Autumn Statement Resolutions

Nicholas Brown Excerpts

Monday 21st November 2022 Commons Chamber

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

It is an experience to follow the hon. Member for South Dorset (Richard Drax). I cannot say that I agree with very much of what he said, except the challenge of unemployment, on which it is right that although we seem to have a fairly tight labour market at the moment, the warnings of emerging unemployment are there and require a response.

This has been an interesting debate. Conservative Members have fallen into one of two categories. Some have made constructive speeches broadly in defence of the Government’s approach and some made slightly naughty old-style monetarist criticisms of it. For a few minutes I was drawn back to the 1980s, when I first entered this place, when we were told that inflation was an evil that must be exterminated. Nobody told us that today, but we got the sense of purpose. On our side, the disagreement is predominantly, although not solely, about the distributive effect of the Government’s measures, and that will be the key theme of my short contribution to the debate.

The income tax personal allowance freezes mean an average earner will pay more than £500 more in income tax a year by 2027-28. Wages are still lower in real terms this year than they were in 2010. It is a widely held view on our side that those who have made extra profits because of the war should make an extra contribution to the public purse. The Government seem to accept the principle of that, but of course we would want to go further and probably wider.

The consequence of the downturn is the spectre of future unemployment. We are told that the present labour market is very tight and the Chancellor has set aside money to explore the reasons why unemployment remains tenaciously high. He is not the first Chancellor to have wanted to look at that and find a resolution. Like productivity, it is an intractable problem, and I make no criticism of the Government for wanting to re-examine the issue.

The Office for Budgetary Responsibility tells us to expect a further 500,000 people being jobless, with unemployment rising from 3.5% to 4.9% in autumn 2024. That seems counter-intuitive to the facts as we understand them today. I will put in a word for the north-east of England, as others have done. It speaks volumes that given all the pressure—and having been in government I understand it—that will have been brought to bear to get a resolution on the devolution deals in time for the autumn statement, the best that the Chief Secretary could do is tell us that the drawing together of the north-east devolution deal is subject to discussions between the local authorities. This is a very under-powered northern powerhouse, so much so that it can get the trains only as far as Manchester.

I welcome the Chancellor’s retaining of the triple lock on pensions. The parallel announcement for working age benefits is also welcome. Although it would come instinctively to a Labour Government, I understand the real discussion of different points of view that will have gone on in the Conservative Government. It will be no help to them if I say that I agree with the decision they have reached. Where people have other sources of income, as with universal credit, they will be caught by the non-indexation of the income tax threshold.

The Chancellor did not mention students, but one in 10 students is using food banks. That, at least, is the figure in Newcastle upon Tyne, where both universities’ student unions are operating their own food banks. With inflation, maintenance loans barely cover rent, and there is little left for food, transport and books. Let us assume that the graduates prosper, do well and eventually end up earning over £50,271, their marginal tax rate will be the 40% higher rate, plus the 12% national insurance plus the 9% graduate repayments. If they are hoping to afford a mortgage, they are being very optimistic.

Hanging over all of this, as I have mentioned, is the spectre of rising unemployment. When adjusted for inflation, incomes are going to fall by 7.1% over the two years from 2021-22 to 2022-23, taking incomes back to where they were in 2013. The OBR has said that real household disposable income per person will drop by 4.3% in 2022-23, and—this is a prediction, not a statement of fact—that will be followed by what is predicted to be the second largest fall in 2023-24, at 2.8%. This is a very grim prospect, indeed.

I am not quarrelling with the broad response the Government have chosen, but my quarrel is with the distributed effect. I think it would have been possible to take more from those who, corporately and individually, have more to give, and to have been a lot more restrained in what we are putting on the shoulders of our fellow citizens.

Budget Resolutions

Nicholas Brown Excerpts

Wednesday 27th October 2021 Commons Chamber

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

It is a pleasure and indeed an honour to follow the right hon. Member for Maidenhead (Mrs May) in this debate. I am not sure that either of us would have thought that we would find ourselves doing this, but we do, and I have to say that I agreed with a great deal of what she had to say. I certainly agreed with far more than is probably good for me nowadays, but I did and I will say so in my speech.

I have been a Member of this place since 1983 and have heard a great deal of just about every Budget speech. The style has changed rather a lot. There was a time when we used to get a long lecture about monetarism and the money supply—the whole theory would be explained to us, with special emphasis on M4. I may have got this wrong, but the present Chancellor’s heart seems to still be with that school of thought, but to his credit he has realised the extraordinary nature of the circumstances that currently confront us and taken what for him, and I guess the Prime Minister as well, has been a philosophically broader view.

The current circumstances are quite mind-boggling. We have not done this voluntarily, and I do not blame the Government for it, but we have borrowing at a peacetime record now. It stands at some £320 billion, which is the equivalent of 14.9% of GDP. Government debt has increased now to about 96% of GDP. Spending, I acknowledge, is falling, but it is still at what for us is a high level and what for the Conservative party must be a very high and worrying level, surpassing anything that we have seen in peacetime.

As well as the national finances being under great strain, the finances of my constituents are too. I welcome some of the measures in the Chancellor’s speech, including the capital funding for the national health service to try to clear the backlog. Whether it is enough, it is certainly more than we were going to get, so I welcome it on those terms. I am very sceptical as to whether the funding for the announced changes will find its way later into the social care budgets. The cost of that—we all see this is necessary, and it is necessary now and not in a few years’ time—will end up with local government. As we work through the details of the Budget—the ones that were not leaked to the newspapers in advance—I think that we will find that local government will be forced, particularly in metropolitan areas, to pick up the burden.

I join the right hon. Lady in welcoming the long overdue—from my point of view—addressing of the taper on the universal credit interface with increased work earnings. Universal credit affects some 9,000 households in east Newcastle, and 35% are in employment so will almost certainly come up against the clawback of 63% as it was and 55% as it is now. It is not as big a deal as it sounds, but it is going in the right direction. It is welcome. The problem of the interface between benefits to people who are in work is not a new one, and my view is that more thought needs to be given to this to find a more equitable solution. The marginal tax rate is still quite high. It was 75% on the old clawback when national insurance and other taxes are added in, and it will be something of that order even with the Government’s announcement, but that does not stop me welcoming it. I do.

Discretionary incomes, particularly those of the poor, are under significant pressure and I regret the fact that the present Government have decided to break their manifesto promise and take more from those who do not really have it, with their 1.25% increase in national insurance. I can see why the Government—a Conservative Government—see the need to raise tax, but there were other ways of doing it and I would like a lot more reassurance that these were explored properly before we arrived at the solution that the Government have arrived at.

Mention has been made of the inflationary pressures that are now loose in the economy. I take this very seriously—

[Sir Desmond Swayne (New Forest West) (Con)]

May I take the right hon. Gentleman back to those halcyon days when he enjoyed lectures on monetarism and remind him that inflation is always and everywhere a monetary phenomenon? There is no such thing as cost-push inflation.

[Mr Brown]

If the right hon. Gentleman would let me make a little more progress, I was going to quote Mrs Thatcher with approval; I rather thought that would catch his interest. What he says is essentially correct, and when these issues were more contentious, it was recognised very vigorously indeed by the then Conservative Prime Minister, Mrs Thatcher, who once said that

“inflation is the biggest destroyer of all—of industry, of jobs, of savings, and of society”,

briefly acknowledging, untypically for her, that there was such a thing as society—perhaps her better known quote.

Although I seem to have lost my copy of the 1987 Conservative manifesto, I have a memory that it contained the memorable phrase, “Inflation is an evil and must be exterminated”. I commend that point of view to the present Government if inflationary forces are unleashed again, given all the other problems we have to face up to at the moment. The victims are my constituents: the poorest and those who are least able to find the extra money—or, indeed, to find the goods to buy, given the way in which the distribution sector is currently challenged. These higher priced products could only be purchased if people found a supermarket that was still selling them and that had not been disrupted by a lack of delivery and HGV drivers. Retailers’ stock levels are at their lowest—or reportedly at their lowest; I cannot claim personally to have done a stock check—since I entered the House in 1983.

We know that inflation will hit our constituents hard. The situation with gas prices needs a response from the state, at least temporarily. My preference would have been Labour’s proposal to remove VAT from fuel bills, at least temporarily—for, say, six months. The Government could do more, and I urge them to, to help our more vulnerable constituents through this winter. That brings me, inevitably, to covid.

The R rate is reportedly now more than 1 and is said to be as high as 1.2. I understand that the Government’s underlying assumption is that the booster vaccine will provide a countervailing policy and that that will be enough to bring the rate back down. But if it is not, the Government need seriously to focus on whatever plan B actually is, because putting the country through a lockdown or some other set of restrictive policies again in the current circumstances will have a devastating effect on our hopes for a recovery.

I will finish soon, because I know that other Members want to get in. It is a fact that, in 2014, 27% of children in my constituency lived in poverty, and the latest child poverty figure that I have for my constituency is 38%. The adjustments that have been made and announced—pre-announced, if you will—in this year’s Budget do not serve to relieve that burden on the bulk of my constituents. All 12 local authorities in the north-east of England are in the top 20 of those that have seen the highest increases in child poverty rates.

The Government used to say that the way through this situation was to increase economic activity through the northern powerhouse. The Chancellor did not mention the northern powerhouse in his address at all, unless the Government have renamed it Teesside. However, the thrust of the argument is still clear and I would like it to succeed; I would like properly paid, well-resourced jobs to be brought to the region, and for them to endure. It is not a quarrel between the parties that we want to drive up the living standards of our constituents in our region. We can make much more common cause here in Parliament on the details of the issue. I tried to tackle that when I was the Regional Minister, with some success—I am not going to say with anything else!

One of the galling announcements in the Chancellor’s statement was the reference to family hubs. What happened to Sure Start? What was wrong with that? If the incoming Conservative Government had thought it was a poor initiative that could have been configured differently, why did they not just pick it up and configure it differently, and shape it like they say they now want to shape the family hubs? The underpinning reasons for the policy are wholly justified. It did deliver results. The Government are right to have found their way to it now, but they should have got there 10 or 11 years ago.

Finally, the greatest question facing our country and the world at large is climate change, and the prospects seem absolutely terrifying. I wish the Government well with COP26 and taking the issues forward internationally. Are we going to get there? I share the concerns and worries of, frankly, every thinking Member of this House. It is essential to the community that I represent that the Government do get there and that we are able to carry international partners with us. The Government’s proposals include industrial jobs—jobs that we could do in the north-east of England and projects that our communities could bid for. We want to play our full part in taking a green industrial strategy forward.

Short Money and Policy Development Grant

Nicholas Brown Excerpts

Thursday 11th February 2016 Commons Chamber

[John Penrose]

My hon. Friend is absolutely right, and, as he says, he speaks from personal experience. I think that the crucial point we all need to remember—the guiding star—is that at some point whoever is in government will be in opposition, although I hope it will not be for a great deal of time in our case. We must therefore come up with rules that we are all happy to live with, whichever side of the aisle we are on.

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

The Government are setting to one side all the conventions for dealing with issues of this kind. There is no precedent for them to proceed in this way. In fact, what they are doing does not amount to anything more than Bullingdon Club bullying of Parliament. They are treating Parliament as if it were a Department of Government, and an unfavoured Department of Government at that. Will the Leader of the House—sorry, I mean the Minister, although it ought to be the Leader of the House—tell us what he has done to defend the interests of Parliament, rather than the narrow political interests of the Conservative Government?

[John Penrose]

I would gently and respectfully demur from the right hon. Gentleman’s starting point. We have been undertaking some informal discussions between parties, which we are planning to make much more formal in the future, and I think that means that there will be plenty of opportunities for cross-party views to be gathered. There is absolutely no intention to subvert the will of Parliament. In fact, as you know, Mr Speaker, whatever proposals are made will have to be subject to debate and passage through the House when they eventually materialise.

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.

Oral Answers to Questions

Nicholas Brown Excerpts

Thursday 3rd July 2014 Commons Chamber

[Sajid Javid]

My hon. Friend makes an important point. I join him in welcoming the work of UK Music in promoting careers in that industry to young people. Just this week, a report showed that the creative industries have added more than £70 billion to the economy over the past year and that they employ more than 1.7 million people. Employment is growing five times faster in that sector than in the rest of the economy. Just yesterday, I helped to launch the industry-led creative industries strategy, which is full of more good ideas.

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

T4. Will the Minister join me in congratulating the excellent Tyne and Wear Archives and Museums and other arts organisations based in Newcastle upon Tyne on their successful Arts Council bids? In doing so, will he acknowledge that there is still a problem with the disproportionate amount of private sector arts funding—the figure is 82%—that is drawn into the capital and not to the regions of England, and consider the remedy that is set out in “Rebalancing Our Cultural Capital”? If he has not read that report, I commend it to him.

[Mr Vaizey]

I am very happy to join the right hon. Gentleman in congratulating Tyne and Wear Archives and Museums—it is a fantastic place that I have visited on at least one occasion. I am pleased that following the Arts Council settlement the balance between London and the regions has shifted in favour of the regions. As he knows, I believe that every arts organisation around the country is capable of raising private funding and should be doing so.

Budget Resolutions and Economic Situation

Nicholas Brown Excerpts

Wednesday 19th March 2014 Commons Chamber

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

It is a pleasure to follow the hon. Member for Chichester (Mr Tyrie) in this debate. I acknowledge the work that he and his Select Committee do on behalf of us all.

Some of the measures in today’s Budget will be welcome in the north-east of England, including the emphasis on manufacturing, the apprenticeships scheme, and the extension of the capital tax regime in enterprise zones. It would not be fair to say that the new leader of the worker’s party does not understand us; the statement on bingo duty shows that he has got to the very heart of our concerns. In my short contribution, I would like to address a number of the structural questions that form the context of today’s Budget, both nationally and internationally.

Income disparity in the United Kingdom has become starker over the past 25 years, with the growth of a class of people the noble Lord Lamont used to describe as the “internationally mobile”. In 1978-79, the top 1% paid 11% of all income tax, while in 2012-13 they paid 24%. The Chancellor made much of this in his address, saying that it proved that the wealthy were making their contribution. However, it is happening not because the very rich are being taxed more but because the top 1% of today are much richer than they were 30 years ago. They are also much richer relative to the rest of the population. For the rest of the population, real wages growth has steadily declined from 2.9% in the 1970s and ’80s to 1.5% in the 1990s, with a decline of 2.2% so far this decade. Of course, regular below-inflation pay rises in the public sector have a cumulative effect, and that is why such a policy cannot endure indefinitely. I was disappointed to hear what the Chancellor had to say about that today.

It is a fundamental truth that the gap between the richest and the poorest, in income terms, has increased substantially over the past 40 years. In 1979, the gap in weekly earnings between the richest and poorest 5% was £445; today it is £938. The richest 5% have seen weekly earnings increase by £531 since 1979, while the poorest 5% saw an increase of just £38. We are certainly not all in this together.

Our economy is largely a service-based economy. Services account for 79% of our economy and 83% of jobs. However, we should not forget the importance of manufacturing which, while accounting for 15% of the economy and only 8% of jobs, contributes a greater gross value added to the economy than financial services—£136 billion as against £115 billion. Manufacturing also accounts for over half of all our exports and three quarters of all research and development investment. While the UK economy remains at 1.4% below its pre-recession peak, manufacturing is at 10% below its 2008-09 peak. I am therefore not surprised that the Chancellor felt it necessary to pay some attention to that area.

As a country, we have a long-term productivity problem, which contributes to declining real wage growth and squeezes people’s living standards. Productivity fell by 0.3% on the previous quarter, following declines in 2012 and 2013. Despite improvements in the 1990s and the 2000s, the United Kingdom remained 10% behind the other G7 nations. The gap today is more marked, at 21%. The Government will say that they anticipate improvements as employers seek more from their work forces. I say we should be looking at some of the deeper structural problems that lead to poor productivity, such as education, skills development and training for both employees and employers.

For the north-east, these issues are of vital importance. Despite this morning’s welcome fall in unemployment of 2,000 people in the region and 38 in my constituency, we still have the highest unemployment rate of any United Kingdom region—9.5% compared with the national average of 7.2%. During recent months, the region has not seen consistent progress in reducing unemployment and it is still estimated that a further 60,000 private sector jobs are needed to make up for the gap with the other regions.

The shadow banking system, as a system operated through non-bank financial intermediaries and often beyond the scope of national regulations, requires much greater attention and understanding. The Financial Stability Board has estimated that the size of the shadow banking sector was €51 trillion in 2011, up from €21 trillion in 2002. That accounts for up to 30% of the total financial system, which is not properly scrutinised and, in my view, not even properly understood. Add a large amount of leverage into the equation and it is clear that the shadow banking system presents a clear risk to the global financial system. It was razor-thin capitalisation ratios held by financial institutions, created by unsustainable leverage, that contributed to the previous crash. The United Kingdom accounts for 12% of all shadow banking assets held through non-bank financial intermediaries, the third highest following the United States and the euro area.

There is a key question as to whether the state, or even nation states collectively, could once again step in to save financial institutions so soon after taking on the burden from 2008. Many financial institutions’ recorded asset values are close to, or even exceed, that of their host country’s GDP, including France, Belgium, Italy and Germany. The United Kingdom has one of the largest disparities, with the combined asset value of the Royal Bank of Scotland, Barclays and HSBC at 337% of UK GDP. That is a sobering thought.

Following the effect of the financial crisis, the combination of cuts in corporation tax and a weaker growth in taxable profits are contributing to what appears to be a longer-term decline in corporate revenues. Despite the United Kingdom historically receiving a higher proportion of revenues from corporate taxes than comparable countries, the Institute for Fiscal Studies confirms that the UK is seeing a downward trend in corporate tax revenues, which is likely to continue for the best part of the decade.

Corporate tax receipts will be at their lowest share of revenue by 2017-18—the level they were in the mid-1980s. Financial services receipts have declined from over 25% of corporate tax revenues before the crisis, to 11% in 2011-12. With corporate tax revenues declining and the rate being cut, there is concern over the extent of tax avoidance, evasion and non-payment by large corporations in the UK. Estimates of the losses vary. HMRC puts them at £35 billion, while Tax Research UK puts them at £70 billion. Whichever figure one takes, these are big figures.

There are remedies. The international dimension to these issues and the world trading environment is clear. Our country has an important role to play as part of the transnational attempts to deal with transnational offenders. The House should also play an enhanced role in scrutinising the progress that the Government are making on these great strategic issues. It is much to the credit of the Public Accounts Committee and the Treasury Committee that they have become two of the most influential Committees in the House, but we should look further and do more ourselves as a House.

Investing in Britain’s Future

Nicholas Brown Excerpts

Thursday 27th June 2013 Commons Chamber

[Danny Alexander]

I agree very much with my hon. Friend. The commitment on broadband in particular, with fixed broadband in 95% of the population and superfast broadband—mobile, 4G and so on—to 99% or more of the population, will be welcomed in every corner of the UK, no matter how remote.

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

The biggest problem facing the north-east of England is the need to strengthen the region’s private sector employment base. How will today’s statement help to do that?

[Danny Alexander]

I would refer to two things. First, the single local growth fund, which we have worked on with the North East local enterprise partnership in particular, will be very welcome news in the north-east. I also hope the commitment to the A1 north of Newcastle will promote significant investment in the north-east economy.

LIBOR (FSA Investigation)

Nicholas Brown Excerpts

Monday 2nd July 2012 Commons Chamber

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

Does the Chancellor identify shortcomings in existing anti-fraud legislation, apart from the costs of pursuing an investigation and a prosecution? Will he confirm to the House that there will be no constraints on either investigation or prosecution costs?

[Mr Osborne]

There will be no constraints because of cost.

LIBOR (FSA Investigation)

Nicholas Brown Excerpts

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

My hon. Friend was prescient in making his case. He has pointed to something that concerns a number of people: the apparent ability of, for example, authorities in the United States to use criminal sanctions, while the authorities in the UK have not been granted those powers by Parliament. That is precisely what we are looking at.

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

The Government’s new financial services regulatory architecture puts a lot of power and responsibility on the shoulders of the Governor of the Bank of England, but proposes no change to the relationship between the regulator and Parliament. May I ask the Chancellor to reflect again on the relationship of the House and the other place with the regulator, and how best we can establish a continuing—not adversarial—dialogue with the regulator so that problems, such as the one that he has shockingly reported to the House, can be explored and reflected on in a mature way, and not subjected to party political point scoring?

[Mr Osborne]

Of course, it is important that the regulator, including the Bank of England, is accountable to Parliament for its actions, and has to answer for its actions, while at the same time—and I think that there is cross-party support for this—we maintain the independence of the Monetary Policy Committee and the Governor in his role. The Financial Services Bill includes many new tools to increase accountability to Parliament and to the public. In the White Paper that accompanied publication of the Bill, we set out further changes that we are making in the House of Lords to increase that accountability.

Public Appointees (Tax Arrangements)

Nicholas Brown Excerpts

Wednesday 23rd May 2012 Commons Chamber

[Danny Alexander]

I can assure my hon. Friend that HMRC is completely blind as to whom any individual works for. Taxpayer confidentiality is an essential part of the way in which HMRC works and we are making no changes whatever to that. We have passed the information that we discovered through the review to HMRC. It will be for it to decide whether it wishes to make any further inquiries. That will be a confidential matter for it to pursue in its own right. This is not an overall review of IR35; it is a particular consultation in relation to controlling persons of organisations. I am certain that the point that he raised will be noted and perhaps brought forward by him or others in responding to the consultation, which opens today.

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

The Chief Secretary deserves credit for his handling of the issue since it came into the public domain. Like my right hon. Friend the Member for Barking (Margaret Hodge), I pay tribute to him and to the investigative journalists, David Hencke and others, who first drew it to our attention. It makes no difference whether those arrangements were agreed by Labour Ministers or Ministers in the coalition; they are wrong and he is proceeding in the right way to put a stop to things. Can he tell the House roughly the cost of unwinding the arrangements and whether that cost will fall on the individual Departments from within their existing allocations, or whether some supplemental allocations will be needed? Can he also say when the Secretary of State for Business, Innovation and Skills first knew about the arrangements for the head of the Student Loans Company and what he did to bring them to an end?

[Danny Alexander]

I am grateful for the right hon. Gentleman’s comments and for his role in bringing these matters to the House’s attention. I wholeheartedly agree that it makes no difference when the arrangements started and which Minister was responsible; frankly, the situation has grown up over a number of years and under Governments of different hues. It is right that we are taking action to bring the situation under control and ensure proper transparency so that there is no perception of the potential for tax avoidance. He and I agree 100% on that.

It is impossible to say at the moment what the costs, if any, of unwinding the existing arrangements will be. Of course, as I said in my statement, senior people must be brought on to the payroll, unless there are exceptional short-term circumstances. For others, we need arrangements in place that allow assurances to be given that the proper and full amount of tax is being paid, and that will depend on the outcome of those processes with individual members of staff. Of course, if there are costs to be borne, they will have to be borne from within existing departmental allocations. If Departments do not comply with those rules, there will be a fine of up to five times the salary involved, levied by the Treasury on departmental allocations, which I hope will give Departments a strong incentive to comply with the rules as quickly as possible.