Budget Resolutions and Economic Situation

Debate between Geoffrey Clifton-Brown and Anne-Marie Trevelyan

Wednesday 16th March 2016 Commons Chamber

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

I am delighted to have caught your eye, Madam Deputy Speaker, and to welcome my right hon. Friend the Chancellor’s Budget and some of the excellent things it contains. I want to pick out important two statistics. First, as of today, we have a record number of people in employment. Contrary to what is often said, 62.66% of that has come from the high-skilled sector, so we are creating high-skilled jobs in this country. Secondly, I welcome the fact that in this tax year we will again become the highest-growth country of all the world’s major economies. That is a significant achievement by my right hon. Friend.

Having spent many hours on the Select Committee on the High Speed Rail (London – West Midlands) Bill over the past year, I have become something of a convert to the Chancellor’s way of thinking about the merit of transport infrastructure projects that are good value for money. I welcome to the Front Bench the Minister of State, Department for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), who is in charge of the HS2 project and who will no doubt pilot the Bill through the House in an excellent manner next week.

If this country is to compete in the 21st century, it needs a 21st-century system of transport. Through HS2 and other transport infrastructure projects, such as Crossrail 2, which the hon. Member for Hackney South and Shoreditch (Meg Hillier) mentioned, and the trans-Pennine rail tunnel, we are easing the burden on our congested roads and building some serious national expertise in areas such as tunnelling. That has enabled us to undertake some projects that we would not have been able to do just a year or two ago. As we have seen with the Thames tideway project in London, we have been able to bring the cost of such major projects down considerably. Competitiveness is the key to a successful economy. We are constantly competing in the global marketplace, whether we like it or not, and the economic decisions that the Chancellor has taken today reflect that reality.

I welcome some of the announcements to simplify our tax system, although we could go further. I particular welcome the measures to abolish class 2 national insurance contributions. However, as income tax and national insurance revenues are slightly larger than the sum required to pay the entire benefits bill, national insurance is still a big burden, particularly for the low-paid. I welcome my right hon. Friend’s measures today to accelerate taking the low-paid out of the tax system, moving the threshold from £11,000 to £11,500 and then to our goal of £12,000.

I come to a slightly discordant note, so I hope my colleagues on the Front Bench will bear with me on it. The VAT system that the Government have inherited is overly complicated. We zero-rate flapjacks but not cereal bars. We zero-rate paper books but not e-books. It was considered a productive use of somebody’s energy to write into the Government’s VAT guidelines—this is true, as hon. Members will see if they go online—that VAT must be applied to gingerbread men covered in chocolate at the standard rate unless

“this amounts to no more than a couple of dots for eyes”.

As some Members in the Chamber will be old enough to recall, the standard rate when VAT was introduced, following the old purchase tax rules, was 8%. It was then increased to 25% for certain items under Denis Healey, and today we find it at 20%. I say to my Front-Bench colleagues that the whole VAT situation needs a thorough review. The problem is that we are governed by the rules of the EU, believe it or not, and the VAT sixth directive, which makes this very difficult. We need to have a conversation with those in Europe if the British people vote to remain in the EU, which I hope they will not.

I sincerely welcome measures in the Budget to make us more competitive, particularly the fact that the Chancellor is going to accelerate the reduction of corporation tax so that it will be reduced to 17% by 2020. That is a really useful measure. Interestingly, chart 1.11 in the Red Book shows that America’s corporation tax is 40%, so it is amazing that its businesses are as competitive as they are. However, it is clear that our corporation tax is not moving quickly enough to keep up with the rapidly changing global nature of modern corporations, and that is leading to perverse outcomes that generate public concern, such as Google’s recent announcement that it was paying only £130 million in back tax. I hope that the newly announced diverted profits tax will improve the situation. As has been said, a number of other measures in the Budget are there to improve the tax generated by some of our big corporations, and I hope that my right hon. Friend the Chancellor is right that those measures will generate £9 billion by the end of this Parliament.

We need to invest more to support small and medium-sized enterprises and encourage them to start exporting. The balance of payments figures in the Red Book are worrying. We could rethink how the Government support companies that want to export for the first time, especially given that we are reducing corporation tax. Bearing in mind that it probably costs a minimum of £50,000 for a company to consider exporting to a new market, we could give companies a complete break on corporation tax for any activity that relates to exporting for the first time. We need to rethink the role of UK Trade & Investment, as our approach is clearly not working. We are not getting enough small and medium-sized companies exporting, so we need to rethink its role under the new chief executive. In some years UKTI’s budget has increased whereas in other years it has reduced, and we need to give it a stable environment in which to operate.

I welcome the Chancellor’s announcement on broadband. The Government plan to invest so that superfast broadband covers 90% of the UK by early 2016 and 95% by December 2017. The trouble is that those are national averages, and rural constituencies such as mine have a disproportionate number of homes and businesses that are not getting a realistic broadband speed to deal with both their business and their leisure in the 21st century.

[Mrs Trevelyan]

We face a challenge on the universal service obligation, which has been committed to but which is currently weakly defined, and those of us who have constituents in very rural parts of England will struggle to see that commitment met. We need to continue to push the Chancellor and the Treasury to understand that a commitment will be required to make sure that every household in the UK has superfast broadband.

[Geoffrey Clifton-Brown]

My hon. Friend has an even more rural constituency than I do, but we both have very rural constituencies, and she is spot on in what she says. We need to make sure that every house and every business gets a reasonable broadband speed as quickly as possible. I was coming on to say that we need to provide support for bespoke solutions, and I am sure that applies in her constituency, as it does in mine, where the Gigaclear contract, which was the first such contract in the country, will enable another 6,495 homes to have a reasonable broadband speed by 2017.

The Chancellor had a free shot about the EU, so I feel that I, as a humble Back Bencher, am entitled to have one, too. While I am talking about competitiveness, I must briefly mention our EU membership, as the issue has been receiving a small amount of attention lately. As a nation, we face a choice between remaining part of an institution that is fundamentally anti-competitive and is collapsing under the weight of its own bureaucracy, and seizing our own destiny and becoming a great trading nation once again, being fleet of foot, free of excessively burdensome regulation and able to make our own deals around the world.

As my right hon. Friend the Member for Wokingham (John Redwood) said, we will have an additional £10 billion net to spend if we leave. We will be part of a free and fair immigration system that allows us—this country, this Parliament—to attract and retain the best and brightest from countries such as India and China, without having to put in place arbitrary caps and restrictions simply to counteract the number of people coming from Europe, over which we currently have no control. Britain should be a place of equal opportunity for anyone who wants to come here with something to contribute, not simply a place for anyone who happens to reside in the EU. The recent EU deal with Turkey threatens to exacerbate the situation.

We live in uncertain times, as the OBR’s growth forecasts clearly show. The Chancellor has said that there are storm clouds gathering, both at home and abroad. The Government are right to push ahead with reducing the deficit. There are naysayers who tell us that a national deficit at 4% of GDP is sustainable, but I say to them that a national debt at 82% of GDP certainly is not. We inherited from the previous Government a rate that was higher than it had been at any time since the 1960s, so I welcome the measures taken in this Budget to reduce it to 74% of GDP by the end of this Parliament. Our debt interest payments alone are equal to the annual budget of the Ministry of Justice and the Home Office combined. Just imagine how much extra we would have to spend, or we could save on taxes, if we did not have to pay that debt. The high level of debt leaves us extremely vulnerable to global shocks that could put up interest rates. Serious efforts to tackle the deficit, so that we can start to bring down our debt, must be accompanied by a sustained effort to continue to reduce regulation, to simplify our outdated tax system, to reduce public expenditure, to get the best possible value for money, and to give us infrastructure fit for the 21st century and for one of the world’s best performing economies, if not the best performing.