Budget Resolutions and Economic Situation

Nigel Evans Excerpts

Wednesday 20th March 2013 Commons Chamber

[Mr Davis]

I will come back to the detail in a minute, but the point I am making—it is a serious point—is that we can do what Keynes said and pay someone to dig a hole and then pay someone else to fill it in, and that creates employment. So long as we avoid that and talk about the real value, we are on the same side. I will come back to the real value issue in a moment.

The problem with actions to promote competitiveness is that they are not always politically popular. Very often, they are politically unpopular, and I will elaborate on that in a second. The other element about growth—everyone in the Chamber today agrees that growth is necessary—is that it is also important to the deficit reduction policy. In effect, if 1% is taken off the growth rate, the OBR’s rule of thumb says that within a year or so that adds £10 billion to the deficit every year thereafter—not once, but every year thereafter. So growth is fundamental to the central fiscal policy as well. While we are talking about growth, we have had much talk about double and triple-dip recessions, but judging by the employment numbers, we have not had real recessions; we have had bouncing around zero to 1% growth, and that will show up when the numbers are corrected, as will be done in a few years.

There are six key elements to ensuring the economy’s competitiveness, and they are all pretty straightforward. I agree with what the Government are doing on some of them, but on others I think that they should go further. The first is straightforward: the Chancellor is absolutely right not to hesitate or flinch in the deficit reduction programme. That is absolutely essential. Canada, Germany and Sweden, which are all successful examples—Japan is not—managed their deficit reduction unflinchingly, and in all of them it delivered 3% plus rates of growth within a few years. Indeed, Canada had the fastest growing economy in the G8 when it carried through. The simple fact is that, even with the deficit reduction programme, we will be £600 billion more indebted at the end of this Parliament than we were at the beginning, and that is a devil of a burden for any country to carry. Clearly we cannot hesitate on deficit reduction.

The second key element is the one on which I and my right hon. Friends on the Treasury Bench might have a difference of view. One of the critical drivers of competitiveness is tax policy. I wholeheartedly welcome the actions announced today on corporation tax and national insurance, although I would like them to go further. The simple truth is that expensive, complex and high levels of tax returns are very damaging to a country’s economic competitiveness. We should be looking hard at the tax categories that are most responsive to lower rates. We have heard today, even from the Labour Benches, about a couple of measures—on beer, I think—that will deliver more money for the Exchequer, not less, so even Labour Members recognise dynamic tax strategy. We certainly want to see lower national insurance contributions for employers. I would like to see the employment allowance scheme that we put together extended considerably. Capital gains tax must come down. At 28%, we are collecting much less money than we would if it was somewhere between 15% and 20%. There is a series of other taxes, including corporation tax, on which action could be taken. Again, the examples to look to are Canada, Sweden and Germany.

The third key element, which we did not hear much about from the Chancellor today—perhaps we have not heard much because we are yet to go through the detail of the Budget—is deregulation. The most successful recovery in Europe in the past decade was Germany’s. The Germans took it upon themselves to dramatically deregulate their employment market for small companies. That is key, because small companies are the biggest employment creator in the economy, bar none. The Germans effectively removed employment law for companies with fewer than 10 employees and created mini-jobs and other mechanisms to reduce the bureaucracy and legislation surrounding employment. That is massively important. It is one very effective way of creating new employment, and it is something we should undertake as dramatically as we can.

Another item that was raised earlier—the hon. Member for East Antrim raised it with respect to Northern Ireland alone—was the question of carbon tax and carbon floors. In the next month or so, the changes that are being introduced will give us a disadvantage of £10 a tonne, and not against China or India, but against Germany, Holland and France. We will see a transfer of heavy industry from this country to Europe. There will now be an exemption for ceramics, but frankly there are many other businesses—they employ about 600,000 people—in the energy-intensive industries. We need to address that. The previous Government were very happy to deliver golden rules of one sort or another. I would like to suggest a rule for us on environmental and energy policy: we should not introduce any environmental policy that is not matched by our European colleagues. That would ensure that we do not do ourselves huge harm.

Let me move on to infrastructure. The hon. Member for East Antrim made a perfectly sensible point about broadband, and I agree with him. What I do not want to see is massive expenditure for its own sake in the expectation or hope that that will simply generate employment by itself. The Japanese experiment demonstrates that that does not work. What we want to see is de-bottlenecking of our railways and road systems and underpinning of things such as broadband. The Government can make some good claims in that area, but we need to do more. That is what will fundamentally allow growth to take off in Britain and get us back to the 3% level of growth.

The last item I want to speak about is bank reform. A number of colleagues, including my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, have talked about bank reform. Bluntly, we have been too slow—[Interruption.] I am out of time—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

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[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. To accommodate as many Members as we can up until 7 pm—just to remind you, there are no wind-ups, so we will go right up to the wire—the time limit is now eight minutes.

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[Barry Gardiner (Brent North) (Lab)]

Socrates called it eudaemonia—living well. He thought of it as the ultimate arete or virtue. In some respects, that is what Budget day is all about: how we can allocate the nation’s resources so that more people can live well. However, when Socrates spoke of eudaemonia, he would never have confused it with prosperity. He thought of it as a state of human flourishing. The Chancellor clearly thinks of it as mere human affluence.

Well-being may be a function of economic activity, but if so, it is not a direct or simple one. One need only reflect that a specific loss of income is much more damaging to well-being than the corresponding gain is beneficial to it. The bedroom tax that reduces my constituents’ incomes has a far greater impact on their well-being negatively than a corresponding tax credit would have positively. That is because other concepts such as security, equality and justice really do matter. For human beings to live well—to flourish—we require all of those.

Our economy must therefore be structured to provide not just so-called flexibility of the labour force, but security of employment. It must minimise the inequality between the bankers’ million-pound bonuses and the savers at risk of losing part of their life savings to bail out Mediterranean countries. It must explain the justice of someone earning £150,000 still getting £1,200 per child in child care, when a mother in my constituency who cannot find more than 15 hours of work a week gets none.

A good Budget is not just about the distribution of national wealth; it is about the management of society’s resources to enable its citizens to flourish as one nation. On that measure, today’s Budget has failed. Today’s Budget is the Budget of a Chancellor who has painted himself into a corner and then run out of paint. He has been wedded to austerity so obstinately and for so long that when he finally is seduced by the noble Lord Heseltine to share an illicit tryst with growth, he lacks the wherewithal to invest properly.

This Chancellor has been wedded not to prudence, but to patience. Year on year, we have been told that the prospect of economic growth and recovery has receded once more over the horizon, always remaining just four years away. In 2010, he forecast that by today, the economy would have grown by 5.3%; it has grown by just 0.7%. In 2010, he forecast that his austerity plan would stop us going into a double-dip recession; we have been teetering on the brink of a triple dip. In 2010, he told us solemnly that austerity was the only way to avoid losing our triple A rating; we now know that it has helped us to lose it.

Believe no one else about this Chancellor. Judge him by his own words. Judge him by his own U-turns. Growth is lower, real wages are lower, public sector net borrowing is £212 billion more than he forecast and debt as a percentage of GDP is up to 76.8%, when he forecast that it would be 69.7%. The Government’s target of debt reduction by the end of this Parliament is now absolutely unachievable.

The real trouble with the Budget is not that it will fail to achieve its growth objective over the five-year cycle of the political process; it is that the five-year cycle itself bears scant relation to the cycles of the resources that we must manage if we are to create sustainable well-being for our citizens. The Chancellor has engaged in a civil war in this Government against any understanding of true stewardship of our natural resources. Oh yes, he can spot a domestic credit bubble in our housing market, but he is incapable of seeing the far greater danger of an annual global consumption of natural resources that it takes our planet one year and four months to replace. That is a credit bubble of terminal proportions not just for our economy, but for our species.

By the time a child born on this Budget day is eligible to vote, the world will require 45% more energy, 30% more fresh water and 50% more food. This child will be part of the generation that will see the global population move from 7 billion to 10 billion. How do we enable this child to flourish? Do we become the most selfish generation of the most selfish species in our planet’s history, or do we become the generation that understood that justice and sustainability are essentially the same thing? If we want peace in the world, we must create justice. If we want justice, we must live sustainably.

This Chancellor’s old mantra was cut, tax and grow, so what if he has changed it for Heseltine’s grow, tax and spend? If he has not learned that growth must be sustainable, it will all end up in the same mess. In a world of 7 billion people, growth can be sustainable only if it is predicated on advances that bring increased productivity and greater efficiency in the use of resource. For the world to continue to achieve a 3% per annum growth target and to maintain a trajectory that keeps carbon emissions below the 2° threshold, we must increase our productivity per tonne of carbon emitted 15 times over, yet this is the Chancellor who has fought tooth and nail to stop us having a decarbonisation target in the Energy Bill.

The Chancellor is oblivious to the argument, regardless of who makes it—friend or foe, politician or industry. Two weeks ago, six of the largest multinational investors in the UK infrastructure wrote to him. Mitsubishi, Alstom, Doosan, Gamesa, Vestas and Areva have interests that span gas, clean coal, carbon capture and storage, nuclear and renewables. They told the Chancellor of their strong support for the early introduction of the 2030 decarbonisation target and warned:

“We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines.”

They explained that supply chain investment decisions depend on reasonable assurances from manufacturers that a production facility built this decade at a cost of millions will have an adequate market for its products well into the 2020s. They told him:

“Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R and D and produce fewer new jobs.”

The hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, began the debate from the Back Benches with the extraordinary claim that low-carbon policies are exporting jobs and that green measures are adding 20% to our fuel bills. He should know that energy efficiency measures cost 15%, not 20%, of our energy bills and that the low-carbon sector has provided one third of all economic growth in the UK and is our fastest growing sector, creating thousands of new jobs. The Chancellor and his friends need to begin to recognise that green growth is the surest way through our economic problems, not the contributor to them. Fundamental to that is an understanding of sustainability. Last year, the EEF manufacturers’ body sounded a warning about the risk—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.

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[Diana Johnson (Kingston upon Hull North) (Lab)]

I was hoping that the Budget would produce a plan for jobs, growth and investment. I was hoping that it would help areas such as mine, and help to rebalance the economy between the south and the north. I was hoping that it would address the problems of my constituents in Hull North and the problems that are becoming far too apparent in other areas of the country. We are becoming “food bank” Britain. That sits badly with other policies the Government are pursuing, such as giving tax cuts to millionaires and fighting hard in Europe to protect bankers’ bonuses.

Jobs are the key issue in my constituency. The latest statistics available show that more than 40 jobseekers go after every vacancy. Today’s figures show that there is 12% unemployment in my constituency against a national average of just over 5%. Young people are particularly hit by unemployment problems. Despite the good work that the local council does with the private sector to try to get young people into work, it is proving difficult to do that. The Work programme has a success rate of 0.83% in my constituency. Jobs are the key to ensuring that my city has a future.

The Chancellor said that 1.25 million private sector jobs have been created, but in my area in the past few months, more than 1,000 private sector jobs have gone from big names such as Kimberly-Clark and Seven Seas. There were job losses in Hull following the underspend on the Warm Front scheme—Hull was one of the bases for the scheme. We need policies that will work throughout the country and not just in specific areas.

The Chancellor said that, for every public sector job that had gone, six private sector jobs were created, but those jobs are often temporary, part-time or zero-hour contracts. A part-time job in Poundland is not the type of job we want in our economy. We want high-skilled, good-quality jobs. I am told that more people will be employed in “McJobs” at McDonalds than in the British Army. That says we are not getting our priorities right.

The Government’s response is the idea that employers have a national insurance contribution reduction of £2,000. That is welcome—the idea is similar to ideas in the five-point plan, which the Labour party has been talking about for many years. However, the managing director of PAT Testing Expert Ltd in Hull has said that the measure is a reduction, not a cut, which is what he was hoping for. The business community is saying that the measure is not quite what they were hoping for.

Overall, the Budget has failed. There is nothing on the skills agenda, which is so important in ensuring that our people have the skills they need to get the jobs for the future. Last night, the caravan industry told the BBC in my region that it needs help in getting investment. The Minister will know jolly well that, come April, there will be 5% VAT on caravans, which was part of the deal that had to be cobbled together after the omnishambles of the previous Budget. The industry is getting no help.

There is nothing in the Budget about business rates. There is nothing on roads or the work that needs doing in my area on the A63—I note that, in the autumn statement, work was planned for the port in Thurrock, which is in the south. The money available for infrastructure is all post-2015. There will be £3 billion, but it will be too little, too late.

The Budget contains no support for the renewables industry, which is where the real potential for growth lies. In my city, we have been trying desperately to get Siemens to build and manufacture wind turbines, so that lack of support is very disappointing.

While there is much in the Heseltine report that it is important to commend, it is disappointing that the Government have not accepted some of the recommendations on the need to protect British innovation and enterprise. As I understand it, there is nothing about the commitment to strengthening local chambers of commerce, which are important organisations for local economies. I am concerned that the single pot might not become available until 2015. Again, that is too late: we need the help now.

On overseas students, our universities’ export of quality education has been vital, with potential for further growth. However, the Government need to get their act together. A lot of overseas students are put off coming to this country by the messages the Government send out on immigration. That is a great shame. The university of Hull has a large number of overseas students and wants to see more of them. It is disappointing that the Government seem to be facing both ways on this issue.

On housing, although I welcome some of the initiatives the Government have brought forward, there are a lot of questions to ask about how they will work and not be abused. More importantly for my constituents, there was absolutely nothing in the Budget about flood insurance. If flood insurance is not available after the summer when the statement of principles comes to an end, that could blight the housing market in large parts of the country. There has been no agreement. As I understand it, the Treasury is standing in the way of an agreement between the Association of British Insurers and the Government. It will not ensure that money is available in the first few years of any new scheme and underwrite it if there are bad floods, such as those in Hull in 2007. That is shameful. My constituents are finding it very difficult to get house insurance now. If they cannot get house insurance after the summer, the housing market in Hull and in other parts of the country that have suffered from flooding in recent years will be in dire straits. The Government need to address this situation urgently. It will become a powerful issue if it is not addressed properly.

The Government talk a lot about how they want the economy to start to improve, but it is clear that growth has been downgraded, there is more borrowing, unemployment is starting to go up—3,000 of the 7,000 rise in the number of job losses announced today were in Yorkshire and the Humber—and millionaires are getting a tax cut in just a few days’ time. The Government have got their priorities wrong.

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The last speech is by Emma Reynolds. Emma, I will not put the clock on you, but if you are still speaking at 7 pm, I will you interrupt you as gently as I can.