Budget Resolutions and Economic Situation

Lord Evans of Rainow Excerpts

Thursday 9th July 2015 Commons Chamber

[Andrew Bridgen (North West Leicestershire) (Con)]

rose—

[Graham Evans (Weaver Vale) (Con)]

rose—

[Tom Pursglove (Corby) (Con)]

rose—

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[Mr Duncan Smith]

If hon. Members want, we can go back over the figures one more time. I am enjoying myself, even if the shadow Chancellor is not.

[Graham Evans]

rose—

[Antoinette Sandbach (Eddisbury) (Con)]

rose—

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[Mr Duncan Smith]

I will give way to my hon. Friend the Member for Weaver Vale (Graham Evans). I know he wants me to keep going.

[Graham Evans]

Opposition Members never miss an opportunity to miss an opportunity to apologise for wrecking the country’s economy. The shadow Chancellor criticised my right hon. Friend the Chancellor and said there was no mention of science and technology. My right hon. Friend has a very proud record of investment in the north of England, as part of the northern powerhouse—

[Mr Deputy Speaker]

Order. Mr Evans, you will be making your speech very shortly. The danger is you will have nothing to say because you will have already made it.

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[Dr Whiteford]

I will not give way at the moment.

Amid all the rhetoric and the hyperbole of Budget day, it would have been very easy to form the impression from the media lines being trotted out yesterday that tax credits are predominantly a benefit paid to unemployed people, when in fact the opposite is the case. In Scotland, the overwhelming majority of tax credits are paid to working people. In fact, half of all families benefit from tax credits, and 95% of tax credits in Scotland are paid to families with children. We should make no mistake about where the cuts are being targeted.

It is inevitable that today we will consider the short-term consequences, because those cuts will put acute pressure on families, but we should be under no illusion: growing up in poverty has serious long-term consequences for children, too. It is associated with poorer educational attainment, poorer job prospects, poorer health throughout life and lower life expectancy. That is why asking families to bear the brunt of the cuts is so short-sighted. It has not only an enormous social cost, but an enormous economic cost: it holds back our economic progress and productivity, which are what we should really be focusing on and trying to improve.

The Government have tried to argue, today and yesterday, that the cuts will be offset by increases to the minimum wage and changes to the personal allowance, but that claim simply does not stand up to scrutiny. I think we all welcome the announcement of a long-overdue increase in the minimum wage to £7.20 an hour from next year and, indeed, the changes to national insurance, but let us not kid ourselves that rebranding the minimum wage as a living wage will actually make it a living wage.

There is already a living wage: it is calculated by the Living Wage Foundation and is already used by employers in the public, private and third sectors, including, I am very pleased to say, the Scottish Government. The living wage is based on the actual cost of living and it is already £7.85 an hour outside London and is due to go up again in November. We need to be absolutely clear that £7.20 is not a living wage and it will not offset the cuts in tax credits.

The critical point about the living wage is that it has been calculated on the basis of low-paid workers claiming their full entitlement to tax credits at the present rate, so any cut in tax credits means that the living wage will have to go up even further in order for it to provide enough for people to live on. If the Government take on board only one of the points I make today, I want it to be that one.

[Graham Evans]

Does the hon. Lady want Scotland to be a high wage, low benefits, low tax economy? Does she agree with what the Government are trying to do?

[Dr Whiteford]

Scotland has already shown the progress we are making towards a high-skill economy. I was interested to hear yesterday’s announcement on improving the apprenticeship scheme in England. I hope the Government will aspire to do what the Scottish Government have already done. The uptake has been phenomenal and we are well on course to reaching 30,000 apprenticeships a year, which is far more proportionately per head of population than the current number in England. The Opportunities for All scheme guarantees a place in education or training for every single young person. It has been a phenomenal success, with more than 90% of our young people going into sustained employment afterwards. Instead of waiting until people have been unemployed for a year before intervening, we are intervening early so that every school leaver gets those opportunities. The approach is much more carrot than stick. The scale of the uptake shows that in Scotland we are committed to having a more successful economy and to growing it to meet the needs of our population.

I want to return to tax credits and not be distracted from them. Today the Resolution Foundation, which has done so much to promote the living wage and highlight the issue of in-work poverty, has said that the living wage would need to be £10 an hour by 2020—not the £9 announced yesterday—to keep pace with the cost of living under the new tax and benefits regime. Let us be clear: we are not going to get out of the poverty trap with this rebranded minimum wage. We need to bring it up to the level of a living wage if we are going to take away the support currently provided through tax credits.

The huge cuts in tax credits will make the gap between the minimum wage and the living wage even greater and it will leave the earnings of low-paid workers even further below the actual cost of living. At present, a family with two children where both parents work and who live in a house with average rent will be below the breadline, and the changes announced yesterday will not change that. Such families will still struggle to keep their heads above water and their children will still grow up disadvantaged.

We need to recognise that bringing up children is expensive—for everyone, in all income groups—but children are not some sort of luxury lifestyle accessory. Having children and encouraging family life is an essential, necessary and natural part of the human life cycle. For some years, however, we have made it really difficult for younger adults to even contemplate starting a family, simply because of the pernicious combination of low pay, job insecurity and exorbitant housing costs.

That brings me to the differential impact of this Budget on women, because, in spite of the progress that has been made, women are still heavily concentrated in low-paid work. We are far more likely to be working part-time or in zero-hours jobs, and we are more likely to be the primary carer of children or, indeed, frail or disabled relatives. Too many women end up in low-paid, part-time work such as cashiering or cleaning simply because they can work their hours around their family responsibilities. While I welcome the increase in the personal allowance, we need to recognise that many of those women working part time in low-paid jobs will not see the full benefit of it. Indeed, the key beneficiaries are, of course, higher-rate tax payers like ourselves, and 80% of the benefit of the increase will fall in the upper half of the income spectrum.

I have a number of questions for the Government about limiting tax credits to two children. I am not sure why they would do this—certainly in Scotland, we have a worryingly low birth rate so we should not be trying to deter people from having more children. I ask Ministers for clarification about the basis on which the number of children eligible for support through tax credits will be determined. Will it be a couple’s first two children together, or will children from a previous relationship be counted in the total? What will happen, for example, if a woman has her first child with a partner who already has two children from previous relationship or if a mother’s third child is the father’s first? As anyone who ever runs a constituency surgery will know, these are not abstract questions, and I hope Ministers will address them this afternoon.

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[Graham Evans (Weaver Vale) (Con)]

It is a great privilege to follow the hon. Member for Bradford South (Judith Cummins)—a fine constituency and a fine city. I am sure that she will do an excellent job as the constituency’s new MP. I also pay tribute to my hon. Friend the Member for North Warwickshire (Craig Tracey), an outstanding individual who will, I am sure, do a great job for his constituents. I also pay tribute to his good lady wife for her service to Queen and country.

At a time of uncertainty abroad—be it in Greece, Russia or the middle east—the Chancellor delivered a Budget that prized economic stability at home. It was a one nation Budget that will provide security for working people in Weaver Vale, greater Cheshire and the north-west as a whole. Despite the chaos in the eurozone, Britain is still growing faster than any other major advanced economy in the world—faster than America and Germany. Our economy grew by 3% last year, a figure revised upwards from the 2.6% we expected in March. Our long-term economic plan is working. Indeed, before the election, the US President commented that the UK must be doing something right on its economy.

British businesses, backed by the Government through tax cuts and the removal of red tape, have created 2 million new jobs since 2010. I know that businesses across Weaver Vale welcomed the announcements made by the Chancellor yesterday about the extension of the employment allowance to £3,000 and the news that corporation tax will fall to 18% in 2020—from the 28% we inherited five years ago.

Earlier, the shadow Chancellor said that science and technology were not mentioned in the Budget, but the Chancellor has a fine record on such investment, including in Sci-Tech at Daresbury. The previous Labour Government took investment away from Daresbury, and when I became MP for the area in 2010 I was advised by the then Chairman of the Science and Technology Committee—he is no longer a Member, but he was a fine Chairman and I pay tribute to him—to watch like a hawk to ensure that the new Government did not take away investment from Daresbury as the previous Government had done. Instead, the Chancellor invested £150 million recently in big data, and I was proud that, just before the election, IBM signed a £130 million partnership with the Science and Technology Facilities Council that will secure high growth and high-tech, well-paid jobs for my constituents in the long term. That is good for my constituency and for the country, as we become an international hub for science and technology and big data.

The OBR has predicted that a further 1 million jobs will be created over the next five years, but we are the party of ambition and we want to go further. We are working towards a target of full employment—a job for everyone who wants one and a country that is open for business. In the past five years, Government-backed schemes such as the right to buy have helped 200,000 people on to the property ladder. That is vital, because home ownership is central to the aspirational country that we are building. Owning their own home means so much more to families. I was born in a council house, the youngest of four children. My family lived there for 20 years and, in 1972, Ted Heath’s Conservative Government offered us the opportunity to purchase the property, so my parents did so. My father died when I was a teenager and my mother had security in old age and retirement because they had invested in that house. The right to buy is central to the Conservative party’s philosophy that everyone should have a home of their own.

Yesterday, my right hon. Friend the Chancellor gave Britain a pay rise. Over the course of the Parliament, the introduction of the national living wage could be worth more than £5,000 to someone working full time for the minimum wage. I need not tell the House how much that extra income will mean to hard-working families trying to get on. Not only will working people earn more, they will keep more of what they earn. Typical taxpayers will pay £905 less tax than in 2010, thanks to the increases in the personal allowance over the last five years.

[Mr Betts]

I do not know whether the hon. Gentleman has seen the analysis from the Institute for Fiscal Studies today, but it says that the minimum wage announcement will not go anywhere near compensating for welfare cuts in cash terms. People currently on tax credits will be significantly worse off and the reform could cost 3 million families an average of £5,000 a year. That is the IFS’s calculation.

[Graham Evans]

I have to confess that I have not seen those figures, but the Government’s overall mantra is “A higher wage, lower tax, lower welfare economy”, which will benefit all of our constituents. That is in contrast to the Labour party, which had a high-tax, low-wage, high-benefit culture. That is the debate we are having today: the Conservatives want high wages and low benefits and I believe that the Budget will move Britain in that direction. That will be good for the country, for my children and for our country’s future. We are a beacon in Europe, as its second biggest economy, and if we continue down the same road, in 10 to 15 years we will become the biggest economy in Europe. The whole world is watching this great country, and we are the beacon for how things can be done in difficult economic circumstances.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I want to add to what my hon. Friend the Member for Sheffield South East (Mr Betts) said. The IFS has said that it is “arithmetically impossible” for the Chancellor’s national living wage to offset the loss of income from tax credits. I recommend that the hon. Gentleman reads that. Will he and other Government Members who have said similar things to him today also advertise a surgery on tax credits and invite their constituents to see how they feel about it and whether they think this Budget makes things better?

[Graham Evans]

I am most grateful to the hon. Lady. I will indeed look into those figures. I hold surgeries every Friday, so I will see constituents about that. What I would say to her is that unemployment in Weaver Vale has dropped by 70% since 2010, and that is 80% full-time, good quality jobs.

I am not saying it is easy, but these difficult decisions have to be made. When Gordon Brown introduced working tax credits, he said the figure would be £2 billion. It is now £30 billion. The Labour party has to decide—I asked this question yesterday and did not get a reply—whether £30 billion is too much, too little or about right. We have to make these difficult decisions, but the hon. Lady makes an important point. I am not saying for a moment that it will be easy, but we are the party of aspiration. We are the party that always makes work pay, which is something that did not happen under 13 years of Labour.

[Jeremy Quin]

My hon. Friend will recognise, as those of us on the Government Benches do, that we will still be paying out tax credits in the same numbers that we were paying them out in 2007 and 2008, under the last Labour Government. What we are talking about is the sudden spike to which my right hon. Friend the Secretary of State for Work and Pensions referred in his speech.

[Graham Evans]

My hon. Friend makes a powerful point. Working-age benefits are something we have to tackle so that we can eradicate the deficit and start paying down the national debt. That is what I believe in. I believe that the Government are right: a higher-wage, lower-tax, lower-welfare economy. Britain is open for business. That is the future for our country.