Budget Resolutions and Economic Situation

Emma Reynolds Excerpts

Monday 13th July 2015 Commons Chamber

[Emma Reynolds (Wolverhampton North East) (Lab)]

I welcome the opportunity to open the third day’s debate on the Budget on behalf of the official Opposition. I will focus my remarks on two of the most important long-term challenges that we face as a country: devolution and housing. First, however, I want to make a number of points about the Budget as a whole.

Last week, the Chancellor presented his Budget as a Budget for working people. Regrettably, the grim reality is that millions of hard-working families will be worse off as a result of this Budget. The Chancellor gave with one hand, but took away so much more with the other. Of course, we welcome action to tackle low pay. The minimum wage was, after all, a Labour policy and one of the proudest achievements of the previous Labour Government. We first introduced it in the face of fierce Tory opposition. More recently, we campaigned to increase it. Let us be clear about what the Chancellor has actually done. He has not introduced a national living wage; he has attempted to rebrand the national minimum wage. Admittedly he has increased it, but at the same time he has decimated tax credits, leaving 3.3 million families worse off and 500,000 families without any tax credits at all.

The independent Institute for Fiscal Studies says that the Chancellor’s claim that the increase in the minimum wage will compensate working people for the changes to tax credits is “arithmetically impossible”. For example, a working couple in full-time employment earning the minimum wage who have two children will earn £1,500 more, but will lose £2,200 as a result of the cuts to tax credits. Far from making work pay, the IFS says that the Government’s changes would

“reduce the incentive for the first earner in a family to enter work”.

In effect, what the Chancellor has done is introduce a work penalty.

As my hon. Friend the shadow Chancellor said last week, the Government are

“pulling the rug from beneath people’s feet while higher wages are not yet available.”—[Official Report, 9 July 2015; Vol. 598, c. 473.]

Young children in the families affected are likely to grow up to become poor adults, which is not only wrong and unfair, but will cost society more in the longer term. Yet again, this Government are hitting women the hardest, with women losing twice as much as men. Yet again, too, this Government are putting more of the burden of clearing the deficit on to the shoulders of young people. The Government seem absolutely determined to deepen and entrench the inequality in our country and the inequality between generations.

[Mr Prisk]

The hon. Lady’s acting leader, the right hon. and learned Member for Camberwell and Peckham (Ms Harman), has made very clear what she thinks about tax credits. Will the hon. Lady be voting in favour or against our reforms tomorrow evening?

[Emma Reynolds]

Let me be absolutely clear. The Budget presented last week is regressive. It hits some of the poorest people in our country the hardest—people on lower incomes who are working hard and doing the right thing. We will vote against the Budget tomorrow, and that is why—because it is regressive and fails all the tests around productivity and all the big decisions on infrastructure that the Prime Minister and the Chancellor have been ducking for some years.

There were, however, some things in the Budget that we welcome. It seems that the Labour manifesto found its way into the Chancellor’s Red Box. I know the Chancellor likes to wear “high vis”, but I did not know he was into cross-dressing. From increasing the national minimum wage to abolishing permanent non-dom status and reducing tax relief for landlords, the Chancellor seems to be a late convert to Labour party policy. The overall test of the Budget, however, is whether it benefits working people and meets the long-term challenges facing our country. It is clear that working families up and down the country will be worse off, but let me now turn to the long-term challenges we face.

[Richard Fuller (Bedford) (Con)]

Will the hon. Lady confirm that even with the changes to working tax credits, they will still be higher as a proportion of gross domestic product at the end of this process than during any period of the Labour Government prior to 2004, and that at that stage there was no commitment to a national living wage?

[Emma Reynolds]

I say to those on the Government Benches that they are simply out of touch with the lives of working people up and down this country. Of course we want an economy in which people are highly paid and highly skilled, but the course towards such an economy has to be charted before the support is cut off.

Let us deal with the crucial issue of devolution. We urgently need to rebalance our economy to drive growth and prosperity in all parts of the country. We are one of the most centralised countries in Europe. London dominates our economy, and its growth surpasses that in all of our major cities, which is not the case in either Germany or France where other cities beyond Berlin and Paris are true engines of economic growth. I agree with what the Chancellor said last week—that we will not achieve a better settlement by pulling London down. We should be proud of the dynamism and success of our capital city—and long may it continue. We must, however, reverse the long tradition of British politicians of all parties and of civil servants who have hoarded power in Whitehall and failed to trust local government.

There is a huge political and economic imperative to devolve power as close as possible to local communities. As ever, the Chancellor’s Budget speech on devolution was heavy on rhetoric, but rather light on substance. This Government boast about bringing about a “northern powerhouse”, but their rhetoric rings hollow, given that no part of the country has faced bigger cuts to local authority budgets over the last five years than those in the north of England. Indeed, the shelving of the electrification of the Manchester to Leeds trans-Pennine railway means that the Government’s plans are closer to a power cut than a powerhouse. We need a settlement for every part of the north, but as one of my hon. Friends pointed out to the Secretary of State earlier, there was barely a mention of the north-east in the hour-long Budget statement or in the 123 pages of the Red Book.

Ahead of the Budget, we know that there were briefings about which deals would be announced, and we know that the Secretary of State did what some might call a frenetic round of local government speed-dating during the Local Government Association conference two weeks ago. We welcome, for instance, the extra powers that the Government are planning to devolve to Greater Manchester. We also welcome the progress that three combined authorities—Sheffield city region, Liverpool city region and Leeds, West Yorkshire and partner authorities—are making towards a devolution deal, and the progress that Cornwall is making. As a Wolverhampton MP, I particularly congratulate the leaders of the local authorities that are working so hard to create the West Midlands combined authority. We are proud of the fact that Labour leaders in local government are making the weather on devolution.

While we welcome that progress, we also believe that the Government should not impose a one-size-fits-all approach to devolution, and should stop putting obstacles in the way. In his first major speech after the election, the Chancellor said that he would not impose the mayoral model on anyone, but in the very same breath he said that he would not settle for anything less. Why are the Government running scared of letting local people decide, and when will they clarify exactly what different areas and combined authorities can expect to achieve from devolution if they do not opt for a mayor?

[Robert Neill (Bromley and Chislehurst) (Con)]

I know that the hon. Lady has a good memory. Does she recall regional spatial strategies? What were they but an imposed one-size-fits-all policy from above? Has she forgotten that so quickly?

[Emma Reynolds]

It seems from the details of the Government’s productivity plan, which were published on Friday, that the hon. Gentleman’s party is introducing a nationalised spatial strategy.

Our amendment to the Cities and Local Government Devolution Bill, which is being debated in the other place today, would ensure that areas that did not want a mayor would not get a second-class deal. A Labour amendment that was passed in the other place earlier this afternoon proposes the introduction of a “devolution by default” test for every new Bill that the Government introduce to Parliament. If the Government did not push down as much power as possible to local level, they would have to give and justify their reasons. I hope that they will agree to retain that new provision, because it will be a test of their commitment to devolution.

[Andrew Gwynne]

Like my hon. Friend, I strongly support the devolution of powers to Greater Manchester, but does she agree that not just devolution to the strategic city-wide level but devolution to the local level is crucial, given that many authorities in Greater Manchester are now struggling to deliver basic services?

[Emma Reynolds]

I could not agree more. When we were in office we devolved power to the Scottish Parliament and the Welsh Assembly, but I know from our colleagues in Scotland that they are very disappointed that there has not been much devolution from the Scottish Parliament downwards. As my hon. Friend says, if we are devolving to combined authorities, we need to ensure that there is real devolution to communities as well.

The Budget also reinforced the Government’s piecemeal approach to devolution. We are calling on them to deliver a more ambitious and comprehensive devolution agenda to every part of the country—to all our cities, towns and counties. Doing a small number of one-off deals is not a one nation approach.

This Secretary of State is certainly better liked than his predecessor—[Interruption.] I accept that it is not a particularly high bar. It remains to be seen, however, whether he will live up to the reputation that he is trying to forge for himself. We hope that he will fight the corner of local government, but we will judge him on the outcome of the comprehensive spending review in the autumn, on the settlement that he achieves for local government, particularly in areas of high need, and, crucially, on the impact that any settlement will have on the vital public services on which people rely. Local government areas where more children are in care, where there are more vulnerable elderly people and where the needs of the local population are more complex and difficult are the areas where the Government have made the deepest cuts in the last five years. Let me say this to the Secretary of State: he cannot champion local government if he is impoverishing it at the same time. Devolution must not be a smokescreen to bring local government to its knees.

Housing is the other long-term challenge with which I want to deal. In our first debate in this House since the election I said to the Secretary of State, when debating the Queen’s Speech, that tackling the housing crisis was a key test for him and his Government. He agreed; he said it was an “issue of huge importance” and that this Government would

“build more homes in every part of the country”—[Official Report, 10 June 2015; Vol. 596, c. 1231.]

He even invoked the spirit of Harold Macmillan, but last week the Chancellor delivered a Budget that contained no proposal to tackle the housing crisis. Worse still—[Interruption.] Conservative Members should listen. Worse still, the Office for Budget Responsibility confirmed that the Budget would lead to 14,000 fewer affordable homes being built, which is contrary to what the Secretary of State said today. His desire to emulate Harold Macmillan appears to have been rather short-lived. If he thought that private house builders would compensate for his Government’s policies, he was mistaken, because the OBR says that it does

“not expect private sector house-builders to offset this effect to any material degree.”

Then there was the Government’s so-called pay-to-stay measure. I was interested to read that the Prime Minister had reservations about these proposals because he was not sure of the wisdom of describing people earning £30,000 as high earners. Indeed, these proposals would mean that a couple working full-time on the living wage would be classified as high earners, with a combined income of just over £30,000 a year. We have not seen the details of these proposals yet, but that couple could have to pay, on average, an additional £3,600 a year according to the Government’s own figures. Those who secure a promotion or more hours could thus be hit by this measure.

[Mr Betts]

The details of this new measure are going to be interesting. Either we are going to have a cliff-edge where people suddenly start paying a lot more rent because they have earned a little more money, or we are going to have to bring in a taper system, which is another form of taxation. Does my hon. Friend agree that we will have a system whereby local authorities are in effect going to have to know the incomes of every single tenant so they can check when people go over this threshold? A massive bureaucracy will have to be created simply to implement this very small measure.

[Emma Reynolds]

Indeed, and the Government introduced a similar measure in the last Parliament, but the threshold was £60,000 a year. In their consultation on those changes, the Government said that putting the threshold below £60,000 a year would result in “perverse incentives” and a “disincentive to work”. Why have they suddenly changed their mind, and why was there no mention in the Red Book of the Government’s plan to extend the right to buy? Once again, it fell to the OBR to mention what the Government were not prepared to refer to. It warned that the policy risked adding £60 billion to public debt.

We welcome some measures—for example, the raising of the rent-a-room relief and the tackling of some of the over-generous tax reliefs for private landlords which help to squeeze out first-time buyers—but they are not going to end the housing crisis. Last week the Chancellor and the Business Secretary were busy announcing planning reforms, which unless I have missed something are the responsibility of the Secretary of State. While the Chancellor was plundering the Labour manifesto, the Business Secretary appears to have been pillaging Labour’s housing review. We welcome the following, given that these were our policies anyway: tougher measures to ensure that local areas have a local plan; strengthening the Government’s duty to co-operate; reform of compulsory purchase powers; and a new dispute mechanism for section 106 agreements. But these were only some elements of our Lyons housing review, which is a comprehensive plan to tackle the housing crisis—something that this Government are sorely lacking. Sadly, one thing the Government are not taking forward is Labour’s commitment to zero-carbon homes. Pulling the plug on this policy will damage the house building industry, cost jobs and investment and mean higher energy bills for consumers, and I am wondering how on earth they can justify it.

The Government’s wider proposals announced on Friday also raise a number of questions. We welcome plans to build homes on brownfield sites, but if the Government were serious about building on brownfield why did they withdraw five years ago some of the investment and neighbourhood renewal fund which helped towards the costs of remediating polluted land—a fund that we put in place in our time in government? If brownfield sites are to get automatic planning permission, how will the Government ensure that local communities continue to have a say, that there is sufficient infrastructure for the plans to be delivered, that the quality of new homes is guaranteed, and that section 106 agreements are applied to ensure that developers fulfil affordable homes obligations? Given that a move to a zoning system represents a significant change to the planning system, will the national planning policy framework have to be amended? Will it perhaps be more accurately renamed the “national planning system”? It seems curious that the Conservative party spent so much time and energy attacking Labour’s spatial strategies in the name of localism, yet now appears to be nationalising planning. I cannot keep up with the Secretary of State: is he trying to be Macmillan or Lenin? I know the Secretary of State has been on a political journey from the Social Democratic party to the Conservative party, but this journey is rather unbelievable.

[Andrew Bridgen (North West Leicestershire) (Con)]

Is it still Labour party policy to re-establish the regional development agency, which inflicted the regional spatial strategies on my constituents and many others?

[Emma Reynolds]

We support the local plans. It seemed that the Minister for Housing and Planning was not that bothered about them—I remember an interview he did with Inside Housing in which he said it was not that important whether local areas had local plans—but the Government seem to have done an about-turn on that as I received a nice letter from him today, spelling out how important the local plan process is.

We think it is important for local people to have a say over what goes on in their areas. We have big questions about the Government’s proposals, which we have only just seen and on which we would like more detail. How will the Government still ensure that local people have that say? How will they ensure that local infrastructure is delivered? And how will they ensure that affordable homes are also delivered on some of these sites? Those are serious questions, we would welcome answers to them and we would like to see more details of the proposals that the Government put forward on Friday.

We are facing the biggest housing crisis in a generation. In England, we are building only half the homes we need. I know we have heard from the Mayor of London—perhaps I should call him the hon. Member for Uxbridge and South Ruislip (Boris Johnson)—but in London we are building only one third of the homes we need. We have had the lowest level of home ownership for 30 years under a Government who claim to be a party of home ownership. The Government urgently need to get a grip of this problem. The result of their Budget will be £60 billion of public sector debt added because of their changes and 14,000 fewer affordable homes, according to the OBR. That is hardly a record worthy of Macmillan.

In conclusion, this should have been a Budget to support working people.

[Emily Thornberry]

What does my hon. Friend think of the fact that the housing benefit bill has gone up by 60% and that we are talking about working people here, 98% of whom are tenants in the private rented sector? We continue to have an unsustainable housing benefit bill because of the rise in private sector rents.

[Emma Reynolds]

My hon. Friend raises an important point. In this area, we spend a lot of government money—95%—on housing benefit, and only 5% on bricks and mortar and building affordable homes. That clearly is not a sustainable or wise use of public funds. The way to bring the housing benefit bill down is by tackling the underlying drivers of low pay and high housing costs, but this Government are tackling neither.

[Rebecca Pow (Taunton Deane) (Con)]

I was back in my constituency this week, where I had long talks with people from my local council. They told me that in just the past year 778 new council houses have been built. That is the highest number of council houses built since the mid-1990s and it is far more than were built under Labour—and 29% of them are affordable.

[Emma Reynolds]

It is wonderful that the hon. Lady has been visiting her constituency—I was in mine, too. Since the reforms of the housing revenue account were brought forward—the last Labour Government proposed them but, to be fair, they were carried on by this Government in the last Parliament—Labour councils have been outbuilding Tory councils quite considerably.

[Boris Johnson]

The reality is, as I am sure the hon. Lady would acknowledge, that the Conservative Government are now solving a crisis that was caused by Labour. Does she accept that when the Labour Government left office in 2010 there were a net 200,000 fewer affordable homes in this country than when they began?

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[Emma Reynolds]

I will not take lectures from somebody who believes that 80% of market rent is affordable for people in London, or from somebody who calls in planning applications, such as the one for Mount Pleasant in the constituency of my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry), to drive down, not up, the number of affordable homes. That is not what I call a good record on affordable homes.

[Lilian Greenwood (Nottingham South) (Lab)]

Having visited my constituency, my hon. Friend knows that one thing the local authorities are doing is investing in our social housing and ensuring that it is of a decent standard. Does she share the consternation of the chief executive of my local arm’s length management organisation, Nottingham City Homes, who notes that the reduction in social rents will lead to a reduction in investment and a failure to invest in the housing standards that tenants would like?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. As we have so many Members who wish to speak, we need short interventions.

[Emma Reynolds]

We will look at those proposals in detail. As for what my hon. Friend has just said, we need to ensure that social housing providers are in a position to build more homes. We want housing associations and councils to build more homes, as there is, I think we can all agree, an acute shortage of affordable housing in this country. We also need to ensure that housing associations have the funding mechanisms in place to continue to invest in their stock. One of the proudest achievements of the previous Labour Government was the decent homes programme. Those homes were refurbished some 10 to 15 years ago, and there is a continual process of investing in the existing stock.

In conclusion, this Budget should have been about supporting working people and those who want to get on, rather than about punishing hard work. It should have been about tackling the long-term challenges facing our country—the productivity challenge, the balance of payments deficit, the housing crisis, the devolution agenda and so much more. Instead, this is a Budget that will hit hard-working people on low incomes, families with children, women and young people. It is a Budget that the OBR says will result in fewer homes, not more. It is a Budget that was more about politics than economics. It is more about the short-term needs of one man whose real mission is to move next door and take over the keys to No.10, rather than the long-term needs of the country.

--- Later in debate ---

[Robert Neill]

Not at all. As there are probably something in the order of 230-plus different views, we could not cover them all in time. It is also rather remarkable that the Opposition have adopted an entirely different stance to elected mayors from that which I remember when I was the leader of the Conservative group on the London Assembly and facing the first ever elected mayor in this country—the first Mayor of London. I am glad to say that things have improved since then. As some may remember, the office of Mayor of London came into being as a result of legislation introduced by the Labour party. It comes back to the same trope. Why does the Labour party now regard any elected mayor as anathema? Because it was an idea of Tony Blair’s, and must therefore be cast into utter darkness.

I find it truly bizarre that a normally thoughtful party that wants to talk about devolution objects to the opportunity to take up city deal models with an elected mayor. The idea has not been forced upon Labour; it is Labour’s choice whether to have it or not. It was Labour that imposed more central control over local government, not just in planning, not just in terms of whether there could be a committee structure or not, not just in terms of whether a very strict and rigid standards regime was imposed, not just in terms of the comprehensive area assessment, not just in terms of planning policy, and not just in terms of financial policy and the cap. After all that, Labour had the gall to complain about an offer—take it or leave it—put forward by my right hon. Friend.

[Emma Reynolds]

I always enjoy debating with the hon. Gentleman. To clarify, we are not anti-mayor. We believe that local areas and local communities should have a say over whether they have a mayor or not. We are in favour of true localism, not imposing structures on people.

[Robert Neill]

That is useful and I regard it as a step forward. I hope the hon. Lady is able to remain in place after the leadership election. Let me explain why. With all respect to her, being on the campaign team of a Blairite in the Labour leadership election probably makes the prospects of the ostrich pretty good in terms of species survival, so I wish her well for the future.

The Labour party has ducked the real issue, which is that my right hon. Friend the Secretary of State and the Chancellor of the Exchequer have offered genuine devolution of power to local authorities. The issue is not so much about the badge on the top of the tin, although there is a good reason for a single focal point in city areas. It is hugely important to remember that we have offered that to Cornwall too, and we are starting to see the good work of city deals rolled out to the shire counties. That should be applauded. The ability to join up adult social care, one of the principal cost pressures on top tier authorities, with the health service should be applauded by everybody in the House, not greeted with the rather curmudgeonly response that has come from Opposition Members.