Budget Resolutions and Economic Situation

Neil Carmichael Excerpts

Wednesday 16th March 2016 Commons Chamber

[John Redwood]

I want to develop the argument a little more. As has already been pointed out, the forecast contains very worrying figures about the balance of payments deficit. And of course, were we to leave the EU, we would immediately have £10 billion at our disposal that we would no longer have to send abroad to be spent in rich countries on the continent. That is the net amount that goes to the continent. So our balance of payments would immediately improve by £10 billion a year if we did not have to make those contributions.

To cheer up Opposition Members even more, and to get them to change their vote, I can tell them that we and they would have the pleasure of spending £10 billion a year more in our own country—[Laughter.] Why is that funny? Why should not British taxpayers who have to pay £10 billion not have the advantage of spending it on things that they want instead of it being spent on new roads in France or Spain? I think my taxpayers want it to be spent here. That £10 billion a year could more than banish the austerity that Opposition Members claim has done some damage to our country. Looking at the figures, we can see that real public spending has gone up all the time under the coalition and the Conservative Government, but not by as much as it went up under previous Governments. If we had that £10 billion back to spend in the United Kingdom, we would have a better profile on public spending and on tax reductions.

[Neil Carmichael (Stroud) (Con)]

Can my right hon. Friend be sure that any figure he quotes is accurate, given that he has just rubbished the OBR and the Bank of England? Presumably he has a list of other British institutions to which he would give the same treatment.

[John Redwood]

But of course. I have checked the Government’s very own net contribution figures, and it is very likely that they have got those figures right, because even the Government can count how much they have spent and how much they have had to give away to the rest of the European Union. That is the damage that is being done.

On the balance of payments, I would urge my right hon. Friends on the Front Bench to do more work on getting the balance of payments deficit down. Obviously, they will not all agree with me about taking the quick easy hit of getting our £10 billion back to make a big reduction in the deficit, but we need to understand that that deficit is entirely the result of an adverse goods trade with the rest of the European Union. We are in profit with the rest of the world and we are in profit in services, but we have a colossal manufacturing deficit with the rest of the EU. Some of that relates to the way in which France and Germany get round the EU rules to make sure that they can buy French or German products, whereas we in Britain apply the EU rules extremely fairly and end up buying a lot of foreign products from the continent.

It is also the case that the very dear energy that European policies require and enforce is doing a lot of damage to our steel industry, our ceramics industry and other high energy-using industries. It is a great tragedy that, despite higher domestic demand for steel, we are still unable always to use British steel in British public sector contracts. Surely we ought to have a fix to create more demand for our own domestic industries.

We also import massive amounts of timber, despite having a big state sector involvement in the timber industry in this country. Why cannot more be done to cut more of the timber we already have as a state resource to meet our domestic demand, along with replanting and extending the planting, given that many people would like more forests? Why cannot we have more managed timber, with the state having an influence over it? We could also do more with the tax system to encourage more private forestry. We have rather good growing conditions here, compared with some of the colder Nordic climates from which we import timber at the moment.

We also import energy, but we have no need to do so. We are an island of coal, oil and gas set in a sea of coal, oil and gas. We also have lots of natural renewables, particularly lots of potential water power. Why cannot we create an energy policy in which we do not need to rely on importing timber from Canada, electricity from France and energy from Norway?

I am pleased that the Budget is starting to tackle the issue of the oil industry offshore through tax changes. We need to do other work on that, and we also need to get on with gas extraction onshore. We will probably find further oil resources when we are prospecting for shale gas in the shale sands. We need to start bridging the gap on energy before it becomes even more damaging to our balance of payments.

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[Neil Carmichael (Stroud) (Con)]

It is a great pleasure to speak in this important debate, not least because it covers two important subjects that I find of great interest—Europe and education. I intend to address them both.

First, let us canter through some of the statistics in the context of the changes that the Chancellor announced. The global economy is going through a very problematic period of adjustment. That has significant impacts on our own performance, and those are driving down some of the more ambitious assumptions made previously. That is why the OBR is so important. My right hon. Friend the Member for Wokingham (John Redwood) said that the OBR had been wrong on a scale of about £45 billion per year on anticipated debt. If we contrast that with the £8.5 billion that we pay to the European Union in net contributions, we see that it is a different scale of issue. However, that does not undermine the function of the OBR because it has to measure changes over a wide variety of different statistics, and does so remarkably well. We should salute that. We should also note that the Office for National Statistics is just as good at making predictions.

The Chancellor mentioned productivity—rightly, because that goes to the heart of the issue. He said that productivity growth is slackening. In this country we need even more productivity growth than we are seeing now because our deficit with other countries who are our competitors is quite significant. For example, the OECD says that we are 28% less productive than the Germans. That makes a difference when we set about exporting. If we are that different from the German economy in terms of productivity, then we are going to struggle with being competitive. We have to stop complaining about UKTI and stop worrying about what people are doing to us, and start recognising that we have to narrow this productivity gap.

The second point about productivity is that it matters in relation to life fulfilment, tackling poverty and so on, because the brutal fact is that if we are more productive through having greater skills and better deployment of training, we will get higher salaries and better wages. Through driving productivity increases in our economy, we will end poverty on the scale that has been mentioned today. That is our challenge, and it is a must-do. I am really pleased that the Chancellor is embedding it in this Budget. He has done so by addressing education, which I will turn to now.

More academies equals better schools. That is something that I believe and, I think, something that we will easily prove.

[Meg Hillier]

As the hon. Gentleman is probably aware, the Public Accounts Committee recently held a hearing on teacher training. We discovered that, after an eight-week course—sometimes it did not even last eight weeks—a staggering number of teachers who had not been qualified to teach certain subjects to a higher level qualified to teach them to our students and young people. Does he not think it is more important to sort out having qualified teachers in the classroom than to force every school into academy status?

[Neil Carmichael]

I could not agree more with my fellow Select Committee Chair. That is obviously a priority, but that does not mean that it is not also important to have good schools that are led well by headteachers who are focused on the right culture, standards and quality staff. We should have more academies and make sure that they operate in a well-structured multi-academy trust.

[Pat Glass]

rose—

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[Neil Carmichael]

I think I have set the cat among the pigeons. Go for it.

[Pat Glass]

The hon. Gentleman knows as well as I do that, when we both sat on the Education Committee, we saw no evidence whatsoever—believe me, we looked for it—that academies improved standards more than maintained schools.

[Neil Carmichael]

That was a year ago, when there were fewer academies. Now, 80% of academies are good or outstanding, which is a really impressive signal. We need to make sure that academies join up in multi-academy trusts.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Will the hon. Gentleman give way?

[Neil Carmichael]

No, I will keep going now. I am really excited about the idea of including university technology colleges in MATs, because that will give greater choice. The Government have already allowed sixth-form colleges to be included in MATs. We need economies of scale in sixth-form provision, and increasing the number of MATs will do just that.

It is a scandal that, according to a national mathematics charity, 78% of our adult population do not reach level 2 maths. That is not acceptable and it is absolutely right that maths should be taught as a compulsory subject up to the age of 18. I have frequently said that we should have a national baccalaureate to do just that, and I urge the Government to point out to Sir Adrian Smith that that would be at least one way of making sure that 16 to 18-year-olds are taught maths. I remind the House that we are the only country in the western world in which maths is not a statutory subject up to the age of 18. That is not acceptable.

I know that this is of no interest to the Scottish nationalists, but the Government have rightly decided to make sure that our schools have fairer funding. When I was a member of the all-party parliamentary group on Yorkshire and northern Lincolnshire, I was not surprised that there were concerns about Yorkshire schools and that people wanted a commission to improve them, because there are a large number of coastal and rural schools. Such schools often suffer most with regard to funding, so it is absolutely right for the Government to tackle that.

I salute and welcome the decision taken on sugary drinks. I am also very pleased that the money from that tax will go towards encouraging more sports participation. My Education Committee will look at that in detail.

I want to mention three other issues before I move on to Europe. First, I think that devolution is a really good thing and I am really pleased that so many cities and counties are considering mayoral solutions. I think that is the way forward. Any structure considering devolution must ensure that it has the right accountability and governance system in place. That is what the Government seek to achieve. I hope that my own county of Gloucestershire—the entire county; I do not want anything to be chopped off—will be a successful devolved power with a suitable governance structure. That is the way to harness business, education and other public services, make sure that the planning system is consistent with the overall interests of the county, and deliver for the people. That is how we can really make a difference, and this Budget helps that process.

It is absolutely right that we continue to invest in infrastructure. I think the key thing is to signal a plan for investment that businesses can look to with some certainty and know that it is happening, so that they can start thinking about the people they need to recruit and the resources that they need. A common complaint of organisations such as the Institution of Civil Engineers is that we do not have the planning capacity to make the decisions that we should be making ahead of starting a project. Forward planning in infrastructure projects is absolutely great, and the Budget does that to some extent, although I think that more could be done.

I am really pleased to see that business rates are being changed so that smaller businesses will simply be exempted. That is good news for a constituency such as mine, where we have a large number of small businesses, many of them in the retail sector. Many are starting to develop really interesting technologies that have huge potential and that will get somewhere if they are given a proper chance. The changes in business rates are really very good.

Back to the European Union. We have to accept that the OBR is right to point out that if we leave the world’s largest single market at a stroke—that is effectively what article 50 will do—we will cause a huge amount of disruption to investment and trade. If anyone thinks that signing 66 new free trade agreements will be easy, quick or comprehensive, they are wrong. As we saw with the discussion about Canada, if we replicated the position of Canada, our situation would not be helpful in terms of motor cars or financial services. That is not a solution.

We should also remind ourselves that proportionally, Norway pays about the same as we do to be in the single market, with no control over anything and no special dispensation over any aspect of the single market. We complain about paying the same amount, per ratio, as Norway, yet right now we have influence. What does that influence do? It effectively created the single market in the 1980s and has expanded it now, and it will continue to ensure that Britain has a leadership role in the European Union, where we can forge a stronger, better place for trade and extend beyond the European Union. The idea that we are in the European Union and that therefore can go nowhere else is utter nonsense. Germans export to China. The Netherlands beats us when it comes to exports to India. We, not Europe, really have to think about where we export and how we do it, and about the productivity issue that I have raised.

Those are the economic reasons for staying in Europe, and I will largely confine myself to them. I am interested, too, in the fact that Mark Carney, the Governor of the Bank of England, has taken the time to consider the implications if we decide to leave. He has recognised that there would be difficulties in our banking system if that were to be the case, and he has taken pre-emptive action. That is a signal that we are taking a risk by considering leaving the European Union. Instead, we should make up our minds and stay in. From then on, we should use our power in the European Union and beyond to shape a Union that represents our interests, deals with more competition, forges more trade links and gives people in Europe as a whole more security—for their own safety and national safety—and economic opportunities. That is why it is important to remain in the European Union, and that is why the OBR, the Bank of England, the CBI and, plainly, the Chancellor of the Exchequer think that we should do so.

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[Sammy Wilson]

There has to be a connect between the promises that the Government make and the ability to deliver on them, whether through legislative changes or, indeed, through having the resources to deal with the issues.

The Northern Ireland Executive will benefit, from Barnett consequentials, to the tune of about £220 million over the comprehensive spending review period. Many people will welcome the fact that £5 million has been set aside to establish an air ambulance in Northern Ireland, for which we have called for a long time.

I want to deal with two areas. I will start where the hon. Member for Stroud (Neil Carmichael) finished, with the Chancellor’s references to the European Union. I notice that the Chancellor made fairly scant reference to it in his statement. Indeed, I think many people were probably surprised about that, given the way in which the Government have tried to drive this issue. On the other hand, I am not surprised, because what does he really have to say about retaining membership of the EU?

The Chancellor talks about struggling with the budget deficit and with the public finances, yet he is quite happy to give £10 billion a year to the EU. In the EU, the money is often so badly spent that its accounts are qualified every year. Such money goes on fraudulent activities; it disappears into black holes; it goes on vanity projects—[Interruption.] I notice that some of the most vociferous supporters of giving public funds to the EU are from the Labour party, while its Members are complaining about cuts in services for their own constituents.

The other point that the Chancellor has to address is that, although he will give £6 billion to companies in corporation tax cuts, he will, over the same period, take £7 billion more off them in environmental levies, most of which are driven by European directives. On the one hand he is giving money to businesses, and on the other, European directives ensure that he has to take it from them.

The hon. Member for Stroud got it wrong when he mentioned what the OBR has said about leaving the EU. The OBR has not been definite that certain things would happen. Indeed, its report says that leaving the EU “could usher in” uncertainty, “could have negative” impacts and

“might result in greater volatility in financial…markets”.

That is also what the Chancellor said. The ironic thing is that he had no sooner uttered his comments about threatening and slaughtering jobs, investment and everything else than, in his very next sentence, he pointed out that since the autumn statement—we have had all the uncertainty about the referendum and the fact that the United Kingdom might vote to leave the EU—the Government had

“created…150,000 more jobs than the OBR expected.”

There is all this volatility and uncertainty, yet in the face of a referendum businesses are not reflecting uncertainty or fear. Indeed, according to the Chancellor they are creating 150,000 more jobs than the OBR expected.

[Neil Carmichael]

I just wondered whether the hon. Gentleman was aware that 80% of businesses in Northern Ireland want to stay in the European Union.

[Sammy Wilson]

Of course, it depends on what survey we look at. Large firms benefit from the lobbying power they have to restrict innovation and the entry of small firms into markets. Small businesses are buried under regulations and strangled by the red tape that emanates from Europe.

The Chancellor carefully avoided talking too much about our membership of the EU, because there is not a good story to tell on that in budgetary terms. I notice that, so intent is he in ensuring that attention is not drawn to it, EU transactions are included with others in chart 1 of the executive summary—he does not want to highlight the exact amount of money we pay into the EU.

The second issue I want to deal with is inequality across the United Kingdom and across sectors of the population. Growth forecasts have been reduced for a whole range of reasons. Some of those reasons are outside the control of the Chancellor, but some are not. One way to improve growth is to borrow money for infrastructure projects. I find it inconceivable that the Government talk about not letting the level of debt go up when there are good infrastructure projects that would give a good rate of return. They are quite happy for debt to go up to finance consumer spending, which has been the main driver of growth. I would rather see growth driven by spending on infrastructure projects that increase productivity and give a return that generates tax revenues in the future, rather than putting individuals in jeopardy if there happens to be an increase in interest rates.