Budget Resolutions and Economic Situation

Julian Knight Excerpts

Thursday 9th July 2015 Commons Chamber

[Jack Dromey (Birmingham, Erdington) (Lab)]

Yesterday, the Chancellor trumpeted one nation. If one nation means anything, it is that Britain cannot succeed through London and the south-east alone. Building on Labour’s great devolution legacy in Scotland, Wales and London, we are pleased to see the devolution agenda for England moving forward, but we in the west midlands were surprised that there was but a throwaway reference by the Chancellor yesterday to the midlands powerhouse. Little wonder that the Birmingham chambers of commerce accuse the Chancellor of hot air and say it is time that he backed the midlands engine.

[Julian Knight (Solihull) (Con)]

Does the hon. Gentleman acknowledge that the midlands engine and the devolution we are undertaking in this country are supposed to take a bottom-up approach, rather than a top-down approach? It is up to the authorities in the west midlands to come to the Chancellor with their proposals, rather than for the Chancellor to dictate to them.

[Jack Dromey]

On this issue, we are as one. We are working together in the west midlands to construct the midlands powerhouse and realise the full potential of the midlands. What was surprising yesterday was that the Chancellor waxed lyrical about the remarkable Greater Manchester, mentioned the northern powerhouse in considerable detail and referred to just about every other part of Britain, and at the end of his remarks made a throwaway reference to the midlands powerhouse. That has not gone down well in the midlands.

Crucially, at the next stages what the Chancellor cannot do is empower but impoverish. One of the great problems with this Government is that everything they do is characterised by a fundamental unfairness of approach. Some £700 million has been cut from the budget of Birmingham City Council—£2,000 for every household—yet in the Chancellor’s own constituency there has been an increase in spending power of 2.6%. Likewise, the West Midlands police have been treated unfairly. If they were treated fairly, they would be entitled to £43 million more—enough for 500 police officers back on the beat.

We will never be one nation while the Chancellor and the Government continue to demonise and divide, with their talk of shirkers or strivers, work or benefits. I was born in poverty—my father a navvy, my mother training to be a nurse; they worked hard to get on. I have always believed that those who can work should work, but I object to wicked caricatures of the sort we heard yesterday in relation to the young homeless—“they come out of school, they go on benefits, then they want to get a flat”.

Three years ago, I hosted in the House of Commons the Homeless Young People’s Parliament in Parliament—quintessentially middle England, middle Scotland, middle Wales young people, the best of Britain, who had ended up homeless, overwhelmingly through no fault of their own. Last Friday, I was at Orchard Village, which serves young homeless people in my constituency. It is substantially dependent on housing benefit for its income and now faces closure.

If we are to be one nation, the Chancellor cannot continue to play politics with the United Kingdom, posing one nation against the other. EVEL—if ever there was an accurate acronym, that is it.

As for the Tories being the party of working people, they introduced in the Budget a tax on aspiration, saying to working families in social housing, “If you get on, you have to pay much more or move out.” The party of working people? On Sunday trading, I agree with what was just said. One of Labour’s greatest achievements, the weekend, is now threatened by this Conservative Government, who would compel seven-day working, in reality forcing millions of retail workers, particularly women, to work on Sunday and putting at risk thousands of small stores all over the country.

The party of working people, with the so-called living wage? Yesterday, when the Chancellor spoke about this, he grinned like a Cheshire cat and the Secretary of State for Work and Pensions punched the air, as if England had scored the winning goal in the World cup. The living wage? Twelve years ago, I was a founder member of the drive for the living wage, working through the former Transport and General Workers Union, with the East London Citizens Organisation and London Citizens, to organise, for example, thousands of cleaners in Canary Wharf and the City of London and the first-ever strike in the history of the House of Commons to win the living wage. This is not the living wage or a “new contract” with the British people, as the Chancellor called it this morning; this is a con trick by a cunning Chancellor, who gives with one hand and takes away with the other.

In the west midlands, 56% of families are on tax credits and 300,000 children depend on tax credits. Yet a family with two children and one full-time earner on £20,000-plus now faces losing £2,000: for every £1 they get from a higher living wage, they will lose £2 in tax credits. What is the Government’s answer? They say, “Ah, the £9”. That is £9 in 2020, but they are cutting tax credits in the here and now.

--- Later in debate ---

[Julian Knight (Solihull) (Con)]

I congratulate all those who have made their maiden speeches today. I remember making mine only a few weeks ago. I was glad just to get it over with, to be frank.

What we heard in this place yesterday was one of the great set-piece Budgets—a resetting Budget—along the lines of Lord Howe’s in 1981, Lord Lawson’s in 1986 and, in a less positive way, Gordon Brown’s Budgets of the early 2000s, when he decided to do away with the careful fiscal management he inherited from my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) in favour of a massive expansion of the welfare state and the hyping up of supposed golden rules, which seemed to change according to his whim or to disguise unsupportable Government expenditure.

The Budget contained many measures that will be welcome in my constituency, in particular the extra money for the national health service. Solihull has an ageing population with particular health challenges, so that money will go a long way there. The higher personal allowance, which I will return to in detail, is a fantastic move for the population of Solihull, as it is a hard-working town. I am delighted to report that its unemployment rate is 1.6%. That is because it is the hard-working engine of the west midlands.

The Chancellor has effectively reset how the state interacts with the economy and the individual, subtly, cautiously and over time. In the Opposition debate on tax credits, I acknowledged the important role that tax credits play in many of my constituents’ finances. They help them to get over humps in the road in their lives and can be very helpful. I am pleased that the Chancellor recognised that, as I knew he would, and that the overwhelming majority of people who receive help through the tax credits system will continue to do so.

In the same debate, many of my hon. Friends made the point that tax credits were propping up low pay and effectively trapping many people in welfare dependency, and that many people on salaries far higher than the national average were receiving state help when, frankly, they should not be. Over the past decade or so, many of our fellow citizens have moved into a relationship with the state that, over the long term, is unhealthy for their career ambitions, business more widely and the nation’s finances.

The Chancellor has pressed the reset button on that situation. We will see a freeze in working-age benefits and a narrowing of the people who can claim tax credits. To ease the transition away from tax credits for some people, there is a raising of the personal allowances, which cuts out the middle man by letting people keep more of their own cash, rather than having to go through a complex tax credits system. There is an expansion of childcare provision; the introduction of the living wage, which will rise to £9 by 2020; and support for business, as part of this transfer, through lower corporation tax—something that was opposed by the Labour party in its manifesto—and the ongoing reduction in national insurance contributions for new employees.

The Government are moving from being a nanny who keeps individuals wedded and chained to a fiendishly complex system prone to substantial fraud and endemic overpayment to being a facilitator. Good Governments should be there to create the correct environment for individuals and businesses to flourish. If that is brought to fruition, it will mark the end of Brown economics, and not before time.

That is all big-picture stuff from the Chancellor, as we would expect, but I should like to say something about the smaller bits of the Budget, and the good news that we have received. I was delighted that he accepted Budget submissions from me and from my hon. Friend the Member for Plymouth, Sutton and Devonport (Oliver Colvile). We asked him to raise the rent-a-room scheme allowance, which had been languishing at just £4,250 a year since 1996. By raising it to £7,500, he has made up for nearly 20 years of inflation, and will help thousands of home owners who want to let a room to make ends meet, or even just to have some extra company at home. The measure should also increase the availability of rooms to rent in the private sector, which will be particularly helpful to young people who want to strike out on their own in the world.

Another welcome step was the decision to up the compensation for Equitable Life members by an estimated £80 million. There are many former members of Equitable Life in my constituency. It is a black mark on the Labour Government that they first allowed the development of a regulatory regime which effectively allowed the world’s oldest mutual to collapse, and then, when its administration was found wanting by the parliamentary ombudsman, wriggled like mad to avoid paying what was due to people who had seen their life savings largely disappear. When the country had the money with which to compensate the members of Equitable Life, the Labour party chose not to use it.

I believe that it is great credit to the Chancellor and to my hon. Friend the Economic Secretary to the Treasury that they have not forgotten about those wronged individuals, but—despite the global recession, and despite having inherited the worst public finances since the war—have sought to help. The compensation is not perfect by any stretch of the imagination, but the Government, like the coalition before them, are doing their best within the confines of the current fiscal position.

There are many other highlights in the Budget. The apprenticeship levy, for instance, will help to secure fairness in the apprenticeship system, and the best employers will be rewarded. Like my hon. Friend the Member for Torbay (Kevin Foster), I am no fan of trading on the Sabbath, but I welcome the Chancellor’s indication that it should be up to local mayors to set Sunday trading hours. Should we have an elected mayor in the “midlands engine”, I shall welcome the opportunity to lobby for a sensitive approach, along with my friends in local church groups. That is real devolution.

Finally, there will be a great deal of cheer over the freezing of fuel duty, which means that it is 18p lower than it would have been if Labour’s anti-motorist plans had been implemented.

That is what this Budget is all about. We are on the side of normal people who want to get their kids into work, keep more of their cash, and interact with the state in the right way. It is about a hand up, not a handout. The Budget sends a loud and clear message: we are the workers’ party now.