Budget Resolutions and Economic Situation

Lord Wharton of Yarm Excerpts

Wednesday 20th March 2013 Commons Chamber

[Mr James Clappison (Hertsmere) (Con)]

It is a pleasure to follow the hon. Member for Dundee East (Stewart Hosie). I do not agree with his overall analysis, but he deployed statistics in a careful, if selective, way. I disagree with the fundamental direction of travel that he indicated for the Government; he falls into the trap of allowing immediate difficulties to deflect the Government from the long-term commitment to maintaining financial control and dealing with fiscal consolidation.

It is against that background that I want to commend the Budget statement by my right hon. Friend the Chancellor, in particular for the commitment he expressed to fiscal consolidation and to maintaining control of public expenditure. The Chancellor set out the position clearly and frankly. It is refreshing to have such frank Budgets, particularly in comparison with the first 10 years of the previous Government, when we found out about undesirable developments later on by consulting the Red Book. I urge the Government to maintain a tight control of public expenditure.

Of all the statistics presented today, the most important is the trajectory of debt consolidation and dealing with the financial deficit—one to which I do not think the hon. Member for Dundee East alluded. Although he chose to refer to the national debt, he did not refer to the fiscal deficit, which is an important determinant of the national debt. As the Chancellor rightly said, the deficit has been falling. It has fallen by a quarter, and has now fallen by a third. The trajectory set out by the Chancellor was encouraging: falling by 6.8% next year, 5.9% in 2014-15, and down to 2.2% by 2017. Cyclically adjusted, as I understand from the Red Book, that would amount to 0.6% in 2017, and that is very important.

The Leader of the Opposition gave a disappointing performance and missed an opportunity to set out his plans for the future. He was very keen to draw attention to the downgrade by Moody’s. The hon. Member for Dundee East said that that had not been mentioned—I am mentioning it now. The downgrade took place, and people can make of the ratings agency what they want, but it would be instructive to refer to what was actually said by Moody’s at the time and the reasons it gave for the downgrade, particularly the weakness in the eurozone. On the long-term trajectory, Moody’s stated:

“The stable outlook on the UK’s Aa1 sovereign rating reflects Moody's expectation that a combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK’s debt trajectory. Moreover, although the UK’s economy has considerable risk exposure through trade and financial linkages to a potential escalation in the euro area sovereign debt crisis, its contagion risk is mitigated by the flexibility afforded by the UK’s independent monetary policy framework and sterling’s global reserve currency status.”

On the last point about our ability to set an independent monetary framework, therein lies another tale, as far as the Leader of the Opposition is concerned. The Opposition say that they are not committed to joining the euro at the moment, but I have not heard them rule out joining it at any stage. I believe that the benefit of an independent monetary framework is a permanent, not just a temporary one, as has been proved over the last decade.

[James Wharton (Stockton South) (Con)]

Does my hon. Friend think that there will long be a euro to join?

[Mr Clappison]

I was one of those who joined the crusade led by my right hon. Friend the Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, against the euro. Some of the comments made at the time about that crusade, which has been of lasting benefit to this country, have come back to haunt those who made them.

The Leader of the Opposition missed the chance today to set out his plans in detail. He said that the Government had been downgraded and he referred to borrowing, but he did not say how much more borrowing he would undertake, how it would be spent, how it would affect the economy, what effect it would have on our international credit rating or how those who take business and monetary decisions would view this country. We need to hear much more detail from the Opposition. We heard a lot about the millionaires’ tax cut. I do not think that Opposition Members are going to get much more mileage out of that. We all remember that the 50p tax rate was put in place in the last five minutes of the previous Labour Government.

The Opposition’s rhetoric runs the risk of creating an anti-business and anti-success environment and of deterring investors from investing here and earning rewards. That contrasts with the policies we heard from the Government today. I commend their priority in giving help to business, particularly in reducing the rate of corporation tax, which I think is an achievement and will give us a good rate compared to our competitors. I also applaud the employment allowance, which is an imaginative proposal that will help many people and small businesses. Of course, I also applaud the help being given to hard-working families through the tax-free child care, the fuel duty freeze and the beer duty cuts, which will be of particular interest to many of my constituents who have lobbied me from the real ale society. I also welcome the Government’s plans to help more people to buy their own homes. I agree with the priorities the Government have set, with the funds available, within this tight fiscal framework and given the desire not to make unfunded tax cuts. They have struck the right balance in first helping business and hard-pressed families with the pressures they face.

For future reference—this is not intended as a criticism now—I would urge the Government to consider the position of, and to give some assistance to, savers, as the Conservative party committed to doing in a previous manifesto. The savings environment is not the best for small savers, particularly older people looking to supplement their pensions with interest on their savings. They have been hard hit by a combination of the interest rates offered by the financial institutions and the effect of inflation. We need to look carefully at its effect and what more can be done to help savers.

Over the past week or so, we have heard a lot about the effects of the savings levy on Cyprus, but I understand from a calculation that the House of Commons Library made for me that a basic rate taxpayer saver, having obtained the best possible current easy access account, with the forecast rate inflation in the country, at the end of four years will have seen their savings lose in value the equivalent of the 6.75% levy on Cyprus savers. That is the hidden effect of inflation on savings. We know that inflation has been rising and that savers cannot obtain high rates of interest from any of our financial institutions. Very few if any will beat the rate of inflation, and certainly not if one is a basic rate taxpayer.

I urge my right hon. Friends to look carefully at that issue and, in particular, at helping savers with individual savings accounts by giving more flexibility to ISAs. That could be done by increasing the limit for cash ISAs—this point has been made in many circles—up to the same as that for stocks and shares ISAs, to give people the opportunity to save £10,000 tax-free in cash, and also by giving people the opportunity to convert stocks and shares ISAs into cash ISAs. People cannot currently do that—although they can do it the other way around—yet it is something that some in retirement or approaching it may wish to do. ISAs are the most democratic form of saving, if I can put it that way. If future help is to be made available, I would urge the Government to ensure that it goes to our savers.

I applaud the choices we are making for today’s purposes in the Budget. It is right to help hard-pressed families and businesses for the future. This is a business-friendly Government who are taking the decisions to lay the foundations for successful businesses in this country in difficult economic circumstances.