Kevan Jones
Main Page: Kevan Jones (Labour - North Durham)Department Debates - View all Kevan Jones's debates with the HM Treasury
Finance (No. 2) Bill
Kevan Jones Excerpts(10 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (Danny Alexander)
I beg to move, That the Bill be now read a Second time.
The Bill is certainly substantial—602 pages, 295 clauses and 34 schedules—but it is packed with measures that will help British businesses invest and create jobs, help British households work and save, and help ensure that everyone in Britain pays their fair share of tax. It takes forward the Government’s long-term plan to create a fair, competitive and transparent tax system that is enforced effectively, in stark contrast to the uncompetitive and leaky regime that we inherited from the Labour party.
I will begin by talking about the measures that boost growth and investment, deal with those that cover avoidance and aggressive tax planning, consider those that help working people and savers, and finally come to pensioners.
Mr Kevan Jones (North Durham) (Lab)
Will the Chief Secretary tell the House at what point in the last Parliament he, as a Liberal Democrat, objected to the Labour Government’s spending targets?
Danny Alexander
I cannot put a time and date to it, but I recall several occasions when I and my Front-Bench colleagues, particularly my right hon. Friend the Member for Twickenham (Vince Cable), objected to the Labour party’s plans. Labour Front Benchers, when they were in government, ignored warnings from the Liberal Democrat Benches for a number of years before the financial crisis, and that led, to a considerable extent, to the mess that was made of the economy when the Labour Government finally saw what was coming.
Danny Alexander
I am tempted to say that we are wandering slightly from the Bill. I can draw the hon. Gentleman’s attention to several measures in the 2010 Liberal Democrat manifesto that proposed reining in excessive expenditure by the Labour Government.
I note that Labour Members have tabled a so-called reasoned amendment. I point out that we are investing in new technology and new energy sources because of the Labour Government’s failure to tackle rising energy bills; because of their failure to get young people into work, we have created the conditions for more than 1.5 million new jobs in the private sector; because of their failure to boost housing supply, we have had to cut back hundreds of pages of planning laws, and because of their failure to help families with child care costs, we have taken bold steps to introduce tax-free child care. In short, because of Labour’s failure to create jobs and growth and build homes, the British public asked the coalition to clear up the mess. The Bill takes further steps to do that. A Labour party that stands in its way is a blockage on the road to recovery.
Danny Alexander
The way that universal credit is structured means not only that we have a much simpler system, but that most people in the benefits and tax credits system will keep more of their additional earnings as they progress in work than they would have done under the extremely complicated, confusing system that we inherited from the hon. Gentleman’s party. The work incentive clearly has a positive effect overall.
Danny Alexander
I will give way one more time, and then I will make some progress.
Mr Jones
The Chief Secretary to the Treasury says that he is proud that the idea of an increase in personal allowance came from the front page of the Liberal Democrat manifesto. Will he explain why his party, which campaigned on not increasing VAT, increased VAT when it entered the coalition, affecting some of the lowest and most poorly paid people in this country?
Danny Alexander
I am glad that the hon. Gentleman gives me an opportunity to repeat the fact that this policy came from the front page of the Liberal Democrat election manifesto, and I welcome his confirmation of that point. He should recognise that the coalition Government came together to sort out the catastrophic economic mess that was made by his party in the previous few years. When we came into office, we were borrowing £150 billion a year—for every £4 we were spending under his party, £1 had to be borrowed—[Interruption.] I draw his attention, if he is interested, to the distributional analysis of fiscal consolidation that was published alongside the Budget this year, which shows that the wealthiest in this country have made the largest contribution to the fiscal consolidation.
Danny Alexander
I will not give way, because I want to make progress. The increase in the personal allowance will mean that a typical basic rate taxpayer will pay more than £800 less income tax per year than in 2010-11. That is real action to support the millions of people on low and middle incomes. It helps them to keep more of what they earn and rewards those who want to work hard. This Government and this Bill also recognise that people who rely on their savings income have been hit particularly hard by low returns in recent years. It is for that reason that we are cutting tax on savings for the lowest earners. From April 2015, the 10p starting rate of tax on savings will be abolished and a 0% rate will be extended to the first £5,000 of savings income above the personal allowance. That will benefit 1.5 million people with low earnings from some savings, and more than 1 million people will no longer pay any tax on their savings income at all.
It is no exaggeration to say that this Government have achieved sweeping reforms on pensions. Under the excellent leadership of my Liberal Democrat colleague, the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), our simplifications and reforms of the pensions sector will be one of this Government’s most enduring legacies. Automatic enrolment will see nearly 6 million people enrolled in workplace pension schemes by the end of this Parliament. The single-tier pension will provide millions of individuals with a firm foundation to support their saving, and it will particularly benefit those groups that, under the current system, have tended to build up low amounts of savings. I am talking about women with broken work records, the low paid and the self-employed. The triple lock has helped to protect the most vulnerable members of our society, and the recent Budget announcements provide us with the final thread of this coalition’s web of pension reforms.
From April 2015 we will allow individuals much greater choice about how they access their defined contribution pension savings. Individuals will be able to access their defined contribution as they wish, subject to their marginal tax rate, and no one will be forced to take out an annuity if they do not want to. We are well aware that this is the biggest shake-up of pensions in almost a century—since Lloyd George was the Liberal Minister in the Treasury. As such, we recognise that it is absolutely crucial that we get it right. We are consulting on the detail before making further announcements later this year.
In the meantime, the Finance Bill will make some initial changes to deliver greater flexibility with immediate effect. We are reducing the minimum income requirement for accessing pension savings flexibly from £20,000 to £12,000. We are increasing the annual withdrawal limit for individuals in a capped drawdown arrangement from 120% to 150% of an equivalent annuity. We are increasing the total pension wealth that can be taken as a lump sum from £18,000 to £30,000, and we are increasing the size of a pension pot that can be taken as a lump sum—regardless of other pension wealth—from £2,000 to £10,000. Taken together, these changes mean that more than 400,000 people will be able to access their pension more flexibly in the financial year 2014-15.
Chris Leslie
If the hon. Gentleman wants to trade statistics, I am more than happy to do so. In my constituency there is a significant problem with unemployment, long-term youth unemployment and youth unemployment generally, and it has worsened significantly since the general election. He talks about the past 12 months. Let us hope we are turning a corner in aggregate levels of unemployment because it is about time that happened. The tax and benefit changes and their impact on our constituents are very significant indeed. I hope to have an opportunity to focus on a few of them.
Mr Kevan Jones
I asked the Chief Secretary to the Treasury whether he could remember any time when the Liberal Democrats opposed the Labour Government’s spending commitments. Does my hon. Friend agree that Conservative Members have amnesia, in that they agreed to our spending targets right up until the banking crash in late 2008? If at that time we had followed the proposals of the present Chancellor of the Exchequer and the present Prime Minister in relation to things such as Northern Rock, that crisis would have been a lot worse.
Chris Leslie
Trying to get inside the heads of the Liberal Democrats could take quite a long time. The Chief Secretary is enjoying being at close quarters with the Conservative party a little bit too much. The Conservatives have captured him—it is called capture bonding. Sometimes he even starts to view the abuse or the lack of it as rewarding. That is not coalition; that is Stockholm syndrome.
Chris Leslie
Conservative Members love to bash what is going on in Wales. They have an anti-Welsh attitude to these things, but it is one of the great success stories of devolution, making sure that they focus on a meaningful back-to-work scheme, particularly for those who have been out of work for a prolonged period. That is what we need to have, and I wish Ministers would learn from that.
Chapter 4 deals with annuities and pensions. Obviously, as we have said, in general those annuity changes are to be welcomed. Annuities are an outdated product and they failed too many pensioners, but it is important to reiterate the tests that we have. What sort of advice or comprehensive guidance will be put in place for those reaching retirement and potentially having to make calculations of income perhaps over a third of their lifetime to come, and what will happen to the annuities market for those who do wish to purchase such a product to have a steady stream of income in perpetuity?
Mr Kevan Jones
Does my hon. Friend also think that the Government should publish their modelling on the proposal to see what effect it will have, not only on the annuities market but on the cost to the taxpayer in the long term, in terms of matters such as housing benefit and future care costs? Producing that modelling and making it transparent for all would allow people to see whether the policy will have a long-term implication for the taxpayer.
Chris Leslie
It is vital that we have serious consultation on those measures. We support flexibility in principle, but the changes cannot be made without taking into account the wider implications, so it is important that we have that level of information and analysis in the Treasury projections. I do not know whether the Government were motivated by the desire to benefit the population more broadly or by the short-term opportunity, following the annuities changes, to bring in a vast amount of tax revenue from pensioners much earlier than would otherwise have been the case. All I know is that the Chancellor used the annuities issue to provide a veneer of long-termism over what was otherwise an exceptionally short-term Budget and what is an exceptionally short-term Finance Bill.
Clauses 112 and 113 deal with the old question of the bank levy. My hon. Friends will be familiar with the Government’s track record on the bank levy. We will scrutinise those clauses very closely indeed, because The Daily Telegraph, among others, has reported that they could mean a secret tax cut for the banks. Last year Barclays paid £504 million in levy charges and HSBC paid £544 million—the most of any bank. But under the draft proposals the Chief Secretary is bringing forward in the Bill, Barclays’s bill would have been £129 million lower and HSBC’s would have been £169 million lower. What is going on? Given that the levy was supposed to catch up with the lack of collection in previous years—it was supposed to increase by 20% this year—it seems very strange that these clauses might give the banks a very significant saving indeed.
The purpose of the bank levy, of course, was to allow the Government to take £2.5 billion every tax year. It was an unusual tax because they set the amount of revenue to be raised and the methodology revolved around that. In its first year, the levy brought in £1.8 billion, which was a significant shortfall. Things got worse the next year, because in 2012-13 it raised just £1.6 billion. My hon. Friends know the attitude Her Majesty’s Revenue and Customs takes to our constituents if an amount of tax they are asked to pay is not forthcoming, but that is not the case when it comes to the banks. It has gone soft in collecting the money the levy was supposed to raise.
We read in the small print of the Office for Budget Responsibility’s report that accompanied the Budget that in 2013-14, for the third year running, the bank levy is projected to raise only £2.3 billion, which falls short yet again. The combined shortfall from the past three years is now a very significant £1.8 billion. We could pay the salaries of 60,000 nurses with that sum.
Chris Leslie
We do not oppose the Help to Buy scheme unless it is not accompanied by a help to build scheme. The supply of housing is key. Housing policy must revolve around affordability. We now have the lowest level of house building since the 1920s; the Government cannot just turn a blind eye to that problem. Affordability has to be at the heart of our approach. It is all very well helping people on to ever-higher mortgages chasing ever higher prices, but unless something is done to supply new buildings, we will not deal with the problem of affordability.
Mr Kevan Jones
I am not sure what nirvana the hon. Member for Hexham (Guy Opperman) lives in if he thinks that the housing market in the north-east is booming. Average house prices in the north-east are still £5,000 lower than in 2008; that compares with an increase of about £77,000 in London. The hon. Gentleman also fails to recognise that 16% of people in the north-east are still in negative equity. The idea that somehow the housing market in the north-east is booming is wrong. We have a two-speed Britain—a booming south-east and London, and a stagnating north.
Chris Leslie
For all the Government’s talk of a balanced, sustainable recovery, we see no action. Most of our constituents and most businesses would recognise that supply and demand have to be part of the picture. Everybody recognises that except, it seems, for the Chancellor and Chief Secretary, who do not recognise the fundamental problem in their approach.
There needed to be tough decisions, such as the 50p rate, in the Bill to make sure that there was fairness in dealing with the deficit and that we tackled the Government’s failure to keep their promise about balancing the books. That has not come to fruition. We need to help with business rates; we should be cutting them rather than simply focusing help on 2% of companies.
The Government are not ensuring a sustainable and balanced recovery. Consumers are having to dip into their savings at an alarming and increasing rate. The OBR even predicts that growth may well slow in future, when those savings run out. Exports are not predicted to contribute a thing to the economy for the next five years and nothing in the Budget tackles the country’s productivity crisis that has emerged in recent years.
Instead, the Exchequer Secretary and Chief Secretary have convinced themselves that cutting public services and raising taxes have helped economic growth. They believe their own propaganda about expansionary fiscal contraction, which was the philosophy of the right in British politics. It used to be the opposite of the Liberal Democrats’ view, but of course they have now bought into the concept.
Mark Field (Cities of London and Westminster) (Con)
It is usually a pleasure to joust with the hon. Member for Nottingham East (Chris Leslie), but his comments were unremittingly negative. It is amazing that he contrived a speech lasting no fewer than 46 minutes about a Finance Bill that supposedly had so little in it.
For almost the past four years, the British electorate have, perhaps grudgingly at times, recognised that the coalition’s avowed economic plan—the elimination of the structural deficit in the course of this Parliament—has been the right path in response to our grisly economic inheritance.
Key to the plan was consistent growth. The Office for Budget Responsibility’s predicted compound growth of 2.7% to 2.9% for the duration of the Parliament accounted for more than half the deficit reduction programme. As the hon. Gentleman rightly pointed out, that has not been achieved, but the international capital markets have maintained their confidence in the coalition despite its first three years having being characterised by somewhat sluggish growth. Fears that excessive borrowing on the scale that became necessary between 2010 and 2013 would lead to higher interest rates have proved entirely unfounded.
Mr Kevan Jones
I know that 2010 seems a long time ago, but does the hon. Gentleman remember that when this Government came to office the economy was growing and we went into decline only because of the sucking out of demand and investment in the economy during their first two years?
Mark Field
The hon. Gentleman will be well aware that it is in the power of any Chancellor to orchestrate something of a pre-election boom. The VAT reduction certainly assisted in that, such that there were two or three quarters of unsustainable growth in the period from the end of 2009 to 2010, as became apparent fairly quickly.
We have seen some very significant growth. The first glimpses that came a little over a year ago in spring 2013 have turned into healthy, consistent growth that has in many ways surprised even economic experts. This has been maintained, alongside a very strong performance in employment, and barring unforeseen economic shocks it should continue for the rest of this year and beyond.
After the frenzy of Labour’s energy price freeze promise, the early new year period has allowed the Government to regain their footing and reset the important message that we are following a long-term economic plan that will benefit hard-working people. If, in the coming months, we can overlay this sober foundation with a sense of upbeat optimism and positivity about our nation, we will have a solid base from which to bat away unremittingly negative political attacks of the kind that we heard earlier. To complement consistent messaging on the deficit, we must also give the electorate a feeling of hope about life under a future Conservative Government. Nevertheless, the Treasury has been right to be wary. A giveaway Budget implemented by this Finance Bill would have sent out entirely the wrong signals. If money were found for substantial tax cuts, our opponents would question the need for further reductions in the welfare budget, and this at a time when the Institute for Fiscal Studies calculates that we are only two fifths of the way through the total planned spending cuts.
In the months ahead, the Chancellor might perhaps borrow some tricks from the Bank of England. While the notion of forward guidance has hitherto proved something of a mixed success for the Governor of the Bank of England, Mark Carney, it might prove a useful tool for the Treasury. Unlike some of my hon. Friends, I have always doubted the wisdom of promising instant and substantial tax cuts, as that puts in jeopardy our central mission of restoring order to the public finances. However, there is no doubt that reducing the tax burden should always be part of a Conservative offering, not least as we approach a general election. I hope that in a future autumn statement the Chancellor will offer his own brand of forward guidance, giving a clear signal that when progress has been made on reducing the deficit, and that progress breaks past a certain point, a series of tax cuts will kick in. In that way, the electorate will know full well that while our priority is, and must remain, stability, our ultimate aim will be a low-tax, competitive economy.
The Opposition’s messaging over the past six months, as in the course of this debate, has blended naive populism with flagrant opportunism. Their appeal has rested not on their practicality but on their exploitation of a deep sense of unease among many in the electorate that the current system does not deliver for them. The Government’s response has at times been too erratic and confusing, and has lent greater weight to policies that should rightly be dismissed as dangerous and unworkable. What voters need from us, and what this Finance Bill offers, is a sense of consistency and simplicity.
Rather than blowing us off course, the Bill implements a Budget that has been designed to cement our position as a calm and rational team slowly and patiently getting the UK economy back on track and the public finances under control. Substantial or radical reductions in tax should sensibly come only when that mission has been accomplished. Perhaps understandably, this sober message was not the headline-grabbing element of the Budget. Rightly, the proposed liberation of pensions will now be subject to extensive consultation. These ground-breaking reforms will need to be assessed to ensure that any potential unintended consequences are properly analysed before any new pensions regime is put in place.
I want to put on record some specific concerns about the tax avoidance regime that may differ from those raised by the hon. Member for Nottingham East. I addressed these last Friday in an article in The Daily Telegraph about the operation of Her Majesty’s Revenue and Customs’ disclosure of tax avoidance schemes—DOTAS—regime. I have been struck by the number of financial advisers and investors, large and small, from across the country who read my piece and have responded over the past few days by outlining their own cases of particular concern.
Last year, for the first time, aggregate investment in UK-based film production topped £1 billion. This has been aided by a crucial tax break that has attracted huge sums of private cash into the British film industry, which we can be proud of and which is recognised on the global stage with the success of many British films at the Oscars. In last month’s Budget, the Chancellor introduced a theatre tax break to match similar provisions for high-end TV, film, and televised animation. I warmly welcome this energy from the Government on behalf of our crucial creative industries. As well as being home to the much-maligned banking industry, my constituency is also the traditional home of many of our great, globally competitive creative sectors in Soho and Covent Garden. I campaigned for some three years to get the animation tax credit that was successfully announced in the 2012 Budget and agreed on in all parts of the House.
Last month, however, I heard a tale of woe from a group of experienced private investors who have found themselves squeezed awkwardly between the coalition’s ambitions for the creative industries and its other understandable priority—a clampdown on tax avoidance. Their experience should be a warning sign to any investor who has sought to engage in an open and transparent relationship with HMRC. It should also give Treasury Ministers pause for thought—not least the Exchequer Secretary, who is in his place, as he aggressively pursues the Government’s anti-avoidance agenda in the months ahead. Some years ago, the group who came to see me had approached HMRC with their model for private investment in the UK creative industries. After extensive discussion on its structure, they were not only given the green light but told that their vehicle was exactly the sort of thing that the Government were envisaging. On the basis of this understanding, the group proceeded to invest more than £1 billion of risk capital into the British film industry, leading to the production of more than 60 home-grown films.
Given the discussions they had had, HMRC considered these legitimate investors to be firmly “inside the tent”, but as a precautionary measure they elected to place themselves on the DOTAS register. Because tax avoidance measures are now so widely drawn, it has been common practice to err on the side of caution by signing up to HMRC initiatives of this sort. The investors thought nothing more of the DOTAS registration until a flurry of high-profile scandals, or so-called scandals, came to light whereby film investment vehicles had been used by celebrities to slash their tax bills. Rather than sifting through the egregious examples of so-called aggressive avoidance through legitimate investment vehicles, HMRC threw a blanket of suspicion on to any DOTAS-registered scheme. Keen to establish their vehicle’s legitimacy as swiftly as possible, and exhausted by HMRC’s consistent mismanagement of their case, as they see it, the investors elected to put their scheme before an independent tax tribunal.
Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. This was discussed earlier by the Chief Secretary. Because the Government believe that this incentivises scheme promoters to sit back and delay resolution, they now propose to extend the accelerated payments measures to existing DOTAS-registered schemes. This means that disputed tax will be paid up front to HMRC and returned only if a scheme is subsequently found to be legitimate. However—this is where the Government need to rethink their understandable enthusiasm for clamping down on tax avoidance—no exception is proposed in cases where taxpayers have demonstrably not sat back and delayed as long as possible. My investor constituents are desperate to get their dispute settled by an independent arbiter as a matter of urgency. In their case, it is HMRC that is stalling progress. Legitimate investors understand the need to deal quickly with the tens of thousands of outstanding mass-marketed avoidance cases currently clogging up the courts. They simply propose an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal.
It strikes me as a shocking breach of faith that the Government are now attempting to impose a requirement on such individuals to pay a disputed up-front sum when it is an agent of the state—in this case, HMRC—that is deliberately and actively delaying the sitting of the tribunal. Worse still, I fear, is the general message being sent to other private investors, who stand to be deterred from any future investment in the UK film industry.
DOTAS was designed with the best will in mind—something you may well remember, Madam Deputy Speaker, as the system came into play under a previous Administration. It was designed, rightly, to promote openness and transparency in investors’ relationships with HMRC—in principle, a welcome step. However, DOTAS is now in effect helping to produce retrospective legislation, with DOTAS declarations being used as a stick with which to beat legitimate investors who never planned on having liquid assets to meet disputed liabilities. I fear that augurs ill for the Government’s broader, much vaunted anti-avoidance plans, as set out in the Bill, and their overarching plan to make Britain entirely open for business.
It is useful at this juncture to highlight some of the letters I have received in response to my article of last Friday. One constituent, a small-scale investor in the scheme, advised me:
“HMRC has previously offered us full relief on our cash contributions if we forgo relief on the loan element. We haven’t agreed to this. Now they plan to make us pay all the tax in the autumn. Many will feel pressured to settle on the basis of HMRC’s earlier offer as that will reduce the cash to be found by some 37%. This is harassment, which if conducted by a loan shark would rightly have you and your colleagues legislating. HMRC has no case and is relying on intimidation and extortion instead.”
A correspondent from further afield wrote:
“I am an ordinary, law abiding person who has never knowingly cheated anyone, least of all HMRC! But their endless delays and apparent moving of the goal posts make me feel almost like a criminal.”
Another wrote:
“The cries of protest highlighting this radical shift in power seem to have fallen on deaf ears of government officials. I represent hundreds, if not thousands of similar professionals that are on the brink of ruin as a result of the changing of the goal posts by HMRC whose unchecked powers seem to be morphing.”
That concern was shared by many others. There is concern that the decision process lies solely in the hands of a designated officer—some relatively anonymous HMRC official, acting as judge and jury, with no independent or proper safeguards. That does not seem right, as pressures on individuals to act in the best interests of a Department that is failing to collect taxes as quickly as it would like will be immense.
I know we discussed this matter in the House in the context of retrospective legislation last year, but we need to give serious thought to how Parliament can properly control such Executive power. There seem to be no checks or balances on a Government Department, and that does not seem the right way to address our tax policy.
In my view, if the Treasury wishes actively to encourage investment via additional tax credits, we must be assured that legitimate investors’ previously agreed, transparent vehicles are not at some point going to be subject to unplanned for, up-front tax liabilities in the event of a sudden change to the rules by HMRC. As the Exchequer Secretary will know, I have consistently pressed for Government efforts on tax evasion to go hand in glove with the creation of a comprehensive pre-clearance regime. That would allow firms and their tax advisers to road-test proposed taxation schemes with HMRC officials. Ideally, if that were to work efficiently, no new scheme would be permitted to be marketed until such time as approval had been given.
I am sorry to speak on a slightly negative note, because as I have said I support much of the Bill, but it is important to put on record some of the concerns about how the anti-avoidance process is working. Alarm bells should be ringing throughout Parliament as we preside over this unprecedented transfer of power to HMRC. This agency of the state is being empowered not only to apply the law but to a large extent to rewrite it. In summing up, will the Minister provide assurances on the steps that he is putting in place to ensure that incorrect seizures are avoided and that hardship will not follow as a consequence?
The Government’s aims to encourage investment in British industry and to clamp down on aggressive tax avoidance and evasion should not be incompatible. I trust that during the full consideration of the Bill we will further highlight some of those unprecedented powers to rewrite the laws and ensure that Parliament and, above all, the Treasury take a step back, so that we have a system that, as far as possible, promotes the sort of investment that all of us crave, not just in the creative industries but throughout the UK economy.
Bridget Phillipson
I agree entirely with my hon. Friend’s point. I was about to come on to look at the Labour Government’s record on the automotive industry and on industrial strategy. It is simply not right to begin looking at the sector only from 2010. A lot of work went in, over a long period of time, with the work force and the trade unions as well as through Government, to make sure there were the right skills and the investment needed for the industry to compete in the future. The Labour Government took that seriously; I hope this Government will take that forward.
Mr Kevan Jones
I agree with my hon. Friend about the long-term strategy that was put in place. Also, when help was needed at a crucial time in the downturn, the vehicle scrappage scheme helped work forces not only at Nissan but in the constituency of my hon. Friend the Member for Coventry South (Mr Cunningham). It may have been a short-term stimulus, as the hon. Member for Cities of London and Westminster (Mark Field) said, but it certainly helped at that time.
Bridget Phillipson
My hon. Friend makes the point that I was just about to come to, about the car scrappage scheme. There was also the enterprise finance guarantee. During the downturn that was crucial in keeping people in work and keeping the plant productive. My hon. Friend has no doubt visited Nissan and will know that it is crucial for a plant to keep staff numbers up, to be able to compete and to attract contracts. Nissan is very competitive internally, and Nissan in Sunderland continues to have to compete with plants in Europe and across the world. It is crucial to maintain core staffing levels so that when contracts come up internally, we can bid for them in Sunderland. The car scrappage scheme was crucial in making sure that we kept people in work at the plant and in the supply chain.
Ministers cannot afford to be complacent about the degree of success we have been enjoying and about ensuring that it is maintained. Continued success is not inevitable. A constant concern that is raised with me is that talk of Britain leaving the European Union and all that would follow from it creates massive risk and uncertainty about investment in Nissan. Nissan has rightly warned against that and Government Members should be mindful of the fact that continuing to engage in a Back-Bench debate about the future of Britain in the EU could have damaging consequences for areas such as mine, which rely so heavily on our ability to export to Europe.
A report published just yesterday outlined that the north-east and the midlands would be hardest hit by Britain leaving the European Union. That is no doubt linked to the automotive industry in both regions and our ability to export to that single market.
Mr Jones
I concur with my hon. Friend, but it is not just the automotive industry in the north-east that would be affected. Investment in Komatsu, which employs a lot of people in my constituency, and the new, welcome investment in Hitachi would also be affected. The chemical industry on the Tees also relies heavily on European markets.
Bridget Phillipson
That is absolutely the case. One of the ways in which Sunderland has diversified its economy has been to move towards software. The number of new small software firm start-ups is among the highest in the UK. Many of them are looking to expand into and open offices in Europe and I have no doubt that they do not find helpful the constant discussion we are having about Britain’s role in Europe. They want to expand what they export and their role in Europe by opening offices there. They do not want to have a pointless debate about Britain’s role; they just want to get on, create jobs, invest in our region and continue to diversify our economy. I have no doubt that my hon. Friend, like me, will recognise the fact that there was a big shift in the north-east economy in the 1980s and ’90s. We have transformed our industries, although that has not been entirely of our own choosing—we had to transform them. In fact, given the transition that had to take place, we have been remarkably successful. The fact that the software sector in Sunderland continues to grow, including in Rainton Bridge in my constituency, shows what we are capable of in the north-east, but we need the Government to work with us to achieve it.
Richard Harrington
I respect the hon. Gentleman’s view. I described my experience of the last scheme and he has spoken of his personal experience. I am in favour of that kind of scheme. When I was very young and starting out in business, I was able to take on one person under the old youth training scheme, which was much maligned by the Labour Government afterwards. I paid her £30 a week and the Government made up the balance. It was a very simple scheme and not as sophisticated as the schemes that we have today. That person is still in employment, although I am no longer anything to do with the company. She was 17 at the time and is now 40. That shows how old I am, but it also shows that such schemes can work for people. In my experience, the jobs that were provided under the last scheme would not otherwise have existed. It did not subsidise a job that would have been there anyway. However, I am perfectly happy to accept his point and his experience.
Mr Kevan Jones
I do not think that the hon. Gentleman has looked very closely at what we did in government. The scheme that my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) referred to is more akin to the scheme that the last Labour Government had. The alternative is that people are sat at home doing nothing. I agree with the hon. Gentleman that if people do not get a work ethic early on, but have two or three years sat on the dole, it is even harder for them ever to get into work.
Richard Harrington
The hon. Gentleman is absolutely right. There is a consensus that it is not acceptable if people who are on jobseeker’s allowance do not have to do anything towards getting a job. We can deal with that either by the Government providing a job through a direct subsidy, as the Opposition suggest, or through the current system.
Richard Harrington
If the hon. Gentleman will bear with me, I will make a bit of progress first.
The system means that people are effectively signing an employment contract when they sign on—I have seen such contracts, and the purpose is to get people looking for work. It is a programme of looking for work and taking up initiatives that have been derided by the Opposition, such as the work experience programme, the Work programme and other things. But I have seen the system work. It provides a lot of jobs in my constituency. However, the principle of what the hon. Gentleman says, which is that people should not be allowed to rot and do nothing while on jobseeker’s allowance, is right.
The hon. Member for Houghton and Sunderland South (Bridget Phillipson) made a good point that was pertinent to her constituency, and she has met people who have applied for hundreds of jobs and been unsuccessful. I accept that and have heard of similar cases. I cannot compare my constituency with that of my hon. Friend the Member for Cities of London and Westminster (Mark Field), or with Kensington and Chelsea, but in Watford—as the shadow Chief Secretary to the Treasury, who is not here, would know as he is a frequent visitor, for which I am grateful—jobs are available. I am not saying there are jobs everywhere, and it is difficult for anyone to get a job, but I accept that in the hon. Lady’s constituency things are completely different.
Stephen Doughty
The hon. Gentleman fails to note that the average worker has become £1,600 worse off since his Government came to power. I am sure that he is doing relatively well, but many people in his constituency, and certainly in mine, are not. Small businesses in my constituency are struggling with energy bills and business rates.
Hard-working people across my constituency are £1,600 worse off since the Government came to power. The increase in the personal allowance is often paraded by Government Members, but that is dwarfed by the 24 tax rises that have hit hard-working people. At the same time, the Chancellor has given a tax cut to millionaires. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is not in his place, but he spoke on that earlier. The economic adviser to the leader of Plaid Cymru has apparently also supported that recently.
Mr Kevan Jones
Does my hon. Friend agree that there is the problem of insecurity, even for those who are in employment? Zero-hours contracts and a lot more part-time work make it difficult for many people to get credit, or even to dream of getting on the housing ladder.
Stephen Doughty
My hon. Friend makes an excellent point. Indeed, I will come on to the value of high-paid and well-paid work later in my remarks. That is one of the reasons I am such a strong supporter of the living wage. I am not surprised that Government Members will not give us an answer, when asked about the job figures, on how many of them are part-time, zero-hours contracts and minimum wage jobs. That is deeply revealing.
Businesses across my constituency are still struggling to get competitive financing to grow, yet bank bonuses are rising again. The Chancellor is using his time in Europe to fight on the bankers’ behalf, rather than looking at how we regulate our banks and financial sector in a sustainable and fair way that will drive real investment and real jobs in our economy.
What affect businesses in my constituency just as strongly, and 2.4 million businesses across the country, are energy price rises. They have hit the cafes I visit in Grangetown as much as they have hit the hard-working nurse or police officer who is struggling to pay their energy bills in places such as St Mellons and Penarth in my constituency. Energy bills have risen by £300 a year since the election. The Government constantly try to con us into believing that they are cutting bills, but the bills continue to rise. The Government remain unwilling to agree to an energy price freeze, although this week one of the major energy companies agreed to freeze its prices.
Earlier, my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) spoke passionately about visiting food banks in her constituency. I meet people who are struggling to get by: people who have been in work and have been looking for work, but who are now experiencing the indignity of having to go to food banks for emergency help.
Stephen Doughty
Indeed, indeed.
As my right hon. Friend the shadow Chancellor pointed out today, it was Labour that supported, and indeed beat down, successive cuts in the main rate of corporation tax, which fell from 33% in 1997 to 28% in 2010. Given that the rate today is 21%, however, we cannot justify another cut for bigger businesses when so many small and medium-sized businesses are under pressure. We want to see a cut that would benefit 1.5 million businesses throughout the UK, and in Wales we are already leading the way in that regard.
A moment ago, I mentioned the success of the Jobs Growth Wales scheme. I want to highlight that success, because there is a big contrast between it and, say, the failures of the Work programme introduced by this Government. As I said earlier, the Government cut the future jobs fund when they came to office. We in Wales, under a Labour Government, chose a different way, without which far too many young people would otherwise be missing out on opportunities for growth, development and experience. They would be sitting idly at home, rather than being out there developing skills and contributing to the economy.
My hon. Friend the Member for Airdrie and Shotts (Pamela Nash) has recently done some excellent work on youth unemployment and highlighted that 900,000 young people throughout the country receive unemployment benefits for more than a year—a figure that has doubled under the Government. Again, it is a tale of two approaches. Obviously, we want the jobs guarantee to be funded by a bankers bonus tax, learning from the example of schemes in Wales.
I have strongly supported a living wage for some time. I congratulate Cardiff council, which has introduced a living wage and Cardiff university, which took the bold step of introducing the living wage following campaigning by many organisations such as Citizens UK to bring people’s wages up so that they can earn more and cope with the cost of living, and ultimately contribute more to the taxation system and the economy. I am disappointed that the Bill does not make any plans to boost wages such as the Opposition’s proposals to incentivise firms to pay the living wage by giving a 12-month tax rebate of up to £1,000 for every low-paid worker who gets a rise. Increased tax and national insurance contributions raised from employees receiving higher wages would fund that scheme. That is about a race to the top. It is about building people up and getting them off social security and into better paid jobs, rather than the Government’s race to the bottom.
Tax avoidance generated some strong remarks from the Chief Secretary when I mentioned it. This morning, we heard that the Business Secretary has lost taxpayers billions in the Royal Mail fiasco. We need to look increasingly carefully at the Government’s great claims about tax avoidance and how much they will get back in various deals and schemes. I only wish that they had spent as much time in the past three years on measures to stop people avoiding tax as they have on cutting taxes for the richest.
I want to respond to the Chief Secretary’s comments. Despite the Bill’s numerous clauses and instruments on tax avoidance, which, I am sure, will be interesting to debate, the amount of uncollected tax rose last year. The Swiss tax deal will raise only a quarter of what the Chancellor claimed when he added it to his autumn statement. Many Opposition Members will treat with scepticism any future big claims about billions that will come from such deals when they are not delivered.
Tax avoidance is significant for the country’s finances and is also regularly raised with me locally. Ordinary taxpayers and businesses throughout the country are concerned about companies and individuals engaging in aggressive tax avoidance and tax avoidance schemes, and about individuals who fritter away this economy’s wealth in tax havens and through other loopholes, rather than contributing.
I will examine the provisions closely and follow the debates with interest. I am unlikely to serve on the Finance Bill Committee this year, although I enjoyed it greatly last year. [Hon. Members: “Shame!”] Indeed, it is a shame. We need to continue to hold the Government’s feet to the fire on tax avoidance. Many of our constituents would want us to do that.
The general anti-avoidance rule has been introduced and there are new schemes about accelerating receipts, but will they generate more money for the Exchequer? It is all well and good to introduce them faster—we all want that—but will more money be raised? A recent report in the Financial Times stated that the Office for Budget Responsibility originally hoped that the tax system would collect revenues worth 38.8% of national income in 2014-15, but that figure has been progressively revised down to 37%. We have to treat some of the Government’s claims about tax revenues and receipts with great caution.
This Finance Bill does nothing to tackle the cost of living crisis that many of my constituents are facing. It does very little to support the small and medium-sized businesses that are crying out for help, and it is continuing with out-of-touch policies such as millionaires tax cuts. Instead of learning from the economic and employment successes of the Labour Government in Wales, this Government are continuing to attack and to smear that Government. They would do far better to learn from them.
Ian Swales (Redcar) (LD)
This Finance Bill represents another step in clearing up the mess left by the previous Government. Most of my constituents know that a standard of living that depends on borrowing from the bank and running up credit card bills will eventually be reduced when people have to start paying off the debts. That is what we had under the previous Government. The Opposition are trying to con the public—
Ian Swales
Just a moment; I have only managed a couple of sentences. The Opposition are trying to con the public into believing that the cost of living can remain the same, regardless of the history and of the amount of money that was left behind.
Ian Swales
Unfortunately, I was not here during the last Parliament, but I have read a great deal of what my right hon. Friend the Member for Twickenham (Vince Cable), now the Business Secretary, said at the time. He was warning of the difficulties many years before they actually arose. I am quite certain that our party was watching the situation carefully, and that it could see what was happening.
There is a growing myth, which was repeated by the hon. Member for Cardiff South and Penarth (Stephen Doughty), who is no longer in his place—[Hon. Members: “He is here.”] My apologies; he is in a different place. That myth has also been repeated in the Opposition’s reasoned amendment, which states that
“working people are £1,600 a year worse off”.
Even the Institute for Fiscal Studies would admit that that is to do with gross income; it is not to do with net income, and it is not the amount by which people are worse off. Even the shadow Chief Secretary to the Treasury, the hon. Member for Nottingham East (Chris Leslie) pointed that out in his speech. One reason why people are not worse off by that amount is that there has been a large cut in income tax. That was a high priority for the Liberal Democrats, and I am delighted that in a few days’ time people will have experienced a £700 tax cut since the general election. The Bill includes another £100 for basic rate taxpayers.
Ian Swales
Everyone is in a different situation, but it is certainly not true to say that, for more people, the Government have given with one hand and taken away with the other. The hon. Lady should know that.
The Opposition’s reasoned amendment also mentions a “tax cut for millionaires”. This is from a party whose former Business Secretary said that he was
“intensely relaxed about people getting filthy rich”.
And it showed in what the Labour Government did for 13 years: the top rate of income tax was 5% lower than it is now until 6 April 2010, the very last day Labour Members sat on the Government Benches—until then they cut taxes for millionaires every year they were in power; capital gains tax was 10% lower, meaning that hedge fund managers in the City had a lower tax rate than those cleaning their offices; tax relief was available on pension contributions of £250,000 a year, whereas the current figure is £40,000—the difference is £100,000 in tax; and VAT was 2.5% lower, making a top Ferrari £5,000 cheaper—that is what was actually happening for millionaires.
Julie Hilling
The hon. Gentleman should continue to listen to what I have to say, because before the crash we did not have the structural deficit that he is talking about.
Mr Kevan Jones
The hon. Gentleman just referred to a “record structural deficit”, but according to the OBR in 2010 it was 7.7%. In 1998, it was more than 8%.
Julie Hilling
I thank my hon. Friend for that intervention. I will come on to some of the details in just a moment.
Before they say that Labour should have done more to regulate the banks, Government Members must show some humility. The Conservatives wanted less regulation. Yes, Labour responded by boosting public spending and borrowing to offset the catastrophic collapse in private sector spending, and the £90 billion spent on the bank bailout plunged the public sector into record annual deficit, but what would they have done? Would they have allowed the banks to collapse and allowed us to go into a depression worse than that in the 1930s? Would they have allowed thousands, if not millions, to lose their houses, their pensions and their jobs? Yes, we bailed out the banks, we cut VAT and income tax and we gave 150,000 businesses more time to pay their tax bills. We put in place measures that helped 300,000 people stay in their homes and we set out how we would halve the deficit over four years once the recovery was in place.
Do Conservative Members agree with those who were on their Front Bench at that time? They opposed the fiscal stimulus and the measures to support the economy and families. They pushed for the deregulation of the mortgage market even as the crisis began and they voted against the Bill that became the Banking (Special Provisions) Act 2008, which would have let Northern Rock fail. Where would families and businesses be now if the Tories had got their way then?
Charlie Elphicke (Dover) (Con)
It is a real pleasure, as always, to follow the hon. Member for Bolton West (Julie Hilling). Listening to her speech, and indeed that of the shadow Chief Secretary to the Treasury, the hon. Member for Nottingham East (Chris Leslie), I was reminded, given recent events in Ukraine, of the charge of the Light Brigade in the first Crimean war, which we fought some years ago. They were very game, very determined and, in complete denial of the situation in which they found themselves, carried on regardless. It was fascinating to listen to the shadow Chief Secretary’s amazing negativity about the changes the Government have made. The Government have turned around the very difficult situation that they inherited.
The hon. Member for Bolton West seems to have a somewhat short memory, to put it gently. She was quick to blame the problems on everyone else, but slow to acknowledge any responsibility on the part of the previous Government. It is important to remember that there were problems in the UK’s banks due to the extremely poor and dislocated regulatory system put in place by the previous Prime Minister. There were problems with this country’s finances, and not just since the 2008 recession, because the previous Government ran a structural deficit from 2002 onwards, which left this country massively exposed. They said that they managed the crisis so well, but the UK, as some of us recall, had one of the largest budget deficits in the developed world. They spent the good years introducing more welfare and more spending, rather than controlling welfare and spending and making sure the UK’s finances were in a good state while the sun shone.
Mr Kevan Jones
The hon. Gentleman, who was not a Member in the House at that time, belongs to a party that throughout that whole period was calling for less banking regulation, not more. I know that he is one of the new Members who have been programmed to think that way by Tory central office, but the facts are that the GDP debt in 1997 was 42% and by 2008 it was down to 35%. Those are the facts, irrespective of what Tory central office tells him. He cannot deny the facts.
Charlie Elphicke
The hon. Gentleman knows perfectly well that his Government ran a budget deficit for a very long time. Running a budget deficit is understandable when coming out of recession, but not in a time of economic success. The previous Labour Government’s irresponsibility left this country badly exposed.
Mr Jones
I am sorry, but the hon. Gentleman must look at history. The previous Conservative Government ran a budget deficit for about 16 of their 18 years in office. In 1997 the deficit was nearly 8%. He has to look at the facts. The previous Tory Government ran a deficit even in good times.
Charlie Elphicke
Let us talk about those good times. Before the downturn in the ’90s, the national debt was at least 10 points lower than before the latest crisis.
Charlie Elphicke
Indeed.
There was Labour’s crash. We hit the wall in 2008 and were left overexposed in a bad place with an economy that had been run very badly for a long time. Then the Labour party has the cheek—
Charlie Elphicke
I have given way quite a lot. I think we have heard enough from the hon. Gentleman for a minute. Will he allow me to develop my points?
The Labour party, having learned nothing and forgotten nothing, has the gall to say that when we woke up in spring 2010, with a new Government, everything should immediately have been fine. Recessions are not like that; they continue for some time. It takes time to fix the car after it has been driven into the ditch. The absence of any sense of responsibility from the Labour party for the difficulties that it left and the toxic legacy that the Government inherited is, frankly, extraordinary. Government Ministers have done great work to turn things around and fix things. We cannot hand back the keys to the people who crashed the car when they remain in denial as the Labour party does today.
David Rutley
My hon. Friend says, from a sedentary position, that it is a great place.
These are, of course, challenging times, but things are improving. The reason for having a Budget that is useful and important for business is that it is through business and the private sector that we create jobs to enable people to take care of their needs and those of their families. The hon. Lady will know—as will, no doubt, Mr Deputy Speaker, although he cannot comment—that under the Labour Government 100,000 public sector jobs were created in the north-west over a period when net new jobs in the private sector came to approximately 18,000. Surely, that is completely unsustainable.
Mr Kevan Jones
The neo-cons of the Conservative party think that public service jobs—nurses or cleaners in hospitals—are somehow worth less than private sector jobs. I do not subscribe to that. I put it to the hon. Gentleman that the growth in jobs he refers to was achieved through spending that his party agreed to throughout all that time.
David Rutley
Public sector jobs are vital, but I am talking about the need to get the balance right between private sector jobs and the size of the state. That is what we are seeking to balance. On the comment that he has made repeatedly throughout the course of the debate, I was not in this Chamber prior to the general election.
David Rutley
That is true, and so were the Prime Minister and others, but I was not. I was working in the world of commerce and had severe reservations, like other Members no doubt, about the policies of the Labour Government. Let us look at the results: the bust that was created after the boom. We are clearing up that mess.
It is a pleasure to speak about the Bill, and a pleasure to speak about the way in which it builds on the Budget. Not only does it make Britain more competitive on the world stage, but, crucially, it reduces the barriers to competition and consumer choice here at home. It is vital to our residents as well as to our businesses. It is a sensible, responsible Bill from a sensible and very responsive Government. It is a Bill for enterprise, intended to rebuild trust in our economy and in our public finances, and also to rebuild the trust that this Government are on the side of the consumer, taxpayer, the saver and, of course, the entrepreneur. That is necessary, because confidence in the economy and in the free-market system can be regained only by increasing the power of choice and market knowledge among consumers. The crisis of confidence—the trauma of trust—that we inherited was a natural reaction to the failures of the Labour Government, and threatened to damage wider belief in prospects throughout the market economy itself.
It was not just a market problem that we faced; it was the problems of yet another Labour Government that we were having to clean up. A great deal of good has already come from the reversal of Labour’s policies on tax, and their disposition to micro-manage and, of course, to mis-spend. This Government have been opening up the economy to transparency and to competition—not least in banking—and putting the consumer and opportunities for new entrants to markets first. It has been a long, hard road, and there is more to follow. The global race is a marathon, not a sprint. We inherited the extraordinary deficit that many Labour Members want to deny, which amounted to 11% of GDP between 2009 and 2010, but will be halved to 5.5% of GDP next year.
David Rutley
Of course, if the hon. Gentleman will agree that it is a good thing that we have been able to reduce the deficit to 5.5% of GDP.
David Rutley
I did: absolutely. In fact, as Hansard will record, I referred to “the extraordinary deficit” that had been created by the Labour Government.
A budget surplus is now in our sights. We are likely to see it in 2018-19. According to the International Monetary Fund—which is often quoted by Labour Members—the UK is achieving a larger reduction in both the headline and the structural deficits than any other major advanced economy in the world. Unemployment is falling, growth is up, and we have a record number of businesses and a strengthening culture of entrepreneurialism and self-employment. Those are clear results from a Government with a clear sense of direction.
This Bill will doubtless be remembered for years to come for the great work that it is doing to help to promote the interests of savers and pensioners through the reforms that it introduces in clauses 39 to 43, which we will debate in Committee.
Mr Kevan Jones (North Durham) (Lab)
The hon. Member for Cities of London and Westminster (Mark Field), who is unfortunately no longer in his place, said that the Budget gave him a feeling of “upbeat optimism”. We have also just heard the hon. Member for Macclesfield (David Rutley) say that we should all be smiling, as though the Budget were to be the salvation of our nation. The Conservative party will clearly go into the next election using “Happy Days Are Here Again” as its theme tune.
Jacob Rees-Mogg
The hon. Gentleman will recall that “Happy Days Are Here Again” is traditionally a Democrat theme tune. I think it unlikely that the Conservatives would borrow from the left in America.
Mr Jones
I would not put anything past the new Conservative party, although I know that the hon. Gentleman is part of the ancient—even prehistoric—Conservative party. It is clearly part of the Conservative party’s strategy to try to give the impression that we have turned the corner and that the sunlit uplands are now before us. The public are neither so stupid nor so naive as to believe that, however, because they are living the reality of what this Government are doing to this great nation of ours.
Ian Swales
I thank the hon. Gentleman for giving way. The North East chamber of commerce said recently that its members’ business outlook was the most positive since 1995. Does he disagree with that? I accept that business is not everything, but surely he can welcome that.
Mr Jones
I have great respect for the North East chamber of commerce, but it represents only a certain section of the business community—it does not represent all the business community—and I have never seen it disagree with any Budget, because, understandably, it likes to keep in with the Government of the day. The “Conservative” Member for Redcar is clear in giving an upbeat assessment of his own constituency, but it is not one that I recognise and neither do many Members representing north-east constituencies.
The hon. Member for Macclesfield said that the Government had a clear sense of direction and the hon. Member for Dover (Charlie Elphicke) said that they had a clear plan, unlike the Opposition. Let us look at this clear plan and sense of direction. The narrative goes as follows, and before any Government Member says differently, these things are not invented by the Opposition; they are what this Government did when they came to power. We should recall that in 2010 our economy was actually growing. Why did it go into recession? It did so because of what happened during their first few days, including the measures on investment, which my hon. Friend the Member for Nottingham East (Chris Leslie) mentioned. What the Government did sucked money straight out of the economy, so demand went down. We have had the longest recession and recovery in history. On the Conservative party’s and the Chancellor’s own figures—these are not my figures or the Labour party’s—by now we should have seen 8.4% growth, whereas we have actually seen 3.8% growth. We were supposed to have got rid of the deficit by 2015, but we are actually borrowing another £190 billion more than we were planning to borrow.
That is the Chancellor’s supposedly successful plan. People would think that he would apologise for that, but that is about as likely as the hon. Member for North East Somerset (Jacob Rees-Mogg) walking into the Chamber wearing a pair of Wrangler jeans. The fact is that the Chancellor’s plan has not been working, with the root cause—the Liberal Democrats have been going along with this—being an ideological Conservative party, which is not just about deficit reduction, but is actually about small state Conservatism. The headlines in last week’s Budget were clearly designed around things such as the pension measure, which I will discuss in a moment, but tucked away were another £1 billion of cuts, which the Chancellor made permanent for future years. So that is more pain for Departments across Whitehall and communities across our country.
The Budget headline was clearly on pensions, and much has been said about the freedoms that the measure is going to give. I do not usually agree with the hon. Member for Watford (Richard Harrington), but he made some interesting points in his contribution and I share his fear about people’s ability to get proper financial advice about what to do with their pensions. I take his point that we are dealing with relatively small sums in terms of pension pots of £20,000 to £25,000 and the costs of giving that advice would be astronomical. Are we, however, going to avoid the chaos we had—many of us remember seeing it in the 1990s—when the vultures descended on workplace pension schemes, advising people to take money out and put it into all sorts of products, which led to people making bad investment decisions?
The Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), who is responsible for pensions, says that he is not really bothered if someone wants to go and blow it all on a Lamborghini. Hon. Members might not be surprised to learn that I do not know a great deal about Lamborghinis, but I was a bit disappointed that he did not use an example of a British car, because it would have been a good idea to boost the British economy if he really wanted to give an example of an expensive car. Today, I looked up the cost of the cheapest Lamborghini and found that it is £300,000—that represents quite a big pension pot. The problem arising out of that policy is that the Government have not published the modelling on what the effects will be on the public purse. They need to do that because hidden issues need addressing. It is right to give people choice and freedoms, but the Chancellor did nothing at all to affect the charges, fees and so on that small pension pots are attracting, which can be substantial, not only at the time of buying an annuity, but over the lifetime of the pension. That would be a thing to do.
I have serious concerns. For example, if a pensioner uses their £300,000 plus to buy a Lamborghini—or possibly a Bentley, which would at least boost jobs in this country rather than in Italy—what do they do when they have no money left? The Pensions Minister says, “Well, that’s fine because it has all been taken care of by the new generous state pension.” He forgets that there are other things. There is no mention, for example, of care costs or of housing benefit. Those things need to be explained. It helps the Chancellor; he has a figure in the Red Book for the amount of tax he will raid out of pensions in the short term. There will clearly be a boost if people spend their money in the economy. I am not usually a great fan of the Association of British Insurers, but a serious issue has been raised about the future of the annuities market. Insurers do not just get in money and sit on it; they invest it, so we are talking about long- term investment that is being taken out of projects and businesses. To make a full assessment of the effects of this move, we need to understand the modelling of the scheme, and that has not been forthcoming. It will be interesting to see whether the Government will produce it.
The other issue is the increase to £15,000 a year in the allowance for individual savings accounts. Like the hon. Member for Macclesfield, I speak to my constituents. It is laughable to suggest that they may have £15,000 lying around to invest each year. I think that most people are in the same position. As my hon. Friend the Member for Glasgow North East (Mr Bain) said, people are not investing the money; they are actually spending it to live in their old age. Some 8 million people in this country have no savings whatever, and another 32% have less than £1,000 in savings, so the proposal will not help anyone. It may help some who have £15,000 to invest. Should we welcome that? Possibly, but the idea that it will help most of my constituents, or most of the constituents of my hon. Friends, is frankly not right. On Saturday, when I was out at an event in Chester-le-Street in my constituency, someone said to me, “Who’s got £15,000 lying around to invest in that type of savings plan each year?”
When the Chief Secretary to the Treasury opened the debate, my hon. Friend the Member for Nottingham East said that he was suffering from Stockholm syndrome, because he has actually become part of the Conservative party. Indeed, having heard the speech and the comments of the hon. Member for Redcar, I think that he also has a very bad dose of the syndrome.
I asked the Chief Secretary at what point in the previous Labour Government did his party say that spending was too high. I then gave him another chance and asked him whether the Liberal Democrats had called for reduced expenditure in any area—whether it be in the NHS or anywhere else. There was not one single area. At least the Conservatives could say that they ditched the pledge around 2008-09. The Liberal Democrats kept going right into the last general election. To hear the hon. Member for Redcar now, we might think that he had long been there calling for fiscal responsibility and less expenditure. The Liberal Democrats may trumpet it now, but that was not the case back then.
The Chief Secretary to the Treasury said that he was proud that the increase in allowances was straight from the last Liberal Democrat manifesto. It might have been, but the commitment on VAT—he was challenged about what happened to that—went the same way as the commitment on tuition fees. Remember the VAT bombshell? It was the first thing they did and the Liberal Democrats could not even claim at that stage that they had been affected by Stockholm syndrome, as they were only in the early days of captivity. And what did they do? They increased VAT. The hon. Member for Redcar says that the increase in VAT is a progressive form of taxation. I am sorry, but it is not. All the indications show that it is a regressive form of tax that hits some of the poorest in our communities, including in Redcar.
Ms Margaret Ritchie (South Down) (SDLP)
Is my hon. Friend aware that in Northern Ireland we have a particular problem with VAT and our land border with the Republic of Ireland? Our VAT is levied at 20% for tourism products and in the Republic of Ireland they have been able to retain it at 9% as of today. They also have air passenger duty at 0% from today.
Mr Jones
I agree. Some particular issues that appertain to Northern Ireland need to reflect the common land border with the Republic of Ireland.
As we have heard several times this afternoon, the Liberal Democrats are trumpeting as a great thing the fact that we have increased the personal allowance. The people who gain from it most are not the poor but those on middle incomes. MPs—quite apart from some Government Members who earn a lot more than their parliamentary salaries and who will gain even more—will gain more than the low paid.
Jacob Rees-Mogg
The hon. Gentleman must bear it in mind that nobody gains more than the £700 and that in the early stages the higher rate taxpayers were not included in the increase in the lower rate threshold. It was clawed back from them, so what he says about MPs is actually not correct.
Mr Jones
I was referring to some of the hon. Gentleman’s colleagues and I do not know whether he is included, as I did not look up his figures. The right hon. Member for Wokingham (Mr Redwood), who was in the Chamber earlier, earned £213,000 last year on top of his salary. He will therefore gain from the tax cut that the Government have given him. The Conservative Member with the highest figure earned something like £800,000 a year.
VAT, the cuts to housing benefit, the bedroom tax and the changes to tax credit have all affected those individuals. My hon. Friend the Member for Glasgow North East also mentioned national insurance, which affects those who are on very low pay. As for the idea that the increase in the personal allowance is somehow a great gift to the low paid, it is, as somebody said earlier, simply about giving with one hand while taking away with the other.
One missed opportunity in this Budget is that of putting investment into our economy. Clearly, the narrative is about a small state and the Conservative party wants as small a state as possible. The view expressed by the hon. Member for Macclesfield gave the game away and that is, basically, that the only people who create wealth in this country are entrepreneurs and business, that somehow public expenditure is a bad thing and that spending money on services does not create any wealth at all. In the early days of this Government, the one thing that sucked more money out of the economy than anything was the cuts to public services and local councils. Councils do not sit on money, they spend it in their local communities. I know that many small businesses, including one small building company in Chester-le-Street, nearly went to the wall because their main contracts were with the local authority.
The hon. Member for Redcar used a comparison with maxing out credit cards, but the idea that the state is like an individual’s personal bank account is complete nonsense. Clearly, if the state invests in infrastructure and other things, we get growth in the economy.
Philip Davies (Shipley) (Con)
On a point of order, Mr Speaker. I hope the hon. Gentleman will accept my apology for interrupting his flow. When I opposed the ten-minute rule Bill earlier today, I had intended to start by referring Members to my entry in the Register of Members’ Financial Interests. Having read Hansard, it appears that I failed to do so, so I wanted to come to the House at the first opportunity to correct the record and refer Members to my entry in the Register of Members’ Financial Interests. That is my purpose in doing so now; it was not intended to interrupt the hon. Gentleman’s flow.
Mr Speaker
I am grateful to the hon. Gentleman for that point of order. His courtesy in the House is well known, as in general terms is his interest in the sector concerned. His omission was inadvertent and he has put the record straight at the first opportunity, and I thank him for doing so.
Mr Jones
The hon. Gentleman has not broken my flow, but I thank him for the little breather to give my larynx a rest.
If one follows the logic of the hon. Member for Macclesfield, business should not get any subsidies whatever. But we all know that that is complete nonsense. The Government are now increasing investment allowances, but they cut them in 2012. We are now told that this is a great achievement of the Budget, but we are only back to where we were in 2012.
I am seriously concerned that we have a two-speed Britain. We have a housing market that has clearly been stoked in London and the south-east, and we have a stagnant north. The hon. Member for Hexham (Guy Opperman) described Hexham, which is a nice constituency, and in the north-east, but he is living in some type of parallel universe if he thinks that the north-east economy is booming. Well-paid jobs in the public and private sectors have been replaced by low-paid zero-hours contracts. Four out of five of the new jobs that have been created are low paid and in the service sector, not in the long-term sectors. Added to that—as a north-east Member the hon. Member for Redcar is voting for this—is a movement of the limited public finance that there is from the north-east and other areas to the south. For example, we have already seen the record level of cuts in public expenditure for councils in the north-east. Durham county council has lost 40% of its budget. Contrary to what the Secretary of State for Communities and Local Government says about 40% of a budget somehow being saved by cutting down on pot plants or the fripperies, that is not possible. It has to be done by cutting back on services and people.
As if that was not bad enough, there is more to come. In the Budget and as part of the process, Durham county council will now lose another £13 million. Gateshead council will lose nearly £8 million. Newcastle city council will lose a further £14 million. South Tyneside will lose £7 million and Northumberland nearly £4.2 million. That will take money out of the economy and redistribute it to those in the south. The cut per dwelling in South Tyneside is £101.50. In Sunderland, it is £90.45. Meanwhile, Wokingham—people will think I have a thing about Wokingham—has an increase of £55, and Surrey an increase of £51. The hon. Member for Redcar, the great champion of the north-east, is voting for these things, redistributing money from the north and north-east to the south of England. That is having an effect on jobs.
The hon. Member for Macclesfield might think that public sector jobs are not important, but I tend to think that they are. When one needs the NHS, people must be there. When home care is needed from a local authority, people must be there. If there is no money and deprivation indices have been removed, not only are those services being removed, but money is being taken from the local economy. That will have an impact on exactly the businesses that the hon. Gentleman argued earlier we should be supporting and growing.
David Rutley
The record will show that I did not say that public servants do not do a useful job, because I think that they do. Where do the interests of the taxpayer fit into the hon. Gentleman’s world, because I have not heard that mentioned in anything he has said? He seems to think that money grows on trees, rather than coming from taxpayers.
Mr Jones
The hon. Gentleman’s naive and simplistic approach is that the only way to grow the country’s economy is to sit back and wait for the great entrepreneurial spirits he talks about to grow up, as if by magic, and rescue the economy. Governments have a role to play in generating economies and delivering good, local public services. The idea that Durham county council, or any council, sits on that money is ridiculous; it spends the money in the local community, as do the people who work for it. It should come as no surprise to anyone—it might to him—that taking money out of an area, including the spending power of local authorities, public services and local people, will have an effect on private businesses, whether shops or services, because people do not sit on their money at home; they spend it in their local communities.
David Rutley
Whose money is it? It is not the state’s or the council’s. It is the taxpayers’ money, and there is a responsibility to spend it wisely.
Mr Jones
I totally agree. The hon. Gentleman should look at my record on Newcastle city council, because I always ensured that we got value for money. But there is a big difference between getting good value for money for the taxpayer and his suggestion that local authorities and public services spending money will somehow not have an effect on local economies. It should come as no surprise to anyone that taking money out of people’s pay packets, whether in local councils or public services, will have an impact on private sector jobs in local communities.
Jacob Rees-Mogg
The point that the hon. Gentleman is missing is that the money that is taken out of the taxpayer’s pay packet is tax in the first place, so this is merely changing the money from being spent in one part of the country to being spent in another; it is not creating new money.
Mr Jones
I disagree. Were we to build a new motorway or railway line, such as HS2—I am sure that the hon. Gentleman is a great advocate of that vanity project—the increased speed with which people would be able to move around and do business would have an impact, so it cannot be said that that will not have an effect. We come back to the idea that somehow Governments cannot have an impact on what is happening.
Last week my hon. Friend the Member for Middlesbrough (Andy McDonald) raised with the Prime Minister the disproportionate amount of money spent on transport in London, compared with the north-east. Interestingly, the Prime Minister rattled off four transport projects that he claimed this Government had delivered for the north-east. He was very confident about his facts, which did not surprise me, because his public school background means that he can be very confident even when talking complete nonsense—it does not really bother him, because that is the way he has been brought up. He mentioned the Tyne and Wear Metro and the Tyne tunnel—I cannot remember what the third and fourth projects were. They were all agreed by the previous Labour Government. In fact, the Tyne tunnel was finished before this Government came to office. The idea that this Government are somehow leading on those big infrastructure projects, which are desperately needed in the north-east, is ridiculous, because clearly they are not.
Housing is an issue that could be completely missed in the Budget. The way forward is clearly to encourage people to buy their own homes, and I have no problem with that, but if someone is in low-paid work on a zero-hours contract, and possibly having to work two part-time jobs, as many people do, the idea that they will ever get the credit worthiness to own their own home is complete nonsense. What we need, certainly in the north-east and in my constituency, is affordable housing for rent. The easy thing that the Government could do—it would not cost them any money—is give housing associations the borrowing requirements they need against their assets to build houses. The Government could do that, but they are not. Instead, they are creating an artificial bubble in the housing market. Look at the difference between the north-east and the south. Prices in the north-east are still £5,000 lower than in 2008; in London and the south-east, they are 77% higher. Ridiculously, housing is completely unaffordable for most people in London and parts of the south-east, with average house prices of £400,000. Even people with reasonable standards of living find it hard to buy a house.
I turn to youth unemployment, one of the great tragedies of the Government. I fear that there will be a repeat of what we saw in the 1980s—a completely lost generation of young people. They have no opportunity for a job, not only in the short term but in the longer term. Why is that important? If someone meets us for the first time, they usually ask us two things: our name and what we do for a living. Some people cannot answer the second question about a fundamental part of who they are. Some say that there are lazy people, but I am sorry—there are hard-working people struggling to make ends meet.
I will give two examples from my constituency. I met someone on a zero-hours contract working in a store, which I will not name, in the Metrocentre—that great cathedral to Thatcherite free market enterprise.
Mr Jones
In Gateshead. This 17-year-old on a zero-hours contract, who lives in Stanley, told me that he turned up at the Metrocentre one morning only to be told that there was no work and he should go away. He had paid his bus fare to get there, went back home and was then rung up to be asked back for two hours that afternoon. If he said that he could not do that, he would be sanctioned as one who was not trying hard enough. As was said eloquently earlier, for the Government the issue is a job at any cost. That man was getting out of bed every morning to try to work.
I met another young lad in Stanley last week. He had applied for well over 150 jobs and been on umpteen courses. The scandal about the Work programme is that the Government are lining the pockets of private sector suppliers. This lad was desperate. He said he wanted to set up his own business. I am sure that Government Members would think, “Brilliant! This great entrepreneur needs to go forward.” He went to the jobcentre to ask for assistance in getting his driving licence. They told him no, although they could send him on a course to do everything else. That is the trap for some of these young people. There is no hope for them and they feel neglected.
The issue goes further than that. The older generation look at their grandsons and granddaughters and see no hope. We needed hope in the Budget for those young people, but there was none. We need to give them hope. Labour has a commitment to get people into work. The hon. Member for Dover was disparaging about the previous Government’s attempts to do that, but it is important to get people into the ethos of work, because not having that place in the world is difficult. People can get into a cycle and give up hope.
The young people I meet in my constituency are working hard and trying. As I said, some are treated like hired help—paying out of their own pockets to get to work and being told to come back later when there might be hours. That may be the type of society that the Liberal Democrats and Conservatives want, but I do not. The next election must be about a very clear message not only about standards of living but what type of society we want to live in. Do we want to live in a society where people are on zero-hours contracts with uncertainty about whether they are going to get work, and youngsters are not going to improve their life chances as others did? The hon. Member for Macclesfield talked about a global race—well, it is. This Government have a clear policy: a global race to the bottom. This is not the high-skilled and forward-looking country that I want to live in.
As my hon. Friend the Member for Bolton West (Julie Hilling) said, if we are the sixth richest country in the world, it is a scandal that people who are not sat idle but going out to work are reliant on charity to live and put food on the table for their children. That makes me very angry. This is not the society I want to live in. The Budget does nothing for those people. In areas such as the north-east—my hon. Friend the Member for South Down (Ms Ritchie) mentioned Northern Ireland—there needs to be a clear plan for getting those regions working again: a new deal that has real investment behind it as regards infrastructure and making sure that young people have the opportunities they need.
Next May, I will make sure that I always remind people of one thing: that not a single one of this coalition Government’s horrendous, horrible policies, with the torture they have inflicted on many thousands of our citizens, as we expect from Tories, could have been introduced without individuals such as the hon. Member for Redcar and other Liberal Democrats who have voted for them all.
Jacob Rees-Mogg
I am grateful to the hon. Gentleman for that intervention. The thing about corporation tax is that a lot of corporations can be taxed almost anywhere in the world. That is why I think the Government are absolutely right to bring down the rate of corporation tax. It will help businesses to be headquartered in the United Kingdom, which is good for the UK in terms of employment and, indeed, tax revenues, by which I mean not just corporation tax revenues, but the other tax revenues paid by companies, namely business rates and employer national insurance contributions, as well as the taxes paid by their employees. We get a larger, more successful economy if we are relatively generous to corporates.
Northern Ireland Members have spoken of the particular circumstances there and the competition Northern Ireland faces from the Republic of Ireland. That is a very good case of tax competition between neighbours and it can be seen very bluntly in Northern Ireland because of the land border. We see less of it on the mainland of the United Kingdom because we do not cross borders quite so easily and we do not necessarily focus on it as much as we should. I think that the Government are absolutely right on corporation tax and that they should continue down that line.
The Government have also been right on the raising of thresholds and I hope they will continue with it. It makes sense, as my hon. Friend the Member for Redcar (Ian Swales) has said, because it is not logical for people on the minimum wage to be paying taxes. There is no point in taxing people who are low earners merely to pay them benefits with their own money. Although it was a Lib Dem policy in the last election and they deserve credit for that, it was suggested earlier by Lord Saatchi and Peter Warburton in a booklet they produced for the Centre for Policy Studies. The Conservative antecedents of the policy are pretty good and solid. It is a Tory policy in origin and it ought to continue.
The aim of the Government in the long run should be that people on the minimum wage should pay neither tax nor national insurance. In that way, the amount of benefits that needs to be paid to them will be very significantly reduced, as will the administrative burden. Roughly speaking, tax collection costs 1% of the amount collected, and benefit payments cost about 2% of the benefits paid out, so if we tax people to pay them benefits, the overall cost will probably be about 1.5% of the total amount paid and received. The policy is very good and welcome.
Another policy that must be welcomed is the change to pensions. Questions about pension funds came up when my right hon. Friend Chief Secretary to the Treasury spoke. What the Government are doing is very simple: they are allowing people to keep their own money. That is not very popular among Labour Members, who seem to have the view that it is the Government’s money and should be distributed as they, rather than individuals, wish. Conservative Members and, indeed, Liberal Democrats who still have some residual liberal attachment believe that the money belongs to the individual taxpayer.
The policy has a very clear advantage for the tax authorities, because it clarifies the idea that pension saving is nothing but a tax avoidance boondoggle. It is about taxing people once, rather than twice. People are taxed when they withdraw the money from their pension fund, with a 25% exemption, rather than taxed when they put it in. It is worth bearing in mind that if that was at any point reversed, the withdrawal would be taxed as a capital gain rather than as income, and the rates that applied might be very different from those that currently apply to withdrawals from pension funds. Any Government who intend at any point—whether at the higher or the lower rate—to withdraw the benefits of saving through a pension fund should consider the ultimate pay-out, and how the policy is a fair means of taxing people and ensuring that they are not taxed more than once.
As my hon. Friend the Member for Dover (Charlie Elphicke) said, this was a “steady as she goes” Budget. It is very impressive. The Government have not gone for cheap gimmicks, as parties sometimes do before elections; they have gone for continuing the work, which they started in 2010, of getting the country back on track. They are doing so in a way that benefits the least well-off in society the most. It is absolutely striking that the real incomes of every decile other than the highest-paid decile will rise by more than prices this year, as they did last year.
That Government achievement is helping where help is most needed: it is helping business to allow it to invest; doing more to help exporters; helping to rebalance the economy for the long term; and—gloriously, splendidly and rejoicingly—it is doing something to ensure that people have their own money. What a fine Conservative principle that is. We believe that the individuals and their families who build up society have the greatest wisdom about how they spend their money, not the tax authorities that dish it out. What is being done with pensions is the clearest statement of that. Yes, if people buy Lamborghinis, Bentleys or Porsches, they will spend it unwisely—
Jacob Rees-Mogg
None of them is British, unless people buy Aston Martins. We could say, “Let us all buy Aston Martins with our pension funds to save the British car industry.” If we decided to do so, we would at least be spending our own money to support Britain. If we ended up sleeping in the Aston Martin, we would have nobody but ourselves to blame; it would not be the nanny state, the socialist state or the “Let’s tell you what to do” state that had taken charge. For that, we should rejoice at the Budget and the Bill.
Guy Opperman (Hexham) (Con)
Growth up, unemployment down, inflation down and, certainly in my region and constituency, a very positive response to the Budget. The North East chamber of commerce held an event, to which I went with the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) 10 days ago, to assess and review the Budget. The response was overwhelmingly positive. I accept that it is only a chamber of commerce, as some Members have said—the hon. Member for North Durham (Mr Jones) was rather disparaging about the North East chamber of commerce—but it has 3,000 members, all of whom are SMEs and businesses in the north-east. They said:
“The NECC is pleased to see recognition of some of its key priorities in the Budget and that these figures demonstrate that increased business confidence, as reflected by the NECC quarterly economic survey, is manifesting into real growth and jobs.”
I welcome the fact that the jobs situation is improving in the north-east. [Interruption.] As always, it is good to hear the hon. Member for North Durham chuntering from a sedentary position. His speech was one of those where the glass was either half full or half empty. From HS2, Adonis and the job situation, the glass was evidently definitely half empty, but the figures—these are not my figures, I hasten to add, but the House of Commons unemployment by constituency JSA figures—indicate that in North Durham the number of JSA claimants is down 21.8%. The 18 to 24 claimants are down 22.4%, the 50 and over claimants are down 14.8% and the claims of 12 months duration are down 13.3%.
Mr Kevan Jones
The hon. Gentleman is looking at claims rather than unemployment, which is the important thing. That is the point my hon. Friend the Member for Edinburgh East (Sheila Gilmore) made. He should talk to people who are not on the claimant count and people who are being sanctioned by the Government. The idea that claimant count is a reflection of economic activity in North Durham is complete nonsense.
Guy Opperman
Let us try to be nuanced about this. We all accept that there are isolated examples of genuine distress and difficulties of the kind that the hon. Gentleman describes. No one disputes that; such circumstances exist in all our constituencies. However, as the hon. Gentleman knows, I spend more of my time in Newcastle than in Hexham—
Guy Opperman
The claimant counts in Newcastle are down as well, as are the claimant counts in virtually every constituency in the north-east. Suggesting that individual examples take care of all 21% is fatuous.
Guy Opperman
Not at this stage. I want to make some progress. I had the great pleasure of listening to the hon. Gentleman for 42 minutes—
Guy Opperman
And, sadly, I shall not be burdening him with 42 minutes myself.
Guy Opperman
It is great to be applauded by one’s Whip.
Let us look at the bottom line. Corporation tax is down from 28% to 21%, and employment allowance will reduce employers’ national insurance bills by up to £2,000. Anyone who visits any high street in any town or village in the country will find that that is a massively popular policy, and anyone who wanders into the premises of any small and medium-sized enterprise will find that everyone there is talking about it. Larger businesses will benefit particularly from the doubling of the annual investment allowance, and nearly every business will pay no tax up front when it invests in the future. That is fantastic.
The north-east is the only region in the country with a positive balance of payments. We export more than we import. I welcome the fact that manufacturing is being turned around and being supported by this Government, after struggling under the last Government. The number of apprenticeships is doubling in our area, and the number of traineeships is also increasing. I cannot stress strongly enough the difference that traineeships are making in the brave new world in which we are living.
I visited a company called Release Potential, which is in Stocksfield, in my constituency, and which is giving young people the opportunity of becoming trainees. Once they have done that, they have a much better chance of securing apprenticeships and jobs. We should be supporting that, and, as always, encouraging employers to take on apprentices and trainees. I should make a declaration at this point: I am the first Member of Parliament to hire, train, retain and, now, employ an MP’s apprentice. She is not an apprentice MP; she is an office manager, although some people often say that she would do a better job as an MP. The honest truth is that if I can do that when running a small business with a relatively low budget and very few staff—as all MPs do—I see no reason why other SMEs cannot do the same.
What else is there to welcome in this outstanding Budget? [Laughter.] Labour Members laugh from a sedentary position, as they always do, but Newcastle airport has sought a change in the air passenger duty rules for ages. When I went to see the Chancellor, he listened to my representations and to those of Members from Manchester and Bristol, and I am grateful to him for that. The changes in APD rates, including the abolition of the two highest rates, will be fantastically helpful, and—again—will be welcomed by the chambers of commerce, not just in my constituency but throughout the country. Anyone who travels on an international route to try to promote trade overseas will welcome it.
As chair of the all-party parliamentary group for air ambulances, I should declare an interest in the subject. I also made use of one or two air ambulances when I was a very bad jockey and required their assistance. For many years, since the presentation of a petition signed by 155,000 people—and the Hexham Courant’s small but very weighty petition—we have been trying to get rid of VAT on the fuel used by air ambulances. In the north-east, the Great North air ambulance service led the campaign, and is a massive beneficiary of it. The cut announced in the Budget will save air ambulances a huge amount. It will allow more missions to be flown, and there is no doubt that lives will be saved. There is immense support for the measure in all the air ambulance services in the country,
The Chancellor said in his Budget statement:
“I will continue to direct the use of the LIBOR fines to our military charities and our emergency service charities”,
but added that he would also
“extend that support to our search and rescue…and provide £10 million of support to our scouts, guides, cadets and St John Ambulance.”
His intention was best expressed by this simple expression:
“1…want the fines paid by those who have demonstrated the worst values to support those who demonstrate the best of British values.” —[Official Report, 19 March 2014; Vol. 577, c. 786.]
That is absolutely outstanding, and offers support to all the individual charitable and voluntary organisations that are the bedrock of our communities.
There were also announcements on school funding. Anyone who, like me, has taken part in the F40 fair funding campaign will greatly welcome the announcement from the Minister for Schools, and the support from the Treasury. F40 budgets will be increased, be it in Northumberland, Durham or in other rural areas. The consultation going forward is an outstanding and important contribution. If we can change the way our schools are funded, they will have a genuine possibility of surviving.
I could talk about fuel duty, which, as we all know, the previous Government raised remorselessly—well over a dozen times. I am pleased to say that the Chancellor, with great difficulty and in very difficult times, has managed to cancel the fuel duty escalator that the previous Government sought to include in future Budgets.
I have some outstanding breweries in my constituency, such as the Hadrian Border Brewery, Allendale and Matfen. I can assure you, Madam Deputy Speaker, that when you holiday in God’s own county of Northumberland, you will want to visit the various beer festivals that will take place there this summer, where the further reduction in beer duty will be welcomed. That reduction supports not just the person who wants a pint of bitter, but the brewers, because it allows them to invest and to create jobs. It provides genuine support for businesses that struggled desperately under the previous Government, and they are extremely grateful.
On housing—unlike the hon. Member for North Durham, I am having to condense my 42-minute speech into approximately 10 minutes—those who visit Humbles Wood, in Prudhoe, in my constituency, which is a new-build housing estate, will find that 85% to 90% of all purchases there are made with Help to Buy. It has utterly transformed the ability of a relatively low-paid local community in one of the smallest towns in my constituency to access housing. It is a massive help, and not just there. To answer the point made earlier by the hon. Gentleman, when I spoke to the various estate agents in West road, Newcastle, they too reported the massive difference that Help to Buy has made in what is—
Guy Opperman
One last time, just to give the hon. Gentleman an extra minute or so.
Ian Mearns (Gateshead) (Lab)
It is a pleasure to follow my near neighbour, the hon. Member for Hexham (Guy Opperman). There has been a north-east persuasion to the debate today: we have heard from North East Somerset and Glasgow North East—as well as Edinburgh East—and I represent the central, northern and eastern parts of Gateshead, which is in the heart of the north-east of England. I have to say, however, that my part of the north-east of England is quite different from that of the hon. Member for Hexham. From my perspective, he is way out west.
From the perspective of many of my constituents, the Budget and the Finance Bill come across as complacent, smug and somewhat self-serving. The Chancellor painted a rosy picture of recovery in his Budget statement, but for those who represent many of the constituencies outside London and the south-east, the picture is very different. I have to defend my region and my constituency, where real incomes for most are falling not rising, where living standards for most will be lower in 2015 than in 2010, and where the number of working poor is rising, with many in insecure work now being paid a low hourly rate for part-time or combinations of part-time jobs. There has also been slower growth and a higher continuing deficit than expected, and the overall debt has grown dramatically.
We are a diverse country. We have regions of relative prosperity with pockets of poverty, but we also have regions of relative poverty with pockets of prosperity. The north-east of England is a region of relative poverty with pockets of prosperity, and the north-east economy is still in recession. In my own constituency of Gateshead, the pace of economic recovery is painfully slow, if not non-existent. The negative impact of welfare reforms, the lack of central Government investment and the cuts to local government are having a profound and damaging impact on our economy and on people’s lives. They are also having a profoundly negative impact on the business community in parts of the north-east. The policies and priorities of this Government show a total disregard for the people and the region of the north-east.
This Finance Bill is another missed opportunity. The Chancellor has made it clear that public sector cuts and austerity will continue for the foreseeable future, but local government budget cuts are sucking the spending power from local economies. Since 2010, my local authority in Gateshead has suffered cuts of £75 million, with the loss of over 1,200 employees. That is 1,200 people who no longer have the wherewithal to spend money in their local shops and communities or to support local businesses. In 2014-15, we will suffer a further reduction of over £15 million, with a reduction of a further £24 million in 2015-16. In total, by the end of 2015-16, Gateshead will have suffered a 37% reduction in its grant from central Government. That figure is in line with that for all 12 local authorities in the north-east, all of which have suffered cuts of more than 30%.
Such cuts are 10 times the figure suffered by authorities serving affluent areas in the south-east and the south, where average cuts in grant support have been less than 3%. Needless to say, we top the league not only in cuts for local government, but in cuts for welfare benefits—it is a shame our football teams are not topping the league. When the current welfare reforms have come into full effect, they will have taken nearly £19 billion a year out of local economies, which is equivalent to about £470 a year for every adult of working age in the country. Of course the impact on the poorest—on those in most need—will be greatest, and the impact varies greatly across the country. At the extremes, the worst-hit local authority areas lose about four times as much per adult of working age—as much as £910 per working adult—as the authorities least affected. The three regions of the north of England alone can be expected to lose about £5.2 billion in welfare benefit income. That money is being sucked out of the spending power in local economies.
Mr Kevan Jones
Does my hon. Friend agree that this is about not just cuts in local authorities, but cuts in welfare? For example, in Wokingham the number of people affected by the bedroom tax is only 237, whereas I am sure the figure for his constituency is much higher.
Ian Mearns
I could not agree more.
Again, on employment, we have to wonder whether the Prime Minister and Chancellor are on the same planet as we inhabit in the north-east of England. Whereas unemployment figures for the UK are hovering around the 7% mark, unemployment in the north-east has only just dipped below 10%. That is the claimant count figure; it is not the count of people who are economically inactive, which is a much greater figure for a region such as the north-east of England. I baulk at the complacency from Government Members in the face of that, because it is having a dramatic impact on people’s lives.
Ian Mearns
Those figures are interesting. It has to be said that economies such as the north-east of England look at the JSA figures and see that they have removed from them people sanctioned because of their benefits. The last estimate I saw was that almost 1 million people on JSA were in receipt of a sanction in the last counting period. In addition, some 600,000 people, on a conservative estimate, are now employed on zero-hours contracts. Our regional economy suffers from not only unemployment, but significant amounts of under-employment.
Despite the Government pledge to ensure that it is always worth working, it will be those in work who will most feel the squeeze of this Government’s policies. Average weekly earnings and gross disposable income in the north-east are the lowest of any English region. According to the latest Real Life Reform report, which has been conducted by the Northern Housing Consortium, the average spend on fuel among the study subjects has risen by 8.5% since only December and by more than 30% just since last September, and is now at an average of £32.62 per household per week in that study, which is of people on very low and modest incomes.
The Chancellor has made much of his personal allowance increase, but the Government continue to ignore the negative impact of their 24 tax rises between 2010 and 2015. I am not a natural bedfellow of the TaxPayers Alliance, but it believes that there have been 254 tax rises, particularly the hike in VAT in January 2011 from 17.5% to 20%. Even the Prime Minister accepts that VAT rises impact on the poorest, and he always knew that they would. On 5 January 2011, he said:
“If you look at the effect”—
of VAT—
“as compared with people’s income then, yes, it is regressive.”
In Exeter in 2009, the right hon. Gentleman, as the then leader of the Opposition, said of VAT:
“You could try, as you say, to put it on VAT, sales tax, but again if you look at the effect of sales tax, it's very regressive, it hits the poorest the hardest. It does, I absolutely promise you.”
Mr Kevan Jones
Like me, was my hon. Friend shocked when the “Conservative” Member for Redcar (Ian Swales) said that VAT was not a regressive tax?
Ian Mearns
Given the statements that I have just read out, which are attributed to the current Prime Minister, I am flabbergasted by the attitude of the “Conservative” Member for Redcar.
In his Budget statement, the Chancellor proudly championed the rise in the minimum wage to £6.50. However, given that his entire experience revolves around his coterie of millionaires—including the majority of his Cabinet colleagues—it is little wonder that he has absolutely no idea how difficult it is to raise a family on £6.50 an hour. How can one invest £15,000 a year in an ISA on a salary of £6.50 per hour? The Finance Bill does nothing to help my region and nothing to reverse any of the damage inflicted by this Government over the past four years.
The Government’s proposed cuts to the public sector—the Institute for Fiscal Studies estimates that, outside of the NHS and schools, they could result in a 40% cut in the public sector workforce—will disproportionately affect my region. Cuts to local government expenditure will also have the heaviest impact on the most vulnerable who rely on the provision of services by their local councils. We are letting down the most vulnerable in our society.
The Chancellor’s much-heralded recovery is, to be honest, little more than a rise in consumer spending, fuelled by a false confidence based on rising house prices in the south-east of England, which have been stoked by the Government’s Help to Buy scheme.
When the Chancellor of the Exchequer announced the pension pot release scheme, I am sure that he was not actually expecting the vast majority of recipients to buy a Lamborghini, but I am pretty sure that he was hoping that enough pensioners would spend their lump sums—even if it is only 10% or 15% of it—on things such as cars and home improvements, and thus help fuel a consumer-led recovery.
The Government’s stated aim was to “rebalance the economy”. So far, I see little evidence that the massive losses to public sector jobs in the north-east are being offset by private sector job creation. That needs to be addressed urgently.
A representative of the Federation of Small Businesses told me that the north-east has some 136,000 private sector businesses, which sounds very positive, but he went on to say that only 1,000 of them had more than 50 employees, and 100,000 of those businesses are sole traders. When we are sucking out money from people’s pockets and from their spending power, we are bound to impact on the private sector in an economy that has so many small businesses.
The north-east is very different from London and the south-east. Having suffered savage and disproportionate cuts, the region has experienced severe impacts on its small business sector as the Government have deliberately gone about the business of shedding jobs and sucking out spending power and disposable income from the region’s economy.
Let me highlight the difference in investment in different parts of the country. I do not understand how Government Members who represent our region can be so complacent about this matter. We all know the facts about how much has been invested on transport infrastructure in London and the south-east per head of population in comparison with the north-east. It is in the order of magnitude of 500:1—£500 more spent in London and the south-east per head of population than in the north-east. That is severely affecting travel to work mobility in the north-east. According to the Institute for Public Policy Research, it is quite unsustainable from a regional economic perspective.
High Speed 2 will not help us in the short to medium term. It will take until 2033 for HS2 to reach the north-east, seven years after it reaches the west midlands. As I have said on several occasions, 20 years ago I could travel from Newcastle to London in two hours and 38 minutes. After £50 billion of investment and 40 years, our journey time will have reduced by 20 minutes. From the perspective of the people of the north-east of England, is that a good and sound investment? Even the chairman of HS2 believes that it is a bad deal for the north-east and has said in the press today that if people in the south-east of England had the transport infrastructure and trains that we have in the north-east, there would be riots in the streets. That is the chairman of HS2.
This is a complacent Budget that does nothing to rebalance the economy. I urge Members on the Government Benches to think again, because I can tell them that the hon. Members for Redcar and for Hexham will be severely tested come the next general election.