Comprehensive Spending Review
Mary Macleod Excerpts(14 years ago)
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Stephen Williams
The hon. Gentleman is a thoughtful man who now sits on the Treasury Committee. Perhaps he thinks that this is a serious issue that needs to be tackled, but many of his hon. Friends seem to be in deficit denial. We have not heard thus far in the debate—although there are many hours to go—a single idea from the Opposition on how they would tackle the deficit, whether it is over four years or five years, which is a point of debate.
Stephen Williams
I am running out of time, so I will not be able to.
The Chief Secretary announced that the comprehensive spending review was designed to achieve three things. The first of those was growth, and today’s statement by the Business Secretary certainly builds on that. I welcome the £1.4 billion for the regional growth fund and the local enterprise partnerships that have been set up to replace the regional development agencies. In Bristol, the South West Regional Development Agency will not be missed, and I look forward to working with our local enterprise partnership for Bristol and the west of England. I welcome the fact that the science budget has been protected in cash terms, and the fact that £250 million extra is being put into apprenticeships—something that I spoke about repeatedly in the last Parliament, when I led for my party on these issues.
I also welcome the moves towards a low-carbon economy to ensure that we have stable and sustainable growth in future, with the green investment bank and the first investment in carbon capture and storage, which the previous Government pulled out of.
I welcome, too, the transport schemes that have been announced so far this week, but I look forward to confirmation next week, when we have the announcements on rail, that the electrification of the great western main line from Paddington to Bristol and to south Wales should go ahead in order to support growth and stability in Swindon, Bristol, the west of England and south Wales.
The second theme of the CSR is reform to the welfare system, which is absolutely essential. The need for that was recognised by the last Labour Government, but now Lord Freud is a Minister in the coalition Government and Lord Hutton is advising the coalition Government on how to achieve what the previous Government recognised but failed to tackle. It is a key principle that work should always pay: it should be clear to everybody that if one is in work one should be better off. However, the welfare system is a social contract between all of us, and, in addition, taxpayers must think it is fair for them to pay for it.
Stephen Gilbert (St Austell and Newquay) (LD)
Let me begin by reminding the House why the country is in its present position, and why the spending review has had to be so tough. We are in this position because the last Labour Government left the largest deficit in our peacetime history, and the largest structural deficit in Europe.
What does that mean? I will tell hon. Members what it means. This year, we will spend £43 billion on debt interest alone. That is £120 million every single day. For that money, we could build a new primary school every hour. We could triple the number of doctors in our hospitals. We could spend twice as much on education every year. I therefore do not see how it is tenable for Opposition Members to ignore the astronomical waste of money that those interest payments are leaving with us, and the unfairness of suggesting that we pass it to future generations.
Labour Members claim that they planned £48 billion of public spending cuts when they were still in government, but they forgot to tell us where those cuts would fall. Throughout the debate, I have been enlightened no further on what they would cut and how they would address the problem. I hope that, in the hours that remain, some Labour Members may come up with some ideas of their own.
The Government’s comprehensive spending review sets out £1 billion less of cuts in Government Departments. The remaining plan focuses on long overdue reform of a complex and byzantine welfare system that delivers unintended effects to people throughout the country—and, of course, tax rises. The important point, however, is that the spending review is also fair. The banking levy will raise £2.5 billion a year. The last Government did not do that, and they had 13 years in which to do it. Indeed, under the last Government bankers and lawyers often paid lower taxes than those who cleaned their offices. That is something else that was left to this Government to sort out.
Mary Macleod
Does my hon. Friend agree with the leaders of 35 of the biggest companies around, including Marks & Spencer, Microsoft, Diageo and Next? They say that they believe that
“Addressing the debt problem in a decisive way will improve business and consumer confidence”
and that
“The cost of delay…would result in almost £100 billion of additional national debt”.
Stephen Gilbert
I thank the hon. Lady for her intervention. Not only do I agree with those companies; I also agree with the CBI and the International Monetary Fund, which have commended these plans as the best way both to ensure growth and to deal with the deficit.
Let me be clear. The Opposition have every right to challenge and to resist the measures that the coalition Government are implementing. That is of course the Opposition’s job, but they need to come clean with the British public and tell this House and the public at large what their alternative is. They will not be taken seriously until we hear different ideas from them. Today so far we have heard special pleading on transport, child benefits, housing and myriad other topics, but we have not heard anything about the measures that they would put in place to address the significant problems that we face.
The spending review has had to be tough, and of course we and our constituents will feel it, but there are many positive policies that will help create a fairer, freer and more responsible country over the next few years. One crucial area is the fairness premium that was announced by my right hon. Friend the Deputy Prime Minister.
The fairness premium involves extending 15 hours per week of free education and care to all disadvantaged two-year-olds, and a £2.5 billion pupil premium, with extra money attached to the children who need it most. Like my hon. Friend the Member for Bristol West (Stephen Williams), who has left his place, when I was at school, I was eligible for free school meals, and I know what a difference extra money going to the pupils who need it most can make. The funding will not just benefit them. By driving up standards across our schools, it will benefit every child in every school. It could be used to cut class sizes, provide one-to-one tuition and catch-up classes, or used in any way the school sees fit, ensuring that every child gets the individual attention that they need and deserve.
As everyone in the House knows, performance at school is tightly linked to future outcomes. That is where fairness can start: the funding can make a difference in the early years. Giving this country’s poorest children the best possible start in life is the most effective way to lift them out of poverty and to help them to achieve their full potential. The fairness premium is therefore one of the most important policies of the spending review and I hope that it will be welcomed by Members on both sides of the House.
There is no doubt that the spending review is full of difficult decisions, but these are decisions that Labour Members shirked for the 13 years that they were in government. These are decisions that two parties coming together and acting in the national interest will be taking.
Mary Macleod (Brentford and Isleworth) (Con)
It is good to have this debate on the comprehensive spending review following the gross domestic product growth figures and the news of the enhancement of Britain’s triple A rating, which was described by the Financial Times as
“offering a vote of confidence in the government’s austerity programme”.
For me, the CSR has summed up this Government’s intention to deal with the budget deficit in a way that gets this country back on a firm financial footing and invests in our future.
Earlier, I was appalled when the hon. Member for Wallasey (Ms Eagle) not only did not recognise that there were some women on this side of the House, and directed her comments to the gentlemen—as fond as I am of my hon. Friends, I thought she ought to have recognised the talent that we have on the Front Bench in the shape of my hon. Friend the Economic Secretary to the Treasury and elsewhere, too—but, more importantly, did not give us any one plan or any cut that we have come up with that she could agree with. She also did not come up with plan of action that showed exactly what the Opposition would do to get rid of the awful mess that we are in, which they created.
The comprehensive spending review is all about fairness and getting things back on track, ensuring that we get value for money and investing in the future. The general public appreciate that cuts need to be made, and that those cuts need to be right and fair, but that we need to ensure that we support those in need. That is what I believe we are doing. There is nothing fair about running a huge budget deficit and burdening future generations with the debts that we are not prepared to pay.
I have met several people in my constituency who are keen to work but who are prevented from doing so because they would be worse off. The time has come to make those changes and to ensure that we deliver real change for the future. The hon. Member for Hammersmith (Mr Slaughter) was talking about the impact on the local area in London, but let me tell him about my vision not only for Chiswick, Brentford, Isleworth, Osterley, Hounslow and Hammersmith but for the rest of London and for the country beyond. I want to build confidence in people, no matter where they come from or where they live. I want to ensure that we build skills for the future and that we build hope and aspirations, so that we can get people back into work again. That is what I believe that the comprehensive spending review will do.
Those of us who spent many hours, days and years in business know that we can get better value for money in the public sector. As part of this plan we will look at each Department to see where we can simplify how we do things, where we can remove duplication and where we can add value. Those things are possible.
It is also important that we do not forget those organisations that play a key role across our many constituencies. Let me bring one to mind: Refuge, which deals with domestic violence. When local authorities and others are considering their budgets and prioritising their spending, I want to put in a word for organisations such as Refuge, which need support because they provide valuable services to the local community.
Finally, I want to touch on our investment for the future—that is, investment in infrastructure, in people and in growth. I commend the Government for their announced investments in Crossrail and in many of our roads—including in the Hounslow highways private finance initiative, for which we have support—and for their many other investment announcements. I agree with our Mayor that London plays a vital role as the engine of the UK economy and that investment in the capital is critical to the well-being of the economy overall.
We are also investing in schools, with the announcement of capital funding for and the refurbishment of schools. Several schools in my community—Chiswick Community, Hounslow Manor and Oaklands—need that support. They also need the support for the additional places that they will need for the future.
In this comprehensive spending review, the Government have had to deal with the economic realities and they have not shied away from their responsibilities. We are committed to cutting waste and reforming public sector services while at the same time investing in infrastructure, people and businesses to make this country successful for the future.
Mr Hanson
No, not in view of the little time I have left.
More widely, there are cuts to front-line policing, putting at risk Labour’s record falls in crime and, as my hon. Friend the Member for Leicester West (Liz Kendall) noted, putting extra pressure on health and education services, despite pledges to support them.
Mary Macleod
What is the right hon. Gentleman’s plan, and which cuts does he agree with?
Mr Hanson
I can see a pattern developing. Members who were not here in March of this year did not hear my right hon. Friend the Member for Edinburgh South West outline his proposals.
Despite what the coalition would have us believe, this grossly unfair series of cuts is not inevitable—there is another way. The deficit was there because as a Government we faced a choice. Incidentally, the right hon. Member for Witney (Mr Cameron), as Leader of the Opposition, supported our deficit reduction plan and spending programmes. After much dithering, he supported us in taking measures to ensure that we did not let the United Kingdom slip into a depression. Members such as the hon. Members for Central Devon (Mel Stride) and for Watford do not realise that the official Opposition supported us in ensuring that we took action to help to support the banks to keep people in their jobs and to keep people’s mortgages alive.
That is unlike what happened in the recessions of the early 1990s, which I remember as a Member of Parliament, when we saw mortgages go up, houses repossessed, and jobs lost in their thousands. We took action to save those things on behalf of the British people, and we were proud to do so. The action that we took kept people in their jobs, kept people in their homes, and gave more businesses the support they needed than at any time during the 1990s. Through our action, inflation stayed at a historical low and plans were put in place to ensure that we saw a return to growth at the end of this year. We took that action to support the economy.
We need to bring the deficit down—certainly we do. We know that tough spending choices are needed, and in our Budget we looked at saving money on IT systems in the NHS, police overtime and welfare, and made £15 billion of efficiency and back-office savings on a range of other issues. They were important savings. [Interruption.] As my hon. Friend the Member for Streatham (Mr Umunna) says, we raised money through a higher and more effective banking levy.
This comprehensive spending review debate is about choices. It is about choosing whether the banks bear more of a burden than our children. It is about choosing whether we cut public services spending deeply or quickly—and we would not. It is about targeting new tax rises to fund £7.5 billion of capital spending in order to support jobs now. The Government are making the wrong choices. We are not “all in this together”. They are gambling with jobs, gambling with growth, deepening unfairness, and increasing inequality. To cite a notable former Prime Minister, there is an alternative.
We announced our programme in our Budget in March, and we were elected—every single one of us—on that programme for the future. In the coming weeks and months, we will promote that alternative vigorously, expose this Government’s reckless policies and ensure that we stand up for the ordinary, squeezed, middle-class people of this country and the people on lower incomes. We will reject the cuts where it is appropriate to reject them and support efficiencies where they should be made. [Interruption.] Again, the right hon. Member for Rayleigh and Wickford was not listening to what was said earlier. He has not been here listening to the debates and the arguments. I urge him and the House to reject this comprehensive spending review, support the Labour alternative and ensure that we defend the poorest in our society.
Comprehensive Spending Review
Mary Macleod Excerpts(14 years, 1 month ago)
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Mr Osborne
First, to put it in context, close to 200,000 jobs have been created in the last three months. Secondly, the Labour party’s plans involved a head-count reduction of more than 400,000. It was accepted by Labour politicians during the election that there would be a head-count reduction and that there would be redundancies. This is what happens when a country loses control of its public finances. If we had been better managed over recent years—if the people doing my job before me had managed to avoid this record budget deficit, which is the largest in the G20—[Interruption.] Opposition Members keep saying that this is all to do with the international situation. They have not yet managed to explain to me why we were the worst affected in that international situation. We have to take some difficult decisions, but it will help if private sector recovery helps to create jobs. The number that the hon. Lady keeps using is a number from an independent body—the Office for Budget Responsibility—that she presumably regards as credible, since she is quoting it, but the OBR also forecast falling unemployment over the period. She cannot really use one forecast from the body and not the other.
Mary Macleod (Brentford and Isleworth) (Con)
When my right hon. Friend met the IMF and World Bank officials in Washington recently, did they agree with his approach on reform, fairness and growth, which he has presented today, or did they suggest something else, like the Opposition have?
Mr Osborne
They said very clearly in their article IV assessment of the British economy that the measures we had taken were essential for fiscal sustainability. They do not always say that kind of thing about economies—last year, they criticised the previous Government’s economic plans. To be honest with my hon. Friend, I did not share all my detailed budget plans with the IMF; I thought I would share them with the House of Commons first.
Banking in Scotland
Mary Macleod Excerpts(14 years, 1 month ago)
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Mr Davidson
The first is certainly true. We have been told that money is available but is not being taken up, and money is being paid back faster than it is going out. We have not adequately explored the point at which decisions are made, not made, or knocked between front office and back office, and my hon. Friend gives us a valuable pointer. Having met representatives from three industries that are significant and important to the welfare of the Scottish economy, and having heard the same story from them all, it seems that something is still not right in the relationship between banking and its customers in Scotland.
When we met the CBI representatives, we did not quiz them as directly as we might have done because it was an informal meeting, but the same sort of message was coming back. I know from meeting various development groups in my local area, including construction companies, that people are concerned about the lack of co-operation that they receive from the banks. That is one area of the report where further work is required, and I hope that the Minister will be suitably co-operative on that.
I will now look at how banks deal with individual customers. We all deal with the public and we are aware from our activities and surgeries that there is a fair number of rascals, chancers, villains and incompetents in most constituencies, except my own. The banks are not necessarily dealing with paragons of virtue on every occasion and there are people who borrow irresponsibly. However, the volume of complaints present at the time of our report seemed far greater than could reasonably be expected. The stories that we have heard since from Citizens Advice, and the experiences in my surgery and those mentioned by my hon. Friend the Member for Dundee West (Jim McGovern), suggest that the banks continue to be less than completely understanding and helpful when dealing with customers in financial difficulty.
A number of examples of bad practice are quoted in the report, and it is perhaps appropriate to mention them so that they are on the record. In its evidence to us, Citizens Advice highlighted:
“Unfair overdraft charges; banks being more aggressive in their behaviour towards debtors; banks encouraging debtors to take out more products as part of their repayment; banks demanding higher repayments from clients in order to repay debt quicker;.”
Banks are also using the “right of set off” to transfer cash around people’s accounts. None of those are examples of particularly good practice. Many of us were worried by the way that banks were utilising call centres to a far greater extent than we believed was justifiable. In many cases, call centres were ringing up customers several times a day, and they often seemed to be in complete ignorance of arrangements that had been made with another section of the bank. Those call centres were often based abroad and perhaps there were difficulties in communication. The people who rang up and talked to the customer seemed to have no flexibility or power to negotiate or discuss matters, but simply reiterated that they wanted money back. Hon. Members will understand how stressful that was to people who, in many cases, were already highly stressed because of their financial position.
To some extent, the assurances that we had from the banks reminded me of Bart Simpson, who, when he was accused of anything, would say, “It wasn’t me, nobody saw me and you can’t prove it.” The banks tended to say, “We never did that, it wasn’t as bad as you say and we don’t do it now.” Clearly, the banks are now at some pains to distance themselves from some practices that have been going on, but I do not think that they have abandoned them entirely. We have been told that banks now show greater forbearance before taking people through the repossession process, and feedback I have received suggests that that is true. The Government are probably in a better position to clarify the figures. That is certainly a matter that we want to pursue.
We continue to receive feedback from Citizens Advice and other organisations suggesting that cases continue where one arm of a bank strikes a deal with a customer who is in financial difficulties, but another section continues to pursue the customer, irrespective of the deal done; and irrespective of the bank having been notified that somebody wants to use Citizens Advice or another intermediary as a representative, it continues to pursue the customer directly in order to harass them into making additional payments. There must be a degree of responsibility on the part of the banks. We understand that the banks need to try to recover their money, and, particularly when many of them are state-owned and state-financed to a great extent, we do not want to put them in a position where people can escape their obligations, but a balance must be struck. Paragraph 113 of the report states:
“We conclude that banks continue to use aggressive tactics towards customers who have fallen into debt.”,
We should all be concerned about that. We have been told by a number of bank staff that some of the processes and procedures that I have described continue. That is concerning.
Mary Macleod (Brentford and Isleworth) (Con)
Let me state for the record that the Royal Bank of Scotland used to be a client of mine.
I suggest to the hon. Gentleman that if customers and constituents are having problems with lending or other general banking issues, they should be encouraged to bring their problems to us as Members of Parliament, so that we can raise concerns directly with the banks. We could give the banks specific examples of where their processes and procedures are going wrong, so that they can deal with them directly.
Mr Davidson
The hon. Lady is in a good position if she can say that the Royal Bank of Scotland was a client of hers. I used to be a client of the Royal Bank of Scotland. Not many of us have it the other way round. She is right—people should feel able to come to their MPs and ask them to raise issues on their behalf, but I fear that in some locations, the Members involved would run the risk of being swamped.
In my early days as an MP I was involved in establishing a money advice centre and a citizens advice bureau, simply because my office could not cope with the volume of complaints it received. We do not necessarily need to meet those involved in such cases directly in order to get information about them. I regularly get information from advice and information centres, which aggregate. There is always a problem for individual MPs when dealing with casework in this and a number of other areas, because one is never certain of the extent to which the problem presented is typical and shared by a lot of people, or whether it is due to a persistent constituent who wants to pursue the matter as far as their MP. Although I accept that it would be immensely helpful if MPs had more information, seeing people individually is not the sole way of getting it. However, I congratulate the hon. Lady on having had the Royal Bank of Scotland as a client. I hope that she treated it better than some of its clients have been treated by that bank.
I have spoken enough about Citizens Advice; in the accompanying papers, people can read an update from that organisation which indicates that not everything is flowing as well as it might. I conclude on this aspect by pointing out that there are always two elements to a relationship between a group such as Citizens Advice and an organisation such as a bank. First, it is important that the banks are willing to listen, and I think that they are getting better at that. However, they are not necessarily better at the second element, which is acting on what they have heard. Citizens Advice tells us that it has greater access to the banks, and the banks tell us that they have more meetings, but it is not entirely clear that the banks act on the information they receive in the way that we would want.
I want to make two other points. The first relates to the work force. It is important to stress that the vast majority of people working for the banks are not on megabucks—they are not enormously well paid or taking huge risks with other people’s money. The Committee had figures indicating that bank employees’ average pay was about £28,000 at Lloyds bank and £30,500 at the Royal Bank of Scotland, with the UK average being about £25,000. It would therefore be unfair and unreasonable to say that everyone working for a bank should be the subject of the same opprobrium and be held responsible for the activities of those at the very top. We want to make sure that bank employees at the lower levels are not held responsible or accountable and do not suffer the pain as a result of lay-offs and the like. We welcome the fact that the dialogue between the banks and the trade unions on a number of these issues has improved recently. As we take this matter forward, however, we will want to hear from the trade unions about what happens subsequently.
I also want to touch on the question of bonuses, which is related to the issue of staff but not properly part of the Committee’s remit, so I will allude to it only in passing. It was clear from the evidence that we took that the offence caused to many of those affected by the economic crisis by the paying of enormous bank bonuses was disproportionate. The issue was very high up the list of people’s priorities, even though people were not necessarily affected by it and notwithstanding the fact that those bonuses might not come to a lot if they were spread across all the bank’s clients. People simply saw the bonuses as immensely offensive and unfair, and the Committee’s view when the report was drawn up was that if we are all in this together, the Government—whichever Government—should be involved in ensuring that bonuses are curbed as much as possible. I very much welcome the fact that the previous Government dealt with that by introducing a levy and that the present Government have indicated that they intend to do something similar. We look forward to seeing the details.
As I said at the beginning, I hope that the report and this debate are not the end of the process. Given the significance of the banks to economic life in Scotland, I hope that the Committee will continue to keep these matters under review and that the Government will continue to work with the Scottish Government and others to ensure that there is an appropriate and constructive regulatory environment. So much economic development in Scotland depends on our getting our banking right. I hope that Committee members who are here today will be able to add to the points that I have made. I also hope that the Government will endorse the report and its conclusions, as they have already, and agree that most of the conclusions should be taken forward actively.
Finance (No. 2) Bill
Mary Macleod Excerpts(14 years, 1 month ago)
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Charlie Elphicke
I would agree with the hon. Gentleman that confidence plays a massive role in our economy—and nowhere more so than with our smaller businesses. The confidence that we have seen since the election seems to be feeding through to the growth figures, which seem to suggest that we are coming out of the recession faster than anyone thought we would. Personally, I think we should be more positive about the prospects for the economy and the prospects for faster growth over the medium term, given the nature of the stabilisation and the confidence that the coalition Government have provided to the country. However, that does not mean that there is not more we can do for small businesses. We can and must, as my hon. Friend the Member for Devizes (Claire Perry) and others have said, have more liquidity for the small business sector. It has been too locked up in banks preparing their balance sheets—we need more lending.
Mary Macleod (Brentford and Isleworth) (Con)
Does my hon. Friend agree that a reduction in corporation tax is a way to encourage more small businesses and to keep big business in the United Kingdom, and that it will help the overall long-term growth of our economy?
Charlie Elphicke
Absolutely, yes. The previous Government were planning to increase corporation tax on smaller businesses and to do nothing for larger businesses. The reduction in corporation tax that we are seeing across the board is an incredibly positive move by the coalition Government that will help to create more jobs and money and help to encourage businesses—international businesses in particular—to set up in the UK.
We need more liquidity for smaller businesses, but we also need tax reform for smaller businesses. Earlier today, I met the Quoted Companies Alliance, which represents smaller quoted companies. It put to me the suggestion that we should perhaps think harder about the enterprise investment scheme and venture capital trust regimes. They are limited at about 50 employees, but EU state aid approval would be allowable for fewer than 250 employees under the EU SME definition. I hope that Ministers will consider that in due course and in further Finance Bills. There is a negative effect on businesses because they dare not grow over 50 employees. That is quite important.
The QCA says that the connected company or connected person regime should be considered, because business angels could be effective and useful directors and advisers to those businesses. The alliance also says that it would be better to have lighter-touch regulation. It would concede the income tax relief if it would help to keep the capital gains tax relief and increase the limits and thresholds available in the EIS and VCT regimes. I hope that Ministers will consider that and will consider the technical detail that will help to improve things for the smaller business sector.
On CGT, the alliance welcomes the entrepreneurs’ relief—it says that that is great—but asks why it lasts for only 12 months. Does that not encourage speculators? Should it not be for three or four years, to encourage long-term investment? Should it be restricted just to those who have 5% and are employees or should it perhaps involve those who have 5% or who are employees, to widen the investment base for smaller businesses that benefit from entrepreneurs’ relief? I hope that Ministers will also consider reinvestment relief when entrepreneurs come up with wonderful ideas, sell their businesses and reinvest. Perhaps they should be encouraged to do so with a wider base of reinvestment relief, to lock in more capital and investment, which will create more jobs and money over the longer term. I recognise that these are ideas to be developed in further Finance Bills, but I hope that Ministers and the Government will give them due consideration as time passes.
The other question the alliance raises is why we do not allow AIM shares to be put into individual savings accounts. That seems to make little sense. The AIM market has changed massively since the late ’90s and it would perhaps be constructive to allow AIM company shares to be in ISAs so as to widen the investment pool and widen the availability of capital to businesses that are typically smaller in nature and faster growing.
Finally, although the London stock exchange has said for a long time that we should have got rid of the stamp duty reserve tax, which is difficult to afford in the current circumstances, the QCA asks the interesting question: what would happen if we allowed getting rid of SDRT outside the FTSE 350 for smaller companies, to help to make their shares more liquid? Trading volumes would be lower and it might be more affordable. I hope that that is something to which Ministers will give due consideration and thought in future Finance Bills.
The most important thing for our country and our countrymen is to have more jobs and more money. I hope that over time we will develop a further growth agenda and deepen the one that we have already put forward, so that we can have faster structural trend growth and the UK can become the envy of not just our friends in the European Union but the world as a whole.
Capital Gains Tax (Rates)
Mary Macleod Excerpts(14 years, 5 months ago)
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Ms Angela Eagle (Wallasey) (Lab)
As the hon. Gentleman is talking about the Office for Budget Responsibility and its forecasts, will he have the good grace to note that its recent deficit forecasts are considerably lower than those in the March Budget because more money has been collected in taxes? The deficit that the hon. Gentleman is obsessing about is actually 2% of GDP lower than the forecast in the March Budget. Will he have the decency to recognise the other side of the coin, as well as this side of it?
Mr Ellwood
As my hon. Friend the Member for Brentford and Isleworth (Mary Macleod) says from a sedentary position, the structural deficit is actually higher.
Let me deal now with total borrowing as stated by the Office for Budget Responsibility. This is now expected to fall by 2.1% of GDP by 2015, or by £37 billion, which is exactly half of what Labour were predicting, and to reach 1.1% by 2016.
Mary Macleod (Brentford and Isleworth) (Con)
I am grateful for the opportunity to speak in this debate on a matter that impacts on the life of every person in the country, every minute of every day. I congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) on his maiden speech, in which he spoke warmly about Yorkshire at its best, and said that his constituency was open for business. He took the words out of my mouth, because I was going to say that my constituency was open for business, and that shows how we need the whole country to be open for business after the Budget. My hon. Friend the Member for Carlisle (John Stevenson) also made his maiden speech, in which he spoke about regeneration. I am sure that he will be just and fear not in his time in the House.
This is a serious Budget for serious times. As my hon. Friend the Member for Bournemouth East (Mr Ellwood) reminded us, this is also a day when England were playing a serious game of football. On behalf of the House I congratulate our team on winning the game, and perhaps they will continue to win throughout the World cup.
I really do not know what planet the hon. Member for Derby North (Chris Williamson), who has just spoken, is on. He should be apologising for what the previous Government did to take the country to the brink of ruin.
Guy Opperman
The hon. Member for Derby North quoted some statistics at us about the degree of unemployment in his constituency. I am lucky enough to have the paper on unemployment by constituency from June 2010; handily, it was in my pocket as I walked into the Chamber. Without going back 13 years in relation to the Labour Government, let me say that the paper indicates that in Derby North in May 2005 there were 1,318 jobseeker’s allowance applicants, but that that has now gone up to 2,576—a significant increase, one might think, of 95.4%.
Mary Macleod
My hon. Friend is absolutely right. That proves that the Opposition are living on a different planet, and that they have not a clue about what they have really done to the country over the past 13 years.
This emergency Budget is very much about a plan for the future. We have shown that we are bold enough to make the tough decisions that need to be made. The Chancellor has been faced with a deficit of a size that we have never seen before. I commend his Budget and his determination to stick to the principles of responsibility, fairness and enterprise. Not acting to reduce the deficit is simply not an option. We are not in a position to decide whether to deal with debts or go for growth, as Labour would have us believe. We have seen from the recent crises in the eurozone that unless we deal with those debts, there will be no growth. This Budget is about achieving balance in our economy by paring spending to affordable levels and stimulating growth so that we can encourage business and enterprise.
Mr Tom Harris (Glasgow South) (Lab)
I hope that the hon. Lady will steer away from misleading the House into believing that the Labour Government did not wish to reduce the national deficit, because she must know that they proposed to halve it over a period of four years. Can she tell us with what part of that package she has so much difficulty?
Mary Macleod
The hon. Gentleman clearly has a very short memory of what the present Opposition did to the country. What we, as the Government, need to do now is address the present situation and, as we have done in the emergency Budget, come up with measures to turn it around.
Far from being reckless, as was suggested yesterday by the right hon. and learned Member for Camberwell and Peckham (Ms Harman), this Budget has shown that the Government are prepared to take on their responsibilities and make the tough decisions required. That is something that the previous Government neglected to do. We are putting the country first, and doing the right thing. What would be reckless would be to continue to allow debt interest payments to increase as they have been doing. The cuts that are coming are actually Labour cuts. We have inherited a mess far worse than we were told we would inherit before the election, and we are paying the bills for the last Government’s irresponsible actions. That is their legacy to Britain. If we carry on as we are, we may be paying about £70 billion in interest on our debt in five years’ time.
Huw Irranca-Davies
I said in my speech that no one could avoid cuts, efficiencies, choices, priorities and projects, but there is a choice to be made in terms of both timing and speed. I ask the hon. Lady to hesitate before saying that the proposals from the coalition Government are the only way forward. There are plenty of voices out there saying that there are other ways of doing this.
Mary Macleod
The hon. Gentleman spoke very movingly about the impact on his constituents. Let me reassure him that I believe that this is the right Budget for the future, and that his constituents will recognise that over the next five years. If we retain our current debt in five years’ time, however, we could be paying more in debt interest than on educating our children, policing our streets and defending our country, and that would be a disgrace.
The United Kingdom remained in recession for longer than the other G7 countries. Output declined for six consecutive quarters, and we now have the highest inflation in Europe. Continuing with business as usual simply is not an option, so we are faced with the task of making the unavoidable, and in some cases unpalatable, decisions that have been called for by the Governor of the Bank of England, the G20, and many in industry. Mervyn King has described the Government’s deficit reduction as “strong and powerful”. He said:
“I am very pleased that there is a very clear and binding commitment to accelerate the reduction in the deficit over the lifetime of the Parliament”.
The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso)—I went to Lairg primary school, so I am very fond of his constituency—talked about the risks and pain associated with the Budget, but he also said that this was something that we had to do. I agree wholeheartedly with that. However, we have tried to do it in a way that spreads the pain that is so inevitable, while protecting those most at risk and establishing the conditions required to ensure future growth.
First, let us look at the impact on business. Businesses large and small have much to be hopeful about following this Budget. As in other constituencies, there are many such businesses in Brentford and Isleworth. They need a stable economic environment in which to prosper, and this Budget will deliver that. The cuts in corporation tax will benefit them greatly and encourage them to continue to grow their staff and expand their operations in the UK, and smaller businesses will appreciate the cut in the small companies tax rate from 22% to 20%.
However, let me tell Members what some of my constituents said to me when I spoke to them today. The chief executive of West London Business, who represents more than 800 businesses in west London, said:
“Overall we feel that this is a pro-business Budget and we are pleased with it: a key element is the reduction in corporation tax which is positive for all businesses; 89% of businesses in our area have fewer than 10 employees so they will be happy with the relief on national insurance payments for small businesses. Whilst CGT has increased, these are welcome allowances for business.”
I also spoke to Andrew Doggwiler of the Hounslow chambers of commerce. He said:
“It was a tough Budget with a lot of pain being shared around, aimed at reducing the public sector deficit and restoring the confidence of the international markets in the British economy…There are positives for business in terms of reduction in corporation tax rates, extension of the enterprise finance guarantee scheme and increase in the entrepreneurs’ relief, which indicates that the Government are keen to promote business success. The Government must continue to find ways to support businesses, particularly small and medium-sized businesses, as their success is the best way of ensuring a sustainable economic recovery creating long-lasting jobs and wealth.”
That is what businesses in the hearts of our constituencies are saying.
Owen Smith
I ask the hon. Lady to reflect on the views of others in business. Ernst and Young has already said that it feels the Government have not fully understood the long-term financial consequences of the cuts, by which it means the reduction in demand in the economy. May I also point to the view of an inward investor in my constituency, GE Aircraft Engine Services Ltd, which feels that the reductions in corporation tax will not offset the damage done to its ability to invest by the reductions in capital allowances that manufacturing relies on?
Mary Macleod
I understand what the hon. Gentleman is saying, but I have been in business for 20 years, and I could cite plenty of others, including Richard Lambert, director general of the CBI, and the OECD, which says the Budget is far-reaching and courageous, so we need to have a balanced view.
I believe very strongly in the enterprise-led economy that we have put in place, and we have the building blocks in place to support future industry. That is why I was pleased to hear that spending on many capital investment projects will go ahead. Naturally, I will put in a request for Crossrail, a much needed capital investment for London.
Secondly, we also have to tackle the excess costs. This Budget has tried to create the right infrastructure for the future, but it is vital that we tackle the excess costs within our economy and get control of the welfare state. I have received letters from, and spoken to, constituents who feel it is unfair that they have worked hard all their lives and have paid taxes and are living in modest circumstances, whereas others are not working and are being supported by the state in accommodation way beyond anything they could envisage for themselves. As the Chancellor said, some of these benefits have got completely out of control, and we must review these costs.
The Chancellor was also right to point out the waste that the benefits culture engenders, not only in a financial sense to the state, but in terms of the loss of talent from individuals themselves and the ongoing impact on self-esteem and stress on family life to which living in workless households can lead. I therefore welcome the proposals that the various welfare to work schemes will be combined and simplified to support people back into jobs. It is vital for the revised scheme to be as flexible and creative as possible, particularly when looking at ways to bring groups such as lone parents whose children are at school back into the work force.
Thirdly, I want to comment on departmental budgets, which will focus the minds of many of us here in the next few months. I certainly support the target of making savings of 25% in those budgets over the next four years. I have spent many years in business cutting costs in operations around the world and I feel that the 25% figure is challenging and tough, but definitely achievable and necessary.
Fourthly, I want to mention a group in our society who are often overlooked and about whom I am often reminded by my constituents—pensioners. We all know the facts about how many of us are living and thriving into old age these days, but after 13 years under Labour there are still 1.8 million pensioners living in poverty. Many of my retired constituents feel that the contribution that they have made throughout their lives to our economy and society as a whole is not recognised as they struggle to live on their pensions or, if they save money, as they are penalised by taxation policies that seem unfair. I am delighted that we will now be able to restore some of that respect for our older citizens by putting in place the link between pensions and earnings from next April, and through the triple-lock guarantee.
I met one of my spritely 70-year-olds the other day at a surgery. He asked for the Government’s support in helping him to go on working. He said, “I’m fit and well, I love my job, I’m perfectly able to carry on working and I want to be able to continue to do so.” I hope that I will be as energetic as him at his age, and I should like us to take people like him into account when we consider the future of the retirement age.
Andrew Percy
My hon. Friend talks about support for older people. Does she agree that one of the biggest costs for elderly people in the past 13 years has been the doubling of council tax that we saw under previous Governments? In north Lincolnshire, that was done year after year by the Labour council.
Mary Macleod
I agree wholeheartedly with my hon. Friend.
I commend the Government for their plan to increase the tax allowance to £7,475, and I should like to see that go further. Perhaps that level will rise in the next few years. In conclusion, this progressive Budget has set us off on a journey of change. It is well thought out and it gives us a route map for the next five years. I commend the Budget and the courage that it shows in doing what is right for the economy and the country.