Budget Resolutions and Economic Situation

Kwasi Kwarteng Excerpts

Monday 13th July 2015 Commons Chamber

[Robert Neill (Bromley and Chislehurst) (Con)]

I normally regard my right hon. Friend the Secretary of State as one of the most generous-hearted men in politics. When I listened to the opening of his speech, I thought he was being a bit harsh on the Opposition, but having heard their reaction, I think he was, if anything, over-generous. When one of the more thoughtful Members of the shadow Cabinet is reduced to tripping out every stereotypical canard in the socialist book and attempts to take refuge in the same view that was adopted by the last Bourbon King of France, Charles X, who was wholly and genuinely convinced that the French revolution was a terrible aberration, and that people would wake up one day and realise that they had got it wrong and that the divine right of kings was the only answer, I realised the difficulty that any Blairite on the Labour Front Bench faces. If it is any help for the historians here, Charles X lasted three and a half years before he was got rid of. I shall be interested to see how long the next leader of the Labour party lasts.

I also felt genuinely sorry for the current leader of the Labour party. After trying to inject a modicum of realism in relation to benefits and welfare reform, she was entirely disavowed by her own party. It is rather sad when the official Opposition of this country take as their role model the ostrich. They expose their thinking parts to us and bury the realities in the sand, and the country deserves better.

[Kwasi Kwarteng (Spelthorne) (Con)]

Has my hon. Friend heard anything today about the Opposition’s current view on the welfare cap? Has he learned anything interesting about what their actual position is?

[Robert Neill]

Not at all. As there are probably something in the order of 230-plus different views, we could not cover them all in time. It is also rather remarkable that the Opposition have adopted an entirely different stance to elected mayors from that which I remember when I was the leader of the Conservative group on the London Assembly and facing the first ever elected mayor in this country—the first Mayor of London. I am glad to say that things have improved since then. As some may remember, the office of Mayor of London came into being as a result of legislation introduced by the Labour party. It comes back to the same trope. Why does the Labour party now regard any elected mayor as anathema? Because it was an idea of Tony Blair’s, and must therefore be cast into utter darkness.

I find it truly bizarre that a normally thoughtful party that wants to talk about devolution objects to the opportunity to take up city deal models with an elected mayor. The idea has not been forced upon Labour; it is Labour’s choice whether to have it or not. It was Labour that imposed more central control over local government, not just in planning, not just in terms of whether there could be a committee structure or not, not just in terms of whether a very strict and rigid standards regime was imposed, not just in terms of the comprehensive area assessment, not just in terms of planning policy, and not just in terms of financial policy and the cap. After all that, Labour had the gall to complain about an offer—take it or leave it—put forward by my right hon. Friend.

--- Later in debate ---

[Kwasi Kwarteng (Spelthorne) (Con)]

It is an honour and privilege to speak in this important debate after a number of Members on both sides of the House have given good maiden speeches and accounts of the challenges that their constituencies face. I am sure that all today’s maiden speech-givers will become distinguished parliamentarians and will give good service to their constituents.

This was an excellent Budget and I am pleased to support it. When the coalition Government took office in 2010, the deficit was £153 billion. In the Red Book, published last week, we discover that the deficit is £69 billion. There is still a long way to go, but people will recognise that that is a remarkable achievement given the international context and the fact that growth has been much more sluggish across many western economies than we had ever anticipated. The Red Book also makes it very clear that the growth rates we are enjoying as a country and have enjoyed in 2014 and 2015 are particularly enviable. They are the highest across the western world, and we should celebrate that on both sides of the House. That does not happen by accident. It is not an accident that the deficit has been more than halved; nor is it an accident that we are growing faster than nearly all our competitor countries in the G7—I think that we have the highest growth rate in that body.

We appreciate that if the election had gone differently, we would not be in such a good position and there would not be such optimism about the future. It was clear during the election that there was a binary choice confronting the country between a Conservative Government, when the Conservatives had largely delivered very effectively as the leading party in the coalition, and a potential Labour Government—let us be honest, it would have been a coalition—without any economic credibility, when the Labour party was largely responsible for the mess in which we found ourselves in 2010.

I want now to address the specific issues in the Budget that I am particularly happy to endorse and welcome. As a south-east MP, I naturally look to the interests of business—I do not think that business is a dirty word—because lots of my constituents work in small businesses. In fact, 82% of people who are in work in Spelthorne work in the private sector. They work in small businesses, including businesses related to Heathrow airport, and they will welcome the further reduction in the corporation tax rate that my right hon. Friend the Chancellor announced. They will also welcome the fact that the Government are being very serious about addressing the deficit.

The Government’s ongoing commitment to building more housing will also be welcomed. We have talked about the need for more housing, and the Government are happy to take on that challenge.

I am particularly gratified that various measures have been introduced to increase the living wage. The Government are doing absolutely the right thing in reducing the amount paid in tax credits. That is a bold and challenging move, but I am happy to say that it is the right thing to do. However, if the Government are going to do that, they must ensure that companies do not get away with simply exploiting low-paid workers. It is a legitimate corollary of reducing tax credits to try to boost the living wage and the minimum wage. I understand the logic of that move and it is to be commended, even though Thatcherite purists may argue against increasing the minimum wage and particularly the living wage.

Finally, we cannot pretend that the deficit has been resolved or that we are out of the woods in terms of our approach to fiscal discipline. I support and commend my right hon. Friend the Chancellor’s commitment to running surpluses, because my earnest hope is that we will run a surplus at the end of this Parliament. However, when we finally get a budget surplus, the last thing we need is a return to the Labour spend, borrow and tax regime. We need to set in stone a regime whereby this country, like Germany and Switzerland, will have a much more mature and disciplined approach to public finances, and I hope that in the course of our debate we will be mindful of the need to balance the books every single year.

[Mr Douglas Carswell (Clacton) (UKIP)]

I, too, will vote for this Budget. Tomorrow’s vote is a binary choice and although I have reservations about some of the Chancellor’s proposals, on balance I support the measures. We must never return to Ed Balls economics.

I support a number of measures. I unequivocally back the idea of having a fiscal charter, to echo the point made by the hon. Member for Spelthorne (Kwasi Kwarteng). It is a commitment to run a budget surplus by 2019-20 and to retain that approach in subsequent years unless growth is less than 1%. The principle behind that idea is exceptionally good; as a country, we cannot go on living beyond our means. I believe I am right in saying that we have only had budget surpluses in six of the past 40 years. That is unsustainable and also deeply unfair on the next generation. If we keep on running up these debts, someone will have to pay them, and it is deeply unfair and irresponsible of us to pass them on to the next generation. I only hope that the Chancellor manages to meet his own fiscal charter objectives. He has introduced, I think, five Budgets and in each one he has pushed back the date by which he hopes to balance the books.

I also support the proposal to remove the climate change levy exemptions for providers of renewably sourced electricity.

[Kwasi Kwarteng]

I am particularly gratified to hear the hon. Gentleman espousing the cause of sound finance. I just wonder how he feels being surrounded by people who deny that there is any need to reduce the deficit.

[Mr Carswell]

I will come on to say a little about my views on the unreformed Opposition. In fact, I will make them a proposal at the end of my short speech.

My party loves new energy technology. However, there is something we find objectionable: if the technology is so wonderful, why does it need to be subsidised? Removing some of those subsidies is a good thing, particularly when they push up the cost of energy, but the Government lack a fully coherent free market energy policy that allows real choice and competition.

I also cheer Government changes to vehicle excise duty. The new tariff will reflect changes in technology. Given that most new cars’ carbon dioxide output is below the old CO₂ low threshold variable, vehicle excise duty is fast becoming a subsidy from poor people, who cannot afford new cars, to rich people, who can. VED will also be used for the creation of a road fund in 2020-21. That is a very sensible move, as it means that taxpayers will see directly where their VED goes and the tangible benefits that come from it.

I also support raising the personal allowance to £11,000 by 2015-16 and to £12,500 by 2019-20. That should be welcomed as a tax break for everyone who works. Indeed, I hope that at some point we will be able to raise the threshold even higher, to £13,000.

I also support welfare reform. When the tax credit system was put in place, I do not think that we ever expected that it would allow big corporate interests to rely on the taxpayer to subsidise their payrolls, and yet in effect that is what has happened. I fear that tax credits may have contributed to wage compression. Welfare reform is possible and necessary, but it is also very important that, as the Chancellor has said, we are prepared to raise the minimum wage to try to offset some of the impact of that reform.

Having outlined where I support the Government, I am afraid to say that there are one or two measures about which I have some concerns. I am particularly concerned about limiting public sector pay increases to 1%. I fear that that may not be politically sustainable over the next four years. There was a pay freeze in the public sector between 2010 and 2013. Since 2013, pay rises have been limited to 1% and, given that inflation is often above 1%, that has, in effect, amounted to a pay cut. If the economy grows in the way that the Chancellor expects it to, I am not sure that four more years of 1% is sustainable.

I also have some doubts about the Chancellor’s fiscal projections; I fear that there is a degree of fiscal complacency. In its manifesto, my old party told us that it would run a budget surplus from 2019, which is only four years later than promised five years ago. In fact, that target has now been pushed back to 2020.

This year, we will still manage to accumulate a deficit of £70 billion and we still have a bigger primary budget deficit than Greece. The budget deficit last year was 5.7% of GDP, which was higher than that of any country in the eurozone apart from, I think, Spain and Cyprus. UK national debt stands at £1,600 billion, which is £950 billion higher than when the Chancellor first took office. That is not an impressive record. Servicing that debt costs £40 billion a year. Think of what we could do with £40 billion—that is more than the entire defence budget. Think of the tax breaks we could give people and, more to the point, think of how much greater that sum will be when interest rates go up.

I will support this Budget, and I look forward to the Finance Bill that follows. If Her Majesty’s Opposition will repudiate Ed Balls economics and table sensible amendments, I will be delighted to support them, bearing in mind that the Government have a rather slender majority. However, there must never be a return to the recklessness of the Parliaments between 2001 and 2015.

As the UK Independence party’s sole Member of Parliament, I will support classical free market liberal economics. From that point of view, this Budget is not perfect, but it is infinitely preferable to the alternatives.