Budget (North-East)

Lord Wharton of Yarm Excerpts

Tuesday 17th April 2012 Westminster Hall

[Ian Mearns (Gateshead) (Lab)]

I thank the Speaker’s Office for allowing me to initiate this debate, and also the many Members who have come along. The debate has created significant interest, particularly in our north-east region.

In the Chancellor’s millionaires’ Budget, which will hand back tens, if not hundreds, of thousands of pounds to some of the richest people in our society, including some of his Cabinet colleagues, it is clear who will suffer the most. It will be the poorest, those looking for work when few new jobs are available, pensioners, families, the hard-working, the squeezed middle and the working poor.

Following the Chancellor’s Budget speech, the Treasury produced a briefing highlighting the measures that will benefit the north-east of England. The region has borne the brunt of this Government’s policies. February 2012 figures show that unemployment in my constituency has risen from 8.3% to 10.5% since the coalition took office, and in the latest Office for National Statistics survey, up to January 2012, the figure for the north-east as a whole has risen to 10.8%, yet the Treasury’s briefing runs to a grand total of three measures that it claims will specifically benefit the region.

Although the first measure—the increase in personal allowances—is welcome, it can hardly be regarded as specific to the north-east. The second measure is that Newcastle will receive the princely sum of £6 million, and become a super-connected city. Perhaps the Chancellor and the Treasury do not realise that Newcastle, as important as it is to the entire region, is not the entire region—in fact, it has about a tenth of the region’s population. Finally, in the month when the north-east is losing its regional development agency, its local enterprise partnerships will receive a paltry £10 million from the Growing Places fund.

In the Budget statement, the Chancellor notably consigned to the dustbin of history the phrase, “We’re all in this together.” The imbalance in this Budget means that most of us are in this together, but the few at the top of society will be exempt from it all. The regional disparity is all too plain to see. In the three south-east regions— London, the south-east and the eastern region—nearly 195,000 taxpayers will reap the benefit of the Chancellor’s higher-end tax giveaway, but in the north-east the figure will be fewer than 5,000, and about 4,000 in Wales.

[James Wharton (Stockton South) (Con)]

Is it not the case that nearly 1 million taxpayers in the north-east will benefit from the personal allowance increase, and that it is the poorest taxpayers in regions such as ours who will benefit?

[Ian Mearns]

That would be the case if it had not been for the hikes in VAT, which as an indirect tax particularly disbenefits the very poor in regions such as the north-east. There are significant figures showing the genuine disbenefits of that for poor people.

When William I sought to quell the north following the Norman conquest, he developed a slash-and-burn policy to subjugate the unruly barons and the Saxon citizenry, and the people of the north-east could be forgiven for thinking that the Government had developed exactly the same approach—a 21st-century scorched-earth policy for the north. In just two years, they have abolished our Minister for the north, our local authorities have had to deal with massively disproportionate cuts, our regional development agency has been eradicated and there has been a miserly investment in transport and infrastructure projects, at the same time as disposable income has been sucked out of our pockets and our high streets. My local Gateshead authority has had to cut £70 million from its budget—equivalent to £88 per head of population—losing 1,500 staff into the bargain. The average cut for the 12 north-east councils was £84 per head of population, while the 12 least-deprived local authorities in England, including Windsor and Maidenhead, Richmond upon Thames, West Berkshire and West Sussex, each lost an average of less than £20 per head of population, so we are clearly not all in this together.

Almost every aspect of the Budget looks as if it was designed to have a negative impact on the north—on our people and on our businesses. VAT on takeaway food not only most affects people with the lowest incomes but has reduced the value of Tyneside businesses, including Greggs plc, which saw £20 million to £30 million wiped off its share value when the “pasty tax” was announced. I have no doubt that the measure will also have a negative impact on the work of the Greggs Foundation, which last year donated £1.4 million to support breakfast clubs for 65 north-east primary schools, at least four of which are in my constituency. The foundation also supports youth groups in some of the most deprived communities of the north-east, and also in Scotland and Wales. So much for the big society.

In addition, the Government’s welfare benefit changes will have a massively disproportionate impact on regions such as the north-east. Currently, 11,000 people in Gateshead claim incapacity benefit and, together with the numbers on jobseeker’s allowance, almost 24,000 people are claiming out-of-work benefits. National figures show that of those people undergoing the work capability assessment, 37% have been found fit for work and 34% have been placed in the work-related activity group of employment and support allowance, but for the vast majority of them in the north-east there is no real prospect of work in the near future. If the national figures are mirrored in Gateshead, almost 8,000 people will be moved off incapacity benefit and receive lesser benefits, if anything at all.

I am told by Gateshead council that the introduction of universal credit will result in 14,500 tenants having to manage a larger personal contribution each week, which will increase demand for budgeting and money management skills, and risk more tenants being unable to manage their household budgets and resorting to expensive borrowing, including legal and illegal loan sharking. The risk of non-payment of rent, based on a calculation rate for sums not covered by housing benefit, could result in an additional £20 million not being there to be collected by local authorities, which are already struggling to cope with the punitive cuts they have endured.

Benefit reductions for under-occupancy will affect 3,478 of our current tenants in Gateshead—18% of all those with the Gateshead Housing Company. Of those, nearly 3,000 have an extra bedroom and could therefore face a 10% to 15% reduction in their benefit, and the 815 who have an extra two bedrooms could face a 20% to 25% reduction. If we magnify those numbers across the region, we could be dealing with a widespread social crisis.

[Ian Mearns]

My hon. Friend hits on an appropriate point. Regarding how out of touch the coalition is with the vast majority of people in regions such as the north-east, its lack of understanding of how the housing market works in such places is absolutely spot on.

I am a north-east Labour MP, so I suppose that no one will be surprised to discover that I am not impressed by the Chancellor’s support, or lack of it, for the region. However, the north-east’s business community is equally unimpressed. The North East chamber of commerce has said:

“The extra cut in corporation tax is welcome and will help stimulate investment in the UK. However, relatively few North East firms will benefit from this, and we would have preferred to see a greater focus on strengthening investment allowances and cutting employment taxes, to address the two key weaknesses in the North East economy.”

Although it does not deal specifically with the north-east, the Federation of Small Businesses wrote to me when it found out that I had secured this debate, asking that I highlight its concerns. The FSB said:

“We asked for a Budget with long-term measures to help to instil confidence, rather than a barrage of micro-measures that have a limited impact on the ground. We are pleased with some of the actions to cut the burden of red tape, help to get our young workers into employment, and measures to improve access to finance…However, petrol prices remain a major concern for small businesses and we would have liked some further action on reducing the level of fuel duty to help struggling small firms.”

The cost of fuel, although important to all UK businesses, is crucial to maintaining competitiveness in regions such as the north-east. One local business that makes plastic milk bottles informed me that its biggest cost is the cost of fuel. Let us face it: in effect, that business’s biggest cost is transporting its product, which is 90% fresh air, around the UK. Given the geographical location of the north-east and the vital importance of manufacturing employment, was it too much to ask that the Government reduce fuel costs for businesses and maintain jobs in the regions?

The Federation also commented that it welcomed the enterprise finance guarantee scheme, but said that recent figures clearly show that lending under the scheme is falling rather than rising, and that the Chancellor must do a lot more to encourage banks to increase their lending to small firms without requiring the excessive personal guarantees that deter small businesses, particularly in areas such as the north-east.

The Association of North East Councils, which represents the 12 north-east authorities, was also unimpressed, reporting that almost 50% of businesses in the region have no plans to increase staff numbers in the coming months but are hanging on before deciding on reductions. Weakening sales and poor service sector performance are still preventing much-needed growth to offset public sector employment cuts. Job loss in the north-east as a whole is four times deeper than in the rest of the country. None of that has been helped by the complete lack of recognition or action in the Chancellor’s Budget.

This Government are now doing to public services in the north what they did so successfully in the 1980s to our traditional industries of mining, shipbuilding and heavy engineering: bringing them to ruin and laying them waste. If the Government’s plan to replace those jobs is to build the private sector, why are they doing virtually nothing for the north-east? The main problem is not that they are doing nothing but that they are making things worse. For the young in particular, they are removing hope.

The Government have not recognised that for a region such as the north-east, geography and the new politics of the United Kingdom are realities that must be considered. Scotland is just over the border. The Scots at Holyrood still have economic development and tourism strategies and are still offering inward investment incentives, all important determinants whether a company invests in Scotland or the north-east, but the Chancellor and the Secretary of State for Business, Innovation and Skills seem oblivious. For example, Amazon, despite considering a site in the north-east, has located in Edinburgh, purely on the basis of the grants available. Given the existing imbalance in Edinburgh’s favour, the decision to locate the Green investment bank there seems like a political and economic knee in the groin for regions such as the north-east of England.

In last year’s autumn statement, the Chancellor made much of the Government’s plans for our national infrastructure, emphasising the importance of capital spending on infrastructure to support the UK’s long-term growth prospects. He outlined £30 billion in spending, including an immediate increase of £5 billion in Government spending. As one of their central economic priorities, the Government have defined a number of ways in which they wish to rebalance the economy away from over-reliance on public sector jobs and towards private sector employment; away from over-reliance on financial services and towards manufacturing and export industries; away from over-reliance on the south-east and towards more balanced economic growth across the UK.

The Chancellor’s statement emphasised that every region in England will benefit from that infrastructure spending. He even listed a host of road and rail projects in England in his speech. However, research by the Institute for Public Policy Research on the detail behind the Chancellor’s statement paints a different picture. Behind the empty rhetoric and claims of rebalancing, we find that 11 of the 20 largest infrastructure projects will benefit London and the south-east, only five will benefit the three northern regions and more than half of regional transport projects involving public funding will benefit London.

Considered together, London and the south-east account for 84% of planned spending, compared with only 6% for the three northern regions and an unbelievably minuscule 0.04% for the north-east. That equates to £2,731 per head of population for London and the south-east, more than all the other regions combined, compared with £201 in Yorkshire and Humber, £134 in the north-west and just £5 in the north-east of England. A fiver is what we are worth, in comparative terms, in the UK of today. For each £1,000 of gross value added generated in 2009, £81 is being spent on transport projects in London, £38 in the south-east, £12 in Yorkshire and Humber, £8 in the north-west and less than 50p in the north-east.

This Chancellor and this Government have spoken in duplicitous terms, but I now wonder whether they have given up even trying to talk a good fight when it comes to rebalancing the economy. They have clearly been saying one thing and doing another, looking after their home patch while slashing and burning the regions of England. To make matters even worse, they prefer to exemplify the north-east as a basket case. Before this bunch came to office, nothing could have been further from the truth. Thanks to the support of its 12 local authorities and the regional development agency, the north-east had developed an economy that was strong, dynamic and diversified compared with when a Conservative Government last laid waste to it in the 1980s.

However, in a typically knee-jerk, ideological and spiteful reaction, this Government have abolished our RDA, despite the fact that during the last three months of 2011, the north-east enjoyed record high growth in exports. Goods worth £13.5 billion were sold overseas from the north-east, up from £12 billion the previous year. If every other region in the United Kingdom were performing as well in those terms as the north-east, we would be doing rather well indeed.

Only yesterday, I received e-mail confirmation from the largest private sector employer in my constituency—AkzoNobel, known locally as International Paints—that last year it received an essential grant from One North East to support the establishment of its fire protection research and development facility. Recently produced documentation on the legacy of One North East showed that during the past 10 years, the north-east enjoyed the greatest level of economic growth outside London, and that during the last Government, the development agency helped to increase the region’s employment massively and its number of businesses and GVA to among the highest in the country.

Before the RDA’s inception, our regional economy was falling further behind other English regions. Since it was established in 1999, only London has experienced greater economic growth, but this Government have replaced the RDAs with local enterprise partnerships, which have no powers and little or no funding, and the much-heralded regional growth fund, which has delivered only modest amounts of direct aid to companies in the north-east.

From 1999 onwards, employment in the north-east rose at the third highest rate in the country after London and Yorkshire and Humber, and 116,000 jobs were created, representing growth of 11.2%. We also had the highest growth in new businesses, 18.7%, and the highest growth outside London in GVA per head of population. Tourism, conferencing and inward investment were all significantly boosted by the RDA’s “Passionate people, passionate places” campaign. The agency’s work on low-carbon vehicle production and green energy generation are legacies on which we could build if only the Government had a credible policy for the economy.

We had a credible policy for growth in the region, a credible policy for jobs and a credible policy to rebalance England’s economy, which included the idea that the north-east is a place to do business. Sadly, this Government have none of those, and prospects for my region remain bleak. Disposable income is being sucked out of our communities through public sector job losses, wage freezes and benefit cuts.

Before the recess, the Newcastle Journal published an editorial headlined “Never mind a Heathrow runway”, which stated:

“It would be a terrible shame if the row over party funding deafened the Government to the findings of the OECD. Its report makes grim reading for the region, but not simply because it highlights the problems caused by rotten infrastructure, poor connectivity and the lack of continuity in government. No, what really hurts is that a Paris-based organisation has been able to recognise basic, obvious, well-known facts that should not have been possible to ignore. Yet successive administrations in London have managed that feat damagingly well. Never mind arguing about a third runway at Heathrow, how about helping the North East instead?”

What are the Chancellor’s answers to these regional conundrums—a brain wave, a stroke of genius, an innovative investment package? No, what we got was the concept of regional pay. If that is the direction that he wants to take, perhaps we could also ask him to consider regionally reduced utility bills for gas, electricity, water and telephones, and while we are at it, cheaper council tax and grocery bills. If the Chancellor or the Prime Minister fancy paying £250,000 for the privilege of dinner with the chief executives of Tesco, Sainsbury’s, Asda and Morrisons, they could ask them, “Could the supermarkets reduce the cost of shopping in the regions, please?” They could also ask representatives of the east coast main line to charge regionally reduced fares for journeys to London.

[James Wharton]

I thank the hon. Gentleman for giving way to me for a second time. When the previous Labour Government introduced localised pay for the Courts Service, did they also introduce the other measures that he has mentioned?

--- Later in debate ---

[James Wharton (Stockton South) (Con)]

Thank you, Sir Roger. It is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Gateshead (Ian Mearns) on his passionate speech and on securing such an important debate. The issue is important to all of us who represent the north-east, in whichever party.

It is important to be clear that the north-east is not a basket case. It is not the end of the world and it is not a place where economic activity does not exist. There are many good signs of progress and economic success in our region. Unemployment in the north-east has been falling for the past two months, against the trend in much of the country, in what Members will agree is a difficult economic climate. There are many examples of significant good news stories, such as the relighting at the weekend of the SSI blast furnace on Teesside. That is very good and positive news, due in no small part to the sterling work of my hon. Friend the Member for Redcar (Ian Swales), who has fought long and hard to see steel-making return to that part of our region.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will the hon. Gentleman also acknowledge that the work to get SSI to purchase the Corus steel plant began in the summer of 2009 and was largely due to the work of the trade union on the site, which led the “Save our steel” campaign, in conjunction with Labour Ministers, who regularly met plant representatives, unlike this Government’s Ministers, who refused to meet work forces at Rio Tinto Alcan and—these are not in the north-east—at steel sites in Kent, such as Thamesteel?

[James Wharton]

The hon. Gentleman’s generosity in wanting to ensure that everybody who played a part is adequately recognised is testament to his character. The unions played a significant role, as did the Government of the day, when the plant’s closure was announced, as have the Government of today, in delivering the success. It is something about which we can all be pleased in our region and I welcome the hon. Gentleman’s comments.

We have also received the good news that Hitachi will come to Newton Aycliffe to build trains. Nissan has announced that more jobs are being created and more work being done. In my constituency, Nifco has just opened a new factory in Eaglescliffe—a smaller but none the less significant manufacturing investment—and is already considering options for expansion because it is doing well.

More than 47,000 private sector jobs have been announced in the regional media since the last election. Articles in the press report what is said and announced, the levels of investment and the positive news, yet all too often all we hear are the negatives. I am sure that we all agree on a cross-party basis that it is important to take every opportunity to talk up our region and make it clear to anyone who is considering investing there that we are open for business and looking to do business, and that we welcome investment and we want to see the jobs and growth it would create.

[Helen Goodman (Bishop Auckland) (Lab)]

We all agree with the hon. Gentleman that there should be willingness to invest in our region, but does he not understand that it is deeply problematic that only 0.1% of the extra capital investment announced by the Chancellor in his autumn statement came to our region?

[James Wharton]

I was, of course, referring to private sector investment. The hon. Lady makes an interesting point, but we have to look at the figures realistically. A lot of the spending that has been announced is for specific large projects, some of which are in London, such as Crossrail, and some of which will potentially benefit the north-east, such as High Speed 2. Although it is not yet coming to our region, the benefits are real.

The RDA has been mentioned. I have my differences with Opposition Members on that issue. I always felt that the RDA was too focused on Newcastle and as the hon. Member for Gateshead said, we must remember and acknowledge that Newcastle is not the entire region. I welcome the new local enterprise partnerships because they are more localised and more focused on the areas where the growth that we want to see needs to be delivered. From the growth that we are seeing and the investment that is being announced, the signs are that LEPs are already doing a good job. The LEP in Teesside is certainly doing an excellent job. It hit the ground running and is making a difference to securing the growth that we need in that part of our region.

There were, of course, a number of announcements in the Budget that will both directly and indirectly benefit our region. One of the most significant is the increase in the personal allowance. In total, across all the Budgets we have had so far from the Government, 82,000 people have been lifted out of income tax altogether in the north-east region. That significant and welcome benefit will make a real difference to the lives of tens of thousands of families across the north-east who are on the lowest incomes and who most need that support.

The increase in the personal allowance will also, of course, deliver improvements for our regional economy because that money is not being taken in tax and spirited away to London to be redistributed in accordance with the diktat of the Government—whoever they are. That money is staying in the pockets of families in the north-east, so that they can spend it in our local economy, provide a welcome economic boost and create jobs and growth, which is what we all want to see.

In the north-east, the income tax bills of nearly 1 million people will decrease, although some of them will not be entirely lifted out of income tax just yet. The child benefit tapering changes are a welcome mitigation of the impact of the need to control the child benefit bill because of the financial situation in which the Government find themselves. That will benefit 14,000 families across the north-east and is another welcome measure in the Budget that will leave more money in our regional economies and in the pockets of the people who live and work in the north-east and elsewhere. That policy will make a difference to our regional economy and the lives of those who live in the regions.

Negatives in the Budget do exist. Stamp duty land tax is increasing. However, we are lucky in the north-east because only 1% of the properties affected—

[Sir Roger Gale (in the Chair)]

Order. I call Mr Grahame Morris.

--- Later in debate ---

[Ian Lavery]

Thank you, Sir Roger. I agree with everything that my hon. Friend said.

We in the south-east of Northumberland are a million miles away from Nissan. The perceived jobs bonanza at Nissan is two bus journeys, a Metro journey and a further bus journey away. We wish that we had the same opportunities as there are at Nissan. We hope that they will come. We have not even got a rail service in my area: there is a railway line but no trains to run on it. We cannot even get to Newcastle, Sunderland or Middlesbrough city centre from where we live, because there are not the transport links and the much-needed transfer links.

I want to focus on a strong appeal to the Minister to hear the case of the people in south-east Northumberland. If we in Wansbeck are to have an opportunity for growth, a Northumberland extension of the North Eastern local enterprise partnership enterprise zone—the port of Blyth and the estuary—needs to benefit from capital allowances and rate relief at the same time. It is not enough to extend the enterprise zone without the provision of the additional allowances and incentives necessary to attract businesses and jobs. We need those guarantees. In addition, with the appropriate allowances and incentives, further extension to the enterprise zone is desperately needed, so that it stretches through Wansbeck as far up the coast as the Alcan site. A failure to do so will place Wansbeck and south-east Northumberland at a distinct disadvantage, by further damaging employment opportunities for our communities.

[James Wharton]

On a point of regional, cross-party unity, I echo the hon. Gentleman’s calls. The enterprise zones are a good initiative of the Government, and I should like to see them extended. Anything that we as a region can do to put pressure on Ministers to extend the enterprise zones and to give us further opportunities for growth is welcome.

[Ian Lavery]

Having enterprise zones surrounding areas such as mine only compounds the entire problem; basically, they incentivise people to stay away. May I appeal to Ministers, on behalf of the young and the old? Please listen, visit the area, help the anxious communities that we represent, give them fairness and a level playing field and give them hope and access to aspiration. Although not the most wealthy people in the country, we are most honest and most sincere. We need the Minister and the Government to act now to save what might be lost future generations.