Budget Resolutions and Economic Situation

John Redwood Excerpts

Wednesday 8th July 2015 Commons Chamber

[John Redwood (Wokingham) (Con)]

I remind the House of my entry in the Register of Members’ Financial Interests, which reveals that I am an investment and business adviser to a couple of companies.

I congratulate my hon. Friend the Member for Louth and Horncastle (Victoria Atkins) on her excellent maiden speech, in which she gave us a very good portrait of her constituency. I have noted the need to beware of her arrival when she is in her armour; if she throws her gauntlet around, I think that I will be looking the other way. She will clearly be a champion for her area.

I welcome the emphasis on prosperity in the Budget. I want a party and a Government who drive more prosperity for everyone in our country, and I want that to benefit people on all income levels. I especially want to see more people get into work and find other routes out of low incomes and poverty. The Chancellor is right to say that Britain deserves a pay rise and that we need to reinforce that pay rise as people get it, or reinforce their success in getting into a job and getting a pay packet, with tax cuts. I want tax cuts for all, and I am glad that my right hon. Friend has made a start on the promises made in our Conservative manifesto.

It is crucial that, as the Chancellor goes about the task of getting rid of unemployment and poverty through supportive policies, people are better off. What I want to do when we get to the detail of the welfare cuts is to see what the impact is, because we need to look at the overall impact. If people are going from unemployment to work, staying in work, getting a pay rise or getting a tax cut, those are all positive things that will make them better off, and we need to make sure that they are not completely offset or badly damaged by the welfare changes he is making. I look forward to those more detailed debates.

The overall picture in the Budget is quite different from the picture of the next five years set out in the outgoing coalition Government Budget. There is nothing surprising about that. We now have the opportunity to think the strategy through, based on the success in getting the recovery this far in the last Parliament, and learning from the coalition’s experience of the difficulties of getting that recovery up to speed and getting productivity to come through as we would like. The Chancellor is right to make adjustments. People need to work smarter to be paid better. We need a pay rise but we have to earn it, and that is the purpose behind many of the measures.

The expenditure proposals in the March Budget were quite tight in the middle years of this Parliament, and the Chancellor seems to have reached that conclusion as well, because the Red Book sets out some quite big spending increases for those middle years. Current spend in 2016-17 will be £15 billion higher than the March forecast, and the 2017-18 current spend will be £25 billion higher. I think that will make things a bit easier. At the time of the March Budget, there was quite a lot of criticism that the numbers were tight, and the changes give us more scope. We have seen some of the benefit already in the defence statement, but there will be other benefits. We have rather more latitude.

By the end of this Parliament, on the plans set out today, we will be spending £69 billion a year more than we were in the last year of the last Parliament. No doubt, there will be arguments about whether or not that is a real cut. We had those arguments in the last Parliament, when there was a similar rise in spending. I argued that there would be no overall real cuts and was told I was wrong, but the subsequent figures showed that that is broadly what happened: we avoided overall real cuts, but within that, because health, education, the European Union contributions and overseas aid were priorities, some areas suffered, to balance the figures.

The way the deficit comes down is not through spending cuts, of course; it is through a large increase in tax revenues from a more prosperous and faster growing economy. The figures state that tax revenues will be £168 billion a year higher in the last year of this Parliament than in the last year of the coalition. I would have thought that that is a tax rise to suit all socialists. It is a large increase in taxation, but I am pleased that it will come not by raising the rates—indeed, if we raised rates, we would probably collect less money in many cases—but by growing the economy and by people being better off and so able to afford the taxes. By the end of the Parliament, tax revenues will be some £10 billion a year higher than was forecast as recently as March. That shows the improvement in prospects.

[Mr Iain Wright (Hartlepool) (Lab)]

Has the right hon. Gentleman seen the OBR report, accompanying the Red Book, which states:

“We have revised borrowing up in 2016-17 and more significantly in 2017-18, while the surplus of £5.2 billion in 2018-19 that we forecast in March is now expected to be a deficit of £6.4 billion.”?

Is he comfortable with that?

[John Redwood]

I am perfectly comfortable with that. It is the direct result of easing the squeeze on spending to which various people objected in the past. The figures show the deficit coming down and being eliminated over the course of this Parliament, which is exactly what ought to be done. I wonder whether the hon. Gentleman’s new enthusiasm for that is personal, or whether it is just to tease me, but if it is personal enthusiasm, it is welcome to hear that the Labour party would now like to go faster in deficit reduction in the middle years of this Parliament than will happen under these proposals.

The economic background to the official forecasts shows that the growth figures are still pretty good and we have had a welcome upward revision to figures for the immediate past. We also see a welcome upward revision to the number of people in employment, which is fundamental to the whole strategy. There has been a modest deterioration in the balance of payments, which shows that there is more work to be done. The productivity work will link into that to make us more competitive. We have to earn our living, so we need more competitive products. All that growth and improved revenue is taking place despite higher interest rates—the forecast assumes a modest increase in interest rates compared with past forecasts.

On productivity—working smarter and working better —I welcome the scheme that the Chancellor outlined today. It will mean better roads and spending money on railways more wisely to get extra capacity in the parts of the system where we need it and increased efficiency. There will have to be a lot of work on energy, because we will need cheaper and more energy: as the march of the makers begins and the northern powerhouse cranks up, more electricity and more gas will be required. I hope that we will find cheaper ways to produce them than we have under the policies followed in recent years. It is important that we price people back into energy-intensive markets, rather than export all our energy-intensive business to other countries. It is no great win for those who want to cut carbon dioxide emissions if it is poured out of a factory in China rather than one in the United Kingdom. We need to be conscious of the need to be competitive in our energy generation.

We will need more on broadband, and clearly much more on housing, as many people have mentioned recently. I look forward to an investment-led recovery, with much more private sector investment coming in. We need to pay special attention to cheaper energy and to fix the railways, where we are spending too much and getting too little. It is not just a question of big investment programmes; it is a question of managing them better. Above all, we need to make sure that, as we implement the welfare reforms, everyone is better off and gets the benefits of tax cuts and higher wages.

[Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab)]

Like the right hon. Member for Wokingham (John Redwood), I congratulate the hon. Member for Louth and Horncastle (Victoria Atkins) on her maiden speech. She replaces the former Father of the House, who held the attention of the House whenever he spoke. I am sure she will follow in his footsteps and do that, too.

Presenting the Budget today, the Chancellor was smug, self-confident and arrogant. He told us that we were the fastest-growing economy in the world, then proceeded to tell us that we would be on a downward trend for the next year and the year after. That needs to be looked at carefully. He spoke about cutting the deficit. We were told before the 2010 election that this Government and this Chancellor would eliminate the deficit completely by this year, but he has not been able to do so. He says now that he will reduce it by 2020. He reminds me of a good councillor friend of mine, Councillor Barbara Dring, who says that such promises are like pie crust—meant to be broken. The Chancellor has been good at doing that.

The Chancellor spoke about the nation’s finances, but in his speech today, he did not recognise the one serious issue affecting us all—the elephant in the room: the current situation in Greece and what effect the next couple of days of negotiation will have. Negotiations have been going on for a long time and there is no way forward. It would have been right for the Chancellor to tell the people today what his response to that would be.

[John Redwood]

The Chancellor came to the House this week to make a statement on just that and was very clear. The good news from Britain’s point of view is that Greece is a very small part of the European economy and we are not very linked to it.

[Mr Mahmood]

I agree, but if the right hon. Gentleman is saying that there will be no effect on our financial institutions or on us as a nation, the people to whom he gives financial advice should have another look at that.

The Chancellor spoke about the wage freeze in the public sector for at least another four years. This is a real-terms reduction for those very important people who work in our services, particularly people in the national health service, and above all nurses. I have an interest to declare. Over the past four or five years, because of my personal health issues, they were at my service, supporting me through a very difficult time. When I was discharged, the duty nurse that day had worked for almost 11 hours, which she was not contracted to do, so that she could sort out the backlog that existed. For the Chancellor to keep those people at a 1% pay increase while he boasts about other things is a shame.

On apprenticeships and the proposed levy on large employers, if the Chancellor comes to my constituency, I will show him a brand-new centre set up by the Engineering Employers Federation, which I was fortunate enough to open. It has more than 330 full-time first-year students from members of the EEF in the west midlands, who are being properly trained. The issues relating to apprenticeships concern not only how we work with and support larger manufacturers, but how we deal with the smaller manufacturers—the people who have the skills. I know of a small company that is a world leader in submarine valves. It is a fantastic company, but it has had a huge problem trying to take new people on. It has had to keep people on past their retirement, so that they can hand down their skills to younger people. It does excellent work with Birmingham University. It is important for us to have that perspective when we talk about apprentices.

When we talk about apprenticeships in the engineering sector, the question is how companies afford the equipment that goes with that—lathes, millers, computer-controlled lathes and millers, and welding equipment, all of which is extremely costly. The EEF centre has obtained such equipment at huge cost because apprentices must be trained to use it if they are to be employed in the industry. We have had huge success with Jaguar Land Rover in Birmingham and the west midlands, but for us to supply the skills it needs, the Government must look at how we can support people who want to go back to real first-class engineering, which is what we should be engaged in.

The Chancellor has made a 40% cut in funding to adult colleges. We want people post-19 to be able to get apprenticeships, but colleges are having great difficulty operating with such a funding cut. The cut affects not just the post-19 age group, but the 16-to-19 group, because most specialist courses are run for both cohorts working together to provide a critical mass. Cutting the 19-plus funding affects 16 to 19-year-olds as well. Our colleges are at their wits’ end trying to meet those needs.

The Chancellor has made huge cuts to English for speakers of other languages provision. We have many people with the necessary skills, apart from spoken and written English. The more he cuts that provision, the more those people will stay on benefits, rather than working their way off benefits. Most of my colleges are proud to be working on giving people proper skills, but if the cuts continue, it will be difficult for them to do that.

The Chancellor announced that student grants are to be turned into loans. People in my constituency will be put off by more loans being imposed on them. What repayment do we get from those loans? It is all very well making such announcements, but the Chancellor has already had to sell the loan book to his friends. They bought it for a pittance before trying to recover some of the money owed. If a project is not working, we try to do something about it. That does not mean adding more to the loan book and selling it off to our friends, getting a better deal for them rather than for the people who need it and the universities.

A university in my constituency, Birmingham City University, decided unilaterally to move out of the constituency and seek a central location. We had a huge facility for the university, and we have had it for a long time. My predecessor, now Lord Rooker, formerly Jeff Rooker, attended that university, as did I, in engineering. [Interruption.] My hon. Friend the Member for Wolverhampton South West (Rob Marris) was also there. It is clearly a great seat of learning, as all these people were able to attend it. The chancellor unilaterally decided to up sticks and move to a different location at huge cost.

The changes to family tax credits will have a huge effect on my constituency and on people trying to make some sort of living by working. This Chancellor has succeeded in doing what his guru might have aspired to do. She took milk from the mouths of children. He has managed to take breakfast, lunch and dinner from the mouths of families and drive them to food banks. This is a Budget for a divided nation. It has given more to those who have more and taken from those who have less. It is a deplorable Budget, and I urge all fair-minded Members to vote against it.