Budget Resolutions and Economic Situation

Helen Whately Excerpts

Tuesday 14th July 2015 Commons Chamber

[Sajid Javid]

I think the hon. Gentleman would agree that it is better to have a sustainable welfare system that protects the vulnerable while at the same does not allow companies to get away with paying lower wages than they otherwise were. I hope he supports our national living wage, especially the fact that it means someone working at the national minimum wage today will get at least £5,000 more a year by 2020 because of our national living wage.

A business-led economy in which hard work is rewarded, entrepreneurs are encouraged and aspiration is applauded —that is at the heart of our Budget. Above all, it is a Budget that supports business. For all the rhetoric one hears from politicians, Governments do not create jobs; businesses do. As my right hon. Friend the Secretary of State for Work and Pensions said last week:

“It is only when businesses are thriving that the people of our country can thrive too.”—[Official Report, 9 July 2015; Vol. 598, c. 482.]

It is only a strong and growing economy that allows us to invest in the NHS and schools; and it is only a strong and growing economy that allows us to spend money on protecting our most vulnerable citizens. Anyone who is successful in business should be congratulated and not condemned.

[Helen Whately (Faversham and Mid Kent) (Con)]

Does my right hon. Friend welcome, as I do, the introduction of a national living wage, which will increase the pay of the worst paid and help make work pay?

[Sajid Javid]

My hon. Friend is absolutely right. At the heart of the new national living wage is just what she says—it will mean working people earning even more, and it will go on to boost productivity, too.

Aggressive regressive policies that penalise honest labour have no place in the modern world. That is why we have already cut the main rate of corporation tax to 20%, rewarding productive companies and boosting UK competitiveness. It will now fall further to 19% in 2017 and just 18% in 2020, making it the lowest in the G20. More than a million businesses will see their tax bill fall as a result, allowing them to invest more in their staff and facilities.

That is not all. As corporation tax falls, tax allowances for growing businesses will rise. The annual investment allowance will be set at £200,000—its highest-ever permanent level, while the employment allowance will increase by £1,000 to £3,000, cutting employer national insurance contributions still further. By next year, businesses will be able to employ four people full time on the national living wage and pay no national insurance at all. By April next year, we will publish a business tax road map, setting out our plans for business taxes over this Parliament and giving employers the information they need to plan ahead.

From September 2017, working families with three and four-year-olds will receive 30 hours of free childcare—twice what they currently receive. This will help the parents themselves, but it will also get more skilled employees back in the workforce sooner—a real bonus for British business.

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[Mr Umunna]

My hon. Friend is right to draw attention to the assault on the aspirations of young people all the way from school to when they get a job. We remember that the Government stopped the Building Schools for the Future programme, which helped to give our young people a decent place to work. The Government took away the education maintenance allowance when people got to college and trebled their tuition fees when they got to university. Now, when they leave university the Government tell them that they should not earn as much as everybody else and that they will not extend the increase in the national living wage to those under 25.

Let me return to research and development. Although I welcome putting the annual investment allowance on a more long-term footing and the corporation tax changes, which also help, I would ask Ministers, who have suddenly perked up, this: where was the action on business rates for small businesses in this Budget? They create two thirds of private sector jobs, so where was the news for them?

Reducing the tax burden is all well and good, but in order to invest people need to be able to raise the finance to do so. According to the Bank of England, net lending to small firms has fallen by more than £1 billion in the past year and it continues to be an issue. Towards the end of his time in office, the Secretary of State’s predecessor joined us in championing a state-backed investment bank and put in place the British Business Bank, which we support. Now that he is no longer in post, and with the Government flogging off the Green Investment Bank, the British Business Bank has had no guarantees of future funding in the spending review and faces an uncertain future. I note that there was just one mention of it in the Red Book. I am happy to give way to the Business Secretary if he wants to answer this question: can he confirm today whether the Government plan to sell off the British Business Bank, too, and can he rule out doing that in this Parliament? The silence is deafening.

Let me turn now to infrastructure. We must end the dither and delay in making decisions on projects that not only increase our productivity but iron out regional imbalances and help people travel around in a more cost-effective way. In the Red Book, we are told that the Government believe that a modern infrastructure network is vital, so why, having commissioned the Davies report on aviation, do they appear to be locking themselves into a holding pattern right through until the autumn before coming into land and making a decision on this important matter? Our aviation industry employs hundreds of thousands of people, contributes more than £50 billion to GDP and pays the Exchequer more than £8 billion in tax every year. We have been clear that we will make a swift decision on this matter in the national interest. If the commission’s proposals to build a third runway at Heathrow can meet our tests, including consistency with our climate change obligations, we will take swift action to back them. I suspect that the Business Secretary agrees with me and all I say to him is that he needs to face down the opposition arising in Cabinet and do the right thing.

As for the regional growth policy, there has been a lot of chat about the northern powerhouse, so let me make a few observations. We cannot build a powerhouse if there is no power to connect our northern cities. The decision to shelve northern rail electrification, such as for the TransPennine Express route between Manchester and Leeds, was a kick in the teeth to the areas and regions of the north, and plans for a northern Oyster card do not make up for it. If I have one criticism of the Government’s overall approach to devolution, it is that they should be seeking to make every region a powerhouse rather than simply having a northern powerhouse.

[Helen Whately]

rose—

[David Rutley]

rose—

--- Later in debate ---

[Shabana Mahmood]

That was hardly worth the wait. I have to say that the hon. Gentleman should have been paying attention to what my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman) actually said. She came out very strongly against the whole package of working tax credit changes. If he had listened to my remarks, rather than try to intervene with a Whip’s question, he would have realised that that is exactly what I am doing myself.

The Government will say that they have moved on pay. Again, however, there is a big difference between rhetoric and reality. The Government’s cuts to tax credits overwhelmingly outweigh their measures on pay. I welcome the proposed rises in the national minimum wage, which is still what it is. [Interruption.] I am pleased to see that the Chancellor has joined us. He has failed to explain why raising the minimum wage was so wrong only a few short weeks ago during the general election campaign, in view of our manifesto commitment, or how he came to agree with us so soon after the general election. Nevertheless, imitation is indeed the sincerest form of flattery. We are pleased to observe that the party that forced the last all-night sitting in the House in an attempt to block the introduction of the national minimum wage by the last Labour Government now agrees with us not only that it is important and necessary, but that it should go up. However, we should be clear about the fact that it is not a living wage.

There has always been a difference between the minimum wage and the living wage. Re-badging the new national minimum wage as a living wage will not help the Chancellor, because ordinary working people can see a political con for what it is. The Living Wage Foundation was quick off the mark on Budget day in making that very point. The inconvenient fact for the Chancellor is that the living wage—the real living wage—is calculated on the assumption of a full take-up of tax credits, the very tax credits that the Chancellor has just cut. To make up for the loss of those tax credits, a real living wage would have to be considerably higher than what the Chancellor is now promising working people in Britain.

The new national minimum wage rate of £7.20, when it is introduced next year, will be lower than the current living wage of £7.85. In effect, the Chancellor, who says that he stands with working people, will offer working people in 2016 the 2011 living wage, and we will not let him pretend otherwise. In the end, the simple truth is that the wage increases that are on their way are not enough to make up for the loss of tax credits.

Twenty-four hours after the Chancellor delivered his Budget, the Institute for Fiscal Studies dismissed his claim that increasing the minimum wage would compensate working people. The IFS said:

“the key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of losses that will be experienced by tax credit recipients. That is just arithmetically impossible.”

The IFS also said that the biggest change, which sounded very technical, was the reduction in the work allowance. It explained:

“The work allowance is the amount that a claimant can earn before benefit starts to be withdrawn. Significant allowances were an integral part of the design of UC”

—universal credit—

“intended to give claimants an incentive to move into work. This reform will cost about 3 million families an average of £1,000 a year each. It will reduce the incentive for the first earner in a family to enter work.”

A regressive Budget with a work penalty of £1,000 a year: that is what the Government have delivered to ordinary working people in our country—and while they hit those ordinary working people, they also fail to address a central economic challenge—productivity. That is the puzzle that it is crucial for us to crack and solve, because getting it right is vital if we are to achieve higher living standards, sustained GDP growth, and effective deficit reduction, but this Budget failed the productivity test.

[Helen Whately]

Will the hon. Lady give way?

[Shabana Mahmood]

I will not give way for another Whip’s question. I must make some progress.

Productivity has stagnated under this Government, and the Office for Budget Responsibility has revised its productivity forecast downwards for next year and the three years after that. It has also confirmed that the Chancellor will miss his target of increasing exports to £1 trillion by a staggering £367 billion by 2020. Productivity has been revised down and the current account deficit has widened to 5.9% of GDP, becoming the largest annual peacetime deficit since at least 1830. However, all that the Government had to offer was a damp squib of a productivity plan on the Friday after the Budget—a patchwork of existing schemes rather than a substantial reform to boost skills, business growth and wages, and, in relation to infrastructure, output that is lower than it was five years ago.

There are, of course, some measures in the Budget that we will support, not least those that started life—[Interruption.] I am glad that Conservative Members are cheering, because the measures that I am about to mention started life on our Benches as our manifesto commitments. I welcome the Government’s new-found zeal in dealing with non-doms and with the so-called carried interest loophole involving private equity managers. Conservative Members were not so vocal on such matters just a few weeks ago, but I am glad that they have had a rethink since the general election, and have found their voices when it comes to our policies.

We will, however. stand against measures that are wrong and unfair. Apart from the overall package of measures on tax credits, we are deeply concerned about the impact of removing student maintenance grants from the poorest undergraduates, about the lowering of the level of benefit for those who cannot currently work and are in the work-related activity group, and about the Government’s strategy on child poverty, which essentially boils down to their changing the definitions because they will miss their target otherwise. Every Budget is about choices. This should have been a Budget to bring the deficit down and help people into work and into better work by creating the high-skill, high-pay jobs needed to boost productivity. Instead, it penalises those already in work. It is people on low and middle incomes, the ordinary working people of Britain, who will pay the price for this Chancellor’s choices, and we will stand with the ordinary working people of Britain by voting against this Budget tonight.