Lord Bellingham
Main Page: Lord Bellingham (Conservative - Life peer)
Sir Henry Bellingham (North West Norfolk) (Con)
It is a privilege to follow the right hon. Member for Birkenhead (Frank Field) who commands huge respect in this House. I agreed with much of what he said, but I remind the House that increasing personal allowances and creating an economy that now has the lowest unemployment since 1975 is another way, perhaps the main way, to help people on low incomes and people who have been in poverty in the past.
I welcome much in this Budget; it is a balanced Budget. I certainly welcome the increases in personal allowances, the extra money for mental health and defence and what the Chancellor said about enterprise, which I will come on to in a moment. I also welcome his realism on Brexit. He made it very clear that he expects Britain to get a good deal. He has also explained very clearly that he will make sure that, if we do not get that deal, we will be prepared for that eventuality. Indeed, there may well be an emergency Budget. I am also optimistic. The Prime Minister has laid down those red lines, which I support 100%. We cannot countenance any initiative or structure that treats Northern Ireland fundamentally differently from the rest of the UK, thus undermining our precious Union. We certainly cannot accept a backstop that is completely open-ended. I know that 50 of our most talented civil servants are working on Brexit and I am confident that, with good will and a degree of flexibility on Europe’s side, we will get a deal. I ask the Minister, in the unlikely event of our getting no deal, what happens to the £39 billion? How much of that will actually be committed and owed, and how much of it will come back and revert to the Treasury? Will he answer that point?
I really was impressed by the Chancellor’s vision for the future—for Britain over the next number of years. For the first time in a long, long time, and at a time when the EU faces huge problems, a Conservative Minister has actually laid out a really clear vision for the future. In fact, what is happening in Italy could precipitate a systemic pan-European monetary union crisis and put at risk the very survival of the euro, and, at the same time, we are looking at markets elsewhere and are actually optimistic about the future. I was really pleased that the Chancellor said that. I think that he would agree with me that what we need is a high-skill, high-productivity, low-tax, business-friendly economy. There is still some way to go to simplify our tax system, and, when I look at Tolley’s Tax Guide, I see it getting bigger and bigger. Just as my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) had a word of caution about austerity, there should be a word of caution also about the fact that the UK has recently slipped down the OECD rankings of the most competitive tax systems in the world. We have gone down to 23rd from about 15th. We must arrest that.
On the wider economy, it is good news that the OBR has predicted a 7% drop in our borrowing for this year and, as a result, the Government will be £13 billion ahead on the forecast. All of this is taking place at the same time as we have better growth than expected—we might even have better growth this year than both France and Germany—exceptional employment figures, wage growth at 3.1% and inflation easing to 2.4%. Yes, there are numerous woes, not least on the high street, but the overall picture is incredibly encouraging, and the Chancellor made that clear. I also agree with my right hon. Friend the Member for Chelsea and Fulham when he said that we have to be realistic and cautious about austerity. As he pointed out, when the coalition Government took office, we inherited an all-time record budget deficit. At that time, total managed expenditure was just under £700 billion. It went up in every year of the coalition Government and indeed of this Government. It is now moving to just over £800 billion. That is controlling public expenditure increases; it is not actually cutting public expenditure. It is not austerity as such. As my right hon. Friend pointed out, the interest on our debt—every year our overdraft goes on the national debt—is currently £41 billion. We should remind Opposition Members, particularly the shadow Chancellor, that, at the moment, that £41 billion, which is equivalent to just slightly more than the policing budget, slightly more than the transport budget, and 40% of the education budget, is currently manageable and fundable. That is at a base rate of 0.75%. If rates returned to the pre-recession levels of 4% to 6%, the amount the Government would spend on debt interest would quadruple. I just say to the shadow Chancellor that some of his spending commitments, some of his proposals for a massive spending surge, are not only grossly irresponsible, but quite cruel on the many people whose hopes will have been built up by that.
I just want to say something very quickly about the high street. I warmly welcome what the Chancellor said about the high street. Our local high street in King’s Lynn is thriving, despite all the closures of national chains. I particularly welcome what he said about the high street fund. We must get more flats above shops in high streets opened up for people to live in. If I look back 50-odd years ago to when I was a child in King’s Lynn, there were many independent retailers in our local market towns. Every single one of them had a flat above a shop where either the retailer or someone in his family lived. Many of those retailers have been taken over by large chains and most of the flats are now empty. I recently went round King’s Lynn, fairly late in the evening, and saw for myself that about 10% of the flats are now occupied. We need changes in the planning system, a much easier route to converting these flats back into accommodation and a change of attitude on the part of many of the regional and unit managers of these national stores. Very often, this is not on their agenda; it is in the “too difficult to do” category. If we take this issue forward with the high street fund, we can seize an opportunity to transform many of our market towns.
In conclusion, it was Jean-Baptiste Colbert, the Minister of Finances for France, who said:
“The art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”.
The Chancellor’s innovation and imagination has meant that he has not had to follow that advice and he has produced a first-class Budget that I fully support.
John Redwood (Wokingham) (Con)
I have declared my business interests in the register, but I am not going to be talking about them.
I welcome this Budget. I particularly welcome the decision to provide some more money for crucial public services. In Wokingham and West Berkshire, we need more money for social care, and there is some in the Budget. We need more money for our local surgeries and hospitals, and a lot of money will be coming through for the health service in the years ahead. I just urge the Government to ensure that it is well spent and that there a proper prospectus before the money is finally committed in detail.
We definitely need more money for our roads and local transport. I am pleased to see funds with imaginative ideas to improve flows and safety over junctions and to ensure more roundabout junctions and improvements in strategic local route networks. I will be working with West Berkshire and Wokingham Councils, encouraging them to come forward with schemes that I hope qualify, because these are important to the productivity of my part of the world and, indeed, any part of the United Kingdom. Anyone with customers or clients in their area who goes to work daily in a van or car cannot book as many appointments as they would like and might lose one or two contracts each day because they are spending far too many minutes or even hours in traffic jams, particularly at the busy periods of the day. We therefore need to improve flows, which can also improve safety and lower fuel usage, which would be great benefits.
I also welcome the way that the Chancellor is injecting a bit more money into the economy, because there has been quite a sharp fiscal and monetary squeeze administered to the economy since March 2017. The story so far is one of dreadfully inaccurate forecasting by the OBR and the Treasury. We had the idiotic, wild forecasts about how we would have a recession, falling house prices and a big increase in unemployment if we voted to leave the European Union. They said that that would happen in the winter of 2016-17, whereas I am pleased to say that the economy continued to grow pretty well until March 2017. Jobs and employment went up and house prices did not tumble in the way that was forecast, because Brexit was not bad news. A lot of people thought that Brexit was very good news, and they went out and spent a bit more money because they liked it.
We then had a fiscal and monetary squeeze. The Bank of England has put interest rates up, and it withdrew special lines of credit from the clearing banks and issued instructions to lend less against cars and certain types of houses. That had a visible impact on the car and housing markets. We had a fiscal squeeze, because as we see in today’s figures, in this year alone £7.4 billion more has been collected in tax and £4.5 billion less has been spent on public services than was forecast in March. There has therefore been a £12 billion—I presume unplanned—fiscal squeeze on the economy since March, and there was also a squeeze in the previous year, combined with a rather sharp monetary squeeze, whereby money growth has now halved, as a result of what I think was the Bank of England’s fairly untimely and overdone interventions. I do not think there is a huge inflation problem out there, and I think the action that it has taken is too strong.
I am therefore delighted that something has been given back. What the Chancellor is giving back next year—about £11 billion—only matches the £12 billion of the squeeze that was being taken out this year. The OBR says, “This is a big giveaway,” but it is not actually a giveaway compared with what it said as recently as March this year. One needs to put that into perspective.
We now have to discuss what impact Brexit will have. All the forecasts grossly exaggerate the economic impact of Brexit. It is an extremely important political event, but I do not think we will see it on world economic graphs when we look back in two or three years’ time, and I think we would be hard pushed to see it on the graphs of the UK economy as well. The effect could be reasonably neutral. If we go for a no-deal Brexit because, unfortunately, the EU does not offer us something that is better than no deal, or if there is a continued breakdown in the negotiations—at the moment, the Chequers plan does not look very popular with the EU—then, yes, the Chancellor is right that we will need an additional Budget, but it will be a Budget full of good news because it will be the Budget to spend the £39 billion.
An awful lot of Brexit voters voted in part to take back control of our money. The OBR confirms that if we go ahead with the withdrawal agreement it has in mind, we will indeed be asked to spend £39 billion, sending that money over the exchanges to be spent in relatively rich continental Europe rather than having it available for our own priorities here. So will it not be great to have a Budget to confirm that we can spend £39 billion in a no-deal scenario?
Sir Henry Bellingham
A moment ago, as my right hon. Friend will recall, I also made the point about the £39 billion. It is incredibly important that the Government clarify the situation on that, because some Ministers are saying that part of it is owed contractually in many different ways, while other Ministers are saying that the whole lot would revert to the Treasury in the event of no deal. Surely, the Minister must clarify that when he winds up.
John Redwood
I have looked into this. I have taken advice from lawyers. I have also read the report from the House of Lords—not a known bastion of leave enthusiasm. Its legal conclusions were wholly admirable. It said, “No, there is no legal requirement to pay a penny to the EU after we have left.” If we leave on 29 March 2019, we would definitely save that money. There is no requirement to pay. We did not get a bonus when we joined the thing, because there were lots of inherited liabilities, so we do not have to go on paying for liabilities after we have left. That is quite an absurd proposition. We should be able to grasp this opportunity.
If we were able to spend that £39 billion over a three-year period—I know that it is spread over three years and does not come all in one year—there would be, over that period, a 2% boost to the UK economy. That could take our growth rate back up to about 2% per annum. The OBR forecasts are a bit gloomy, and it could be that our economy has grown by only 1.5%, but that is underperforming. We need to ask why that is, and it is certainly nothing to do with Brexit. The reason the growth rate fell is, as I say, deliberate policy by the Bank of England and possibly inadvertent policy by the Treasury creating a combined monetary and fiscal squeeze. This Budget does something to start to lift the fiscal part of that squeeze, and that is very welcome.
It is crucial that we do end austerity. I am absolutely with the Prime Minister on this. Indeed, I fought two elections on the proposition that we want prosperity not austerity. I strongly agree with the Chancellor that we should define austerity, as the public do, in its wider sense. Austerity does not just mean not having enough money for social care, which we need to remedy; it means that people’s real wages have not gone up enough or at all, so they are not better off. People expect us collectively, as a result of our interventions in the economy and our supervision of the general position, to help them to progress and have real income increases so that they can afford more and improve their lifestyles as they go on life’s journey. That is what we should be doing. We should be in the business of promoting more jobs, better-paid jobs and lower taxes so that people keep more of the money from those jobs and the income they are earning. I therefore welcome the bringing forward of the income tax reductions, which will be very helpful.
I also strongly support tackling the problem of low pay. There is still too much low pay, and I am glad that the Government regard this as an important issue. We need to do more on productivity measures, because the real way to eradicate low pay is by higher productivity: “work smarter and get paid more” is what we need to be thinking and doing. That requires a whole raft of the policies that were mentioned in the parts of the Budget document on education, training, transport and many other areas. That will contribute to making a more productive economy.
I am fully behind the Government’s aim of banishing austerity. I am fully behind the aim of getting real wages up and allowing people to spend a lot more of their own money. I want the £39 billion because that would be a really knock-out blow in getting a stronger and better economy.