Budget Resolutions

Peter Dowd Excerpts

Thursday 9th March 2017 Commons Chamber

[Mr Raab]

Let me give the hon. Gentleman my three points; I will look forward to hearing his intervention after that.

There is also the whole concept of people’s quantitative easing—the idea that the Bank of England should print more money to spend on some of these ivory-tower, socialist-pipedream projects. That is the Mugabe school of economics; it is deeply irresponsible. Again, if we are talking about difficult decisions, that would be far worse for savers than any of the difficult decisions that have had to be made in this Budget.

Finally on the alternatives put forward by the Labour party, the leader of the Labour party is actually on record as being amused about the possibility of raising the basic rate of income tax by 5%—I have the quote here, but I will not embarrass Labour Members by reading it. Honestly, of all the tax rises in the world to contemplate, a rise in the basic rate is deeply irresponsible, not just economically but socially.

[Peter Dowd (Bootle) (Lab)]

Why do you not talk about your manifesto instead of our manifesto? Why do you not talk about the promises in your manifesto that you have broken?

[Madam Deputy Speaker (Natascha Engel)]

Order. The hon. Gentleman should remember that he is speaking through the Chair. It is not my manifesto—it is the manifesto of the hon. Member for Esher and Walton (Mr Raab).

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[Mr Raab]

I will give way at a time of my choosing, not the Labour party Whip’s choosing.

If the shadow Minister would like to explain how it can possibly be right to hike the basic rate of income tax by 5%, I will give way.

[Peter Dowd]

I beg your pardon, Madam Deputy Speaker.

The bottom line is that we should be talking about the broken promises from the Conservative party manifesto. However, the national infrastructure plan involves £500 billion of expenditure—some public expenditure and some private—so I would ask how the Government are going to fund that.

[Mr Raab]

I am not sure that it is incumbent on me to fund the commitments that the Labour party may or may not be willing to make.

The truth is that we have a properly funded Budget in which difficult decisions have been made. Investment is being made in the right things, such as skills and social care, but—

[Peter Dowd]

Will the hon. Gentleman give way?

[Mr Raab]

No, I will not. The hon. Gentleman has had plenty of opportunity. I have allowed him to intervene on me and I am looking forward to hearing his speech. However, the truth is that he is unable to answer the question of how it can possibly be right to raise the basic rate of income tax. I would just point out that, as a result of the extension of the personal allowance, the average taxpayer will receive £1,000 a year extra.

[Peter Dowd]

It is fantasy.

[Mr Raab]

No, these figures have been properly costed. From the Institute for Fiscal Studies to the official figures, it is clear that, by raising the personal allowance, we are putting £1,000 back into the average taxpayer’s pocket. At the same time, the Labour party—[Interruption.] Not just the uber-rich—we are used to hearing about that predictable bugbear from the Labour party.

[Peter Dowd]

He’s frit.

[Mr Raab]

Having taken two interventions from the hon. Gentleman, I have to say that the suggestion that I am frit is a bit silly.

The truth is that the Labour party will want to put up taxes on not just the super-rich, but low and middle-income families. Frankly, that is fantasyland.

[Mr Raab]

My hon. Friend hits the nail on the head. The key thing the Government can do is to create the conditions for record levels of employment, with real wages rising, and with inflation—yes, it needs to be looked at—stable and under careful control. Even on the worst-case scenarios that have been forecast, inflation would rise above 2%, but come back down shortly thereafter.

The reality of this Budget is that we have a Chancellor and a team of Ministers grappling with difficult decisions at a sensitive time, when there is a degree of uncertainty because of the referendum result, and coming up with a sensible, measured package. We have the Labour party talking about printing money and £500 billion of spending commitments when it has no idea where it can fund them from, and we have a Government who are committed not to tilting at socialist windmills, unlike the leader of the Labour party, but to building a better Britain—not only an enterprise economy but a meritocratic society for our children—and to making sure that the most vulnerable, and particularly the elderly, have the social care they need. [Interruption.] If the hon. Member for Bootle (Peter Dowd) would like to intervene on me rather than chuntering in frustration—more in frustration at his own party, I suspect, than at me—I will give way.

[Peter Dowd]

The hon. Gentleman can make up as many false “facts” as he would like, but the fact of the matter is that he is making them up. He should concentrate on his own manifesto. He still has not answered the question about the £500 billion in the Government’s national infrastructure plan. Where are the Tories getting the money for that from?

[Madam Deputy Speaker (Natascha Engel)]

Order. We are mulling over making up false facts. I think we are starting to get quite close to language that is not really acceptable in Parliament. We should just be aware of it.

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[Mr Reed]

Perhaps Conservative Members, including the hon. Gentleman himself, should have thought about that before they stood for election on a manifesto that said absolutely categorically that there would be

“no increases in...National Insurance contributions”.

It does nothing for trust in politics when politicians say one thing to persuade people to vote for them but then, once they are elected, do the polar opposite. They are helping to further break trust in this House and trust in politics. This is not down to the IFS; it is down to Tory Central Office, the Prime Minister, the Chancellor of the Exchequer and—dare I say it?—the hon. Gentleman himself, if he is going to vote for the proposal. Given all the uncertainty about Brexit—it is shocking that the Chancellor had so little to say about Brexit in his statement—small businesses and the self-employed need reassurances, not broken promises.

I now turn to those in employment, because this Budget has very little to offer them either. Low pay and stagnant wages have become endemic. Most people have seen no growth in household incomes in the 10 years since the global financial crash; indeed, many have seen a real-terms cut. The British economy might be getting richer, but British working people are getting poorer. Ours is the only advanced economy in which wages fell while the economy grew between 2007 and 2015. In Croydon, average earnings have fallen by 7.6% in real terms, and today more than one third of my constituents earn less than a real living wage. So where has the money gone? Who has taken the proceeds of that growth? It is not the vast majority of people in Croydon or across Britain who work around the clock to pay the bills and put food on the table, but the shrinkingly small number of the super-rich whose interests this Government really represent. Wages are stuck and household debt is soaring, but the Chancellor had absolutely nothing to say about any of it.

[Peter Dowd]

Is my hon. Friend aware of today’s Resolution Foundation report that says that the UK is set for the worst decade for pay growth in 200 years?

[Mr Reed]

That is absolutely shocking, but it reflects what we are seeing in our constituencies and what our constituents are telling us.

Once upon a time in this country, there was a covenant between people and Government. People gave their consent to the system in return for a fair reward for the work they put in. There was an understanding that if people worked hard, they would do well. They could expect a decent home, security for their family, and healthcare when they fell ill or grew old, and that if they could not work, they would be looked after with dignity and respect. But today that covenant is broken. The unfairness and inequality that this Government stoke has bred resentment that has catapulted us out of the European Union and over a cliff edge into uncertainty.

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[Kerry McCarthy]

As the Bill goes through Parliament, we will have to scrutinise the detail. All I know at the moment is that I have constituents who are extremely worried about this proposal and it is making them think twice about whether they should continue as self-employed or look for jobs that are potentially less lucrative, but that have more security.

[Peter Dowd]

Does my hon. Friend agree that if the Government get away with this proposal, it will be a down payment on more NIC and tax increases?

[Kerry McCarthy]

That is certainly the concern. As has been said by several hon. Members, if people cannot trust the Government on this matter, they will think that they cannot trust the Government on anything in respect of their future economic security.

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[Wes Streeting]

I shall return to the subject of Europe, and the hon. Gentleman may want to intervene later. I am conscious that other Members are waiting to speak. There are still a number of them on the Labour Benches, even if there are none on the other side of the House.

This is a case of all pain and no gain. If it were not bad enough that the Conservative Chancellor arrived yesterday to clobber the self-employed, he is also failing to put right the public services on which people depend. We were told that the crisis in the NHS and social care required an additional £6 billion by 2019. While the £2 billion announced yesterday may be welcome, it is wholly insufficient to meet the demands of our rising population, our ageing population, and the people who want to be able to rely on the NHS and social care when they need it most.

Having been a local councillor for nearly seven years—I will stand down next year—I have to say that the situation facing local authorities is dire. When faced with a choice between child protection and adult social care, councils will of course prioritise keeping children safe, along with keeping the elderly and disabled alive and well. However, such choices have consequences: increased council tax for people who can ill afford it, and cuts that affect the services on which people rely and for which they pay their council tax. I only wish that the Government would have the courage to accept, 75 years on from the Beveridge report, that the model for health and social care in this country is no longer fit for purpose and no longer sustainable unless it receives the funding that is so badly needed. I cannot understand why Ministers have not had the courage to ask Members on both sides of the House to help the Government come up with a plan to make the NHS sustainable for the 21st century.

[Peter Dowd]

Was my hon. Friend as shocked as I was to find that it was being trailed today by the Government that unless Tory MPs backed down, social care funding would be under threat?

[Wes Streeting]

I entirely agree. I am not sure how many experienced, wise leaders of the NHS and local councils could come forward and warn the Government about not just an impending crisis, but a crisis that is affecting hospitals and care services in each of our constituencies today. What more will it take for the Government to show the courage, and find the money, to fund social care? Imagine what a cross-party commission led by the likes of my hon. Friend the Member for Leicester West (Liz Kendall), the right hon. Member for North Norfolk (Norman Lamb) or the hon. Member for Totnes (Dr Wollaston) could do to build a health and social care model for the 21st century.

Was it not a travesty that, as schools in our constituencies faced cuts in their budgets, the Chancellor chose to arrive yesterday with a funding package that would benefit a small number of pupils at a few selective schools? What do Ministers have to say to headteachers and parents in my constituency, or to the pupils who attend the vast majority of schools in my constituency, about the fact that they face on average a funding cut of £188 per pupil per year? I do not need an opinion poll to tell me that there are a few things that people, whether they vote Labour or Conservative, expect the Government to do, and among them are to make sure that we have decent hospitals and well-funded schools. It is a scandal that so much of the educational progress made in my city and across the country, led by the last Labour Government and following on since then, is being put at risk because of swingeing budget cuts to schools. What sort of Government choose to cut education for the next generation while also cutting the tax bill for the very wealthiest?

The flimsiness of the Budget Red Book—for once it did not take long to get through—betrays the fragility of our economy. In the long list of supposed good news the Chancellor arrived with yesterday, a few facts were missing. This was the ninth Budget by a Conservative Chancellor since 2010, and what do we have to show for it? We have the only developed economy that has a growing economy but falling real wages; rising costs of living, but wages still at pre-crash levels; a widening productivity gap holding back growth and depressing wages; a weaker currency fuelling inflation that households and businesses can ill afford; a failure to meet the Tories’ own targets for debt and deficit reduction because they have never understood the need to balance spending cuts with investment for growth; and a failure to meet their own welfare cap because of their failure to tackle unemployment, under-employment, casualisation of the labour market and exploitation by unscrupulous employers, which leaves a welfare system that lacks the confidence of the majority of the public but also fails the people who need it most. That is the very worst of all worlds, and even now, in the wake of a Brexit vote driven in large part by the votes of people who have been left behind, we have a Government willing to preside over rising child poverty, public services at breaking point, and an economy ill equipped for the challenges that lie ahead.

It should not take dragging a former—Conservative—Prime Minister out of retirement to tell this Government that the way they are handling the single biggest issue facing our country, the departure from the EU, and the path they have set us on is putting the economy at risk. What John Major said was very straightforward:

“There is a choice to be made, a price to be paid; we cannot move to a radical enterprise economy without moving away from a welfare state. Such a direction of policy, once understood by the public, would never command support. It would make all previous rows over social policy seem a minor distraction.”

Sir John Major could have been reading from the Labour party script on this issue. There we have it: a former Conservative Prime Minister holding up the truth that we on the Labour Benches know, which is that unless the Government negotiate a smooth and sensible exit from the EU, they will consign this country to being a small tax haven off the north-west coast of Europe, unable to meet the needs of their people and unable to make sure that prosperity is shared.

Of course, it is not just John Major who has concerns: the former Chancellor, the right hon. Member for Tatton (Mr Osborne), told the House that this Government have chosen not to make the economy the priority. When so much of this country’s economic success relies on trade abroad, when we have the largest single market in the world on our doorstep, and when being a member of the customs union gives us access to more trade agreements than are enjoyed by any leading economy in the world, for a Government to decide not to make the economy the priority is reckless and irresponsible.

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[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

After the spin around the Budget, which has not exactly gone to plan, let us look at the actual facts. According to the Resolution Foundation, we have had the worst decade for pay growth in two centuries of earnings data. GDP growth is overplayed and inflation is underplayed. GDP growth is expected to flatten as increasing inflation, which has sped up in the past few weeks according to much of the data, squeezes living standards, and as consumer spending, which as we have heard has been largely driven by a credit card boom, dries up. Again, that creates a false impression. Borrowing continues to rise and is expected to rise further. The OBR has made it absolutely clear that the

“government does not appear to be on track…to return the public finances to balance at the earliest possible date in the next parliament”

as they had promised.

On productivity, the Chancellor did a very good job of outlining what a bad job the two successive Conservative-led Governments have done. He said:

“The stats are well known: we are 35% behind Germany and 18% behind the G7 average”.—[Official Report, 8 March 2017; Vol. 622, c. 818.]

What on earth have they been doing for the past seven years if we are in that position? Small businesses are hit not only by the NICs issue, which I will come to, but by the reduction in the dividend allowance, which we have heard about, and the additional red tape and burdens of things such as quarterly reporting.

We can talk about statistics and the real things going on in the economy, but the impact I am interested in is the impact on my constituents in Cardiff, Penarth and the Vale of Glamorgan. I am proud that the Welsh Labour Government are investing in our schools and hospitals. New schools and hospitals are being built in my constituency, and more is being spent on NHS and social care together than the average spent in England. Indeed, councils in Cardiff and the Vale of Glamorgan are doing their best to invest in local services and to protect people who are suffering as a result of the policies of the Tory Government in Westminster. The fact remains, however, that by 2020, according to the Joseph Rowntree Foundation, ordinary working families will be worse off than they were in 2015. The income of a couple with two children, working full time and receiving the so-called national living wage, will fall by £1,051, while that of a lone parent with two kids, working full time on the national living wage, will fall by £3,363. My constituents tell me about the real challenges and hardships that they face, as opposed to the spin that we get from the Government.

Let me say something about self-employment and the increase in national insurance contributions. I think that the Government’s approach has been a huge mistake. It is clear that those in the self-employed sector face huge additional fixed costs and risks. I speak to many self-employed people every week in my surgeries—for example, I have spoken to a number of taxi drivers recently; I shall say more about them shortly—and I know about their lack of benefits, their higher insurance premiums, and their difficulty in obtaining mortgages. There is clearly some abuse on the margins of self-employment, and we must address the issue of bogus self-employment, but hitting a whole swathe of self-employed people is a crude measure which can have hugely differential and damaging impacts on some sectors and groups.

[Peter Dowd]

My hon. Friend said that the Government’s approach had been a mistake. Today, on Radio Cymru, the Under-Secretary of State for Wales, the hon. Member for Aberconwy (Guto Bebb), said:

“I believe we should apologise. I will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election.”

Well, he was the Minister, but I am not sure whether he still is. Does my hon. Friend know?

[Stephen Doughty]

I was not aware of those comments, but, as someone who listens to Radio Cymru occasionally, and to Newyddion, I shall listen carefully to what the Minister said, whether it was in Cymraeg or in English. I hope that his ministerial colleagues will listen as well, because it is clear that there is much disquiet on the Government Benches. Perhaps that is why so few Conservative Members are present today, and why those who have spoken have been quite critical of the decisions in the Budget.

There are 4.8 million self-employed people in the country, and nearly 5,000 in my constituency. It is all very well to say that this measure will not affect the very poorest, and, at the other end of the spectrum, that it will ensure that the very richest are brought into line. However, as we heard from my hon. Friend the Member for Ilford North (Wes Streeting), no amount of distributional analysis and charts can reflect the reality and the impact on those in the middle deciles: people who are just about managing, and the strivers who the Government were so keen to say that they were trying to support, but who have been shafted. The Government are not helping those people; they are doing exactly the opposite.

The Federation of Small Businesses has described the measure as

“a tax grab on middle-income self-employed people who are just about managing”.

The Musicians Union—I work closely with that union, and with many other unions representing the creative industries in my constituency—has said:

“This Conservative Government…have done nothing but cut funding for the arts and for music, and they are now penalising musicians further by increasing their tax contributions.”

Those are the real facts. The Federation of Small Businesses at one end of the spectrum, and representatives of those in the creative industries at the other, have decried this measure.

I want to say a little about the reality of life for one group of workers who are self-employed at present, although many of them would argue that they are actually employed, and, indeed, that is the subject of many current legal cases. I am talking about taxi drivers. As a member of the GMB, I am proud to have been working with its members locally, and hearing about the concerns of many taxi drivers in Cardiff, the Vale of Glamorgan and south Wales as a whole.

Taxi drivers are hard-working people. They work every hour that God sends. They are striving to make a difference for their families, but they are struggling with the costs that they face from the companies that engage them. There are the fines, the administration fees, the cost of fuel, and the cost of replacing windows when they do not accord with regulations which vary so much across the country. They are often trapped in low-paid account work, receiving wages that do not reflect the effort and time that they put in. They have differential insurance costs. Drivers from other local authorities, or indeed from London, where different rates are paid under different regulations, come to Cardiff and undercut the industry there. Antiquated legislation allows private hire licences to continue to rise without any cap; that is a simple matter of supply and demand. These national insurance rises will hit people who are striving on the margins. They can barely afford the additional £20, £30 or £40 that this measure is going to bring in. They are the ones who are going to be hardest hit, and they are already hit hard by many other measures.

This is just one measure hitting those in self-employment. I have been speaking to a number of companies in Cardiff that are using the self-employed in the ways I have mentioned. I am concerned that companies such as Dragon and Veezu, who operate taxi firms, are not willing to meet drivers to discuss their concerns or to meet the GMB. That is of great concern to me. Fundamentally, what are the Government doing to help such people who are striving and working hard, and who just want a level playing field and enough money to be able to support their families?

I mentioned the impact on the creative industries. We have lots of start-up creatives in my constituency, including small design, music, production and technology firms. They are also going to be hit badly by these changes. What are the Government doing to support them?

Finally, I will make a few further points. Where on earth was the mention of Brexit? That is the biggest economic challenge facing this country in generations, but it was not mentioned. There were no answers on the question of the additional debt that the OBR has predicted is going to be added to the national debt; no answers on whether Wales is going to be left a penny worse off as a result of the potential changes to regional finance and structural funds; no answers to the exchange rate volatility that is causing the prices at the pump to go up; and no answers on the single market, or the impact of tariffs if we end up in the “deal or no deal” situation that the Prime Minister seems to be leading us towards. Where was the mention of those things? That was utterly irresponsible.

We should consider what else was missing, too. Where was mention of climate change, or further support for the steel industry, or support for veterans—including younger veterans who are leaving but are struggling with their housing costs and are discriminated against in housing benefit? Where was action to right the injustices for women pensioners? The WASPI campaigners were here yesterday; thousands from across the country, including hundreds from Wales, were here speaking out. Where was the help for the Allied Steel and Wire pensioners who were let down in my constituency, and are still let down today? Where was the money to address the police cuts—the police are suffering huge pressures, as the former Chair of the Home Affairs Committee, my right hon. Friend the Member for Leicester East (Keith Vaz), pointed out? Where was the help on energy prices when people are seeing their bills go up?

This Red Book is one of the thinnest Budget books we have seen, certainly since I have been in this House. That is because there is a whole lot missing from it, and, frankly, the Chancellor is going to have to do a lot of rethinking on the bits that are in it.