Budget Resolutions and Economic Situation

Lord Beamish Excerpts

Friday 22nd March 2013 Commons Chamber

[Mr Duncan Smith]

I do love these little exchanges with the right hon. Gentleman—I am sure we could become quite friendly—but the reality is that he is dancing around what was actually happening. I remind him that Labour’s capital spending programmes would have resulted in a real cut of 7% compared with our plans. It is all very well for Labour Members to talk about this now, but under the plan they left, capital spending was falling fast. We are spending more than their plan proposed, which would have resulted in a net 7% cut.

Borrowing today is lower than under Labour. It was £159 billion at its peak and it is now £120.9 billion, which is £38 billion lower, and forecasts approved by the Office for Budget Responsibility show that by the end of this Parliament it will be £63 billion lower and falling. [Interruption.] I say to the right hon. Gentleman that the public do not believe that Labour’s plan would have been any better. In fact, it would have been a lot worse and now Labour Members want to make it even more so, because they want to spend more, borrow more and see the deficit rise.

[Mr Kevan Jones (North Durham) (Lab)]

Does the Secretary of State not recognise that the difference between this Government’s plan and the one we left is that the economy and capital investment were growing? The Chancellor’s emergency budget in 2010 caused damage by ripping the heart out of the capital programme, and that led to a depression.

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[Thomas Docherty (Dunfermline and West Fife) (Lab)]

rose—

[Mr Kevan Jones]

rose—

[Mr Duncan Smith]

Let me finish my point. That is one coalition measure of which I, as a Conservative, am incredibly proud. I am incredibly proud that we struck that agreement, and that, a year early, before the end of the Parliament, we will raise the threshold to £10,000. That will do more for poorer people who are struggling to make ends meet than almost anything the previous Government did. I should remind the House that they did exactly the opposite. They got rid of the 10p tax rate. They tried to pretend that that was somehow a tax cut, only to find that they spent billions of pounds—borrowed billions—to try to rectify it.

[Mr Jones]

The right hon. Gentleman has pledged to produce figures by constituency of how much each will benefit from the £10,000 income tax cap. Will he produce the constituency figures on those who have lost in terms of tax credits, bedroom tax and VAT?

[Mr Duncan Smith]

During the passage of our last Bill, we were clear about who was winning and losing in those circumstances, and I am happy to engage with the hon. Gentleman on that. There are two important things to remember. The Opposition go on about this, but the reality is that in every year of this Government, the wealthiest in society—the top 1%—will pay nearly a quarter of all income tax, and the top 5% will pay nearly half of all tax. The richest will pay more in every single year of this Parliament than they would have paid under the previous Government’s plans. The 14,000 people in the UK who earn more than £1 million a year will pay £14.2 billion in tax this year. Conservatives did not say that they were pleased for people to be filthy rich; Labour did. The previous Government allowed wealthy people to boast that they paid less tax than their cleaners. We need take no lectures on upper rate tax from the Opposition.

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[Steve Baker (Wycombe) (Con)]

I am glad to follow the hon. Member for Glasgow North East (Mr Bain), who talked about bad economics, which will be the central theme of my speech. He also asked why there has not been growth. I refer him to the report “Thinking the Unthinkable”, which has the unfortunate subtitle “Project Armageddon—the final report” by Tullett Prebon. It explains that three of the UK’s eight largest industries—real estate, financial services and construction—accounting for 39% of the economy, are incapable of growth now that net private borrowing has evaporated.

The report goes on to say that another three of the top sectors—health, education and public administration, plus defence—account for a further 19% and cannot expand now that growth in public spending is a thing of the past. That means that 58% of the economy is ex growth, a figure that could rise to 70% if, as seems probable, growth in retailing is precluded by falling real consumer incomes. That is why there is no growth, and it is important to understand properly why we are in this mess.

The Budget was one of two halves. I certainly welcome all the tax cuts—the £10,000 personal allowance and so on. I am sure that my constituents will be glad to know that fuel duty will be 13p lower per litre than it would have been under Labour’s plans. However, I want to talk mostly about credit market interventions and monetary activism. I am particularly reminded of the curious fact that the general disinclination to explain the past boom by monetary factors has been quickly replaced by an even greater readiness to hold the current working of our monetary organisation exclusively responsible for our current plight.

The same stabilisers who believed that nothing was wrong with the boom, and that it might last indefinitely because prices did not rise, now believe that everything could be set right again if only we would use the weapons of monetary policy to prevent prices from falling. The same superficial view sees no other harmful effect of a credit expansion but the rise of a price level now has it that our only difficulty is a fall in the price level caused by credit contraction. I thoroughly recommend the preface to “Monetary Theory and the Trade Cycle”, published in 1932, since which little has changed when it comes to the error of the monetary stabilisers.

We need to ask ourselves what is holding the economy back. I refer particularly to feedback from Stewart Linford chair makers in my constituency. Stewart Linford is a great man, and chair making is what made High Wycombe a great town. As costs rose in Britain, Stewart remained competitive by increasing the quality of his product and exporting. Yesterday, he said to me:

“What’s holding me back isn’t red tape. It’s not taxation. It’s not even foreign competition. It’s HSBC bank holding our money against an interest rate swap we didn’t need.”

That swap was originally sold to him by RBS. I fully support the Government’s efforts to change the culture of banking. Previously, they have talked about the need for a responsibility revolution and it is firms such as Stewart Linford’s in my constituency that demonstrate the great David and Goliath battle that is going on.

Why is that battle going on? If we look at debt in the past 10 or 13 years, we find that the big story of banking and money is a great transformation in borrowing. In about 2002-03, under the previous Government, mortgage lending rose substantially. Eventually, the banking system blew itself up and mortgage lending collapsed and deficit spending by the Government took over.

If we look at the money supply back to 1997, we find that under the previous Government it tripled. In 1997, M4 was £693 billion; by 2010, it had risen to £2.2 trillion before stagnating. That chart, if well understood, is remarkable. It tells us that there was an accelerating rush to destruction in debt. Shortly, we will realise that while we were originally told that this was a banking crisis and then that it was a debt crisis, we will have to face up to the reality that what we use as money is debt—debt that was loaned into existence in response to incentives created by central bankers lowering interest rates.

[Mr Kevan Jones (North Durham) (Lab)]

Is it not a fact that when the Labour Government came into office in 1997, debt stood at 42% of GDP? When the banking crisis hit in 2008, it was down to 35%. The reason for its increasing was the fact that we had to bail out the banks and carry out the economic stimulus, which made the economy grow—all that, including the spending targets, was supported by the hon. Gentleman’s party when in opposition.

[Steve Baker]

I am grateful to the hon. Gentleman. I came here to speak today because I expected to have 20 to 30 minutes, and if I had, I would have given him a full explanation. In many ways, I am trying to help him. If he looked at price inflation going back to 1750, he would discover that for the whole of my lifetime, since 1971, we have been living in an inflationary era unprecedented in industrial times. That is why the banking system was broken. If money is pumped into the economy at that rate, that is bound to create asset price bubbles. An independent Bank of England therefore found itself controlling the money supply by looking at price inflation without looking at house prices, which were rushing away. That was bound to end in catastrophe.

Let me explain the problem with the Chancellor’s policy on credit market intervention. When we look across the range of things that were intended, we can see that there is a clear objective, which is to restart the process of credit expansion—credit creation—into the economy. In the short term, that is indeed bound to create an increase in trade and housing and to create a small housing boom. The problem is the damage it does to the rest of the economy. If I had more time, I would talk at some length about the problem being that for far too long people have persisted in believing that there is a simple mechanical linkage between aggregate demand and total employment, but unfortunately that is not true. What matters is the distribution of employment and the use of capital across the structure of the economy and through time.

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[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

It is a great pleasure to follow my hon. Friend the Member for Lewisham East (Heidi Alexander). I can only apologise for breaking the gender/London cabal by heading to north Staffordshire and being a male Member of Parliament.

It would be nothing less than churlish not to begin with the keynote policy of this week’s Budget: the climate change levy exemption for the ceramics industry in my constituency and also the steel industry. There is satisfaction at the highest level in the city and among our industrialists for this welcome tax break. Only last night, at the opening of Hanley’s wonderful new bus station, designed by Grimshaw Associates, which is like the inside of a whale—[Interruption]—from Victorian prints—grizzled Labour councillors and old potters were full of admiration for this welcome policy. It will make a genuine difference to the bottom line of companies. They will now be able to hire more people, invest in kit, innovate and design.

[Mr Kevan Jones]

My hon. Friend is being modest by not paying credit to his campaign for this move. Does he think the people of Stoke-on-Trent should perhaps think of erecting a statute or making a memorial mug to mark his valiant efforts?

[Tristram Hunt]

I am grateful for my hon. Friend’s interjection. I would also pay tribute to my hon. Friends the Members for Stoke-on-Trent South (Robert Flello), for Stoke-on-Trent North (Joan Walley) and for Newcastle-under-Lyme (Paul Farrelly).

[Mr Jones]

Three more mugs.

[Tristram Hunt]

I hope the kilns are firing up as we speak.

I hope this change is part of a broader shift on energy-intensive industries. I think we have realised that we can no longer tax such businesses out of production in the UK. It does no good for our economy or our manufacturing base if we export these jobs. The production then goes abroad, where environmental controls are less rigorous and pollution is often greater, so we increase global carbon emissions and also lose worthwhile jobs. We have already lost the aluminium industry in this country thanks to cumulative taxation and we do not want to see the glass, paper, steel or ceramics industries go the same way.

I also welcomed the new tax regime for shale gas in the Budget. I regard shale as a potentially important new energy source that we need to see exploited in an environmentally sound manner. We are seeing it exploited right around the world. The technology behind it is improving at every stage. People have rightly expressed fears about contamination of water supplies, which are beginning to be addressed, but shale has a potentially paradigm-shifting capacity. What we have seen in America will not necessarily occur in the UK. It is absolutely right that we begin to explore shale—just as the Chinese and other European countries are—both onshore and, potentially, offshore. We need the technology and innovation to do that and we need a suitable taxation system.

Those involved in shale gas production need to take the communities with them and to have a social licence to produce it, but I urge Ministers to think more creatively. The great loss from North sea oil was that unlike Norway we did not create a sovereign wealth fund out of our oil riches. If we gain riches from shale, should we not consider a sovereign wealth fund? I will leave Ministers to mull on that idea.

While I am focused on industry and energy, let me highlight a contemporary crisis affecting industry here and now. As we speak, gas storage in this country is under 10% and this morning the Bacton gas connection to Belgium broke down. The price of gas hit £1.25 per therm when it is usually about 60p per therm. There is a real danger that kilns will have to close in north Staffordshire and that brickworks will close down, and I do not think that there is the necessary urgency from Ministers in Department of Energy and Climate Change or the Department for Business, Innovation and Skills about what is happening with the gas supply. That points towards a broader issue about gas storage: if we want rebalancing and want our industries to improve, we must ensure that we have a much greater system of gas storage in this country.

I am proud to represent an industrial constituency and I welcome some of the pre-Budget announcements on an industrial strategy, particularly that about the aerospace technology institute. I also welcome the adoption of 81 out of 89 of Lord Heseltine’s recommendations, particularly those on a single local growth fund. That is exactly the devolution of funding we want to see and a rightful acknowledgement that those in town halls often know a great deal more than those in Whitehall. As the Financial Secretary is on the Front Bench, let me say that we look forward to the upcoming announcements on city deals. I know that Stoke-on-Trent and Staffordshire have been working very hard to ensure that the Treasury is happy with what they are doing. It is quite right that the Government have allocated an extra £3 billion for infrastructure.

Behind all that must lie the acknowledgement that it is all too little, too late. The spending on infrastructure should have happened at the beginning of the Parliament, not more than halfway through it. As the Deputy Prime Minister has said, the Government should have not come to power and unleashed such capital spending cuts. The local growth fund could have been managed by regional development agencies, but the Government came in and abolished them. They are now realising that local enterprise partnerships often do not have the capacity and co-ordination to deliver the resources we are asking of them.

We should not have had to wait until the second half of a Parliament for an industrial strategy. In 2007-08, when we were in government, we were beginning to develop a credible industrial strategy that the Government should have continued rather than ripping it up in that terrible June Budget and beginning again. Over the past few years, we have seen a textbook example of how not to manage a recession, which will be taught in universities across the world. This is a catch-up Budget that is trying to undo the mistakes embedded in our economy three years ago.

The austerity agenda has spectacularly failed. Growth has collapsed, debt has mushroomed and the deficit at the end of the Parliament is expected to be £96 billion, five times more than the £20 billion the Chancellor expected at the beginning. As my hon. Friend the Member for Walthamstow (Stella Creasy) suggested, any board member who came to a board with such figures would be sent packing. As the shadow Chancellor warned in his celebrated Bloomberg lecture, that is the product of slashing spending, sucking demand out of the economy, the rhetoric of doom and gloom and the undermining of confidence. That is being borne witness to by the remarkable collapse in sterling, which is a sign of weakness, not strength, and by the collapse and loss of our credit rating. The austerity is not working, and, as my hon. Friend the Member for Lewisham East (Heidi Alexander) said, it is just hurting.

As the IMF chief economist suggests, we need a plan B. We need a VAT cut, a house building strategy and concentration on vocational skills and infrastructure. We need a different model, because this one simply is not working. Although I am happy to welcome the micro-element of this Budget in the context of the climate change levy, the macro-element fails spectacularly.

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[Mr Kevan Jones (North Durham) (Lab)]

It is clear that plan A is not working—growth is down and borrowing is up by £245 billion. The Chancellor can meet the target set by the Office for Budget Responsibility only by doing the equivalent of hiding behind the curtains when the debt man comes, or saying when answering the door, “No, I can’t pay this week; I’ll pay next week.”

As has been mentioned, the OBR also said that people will be worse off in 2015 than they were in 2010. My hon. Friend the Member for Ilford South (Mike Gapes) has just said that the blame game in the early days was “This is all because of the mess Labour left the economy in.” I am sorry, but the Chancellor cannot get away with that after three years in power. Let us also look at the facts. In 1997, the debt inherited by the Labour Government was 42% of GDP, and the figure was 35% in 2008—the last Labour Government actually paid down debt. Debt then went up because of the economic downturn and the massive effect of the world banking crisis in 2008, as my hon. Friend mentioned.

It is also said that there was profligate spending. In 1997, we inherited a 3.9% deficit of GDP, which was down to 2.1% by 2008. I was in the House at the time, but never heard the then Opposition argue that our spending targets were reckless or that we should reduce spending at all. In fact, in some areas—including defence, which I know about—they were asking for more expenditure.

[Dr Matthew Offord (Hendon) (Con)]

Does the hon. Gentleman acknowledge that the Labour Government who came to power in 1997 followed the Conservatives’ spending plans for their first two years? Those plans were laid by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke); he achieved the reduction in the deficit that the hon. Gentleman mentions.

[Mr Jones]

Following that logic, the hon. Gentleman cannot argue, as his party has continually done since the last election, that a mess was left by the last Labour Government. The situation was due to the economic downturn.

We are now three years into plan A, and who is to blame now? We have slightly moved away from the Labour party—now it is all Europe’s fault.

[Lilian Greenwood]

Does my hon. Friend remember that when the Chancellor was in opposition, he specifically said in September 2007:

“The result of adopting these spending totals is that under a Conservative government there will be real increases in spending on public services, year after year”?

He and his party agreed with our plans.

[Mr Jones]

I totally agree. In defence, for example, the Conservatives called for a larger Navy and larger Army and more expenditure. What have we seen? Cuts, cuts and more cuts.

This morning we again had the nonsense from the Secretary of State for Work and Pensions that somehow if the austerity plan does not continue we will end up like Cyprus—it used to be Greece. The right hon. Gentleman conveniently ignores the fact that the wonderful triple A rating, so coveted as the great prize, has now been lost. We need to lay the blame for the country’s problems with this Government.

We used to hear the nonsense about Labour being irresponsible, and not having mended the roof while the sun was shining, but the house has no roof now. All we have seen in the Budget is tinkering at the edges. It is a little like suggesting to someone who has lost the roof that new double glazing should be put in. The important point, which has been made by several colleagues, is about demand in the economy. The way to get the economy going is to stimulate demand, and capital expenditure is one way of doing so. I welcome the announcement of £3 billion of additional capital expenditure, but it is only from 2015, and we need it now.

My hon. Friend the Member for Hyndburn (Graham Jones) rightly referred to the effects of the downturn for housing on other sectors. The emergency Budget slashed housing spending and capital expenditure on schools and so on, and that meant that demand went out of the economy. We are now spending £7.7 billion less than the Labour Government would have spent in the same period. There is an idea that this is somebody else’s fault, but it is not. Deflating the economy and taking demand out of it, while telling everybody that it is in dire straits, will depress demand not only for housing but in other sectors.

The housing proposals in this Budget are very ideological. Am I opposed to encouraging people to buy their own homes? No, I am not. However, it is nonsense to think that someone living in my constituency who has a low-paid job in local government, and is having their pay cut in real terms because of the cap, is going to save up the deposit for a mortgage. It would have been better if the Budget had provided a massive injection of resources into affordable housing and housing for rent. If my local housing provider, Derwentside Homes, was given the ability to borrow money to build new houses, it could do it now. That would provide the housing that we need.

[Michael Ellis]

Will the hon. Gentleman give way?

[Mr Jones]

No.

My fear about these proposals is that if we do not get right the balance between demand and supply, we will end up with a housing bubble and the sub-prime situation that landed us in this mess in the first place.

The other thing that could make a big difference, as it did in my constituency when we were in power, is investing in improvements to local authority housing and social housing. Cestria Housing spent £67 million on improving local housing. That not only made a real difference to those houses but regenerated the local economy. I agree with one thing that the hon. Member for Wycombe (Steve Baker) said; frankly, most of it was complete nonsense. If this Government really want to get the economy moving, they have the instruments to do it through banks such as RBS. However, RBS is crucifying small businesses in my constituency, including Ambic, which is run by David Potter. He has a very successful business, but he is being absolutely hammered in trying, in effect, to get RBS’s balance sheets down because this Government want to get it off the asset books as quickly as possible.

Much has been trumpeted about the new cap on the level at which people pay income tax. In my constituency, many low-paid workers will benefit from this, but they will also lose through the bedroom tax, VAT increases, and the loss of child credit. Earlier I challenged the Secretary of State to publish information, constituency by constituency, on how many people were going to gain from this measure. I challenge him again to say how much these individuals are losing through the Government’s welfare cuts.

The welfare cuts that will begin in April will hit some of the poorest parts of the United Kingdom, including my own. The thing about poor people that many Conservatives might not realise is that they do not save money: they spend it. That is not because they are profligate or irresponsible but because they have no choice. These cuts will take money out of poorer communities in North Durham, and in the constituency of my hon. Friend the Member for Easington (Grahame M. Morris), who can ill afford to lose it. Unemployment is rising. As my hon. Friend the Member for Walthamstow (Stella Creasy) said, these people do not want to be unemployed, but there are no jobs. The jobs that are being created are part time, low paid—[Interruption.] The hon. Member for Northampton North (Michael Ellis) says “Rubbish.” He should look at the figures, which show that people are holding down two or three jobs to make ends meet. He will also see that productivity is coming down.

This involves a bigger debate about what type of society we want to live in. I congratulate those who work hard in food banks up and down the country; they are very good and worthwhile citizens. However, I feel very uncomfortable in 2013 living in a society where I have constituents relying on charity and food banks. That is not the type of society that I want to live in. We also all need to be conscious of the fact that, while things might be easy for all of us here, including millionaires such as the Chancellor and other Treasury Ministers, each unemployed person faces individual consequences, and suicides are on the increase because of the economic downturn.

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[Michael Ellis (Northampton North) (Con)]

I start by congratulating the Chancellor of the Exchequer. In speech after speech, Labour Members seem to have forgotten the note left by the outgoing Treasury Minister—

[Mr Kevan Jones]

Not the old chestnut!

[Michael Ellis]

Oh yes, the old note that was left: “There is no money left.” That is the legacy Labour left this country. After 13 years of a Labour Government who brought this country to its economic knees and a position worse than that of Greece, the Chancellor of the Exchequer and the Treasury team have picked the country up from where it was left, and will continue to do so.

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[Michael Ellis]

Exactly. The Labour habit of spending money that the country cannot afford almost brought this country to ruin. The lack of an apology grates, but it is difficult for Labour Front Benchers to offer one, because the team that wrecked the country’s economy and trebled the national debt are still on the Opposition Front Bench.

The Budget has been welcomed by the International Monetary Fund, the OECD, the Bank of England, the CBI, the Institute of Directors and the British Chambers of Commerce—it has been rightly welcomed by everyone who knows what they are talking about as far as the economy of this country is concerned. I say to the Chancellor that he should stick with it. We cannot have a situation in which Labour is allowed to borrow more, or we will end up with a Mili-shambles.

Plan A works. It tackles the appalling structural debt legacy. An IOD official has said:

“Deficit reduction is not an option…it is an absolute necessity”.

The Government started in 2010 with the worst debt to GDP ratio of any country—it was worse than that of Greece. Other countries with better figures than ours in 2010 had been put into special measures by the IMF.

[Mr Kevan Jones]

In opposition, the Conservative party not only agreed to, and did not question, Labour’s spending, but asked for more. As for the figures he quotes, will he explain to the House the difference between the size of Greece’s economy and that of the UK?

[Michael Ellis]

In common with most Labour Members, the hon. Gentleman’s understanding of the economy is limited. The reality is that the country’s debt is the responsibility of the Labour Government. However hard Labour Members try to transfer the blame on to the Conservatives, we did not spend that money.

When the current Government took over, £1 for every £4 spent from the public purse went on interest. Borrowing is now £3 billion lower, and the deficit is down by one third. What is Labour’s plan? Labour wants to borrow £200 billion more. I wish we had that money, but we do not have it. That is Labour’s plan.

Meanwhile, the OBR forecasts, post-Budget, 600,000 more jobs in 2013. What is the Labour party doing about jobs? Labour Members pretend that the 1.2 million jobs that have been created are fictional, not real, low-quality and part-time jobs. That is a complete fiction, and they should be embarrassed about it. They should talk the economy up and promote industry, trade, manufacturing and jobs. Are they holding jobs fairs in their constituencies? I have a jobs fair in Northampton North on 17 May. A number of companies will attend. I am doing what I can to improve the jobs market, but all we hear from Labour Members is that they will spend and borrow more, and yet they complain.

Corporation tax will be 20%, which is one of the lowest rates in the world. If we had stuck with Labour’s figures, we would have 3p a pint more in beer duty. Not only has that escalator been cancelled, but 1p has been taken off beer duty, but I have sat in Chamber and heard Labour Members criticise even that. They cannot bring themselves to acknowledge positives.

What is more grating is the self-righteousness of Labour Members. They believe that only they can have any compassion or think in any way of the most disadvantaged in society. Well, I have news for them. My colleagues on the Government Benches are equally if not more compassionate. We do not need to be lectured by those who put this country into such debt.

The dramatic fuel duty measures taken by this Chancellor—[Interruption.] If Labour Front-Benchers want to intervene, I am happy to give way.

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[Michael Ellis]

The chambers of commerce have accepted that this is an excellent Budget. Of course there are issues that need to be addressed, but we are dealing with a dramatic deficit. Not everything can be done overnight.

The measures that we have taken on fuel duty mean that it will be £7 per tank cheaper to fill an average car, such as a Vauxhall Astra, than it would have been under Labour’s fuel duty plans. Under Labour, fuel duty went up dramatically. It was costing more and more. The Chancellor’s fuel duty cuts will have a dramatic effect on the cost of filling up the average car.

Measures are being taken across the board in very difficult times to improve the economic position that we inherited. All that Labour can do is whinge, whine, moan and be judgmental.

[Mr Kevan Jones]

Will the hon. Gentleman get a tax cut for earnings over £150,000 and what type of car does he drive?

[Michael Ellis]

I am quite happy to answer that question. I will not be getting a tax cut and I have been driving the same car—a Toyota Prius with several dents and scratches—since well before I was elected to this House. However, I would not want to spoil the situation for the millionaires on the Labour Front Bench. There are a fair few of them, driving around in their Mercedes.

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[Mr Jones]

The Toyota Prius is made in Japan. Why is the hon. Gentleman not supporting the UK car industry?

[Michael Ellis]

Not only does Toyota build cars in the UK, but thanks to the measures taken by the Government, this country is exporting more motor vehicles than it is importing for the first time since 1976. That is a measure of the manufacturing improvements made by this Government. It is just one of this Government’s excellent measures, which is why I support the Chancellor of the Exchequer and the Budget.

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[Dr Matthew Offord (Hendon) (Con)]

I welcome the Budget, which I recognise has been produced in difficult economic times. I should like the Government to make further tax cuts, but I realise that that may not be acceptable to some of our constituents who are feeling the increases in their cost of living. As a consequence, I am pleased that the Chancellor has decided to abolish the 3p rise in a pint of beer. I am also pleased that he has decided to cut the price of a pint by a further 1p. Only last week the Adam and Eve pub in Mill Hill and the Bodhran bar in Hendon thanked me for lobbying the Chancellor to do just that. Perhaps on Sunday night we will all say “Cheers” to the Chancellor.

Those proposals, alongside the abolition of the fuel duty escalator, are welcome. I certainly feel the pressure every time I put petrol in my car, and I know that many of my constituents feel the same as they have e-mailed me to say so. That measure, in conjunction with the freeze in council tax in the London borough of Barnet, is helping my constituents. Most significantly, raising the amount of money that people can earn before paying tax—the personal allowance—to £10,000 is welcome. In my constituency, 49,360 will benefit from paying £700 less in income tax than they did in 2010, and 4,967 will be taken out of tax altogether, which is a very good thing.

It is interesting that in many contributions from Opposition Members, I have heard repeated mentions of the so-called bedroom tax. The use of the word “tax” just goes to show how out of touch Labour Members are. As many people who work in this country will know, tax is levied on income earned. Housing benefit is paid to those who either do not have an income high enough to pay their appropriate accommodation costs, or do not have an income at all. In both those scenarios, if someone finds that they do not have enough income, they need to change their accommodation circumstances. I must make special mention of an hon. Member who spoke about her 17-year-old constituent who will receive a reduced income for his two-bedroom flat. The most shocking aspect of that to Government Members is that the Government are paying a 17-year-old to live in a two-bedroom flat. I wonder how many of my 17-year-old constituents would like a two-bedroom flat paid for for them.

[Mr Kevan Jones]

Would it not cost the Government a hell of lot more to keep that person in care?

[Dr Offord]

Yes, of course it would, but I think we need to focus on ensuring that families do not break down, rather than putting someone into care. I know that the circumstances the hon. Gentleman is talking about—[Interruption.] Members are chuntering from a sedentary position, but unless they wish to intervene—