Owen Smith
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Owen Smith Excerpts(14 years, 6 months ago)
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John Thurso
We should certainly listen to “Danny” Blanchflower, for whom I have great respect. He gave evidence to the Select Committee on several occasions, and he is one of a number of voices that we should—[Interruption.] Absolutely—it was David Blanchflower’s nickname at the time. We should certainly listen to him, but we should also listen to all the evidence. He was, on that occasion, more right. I am not persuaded, having heard other voices, that he is entirely right now—but he does highlight a danger, and we should certainly not disregard that. Across the piece, as the hon. Gentleman acknowledged, we did not appreciate the scale of what was coming.
When I look at what was happening in the early part of this year, my instinct would be to cut the least possible, and to stimulate growth as much as possible. However, there comes a point at which we have to deal with what is before us, rather than what we hoped might be before us. It became clear during the election—and I remember making this point at an all-party hustings—that throughout Europe it was a very different ball game from the one with which we had all been dealing just three, four, or five weeks before, and that we needed to take that into account.
I am therefore predisposed to assume the worst, and to look hard at the core problem. The next piece of guidance derives from my experience of running companies in the hospitality industry. I am not for a moment saying that the relatively small companies that I ran bear comparison to a country, but some of the principles do. I remember taking over two companies that were essentially bankrupt. If the owning shareholders had not guaranteed the finance, they would have gone into administration. In both cases, my job was to turn them round, and I heard arguments about how I should get hold of money and invest it on the one hand, or how I should redress the costs of the company on the other.
When people do not have money—the piggybank is empty, and it is difficult to get money from the banks—they have no choice but to live within their means. I learned that by stabilising company expenditure, and forgoing some investment for the future, I could produce a more stable enterprise. It is the same with this country and the balance of risk. The risk, on the one hand, of failing to take action is that we seriously run out of money, our credit rating is reduced, our borrowing costs go up, and we end up spending far more on debt interest than on health, education or defence. Something would then be imposed on us, as happened with the Labour Government in the 1970s. The risk on the other side is that if we cut too quickly, growth will be stifled and we will take longer to come out of our current situation. Balancing those two risks, I believe that the risk is greater if we do not deal with the deficit, so it needs to be dealt with.
Secondly, is the Budget fair? My right hon. Friend the Secretary of State for Business, Innovation and Skills made an extremely good case for demonstrating that it is—in as much as any pain can be fair. I would far rather be standing here supporting a Budget that gave people lots of money. That would be lovely, but, as the Labour Chief Secretary to the Treasury said, there is no money. So we have to be prudent, and that means that we have to share the pain. The whole point is that everybody will suffer, but we have to ensure that the suffering falls least on the most vulnerable, and most on those who can afford it. Charts A1, A2 and A3 in the Red Book set out exactly how the suffering will fall, and it is perfectly clear from them that those at the bottom will bear the least pain and those at the top bear most.
In my constituency average earnings are £21,000, and table A1 on page 64 shows that after the Budget somebody on £20,000 will be £170 better off, given the amount of income tax and national insurance that they pay. They will pay £170 less than they would have done. Table A2 shows that they will receive £145 less in family tax credit, but when we put the two amounts together we see that they will still be £25 better off. That is not a large amount of money, but it makes the point that if we take the Budget in the round, including VAT, which nobody can deny is regressive on its own, we clearly find that the pain is shared, and felt less by those at the bottom than by those at the top. So I conclude that the Budget is fair.
I welcome the Budget. It is not one that I would have liked to have to support. I would have liked to see the coffers full, and to be able to be nice to people—but in the circumstance this is the right Budget, and it is fair.
Owen Smith (Pontypridd) (Lab)
Will the hon. Gentleman not also reflect on the fact that those tables do not capture the punitive effect of the forthcoming 25% cut in non-ring-fenced public services on people who most rely on benefits and public services? Those elements in the tables and in the Budget do not really take into account—in the round, as he puts it—the full impact of the cuts that we will see.
John Thurso
The hon. Gentleman makes a very good point. Broadly speaking, 20% to 25% cuts are going to be introduced in this autumn’s spending review, and we will need to look at that. However, I find it difficult to take lessons on that from a party that introduced £40 billion of cuts without a single centime being allocated to anything whatever. That is like a bankrupt father promising his children a sackful of presents at Christmas as the bailiffs wheel him out on Christmas eve: it is deeply irresponsible.
Let me turn to the specific measures. I absolutely must commend the Government on their commitment to consider a pilot scheme for a remote rural fuel discount, because year in, year out I made that proposal from the Opposition Benches and the previous Government compared it to the cost of beer and all sorts of other things. My friends in the Conservative party chose to wait and see what would happen, and I am delighted that they did so, because they now agree that my measure should be considered, for which I thank them warmly.
On enterprise, it is critical that we rebalance the economy. First, we must achieve a rebalancing whereby there is more private sector and less public sector. That does not mean that the public sector has to shrink; the private sector has to grow to support the public sector. Secondly, we absolutely have to move our economy away from an utter dependence on financial services, which delivered 25% of tax revenue three years ago, and towards manufacturing industries and technologies and skills-based industries throughout the regions of the United Kingdom.
I am glad that the Government will continue with and enhance the enterprise finance guarantee scheme. However, the scheme has one flaw, which I have highlighted many times: the Catch-22 situation whereby the banks that do not lend then decide whether to include an enterprise in the scheme. There must be some way in which the banks’ decisions can be reviewed.
I also commend my right hon. Friend on the action being taken to get non-bank finance into small and medium-sized businesses, but may I gently ask my friends who are now on the Front Bench to look at the papers that I wrote—they were in the Liberal Democrat manifesto—on enterprise funds, and consider whether some of those ideas might help to address how we get equity funding into small businesses? May I also stress the importance of the regional growth funds and express the hope that the details of them and how they will work will be brought forward quickly? The concepts of an infrastructure bank and a green investment bank should be brought forward as rapidly as possible, too.
Having looked at the Budget, I conclude that it is not one that I particularly like to see brought in, but it is necessary. There is pain, and it has to be borne, but the Budget is equitable in that the pain falls least on those who have least. Notwithstanding my personal regard for the shadow Chancellor, I really cannot take lessons from him or his party, having listened for nine years from the Opposition Benches to their boasts about the end of boom and bust. We now know that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) was the father of all booms and the mother of all busts. That much-vaunted child, prudence, is lying battered, bloody and bruised in the gutter—and it is this Government who will take her out and restore to health.
Mr Ellwood
I am grateful for that intervention because it gives me licence to underline the fact that, if we are to move into a coalition, there needs to be agreement, and it is a tribute to the parties and the leaders that in a short period they achieved something that, in countries such as Belgium, takes 100 days—forming a coalition grouping while all the horse-trading takes place. Yes, there are compromises and changes that were not expected during the election. However, according to the polls the country supports what we are doing.
Owen Smith
Does the hon. Gentleman think it a minor omission that, although the Conservatives’ manifesto said that they would not increase VAT, they have done exactly that and introduced an enormous, £13 billion tax? There was no mention of that before, so should we trust their manifestos in future?
Mr Ellwood
Rather than leave a curt note on the desk of the Chief Secretary to the Treasury, we have given an indication of the real situation in the UK. Again, I underline the fact that there are aspects of the coalition agreement we perhaps were not expecting—that should be understood on both sides of the House. I fear that it will remain a Labour tactic to go on about this, perhaps to try to drive a wedge into the coalition. That is dangerous, out of touch and wrong, because the nation said to us, “We don’t support any one party outright”, but it approves of a coalition and the leadership, and the stability that they and this Budget are providing.
My hon. and good Friend the Member for Harrogate and Knaresborough (Andrew Jones) made an excellent maiden speech. He mentioned Guy Fawkes wandering through his constituency, and I am sure he will make just as big a bang in this place as Guy Fawkes did. I cannot mention Harrogate without also paying tribute to Betty’s tea rooms. Those of us who have gone there for conferences will appreciate the delicacies that Betty’s provides—I only wish that could be emulated here in the House. The hon. Member for Hemsworth (Jon Trickett), who also is no longer in his place, made the most Marxist speech I have heard in this place for many years. I was waiting to see how long it would be before Maggie was blamed for what has happened over the past 13 years—and that is what we got from him. I was astonished.
This emergency Budget is tough but necessary, difficult but unavoidable. It is not the time for timid steps in the hope that we can tiptoe our way out of recession. We needed a bold statement of intent, mapping out a clear route to recovery and invigorating confidence in our businesses and markets. That is exactly what we got. Three main themes run through the Budget and Red Book. The first is one of responsibility in reducing the deficit over the next five years, mostly through spending cuts but also, yes, through some tax rises. That is the price we must pay for Labour’s incompetence and legacy.
Economic growth is the second theme. Measures taken in the Budget are designed to support businesses and stimulate growth, which will help to generate jobs as businesses are able to expand. That will mean cutting red tape, which will free businesses, because removing red tape is the same as introducing a tax cut but without reducing public revenue. It also means preventing Labour’s job tax through a rise in national insurance, reducing corporation taxes and improving our infrastructure.
The third theme is fairness. Of course, we are in a period of austerity, but every part of society must make a contribution to paying off our debts. At the same time, however, we must protect the least well-off. Listening to some of the contributions from Opposition Members, one might think that no such initiatives were part of the Budget. However, we have ensured that those earning less than £21,000 in the public sector will not be subject to the pay freeze. We will see a £1,000 increase in the personal tax allowance for low and middle-income earners; and finally we will see a re-linking of the basic state pension and earnings—well overdue and promised for years by Labour, but never acted upon. We will also see a £2 billion commitment to child tax credits for the poorest families, helping to ensure that there is no increase in measured child poverty over the next few years.
These are the tough decisions we need to take. We have to do this to secure our financial markets and ensure that credit agencies do not lose confidence in Britain. If we do not, interest rates and inflation will rise, and that is what would lead to the dreaded double-dip recession. I am glad that our triple A rating is now secured, thanks to the Budget.
I will give the Labour Government their due: they acted promptly and expeditiously when the Northern Rock issue broke. But then what happened? We have been left with one of the worst economic inheritances imaginable. They racked up one of the biggest budget deficits in Europe. If that is not shocking enough, our borrowing amounts to unheard sums of money. They continued to live beyond their means, borrowing £1 for every £4 they spent, which led to the doubling of the national debt. I well remember Labour’s last Budget, in March 2010. I was sitting in this Chamber waiting for the leadership, initiative and guidance to take us out of this mess. It was the Labour Government’s last opportunity before the election to get us out of the mess they created, but it was more about the political, rather than the economic, cycle. The previous Chancellor went as far as announcing £40 billion of cuts, but he did not say where the axe would fall, so he managed to ring-fence a black hole, which was a first in this House.
Significantly, the Labour party really had nothing to say yesterday. The acting leader of the Labour party was almost like a rabbit in the headlights. Labour Members rolled out the same old line, which we have heard time and again—I am sure we will hear it again in the summation today—about “the same old Tories”, thereby exhibiting an insane refusal to acknowledge the scale of the economic crisis. We have seen Labour Members attempting endlessly to promote and fight a class war with the Conservatives. That is the direction in which they are now trying to take us, avoiding any notion of mea culpa or of taking responsibility for the mistakes made in the lead-up to the current crisis. That illustrates how out of touch the Labour party has become.
Labour continues to argue that we cannot rip the money out of the economy—through the cuts, the increases, and so forth—and also achieve growth, but I believe that we can. We need to give business and the private sector the space to breathe by reducing national insurance and corporation tax. Those are the measures we need to take. That is what will help us to avoid going into a double-dip recession, allowing our businesses to thrive and employment to grow. Labour’s tactic—I am worried about this, because I understand that the unions bankroll Labour to the tune of 60%—is to fight the public sector cuts. That is what we will see as things move forward: these astonishing arguments why, unlike any other part of our society, the public sector should somehow be ring-fenced and not have to share some of the economic pain we are experiencing.
The unions are clearly looking for a fight. I pay tribute to the nurses, doctors, teachers, train drivers—all those who work hard—but let us look at who is now taking over some of the unions: Dave Prentis from Unison, who has pledged to fight the cuts; Christine Blower from the National Union of Teachers, who has enthusiasm for industrial action of some form, as she has made clear; and Paul Kenny from the GMB. Then there is the Unite leader, Len McCluskey—we have all seen what he has done to British Airways—who is seeking re-election. If he gets re-elected, the consequence will be strike after strike, because the public sector unions—not the members, but the unions—do not recognise that we are all in this together.
Labour’s tactic is to blame the global downturn. We hear this all the time: “It’s not our fault; this is because of what happened right across the world.” However, as I pointed out in an intervention, yes, we are exposed—perhaps more than other countries—because of the size of our financial services sector, which is one of the biggest in the world. That is accepted, but we cannot get away from the fact that the previous Government changed the rules, making it unclear who was responsible for the City back in the late 1990s. That is why we got into the position where banks were lending money they did not have to people who did not understand the situation, and in ways that meant that they could not pay it back. That is what led to the current position.
We cannot blame Freddie Mac, Fannie Mae or the sub-prime market for the fact that, even up to about two years ago, Bradford & Bingley was offering mortgages of more than 125% to people who clearly could not pay them back. I remember when I was at university wandering into Midland bank, as it then was, and seeking a mortgage. I was told that I had to cough up one third of the price of the house. What happened to that rule? It went, and that is why we ended up with more money than houses were worth being lent to people who could not pay it back. That is a British problem, not an international one, and that is what led to the crisis we face now.
I repeat my earlier point: I think Labour are going to adopt the tactic of trying to drive a wedge between the coalition by saying, “The Lib Dems said one thing in the election and the Tories said another.” The nation will get bored of it. People want direction—they want leadership and stability—not harping back to what happened prior to the election.
Let us look at the numbers. Our focus is to try to balance the books by 2016. We will cut the structural budget deficit to zero in the next six years. That deficit represents the hole in the public finances that is not expected to be repaired by the economic recovery. That is why we need to take the initiative that we have. Let us look at what the shadow Chancellor has done. I asked him in an intervention whether he supports the Office for Budget Responsibility. I am pleased to say that for the first time, he placed it on the record that he does. However, it is difficult to take anything that he or anybody else on the Labour Front Bench says seriously, given that the OBR reviewed his figures and revised his growth forecast for 2011 from 3.25% to 2.6%.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
It is a privilege to make my first speech in this Parliament and to do so from the Government Benches. May I congratulate you, Madam Deputy Speaker, on your election? It is great to see you in the Chair. I also congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) on a splendid maiden speech. He will obviously go on to represent his constituents with great poise and ability.
I should like to pay tribute to my new right hon. Friend the Secretary of State for Business, Innovation and Skills. Far from being the damascene conversion that Opposition Members have mentioned, his ability to meet the top officials in the Treasury and the Bank of England, study the evidence and conclude that he had been wrong in his assessment of how quickly we need to deal with the deficit shows a man of huge stature, to be honest. It is incredible that the shadow Chancellor, who must have been in possession of the same advice, came to a completely different conclusion.
Today’s debate has been fairly predictable, and I am certain that if Opposition Members were true to themselves they would say that they know perfectly well that, if they had been elected—God forbid—as the Government of this country, they would have had to take some pretty severe measures to deal with the deficit that we have inherited. I pay tribute to the coalition Government, frankly, for being as brave as they have been. This is an austere and difficult Budget, and every person—rich or poor—in the country will take pain. There is no getting away from that.
Owen Smith
Does the hon. Gentleman think that the volte-face performed by the Secretary of State for Business, Innovation and Skills reflects perhaps more on his inconsistency and shifting values, as opposed to the position adopted by Labour Front Benchers that has been consistent either side of the election?
Geoffrey Clifton-Brown
I rather wish that I had not given way for that intervention, but, frankly, it says more about the hon. Gentleman than about the Secretary of State for Business, Innovation and Skills, whom I regard as having the greater stature because of what he has done.
I am amazed that the shadow Chancellor can conclude that severe action did not need to be taken to deal with our deficit. If we had not begun to take such action, the international markets would have taken the lead. Spot interest rates and bond rates would rise sharply. The cost of financing the huge deficit that we inherited would rise substantially. Business failures would accelerate. Unemployment would rise. Ultimately, by not taking the action that we have taken, we would return to recession. I completely take the opposite view from that of Opposition Members, who have said that we do not need to deal with deficit in the way we have now done.
Those siren voices of the Opposition would have led us into greater trouble than we are in now. What we see from the Opposition is a legacy where the gap between the rich and the poor grew in their 13 years in government. I would be bitterly disappointed if the Government’s actions do not lead to the economy being immeasurably stronger in five years’ time. We can then start to reduce that gap and put money into poor communities, exactly as the hon. Member for Ogmore (Huw Irranca-Davies) wants us to do, so that we can start to benefit some of the poorest people in society.
It was a huge tribute to the Chancellor that he said time after time yesterday that he wanted to bring the bottom of this country nearer to the top, with some of the measures that underlie the Budget—for example, how he will deal with the state pension. Opposition Members had 13 years to deal with the state pension. More than 1 million pensioners had to go grovelling to the Government and to fill in huge forms to get pension credit. We have now promised that everyone will receive a pension increase linked to earnings, prices or 2.5%, whichever is higher. That is real promise. Pensioners can now look forward to receiving at least a 2.5% increase from 2011.
Owen Smith (Pontypridd) (Lab)
Noted, Mr Deputy Speaker. I welcome you to your new position.
I congratulate the hon. Member for Carlisle (John Stevenson) on making an excellent maiden speech. I made my own only a couple of weeks ago and know that it is a nerve-wracking affair. He gave an extremely assured and insightful performance.
I want to nail a disgraceful canard, which has been repeated several times this afternoon, that Welsh Members present today are absolutely uninterested in the England football score. I assure the House that I am very interested in that. I wish England well and hope they go all the way, but, to be blunt, such is the seriousness of today’s debate that I had to forgo the pleasure of watching the game and instead sit in the Chamber throughout the afternoon, listening to the excellent speeches made by Members on both sides of the House. Far more seriously, there is another canard that I would like to try to nail: the belief that Labour Members have acted both before and since the election as if nothing needed to be done in the face of the economic crisis. We did act before the election, and made tough decisions to attempt to shore up the economy to make sure that there was not a more profound recession or, indeed, a depression as a result of the global economic crisis. I believe that we secured a better future for the country as a result of those actions.
Before the election, we acknowledged that we would need to tighten our belt and make post-election savings to redress the balance and to draw down the deficit. We certainly spelled out the fact that we would make cuts and savings of £40 billion. We did not spell out exactly where those cuts would fall, but neither did the then Opposition. They gave us the impression that they would do more, and they mentioned £6 billion of savings that they would make in efficiency cuts. We were not told about the specific measures that appeared in the Budget yesterday. We were not warned about the VAT rise that they have now deemed necessary, and we were not warned about the enormous and savage cuts that we expect in the autumn to public services. Those things were not spelled out by the then Opposition. If we had won the election—doubtless, many Liberal voters, both in my constituency and up and down the country, now wish that we had done so—we would have to make some tough decisions. However, I believe that we would make them in a way that was genuinely fair and informed by principles of social equity and economic justice.
I do not believe that the decisions announced in yesterday’s Budget meet those principles. Many people say that politicians are all the same but, like my hon. Friend the Member for Ogmore (Huw Irranca-Davies), we can no longer go on believing that there are not genuine ideological divides between the two sides of the House. Yesterday’s decisions clearly mark out the Government’s territory, and I contend that if we were in a similar position, the values that I have just outlined and which inform our politics would lead to a different set of conclusions that would not result in the poorest and the most vulnerable having to bear the pain and pay the price for paying down the deficit.
I commend the Secretary of State for Business, Innovation and Skills for the chutzpah with which he performed today’s volte-face. It was truly remarkable to see him stand at the Dispatch Box and defend this Tory Budget and Administration to the hilt. He bore eloquent testament to the old adage that there is no one as zealous as a convert. He invoked the name of Sir Stafford Cripps, the famously austere Labour Chancellor, who—this says a few things about austerity—was rumoured to get up in the morning and prepare with an ice-cold bath at 5 am before coming to the Chamber. I am not sure that the Secretary of State does that yet; perhaps he will move on to that. It was wholly unfair of him to invoke the name of Sir Stafford Cripps, because while the 1949 Budget was an austere Budget—he was right at least to imply that it was a Budget in which a Labour Chancellor raised the forerunner of VAT—the austerity of the measures that were recommended yesterday is such that even Sir Stafford Cripps would find them breathtaking and, indeed, eye-watering.
The scale of cuts proposed by the Government—25% in non-ring-fenced departmental budgets—was previously unimaginable in the history of Parliament. We have never seen cuts on such a scale.
We have heard invoked many examples—analogies—of other countries where similar cuts, or allegedly similar cuts, and programmes have been implemented, but today we have heard those analogies thoroughly knocked down. Canada and Sweden are two such examples. We know that Canada succeeded in implementing a programme of cuts which was half the size of what the Government now propose, and did so in twice the time. Government Members have repeatedly referred to Sweden, but again the very clear evidence of history is that Sweden tried to implement swingeing cuts of only 20% and did so over 15 years, not five. So we have something that is twice as draconian as what was done in Canada, three times as draconian as what was attempted in Sweden and, on many measures, more punitive than the extraordinary programme of cuts that the IMF has imposed on Greece—an analogy that even the Secretary of State for Business, Innovation and Skills acknowledges is not appropriate. Many Opposition Members have already outlined the statistics that underpin that contention.
I stand here as a Welsh Member fearful that my constituents will suffer disproportionately as a result of the Budget. The Financial Times stated earlier this week and the Manchester school of economics pronounced only this morning that, inevitably, parts of the country such as mine will suffer disproportionately. For all sorts of reasons, we have greater economic problems, relating to our post-industrial heritage, and a greater reliance on public sector jobs and spending, and I am deeply worried that currently there are no indications from the Government about how they will alleviate or offset that damage in areas of Wales such as my constituency.
As we look at the blizzard of statistics in yesterday’s Red Book and trade them across the Floor of the House, the human impact of those cuts is too often forgotten. I went back to my office yesterday evening to find several e-mails from constituents who are deeply worried about the proposals. I highlight the case of a couple, Phillip and Sandra Woods, who said that they were terrified that they would see an assault on the benefits that make their life liveable. They are severely disabled and rely on disability living allowance, jobseeker’s and employment allowances and housing benefit. For those people, who live on meagre amounts of money, hand to mouth, week to week, the Budget presents a horrifying prospect. Equally, they were right to point out their anger that so many Government Members castigate such people as part of the problem, as opposed to people who need to be supported in our communities.
I have one more human example of the cuts: the public sector workers at Companies House in my constituency at Nantgarw. They are relatively low-paid public sector workers, working in a Government Executive agency—sitting beneath the Department for Business, Innovation Skills—that is profitable. It is statutorily mandated to operate within its costs and to return to the Exchequer 3.5% per annum. I cannot understand the logic or fairness of what has happened to those people, because they are being asked to suffer 11% cuts. That means moving jobs out of my constituency, fewer jobs moving into Cardiff and the local management imposing a pay freeze that will not be offset by the £21,000 cut-off suggested by the Government yesterday. Companies House management, in order to meet their requirements of 11% savings, will have to freeze pay across the board and stop any staff promotion. Both measures are punitive and unfair, and when I meet the workers at Nantgarw I cannot explain why they should be asked to pay the price for a crisis that was made on trading floors and in bankers’ back rooms.
It is a shame that the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) has left the Chamber, because he gave a paean of praise to UKTI earlier, and he ought to know that UKTI will be subject to that 11% cut. Far from its being protected, it too will be subject to serious cuts.
Why have we been told that we need to make these cuts? It is because of the false spectres that are being raised on the Government Benches, including the notion that our markets were in danger of pulling the rug out from under the economy and that we were about to have our triple A rating withdrawn by the very people who got all the ratings wrong, or certainly got their call wrong on where we stood in respect of sub-prime debt. Equally, we are being fed lines about the nature of the unaffordability of our debt that I suggest we should ignore.
I close with a plea that Government Members remember the human cost of budget cuts and look ahead to the comprehensive spending review, when we anticipate seeing even greater cuts implemented. They should think hard about how that will bite on ordinary working people in our communities in places such as Pontypridd, and think hard about what we can do to alleviate that and to implement cuts in the most sensitive and affordable manner possible.
Mary Macleod
The hon. Gentleman spoke very movingly about the impact on his constituents. Let me reassure him that I believe that this is the right Budget for the future, and that his constituents will recognise that over the next five years. If we retain our current debt in five years’ time, however, we could be paying more in debt interest than on educating our children, policing our streets and defending our country, and that would be a disgrace.
The United Kingdom remained in recession for longer than the other G7 countries. Output declined for six consecutive quarters, and we now have the highest inflation in Europe. Continuing with business as usual simply is not an option, so we are faced with the task of making the unavoidable, and in some cases unpalatable, decisions that have been called for by the Governor of the Bank of England, the G20, and many in industry. Mervyn King has described the Government’s deficit reduction as “strong and powerful”. He said:
“I am very pleased that there is a very clear and binding commitment to accelerate the reduction in the deficit over the lifetime of the Parliament”.
The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso)—I went to Lairg primary school, so I am very fond of his constituency—talked about the risks and pain associated with the Budget, but he also said that this was something that we had to do. I agree wholeheartedly with that. However, we have tried to do it in a way that spreads the pain that is so inevitable, while protecting those most at risk and establishing the conditions required to ensure future growth.
First, let us look at the impact on business. Businesses large and small have much to be hopeful about following this Budget. As in other constituencies, there are many such businesses in Brentford and Isleworth. They need a stable economic environment in which to prosper, and this Budget will deliver that. The cuts in corporation tax will benefit them greatly and encourage them to continue to grow their staff and expand their operations in the UK, and smaller businesses will appreciate the cut in the small companies tax rate from 22% to 20%.
However, let me tell Members what some of my constituents said to me when I spoke to them today. The chief executive of West London Business, who represents more than 800 businesses in west London, said:
“Overall we feel that this is a pro-business Budget and we are pleased with it: a key element is the reduction in corporation tax which is positive for all businesses; 89% of businesses in our area have fewer than 10 employees so they will be happy with the relief on national insurance payments for small businesses. Whilst CGT has increased, these are welcome allowances for business.”
I also spoke to Andrew Doggwiler of the Hounslow chambers of commerce. He said:
“It was a tough Budget with a lot of pain being shared around, aimed at reducing the public sector deficit and restoring the confidence of the international markets in the British economy…There are positives for business in terms of reduction in corporation tax rates, extension of the enterprise finance guarantee scheme and increase in the entrepreneurs’ relief, which indicates that the Government are keen to promote business success. The Government must continue to find ways to support businesses, particularly small and medium-sized businesses, as their success is the best way of ensuring a sustainable economic recovery creating long-lasting jobs and wealth.”
That is what businesses in the hearts of our constituencies are saying.
Owen Smith
I ask the hon. Lady to reflect on the views of others in business. Ernst and Young has already said that it feels the Government have not fully understood the long-term financial consequences of the cuts, by which it means the reduction in demand in the economy. May I also point to the view of an inward investor in my constituency, GE Aircraft Engine Services Ltd, which feels that the reductions in corporation tax will not offset the damage done to its ability to invest by the reductions in capital allowances that manufacturing relies on?
Mary Macleod
I understand what the hon. Gentleman is saying, but I have been in business for 20 years, and I could cite plenty of others, including Richard Lambert, director general of the CBI, and the OECD, which says the Budget is far-reaching and courageous, so we need to have a balanced view.
I believe very strongly in the enterprise-led economy that we have put in place, and we have the building blocks in place to support future industry. That is why I was pleased to hear that spending on many capital investment projects will go ahead. Naturally, I will put in a request for Crossrail, a much needed capital investment for London.
Secondly, we also have to tackle the excess costs. This Budget has tried to create the right infrastructure for the future, but it is vital that we tackle the excess costs within our economy and get control of the welfare state. I have received letters from, and spoken to, constituents who feel it is unfair that they have worked hard all their lives and have paid taxes and are living in modest circumstances, whereas others are not working and are being supported by the state in accommodation way beyond anything they could envisage for themselves. As the Chancellor said, some of these benefits have got completely out of control, and we must review these costs.
The Chancellor was also right to point out the waste that the benefits culture engenders, not only in a financial sense to the state, but in terms of the loss of talent from individuals themselves and the ongoing impact on self-esteem and stress on family life to which living in workless households can lead. I therefore welcome the proposals that the various welfare to work schemes will be combined and simplified to support people back into jobs. It is vital for the revised scheme to be as flexible and creative as possible, particularly when looking at ways to bring groups such as lone parents whose children are at school back into the work force.
Thirdly, I want to comment on departmental budgets, which will focus the minds of many of us here in the next few months. I certainly support the target of making savings of 25% in those budgets over the next four years. I have spent many years in business cutting costs in operations around the world and I feel that the 25% figure is challenging and tough, but definitely achievable and necessary.
Fourthly, I want to mention a group in our society who are often overlooked and about whom I am often reminded by my constituents—pensioners. We all know the facts about how many of us are living and thriving into old age these days, but after 13 years under Labour there are still 1.8 million pensioners living in poverty. Many of my retired constituents feel that the contribution that they have made throughout their lives to our economy and society as a whole is not recognised as they struggle to live on their pensions or, if they save money, as they are penalised by taxation policies that seem unfair. I am delighted that we will now be able to restore some of that respect for our older citizens by putting in place the link between pensions and earnings from next April, and through the triple-lock guarantee.
I met one of my spritely 70-year-olds the other day at a surgery. He asked for the Government’s support in helping him to go on working. He said, “I’m fit and well, I love my job, I’m perfectly able to carry on working and I want to be able to continue to do so.” I hope that I will be as energetic as him at his age, and I should like us to take people like him into account when we consider the future of the retirement age.