to small and medium-sized businesses with fewer than 250 employees.

The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) said that the Labour party has proposals in this area, but the employment allowance is much simpler and is permanent, not temporary. It applies to all businesses and charities, not just the smallest, so there will not be a cliff-edge problem whereby people face disincentives in taking on a 10th employee. It will benefit all businesses and charities, not just those that are taking on new staff. It will be very simple to operate through the real-time information system. It could not be simpler. It is also worth pointing out that the Labour party fought the last election with the intention of increasing employer’s NICs. They wanted to put the jobs tax up, not cut it.

The previous Government’s plan for reducing the deficit was inadequate and had no credibility. The Labour Opposition have not stood by any element of that plan. They wanted to raise employer’s NICs; now they want to cut them. They proposed huge cuts in capital spending, which we have partially reversed. They now complain to us that capital spending should be higher. They put in place a fuel duty escalator, but have subsequently called for it to be scrapped. This Government have managed to freeze fuel duty and it is falling in real terms. The previous Government put in place a beer escalator. I think that the Opposition are supporting us in cancelling that as well.

The Labour party has one solution to our economic problems: borrowing and spending more. It spent and borrowed too much during the boom and it never accepted that there was a structural deficit before the crash. It has resisted all our attempts to control public spending and is not willing to accept that there is a need to constrain public spending in the years ahead. The truth is that the Labour party always wants to spend and borrow more. To be fair, when it is in government, it does spend and borrow more. However, the country cannot afford it.

We need to prepare ourselves for growth. We need to put in place incentives for companies to invest and expand. In government, the Labour party failed to do that and failed to control spending. That is why it cannot be taken seriously. That is why it is not the Labour party, but this Government who can achieve for the United Kingdom.

Ordered, That the debate be now adjourned.—(Joseph Johnson.)

Debate to be resumed on Monday 25 March.