Budget Resolutions and Economic Situation

George Freeman Excerpts

Wednesday 19th March 2014 Commons Chamber

[Mr Hoban]

My hon. Friend is absolutely right. The number of people who want to take control over their own lives and employment, and who want the security that comes from self-employment, is significant, and the number of schemes that we have introduced to help young people find self-employment as a route out of poverty and unemployment have been a huge benefit to those who want to set up their own businesses.

The dynamism that we have seen in the private sector, which has led to this increase in employment, has been coupled with welfare reform—a key part of our long-term economic plan. Welfare reform has sharpened the incentive to work, and we expect more of those who are out of work, too. We have brought forward the point when we work with lone parents before their youngest child starts school, so that they are better prepared to start work rather than remain on benefit. For far too long, people who have been out of work through illness have been written off by the system and expected to live on benefits for the rest of their working life. We have been working with them to ensure that they get into employment so that they can look after themselves and their families, and achieve the dignity that we so often take for granted.

The recovery in employment is a product of a strong and dynamic private sector. I welcome the measures that the Chancellor has announced today to encourage business investment and to double the annual investment allowance to £500,000. That will encourage businesses in my constituency that are strong, growing, dynamic manufacturing businesses to invest more in capital equipment. They are aided by the reduction in corporation tax. We should not forget the importance that that has in sending a signal to businesses overseas that the UK is open for business and a place where they should do business. The reduction in corporation tax is mirrored by measures around the employment allowance and scrapping national insurance for young workers under the age of 21. These tax changes, along with cuts to red tape, the investment in skills and the reform of training, are part of our long-term plan to sustain the economy and job creation.

I want to spend a few minutes on the savings measures announced in the Budget. Since they took office, this Government have made radical reforms to pensions and savings. They ended compulsory annuitisation and we are seeing the successful roll-out of auto-enrolment, which will give many people their first chance to build up a pension pot for their retirement. In the next Parliament, we will be launching a single-tier pension, which will mean that people will retire on a pension above the level of means-tested benefits. We have seen the launch of the Money Advice Service and strengthened consumer protection through greater powers for the Financial Conduct Authority. They are important steps that will help reform the savings landscape, and as the Chancellor said they also create a fresh platform for radical reform of pension savings.

When compulsory annuitisation was scrapped, people could take full advantage of the flexibility of income drawdown products only if they could demonstrate that they would not be entitled to means-tested benefits. That meant they had to have a guaranteed income of £20,000 a year. That of course predated the introduction of a single-tier pension, and the limit was set at an amount that ensured that people would not fall back on those means-tested benefits. Now that the single-tier pension is in place, it is right to reduce that amount to £12,000 this year.

We also know that for many consumers it is difficult to shop around to buy an annuity. They are bewildered by the choice in the market, and annuities are often the only product that many of them can buy. Recent surveys have shown just how badly off consumers are as a consequence of not shopping around. I think that the Chancellor’s announcement today about the simplification of the way people can use their defined contribution pension pot will radically transform the insurance and savings market. It will force insurance companies to demonstrate that their products are good value, and create room for innovation for others to come up with products that will help people maximise their income in retirement.

[George Freeman (Mid Norfolk) (Con)]

Does my hon. Friend agree that the historic reforms announced today on the pensioner bond, the tax simplification for annuities and the scrapping of the 10p rate will begin the process of rebuilding a savings culture in this country? We last did that in the 1980s, but it was shamelessly attacked by the former Prime Minister through a series of stealth taxes on savings and pensions.

[Mr Hoban]

My hon. Friend is absolutely right. I think this should be seen as the first stage in a series of reforms, because as the Chancellor also said in his statement, the Office for Budget Responsibility predicts that the savings ratio will continue to fall. As well as ensuring that we can provide a better deal for those in retirement, a better way for them to spend their pension pot and encouragement for them to build up more through individual savings accounts, we need to do more. I will come back to that in a moment.

These are radical reforms. I welcome another part of the package that goes hand in hand with the increased flexibility. The challenge that many pensioners face is finding advice and someone to help them through complex decisions about what they should do in retirement. Recent surveys have shown just what a bad job some of the comparison websites do for people trying to buy an annuity.

The right to advice is an important part of the package of reform, but I suggest to those on the Treasury Bench that we need to go further. The auto-enrolment savings system assumes that people do not think too hard about saving but save automatically. We then expect them at the point of retirement to engage in saving. We need to make sure that there is more advice and guidance available before they retire, to help them think about what age they want to retire at and what sort of income they want to retire on. I think that a key part of the next stage of reform should be to take that right to advice and see how we can provide better advice for people in the run-up to retirement in order to help them provide more for their retirement.

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[George Freeman (Mid Norfolk) (Con)]

It is a pleasure to follow the hon. Member for Bolton South East (Yasmin Qureshi).

I suggest that today’s Budget was a significant and historic one for this country. Twelve months before a crucial general election, it gave the British people a clear choice. It showed through the Office for Budget Responsibility report the success of the last four years’ work of rebalancing and laying the foundations for long-term growth. It showed us a Chancellor and a Government committed to the long-term programme of recovery on which we had embarked. It was a Budget for resilience, responsibility and the real economy.

I particularly want to highlight three elements: first, the extent to which we have finally begun to get on top of the appalling historic legacy of debt that we inherited from the Labour party; secondly, the significant steps that we set out to support science, innovation and export-led growth; and thirdly, the historic package of support for savers and pensioners.

[Dr Julian Huppert (Cambridge) (LD)]

Will the hon. Gentleman add the Cambridge city deal as a fourth point? That will contribute so much to what will help his constituents, as well as mine.

[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.

[Ian Mearns]

Will the hon. Gentleman also be sending them a copy of the noise that was being generated by Government Members during the speech of the Leader of the Opposition today?

[George Freeman]

I will have a chance to read Hansard. I am not surprised there was noise. It was a shameful performance. When, 12 months from the election, this country needs a choice, and Her Majesty’s Opposition are supposed to set out an alternative economic policy, it was woeful. It gives me no pleasure to say it. The result is that the choice is now clear: a Chancellor, a Government and a Prime Minister with a long-term plan for resilience and recovery, led by the real economy and investment, and a Leader of the Opposition who seems now committed simply to going into the election on a ticket of partisan politics and gesturing to his trade union funders. It was not a Budget response that merited his title. It did not set out a serious economic programme for recovery, and I am afraid that it deserves the response that I think it will get at next year’s general election.

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[Damian Collins (Folkestone and Hythe) (Con)]

Mr Speaker,

“By making a better business environment his top priority, the Chancellor has recognised that successful and confident companies are the key to transforming Britain’s growing economic recovery into one that is felt in homes and on high streets.”

That was the response this afternoon of the director general of the British Chambers of Commerce. It reflects the fact that the Budget takes place in an economy where growth is established—it is set to grow faster than any other developed economy in the world—and where unemployment has been falling consistently and steadily. More than 1 million jobs have been created in the private sector across the country. Today’s unemployment figures provided further good news. In my constituency, unemployment fell again. Unemployment is 20% lower than it was at the time of the last general election and I hope that it will continue to fall. That is making a difference to people’s lives and circumstances.

I am sometimes dismayed to hear Opposition Members decrying the number of jobs that have been created and pretending that they are not worth anything. The best thing that we can do in the economy is get people back into work, and there are a variety of jobs that people want to do. In an intervention earlier, the hon. Member for Swansea West (Geraint Davies) seemed to dismiss a job for a young person as an apprentice in the retail sector as one that was not worth having, particularly in the fashion and textile industry. I find that absolutely staggering, because it is an important industry that people want to go into.

I welcome the extra investment in the apprenticeship programme announced today. The programme has helped a lot of young people get into work, and I have seen it work to great effect in my constituency. At an event that I attended with the Federation of Small Businesses last week, I was pleased when it said that because of growth and falling unemployment, one of the big demands from employers is to have more skilled people to recruit from. Investing money in apprenticeships, further education and skills training is important in meeting that demand.

The Chancellor reminded us today of the cuts in business taxes that the Government have put in place, particularly the headline cut in corporation tax from 28p to 20p in the pound next year, which will make a big difference, including to smaller businesses on the high street. One of the great tests that I apply in Folkestone and Hythe to see how well the local economy is doing is what the high street looks like. Is it busy? Are people out shopping? Are businesses trading? I am pleased to see more new independent businesses opening and taking shape, and more entrepreneurs setting up their businesses in incubator spaces such as the Workshop in Tontine street in Folkestone. Town centre businesses will benefit from the £1,000 cut in business rates that the Chancellor announced in the autumn statement and the £2,000 employment allowance, which will go to smaller businesses.

The cuts in income tax will benefit a huge number of people across the country. More than 3 million people will benefit from the lifting of the personal allowance to £10,500, and 45,000 people in my constituency will be better off as a result of the changes in income tax that the Chancellor has announced.

I also particularly welcome the Chancellor’s focus on what he called “the makers”, who are an important part of our economy. The right hon. Member for Tottenham (Mr Lammy) said that we should do more to support and stimulate the creative economy, but we have done a huge amount. The Chancellor confirmed today that the European Commission has approved the production tax credits that were announced in the previous Budget for the video games industry, high-end TV production and drama and the animation sector. Those policies are now bringing investment into this country and into a rapidly growing industry. The film and television sector in this country is booming and sustains a large number of jobs across the creative sector, not just those employed in it directly. The Chancellor was absolutely right to say that he wanted to extend those production tax credits to theatre, including regional and touring theatre.

I know that many people in the drinks industry, as well as drinkers, will welcome the cut in beer duty and the freeze on whisky duty. Last week, I met some winemakers at Chapel Down in Kent, who work in an important and growing area of the UK drinks industry. I am sure that they will welcome the scrapping of the duty escalator, but what was more important to them in today’s Budget were the incentives to invest in the growth and development of their business. They are much more concerned about growing and expanding their market overseas, so they will hugely welcome the increase in export finance from the Government to £3 billion and the £500,000 annual investment allowance for businesses, as they invest in the future success of their business.

I wish briefly to mention savers. Many people in my constituency will have been delighted to hear what the Chancellor said today. For a long time, it has been a bugbear of many people approaching retirement that annuities have been poor value, and they have resented being forced into taking out a poor product that they did not want. They now have more freedom. I know that many older people who rely on savings income have been concerned that they have not been able to get the returns that they would like, because banks’ interest rates have been low and the range of products has been limited. The creation of new bonds that will be available to pensioners, with returns of up to 4%, will lead to a revolution in the savings market in this country, as will the reforms to ISAs. Somebody said earlier that they should now be known as NISAs—new ISAs—which is a nice touch. They will be simpler, and people will be able to save more, which will be—

[George Freeman]

Nicer.

[Damian Collins]

Exactly.

Like other Members, I greatly welcome the removal of VAT on fuel for air ambulances. Kent, Surrey and Sussex Air Ambulance is a fantastic organisation and has been calling for that change, and it and people across Kent will welcome it.