Kevan Jones
Main Page: Kevan Jones (Labour - North Durham)Department Debates - View all Kevan Jones's debates with the HM Treasury
Amendment of the Law
Kevan Jones Excerpts(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Sir Stuart Bell
I was much amused when statements were made about how the debt was reduced, how much we had to pay off and how much the Labour Government borrowed. In the month of February, the Government borrowed £11 billion when they should have borrowed £8 billion. It is perfectly correct that we have mixed up the structural deficit with the overall deficit, but public spending will continue to go up. There was a certain sleight of hand from the Chancellor when he made his Budget speech.
Mr Kevan Jones (North Durham) (Lab)
Does my hon. Friend agree that cutting public sector jobs has a direct effect on the private sector? I do not know whether he has seen the study modelling done by Durham university that shows that in the north-east, some 50,000 jobs will go because of public sector cuts, 20,000 of which will be in the private sector.
Sir Stuart Bell
I have seen that study. I have also seen the study by PricewaterhouseCoopers about the impact on the north-east of the various deficit reduction plans.
May I, without in the least way being sycophantic, congratulate the Leader of the Opposition? He made a short and precise speech but he hit every nail on the head that needed to be hit. Growth is down. Snow or no snow, we entered into zero growth in the last quarter. Where is growth going this year? It is at 1.7% for the year. How does that compare with Germany, where there is 3% growth?
Mr Kevan Jones
In 2009-10, the budget for the nine regional development agencies in the UK was £2.2 billion.
Sammy Wilson
That probably puts it all in perspective. The measure looks good in the Chancellor’s speech, but, when one looks at the resources that it releases, which in turn are supposed to increase the willingness of firms to invest and the productive potential of the economy, one sees just how miniscule it is, and we have to judge whether it will make a very great impact.
Mr Robert Syms (Poole) (Con)
I should like to draw Members’ attention to my declaration in the Register of Members’ Financial Interests in case I stray into the subject of property or something similar.
The situation at the end of the previous Government’s time in office was unprecedented in international terms. The way that they handled things in their last 18 months was not too bad. They went down to 0.5% interest rates, allowed the automatic stabilisers to come in, and allowed the pound to devalue, as we could because we still control our own monetary policy. Everything possible was done to adjust to the dire situation in the banking system.
To be less complimentary, the regulatory regime that allowed the banks to do some of the things that they did was set by the former Prime Minister when he was Chancellor by taking powers away from the Bank of England. That was a retrograde step, and I am glad that the current Government are reviewing it. Before we hit trouble, the deficit was 3%, whereas the German economy had a surplus of 3%. The difference that we can see today is that the Germans have a deficit of 5% or 6%, while we have one of nearer to 10%. That means that the adjustments we will have to make over the next four or five years will be much more difficult, and it will take longer to get there.
Mr Kevan Jones
I accept the hon. Gentleman’s point about bank regulation, but he has a very short memory, because I remember being in this House when the current Chancellor and Prime Minister were calling for more light-touch regulation of the financial industry, not for more regulation, as they seem to be doing now.
Mr Syms
It was nothing to do with light-touch regulation; in fact, we needed more competent regulation. The Financial Services Authority was not up to the job, and the Bank of England would have done a better one.
The key thing is that we now have a great imbalance in our economy. Over the long term, Britain has always tended to have public spending of about 40% of GDP, taxation of about 40% of GDP, and a national debt of about 40% of GDP. We have always managed to grow and export, and to be a fairly successful economy. We now have to yank public spending and the deficit back to those sorts of levels. As was pointed out earlier in the debate, even after five or six years, we will only be back down to where we were towards the end of the Labour Government when we had to go into deficit to deal with the difficult economic situation.
I think that the Government’s response is sensible. It is planned over five or six years, and is gradual. For all the talk of expenditure cuts, the expenditure cuts will be gradual over that period. The plan, as the Chancellor set out today, is for the economy to grow. That should generate more tax revenue. The difficulty, of course, is that we will have to raise taxation, as can be seen in the plans, to help balance the budget. I hope that that is more of a short term, rather than a medium to long term thing, because we need to build incentives back into the British economy.
Dame Anne Begg
Indeed, if the oil price goes up, the amount that the Chancellor gets will go up. These must at best be guesstimates. Therein lies the problem for the offshore industry. The North sea is a mature province, but there is still a lot of oil left. In fact, there are probably as many known oil reserves in the North sea today as there were in the 1970s, but they are much harder to reach and more challenging to get out of the ground. The one thing that the offshore oil and gas industry needs is stability—stability in what the Chancellor is going to do. The last time the tax revenues for the offshore industry were changed, by the last Labour Government, there was a slowdown in the industry for a good two years before it recovered. The industry complained about the unexpected nature of that change and the fact that it was not able to plan for it. This change comes into effect from 12 o’clock tonight, so it will come as a huge shock to the offshore sector that it will be affected.
Mr Kevan Jones
Does my hon. Friend recognise, given her expertise on the oil industry, that investment in exploration is long term? In some of the fields that she is talking about, planning and investment can take up to 10 years. A fluctuating oil price will make such decisions very difficult. That will have a direct impact on Tyneside and Teesside, which are strongly supported by the supply industry for North sea oil.
Dame Anne Begg
I could not agree more. In fact, I believe that 200 constituencies have 50 jobs or more that are directly related to the supply chain of the offshore industry. The change will come as a big shock out of the blue, and I do not think people are prepared for it.
As my hon. Friend suggests, in its long-term planning, the offshore sector tends to use an oil price of between $50 and $60 a barrel. In other words, it projects a stable oil price in its forward planning. That is clearly not the real situation, because sometimes the price dips below that level and sometimes, as at the moment, it goes up to $100 a barrel. The fluctuation of the oil price makes the sector’s long-term planning difficult, and the Chancellor has added another factor that will fluctuate, making the situation even less stable. To call it a fair fuel stabiliser is a complete misnomer.
Dame Anne Begg
I advocated a universal or citizens pension as a Government Member for many years, but one strong argument against such a pension is that many people are very attached to the contributory principle. That came out in the original discussions, when the Government of the day decided to reduce the state pension qualifying years down to 30 for both men and women.
Part of the problem in this country is that we have no means other than NI contributions by which to determine who should qualify for a state pension, because we do not keep residency records, which is how the judgment is made in, for instance, New Zealand. The problem in this country is more complex than it may seem.
The state pension age is about to go up to 66 for men and women by 2020. This was meant to be a Budget for growth, but the very first thing the Chancellor spoke of was the downgrading of the growth figures. I am worried about where all the jobs will come from given the increased number of people in the workplace. The numbers in the work force are expected to increase because of the new work obligations on jobseeker’s allowance claimants; because lone parents will be expected to look for work when their youngest child is five; because 30% of incapacity benefit claimants will be assessed as fully fit for work and expected to go into the workplace; and because another 30% of such claimants will end up in the work-related activity group of employment and support allowance. Huge numbers of people are expected to go into the workplace. It is difficult to get figures on how many more people will be looking for work because the Department for Work and Pensions could not give them to us, but on top of those, the raising of the state pension age means that even more people will be looking for work.
Mr Kevan Jones
The Chancellor trumpeted the extension of support for mortgage interest, but has my hon. Friend seen page 42 of the Red Book, which says that that will continue for 2012-13, but decrease in 2013-14 to £15 million and then to zero in 2014-15?
Dame Anne Begg
I was going to talk about housing, but I could speak for another three hours if I go down that route, so if my hon. Friend will forgive me, I shall resist.
Will older people who have not reached state pension age be in work or not? At the moment, only 30% of men are still in work aged 65—not only because of early retirement and other things, but because people lose their jobs towards the end of their working lives—but they will be expected to work another year. Only 47% of women aged 60 are still in work, but they will be expected to work for another six years. Those people will not necessarily get anything under the universal credit, because they will probably have saved a nice little nest egg—a nest egg of just over £16,000—to see them through retirement. They will not get jobseeker’s allowance—or rather, they might get it for six months, but that is all they will get through the contributory principle. If they have fallen out of work because of ill health, the most that they might get is a year of employment and support allowance before then getting nothing. Those are big figures, and that is where a lot of the welfare reform savings in the Red Book will come from.
Indeed, it is perhaps worth alerting the House to the fact that the big savings in welfare reform do not come from getting “shirkers” back into work; they come from taking money from those who would normally have got contributory incapacity benefit, but will now get only contributory employment and support allowance for a year. That means that around £80 a week will come out of those people’s incomes. They will get nothing else if they live in a household with someone in work or with any other source of income, or if they have a small pension or savings of more £16,000. Therefore, there will be a new group of people struggling, and they will not be old-age pensioners; they will be pre-old-age pensioners, as it were. They are people who have fallen out of work, but not been able to work to 66 and get their state pension. They have been left with little—in fact, in some cases nothing—from the safety net that we think the welfare state is there to provide.
There is a lot more that I could say; indeed, I am sorry that I have spoken for longer than I intended. Over the coming days I will go through Red Book in a lot more detail than I have managed to today. However, from what I have seen already, there is a great deal for people to be concerned about in what the Chancellor has announced today.
Stephen Williams
My hon. Friend is of course referring to the derogation from the European Commission that has been applied for in order to ensure that the coalition Government’s Budget promise is deliverable under Community law, unlike the undeliverable measure to reduce VAT proposed by Labour.
Fuel duty is, however, a blunt instrument for taxing the motorist. I welcome the measures put forward today to stabilise the prices in between the oil companies and the consumer, but in the medium term, we must look for a much better way of developing a market mechanism for taxing the use of our roads.
A further issue of fairness relates to tax avoidance. Whether practised by large companies or by rich individuals, tax avoidance is an affront to fairness, when ordinary people around the country are going out to work, paying their taxes on time and making their contribution. It is an affront to them that some companies are using the tax system unfairly to avoid tax. Some rich people in society—including sportsmen whom people admire—are also using those schemes. It is therefore right that the Government should take further measures today to close down some of those avoidance schemes and introduce an increased levy on non-domiciled individuals.
Right across the age scale, from pensioners who will benefit from the triple lock, guaranteeing that their pension will go up each year, to children from the poorest families, whose schools will receive the pupil premium, this Government are delivering for all sectors of society. These are fair measures that meet the concerns of ordinary Britons, the people who, according to the term that my party leader, the Deputy Prime Minister, has recently injected into the political debate, wake up to alarm clock Britain. [Laughter.] I knew people would like that, but those are the ordinary families around the country whom all hon. Members represent, and we should not laugh. They are the people who get up and go out to work. They work hard, they want their children to do well and they want their parents to be secure in old age.
Another major element of the Budget, along with fairness, is the plan for growth in the green book that has been launched today. It is important that the plan should be regionally balanced. One of the unfortunate legacies of the last Labour Government was the overheated economy in London and the south-east of England, and the credit bubble which, as we know, eventually burst. We cannot allow that to happen again. This Government are determined that growth should be shared fairly right across the nations and regions of the United Kingdom. That is why I particularly welcome the announcement today of 21 enterprise zones and I look forward tomorrow to hearing confirmation from the Prime Minister and the Deputy Prime Minister of where they will be based. I hope that one of them will be in the Greater Bristol local enterprise partnership.
Mr Kevan Jones
I suggest that the hon. Gentleman read the Red Book. If he looks at the figures for the local enterprise zones, he will see that they add up to about £900,000 for each one. That needs to be compared with the funding for the regional development agencies in the last year of the Labour Government, which was more than £2 billion.
Stephen Williams
We will have to wait and see the detail on the local enterprise zones. What we know from the detail we have had today is that there will be a year’s tax holiday from business rates for people locating in those zones. They will also be equipped with superfast broadband and, I am sure, other measures of support and advice. This issue is bound up with other announcements already made this week about the technology innovation centres and the Manufacturing Advisory Service. There is a whole package of measures that I suggest the hon. Gentleman looks at.
Mr David Amess (Southend West) (Con)
It is an honour and privilege to follow any maiden speech, but it is particularly so in this case. I know I speak for the whole House when I congratulate the hon. Member for Barnsley Central (Dan Jarvis) on a magnificent performance. He spoke with command, it was a measured speech and in every sense—whether it was the humorous side or the remarks he made about his predecessors—it was an absolute example of how an hon. Member should make a maiden speech. When I made my maiden speech at the end of 1983, it was an ordeal not only for me but for the House that had to listen to me.
The hon. Gentleman performed splendidly. I also held his predecessor in high regard as a parliamentarian and I much regret the way he left this House. Colleagues listening to the hon. Gentleman’s speech will have come to the conclusion that he brings unique experience to this place that will greatly enrich our deliberations in the future. I certainly would not willingly jump out of an aeroplane, you would have to push me and that would be the end of it. I speak for the whole House—I do not think we get much Conservative support in Barnsley Central—when I wish him a long and successful career.
Turning to the Budget, there is no doubt that this has been the most difficult and gloomy time I have known for people in business—until today. I congratulate my right hon. Friend the Chancellor on his well-crafted and clever Budget, which will cheer up the country. It has already cheered up Government Members and, as colleagues will have observed from the general atmosphere among Opposition Members three or four hours ago, it has absolutely cheesed off the Opposition. I am getting sick to death with Members on the Conservative and, dare I say, Liberal Benches being castigated for the absolute mess that the country is in. One party alone is responsible for that—Labour. It is because of the Labour party that we are facing debt interest of £120 million a day and because of the Labour party that we have the biggest structural debt in the G7.
I want to share with colleagues who were elected last year what the past 13 years have been like. As hon. Members will know, the last Prime Minister was previously the Chancellor of the Exchequer. I had the experience of listening to 10 of his Budgets, which he greatly enjoyed delivering. He used to come to the Dispatch Box and two thirds of the way through his speech he would wind Conservative Members up. Then he would make what he thought would be the headline-grabbing news item that would cheer everyone up. But then we would all go away and people would read the Red Book and within a few weeks we would find out that what he had told us was not in any sense accurate. So I congratulate the Chancellor on the new Red Book, because unlike the previous one it is not big enough to use as a doorstop, which is all that one was fit for.
Labour Members seem to think that Government Members relish making cuts.
Mr Amess
We do not, and I find it hypocritical that although Labour Members used to speak about cuts before the general election—I can only talk about those who were here before the election—we no longer hear about the cuts they were going to make. It is as though the Conservatives and Liberals rejoice in making cuts. If anyone wants to know why the country is in a mess, I can tell them it is because the Labour party took away regulation from the Bank of England and gave it to an organisation that was not fit for purpose. Also, as one of my colleagues said during Prime Minister’s questions, Labour stupidly sold off our gold reserves.
I will go further: in all his Budgets the then Chancellor of the Exchequer would make announcements about spending in terms not of millions but billions, and we in opposition used to wonder how it could be funded. We now know that it could not be funded and that we were spending money we never had. I will never forgive Tony Blair—[Interruption.] Hon. Members might huff and puff, but I am entitled to say this because it was Tony Blair who got me to vote for the war in Iraq and I will never forgive him for having told us a pack of lies at the Dispatch Box.
Mr Amess
I hope that Tony Blair will correct what I have said when he again gives evidence, but I blame him for the way he completely misled the country on any number of issues. Not the least part of his lasting legacy is the fact that he destroyed the House of Commons, because this is certainly not the place that I entered in 1983. I further blame the last Prime Minister, who was Chancellor of the Exchequer. New Labour Members come into the Chamber and castigate Government Members for what is going on; what on earth were they standing for in the general election campaign in May?
Mr Kevan Jones
Having listened to the hon. Gentleman’s speech, I wish he was in an aeroplane so that we could push him out. He feels that he has been duped on Iraq and on spending, but why, then, did he and the leader of his party say right up to 2008, including in a speech by the leader of his party in July 2008 to the CBI conference, that the Conservatives would match the Labour Government’s spending?
Stewart Hosie (Dundee East) (SNP)
I would love to say that it was a pleasure to follow the hon. Member for Southend West (Mr Amess), but instead I will restrict myself to saying that I agree with him entirely that the hon. Member for Barnsley Central (Dan Jarvis) made a very good maiden speech indeed. It is certainly a pleasure to follow him, if not the hon. Member for Southend West. [Interruption.] The Economic Secretary to the Treasury says from a sedentary position that that is harsh. It is only a little harsh.
The Budget was billed as a Budget for growth, and by goodness, we need it, so let us test that. In his statement and in the Red Book the Chancellor gave us a great deal of information. Our national debt for 2010-11 was expected last year to be £932 billion. It is now forecast to be £909 billion for that year. It was expected to be £1.6 trillion next year, but it is coming in at £1.46 trillion. The deficit was expected to be £149 billion for last year. That seems to be coming in at £146 billion. But the figure for 2011-12 was forecast to be £116 billion and that is now up to £122 billion, if the numbers are to be believed. That tells us that the Chancellor may have had a little room for manoeuvre, but growth is essential if the figures are to remain on target and if we are to have any chance at all of protecting jobs and services.
I welcome the direction of travel on corporation tax but, because the Budget was so thin and fiscally neutral—the entire Budget barely shifted £10 million in total—it effectively confirms that the cuts, which were forecast last year at £99 billion and revised down to £81 billion in the comprehensive spending review, are still there. It confirms that £29 billion of tax rises announced last year are effectively still there. It confirms the swingeing benefit cuts of £11 billion announced last year and confirmed in the CSR. It also confirms the changes in some of the pension component, particularly the RPI-CPI switch, which will yield the Exchequer £1.2 billion this year, rising to nearly £6 billion in 2014-15.
On pensions, the Chancellor spoke about a single-tier pension. That is similar to the citizens pension concept that many of us support, but to deliver that with savings predicated on changing not just the state pension, but all public sector pensions, which are contracted and paid into, in some cases, for many, many years, cannot be right. He also said in relation to pensions that he would accept all the Hutton recommendations. It may well be that all of us have to save a little more a little longer for the pension that we expect at the end, but let the Government be in no doubt that a 3% hike in pension contributions now will put some of our constituents—indeed, many of our constituents—in serious financial difficulties in the short term. I hope that the implementation of that is carefully considered.
On PFI—the Labour party’s worst legacy—the figures are truly frightening. The value of the capital projects is some £56 billion. The cost of the outstanding repayment liability is £214 billion. The average repayment each year until 2047-48 will be £6 billion, and that will peak at more than £9 billion in 2017-18. The Chancellor said nothing about that, or about how we would replace the PFI system. Throughout his speech he spoke of encouraging private investment, and some of that is to be welcomed, but he said nothing about how we would replace PFI by means of public capital investment. We know how vital that is, given that the economic impact multiplier for capital expenditure is 1:1. It is the most significant thing we can invest in and, more dangerously, the worse possible thing we can cut.
The Chancellor had a great deal to say about oil, which is not surprising given that the forecast for 2011-12 shows that the North sea will generate an additional £4 billion. He is right to take immediate action because households and businesses are struggling. The price of a gallon of petrol in rural Scotland is routinely £6.50, and we know that in the past four or five weeks the price increase in diesel has added £1,000 to the annual cost of running a truck. That is unsustainable and inflationary. I welcome the 1p cut and the fact that the proposed increase has been stopped, but the Government said that they had introduced a stabiliser, and I have re-read his speech any number of times. The stabiliser seems to me to suggest that when the barrel price increases it is merely the escalator that is cancelled, leaving the indexed rise in place. I always understood that the stabiliser would reduce the duty level when the price rose so that we could temper out some of spikes in rising prices. By only including the escalator, we do not have a stabiliser at all and will still see many of the spikes that we have been trying to smooth out to bring some stability back into the economy, particularly in the haulage sector.
The Chancellor said surprisingly little about the banks, so I will go back to what he said in February. He announced that the banks would lend more, especially to small businesses, pay more taxes, bring responsibility and restraint to the sector, pay less in bonuses, be more transparent and make a greater contribution to the regional economy. That is all fine, but in order to thrive and grow companies need access to affordable and flexible funding, and they need it now. That remains a huge hurdle for many of our businesses.
The lack of new lending in particular is continuing to have an adverse impact on individual companies as well as on the economy as a whole. Business investment, as the Minister knows, will remain some 20% below pre-recession levels. Indeed, there was a 0.5% fall in gross fixed capital formation in the last quarter of 2010, which is extremely worrying, given that this is supposed to be a business growth and export-driven recovery.
All the evidence I have seen highlights the importance of expanding sustainable lending. Although we welcome the lending commitments agreed between the Government and the banks, it is important to ensure that they move quickly on the issue. I would have thought that the Chancellor had much more to say today about how the banking community would increase even gross lending to businesses across the country. Instead, although he did increase enterprise investment scheme limits to encourage private investment, which I welcome, he said nothing about bank lending. It is the retail banks on the high street that most of our small businesses depend upon for both capital and cash flow.
The two key issues of oil and access to finance are not just about economic recovery, but about fairness, as is alcohol duty, and there were a few changes on that today. However, the Government brought forward no measure whatsoever to tax alcoholic drinks by alcohol content. Whisky is still penalised and we still have the ludicrous situation where 4% beer is taxed more heavily than 7.5% cider, which does nothing to promote public health or address the wider social and economic consequences of excessive drinking. Picking up the tab for those costs is estimated to equate to a tax of some £3.5 billion in Scotland alone. I am surprised that the Chancellor did not use the Budget to take measures to deal with that problem.
There are also huge dangers in the Budget, as it confirms the cut to the Scottish budget and threatens recovery there. I am sure that the whole House will welcome the recent reduction in unemployment. The figures for March show that unemployment in Scotland has fallen by 16,000 and employment has risen by 8,000, the eighth consecutive reported rise in employment. That is all good news, and we have to drive it forward, but cutting the Scottish budget, particularly £800 million from the capital budget, will have a huge impact on the Scottish Parliament’s ability to drive forward many of the initiatives that were making a difference as we came out of the recession.
Given the economic backdrop, particularly the fourth quarter figures for the whole UK and the need to continue to support growth, the Scottish Government and, indeed, the UK Government need a Budget that supports clear, targeted resources. Given also that the Chancellor had some flexibility, I am surprised that he did not offer up a targeted measure to increase capital expenditure, because it has the most significant impact of any public spending.
What the Chancellor did talk about was enterprise zones, of course, and we certainly welcome those as a concept. They could be used in Moray, for example, given the closure of RAF Kinloss, but the Budget offered little detail beyond suggesting some business rate reductions and streamlined planning measures, both of which the Chancellor rightly said are devolved. For enterprise zones to work properly, they should revert to the old form, which included the significant use of capital resources, but, given that there is only £80 million in four years’ time, or £4 million per site, much of which I suspect will be used to offset business rates for local authorities, it strikes me as inconceivable that the Government have planned and prepared for the significant use of capital allowances to deliver their potential.
Mr Kevan Jones
The amount is actually less than that to which the hon. Gentleman refers, because, although page 42 of the Red Book cites £80 million in year four, over the period, if we spread the amount across the 21 proposed enterprise zones, we find that it works out at less than £1 million per zone.
Joseph Johnson (Orpington) (Con)
It is an honour to follow in the slipstream of the new Member for Barnsley Central (Dan Jarvis), who has executed an elegant parachute jump into the Chamber. His forceful and powerful speech was a reminder of how important it is, at a time when the country is making ever greater demands on its armed forces, that we hear the voices of our servicemen and women from all parts of the Chamber.
Thus far we have touched several times on the critical role that the bond markets are playing in framing the budgetary policy of this coalition Government. The hon. Member for Middlesbrough (Sir Stuart Bell), who is no longer in the Chamber, asked when it was that bond markets acquired this pivotal role in our national economic policy making. If I may venture an answer, I think that the views of rating agencies became impossible to ignore when towards the middle of the previous decade—before the onset of the financial crisis—the British Government
“lost control of public spending”
in three key Government Departments: Health, Education and Defence. Those are not my words or views but those of Sir Nicholas Macpherson, the permanent secretary of Her Majesty’s Treasury, as expressed in a hearing of the Public Accounts Committee not so long ago; they are available in the Committee report if people wish to have a look.
It is also important for the hon. Member for Middlesbrough to realise that we live in a globalised financial market, and if one cannot fund one’s borrowing requirements from captive domestic sources, inevitably one is forced upon the mercies of the international capital markets, and that is exactly where we find ourselves today.
Mr Kevan Jones
I know that the Conservatives are peddling the line that we are in hock to foreign banks, but does the hon. Gentleman not realise that only about 35% of our gilts and debts are held abroad? Greece is always held up as the big pariah, and its figure is nearly 70%. The hon. Gentleman’s argument is frankly complete nonsense.
Joseph Johnson
I thank the hon. Gentleman for that elegantly expressed critique. It is a significant proportion of our borrowing. It is not the totality, and I never said that it was. However, if our marginal investor, whom we need to supply that additional pound of borrowing, is setting the price for our borrowing, that determines the rate at which we finance ourselves. It is as simple as that. That is straightforward marginal pricing through supply and demand.
Joseph Johnson
No, I will carry on for a little.
In my view, it is only thanks to the resolve and determination of this Government that we have sufficient credibility with the bond markets to have delivered a Budget for growth. The Budget includes an acceleration of the plans to cut corporation tax, which will give a much-needed boost to Britain’s international competitiveness. I am particularly pleased by that because at a time when countries need to compete ever more aggressively to attract highly skilled labour, the UK is increasingly being seen not just as a high-tax economy, but as one with a highly complex and unwieldy tax system. The World Economic Forum’s global competitiveness report for 2011 ranked the UK tax regime the 95th most competitive out of 135 countries—almost at the bottom of the world rankings. That sends out a terrible signal to global business.
The UK tax regime was once viewed as an asset and I am glad that the Government are proceeding with plans to make it an asset once again. I fully support the Chancellor’s plans to give Britain the most competitive business tax regime of any major western economy, and to reverse our slide down the global competitiveness rankings. Already, the coalition Government have reversed planned increases in payroll taxes and lowered small business rates. As we heard from the Chancellor this afternoon, they will accelerate reductions in corporation tax so that by 2014, the rate falls to 23%—the lowest ever rate in this country and the lowest in the G7. That is something that we should celebrate if we are serious about enterprise and entrepreneurialism in this country.
I also welcome the Chancellor’s decision to analyse closely whether the top rate of tax is yield positive or negative for the British economy. It is worth considering whether it is deterring investment, thereby losing us more revenue than it is bringing in. A more competitive, simpler and more stable tax regime is an essential precondition for growth and will ultimately be better for everybody in this country, rich and poor alike.
When countries that had public finances in a comparable state to ours last May are still fighting off the terrible spectre of sovereign debt default, it would be terrible folly to slow the pace of what is widely regarded as a necessary fiscal consolidation. Our policies are under intense scrutiny by the international bond markets, to which we are paying £120 million in interest daily. We cannot afford for our borrowing costs to rise, as they have elsewhere. We are paying 3.6% in the gilt markets on our staggering public debt. Other countries are paying rates closer to 8% or 9%, and Greece is paying a staggering 12.6%. We simply cannot afford to be complacent, as the Governor of the Bank of England made clear in a recent hearing of the Treasury Committee, at which he stated firmly that UK gilt rates would rise by three percentage points if we backtracked from the course of fiscal consolidation that we have outlined.
Mr Jones
I wish the hon. Gentleman would do some homework before he makes accusations, and not just swallow the central office lines on such things. He does not tell the House that less than 20% of our debt needs to be repaid in the next three years, whereas Greece and other countries need to repay 36% or 37% of their debt in the next three years. The idea that we have an instant crisis is wrong. Can he tell me when a UK Government have ever defaulted on a gilt payment?
Joseph Johnson
There are problems when a country has a stock of debt as massive as ours. Even with the Government’s plans for fiscal consolidation, it will not start declining for some years to come. Under the Labour Government our stock of debt would have peaked at about 80% of gross domestic product, but under the current Government’s plans it will peak somewhere below 70%—69%, I think I recall. [Hon. Members: “71%.”] Either 69% or 71%. Such a massive stock of debt means that every year, we have to refinance several hundred billion pounds of Government debt. Even if it is not all the debt, that is still a very substantial amount of money.
Joseph Johnson
That is an excellent point.
As my right hon. Friend the Member for Wokingham (Mr Redwood) said earlier, Portugal’s position is particularly precarious at the moment because opposition parties there, much like here, have refused to back the austerity measures needed to help the country avoid a bail-out. That could force Portugal further down the international bail-out route that was first trodden by Greece last spring and then by Ireland at the end of last year. Portugal’s 10-year Government bond yields rose comfortably above 8% yesterday, for the first time since the start of the crisis, reflecting plunging market confidence in the resolve of that country’s political class. That cannot be said of the occupants of Nos. 10 and 11 Downing street.
Mr Kevan Jones
The hon. Gentleman uses Greece, but my hon. Friend the Member for Rhondda (Chris Bryant) makes a very good point: we must look at countries individually. Our economy is larger than Portugal’s or Greece’s and completely different in other ways. In addition, countries such as those have a tradition of being unable to implement fiscal reductions, unlike ours. The basic, simple point is this: £5,000 is a lot to owe for someone earning £10,000, but it is a completely different thing for the hon. Member for Richmond Park (Zac Goldsmith) or other such people to owe that much.
Richard Harrington
The hon. Lady and I were at university at broadly the same time, so we were very privileged. We could debate tuition fees for hours, but no matter what one’s arguments on that, the new regime has not changed the current situation and we are, thus, dealing with Labour’s policy on tuition fees at the moment. I would be happy to debate tuition fees with her on another occasion, but the real issue is that we have young people and older people who are unemployed, and we have vacancies in jobs that people will not go into. The Government’s efforts on work experience for young people—today’s announcement on that was tremendous—and on expanding the apprenticeships scheme are very important, as are the technical universities. I commend those efforts because we must have a work force who have the right skills. That is not solely about graduates; it is also about people who are leaving school and are doing apprenticeships and further education courses. What the Government are doing to help will change the availability of staff.
Richard Harrington
No, I must make progress.
I normally agree with everything said by my right hon. Friend the Member for Wokingham (Mr Redwood), who is not in his place, and one might think that, as a Conservative Member, I would have an overwhelming interest in bureaucracy, labour laws, red tape and obstacles to business and that dealing with those things would be my top priority. However, important though they are, I think that they are secondary to the macro-economic factors—they are secondary to stability and the feeling of confidence. Germany is a classic example of that, because despite its labour laws and the fact that it has lots of regulation, manufacturing industry works well there. So I am very pleased that we are concentrating on the other issues.
I am keeping in mind your earlier comments, Mr Deputy Speaker, but I just wish to remind hon. Members that Watford is an average kind of constituency and so has 3,000 businesses, with eight being roughly the average number of people employed in them—these are predominantly small businesses. I believe that this Budget will help the long-term confidence for them, despite short-term growth forecasts, and so it is a Budget very much for the small business. It is also a Budget for the larger business, given the corporation tax measures. However, more importantly, it is a Budget for ordinary people and for their prospects. I believe that it is the best Budget that we could have, given the mess that the Government were left.
Rachel Reeves
We would like to vote, for example, on the bank bonus levy and other components of the Budget. My right hon. Friend the Member for Doncaster North (Edward Miliband) set out today that we will consider areas of growth in “The Plan for Growth” green book. There are areas where we want to work with the Government but also areas where we disagree with what they are doing.
Given the warnings I have mentioned, it is hardly surprising that the independent OBR has today downgraded its growth forecast for 2011 to 1.7% and has revised growth for next year to 2.5%. Let us put that in context. Before the Chancellor’s first Budget last year, the OBR predicted growth in 2011 of 2.6%. That forecast has now been downgraded three times—to 2.3%, 2.1% and today to 1.7%. Every time the Chancellor gets to the Dispatch Box, the OBR has to downgrade its growth forecasts.
The Government will say that the only way to get growth back on track is to reduce the deficit, but we have also seen today that the OBR’s borrowing forecast is expected to be £44.5 billion higher over this Parliament as a result of lower growth and higher unemployment. Despite today’s opportunity to think again, however, the Chancellor will still not accept that plan A is not going to plan.
Although the Chancellor has no plan for growth, his implicit plan B, I think, was looser monetary policy, yet today’s Monetary Policy Committee minutes show a further split over whether to increase rates and yesterday’s inflation data show more pressure for a rate rise. Plan B is looking as forlorn as plan A, with householders likely to see a mortgage rate rise by the summer.
We have heard many times today that the Government cannot change course, but that is a fallacy. Jonathan Portes, the new director of the National Institute of Economic and Social Research, recently said that that intransigence
“relies on an odd view of market psychology, one that says markets have more confidence in governments that never adjust policy, even when it is sensible…history suggests the opposite: that the real hit to credibility comes from sticking to unsustainable policies”.
He is right. Now is the time—more than ever—for the Government to rethink their plan, which is sapping jobs and growth out of the economy.
We need to begin to build the Britain of the future, because confidence in UK plc requires a belief that we have a competitive economy that productively employs its resources, draws on our strengths across the sectors and regions and invests in science, skills, technology and infrastructure. Today’s Budget, however, does nothing to foster investment or hope. Although I welcome “The Plan for Growth”, which has been published today, and the announcements to relieve us of a further increase in fuel prices and to provide help for first-time buyers, the Chancellor could and should have done more.
Most of all, although the Chancellor has said repeatedly that he will be tough on the banks, page 103 of the Red Book shows that the bank bonus tax brought in £3.5 billion in 2010 whereas the bank levy will bring in just £1.9 billion this year. There is no guarantee that the banks will lend any more to small businesses because the Government agreed gross lending targets and no net lending targets. No wonder the Treasury spokesperson for the Liberal Democrats in the Lords, Lord Oakeshott, resigned, saying that if this was tough action, his name was Bob Diamond. The Government have washed their hands of any responsibility to help small businesses, which are being hit hard by the banks’ actions.
There are other areas where the Chancellor could have acted today. We need a plan for green jobs and there is still the potential for Britain to be a world leader, as my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) pointed out earlier, in the green technologies of the future, but the market requires certainty and we are losing the initiative to countries that are willing to provide it. We need action, not just words, on the green investment bank, yet today we found out that it will not be fully operational until 2015.
We need regional economic strategies. The regional growth fund is estimated to be 10 times over-subscribed, and with a two-thirds cut to regional economic investment, cities and towns across Britain are missing out on opportunities to grow and diversify their economies. We risk another overheating in London and the south-east while the potential powerhouses of the north of England are being left behind. Although I welcome the enterprise zones, the evidence from the 1980s shows that such approaches move, rather than create, jobs. Of course, the funding for enterprise zones is a fraction of what the regional development agencies had to spend.
Mr Kevan Jones
Does my hon. Friend agree that because the enterprise zones are being imposed on regions, unlike in London where the Mayor will decide where they are, entire areas of the north-east such as Northumberland and Durham will be completely excluded from them and the little help they will bring?
Rachel Reeves
I do agree. Of course, only half the plans were announced today, which was disappointing.
We need an approach to business taxation that fosters growth. Although the Government have trumpeted the cut in corporation tax, it has so far been funded at the expense of investment and manufacturing allowances, so while big businesses have benefited from a tax cut, start-up and investment-intensive firms have seen their taxes rise. If we are to create the jobs of the future, we need today’s entrepreneurs to innovate and that is where the limited funds should be targeted.
We also need greater investment in skills and education. Last year, 8 million people graduated from universities in China and India. No other country is cutting investment in universities, reducing the teaching grant by 80% and cancelling partnerships between business and universities, but that is what the Government are doing.
Last week, we heard that the youth unemployment figure is approaching 1 million and it beggars belief that the future jobs fund is closing its doors in the same month that youth unemployment has risen yet again. One in five young people—more in my constituency—now claims unemployment benefit. Today’s unemployment figures are likely to rise further and today’s Budget is bad news for young people up and down the country.
The public recognise the need for austerity, but they also want to know that the Government have learnt lessons from the crisis and are determined to build a fairer and more sustainable economic future. Britain could be a world leader in the jobs, technologies and industries of the future but only if the Government support growth. Today was the Chancellor’s opportunity to show that he understands the needs of businesses and families, but the OBR’s verdict was to downgrade growth for the third time in 2011 and for next year as well. The Government have ignored the wake-up calls. This Budget is a missed opportunity and I urge the Chancellor and his colleagues to think again about what is really needed to ensure that we emerge from this recession with a stronger, fairer economy for everyone in the country.
Mr Kevan Jones (North Durham) (Lab)
I was going to say that it was a pleasure to follow the hon. Member for Peterborough (Mr Jackson), but we have heard a succession of speeches from Government Members that were not only economically illiterate, but stuck to the rhetoric pumped out during the general election. They seem unable to get away from that rhetoric even when the reality of what this country is facing hits them. We heard a rant from the hon. Member for Southend West (Mr Amess) and, frankly, a very strange speech from the hon. Member for Orpington (Joseph Johnson), who clearly had read something about the gilt market but did not quite understand how it works.
I congratulate my hon. Friend the Member for Barnsley Central (Dan Jarvis) on an excellent maiden speech. I think he will be a great asset to the House. He is a man of great courage in both his private and personal life and in the service of this country. I look forward to many more contributions of the standard he gave today.
I would like to focus on two issues: the lack of a policy for growth in the Budget and how that will not affect positively the economy of the north-east of England. Growth figures for the last quarter of 2010 show that the economy contracted by 0.6%, as was mentioned by my hon. Friend the Member for Leeds West (Rachel Reeves). The Government blamed snow for that, but she eloquently pointed out some great examples of economies that grew despite having weather that was far worse than it was in this country.
On top of that, last week we saw a 17-year high in unemployment, set against a continuing fall in house prices and an increase in inflation to 4.4%. It would not take an astrologer, as was mentioned earlier, or a genius to work out that the OBR was going to have to downgrade its growth forecast today. Initially, it said that growth would be 2.6%; then, that it would be 2.1%; and today, that it will be 1.7%. The lack of growth is the main risk to our economy, and let us be honest, the Budget was spun so much that we could have read or predicted most of it before the Chancellor even stood up at the Dispatch Box today to announce it.
The Government also say that the key thing they have to do is to reduce borrowing, but borrowing is now going up, so even by their standards the economic pill is clearly not working. What is happening now is both risky and dangerous to the UK economy, and, although history cannot be repeated precisely, we need to look back, because one of the key lessons we have learned from the 1920s and ’30s is that recovery from large financial crises is delicate, slow and stuttering. Now, as a precise result of this Government’s policies since May, growth is down and unemployment, borrowing and inflation are up.
Rachel Reeves
Does my hon. Friend agree with me and the chief economist of the International Monetary Fund, Olivier Blanchard, who says:
“Unless advanced countries can count on stronger private demand, both domestic and foreign, they will find it difficult to achieve fiscal consolidation”?
Mr Jones
Yes. That is the entire flaw in the Government’s policy: the idea that they can cut public expenditure as deeply and savagely as they are going to, and that somehow jobs will be created in the private sector—something that will just not happen. It might happen in parts of the economy, but there is certainly no indication that it will happen in my region. In fact, the situation is even worse, because Durham university’s model shows that taking out 20% of the public services will lead to 50,000 jobs going in the north-east, with 20,000 of them actually in the private sector. Replacing those jobs, in addition to the 30,000 in the public sector, is going to be very difficult.
Sammy Wilson
Does the hon. Gentleman accept that, if the growth figures are wrong, the impact will be magnified and multiplied the further one moves away from the south-east of England? The impact on regions of the United Kingdom will be much more severe if the Chancellor has got it wrong.
Mr Jones
The hon. Gentleman makes a very good point, but do the Conservatives care? No, I do not think they do. We saw that in the 1980s and early 1990s in the north-east of England. His constituents will face similar problems to constituents in the north-east, given the contraction of public sector jobs, which will have a direct impact on the private sector. Trying to attract business and growth to those areas will be very difficult, and I fear that we could have a two-speed Britain: a reasonably prosperous south-east of England, but stagnant or even declining regions, such as the north-east and Northern Ireland. Does the Conservative party care about that? No, I do not think it does.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
How does the hon. Gentleman deal with the fact that, even with Labour’s slower rate of deficit reduction, he could not have avoided a significant decrease in the number of public sector jobs to meet his party’s own projections of how it would reduce the deficit?
Mr Jones
I find that hard to stomach, coming from the right hon. Gentleman, because he is giving succour to the proposals before us, which could damage the north-east economy more severely than even those in Thatcher’s day. He is looking both ways, as a Liberal saying one thing in the region, and then coming here and supporting and voting for a Conservative Government who are putting the proposals forward. [Interruption.] I will tell him exactly why. What we would not have done is put forward his and his party’s ludicrous proposal to abolish the regional development agency, One North East.
The right hon. Gentleman now has to defend his ludicrous policy on local enterprise partnerships, which I shall come to later. He struggled to get re-elected this time; I doubt whether the voters of Berwick will re-elect him if he stands next time. It is important to remember that none of this could have happened without the Liberal Democrats blindly going along and supporting those savage cuts, which will have a terrible effect on a region I know he actually cares deeply about.
Another major aspect of the current economic situation is inflation. The Bank of England is stuck between a rock and hard place. Interest rates are as low as they can go, and quantitative easing is continuing, yet the inflation target is way above where it should be. It is difficult to know what the Bank will do.
We continue to hear, as we have heard several times this afternoon, that there is no alternative to this approach. I am sorry, but there is a definite alternative. We also hear that the fact that we are in this mess is all down to a Labour Government—that only Britain went through the recession in 2008, while the rest of the world did not, and that we got into the position we did only because of Labour’s reckless spending and financial management. I want to put some facts on the record. Conservative Members use a lot of rhetoric and soundbites; the famous one from the Prime Minister was that Labour did not mend the roof while the sun was shining. In fact, we did, because when we came to power in 1997, the level of debt was nearly 50% and we reduced it. I remember the tremendous debate within my party when we sold off the 3G licences. People said that we should use that money to fund public expenditure, but the then Chancellor took the very good decision to drive down the level of debt. That left us, going into the economic downturn, in the strong position of having the lowest debt, unemployment and inflation in the G7, and the highest investment from overseas.
Was it right to transform and invest in our public services over those 13 years? Yes, it was. They have been transformed in many parts of this country, certainly in my constituency. When I was first elected in 2001, the hospital in Chester-le-Street was in the old workhouse. We now have a brand-new hospital in Chester-le-street, as well as three others in the area. We have six or seven new primary care centres in County Durham. That is a direct result of public investment. When the economic crisis hit, did we have to respond to that by borrowing? Yes, we did. Was it the right thing to do? Yes, it was.
At the time of the crisis at Northern Rock, if we had followed what the Conservatives, including the current Chancellor of the Exchequer, wanted to do, which was basically to let it fold, we would have had a far worse situation, with a banking crisis that would have devastated not only Northern Rock but every other bank. The then Chancellor put in place a package to support banks, subsidise mortgages, cut VAT, fund apprenticeships, and give people money to buy new cars and stimulate the economy—and it worked. If people want to look for the evidence for that, there is the growth of the economy in the months prior to, and just after, the general election.
Contrast that with what we have now—a Government who do not have a growth strategy and are wedded to a strategy that they feel it would be politically weak to go away from, repeating time and again that there is no alternative. I ask Conservative Members to reflect on what they would have done at that time. Last weekend, the Chancellor said that we were in this financial state because of a decade of over-expenditure by the Labour party. Well, the Conservatives supported our spending targets right up until 2008, so they cannot have it both ways. I ask them to look at the facts rather than what central office spun during the election campaign, which, unfortunately, some of them are continuing to repeat.
Sajid Javid
I am glad that the hon. Gentleman said that one should look at the facts. Is he aware that the spending cuts over this parliamentary period are only 3.7%—0.9% a year—in real terms, which is lower than the spending cuts that were implemented by Denis Healey, a former Chancellor? On that basis, would he still describe them as swingeing, drastic or tough cuts?
Mr Jones
I am sorry, but yes I would. If hon. Members are going to make comparisons, they should compare like with like. Whoever writes the central office briefings does one thing all the time. They compare our economy with that of Greece or, as the hon. Gentleman just did, they compare the British economy today with that of the 1970s. That is complete nonsense.
The central point—some Liberal Democrats are starting to wake up to this, including the Deputy Prime Minister—is that although there is a need and a desire to reduce the deficit, there is also an ideological drive to have a smaller state and to put into practice the ideological prejudices that the Conservatives have yearned to implement for many years. The people of this country will suffer from that. Is there an alternative? Yes, there certainly is.
Mr Greg Knight (East Yorkshire) (Con)
This trip down memory lane is very interesting, but, if he does not support the expenditure cuts, will the hon. Gentleman tell us how much more he thinks we as a nation should be borrowing?
Mr Jones
Something that the central office spin machine does very well, and which Thatcher did, is somehow to compare the national economy to somebody’s personal expenditure. Can we afford to borrow at the moment? Yes, we can. Borrowing to invest in infrastructure and other things is the right thing to do, and is exactly what we were doing in government. We are increasingly borrowing not to invest in the economy and infrastructure and to add to the country’s economic power, but to support unemployment. That is exactly what the Major Government found in their dying days.
It is important to recognise that unemployment in the north-east has reached 10.2%, and that is before the real effects of the public expenditure cuts work their way through. The idea of economic zones or business development zones, or whatever they are called, was announced in the Budget, along with the local enterprise partnerships. One North East was very successful in regenerating the north-east economy. It actually moved the economy away from the public sector and grew the private sector. It had real money. It had £180 million a year, and worked with the local university sector and local authorities to spend European regional development funding. The LEPs have no money attached and the regional growth fund has £1.4 billion to be competed for around the country. Today, we have the enterprise zones.
Mrs Mary Glindon (North Tyneside) (Lab)
The Government have said that they want enterprise zones to support real growth and long-term sustainability. Does my hon. Friend agree that the announcement of an enterprise zone for Tyneside means little for growth or sustainability when the Transport Secretary has said that he will not provide funding for the much-needed upgrade of the A19 Silverlink interchange, which businesses have told politicians is essential for the economic development of Tyneside and the wider region?
Mr Deputy Speaker (Mr Nigel Evans)
Order. The interventions are becoming very long. I have said that we are under real time constraints, as Mr Jones knows as well.
Mr Jones
I do know that, Mr Deputy Speaker, but it is important to get these things on the record.
My hon. Friend the Member for North Tyneside (Mrs Glindon) makes a good point. The two enterprise zones for the north-east will be in Tyneside and the Tees valley. That important piece of infrastructure is somehow supposed to be funded by the private sector, but that is exactly the kind of public expenditure that should be going into the region to create jobs and regenerate infrastructure. My concern about the enterprise zones is that places such as Durham and Northumberland have been left out. If we look back at the old enterprise zones, we see that all we got from them was a shovelling around of businesses and artificial borders. The zones will make it very difficult to attract inward investment to Durham and Northumberland.
As has been said, page 42 of the Red Book shows that funding for the 22 enterprise zones will add up to about £1 million each over their lifetime, which will not in any way help the regeneration of either Tyneside or Teesside. We will have the talking shops of the local enterprise partnerships, but no real money to do anything. The disastrous situation at the moment is that we have £106 million of European regional development fund but no money for One North East, local authorities or universities to match fund projects. The Government’s regional strategy is in a complete and utter mess, and the Budget will do nothing to assist.
One issue that has already been raised is—
Mr Jones
If the hon. Gentleman continues, I might go on for a bit longer, so he must be clever and not do so.
As my hon. Friend the Member for Aberdeen South (Dame Anne Begg) said, it has been billed that the Government have somehow saved the motorist by reducing tax by 1p, but the effects of paying for that will be disastrous for the oil industry in this country, including Scotland. They will be disastrous for the north-east, as it relies heavily on Teesside and Tyneside to supply the expanding gas and oil fields, which need long-term investment. It is completely and utterly irresponsible to throw a spanner into the works of the investment in developing some of the most difficult oil and gas fields in the North sea.
Dame Anne Begg
Does my hon. Friend agree that the danger of today’s proposals is that they might fatally undermine the whole North sea offshore sector, which is fragile anyway because the geology makes it difficult to get the oil out? As a result, the country may lose even more money, because the sector is a huge taxpayer. As my neighbouring MP, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), said, 20% of all corporation tax is paid by the industry. What is being done today could put that in jeopardy.
Mr Jones
I agree, and there will also be a direct impact on jobs in oil exploration and in the booming oil supply business in Tyneside and Teesside. The short-term measure to try to get the Government out of a political fix on petrol prices will cause deep and long-term damage to jobs in the north-east and in my hon. Friend’s constituency.
The first-time buyer scheme, which the Red Book states will cost £250 million for just one year, will not help the north-east in any great way, because it will clearly be concentrated where a large number of houses are being built—the south-east and other areas. Because the Government have removed housing targets and affected social landlords’ ability to build new houses through the ham-fisted way in which they have structured the financing of social house building, I doubt whether there will be much effect on the north-east.
I also note that none of the £200 million additional investment in regional railways will go further than Leeds. Investment schemes for railways in the north-east—I have been calling for extra capacity for people to commute into Tyneside from Chester-le-Street and other places—will clearly not be forthcoming.
Finally, I wish to mention armed forces pay. The Chancellor said that there would be a £250 uplift for those in the armed forces earning less than £21,000. I remind the House that that is from the same Government who have frozen armed forces pay for the next two years. In addition, they have changed the calculation from RPI to CPI, which will cost many thousands of servicemen and women huge sums of money over the coming years. The Government should not be proud of that. I get rather annoyed because if the previous Government had done that, when I was a Defence Minister, the Conservatives and Liberal Democrats would have howled us down and called us a disgrace.
Is this a Budget for growth? No, it is not. Will it help the north-east of England? No, it will not. Under the confused regional policy that is proposed, which is supported by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and his Liberal Democrat colleagues in the north-east, we will find that as the country’s economy declines and contracts, regions such as ours will go from the very bad position that they are in now to an even worse one.
Barry Gardiner (Brent North) (Lab)
I shall try to honour the time constraints that you have imposed Mr Deputy Speaker.
Today the United Kingdom has the highest inflation since the days of Margaret Thatcher. The RPI stands at 5.5% and the CPI at 4.4%. Today the United Kingdom has seen the Chancellor announce a lowering of the growth forecast from the 2.6% predicted by the Office for Budget Responsibility last year and the 2.3% in the last Budget to 1.7% today. Today the United Kingdom has the highest unemployment since 1984, when John Major had just taken over from Margaret Thatcher. This is not a Budget for growth into the future. It is a Budget that will take us back to the future of Margaret Thatcher and John Major.
Inflation at 5.5% has a devastating impact on families in the UK, as £1 in every £20 that they earn is now lost. For example, the Secretary of State for Environment, Food and Rural Affairs gave up an enormous 24% of her departmental budget to the Treasury over this spending period, but inflation has now turned that into a real-terms cut of 31%. Have Treasury Ministers commissioned, or do they intend to commission, any research into the capacity of Departments to deliver on their performance indicators, given the effects of rising inflation on the departmental spending cuts that have already been incurred?
It is risible that this Budget has been delivered by a Government who style themselves the greenest ever. The establishment of the green investment bank has been delayed until 2012, and it is still unclear whether it can fully function as a bank or whether it will simply be a glorified fund. The carbon reduction commitment has already outraged the CBI and British business. Instead of rewarding energy-efficient businesses and returning £1 billion to business, as the Labour Government proposed when we introduced the scheme, the Treasury has shifted the goalposts and taken all of the money to itself. I had thought that the implementation of the scheme had been delayed until 2012-13, and that was certainly what was announced to business, but I see from measure O in table 2.2 on page 44 of the Red Book that the Government are now forecasting £715 million of revenue to the Treasury in 2011-12 from that scheme that only goes live in 2012-13. I ask Treasury Ministers to reconcile that anomaly.
The carbon floor price appears on the face of it to be a positive green measure, but in fact it betrays the lack of coherence in Government thinking on this area. The Government’s electricity market reform recognises the need to incentivise 18 GWe of new generation capacity in the UK by 2024. That is the equivalent of £200 billion of investment between now and 2020. As Ministers know, much of this generation capacity will come from gas. At a stroke, the Government have pushed away the very investors they sought to attract. They are now likely to encourage more imports and external dependency. Why should European generators generate in the UK when they can generate abroad with no such tax upon them, and then benefit from higher UK prices by use of the interconnectors? One element of the Government’s energy market reform strategy has been to increase the use of interconnectors. As a result of this step, investment will be pushed into France, Belgium and the Netherlands. There is incoherence at the heart of the Government’s thinking on this matter.
I did not support the Government in the Lobby on Monday night in the vote on military action in Libya. I pay tribute to our armed services, and to their valour and the work they do, but I cannot support the cost of the military escapade taking place in Libya, and I look to what could have been achieved if the funds being expended there were instead being expended around the rest of our country.
Barry Gardiner
No, I will not.
One Tomahawk missile costs £350,000, and 140 of them were launched in the first 48 hours of the attack, which amounts to a cost of £50 million. It is estimated that the cost of prosecuting this military conflict is £6 million each day. The cost of one day of action in Libya could restore in its entirety the £2.25 million of cuts in children’s services forced on my community in Brent by this Liberal-Conservative coalition Government. One month in Libya could protect children’s services across the whole of London. Nine months in Libya could protect children’s services across the entire UK. Aneurin Bevan once said that priorities is the language of socialism. Those are my priorities and that is why I will oppose this Budget.