Amendment of the Law

Lord Harrington of Watford Excerpts

Friday 23rd March 2012 Commons Chamber

[Helen Goodman (Bishop Auckland) (Lab)]

It is always a pleasure to follow the hon. Member for Peterborough (Mr Jackson), who has a particular perspective on things.

I want to focus on two themes: jobs and justice. The overall state of the economy is as follows: the Budget deficit is £121 billion; interest rates are 0.5%; and the Bank of England has undertaken £325 billion in quantitative easing. Yet the economy is in a depressed state, with GDP below its peak and its potential. The worst consequence of that is that 2.67 million people are unemployed, including 1,000 young people in my constituency.

What are the Government doing to tackle that? Given the fiscal squeeze on households, it is clear that what is needed is an increase in business investment and exports, but that is not what we are getting. According to the Office for Budget Responsibility forecasts, the increase in business investment has been pushed back from 2012 to 2013, and the unemployment peak has also been pushed back. In the north-east, the chamber of commerce says that investment is particularly weak. Shockingly, it has been negative since 2008, and the figure currently stands at minus 6.3. That means that, in contrast to what the hon. Member for Peterborough said, the capital stock is shrinking.

Why is investment so low, given that The Daily Telegraph tells us that corporate balance sheets are “brimming with cash” and the Bank of England reports that dividends are at record levels? It is because there is a lack of confidence. Have the Government done anything to strengthen business confidence? What little growth that is forecast will be fuelled by consumer borrowing. Although Government Members inveigh against household indebtedness, over the forecast period, that is predicted to rise from £1.5 trillion to £2 trillion.

[Richard Harrington (Watford) (Con)]

The hon. Lady is an expert in Treasury and economic matters, so I was surprised that she stressed that confidence was so important, because does she truly think that the Labour alternative policy of borrowing more money would give businesses more confidence to invest?

[Helen Goodman]

The fact of the matter is that Ministers have overshot on their borrowing. Their borrowing is £147 billion higher than they were planning a year ago, and the credit rating agencies have put a watch on our creditworthiness. Government Members should not be quite so confident about where their Ministers are taking the British economy.

Turning to growth in the enterprise sector, there is to be a measly £25 million for aerodynamics and another measly £25 million for science, which is crucial to modernising our manufacturing. Under the last Labour Government, science spending rose by £1 billion; a £25-million investment will not get us anywhere.

Let us discuss what the Government are doing on corporation tax. They have trumpeted a cut in the main rate, but the reductions in the allowances mean that the net support to industry overall is £200 million. No wonder investment at home is so flat. Government Members claim that GlaxoSmithKline took its investment decisions in response to the Budget, but that is patently ridiculous. GSK has been planning its investments for the past two years, in response to the patent box changes announced by the previous Government before the general election. Everything this Government have done this time has been swamped by the cuts to capital allowances that they made in their first Budget, which took £1.5 billion from the private sector.

--- Later in debate ---

[Richard Harrington (Watford) (Con)]

I am conscious of the fact that our speeches are limited to seven minutes. I have so much to say in the Budget debate but, first, I shall just answer something that the hon. Member for Bishop Auckland (Helen Goodman) said. One moment she was talking about the importance, in her experience, of confidence in business and among those who do business, and I perfectly understand that, but the next moment she was pouring scorn on attempts to reduce the taxation for those people. I must ask her something, which she does not need to answer now but perhaps she will consider: what gives people confidence? They need lower interest rates, which they have got because of the prudent things that this coalition Government have done to reduce debt; they need stability and the possibility of obtaining funds for investment, and the Government have done such a lot on that; and, above all, they need to know that if they work hard to set up a business, with all the hassle and aggravation that mortgaging their house and creating jobs involves, and they are successful, they will keep the majority of what they earn. We must not forget that that is what growth is about and what confidence is about. We cannot therefore pour scorn on reducing this top rate of tax, which does not work, as has been empirically proven in the figures that have come out. People in business do all this grafting and striving to do what they do, and nothing knocks their confidence more than the fear that the majority—more than 50%, if employers’ national insurance is included—of what they earn will be taken away.

[Helen Goodman]

I am interested in the hon. Gentleman’s description of setting up a business. When my husband set up a business, he took a salary cut. I do not believe that what motivates people is just what they are going to earn and how much money they are going to put in their back pocket; it is about being confident that they can sell whatever it is they are selling and that there is a long-term market for what they are doing. The cuts in domestic consumption are what is killing business confidence in this country.

[Richard Harrington]

I thank the hon. Lady for those comments. I remind her that I said that the rate of taxation was one of a package of things that gives confidence. I have started and owned a business, and I did not draw a salary for two or three years as a result. I drove minicabs and ran a market stall at weekends in order to pay my way, so I know what it is like, as I have experience in that field. I do not feel it is appropriate to take lectures from people who perhaps have not done that themselves. I am talking not about the hon. Lady, but about many other people who have mentioned these things.

[Matthew Hancock]

Should we not base our approach on evidence? Given that the evidence, supported by the Office for Budget Responsibility, shows that there are behavioural effects that lose revenue, does this not show why the Labour party got us into such a mess? That party ignores and is positively disdainful of the impact of taxes on people’s behaviour.

[Richard Harrington]

I absolutely agree with my hon. Friend. I hear a lot from people from all parts of the spectrum in my constituency, as other hon. Members do in theirs. In my judgment, people are very realistic, because they realise that the mess we got into was caused by chronic overspending and a budget that was completely out of control under the previous Administration. I believe that the polling on who got us into this mess is consistent on that point. So it is clear that no matter which party people are going to vote for in the future, they do not want this to happen again; they do not want overspending to take place and they do not believe that spending more money and borrowing more money is the solution to this country’s economic problems. This is the first time in my adult life, from reading the papers and taking part in politics, that I can recall this important lesson having got into the public’s consciousness. That is sensible, because people can relate to it in their own household earnings and the budgets that they make for themselves.

Let me move on to the growth area of the Budget. The focus is on economic growth and infrastructure and that is important because the future growth of this country is the most significant thing that the Budget is about. Rather than talking about—

Proceedings interrupted (Standing Order No. 11(4)).