Budget Resolutions and Economic Situation

Michael Ellis Excerpts

Friday 22nd March 2013 Commons Chamber

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

It is a pleasure to follow the excellent speeches by my hon. Friends the Members for Lewisham East (Heidi Alexander), for Walthamstow (Stella Creasy), and for Stoke-on-Trent Central (Tristram Hunt).

This is truly a triple D-rated Budget that leaves us in more debt than ever before, at risk of a triple dip, and with our credit rating downgraded. It is a Budget once again characterised by unfairness, incompetence and political game playing instead of the national interest. It is unfair, because millions of people face declining living standards while millionaires get a tax cut; it is incompetent, because the Chancellor and the Secretary of State for Business, Innovation and Skills cannot even clarify the details of the spare homes subsidy; and political game playing has seen the Chancellor play fast and loose with departmental spending to even greater political exposure in the short term, regardless of the consequences for front-line services, our international commitments or, indeed, the growth of our economy.

It is not just Opposition Members who say that—it is the Office for Budget Responsibility, which has confirmed that by 2015, people will be worse off than they were in 2010, with real wages set to fall by 2.4% over this Parliament; it is the Institute for Fiscal Studies, which only yesterday accused the Chancellor of “wasting the time” of Whitehall officials and creating “real economic costs” for the country; and, indeed, the Home Secretary, who hit the nail on the head only a couple of weeks ago, when she said:

“It’s not enough to cut budgets and hope for the best.”

I shall focus on page 70 of the Red Book, which details those £7.6 billion-worth of revenue underspends, and £2.1 billion of capital underspends in Government Departments—a staggering £9.8 billion in total. All of that was apparently done so that the Chancellor could present the illusion of a tiny drop in public sector net borrowing and make up for other accounting errors such as the 4G auction, which raised £1 billion less than he promised in the autumn statement. The consequences are serious. Opposition Members have rightly demanded to know which services, which spending, which projects and which promises have been delayed or cancelled by Departments ranging from the Department of Health to the Home Office. We need answers, and we need them now.

To take a Department in which I was proud to work, in 2010, the Prime Minister and the Chancellor categorically promised us that they would

“not balance the budget on the back of the world’s poor”.

It appears, however, that that is precisely what they have done this year, with the Department for International Development underspending by a staggering £0.5 billion, which amounts to 8% of its total revenue budget settlement for this year. That might represent a failure to pay our dues to the UN, or make our contribution to the World Bank. Indeed, the Chief Secretary seemed to suggest in TV interviews that some of the world’s poorest countries might not be ready to receive our funding. I very much hope that that proves to be untrue, because I am pretty sure that children who need vital vaccines, education or food are ready to receive our help.

[Michael Ellis (Northampton North) (Con)]

Is it not rather churlish of the hon. Gentleman to make such references, as the Government have been considerably more generous than the Labour Government were in 13 years in office in affirming a 0.7% rate of gross domestic product for international development, which is more generous than almost any other country, yet the hon. Gentleman stands up and—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I am sure that the hon. Gentleman is hoping to speak later. He must save something to tell the House.

--- Later in debate ---

[Mr Jones]

I totally agree. In defence, for example, the Conservatives called for a larger Navy and larger Army and more expenditure. What have we seen? Cuts, cuts and more cuts.

This morning we again had the nonsense from the Secretary of State for Work and Pensions that somehow if the austerity plan does not continue we will end up like Cyprus—it used to be Greece. The right hon. Gentleman conveniently ignores the fact that the wonderful triple A rating, so coveted as the great prize, has now been lost. We need to lay the blame for the country’s problems with this Government.

We used to hear the nonsense about Labour being irresponsible, and not having mended the roof while the sun was shining, but the house has no roof now. All we have seen in the Budget is tinkering at the edges. It is a little like suggesting to someone who has lost the roof that new double glazing should be put in. The important point, which has been made by several colleagues, is about demand in the economy. The way to get the economy going is to stimulate demand, and capital expenditure is one way of doing so. I welcome the announcement of £3 billion of additional capital expenditure, but it is only from 2015, and we need it now.

My hon. Friend the Member for Hyndburn (Graham Jones) rightly referred to the effects of the downturn for housing on other sectors. The emergency Budget slashed housing spending and capital expenditure on schools and so on, and that meant that demand went out of the economy. We are now spending £7.7 billion less than the Labour Government would have spent in the same period. There is an idea that this is somebody else’s fault, but it is not. Deflating the economy and taking demand out of it, while telling everybody that it is in dire straits, will depress demand not only for housing but in other sectors.

The housing proposals in this Budget are very ideological. Am I opposed to encouraging people to buy their own homes? No, I am not. However, it is nonsense to think that someone living in my constituency who has a low-paid job in local government, and is having their pay cut in real terms because of the cap, is going to save up the deposit for a mortgage. It would have been better if the Budget had provided a massive injection of resources into affordable housing and housing for rent. If my local housing provider, Derwentside Homes, was given the ability to borrow money to build new houses, it could do it now. That would provide the housing that we need.

[Michael Ellis]

Will the hon. Gentleman give way?

[Mr Jones]

No.

My fear about these proposals is that if we do not get right the balance between demand and supply, we will end up with a housing bubble and the sub-prime situation that landed us in this mess in the first place.

The other thing that could make a big difference, as it did in my constituency when we were in power, is investing in improvements to local authority housing and social housing. Cestria Housing spent £67 million on improving local housing. That not only made a real difference to those houses but regenerated the local economy. I agree with one thing that the hon. Member for Wycombe (Steve Baker) said; frankly, most of it was complete nonsense. If this Government really want to get the economy moving, they have the instruments to do it through banks such as RBS. However, RBS is crucifying small businesses in my constituency, including Ambic, which is run by David Potter. He has a very successful business, but he is being absolutely hammered in trying, in effect, to get RBS’s balance sheets down because this Government want to get it off the asset books as quickly as possible.

Much has been trumpeted about the new cap on the level at which people pay income tax. In my constituency, many low-paid workers will benefit from this, but they will also lose through the bedroom tax, VAT increases, and the loss of child credit. Earlier I challenged the Secretary of State to publish information, constituency by constituency, on how many people were going to gain from this measure. I challenge him again to say how much these individuals are losing through the Government’s welfare cuts.

The welfare cuts that will begin in April will hit some of the poorest parts of the United Kingdom, including my own. The thing about poor people that many Conservatives might not realise is that they do not save money: they spend it. That is not because they are profligate or irresponsible but because they have no choice. These cuts will take money out of poorer communities in North Durham, and in the constituency of my hon. Friend the Member for Easington (Grahame M. Morris), who can ill afford to lose it. Unemployment is rising. As my hon. Friend the Member for Walthamstow (Stella Creasy) said, these people do not want to be unemployed, but there are no jobs. The jobs that are being created are part time, low paid—[Interruption.] The hon. Member for Northampton North (Michael Ellis) says “Rubbish.” He should look at the figures, which show that people are holding down two or three jobs to make ends meet. He will also see that productivity is coming down.

This involves a bigger debate about what type of society we want to live in. I congratulate those who work hard in food banks up and down the country; they are very good and worthwhile citizens. However, I feel very uncomfortable in 2013 living in a society where I have constituents relying on charity and food banks. That is not the type of society that I want to live in. We also all need to be conscious of the fact that, while things might be easy for all of us here, including millionaires such as the Chancellor and other Treasury Ministers, each unemployed person faces individual consequences, and suicides are on the increase because of the economic downturn.

--- Later in debate ---

[Michael Ellis (Northampton North) (Con)]

I start by congratulating the Chancellor of the Exchequer. In speech after speech, Labour Members seem to have forgotten the note left by the outgoing Treasury Minister—

[Mr Kevan Jones]

Not the old chestnut!

[Michael Ellis]

Oh yes, the old note that was left: “There is no money left.” That is the legacy Labour left this country. After 13 years of a Labour Government who brought this country to its economic knees and a position worse than that of Greece, the Chancellor of the Exchequer and the Treasury team have picked the country up from where it was left, and will continue to do so.

[Dr Offord]

I feel that my hon. Friend is being slightly unfair to the shadow Secretary of State for Work and Pensions. He may have left that note, but in a confidential briefing in 2006, the shadow Chancellor and the former Prime Minister were warned that the efficiency of the public sector needed to improve rapidly, and that unless it did, spending growth would slow. The former Prime Minister disregarded that advice, and embarked on a £90 billion spending programme once he became Prime Minister.

[Michael Ellis]

Exactly. The Labour habit of spending money that the country cannot afford almost brought this country to ruin. The lack of an apology grates, but it is difficult for Labour Front Benchers to offer one, because the team that wrecked the country’s economy and trebled the national debt are still on the Opposition Front Bench.

The Budget has been welcomed by the International Monetary Fund, the OECD, the Bank of England, the CBI, the Institute of Directors and the British Chambers of Commerce—it has been rightly welcomed by everyone who knows what they are talking about as far as the economy of this country is concerned. I say to the Chancellor that he should stick with it. We cannot have a situation in which Labour is allowed to borrow more, or we will end up with a Mili-shambles.

Plan A works. It tackles the appalling structural debt legacy. An IOD official has said:

“Deficit reduction is not an option…it is an absolute necessity”.

The Government started in 2010 with the worst debt to GDP ratio of any country—it was worse than that of Greece. Other countries with better figures than ours in 2010 had been put into special measures by the IMF.

[Mr Kevan Jones]

In opposition, the Conservative party not only agreed to, and did not question, Labour’s spending, but asked for more. As for the figures he quotes, will he explain to the House the difference between the size of Greece’s economy and that of the UK?

[Michael Ellis]

In common with most Labour Members, the hon. Gentleman’s understanding of the economy is limited. The reality is that the country’s debt is the responsibility of the Labour Government. However hard Labour Members try to transfer the blame on to the Conservatives, we did not spend that money.

When the current Government took over, £1 for every £4 spent from the public purse went on interest. Borrowing is now £3 billion lower, and the deficit is down by one third. What is Labour’s plan? Labour wants to borrow £200 billion more. I wish we had that money, but we do not have it. That is Labour’s plan.

Meanwhile, the OBR forecasts, post-Budget, 600,000 more jobs in 2013. What is the Labour party doing about jobs? Labour Members pretend that the 1.2 million jobs that have been created are fictional, not real, low-quality and part-time jobs. That is a complete fiction, and they should be embarrassed about it. They should talk the economy up and promote industry, trade, manufacturing and jobs. Are they holding jobs fairs in their constituencies? I have a jobs fair in Northampton North on 17 May. A number of companies will attend. I am doing what I can to improve the jobs market, but all we hear from Labour Members is that they will spend and borrow more, and yet they complain.

Corporation tax will be 20%, which is one of the lowest rates in the world. If we had stuck with Labour’s figures, we would have 3p a pint more in beer duty. Not only has that escalator been cancelled, but 1p has been taken off beer duty, but I have sat in Chamber and heard Labour Members criticise even that. They cannot bring themselves to acknowledge positives.

What is more grating is the self-righteousness of Labour Members. They believe that only they can have any compassion or think in any way of the most disadvantaged in society. Well, I have news for them. My colleagues on the Government Benches are equally if not more compassionate. We do not need to be lectured by those who put this country into such debt.

The dramatic fuel duty measures taken by this Chancellor—[Interruption.] If Labour Front-Benchers want to intervene, I am happy to give way.

[Mr Byrne]

indicated dissent.

[Grahame M. Morris (Easington) (Lab)]

rose—

[Michael Ellis]

I will give way to the hon. Gentleman.

[Grahame M. Morris]

That is very kind. The hon. Gentleman has given a list of organisations that support the Chancellor’s Budget. I wonder whether he recognises this quotation from the North East chamber of commerce. Although it was pleased to see certain measures that coincided with its priorities, it said that the Chancellor had

“fallen short of providing the raft of measures that businesses and investors need in order to kick-start growth.”

[Michael Ellis]

The chambers of commerce have accepted that this is an excellent Budget. Of course there are issues that need to be addressed, but we are dealing with a dramatic deficit. Not everything can be done overnight.

The measures that we have taken on fuel duty mean that it will be £7 per tank cheaper to fill an average car, such as a Vauxhall Astra, than it would have been under Labour’s fuel duty plans. Under Labour, fuel duty went up dramatically. It was costing more and more. The Chancellor’s fuel duty cuts will have a dramatic effect on the cost of filling up the average car.

Measures are being taken across the board in very difficult times to improve the economic position that we inherited. All that Labour can do is whinge, whine, moan and be judgmental.

[Mr Kevan Jones]

Will the hon. Gentleman get a tax cut for earnings over £150,000 and what type of car does he drive?

[Michael Ellis]

I am quite happy to answer that question. I will not be getting a tax cut and I have been driving the same car—a Toyota Prius with several dents and scratches—since well before I was elected to this House. However, I would not want to spoil the situation for the millionaires on the Labour Front Bench. There are a fair few of them, driving around in their Mercedes.

[Mr Jones]

The Toyota Prius is made in Japan. Why is the hon. Gentleman not supporting the UK car industry?

[Michael Ellis]

Not only does Toyota build cars in the UK, but thanks to the measures taken by the Government, this country is exporting more motor vehicles than it is importing for the first time since 1976. That is a measure of the manufacturing improvements made by this Government. It is just one of this Government’s excellent measures, which is why I support the Chancellor of the Exchequer and the Budget.

--- Later in debate ---

[Kelvin Hopkins]

A house building programme is exactly what we need. We do not want to increase demand for houses, but supply. If we increase demand without supply, we get house price inflation.

[Michael Ellis]

Does the hon. Gentleman not accept that, under 13 years of the Labour Government, less social housing was built than at any time since the early 1920s? We are now having to catch up.

[Kelvin Hopkins]

Throughout that time I was a member of a group called Defend Council Housing, and time and again I urged my hon. Friends on the Front Bench, as indeed did a number of my hon. Friends, to build more council houses, so in a sense I accept that point.

We have seen the policy on the deficit not working—indeed, it will get worse—but we have seen only about a quarter of the promised cuts so far. What will happen in the next three, four or five years—let us say two years, because the Conservatives will only last that long—will make matters worse. The forecasts for the deficit have been out by many billions. The deficit will be £120 billion in each of the next three years, give or take the odd billion. That compares almost exactly with the tax gap, calculated by Richard Murphy, of £120 billion a year. I am not suggesting that we could overcome the tax gap in one year, but we should start to make the billionaires and fat cats pay their taxes properly. We could make a real dent in the deficit and have money to spend to generate the economy.

--- Later in debate ---

[Mr Andy Slaughter (Hammersmith) (Lab)]

The average price of a house in Hammersmith and Fulham is £653,000. The average price of a flat is £493,000. If costs £770 a week to rent a three-bedroom house, and a one-bedroom flat costs £335 a week. At the same time, according to the most recently published census data, 45% of my constituents live in some form of overcrowding, while 62% live in some form of deprivation. Market rents are four or five times what social rents are, so one can imagine how my constituents greeted the Chancellor’s most recent, desperate attempt to do something with the economy—fuel a house price boom. This is what the Financial Times said about it today:

“The government is encouraging people to leverage themselves up to the hilt in order to buy what is already likely to be overpriced property and, as a result of this policy, is likely to become still more so. This is irresponsible enough. But worse, the government will probably…find itself permanently using its balance sheet to support risky housing finance, as the US has done.”

There is indeed a revolution in housing, welfare and planning in this country, but it has very little to do with the Chancellor’s tinkering earlier this week. It is the actions of the Secretary of State for Work and Pensions, who opened today’s debate, and the Department for Communities and Local Government, along with many Conservative councils, that have made rents unaffordable for 540 households in my constituency on the local housing allowance. Some 2,700 households will be affected by the bedroom tax from next week, and as soon as the benefit changes come in another 800 households will be affected.

[Michael Ellis]

Will the hon. Gentleman give way?

[Mr Slaughter]

We have probably heard enough from the hon. Gentleman today. His temporary attendance in the debate and his whipped speech did not do him any credit; I do not think we want any more of that drivel, frankly—[Interruption.] If I need another minute, I might give way later.

The 1% cap and the restriction on crisis loans will make my constituents more dependent on payday loans or pawnbrokers. That is no way to solve the economic crisis that the Government have got themselves into.

House building is at an all-time low. According to figures from the TUC, only 10% of the money from the increase in right to buy has gone back into house building. Only 384 council homes were built in the last three quarters of last year. At the current rates—given the so-called investment in social house building in the Budget, which meets about 1% of demand—it would take more than a century to address demand. At the same time, changes through the Localism Act 2011 mean that we no longer have secure tenancies and that affordable rents in housing associations are now up to 80% of market rents—completely unaffordable. On 1 April, my local authority will abolish 90% of its waiting lists and sweep away almost 10,000 people in housing need, some of whom have been waiting for years. The local authority accepts only 6% of the people who apply to it as homeless.

On planning policy, we have plans that allow for the conversion of much-needed employment land to luxury residential use. We have a policy that says that no additional social housing must be built in my constituency and existing social housing can be demolished for development as luxury affordable housing. As the shadow Secretary of State said earlier, there will be costs through the bedroom tax and through evictions, which are going on daily and weekly. There is an opportunity cost in that people are being forced to move from west London to places where there are fewer jobs and there is a huge social cost to the poorest people, who are being dislocated from their communities.

That is who is losing through the Government’s economic and other policies, but who is benefiting? We heard at the beginning of the debate from my hon. Friend the Member for Eltham (Clive Efford), who said that the majority of new properties are being built by foreign investors. About 70% of such properties in the richer parts of London are going to foreign investors and are being used as second properties, rather than first properties.

The people who are benefiting are developers. I note from today’s edition of The Daily Telegraph that

“the planning minister, attended a meeting with some of the country’s biggest property developers hours after”

the Chancellor’s

“speech on Wednesday”

and:

“Property developers have been privately promised that planning laws will be liberalised again”.

Developers are making money out of this—the same people who are the friends of those on the Government Front Bench and the donors to the Conservative party.

The same is happening in health. Hospitals in my constituency are being shut so that private providers can come in and clean up with inferior services, as shown today by the 80% of people who do not support the out-of-hours care they are being offered in exchange for the closure of accident and emergency departments. In my area of justice, cuts in legal aid and restrictions on access to justice have been made to benefit the insurance industry, another major funder of the Tory party. It is in those interests that the Government act. It would be polite to call it a class interest, as it is actually a mate’s interest. It is an act of cronyism.

The Budget does nothing to support poorer people or people on middle incomes and it does nothing to help people in crisis in my constituency. The only people it supports are those who fund the Conservative party and those who already are or soon will be millionaires.