Budget Resolutions and Economic Situation

Rebecca Pow Excerpts

Monday 13th July 2015 Commons Chamber

[Emma Reynolds]

My hon. Friend raises an important point. In this area, we spend a lot of government money—95%—on housing benefit, and only 5% on bricks and mortar and building affordable homes. That clearly is not a sustainable or wise use of public funds. The way to bring the housing benefit bill down is by tackling the underlying drivers of low pay and high housing costs, but this Government are tackling neither.

[Rebecca Pow (Taunton Deane) (Con)]

I was back in my constituency this week, where I had long talks with people from my local council. They told me that in just the past year 778 new council houses have been built. That is the highest number of council houses built since the mid-1990s and it is far more than were built under Labour—and 29% of them are affordable.

[Emma Reynolds]

It is wonderful that the hon. Lady has been visiting her constituency—I was in mine, too. Since the reforms of the housing revenue account were brought forward—the last Labour Government proposed them but, to be fair, they were carried on by this Government in the last Parliament—Labour councils have been outbuilding Tory councils quite considerably.

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[Rebecca Pow (Taunton Deane) (Con)]

I congratulate the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) on his maiden speech and painting such a clear picture of his constituency. I look forward to his contributions in the House, which I know will be feisty and campaigning—something that he seems to have been doing for most of his life. I also congratulate the other hon. Members who have made maiden speeches today.

I am delighted to speak in this debate to lend my weight to the general consensus on this side of the House that this was a positive and transformational Budget. It will move towards an economy in which the books will be balanced. We cannot pretend that the deficit is solved. It is still too high, which is why we need the Chancellor’s plan to continue to reduce it. I welcome the philosophy behind the Budget. It is all about changing behaviour and loading the scales in favour of people going to work, with the aim being to develop higher wages, lower taxes and a lower welfare economy. While there will be some time for adjustment, we cannot go on spending more than we earn, and we have to work to this new plan. The key tools for the success of this plan lie in raising the living wage and cutting welfare dependency, and I am delighted that the Leader of the Opposition seems to agree with us. It is a shame that her colleagues are not as enlightened as she is.

We cannot continue on a trajectory where nine out of 10 people claim welfare benefits. Some 1% of the world’s population live in the UK, but 7% of the world’s welfare payments are made here. That does not make sense, which is why, with care and sympathy, we need gradually to alter it.

[Emily Thornberry]

I read the statistics the hon. Lady has just trotted out in The Sunday Times. She draws an equivalence between us and the developing world, where, presumably, enormous amounts of benefits are not being paid. The fact is that we are part of the developed world. Would she like to compare us with other countries in Europe?

[Rebecca Pow]

The hon. Lady makes an interesting point, but my statistics still stand. Even when we make these changes, five out of 10 people will still be receiving some kind of benefit or tax credit. We always need to support the people who really need support, and the Conservatives will always do that. I spent Friday afternoon with my local citizens advice bureau, finding out and understanding what is happening and how we can continue to support the people who really need it. That will always happen.

Thanks to a shrewd Chancellor and the hard work of British business and the good people of Britain, Britain is now moving and growing faster than any other major advanced economy. It grew by 3% last year, as we have heard from other Conservative Members, creating 2 million more jobs—far more than the OBR anticipated. My constituency has played a major part in creating those jobs. Many businesses have grown and expanded. Unemployment is down and jobs are up. I will give just one example of a booming business: the Ministry of Cake in Taunton, which the Chancellor himself visited during the election campaign. Indeed, he iced a carrot cake.

The Ministry of Cake has recently secured a huge contract to supply cakes in coffee shops right across Europe, all the way to Moscow. It already supplies more than 1 million slices of cake a week to customers in the food service and the catering trade. It will now be employing another 30 people in Taunton, all of whom will be contributing to the local economy. This is exactly the direction we want the economy to go in. This example proves that it is. I would also like to say that the Chancellor is much, much better at handling the economy than he was at icing the carrot cake.

There is very little youth unemployment in Taunton: it is very low at 1.9% and it is continuing to fall. On Friday, I met a very fine example of the kind of young person who has been given the necessary skills to take our economy forward and is getting to work. Ashleigh Thompson was an apprentice at the local Creech St Michael preschool. For a year, she worked four days a week at the college and one day a week at the preschool. She has done her NVQ stage 3 and has just qualified. She has now got a full-time job at the preschool, because she is offering exactly the qualification and skills it wants.

[George Kerevan (East Lothian) (SNP)]

The hon. Lady mentions exports. The OBR report, published alongside the Budget last week, shows that our export position and current account deficit is forecast to worsen over the next four years. How does she explain that?

[Rebecca Pow]

I gave an example of exactly the opposite of that. Exports, all the way from Taunton, are increasing. That is exactly what we want: companies taking advantage of the opportunities opening up and skilling up their workers.

I would like to reflect on one of the important tools in the Budget box: the welcome introduction of a compulsory new national living wage for all working people aged 25 and over. It will kick in at £7.20 an hour in April next year, rising to £9 by 2020. It will mean a pay rise for half a million people and translates into a cash rise of £5,000 for a full-time worker. It will benefit women especially—we had the equality and gender pay gap debate the other day—and quite a number of women are still in the low paid category. This measure will help them. Of course, it is businesses that will have to shoulder the changes, but the increase in employment allowance and the improvements to corporation tax should help businesses to pay the extra wages. I have consulted widely with businesses in my constituency. They welcome this measure and they agree that we need to raise the living wage.

I welcome the £7.2 million investment in transport infrastructure in the south-west. In particular, I welcome the Prime Minister’s and the Chancellor’s commitment to upgrading the key road in my constituency, the A358, and its junction with the M5. This is the busiest road in Somerset. There will be a new employment site right on the junction, and without the road upgrade we cannot have the business site. We need the business site because we need the new jobs and the new skills to move the economy in the right direction. I therefore applaud all that, and I applaud the £10 million in the Budget to improve broadband in the south-west. It is absolutely imperative that all the rural areas that are missing out can take advantage and get broadband.

In conclusion, I welcome the Budget. It will transform behaviour and move us to a higher-wage and lower-tax and lower-welfare economy. It will cut the deficit and enable us, at last, to live within our means.

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[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

That is good news, Madam Deputy Speaker, for someone who is always in a rush.

This is an illusion of a Budget of which even Dynamo would have been proud. Saying that it is going to make work pay defies all the evidence. Illusion No. 1 relates to the performance of the economy. The Government are borrowing £219 billion more than they anticipated in 2010, and there is a debt to GDP ratio of over 80%, when it was only 60% after Labour recapitalised the banks. Why is the economy at this level? Basically, because it was absolutely tanked under the coalition and that is now going to be carried forward under this Government.

In 2014, population-adjusted growth was 1.4% below its pre-recession peak, and in the first quarter of 2015 it was still below it, at 0.67% of the pre-recession peak. This reflects the particular issue that the Government have had with productivity, which is the second worst in the G7. Now that we have a productivity plan, will the Minister identify the specific measures that are going to support small and micro-businesses to access finance and to deal with all aspects of late payments, which are an absolute blight on small businesses? How is he going to harmonise taxation and make the tax system more consistent, particularly for self-employed sole traders?

Since 2008, nearly three quarters of the increase in all employment has been down to the increase in self-employment. According to Office for National Statistics data, self-employment has increased by nearly 40% since then, and is now at a 40-year high. There are many benefits from being self-employed: people get to be their own boss, and can choose when and where to work, but there are issues with taxation. We also know that the average income of someone in self-employment is half that of an average employee. It has fallen by 22% since 2008. Last year, Demos undertook research to establish the reason for the sudden increase in self-employment, and concluded that the level was artificially high because there were no jobs for people to move into, and people often moved backwards and forwards between employment and self-employment. There were no real jobs about. There is also the issue of false self-employment. Many large companies in the construction industry, for instance, sub-contract rather than employing brickies, joiners and plumbers. How will the Government deal with those issues?

Another illusion is that the Budget is fair and will make work pay. We know from an analysis conducted by the independent Institute for Fiscal Studies that the poorest 20% of the population will lose proportionally more of their income from tax and benefit changes than any other income group—between £800 and £1,300 a year—and that 3 million people are set to lose £1,000.

The increase in the national minimum wage is welcome, although it is not a living wage as the Government have tried to suggest. It is something, but it does not begin to compensate for the cuts in tax credits that will be suffered by the low-paid. Let me add to the examples that have already been given by many of my hon. Friends. The income of a lone parent with two children who works for 16 hours a week will increase by £400 a year, but that will be accompanied by a tax credit cut of £860, so that person will be £460 worse off. A couple with one partner working full-time on average income will lose £2,000 in tax credits, and will not benefit from the increase in the national minimum wage. According to data published by the International Monetary Fund last month, raising the income share of the poorest 20% of the population increases growth by 0.38% over five years. What the Government are doing will harm the chances of a sustained recovery.

[Rebecca Pow]

It is interesting to note that we hardly ever hear the word “business” mentioned by Opposition Members. It is businesses that must pay the £7.20 that may rise to £9, and that will cost many of them a great deal, but they agree that it is worth it to give people better living standards. Surely we can discuss some of those issues.

[Debbie Abrahams]

If the hon. Lady had listened to my earlier remarks, she would have heard me talk about small businesses then. I have done a significant amount of work with small businesses.

The Government are trying to persuade the public, and to justify what they are doing to working people. We know that, on the whole, it is working people who will be affected. Half the 13 million people who are living in poverty are in work, and two thirds of children in poverty are in working families. The Government are trying to construct a narrative to justify the tack that they have taken—the “divide and rule” narrative about people being feckless—but it is the working people who will be affected most.

Another thing that the Government regularly do is a source of immense frustration. Although I have consulted the Ministers’ code of conduct and many other sources, I have been unable to identify a responsible use of statistics on their part. The Chancellor, for example, tried to suggest in his Budget speech that we were one of the most generous welfare-spending countries in the world. That is simply not true. It is absolute rubbish. If we compare the UK’s spending as a percentage of GDP with that of developed countries in the European Union —as my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) tried to do earlier—we find that it is ranked 17th out of 32.

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[Sue Hayman]

I could not agree more.

The Government are interfering in how people live their lives and in how many children they should have. It is not for the Government to dictate to people how many children they can afford to have. People should be able to make that decision themselves. What if people’s circumstances change after they have had their children? How does that work?

[Rebecca Pow]

Will the hon. Lady let me intervene?

[Sue Hayman]

No, I wish to finish my point. I was talking about vulnerable people. I know that the proposals suggest that vulnerable people will be supported. I asked about how vulnerable people will be assessed. The people whom I am really concerned about are those who do not quite meet the vulnerability criteria. They cannot afford the rent, but they are not classified as vulnerable. What happens to them? Do they then become homeless as well? The Government have not considered the fact that not everyone can move back with their parents and that not everybody has friends and relatives who can give them a home. It is wrong that we have a Budget that will increase homelessness. That is my point.

Let me return to the fantastic work that young people do in my constituency. I am talking about the apprentices and the students who work hard to get on in life. In my experience, most young people want to get on in life and be part of society. This Budget offers little encouragement in that regard, which is why I believe that it should be condemned.