Budget Resolutions and Economic Situation

David Gauke Excerpts

Friday 22nd March 2013 Commons Chamber

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

We have had a well-attended and at times lively debate on the Budget, and I will begin by thanking my hon. Friends for their contributions. My hon. Friend the Member for Rochford and Southend East (James Duddridge) spoke about the steps taken in the Budget to help businesses and ensure growth, and he rightly highlighted measures relating to stamp duty for shares on the alternative investment market. My hon. Friend the Member for Braintree (Mr Newmark) highlighted the extension of capital gains tax policy for seed enterprise investment schemes, and I thank him for his excellent work in promoting those schemes. They are an excellent opportunity to enable start-up businesses to expand, and for investors to find good investment opportunities to help grow jobs in this country.

I thank my right hon. Friend the Member for Sutton and Cheam (Paul Burstow), who I know had to depart early. He highlighted the further substantial progress that the Government have made on the personal allowance, benefiting millions of taxpayers and taking many others out of income tax altogether—a contrast to the record that we inherited. He also highlighted the work on social care reform that the Government have progressed, again in contrast with our predecessors. I know that my right hon. Friend was heavily involved in that process.

My hon. Friend the Member for Enfield North (Nick de Bois) highlighted specific matters relating to community investment tax relief. I know that he has had discussions with the Treasury about his ideas, and we welcome his engagement. My hon. Friend the Member for Wycombe (Steve Baker) dealt with monetary policy—an issue in which he takes a close interest—and we are grateful for his views. My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) highlighted the progress that the Government have already made in dealing with the mess that we inherited, and particularly the fact that we have reduced borrowing by a third since we have been in office.

My hon. Friend the Member for Northampton North (Michael Ellis) highlighted to the House the expression, “There is no money left”, although I have forgotten for the moment who coined that phrase—[Interruption.] I am told that it was Winston Churchill. I was thinking of someone else, although there are certain physical similarities. I also thank my hon. Friend the Member for Hendon (Dr Offord) for highlighting some of the long-standing housing issues in Hendon that he is seeking to address.

[Lilian Greenwood]

Will the Minister give way?

[Mr Gauke]

I was about to come to the contributions by Labour Members, but I shall give way to the hon. Lady on that point.

[Lilian Greenwood]

The Minister mentioned housing. Is he as shocked as I am by figures that the Government have released today that show a 12% increase in the number of households with children accepted as homeless in the last year; an 11% increase in those living in temporary accommodation; and a 29% increase in the number of families living in bed and breakfasts? Is that not a disgraceful indictment of this Government?

[Mr Gauke]

If the hon. Lady is concerned about people on waiting lists or living in overcrowded conditions, she might want to think about what we could do about too many people who have got spare rooms.

We heard a number of speeches from the Labour party, and two points about the fiscal situation were consistently raised. First was the concern that borrowing is higher than we had wanted and expected it to be—borrowing is too high and debt is increasing too fast. We then had a number of speeches that called for more spending and said that we should not worry quite so much about borrowing and should be prepared to borrow more. Remarkably, a number of speeches made both points at the same time, but the reality is that the Labour party believes that the right approach to our current difficulties in the economy is to borrow more. The proposals from the shadow Chancellor involved £33 billion more spending.

The most interesting point in the entire debate was when the hon. Member for Glasgow North East (Mr Bain) called for more spending in a particular area, and my hon. Friend the Member for Battersea (Jane Ellison) intervened to ask how he would do that in a fiscally neutral way. At that point the hon. Gentleman paused and said, “Well, we are on a different path.” He is an articulate and eloquent speaker, but rather than say what that path was, he refused to answer. Labour Members are on the path that dare not speak its name. Their path is simply more borrowing.

[Mr Bain]

If the Budget is such a great success, why has the National Institute of Economic and Social Research said this afternoon that the Budget will make no impact whatever on increasing growth for the next two years?

[Mr Gauke]

I will come to the measures on growth in a moment, but let us not ignore the fact that the Labour party’s approach is to spend more and borrow more. How do Labour Members believe that will enable us to get the debt down? It simply is not feasible.

[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.