Budget Resolutions and Economic Situation

Iain Stewart Excerpts

Friday 20th March 2015 Commons Chamber

[Hilary Benn]

We have made it clear that we will have a fairer allocation from within using funding that is there at the moment. The right hon. Gentleman’s problem is that he cannot justify what the Government have done, and therefore applying more fairness so that everybody has to make a contribution is the right thing to do.

The National Audit Office and others have said there is not much evidence that the new homes bonus encourages house building that would not have taken place anyway. It is top-sliced from revenue support grant and tends in the main to be taken from the more deprived communities with the greatest needs and to go to communities that are less deprived with fewer needs. We will phase that out and redistribute the money back to local authorities on a fairer basis. Government is about making choices. We will devolve £30 billion of economic powers from existing money for county and city regions.

[Iain Stewart (Milton Keynes South) (Con)]

Will the right hon. Gentleman give way?

[Hilary Benn]

I have been very generous in giving way, but I am going to bring my remarks to a close.

We will devolve that money so that local authorities, coming together, have powers over skills, business and employment support, housing and bus regulation. We have talked about London today. If bus regulation, the ability to control routes and fares, is good enough for London—and it is—why is it not good enough for the whole of England? That is something we will do.

The truth is that the Secretary of State has devolved in one other respect: he has passed responsibility for taking difficult decisions down to the areas with the greatest needs. As we know, the 10 most deprived local authorities have seen their council spending reduced by 16 times more than the 10 least deprived. He has taken most from the communities that can least afford it.

I asked the right hon. Gentleman at the beginning of this week about the real impact on social care for elderly people—I said I would come to this—of the decisions he has made, or, to be more precise, as a result of his failure to stand up for local government and social care. He tried to pretend that the fact that there are 220,000 fewer elderly people now getting a hot meal a day, which is what research demonstrates, had nothing to do with him. He even tried to blame the councils, but it is everything to do with the way he has unfairly applied the cuts to local government. If, as he claims, it has been fair to all, north and south, how can he explain cuts to social care being deepest in the councils he has hit the hardest as the result of the decisions he has made? That is what NAO analysis confirms. Everyone knows the answer to that question is that he has taken most from those who have least. Worse is to come. The Office for Budget Responsibility says we will see

“a much sharper squeeze on real spending in 2016-17 and 2017-18 than anything over the past five years.”

Those cuts would be extreme and irresponsible, and have a big impact, including on social care. The Health Secretary takes all the stick for the problems in the NHS, but the Communities Secretary is fanning the flames.

We need a different approach. Local communities and local government are crying out for a different approach. Times are tough, but there is no justification for applying the cuts to local government in such a fundamentally unfair way. There is no justification for taking decisions that mean elderly people in one part of the country are less likely to get social care or a hot meal a day because they live in an authority that has been penalised by the right hon. Gentleman. There is no reason why local communities and the people they elect should not be given the powers and the tools to build homes for their children and their grandchildren. There is no reason at all why all the city and county regions of England—all of them—should not get the economic powers to help them to build their own strong local economies, invest in skills, build homes and create jobs for the future. All those things are possible, but it will take a change of Government to make them happen.

--- Later in debate ---

[Iain Stewart (Milton Keynes South) (Con)]

It is a pleasure to speak in this debate, alongside many right hon. and hon. Friends who sadly are stepping down at the general election. I shall be sad to see many of them retire, and I think the House will lose a great deal of wisdom and experience. Let me say for the record, however, that I do not intend this to be a valedictory speech! I hope the good electors of Milton Keynes South will return me in 47 days’ time.

I welcome the long-term nature of this Budget, and I believe the Chancellor is to be commended for not yielding to the temptation of using the better than expected fiscal position resulting from our strong economic performance as a windfall for short-term gains. Instead, he has stuck to his guns and sought to get the country back to living within its means.

It is easy to forget just how close to the brink this country was five years ago. We have heard from some speakers today a rather rose-tinted view of our position in 2010, but it is worth thinking about just how precarious our financial position was. It has been an incredibly difficult job in a very turbulent global economic situation to get this country back on track. Interruption.] I hear hon. Ladies opposite saying from a sedentary position that the problems were global. Yes, but in case they have forgotten, there has been a small problem in the eurozone, and this country started from a much weaker position because we ran up a structural deficit, which made the challenge even more difficult to deal with.

We must stay on course to eliminate our deficit and then start repaying our debt. That is not dry economic theory or dogma. An interesting table in the Red Book shows what the Government will spend in 2015-16. Next year, we will spend £35 billion on debt interest payments—not repaying the debt, just paying the interest to service it. That is more than we are spending on transport, on industry, agriculture and the environment and on public order. It is money that is not available for spending on defence or the NHS or infrastructure, and means passing on more bills for the next generation to take up. Addressing our debt addressed is also important for our national security. The money we borrow has to be lent by someone. The greater our debt, the more we have to borrow from other countries. The savings glut in many far eastern countries in recent years has meant that borrowing has been comparatively easy and cheap, but that might not always be available or desirable, so we are right to stick to our plans to look to the long term and pay our way as a country.

I warmly applaud the Budget measures on savings and pensions, and particularly the encouragement of personal savings that we have seen in this and previous Budgets. I do not want to encourage the stereotype of a Scotsman and his money, but I say that we need to save more as a country. That is right for the long term. Just as it is right to reduce the country’s debt, so it is right to reduce personal debt that is not secured against an asset. I warmly applaud the abolition of tax on savings for many people. Double taxation is wrong, and people were paying interest on their savings on money that they had invested after taxation. I welcome, too, the pensioner bonds that were introduced in previous Budgets as they give a higher rate of interest to pensioners, and I welcome the greater flexibility in ISAs. Encouraging saving is good for our economic security.

Let me raise one concern, however, about an otherwise excellent Budget. I refer to the restriction of the lifetime personal pension allowance. I completely understand that, as part of our objective of getting our books back in balance, we have to keep a close eye on every single item, and I accept that the cost of this allowance has gone up by £4 billion during this Parliament. It is completely understandable that we have to keep it controlled in the short term. I welcome the Chancellor’s rejection of restrictions on the annual allowance and the fact that the lifetime allowance will be indexed from 2018.

I do hope—let me make a plea perhaps not for the next Budget, but for several Budgets down the line—that as we get our finances back into the black, the lifetime allowance limits will be revisited. I say that not just because it is right to encourage the savings culture, but because it is sustainable in the long term in that the tax forgone on pension contributions is only deferred and not lost. When people draw down the income from their investments in the future, the Government will gain. It is important because pension funds will be increasingly significant for funding investments in our infrastructure.

My right hon. Friend the Member for Havant (Mr Willetts) is no longer in his place, but both he and the right hon. Member for Somerton and Frome (Mr Heath) alluded to the important pension reforms that this Government have made. The attack by the previous Government on one of the best pension funds we had, when they abolished dividend tax credits, caused huge problems for a situation that was previously well into the black. The reforms we have made have put us back on a sensible course.

I have one specific question for my hon. Friend the Exchequer Secretary. It was raised by my constituent Nicholas Clarke, who will be affected by the reduction in the lifetime limits on pensions. He has done the right thing by his family and saved into his pension fund, and he hopes not to be too far away from taking retirement. In the 2014 Finance Bill, an individual protection provision was introduced when the allowance limit was reduced previously. If the Minister does not have the information to hand, perhaps she will write to me about whether it is likely that a similar provision will be introduced to coincide with this reduction. This information would be most helpful to constituents such as Mr Clarke in planning for their retirement.

In the last few minutes, let me turn to a couple of themes relevant to the local government focus of today’s debate. On housing, I very much welcome the Chancellor’s announcement of the new Help to Buy ISA, which will be particularly useful in constituencies like mine. Our demographics show that the children of young families who moved to Milton Keynes in the 1980s, when there was a big expansion in growth, are now at an age when they want to buy their own homes. It is a perfectly natural and laudable aspiration. This new ISA, along with the stamp duty reform in the autumn statement, will help people to get their foot on the housing ladder.

Reference has been made to housing supply. In Milton Keynes, we are delivering. Our core strategy, agreed in 2013, provides for 28,000 homes over the next decade or so. The Government have helped to bring forward some of these developments—at Newton Leys in the western flank of my constituency, for example. I endorse the point made by my right hon. Friend the Member for South East Cambridgeshire (Sir James Paice), who said that we need to do all we can to bring forward these developments.

I have some concerns. Some in Milton Keynes want to go outside this plan prematurely and look at other developments—at Salden Chase, for example. I think that is very short sighted. We should consider further expansion only when it is part of a broader and more strategic view that takes into account other developments such as the new garden cities at Bicester and other places nearby. If I am returned in a couple of months’ time, this is a civic discussion that I wish to lead.

Finally, and not unrelated, is the reform of business rates announced by the Government. I very much welcome it. Under the current system, Milton Keynes pays out far more than it receives, and I would like this review to look at that balance. I was very concerned by some of the comments of the right hon. Member for Leeds Central (Hilary Benn), particularly when he said that a Labour Government would look at rebalancing the distribution of support from central Government. I worry—Labour has not been open about this—that this will mean taking money from fast-growing areas such as Milton Keynes and redistributing it elsewhere.

I note with pleasure the Chancellor’s invitation for other areas to replicate what has been proposed for business rate retention in Manchester and in Cambridge. If re-elected, I shall encourage Milton Keynes council and the business community there to beat a path to his door to see whether we can arrange something similar. That will be important for funding the additional infrastructure we need if we are to continue to grow our housing.

I would also welcome the rebalancing of business rates between the large-scale businesses and the small high-street ones. I have both in my constituency: I have everything from the big John Lewis distribution centre right down to small and wonderful local shops.

This is a good Budget for the long-term success of Milton Keynes and the United Kingdom as a whole. I look forward to participating in our further growth in the next Parliament.