Budget Resolutions and Economic Situation

Geraint Davies Excerpts

Wednesday 19th March 2014 Commons Chamber

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

It is a pleasure to follow the hon. Member for South Northamptonshire (Andrea Leadsom). She concentrated on banking, but my contribution will be somewhat more mundane, because I regret to say that far too many of my constituents have probably never even seen the inside of a bank, let alone know about the workings of a bank.

We again heard today about a drop in unemployment figures. That really has to be welcomed, but I remind the House, as I have done over a period of time, that some parts of the country are not seeing the recovery that others are experiencing. I listened intently to the Chancellor’s fantasy figures and tried to picture in my mind his portrayal of this rapidly improving economic situation across the country. I tried desperately to engage with that, and probably to be as imaginative as the Chancellor himself in entering his world, but I can tell him that far too many individuals and their families, many of them hard-working indeed, have simply not been given a chance to enter that imaginary world.

There can be no doubt—I would be the first to admit it—that thankfully, after some three years, there is a return to growth. However, the Chancellor needs to recognise that in my local authority area an increasing number of people are claiming jobseeker’s allowance. This month, yet again, we saw a further rise in unemployment on the back of last month’s rise. The figure now stands at 2,740—an increase of a further 0.1%. In May 2010, 75 young people were claiming jobseeker’s allowance for more than 12 months; that figure has almost doubled to 145. In February, youth unemployment rose to 740—an increase of 0.3% on the previous of month to 6.7%, which is 1% above the Scottish average and 1.5% above the UK average. In May 2010, the number of adults claiming jobseeker’s allowance for more than 12 months stood at 460; last month, the figure rose to over 800.

That is a tragedy for each and every one of those people. If they took time today to listen to the Budget statement, it will only have confirmed what they have probably suspected for a very long time—that the Chancellor has lost touch with those at the bottom end and does not understand the battle and the sheer struggle that still goes on for many people right across the country.

[Geraint Davies (Swansea West) (Lab/Co-op)]

My hon. Friend might be interested to know that in Swansea, 65% of people on JSA have been sanctioned. These are people on less than £72 a week. It is not that the Chancellor has lost touch with them; he is crushing them under his boot.

[Mr Brown]

My hon. Friend is right. If I have time, I want to mention an experience I had with a young couple who came to my surgery last Friday.

Earlier today, I met a representative of the Prison Officers Association from my area who was down in London taking part in a rally that had been timed to coincide with the Chancellor’s Budget speech. He explained to me that morale in the prison service is at an all-time low because of increases in serious violent attacks on prison staff, a five-year pay freeze and continuing demand for front-line staffing cuts, and an increase in pension contributions that is driving down the take-home pay of hard-working public servants. I suspect that it is not a job that many of us would relish doing. That driving down of take-home pay is coupled with working in an environment that is physical and, all too often, dangerous. These public servants are now being asked to work up to the age of 68. It is little wonder that they are angry and have taken to the streets today.

The Resolution Foundation’s report “Low Pay Britain 2013” shows that 4.8 million workers—20% of all employees—earn below the living wage, which is a massive leap from the 3.4 million in 2009 at the height of the recession. The growth of poverty has an uneven impact on particular sections of the population, and the tragedy is that young workers have been hit particularly hard: one in three 16 to 30-year-olds—2.4 million—are on low pay and are low skilled. These young people deserve better than this. Decent adults they are and will be, but they need greater chances in life. Living standards are down for far too many people, and as colleagues have said, that has been compounded by the 24 tax rises, households £1,600 a year worse off, and a reduction in tax credits.

On the positive side, I applaud the decision to reduce bingo duty to 10%. I am sure that the industry will be very much relieved at that. Like hon. Members on both sides of the House, I have visited my local bingo club, but there were fewer customers than I had ever seen before. The simple reason behind that is that people’s incomes have reduced so significantly that they simply do not have the wherewithal to spend time at the bingo hall in the way that they did for many years.

I also applaud the steps being taken to support pensioners through the relief measures in respect of savings, but again I have to say that many pensioners have no savings at all, and struggle to get by from week to week or month to month. These may be pensioner couples where one of them has been a carer for a son, daughter or elderly parent. They have struggled to get through their working life and they are now struggling in their old age.

I suspect that many energy-intensive industries will be delighted to hear of the extension of the existing compensation scheme. I have one in my constituency that has been pursuing me for answers to various questions that it had. Perhaps now that the Budget is over, I will be able to get those answers without any pre-Budget leak.

I am critical of the youth unemployment levels in my local authority area, and with some justification, but I welcome today’s announcement on apprenticeships, providing that genuine opportunities will be there for young people. I came across a young woman on a Government employment scheme working 32 hours in a retail business. When the scheme ended, the company said that she could remain with them, but that did not mean 32 hours’ work, but eight hours spread over a Saturday and Sunday. She is now out looking for a second job, and—who can tell?—perhaps a third job. It is a throwback to where we were in the early and mid-’90s.

I welcome the decision not to increase fuel duty, but as I have said on many occasions in the House, under the previous Government we saw nine years and 11 potential increases that were either suspended or not introduced at all.

The decision on the personal tax allowance will be welcome, but—here I disagree with my hon. Friend the Member for Glasgow South (Mr Harris)—many people are not even in the tax bracket, so they will see no benefit from the increase from £10,000 to £10,500.

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[Alun Cairns (Vale of Glamorgan) (Con)]

I would like to say that it is a pleasure to follow the hon. Member for Liverpool, Wavertree (Luciana Berger), but I do not recognise the biased and party political points that she made. Her speech was loaded against the positive news, which should be welcomed, about measures to help people in her constituency and others who need the Government’s help and support. I hate to think of the contributions that she and many other Opposition Members would have made if we had not been able to look forward optimistically to the sustainable growth that the Government have helped craft through their difficult decisions over recent years.

As we look optimistically at that growth, it is hard to believe the predictions that the Opposition have presented to us over recent years. We all remember the “too far, too fast” line, and then there was “flatlining”. We then had predictions about a double dip and even a triple dip; then they predicted that there would be a million jobs lost. That shows the Opposition’s lack of credibility, following their previous prediction about having ended boom and bust. They simply have no economic credibility, so their criticisms of an important building block in delivering sustainable economic recovery and growth show them for what they really are.

Of course the growth is welcome, but I am also extremely impressed by the nature of the recovery. Deficit reduction is important in itself—after all, it is the fundamental building block in creating confidence. The deficit has already been reduced by a third, and the Office for Budget Responsibility predicts that it will have been reduced by half by later this year. Of course, that in itself will not deliver sustainable economic growth, so we need to examine the data that are available beneath the deficit reduction figures.

The growth that we are experiencing is quite remarkable, and, again, it undermines the arguments that Opposition Members have made in recent years, and particularly today. The UK is now the fastest growing major economy in the world, and the fastest growing of the OECD nations. Even more than that, all sectors of the economy grew last year. We have to go back to 2007 to find the last time that happened, which demonstrates the balance of the economic recovery we are experiencing, be it in services, construction or manufacturing. Those are important sectors that demonstrate how growth in the economy is serving all parts and sectors of the UK, including those who are employed and those who seek employment. We are all sharing in the success.

All those who spoke from the Opposition Benches mentioned inequality and tried to highlight the differences between those who have and those who have not. However, they missed a really important line from data provided by the OBR and the Office for National Statistics, which is that we now have the least inequality in the United Kingdom for 28 years. That completely exposes all the anecdotal and selective evidence that has been presented. We have the lowest rate of inequality for 28 years, which is something Labour Members should be glad about.

If we examine the data further, we realise that the unemployment figures presented today were remarkable. Unemployment stands at 7.2% across the United Kingdom. It is unheard of for the rate of unemployment in Wales to be lower than the national average. In all my life I cannot remember unemployment in Wales being lower than across the rest of the United Kingdom, yet it now stands at 6.7%, so the gap between unemployment in Wales—my nation—and the rest of the United Kingdom is not just 0.1% as it was last month. I am absolutely delighted, and I hope that Labour Members from the Principality will join me in welcoming that success. It demonstrates that growth is serving every nation of the United Kingdom, and every sector in our country.

If we look at growth figures from the north-west, Wales or anywhere over the past two years, we see that all regions and nations of the United Kingdom have experienced levels of growth. Again, that shows that growth is not dependent on the dominance of London and the south-east, as was the case during the 13 years of the Labour Government.

[Geraint Davies]

As has been said, Wales has the highest level of poverty in the UK, with more in-work poverty than out-of-work poverty, and it is the most affected by the horrendous bedroom tax. The Tories are putting the boot into Wales, which is why we will kick the hon. Gentleman and the Government out next time.

[Alun Cairns]

I am grateful to the hon. Gentleman for making such an important point about poverty in Wales, because it needs to be recognised. However, even in the darkest, most difficult days, when coal mines and steel plants were being closed and things were extremely difficult for those communities, Wales was not the poorest part of the United Kingdom. After 13 years of Labour control, Wales is sadly the poorest part of the United Kingdom, but it is now experiencing higher and faster growth than most other parts of the UK. That goes to show that the UK Government are playing their full part in our turning the corner and getting out of the cul-de-sac that the Labour party left us in. That was what Labour left us.

We talk about balance across the economy, but more needs to be done to strike that balance in every way, and the Budget has taken a significant step in that direction. There has been significant support for manufacturing, including a £7 billion package that provides elements for capping the carbon price support scheme. One benefit of that £7 billion will be the £50,000 cut in energy prices or costs for a mid-size manufacturing plant. There are hundreds of those in Wales, including several in my constituency, and as a result of the Budget they will get a £50,000 cut in energy costs.

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[Diana Johnson]

I do not think the Minister was listening to what I said: 5 million workers earn much less than the personal allowance, so they are not affected by the increase. The analysis that has been done shows that the better off benefit far more from that increase. It is not a way of targeting the poorest in our society.

We are seeing the shocking growth of charity dependency in 21st-century Britain, which, as many hon. Members have said, is the seventh-richest nation. That is Dickensian in a digital age. It is tragic for the life chances of millions of people that after the coalition inherited an economy that had returned to growth in 2010, we have had three years of flatlining. Places such as Hull and the north have suffered the most from, for example, the savage cuts to council funding, despite the coalition Government’s rhetoric about rebalancing the economy.

[Geraint Davies]

Does my hon. Friend agree that the raising of the tax allowance, which will cost £1.4 billion to begin with and rise to £1.8 billion, compared with the bedroom tax, which will save about £500 million, shows us everything we need to know about the Government’s priorities? They are giving three times as much to people who have got some money, and the very poorest are being crushed.

[Diana Johnson]

My hon. Friend makes that point well. There have been 24 tax changes under the Government, and average families will be £1,600 worse off at the end of the Parliament. The recovery is too much based on the south, financial services, private consumer debt and an unsustainable property bubble. More women are now in work than ever before but many of them are in part-time work, on zero-hour contracts or on short-term contracts.

The poorest people in the most deprived areas have been hit hardest by the coalition Government. We have a bedroom tax, but we have no mansion tax. We have bank bonuses for some, but we have food banks for many. The new £1 coin neatly sums up Lib Dem involvement in the coalition. It is not the 12 sides that we need to worry about; it is the two faces. This is another Bullingdon Budget from a coalition of two parties representing one privileged class and creating two nations.

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[Gordon Birtwistle]

I thank my hon. Friend for that remark. When it comes to the north-west, I can only speak about my constituency of Burnley, which is a prosperous manufacturing town. We have invested heavily in manufacturing over the years, and I am pleased to say that we are not one of the problems in the north-west.

I am delighted to hear about the continuation of the triple lock on pensions, which is great for pensioners. I have to declare an interest as I am a pensioner and I understand how it all works. I welcome the end to the hideous 75p rise that was awarded to pensioners under the previous Government.

I am also delighted that we still have the excellent pupil premium, as I have a number of junior schools in my constituency. One school alone receives more than £100,000 a year to help children from really poor backgrounds.

My main interests are manufacturing and apprenticeships. The Chancellor’s decision two Budgets ago to introduce capital allowances was something that I had argued for and that he had agreed were a great idea, but as the scheme had run for two years, I fully expected him to cancel it in this Budget. However, he did not cancel it; he doubled it to half a million pounds a year. An Opposition Member said that she could not understand the reason for capital allowances. She asked what they could do for manufacturing. Obviously, she has never been involved in manufacturing, and probably has never been in business. She is probably one of the few Members who do not understand what is going on.

I also want to comment on the amazing rise in apprenticeships. In my role as apprenticeships ambassador, I have been able to visit apprentices in different industries across the country. I have seen apprentices build Typhoon fighter jets at BAE Systems in Preston, missile systems in Bolton and Airbus aircraft wings in Chester. I have also seen the other side of manufacturing. Only yesterday, I went to see apprentices at Starbucks in the Westfield shopping centre in White City and they showed me how to make a proper latte with a fancy topping. I met some amazing young people.

I have also met apprentices at Next—one would not expect that such industries would have apprentices. The young apprentices at Next were absolutely amazing and a credit to the young people of this country. I did not realise that Next ran such an excellent apprenticeship scheme, which rivals the one run by Rolls-Royce. Next is committed to its young people, and it sees apprentices as its assets for the future. It is fantastic to see the massive rise in apprenticeships. Apprentices are the future—[Interruption.] If the hon. Member for Swansea West (Geraint Davies) wants to intervene, I am happy to give way.

[Geraint Davies]

I am amazed that the hon. Gentleman compares the apprenticeships at Next with those at Rolls-Royce. What a disgraceful thing to say about one of our foremost companies. Picking socks is not the same as fixing engines.

[Gordon Birtwistle]

If the hon. Gentleman had listened rather than talked to his friends, he would have realised that I was talking about the apprenticeship scheme, and not the apprentices themselves. Next treats apprentices properly, and they go through a proper three-year training programme, as do the Rolls-Royce apprentices. It is a different industry, but those young people are as keen as the apprentices at Rolls-Royce to have a proper career—rather than the career that the Labour party offered them when they were in government—and one of which they can be proud.

The hon. Gentleman might not think that is a good idea, and perhaps in his constituency he would like young people to go on Government training schemes that deliver nothing. These schemes are delivered by proper companies for young people.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure to follow the hon. Member for South West Bedfordshire (Andrew Selous), who seems to have been spellbound by the Wizard of Osborne’s Wonga economics.

I say that because since the arrival of this Government, debt as a share of GDP has risen from 55% to 75%, and it will rise to 80% when they leave office next year. [Interruption.] Contrary to the mutterings by Government Front Benchers, the reality is that the previous Government did a very good job in increasing GDP by 40% in the 10 years to 2008 and, when they faced an international crisis, by engaging in fiscal stimulus—with President Obama—to avoid a deep depression and give us a shallow recession, so that by 2010 we had the modest growth that was then destroyed by the current Chancellor. He announced 500,000 job cuts in the public sector, which basically stopped consumption and flatlined the economy, which is why the debt has grown and why this Government have borrowed more in three and a half years than the previous Government did in 13 years.

The Chancellor says that there is now growth, with a new recovery, but if we analyse that growth, we can see that lending by banks in the form of mortgages and consumer debt is at the same level as in 2008, while lending to business is down by 30%. That is why productivity has fallen—down 5% in Britain, compared with an 8% rise in America—and why this is not sustainable growth rooted in the real economy, but just a bubble in the housing market that will burst once interest rates go up, as they will when unemployment goes below 7%. After the next election, the bubble will blow up in people’s faces, as happened with sub-prime debt, because people do not have the income to pay the higher mortgage costs that will follow a rise in interest rates.

Government Members say that everything is rosy and that incomes are going up, but the people who are worst off are those on jobseeker’s allowance who are desperately looking for jobs. As I mentioned in an intervention, in Swansea 65% of people who are on JSA have been sanctioned. They have less than £72 a week to live on, but they are having money taken away for not turning up to Work programme appointments that they were only notified of the day after the appointment should have happened. That is a dreadful situation.

I met somebody last week who has chronic disabilities. He has a major heart condition. Although he is 28 years old, he was judged to have the physique of somebody of 98 by his consultant. He went to Atos and got zero points. He is now in a state of malnutrition, along with his other problems. He is unfit to work.

We all welcome the increase in the tax allowance. That will cost about £1.8 billion. There was choice about that this year.

There has been some talk of inequality being at a 25-year low. However, the changes in benefits will increase inequality. The poorest spend a greater proportion of their money on indirect taxes—some 30% for the poorest fifth compared with 14% for the richest fifth—but the Tories have decided to give money away through direct taxes, because that helps people who are better off. That is only what we would expect.

The major initiatives on exports, such as credits for exports and support for UKTI, are to be welcomed, but let us not forget that the trade deficit has grown by 15% from £100 billion to £115 billion since 2010. We welcome the increase in building, but let us not forget that the target is lower than the increase required by population growth alone. Companies such as Taylor Wimpey and Barratt are saying that they will build a maximum of only 15,000 homes a year each. All the money is being funnelled by the banking system into mortgages, which is lifting the price of existing houses, rather than into building new houses, so Help to Buy is obviously a political ploy that will blow up in our faces.

There have been cuts in infrastructure over the past two years, and they are beginning to pick up. High Speed 2 will not arrive until 2030. The Prime Minister said that he would electrify the railways in the valleys, but now he is saying that the Welsh Government should do it. The Government have given borrowing powers to the Welsh Government and so have said they have to pay for it. That was a clever bit of footwork. There was a 49% cut in road building between 2010 and 2012, and there are no new motorways or highways.

I welcome the cuts in energy prices for companies such as Tata, which is local to me. However, much of the problem was created by the Chancellor’s carbon pricing in previous Budgets.

Obviously bingo is great. If people go down the pub and buy 200 pints of beer, they will now get one pint free. That is great as well.

Overall, this is a political Budget that is focused on the better-off and the south-east, and that cuts the public services that people rely on. It could have been better for businesses and for people. We want a one nation economy, not two nations in Britain being pulled apart. We want fairness and strength, but we will not get them with this lousy Budget.