Budget Resolutions and Economic Situation

Debate between Nicholas Brown and David Anderson

Friday 20th March 2015 Commons Chamber

[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.

Economic Development (North-East)

Debate between Nicholas Brown and David Anderson

Tuesday 15th February 2011 Commons Chamber

[Mr Brown]

Nobody has talked up the private sector economy of the north-east more than I have, not just now but when I was the Minister for the region. My strategy was to broaden and deepen the region’s employment base by broadening and deepening private sector employment opportunities. I have never said that we are over-reliant on the public sector, but the correct way forward for our region is the development of private sector employment opportunities. That is why I said at the outset that there was not much disagreement about questions within the region. There was a consensus about what we were trying to do and how best to proceed. The region’s Members of Parliament, regardless of party politics, found it easy to discuss those issues among ourselves and make common cause on specific projects.

[Mr David Anderson (Blaydon) (Lab)]

Is not the reality that we have learned from a long history of being cast adrift, when nobody had any plan for the north-east? In the past 10 years, we learned to work together, ably led by my right hon. Friend. The private sector, the public sector—everybody—pulled together. There was no difference between us, and we experienced a renaissance in the north-east, which none of us ever thought possible. It was tremendous, but it is being set back by the Government who have come to office in the past year.