Budget (North-East)

Grahame Morris Excerpts

Tuesday 17th April 2012 Westminster Hall

[Grahame M. Morris (Easington) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my colleague, my hon. Friend the Member for Gateshead (Ian Mearns), on securing this debate, the importance of which is testified to by the number of Labour Members present.

The Budget will have few positive benefits for the economy of the north-east, and there is no discernible regional support within the measures set out in the Budget statement. There are cuts in corporation tax and cuts in tax for the wealthy, but there is no credible plan for what is really needed in the north-east: a stimulus for jobs and growth.

The often used line that we cannot spend our way out of a recession has been shown to be an ideological mantra that flies in the face of economic reality. What the Budget has given us is rocketing unemployment and plummeting growth in regions such as ours. The north-east has the highest rate of unemployment of any UK region, at 10.8% of the economically active population. That is mirrored in my constituency where, despite the good news we have had from Nissan, large numbers of private sector job losses are in the pipeline. We are haemorrhaging private sector jobs at an alarming rate.

Regional economies such as the north-east will not make any headway without investment in a comprehensive and lasting economic infrastructure. That can only be done by the courageous state and by Government intervention. The north-east continues to suffer from the unfinished business of transition from heavy industry. However, that transformation has stalled as a consequence of the coalition Government’s policies.

The evidence supports the fact that Labour and our regional development agency, One North East, were making progress in transforming the economic landscape. An analysis from PricewaterhouseCoopers shows that, for every £1 spent by our RDA, an average of at least £4.50 of economic output was achieved. That rose to an output of at least £6.40 when future benefits were assessed.

Ministers have sought to propagate the myth that money spent in the north-east under Labour was wasted, but that is not supported by the facts. Based on the gross value added per head indices, the rate of growth in the north-east went from being the lowest of any region during the 1990s to being the second highest during the past decade. The facts and figures were alluded to by my hon. Friend the Member for Gateshead, so I will not repeat them.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I congratulate my hon. Friend on his speech. Does he agree that another key role that One North East played in the region was to ensure that European regional development funding was drawn down and invested in the region? Some £329 million was made available, but £129 million remains un-invested directly because of the loss of One North East. No one is drawing down that funding and no regional funding can match that investment in the region.

[Grahame M. Morris]

Absolutely. I am grateful to my hon. Friend for putting that on the record. That was another vital element that the RDA contributed towards jobs and growth in the north-east, and it is sadly missed.

Although the Chancellor told us that the Budget is overall fiscally neutral, its impact by region, class or earnings is anything but. For example, VAT—a regressive form of taxation—remains at 20%, which hurts those who have no choice but to spend their wages on life’s basic essentials and depresses demand. The continuation of wage freezes throughout the public sector will make life even more difficult for ordinary people, as will the rise in fuel duty.

In his Budget, the Chancellor has failed the people whom I represent in Easington and in the north-east. There was the increase in VAT, the granny tax, the pasty tax, the philanthropy tax, increases in fuel duty and the loss of tax credits for modest earners. My right hon. Friend the Member for Doncaster North (Edward Miliband), the Leader of the Opposition, was right to call it a Budget for millionaires when what we need is a Budget for jobs and growth in the north-east.

[Ian Swales (Redcar) (LD)]

It is a pleasure to speak in the debate and I congratulate the hon. Member for Gateshead (Ian Mearns) on securing it. Labour Members’ contributions will no doubt be selective so I will not repeat them; instead, I will say a few things that they probably will not.

The increase in the tax threshold that my hon. Friend the Member for Stockton South (James Wharton) mentioned has taken another 35,000 people out of paying tax in the north-east and given 940,000 workers a tax cut. Those workers, including people who are on the minimum wage, would be paying an extra £400 a year under Labour’s tax plans. It would not have been a Lib Dem priority to cut the 50% rate to 45%, but let us remember that Labour’s love affair with the 50% rate lasted for one month out of the 13 years it was in power. For the other 12 years and 11 months, the top rate was 40%. The rate remains 5 percentage points higher than that.

[Grahame M. Morris]

Does the hon. Gentleman recognise that, in my constituency of Easington, 1,400 families on modest incomes will lose all of their child tax credit, which is worth around £545 a year? In addition, 350 working couples in Easington who earn less than £17,000 a year will lose all of their working tax credit, which could be worth up to £3,870 a year, if they cannot increase the hours they work from 16 to 24.

[Ian Swales]

I am sure that the hon. Gentleman has his statistics correct.

I will go on to talk about high-rate tax. The Government have cut from £250,000 to £50,000 the amount of pension contribution that can be claimed against tax. They have put a new limit on reliefs, raised capital gains tax from 18% to 28%, put a new tax on expensive houses and clamped down on tax avoidance. Labour has opposed those measures and charged the rich less in tax.

Let us talk about business. As soon as the Budget was delivered, Glaxo announced £500 million of investment, including a new factory in Cumbria and new manufacturing facilities at Barnard Castle, Teesdale. That was a direct result of the Budget provisions on pharmaceutical patents. As AstraZeneca has also shown, that will lead to huge investment in—

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[Ian Lavery (Wansbeck) (Lab)]

The Budget is a great missed opportunity, not only for the north-east but for the whole country. It should have been a Budget for jobs and growth, but instead it was a Budget for tax cuts for the rich and the toffs.

Unemployment rates in the south-east of Northumberland—in my constituency—are alarming. According to the Library, statistics revealed last week showed that, on average, 22.2 people were applying for each jobseekers’ vacancy. Earlier this year, according to the Office for National Statistics, that figure was 55.5. Every time we mention the problems faced by unemployed people in our area, we are told that we should look at the positive signs, such as Nissan. Nissan has been and is tremendous, but it is a million miles away from where I live.

[Grahame M. Morris]

I am sorry to stop my hon. Friend in full flow, but it is important to place on the record that, although we welcome the additional jobs and the announcement about Nissan, it must be put in context. Does he agree that although 250 jobs are welcome, they do not go anywhere near even offsetting the private sector job losses in my constituency alone? Reckitt Benckiser has lost 500 jobs; Fortress Doors has lost 100; Carillion, Cumbrian Foods and, most recently—

[Sir Roger Gale (in the Chair)]

Order. I am terribly sorry, but the hon. Gentleman is beginning to make another speech. This must be an intervention. I remind hon. Members that each of the first two interventions adds a minute to the time that the speaker is allowed. Hon. Members are in danger of pushing one of their colleagues off the end of the list, if they are not careful.

--- Later in debate ---

[Miss Smith]

If the hon. Lady had let me press on, she would have heard the answer to much of what she asks a little sooner. Let me reassure her that I have often visited the north-east, although not since the Budget, so I look forward to a chance to do that, perhaps in the next recess. As many Members have said, it is a fine region and a great place that we should all seek to support.

Let me return to the matter in hand. In the Budget, the Government made it clear that they have three priorities: first, the creation of a stable economy; secondly, a fairer, more efficient and simpler tax system; and thirdly, reforms to support growth. The 2012 Budget, together with the national infrastructure plan that we published in last year’s autumn statement, set out the Government’s latest steps towards achieving those priorities, based on a model of sustainable and balanced growth, including, of course, in the north-east.

As hon. Members have made clear, the north-east faces difficult challenges. It remains, however, a significant contributor to the national economy, and I would like to reiterate and highlight the numerous good news stories that have been mentioned and involve companies that are already investing in the north-east and creating jobs for people in the area. For example, the Japanese automotive company Vantec has created 230 new jobs and secured 800 existing posts in Sunderland. Nissan has announced the creation of 225 jobs at its Sunderland factory and 900 more with its British suppliers. Both companies have been pledged money from the regional growth fund, which illustrates the difference that that initiative makes on the ground. I join other hon. Members in celebrating the relighting of the blast furnace at the SSI Redcar steelworks, which my hon. Friend the Member for Redcar (Ian Swales) mentioned earlier in the debate.

The reforms set out in the Budget will give businesses and individuals in the region a further boost on top of those private sector initiatives. Corporation tax will be cut by an additional 1% on top of the cuts announced last year. From April this year, the rate of tax will be reduced to 24%, and it will ultimately fall to 22% by 2014—a competitive rate when we consider our competitors around the globe. Let me reiterate that the Budget increases the personal tax allowance by £1,100, which will take 34,000 people in the north-east out of tax altogether. It also increases the Growing Places fund, which will provide additional funding for the infrastructure that is needed to unlock developments that lead to jobs and growth. Local enterprise partnerships in the north-east will receive a further £11 million.

I also confirm that Newcastle has been selected to become a super-connected city. I do not sneer at that; hon. Members may fail to welcome it, but the city will receive up to £6 million of funding to deliver ultra-fast broadband to residents and businesses, which is valuable. On top of that, the Budget includes investment of almost £28 million in stalled development projects within the north-east.

Hon. Members were keen to talk about capital spending in percentage terms, but let me provide some absolute terms and mention £4.5 billion for the intercity express programme; £260 million for the new Tyne tunnel; £57 million for the Tees valley bus network; £350 million to reinvigorate the Tyne and Wear metro; and £82.5 million for a new Sunderland bridge, which perhaps hon. Members will welcome.

[Grahame M. Morris]

I am grateful to the Minister for giving way as I know that time is short. However, she is reading out a list of projects that have already been delivered and were planned by the previous Government. Can she equate the £10 million in the Growing Places fund to a distance of new motorway, for example? Would it buy one, two or three miles of new motorway? We are talking about relatively modest sums of new money.

[Miss Smith]

I am afraid that my mental arithmetic does not extend to working out pounds per mile on the spot, but I will be happy to look into the hon. Gentleman’s question.

I will continue with my comments, which I hope will help hon. Members. I want to talk briefly about support in the Budget for individuals and families to buy new-build properties with a 5% deposit through the NewBuy scheme, and I wish to put it on record that the Budget increases the maximum right-to-buy discount—[Interruption.]