Budget Resolutions and Economic Situation

Mark Lazarowicz Excerpts

Thursday 21st March 2013 Commons Chamber

[Guto Bebb]

Indeed, and I welcome every single one of those jobs.

The worst thing about the argument that we are having is that every time Labour Members appear in the media in Wales, they complain, “Yes, jobs have been created, but they’re not our type of jobs—they’re not proper jobs.” They insult people who are going out to work and trying to earn a living in supermarkets and hotels by claiming that they are not taking the right type of jobs. People in my constituency know that a job is an opportunity to help themselves. This Government are making sure that people in low-paid jobs are keeping the money they earn because their tax rates are going down. Labour Members bribed people with their own money; this Government are allowing people to keep their money in order to look after themselves, encouraging self-sufficiency and responsibility rather than the expectation that the state will look after them. We are moving in a direction that I am proud of, because we will have a country in which people are confident that if they invest, they will be able to keep more of their money without being taxed and in which people will be able to earn money without being penalised for doing so.

In my constituency and in many other parts of Wales, we are very dependent on the small business community, which was never understood by Labour Members; indeed, they do not understand it now. I will give an example of how bad Labour is at understanding business. Labour’s Minister for Finance in Wales says that she does not believe in capitalism and prefers Marxism. If she were a trade unionist or a Labour activist, I would understand that, but she is the Minister responsible for economic development in Wales and does not believe in capitalism. She should give up her job and get somebody better to do it who will ensure that Wales can benefit from the policies of this Government.

Every single one of the small businesses in my constituency will benefit from a reduction in employer’s national insurance contributions. Labour increased national insurance contributions for people employing staff; we are reducing them significantly. Some 35,000 businesses in Wales will benefit, 20,000 of which will pay no employer’s national insurance contributions. My hon. Friend the Member for Burton (Andrew Griffiths) talked about small breweries and the fact that the beer duty escalator has been stopped, which is a good thing for the industry. In my constituency I have four small breweries that will benefit not only from the changes to the beer duty escalator, which was brought in by Labour, but from the reduction in employer’s national insurance contributions, allowing them to invest and to develop more opportunities for work in the area.

There is a 13% differential between the rate at which Labour would be taxing petrol and what this Government are doing. In a rural constituency such as mine, that is crucial—13p per litre makes a huge difference. Labour Members might not understand this because they do not understand rural areas, but in my part of the world there is an understanding that the changes to fuel duty and excise duties are crucial for a rural area that depends on self-employment and the small businesses that do understand the needs of the community and the need to invest in order to improve.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

What does the hon. Gentleman think would be the effect on rural and, indeed, urban communities in his constituency of a housing measure that will apparently subsidise people to buy second homes up to a value of £600,000?

[Guto Bebb]

We await clarity on that issue. However, I am absolutely terrified about the fact that the administration of that measure will be partly devolved to Wales, where the situation is astonishing. The NewBuy scheme was introduced by this Government in April 2012, but it has yet to be introduced in Wales. The Welsh Labour Government will introduce it in June 2013. In other words, 15 months after the money was made available, the Labour Government in Cardiff are still not helping people in my constituency who want support to buy new houses.

I am concerned that the Labour Government in Cardiff are not delivering. Their decisions on every single policy are made for political reasons to undermine the work of this coalition Government, and nowhere is that more the case than with how the Welsh Government refuse to co-operate with the Work programme. Many programmes in Wales are funded by money from the European social fund and they provide support to those who need it to get back into employment, but the Welsh Labour Government refuse to allow those individuals to access the Work programme and the ESF business support programmes at the same time. The Labour party’s commitment to employment growth in Wales is zero, while its commitment to wrecking the work of this coalition Government is 100% and total. The people of Wales realise the betrayal of their communities by the Labour party.

The fact of the matter is that, on every single issue, this Budget is making an effort, in very difficult circumstances, to help those people who want to help themselves. As a Member who represents an area that is very dependent on self-employment, I welcome the key decision to introduce the flat pension rate. For far too long, the option of self-employment was penalised by the pensions system. The move to a flat system whereby people will benefit by about £144 a week from a guaranteed state pension is crucial. The decision to become self-employed is a difficult one to make, especially so in Wales, where it is also difficult to then provide for a pension, because the position of the public sector is so different. I warmly welcome the fact that this Government are tackling the need for a fairer pension system. Every single person in my constituency—employed or self-employed—will realise that if they put money aside for their own pension, they will be supported by a Government who are committed to supporting people to do the right thing.

Finally, one of my concerns about the current economic situation relates to financing for small businesses. This is not a criticism of the Government. Time and again I meet representatives from banks who claim that they have money available but that there is a lack of demand for funding. We have heard the same complaints from the Labour party. The key thing is that MPs can do a lot of work on this matter. During the Easter recess I will hold two surgeries to tell businesses how to get themselves fit for the lending available. Circumstances have changed. The time when money was thrown at businesses has gone, but businesses that go to the banks with appropriate business plans and ideas for development and growth should and could access money at much cheaper rates than the Welsh Assembly-funded Finance Wales scheme. MPs can stand up in this Chamber and complain as much as they want, but the key thing is that we—I know that my Government colleagues do this—work with businesses to help them access that funding, rather than complain all the time in the way that the Labour party does.

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[Andrew Gwynne]

My hon. Friend is absolutely right. She may have read the Manchester Evening News research, which showed that Tameside, which is part of my constituency, is the worst place in the north-west of England for young people to access job opportunities. There are real issues here that need to be resolved by Government.

Some good local initiatives are being pushed through by my two local authorities. One is Tameside, a Labour local authority, and the other is Stockport, a Liberal Democrat authority. They are doing their best in very tight circumstances, not least because every man, woman and child in Tameside is losing the equivalent of £163 in central Government grant to the local authority and Stockport is losing £94 per head of population.

We are seeing initiatives such as the introduction of town teams in Denton—I am proud that my office is represented on the Denton town team—and a pooled apprenticeship scheme in Tameside, which enables firms to reduce the risk in taking on apprentices. That initiative has been ably led by the leader of Tameside council, Councillor Kieran Quinn, who set out an ambition to have every young person in work or training by 2020. Tameside council has done a deal with New Charter Housing, the local registered social landlord, to ensure that one affordable house is built per week for the next three years. Stockport has the Stockport Boost initiative, its town centre is a Portas pilot, and there are huge opportunities along the M60 corridor with its close proximity to the airport city enterprise zone and the Grand Central redevelopment. That initiative is being pushed forward by the Greater Manchester combined authority and the Association of Greater Manchester Authorities—a Labour-led, city region initiative.

Lord Heseltine talks about combined authorities and giving more responsibility to local enterprise partnerships, and that is where Greater Manchester takes a lead. He also mentions local leadership, which is a thorny issue. I personally support the idea of a Greater Manchester-wide mayor, and although I realise that others in the city region are not convinced, I at least welcome the debate started by Lord Heseltine in his report.

My final point—which I have already touched on—is about housing, which continues to be a big problem in my constituency. The new homes bonus announced by the Government in 2010 was supposed to unleash growth and help build at least 400,000 additional homes, but it has failed to deliver.

[Mark Lazarowicz]

Will my hon. Friend give way?

[Andrew Gwynne]

I will not as I do not have time. Housing starts fell by 11% last year to below 100,000—fewer than half the number required to meet housing need. The Government’s £10 billion guarantee scheme has yet to deliver a single penny of support for house building. There were a number of small things to be welcomed in the Budget, but there were no answers on growth or for communities such as Denton and Reddish. After three years of failure, it is time for a different approach.

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[Mark Durkan (Foyle) (SDLP)]

I am delighted to follow the hon. Member for Harrow East (Bob Blackman). I acknowledge the effective advocacy that he has provided for Equitable Life annuitants. I commend him and the Chancellor and his ministerial colleagues for addressing that outstanding injustice. The issue now is to deliver not just the solution that has been designed, but the outcome that people deserve.

There are some things in the Budget that it would be churlish of me not to acknowledge from a Northern Ireland perspective. Our exclusion from the carbon price floor is hugely important, given that Northern Ireland is part of a single electricity market in Ireland. The effect of the price floor would have been to skew investment in our generating capacity in a way that would have penalised business and consumers. I am therefore glad that Ministers woke up to the problems that many of us have been raising in the Chamber for so long, ever since the measure was announced.

We already know that there is some confusion about aspects of the Budget, such as Help to Buy, the mortgage support scheme. The shadow Chancellor has rightly raised some issues and questions about the scheme, but let us be clear: whether or not it will support people with buy-to-let mortgages, there is to be no income cap whatever on the people qualifying for it. At a time when people here are all about the “aspiration nation”, there are a lot of people out there who just feel exasperation that a scheme such as this should come along with no income cap. Meanwhile, they have suffered the loss of child benefit, on which there is an income cap, starting at £50,000, with payments ending completely at £60,000. Those people are exasperated too when they hear, “Oh yes, child care benefits are coming”—in two and a half years’ time. Government Members used to criticise the former Chancellor and Prime Minister when he produced Budgets and made announcements about things that would be introduced in two or three years’ time but sold them as though they were happening at the time. They rightly criticised him for that, yet they are cheering on their own Chancellor for doing exactly the same thing, while people are suffering the loss of support for caring for their children.

The Chancellor talked a lot yesterday about investing in new energy sources, but we needed to hear about investing in energy efficiency. He talked about new house building schemes to help the construction sector, but the sector is screaming out for support for repairs, maintenance and retrofitting to support energy efficiency in our existing housing stock. Many people want to stay where they are and to improve the energy efficiency of their homes, and they should be supported in that, not least through proper, targeted VAT relief and reductions.

Similar VAT reductions should be targeted at the tourism sector. That is happening in quite a number of EU member states. It is allowed, it is effective and it traps the multipliers here at home. I do not agree with the proposals for a blanket reduction in VAT for a particular period, as it could suck in all sorts of imports and send other money out of the country. We should target VAT reductions where they will produce real benefit in home sectors, and such targeting on the construction and tourism sectors would help.

[Mark Lazarowicz]

I agree with my hon. Friend’s point about targeting help, particularly on building maintenance and repair and on tourism. Does he agree that one benefit of such targeting is that it would take effect very quickly and would be likely to help small business and small traders? Many of the housing measures announced yesterday were welcome, but they will mainly benefit the bigger builders. The VAT cuts that my hon. Friend is suggesting would provide a quick way of boosting the economy and helping many of the people who need help now.

[Mark Durkan]

I fully accept my hon. Friend’s point. The multipliers would get into gear far faster under that sort of measure than under some of the other measures that have been proposed, welcome though they are in their own context.

Certain aspects of the Budget served notice of more pain to come. The Chancellor spoke yesterday about changes that he will be making through annually managed expenditure. That sounds like a dry, technical change, but it will have a significant impact in relation to the controls that are being placed on welfare spending. We have already had the Welfare Reform Act 2012, which changed many of the rules, structures and qualifying criteria for benefits. It was designed in such a way as to allow for wide regulatory powers to place further changes and squeezes on benefits without the need for further primary legislation.

It is clear that, by moving to change the rules relating to annually managed expenditure, the Chancellor is trying to put in place more fixed envelopes for welfare spending. That will have particular implications for the way in which social security spend is managed in Northern Ireland, because the money comes to Northern Ireland not as part of the departmental expenditure limit—the DEL—but as annually managed expenditure. If that is now to be subject to some fixed-envelope procedure and capped in advance, it will put serious stress on the Northern Ireland Assembly. The Assembly is in the bizarre position of having to pass karaoke legislation that has to be exactly the same as that passed here, but it is notionally responsible for the administrative discretion on delivery. That will be a fundamental challenge for us in Northern Ireland, and we all need to wake up to that fact.

We need to be as alert to that challenge as the Executive have been on the case for corporation tax. I can see where the Chancellor is going with that, but his rate of travel in regard to corporation tax UK-wide means that, by the time any concession is delivered to Northern Ireland, the marginal benefits it will give us will be a lot less.

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[Richard Fuller]

I appreciate my hon. Friend’s intervention, but I am not sure that I can share his joy. The impetus behind this Treasury document is the notion that enhancing loan-to-value ratios of 95% is somehow a good policy, and I need some more reassurance about that.

Let us compare the average house bought in 1997 at the average loan-to-value ratio of 80% with the average house bought in 2007—after all that price inflation—at a 95% loan-to-value ratio. Over the 20 or 25 years of their mortgage, the people who bought the average house in 2007 will have to spend £234,000 more than those who bought the average house in 1997. Increasing loan-to-value ratios depresses people’s ability to spend money on other things, because they are spending more on their mortgages. I want some more reassurance from the Treasury that this scheme will not have unintended consequences for their ability to spend money appropriately in relation to their incomes.

[Mark Lazarowicz]

Is not another possible unintended consequence of the measure the setting off of regionally based house price spirals, exacerbating some of the regional differences that other measures in the Budget are intended to address?

[Richard Fuller]

The hon. Gentleman makes a fair point, but I do not see that that would be a problem in this instance. In fact, the scheme might counteract the problem. However, it is clear that the issue needs to be sorted out as what is currently an outline becomes a fully developed scheme.

Let me end by making a fundamental point. Every politician in the House must recognise that our debt burden presents us all with a challenge to do more with less. The answer is not to continue kicking the can down the road. We must face up to our responsibilities, and we owe it to the generations to come to do that quickly, while interest rates are low, rather than waiting to see what—as was pointed out by my hon. Friend the Member for Folkestone and Hythe (Damian Collins)—may happen if they suddenly start to spike, and we find ourselves in a much more difficult position in trying to bring Government spending back under control.

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[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

We are told that a number of announcements in the Budget will encourage investment in infrastructure and growth. I hope that these policies do have that effect, because that would be welcome. They are being announced again because the policies announced in the other Budgets since the election have, as yet, signally failed to bring about such growth. There is plenty of evidence about how slowly they are benefiting infra- structure and investment. The recent National Audit Office report on the national infrastructure plan pointed out that although developers notified the Government of 99 infrastructure projects under the plan, by December 2012 only three had been determined, six were expecting a decision within three months, and the remaining 90 were not even at a decision stage.

An example of announcements about infrastructure taking a long time to have an effect is the Caledonian sleeper service from London to Scotland, on which I have been involved in campaigning. It was announced in 2011 and announced again in 2012. The money for it will probably start flowing through into carriages and stations from late 2014 onwards, until perhaps 2017 or 2018. It is obviously a very good investment, but it will not have an effect on boosting the economy in 2013. It did not have that effect in 2012 or 2011, and it will not do so until 2015 onwards. What can be said of that project is certainly true of many of the other investment projects that the Government have been trying to encourage and bring about.

The Government know that they have to do more to get results in terms of boosting the economy. That is why at least some in the Government appear to want to set off a new housing boom before 2015. Of course, we all want to see the encouragement of affordable, or relatively affordable, housing for first-time buyers and people who cannot get on to the housing ladder, and we certainly want to see the desperately needed boost for the construction industry that would come from such measures. However, it is a different thing to promote a scheme that would apparently help anyone of any income to buy a house costing up to £600,000 in any part of the country. That would inevitably run a high risk of setting off an unsustainable house price boom, which, as we have learned from previous experience, is precisely the kind of thing that many parts of the country do not need. It also creates a great danger of exacerbating some of the regional economic differences that the measures in the Budget are supposedly trying to address.

When the Secretary of State was asked about this measure, he told us, in his usual emollient way, that the details are being discussed and that more consideration is going on. Most of us in the Chamber could already hear the gears crunching as the Government prepared another U-turn, or, alternatively, the Secretary of State personally distanced himself from Government policy. This policy is being spun in the media, no doubt by someone in the Treasury. It is not so much about helping people who need housing as trying to get a housing boom in 2015, and it is the wrong approach. The Government say that they are going to introduce a policy that would help people on whatever income, in whatever part of the country, to buy houses costing up to £600,000. That would particularly benefit people with high earnings in areas that already get a great deal of benefit from economic activity.

I hope that the Minister will soon clarify the scope of this policy. We all want support for first-time buyers and people who need housing, but we certainly do not want an unrestrained re-stimulation of the unsustainable housing booms that we have seen in the past.