Budget Resolutions and Economic Situation

Nicholas Brown Excerpts

Friday 20th March 2015 Commons Chamber

[Mr Pickles]

It is very straightforward; it is the same scheme that has existed since the retention scheme was introduced. It is the growth in the business rates. If a council goes out of its way to bring in new investment, it is only right that it should not be penalised for doing so, as it would have been under Labour. It should reap the benefits. I know that Opposition Members have difficulty with the idea that people should be rewarded for creating wealth and working for the common good, but that is how it is going to be. The Government are helping to expand local economies, and we also want to expand powers for local areas. As I have said, we have already devolved significant powers to the Greater Manchester combined authority.

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

Will the Secretary of State give way?

[Mr Pickles]

I will in a moment.

[Mr Brown]

Will he give way on that point?

[Mr Pickles]

In a moment. The right hon. Gentleman is a very distinguished Member, but he should wait for his turn like the rest of us.

That devolution of powers to Greater Manchester is the most historic development in civic leadership for a generation, and it will enable Manchester to support business growth, skills and better health and social care. A new devolution deal for West Yorkshire will give local councils greater responsibility for developing local skills, transport and employment opportunities. Across the country local areas are benefiting from new powers and resources to help their local economies flourish. I will now give way to the very distinguished right hon. Gentleman.

[Mr Brown]

The Secretary of State has not mentioned local authorities in the north-east of England—inadvertently, I am sure. He also failed to answer the question put to him by my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), and he has failed to make the case for the balkanisation of the business rate. Mrs Thatcher’s legacy was to have the business rate raised on the ability to pay and distributed on the basis of need—I am sure that I can remember her saying that to the House. Why is he allowing it to be balkanised?

[Mr Pickles]

The right hon. Gentleman is a very distinguished Member of this House and no doubt has many things on his mind, so perhaps he has temporarily forgotten that we created a combined authority for Newcastle last year, which I understand is flourishing. Indeed, I anticipate that it will be the beneficiary of more devolution in the not-too-distant future. He talks about the balkanisation of the business rate, but it seems to me that if we are offering rewards to people who have worked hard in a local area, it would be grossly unfair to take money away from Newcastle just because it has done particularly well. He will also know that the Government are currently reviewing the business rate to ensure that fairness continues and that greater fairness is possible. I am sure that I speak on behalf of the whole Government when I say that we very much look forward to hearing the contribution that he will want to make on that.

The 2014 and 2015 growth deals are enabling 39 local enterprise partnerships to join up with councils and businesses to decide their own priorities. The funding can be used for investment in housing, roads, broadband or any other infrastructure. Some £12 billion will go towards local economies, and we have already agreed £7 billion of local projects. The result will be more new homes and infrastructure and greater support for local businesses to train young people, enhance skills and create jobs.

Britain has stepped back from the brink and started to recover from the deep failures of Labour’s great recession. Under our watch, the deficit has been cut and businesses are growing. Confidence is returning and house building is increasing. The number of first-time buyers is at a seven-year high and lenders are offering the most competitive range of mortgages ever. Local economies are growing and using their new powers to support businesses. That has happened under our watch only because this Government have provided the right economic leadership and because our long-term economic plan is working. The Budget will keep us on the road to economic recovery and prevent Britain from returning to the chaos of the past.

--- Later in debate ---

[Mr Nicholas Brown (Newcastle upon Tyne East) (Lab)]

It is a pleasure to follow the right hon. Member for Bexhill and Battle (Gregory Barker), particularly since he referred to the most left-wing Opposition the country has seen for years. I am afraid that my remarks may not have as much credibility in that regard as he hopes. The one thing his speech has confirmed is that the subject under discussion is a Conservative pre-election Budget. When he made his tentative references to the northern powerhouse even the sun hid behind the moon, and we know that when it re-emerges the Liberal Democrats will take the credit for it and say that that is what they achieved for us, by working with others.

The Chancellor made it very clear—although he did not emphasise the point—that he is raising money in this year’s Budget and he is doing the same again next year. The substantial spending comes in 2018-19 and beyond—in the future. It is unreasonable to criticise a man for being lucky, but the Chancellor has enjoyed good fortune: inflation is falling; the oil price is coming down—no doubt the Liberal Democrats want to take credit for that as well, but such things are largely outside the control of individual Governments—and he is the beneficiary of the one-off receipts of the Northern Rock and Bradford & Bingley mortgages and the Lloyds bank share sell-off.

The Chancellor’s strategy, however, relies on achieving a further £25 billion-worth of public expenditure cuts. In fairness to the Secretary of State for Communities and Local Government, he has made the point that he cannot do the same thing over again in his Department. Three Departments have a measure of protection: Education, Health and International Development, leaving the burden to fall on the rest. Given the significance of what is proposed, we should have more detail before us. We know that at least £12 billion is to come out of the Department for Work and Pensions budget—and almost certainly out of the working-age component of the budget. Since much of this is demand-led, that seems to me to be quite a difficult thing to do, and the Chancellor should have set out to the House exactly how he intends to do it.

In his 2014 conference speech the Chancellor pledged a freeze in working-age benefits up to 2017, saving £3 billion. There is more to be found. He has indicated changes to jobseeker’s allowance and housing benefit and, in that context, the words “change” and “reform” must mean “less”. It is worth reflecting on what other proposals there might be as part of the £12 billion in working age benefit cuts. For example, there is the restriction of child benefit to the first two children. Of course the devil is in the detail. If that turns out to be unachievable, the alternative—if the Government are to have a chance to stick to their long-term plan—will be to look at indirect taxation or at the budgets of the three exempted Departments, such as Health.

The Conservatives have form on indirect taxation. Before the 1979 election they specifically denied they would double VAT. I remind the House, however, that they moved it from 8% to 15%—thus did they keep their pledge. Towards the end of John Major’s Government, the right hon. and learned Member for Rushcliffe (Mr Clarke) abolished zero-rating for fuel bills, bringing them permanently into the lower VAT band. Before the last general election the Conservatives had no plans to raise VAT, but managed to come up with some immediately after the election.

In earlier decades Conservative Chancellors would treat us to a Budget-day lecture on the money supply without mentioning quantitative easing or the over-optimistic use of leverage in the financial services sector, including the unregulated shadow banking sector. The Chancellor did not mention these things earlier, either. We, as a House—this ought not to be a party political point—need to focus on the work of the Governor of the Bank of England as regulator of the financial services sector and on the Governor’s work in foreseeing potential future shocks to the financial system.

The Chancellor did make one reference to this in the Budget speech, wedged between a section on inflation and a section on farmers’ tax returns. He confirmed the remits of the Monetary Policy Committee and the Financial Policy Committee. There is no new architecture between those committees and the House of Commons, but I think there should be. Accountability and transparency would be powerful weapons in ensuring that those serious issues are being taken seriously. The Chancellor made much of the employment figures, although the tightening of the labour market is not evenly spread throughout the United Kingdom. Unemployment is still an issue for the north-east of England.

I would like to have had some analysis from the Government Front Benchers about the mismatch between the employment figures and the productivity outcomes. The Office for Budget Responsibility described the UK’s “productivity puzzle” as the biggest risk to the United Kingdom’s economic health. The Chancellor is banking on increased tax revenues to help fulfil his Budget forecasts. Low productivity is holding down pay rises, and we are in the fifth year of public sector pay restraint. So there seems to be a contradiction, unless there is an as yet unspoken plan to increase indirect taxation. No doubt, if the Conservatives win and plough on with their long-term plan, they will think about that after the general election.

Unemployment remains an issue for the north-east of England. I welcome the Chancellor’s new-found interest in regional policy, but we in the north-east are not his northern powerhouse—that is Manchester and Leeds; we are his northern outhouse. It is not as if the Chancellor is averse to talking about far-away places in his Budget speeches—last year it was Mars; this year it was Agincourt, so perhaps next year it could be Tyne and Wear and Teesside.

I really would welcome the Chancellor’s taking an interest in the north-east of England. The tragedy is that the political parties do not really disagree about what we need to do. We need to grow, strengthen and deepen the private sector base of the region’s economy.

[Mr Anderson]

Does my right hon. Friend agree that one of the first things the Government did when they came in was to abolish the regional development agency, which had transformed the north-east after decades of deprivation and deindustrialisation? We were moving forward in a positive, united way, in partnership. It was a cynical, clinical move by the Government to get rid of the regional development agency, and it has been detrimental to the north-east.

[Mr Brown]

My hon. Friend is absolutely right. The abolition of the development agency was the largest single blow dealt to economic development in the north-east of England. The Government did it quickly. Governments make most of their mistakes in their first six months. Certainly, on economic development in the north-east of England, this Government did make most of their mistakes in their first six months.

As I said, the tragedy is that we do not disagree about what needs to be done. Resources need to be focused, and the work needs to be led in an authoritative, clear-sighted way. The coalition’s structural changes do not deliver for the north-east of England. Abolishing the RDA was a big step backwards, and the local enterprise partnership is not working for us—it has not even had a chief executive for the past year. If the North East local enterprise partnership had achieved anything, surely the Secretary of State would have told us about it, but he did not have anything to say about it. When I intervened to give him a chance to tell us about it, he still did not have anything to say, apart from generalisations. The money spent over the past five years on regional economic development in the north-east is less than it was for one year under the previous Labour Government’s arrangements.

There is a further regional danger: the unprotected budgets that are lined up for public expenditure cuts disproportionately hit local councils in the north-east. Separately, there have been at least two attempts to redistribute within the budgets that the Chancellor has protected. There are proposals to take £230 million out of the north-east’s health budget and redistribute the money to wealthier parts of the country.

The Chancellor said that we are all in it together. However, on the cost of living, job opportunities, local government budgets and a workable economic development strategy, it does not feel that way in the north-east of England.