Budget Resolutions and Economic Situation

Neil Parish Excerpts

Thursday 21st March 2013 Commons Chamber

[Neil Parish (Tiverton and Honiton) (Con)]

It is good to follow the hon. Member for Dumfries and Galloway (Mr Brown), and I agree with him that it is all about confidence. I believe that the Budget will help to produce confidence in this country, especially in my constituency, where many people are not on the highest wages. Taking people out of tax right up to nearly £10,000 is absolutely the right way to go. The previous Government spent far too much time on a complex tax system, but it is much better to take people out of tax altogether so that they know that they can earn up to a certain amount—nearly £10,000 in this case—before having to pay any tax.

It is also right to reduce national insurance contributions, particularly for small and medium-sized businesses, because they will generate the most jobs. The reduction makes it less expensive to employ people, and that is what the Budget is about. Our economy must be, and will be, more competitive, because we are in a very competitive world and we need to compete. I think that the Budget will bring that about.

I echo what many Members, particularly my hon. Friend the Member for Harrow East (Bob Blackman), have said about Equitable Life and all the people who will now be compensated for policies prior to 1992, which have not previously been compensated. Many of those people are elderly and frail, so I urge the Government to get the money to them as quickly as possible. They were hard-working people who put money away for their retirement and basically were robbed in one way or another. I really thank the Chancellor and the Government for agreeing to those payments, but they need to be made quickly.

On infrastructure, there is a wonderful road, the A30 and the A303, running east from Honiton, and it needs to be dualled—there is no doubt about it. We want to dual that road until we get into Wiltshire, where we might encounter problems with a few stones. I will not say which stones, but I think that Members probably know what they are—Stonehenge. There are all sorts of problems around there, but let us not worry about that. Let us move from Honiton up through Devon and Somerset and into Wiltshire, and let us get that road built. We need a second arterial route into the west country, because tourism is so important to us, and it is linked to agriculture and many of our other industries.

That brings me to fuel and fuel duty. My constituency is only 10 miles wide, but it is 42 miles long and covers over 400 square miles. It starts up in Exmoor and meets the sea at Seaton. My constituents live mainly in villages and hamlets. If they wait for a bus, it might never come. If it does come, it probably is not going where they want to go. I am being slightly facetious, but the point is that bus services in many rural areas do not stack up economically, however much subsidy we throw at them, so fuel and cars are not a luxury; they are an essential. Therefore, every time we raise fuel duty, we tax people’s means of getting to work. That is why I congratulate the Chancellor on freezing fuel duty. It is now 13p less than it was when Labour was in power. I am also delighted about the 1p reduction in beer duty, although I remind the Chancellor that the west country and Devon are, of course, full of cider producers, so I ask him please not to forget them.

I think that the support for home buyers, particularly first-time buyers, is a wonderful idea, because many people in my constituency are on low wages, but house prices are upwards of £220,000, so they really need help with deposits. If this Conservative-led Government are about anything, they must be about getting more people to own their own homes and look after themselves, and this support is one way of helping them to do that. I am absolutely delighted to see it happening. We inherited a huge amount of debt and we are doing our very best to reduce it. I look forward to the Budget having a very positive effect in my constituency and across the country.

--- Later in debate ---

[Guy Opperman]

There may have been plenty of times when the previous Government chose not to raise prices, but they did increase them on 10 occasions, and those with long memories in Northumberland and in Scotland remember that. [Interruption.] Opposition Members may chunter, but that is the bottom line.

The full acceptance of the Heseltine report was particularly welcomed in the north-east. It was specifically called for by the north-east chamber of commerce and has been welcomed by business. Exports from the north-east are up, jobs have improved dramatically since May 2010, and the number of apprentices has doubled. There has been a dramatic improvement. The Corus plant was shut by the previous Government—it was the titanic industrial issue in the build up to the 2010 election—but reopened by this coalition Government.

This Budget comes at a time of self-examination in the north-east. The January declaration and Lord Adonis’s review of the north-east, which I am contributing to and support wholeheartedly, are making a real difference to understanding how the region can improve itself. That is an example of proper self-examination from a detached standpoint.

Bank lending is another important issue. I welcome the Business Secretary’s statement on developments on the business bank and the fact that the Opposition have finally begun to realise that local community banking is a good idea. Sadly, when I invited the shadow Minister, the hon. Member for Hartlepool (Mr Wright), to support my campaign for local community banks in a debate on manufacturing on 24 November 2011, he declined to do so, and the point was raised with him again on the same day the following year. The proof of the pudding lies in the fact that, during an April 2012 debate on the Financial Services Bill, the Labour party voted against clauses in favour of greater competition for local banks, greater ease of entry and greater ability to open a local bank. Why would Labour Members vote against greater competition and a local community bank that makes money for the community, with profits going back to the community? It is illogical in the extreme.

I welcome the fact that the Labour party has finally come on board and accepted that local community banking is a good thing. It has taken a while and I hope that Labour Members will back up what they are saying in public with votes in support of greater competition for local people. It is vital that our campaign for local community banks continues. The work done by the Financial Services Authority is to its credit. It has made it much easier to set up a community bank.

[Neil Parish]

I agree with my hon. Friend about bank lending. Does he agree that getting greater competition locally is essential so that businesses can get better rates of interest and better deals with banks?

[Guy Opperman]

That is entirely the case. As we all know, 75% of bank lending in this country comes from the big banks and few smaller community banks are supported. The decline in local lending is definitely affecting SMEs.

There were four challenges to the creation of new local banks. First, there was a lack of legislation to facilitate such changes. We passed that legislation in the Financial Services Act 2012. The second challenge was the length and complexity of the authorisation process. That has been reduced through our work with the FSA, so it is now much easier to set up a smaller bank, whether it is a bank established by an industrialist to back a local community or an infrastructure bank like Cambridge & Counties bank or Hampshire Trust.

Thirdly, the level of capital that new banks were required to hold used to be very high. They were effectively judged exactly as Barclays would be judged. That has also changed. The FSA has made it very clear, as I have demonstrated in this House by reading out letters to me from the FSA, that it requires lower amounts of capital on an ongoing basis from smaller entrants to the market. Finally, the scale and complexity of the infrastructure was proving to be a burden. That is also being addressed.

The future must surely be local community banks, run by somebody from the local community, investing in that local community. A gradual disaster took place under successive Governments over the past 25 to 30 years, whereby local community banks were divorced from the ability to make decisions locally. Community banks could make a decent amount of profit and return it, when a certain percentage is reached, to the community.

I am delighted to say that on 7 June, the FSA, the Prudential Regulation Authority, the Financial Secretary to the Treasury and various other people will be coming to Newcastle for a debate on how we will take regional banking forward in this country. I urge all interested parties to come.

--- Later in debate ---

[Mr Iain Wright (Hartlepool) (Lab)]

I thank all hon. Members who have contributed today. By my reckoning, we have heard valuable and insightful speeches from 30 hon. Members—although, with the exception of the Business Secretary, no Liberal Democrats. All those hon. Members brought to the debate their feelings about, and analysis of, the impact that the measures in the Budget will have on families and businesses in their constituencies and across the country. We have heard about massage parlours, whip cracks and the Kama Sutra—but I shall move on.

At the start of the debate, we heard a tour de force from the shadow Chancellor, who exposed the complete confusion about the new Help to Buy scheme, suggesting that we now have a second omnishambles Budget. We are expecting a U-turn very shortly. It seems that the scheme will not help hard-pressed families get a foot on the property ladder: it is actually a bung, a spare-home subsidy for millionaires. That is not what the housing market needs, and it is certainly not what the economy needs.

We have heard that public sector net borrowing has been, with acute financial management, revised down next year by £0.1 billion. I thought that would have entailed the Treasury going round Whitehall telling Departments not to order photocopying paper this month, but it is a lot more serious than that. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, we are seeing £2.2 billion moving away from the NHS. Valuable, important and often life-saving operations may not happen as a direct result of the Government’s attempts at financial management. That is an absolute disgrace.

[Neil Parish]

Will the hon. Gentleman give way?

[Mr Wright]

I am afraid that I do not have time.

I would support a comprehensive, intelligent and active industrial strategy, based on rigorous analysis and for our competitive advantage. I commend the Government on Monday’s announcement on the aerospace strategy, which is welcome, but there was precious little in the Chancellor’s statement yesterday to back up such an approach.

I was particularly concerned to read in table 2.4 of the Red Book that both resource and capital departmental expenditure limits—DEL—for the green investment bank will be cut to zero in 2014-15. Given that the CBI and others have rightly identified the low carbon sector as a potential growth area in which the UK can be a leading global player if we have the right long-term vision and targeted investment to provide certainty, the figures in the Red Book do not fill me with confidence and I would be grateful if the Minister could outline the Government’s longer term plans and investment for the green investment bank.

Similarly, I was disappointed that no mention was given in the Budget to science. The Chancellor made great play of the need for Britain to compete in the global race. I agree with him. If we are to avoid slipping behind in the international competitiveness race, we must prioritise science and technological innovation, because if we do not, our future industrial capacity will be undermined. Will the Minister outline why science was not mentioned in the Budget?

Several hon. Members, including my hon. Friend the Member for Denton and Reddish and the hon. Member for North Swindon (Justin Tomlinson), mentioned business rates and retail, and they were right to do so, because the Budget certainly did not. David McCorquodale, head of retail at KPMG, said:

“The decision to go ahead regardless and increase business rates will squeeze embattled retailers further and will not deliver the respite the retail sector needs to recover.

Retailers are now left facing a 2.6% hike to their business rates bill, a move which will add £175 million to their overheads. Amongst a backdrop of flatlining sales and continued austerity, this is not a welcome move by the Government.”

Can I ask the Minister why the Government did not help the embattled retail sector?

In today’s debate, many hon. Members, starting with the shadow Chancellor, reminded the House of what the Chancellor had promised in the run-up to the general election and in his first Budget. He set himself several key targets and tests by which his economic record, competency, judgment and capability should be judged. First, the Conservative party’s manifesto stated that the first objective would be to

“safeguard Britain’s credit rating with a credible plan to eliminate the bulk of the structural deficit over a Parliament.”

In early 2010, he backed that up by saying that

“our first Benchmark for Britain is to...cut the deficit more quickly to safeguard Britain’s credit rating.”

We all know how successful the Chancellor’s performance has been on that score. Curiously enough, there is no mention of the credit rating in the Red Book; nor was it mentioned in the Chancellor’s speech yesterday. Funnily enough, I did not hear many Government Back Benchers mention how important the credit rating is either, although my hon. Friends the Members for Birmingham, Selly Oak (Steve McCabe) and for Scunthorpe (Nic Dakin) certainly did mention it.

At the start of this Parliament, the Chancellor said that the current structural deficit would be eliminated by the end of 2014-15. Yesterday’s Red Book, however, shows that the Chancellor’s target to balance the books by the end of this Parliament will be missed by three whole years. Public sector net borrowing at the end of this Parliament is now forecast to be approximately £96 billion—five times larger than the Chancellor expected it to be in 2010. Every year, he comes to this House and has to admit that borrowing is rising, and that the time scale to cut the deficit is growing ever longer.

The Office for Budget Responsibility has said that deficit reduction has stalled. Net borrowing is higher in each year as a result of weaker economic outlook. My hon. Friend the Member for Barnsley Central (Dan Jarvis) reminded us that the Government are forecast to borrow £245 billion more than they originally planned, and my hon. Friend the Member for Luton South (Gavin Shuker) said that borrowing in the five years of this Government is higher than it was in the 13 years of the previous Labour Government. The dramatic deterioration in sentiment, even since Christmas, is striking. According to Red Book figures, the Government now expect to borrow £55.7 billion more in the next five years than they thought they would have to even three months ago.

The Chancellor assured us that, as a result of his policies, net debt would be falling as a proportion of national income by 2015. That was one of his fiscal targets. Judge me, he said, by my ability to get debt as a share of GDP down. However, the Red Book reveals the true failure of the Chancellor’s approach: net debt as a proportion of national income is not falling but rising in every single year of the rest of this Parliament and beyond, from 75.9% of national income this year, to 79.2% in 2013-14, to 82.6% in 2014-15, to 85.1% in 2015 and peaking at 85.6% in 2016-17. As the OBR states:

“As borrowing now falls more gradually, debt rises more quickly as a share of GDP.”

We are now paying more in debt interest—£51 billion a year, which is more than we spend on the defence of this country—than the £44 billion when this Government came to office. The TaxPayers Alliance, which I do not think is a friend of the Labour party, said today:

“By 2017-18, even on the OBR’s optimistic forecasts, the Coalition Government will have more than doubled the official national debt it inherited.”

The Chancellor is refusing, in the face of all the evidence, to change direction in economic policy, as my hon. Friend the Member for Barnsley Central said. On every single test of economic policy that the Chancellor has set himself and asked to be judged on, he has failed, and because of those failures families in Britain are struggling. Life is worse now and living standards are lower for ordinary families than they were three years ago, and they will be worse in 2015. The Chancellor is pursuing this course for reasons of political vanity and ideological arrogance, rather than from economic necessity. His incompetence and lack of judgment have meant that he has boxed himself in. There is nowhere for him to go with any dignity and he refuses, for reasons of pride rather than economics, to change course. As Andrew Smith, chief economist at KPMG in the UK said in response to the Budget yesterday:

“It is now clear that ambitious deficit reduction is stunting growth. Hemmed in by what is left of ‘Plan A’, today’s measures amount to little more than rearranging the deckchairs…hopes that exports and private business investment will come to the rescue depend crucially on strengthening overseas markets—something over which neither the Chancellor nor the Bank of England have any control.”

The Chancellor is fast running out of excuses. He has blamed the lack of growth in the economy on the snow, on the rain and on the sun. I am sure that the recent eruption of Mount Etna must also somehow be causing a drag on the British economy. He has blamed lack of growth on the diamond jubilee, the Olympics, the number of bank holidays and, as far as I am aware, on the fact that Girls Aloud have reformed and split up, and the Rovers Return has burned down. The excuses have got to stop. The Chancellor needs to look in the mirror.

Despite the difficult European situation, the flatlining economy is down to the Chancellor. A deficit reduction programme without a strategy for growth is no deficit reduction programme at all. Growth forecasts have halved, living standards are falling for millions of people, borrowing is soaring and control of the public finances have been kicked well into the next Parliament. The hon. Member for Bedford (Richard Fuller), for whom I have a lot of respect, has said that we should not kick the can down the road, but with this Budget that is precisely what the Chancellor is doing. He and the Government need to acknowledge their failings and change course, or, better still, make way for a team that will help fulfil the British promise, not hinder it.