Budget Resolutions and Economic Situation

Richard Fuller Excerpts

Monday 13th July 2015 Commons Chamber

[Richard Fuller (Bedford) (Con)]

Will the hon. Lady confirm that even with the changes to working tax credits, they will still be higher as a proportion of gross domestic product at the end of this process than during any period of the Labour Government prior to 2004, and that at that stage there was no commitment to a national living wage?

[Emma Reynolds]

I say to those on the Government Benches that they are simply out of touch with the lives of working people up and down this country. Of course we want an economy in which people are highly paid and highly skilled, but the course towards such an economy has to be charted before the support is cut off.

Let us deal with the crucial issue of devolution. We urgently need to rebalance our economy to drive growth and prosperity in all parts of the country. We are one of the most centralised countries in Europe. London dominates our economy, and its growth surpasses that in all of our major cities, which is not the case in either Germany or France where other cities beyond Berlin and Paris are true engines of economic growth. I agree with what the Chancellor said last week—that we will not achieve a better settlement by pulling London down. We should be proud of the dynamism and success of our capital city—and long may it continue. We must, however, reverse the long tradition of British politicians of all parties and of civil servants who have hoarded power in Whitehall and failed to trust local government.

There is a huge political and economic imperative to devolve power as close as possible to local communities. As ever, the Chancellor’s Budget speech on devolution was heavy on rhetoric, but rather light on substance. This Government boast about bringing about a “northern powerhouse”, but their rhetoric rings hollow, given that no part of the country has faced bigger cuts to local authority budgets over the last five years than those in the north of England. Indeed, the shelving of the electrification of the Manchester to Leeds trans-Pennine railway means that the Government’s plans are closer to a power cut than a powerhouse. We need a settlement for every part of the north, but as one of my hon. Friends pointed out to the Secretary of State earlier, there was barely a mention of the north-east in the hour-long Budget statement or in the 123 pages of the Red Book.

Ahead of the Budget, we know that there were briefings about which deals would be announced, and we know that the Secretary of State did what some might call a frenetic round of local government speed-dating during the Local Government Association conference two weeks ago. We welcome, for instance, the extra powers that the Government are planning to devolve to Greater Manchester. We also welcome the progress that three combined authorities—Sheffield city region, Liverpool city region and Leeds, West Yorkshire and partner authorities—are making towards a devolution deal, and the progress that Cornwall is making. As a Wolverhampton MP, I particularly congratulate the leaders of the local authorities that are working so hard to create the West Midlands combined authority. We are proud of the fact that Labour leaders in local government are making the weather on devolution.

While we welcome that progress, we also believe that the Government should not impose a one-size-fits-all approach to devolution, and should stop putting obstacles in the way. In his first major speech after the election, the Chancellor said that he would not impose the mayoral model on anyone, but in the very same breath he said that he would not settle for anything less. Why are the Government running scared of letting local people decide, and when will they clarify exactly what different areas and combined authorities can expect to achieve from devolution if they do not opt for a mayor?

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[Alison Thewliss]

When the powers this Government have force people into poverty and do not help to support them at their time of need, I say that that is a crisis and that we are hamstrung in our ability to help people. This Government expect the Scottish Government to mitigate the worst of their policies, but we should not exist to do so. Give us the powers, and we will do what we can.

Cuts have now come to the bone. Service provision has been removed, including things that make no logical sense to cut because such low-level interventions save money down the line. Sheltered housing services, which keep the elderly active, and services such as the Glasgow Association for Mental Health, which prevents those with mental health problems from slipping into crisis, have had their funding removed. This makes no sense: we can spend to save by investing at a certain level, but the cuts now mean that local government has to make such choices.

I do not know what the full impact will be of cuts that are starting to amputate huge chunks of our local bodies, but I very much worry that they will threaten the life of the patient. Local government serves both a social and an economic purpose, and the shrinking of public services takes well-paid and useful jobs out of areas and damages small business. In the past few days, the Local Government Association analysis has suggested that a £3.3 billion cut in 2016-17, or some 12%, will mean potentially devastating choices in many areas. These are not arbitrary cuts or figures on a balance sheet; they affect lives.

The proposed housing changes will have a significant impact. In Scotland, we take the attitude that a house is a home. That does not vary depending on whether someone’s house is a bought house or a rented one. I know from my case load that a social rented home in Glasgow is very desirable indeed. The huge numbers on housing waiting lists highlighted by organisations such as Shelter certainly seem to bear that out.

A lot of what has been said in the Budget seems to assume that markets will take care of the housing crisis in this country, but I would turn that contention on its head. The commercial rental market has driven up rents to the point at which people on average or even generous wages cannot afford to live, particularly in this city.

[Richard Fuller]

The acting leader of the official Opposition has said that their goal is not to oppose just for the sake of doing so. The hon. Lady has not mentioned anything in the Budget with which she agrees. Does she disagree with the acting leader of the Opposition?

[Alison Thewliss]

The hon. Gentleman will find that the Scottish National party takes its own stance on many issues and does not follow the Labour party.

The problem with market rents is not, as the Red Book implies at paragraph 1.154, with social rents. I believe that, by and large, council and housing association rents are fair, not subsidised. I was glad that the shadow Secretary of State mentioned the proposed pay-to-stay policy, and I agree with a lot of what she said on that. The policy will drive people out of the communities they call home, push out key workers on modest salaries and all but ghettoise swathes of our towns and cities. The proposals are unfair in that local authorities will not see the benefit of the policy, because their share from increased rents will go back to the Exchequer, while local housing associations get to keep the funds. If the Government insist on pursuing this daft policy, they should at least give an even playing field to all housing providers to allow them to invest in new housing.

I note that there is a proposal to end so-called lifetime tenancies. Long tenancies can contribute positively to the fabric of our communities by ensuring that people stay and make their lives in an area and that they belong to it. They are part of what makes renting with a housing association or a local council attractive, as opposed to the uncertainty of the private sector, where people have to move all the time.

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[Mr Robin Walker (Worcester) (Con)]

This is a Budget that can make a step change in the British economy. It is a Budget that can step us up a gear in terms of work, productivity and pay.

It is a pleasure to follow an excellent maiden speech from my hon. Friend the Member for Somerton and Frome (David Warburton), and a very thoughtful speech from the new Chairman of the Business, Innovation and Skills Committee, the hon. Member for Hartlepool (Mr Wright), whom I congratulate on his election.

I am delighted to be called to speak in a debate on local growth, because I believe that the first objective of the Budget is to deliver growth and prosperity throughout the United Kingdom, and particularly in places such as Worcester. If growth is to reach every part of the UK, it must be sustainable, and if it is to benefit the whole population, it must be translated into sustainably higher pay. For that, the first requirement is fiscal credibility. We need only look at Greece to see the situation countries can get into when they lose control of their finances to know that the Chancellor is right to say that if we do not control our debt, our debt controls us. As my right hon. Friend the Secretary of State pointed out in his opening remarks, that was very much the situation in the UK in 2010, but through the gargantuan efforts of the British people, British businesses and the British Government we have reduced our deficit and set out on a path to begin to pay down our debts.

The second requirement to deliver sustainable growth is security, and I am delighted that this Budget does what the coalition could never, and commits firmly to investing in our nation’s security and defence with that 2% of GDP commitment.

The third requirement is productivity, and I particularly welcome the detailed productivity plan that was published on Friday. This is not before time. The UK lags behind other leading economies in productivity, and it was not a Labour spokesman but my hon. Friend the Minister for Skills who set out the scale of the challenge in his 2012 Macmillan lecture for the Tory Reform Group, when he said:

“we in the political pack must not duck the really hard economic question— which is, why have people in the low and middle-ranking jobs not been able to secure a real increase in their pay for nearly a decade? And we must not dodge the really hard answer—which is, that the productivity of people in those jobs is falling behind that of their competitors.”

He concluded:

“If we want our economy to grow again, if we want our national income to be honestly earned and fairly shared…if we want to benefit from healthcare that is high quality and free, if we want to live comfortably in retirement, if we want all these things, we need to ensure that we are all a lot more productive than our competitors.”

He was right to put productivity at the heart of our mission, and the Chancellor has been right to put productivity at the heart of this Budget. I welcome the plan that sets out to raise investment in skills, in research and development, in infrastructure and, most of all, in people, in order to achieve this.

We need to provide the right incentives to businesses to invest and that should become a core principle of the Government’s ongoing review of the business rates system. We need to remove the disincentives that penalise manufacturing businesses from investing in value-added plant and that create an artificial shelf on business expansion for businesses of all sorts when they move from smaller to larger premises that fall just above the small business rate threshold. We need to design the system so that it supports growth and helps scale-up businesses. We should consider discounts for businesses that invest more in training their staff, and tapers to support businesses that grow through the thresholds for small business rate relief. I look forward to further updates on that important review, promised by the end of this year. This must not be seen merely as an administrative review, but rather as an important tool in the drive to provide higher productivity.

To get there, we need to improve our skills base. It has long been a truism in the post-war period that Germany does skills and apprenticeships better than us. This Government’s commitment to driving up the quality and quantity of apprenticeships has begun to change that, and it is essential that this continues. I am pleased to see the drive to achieve 3 million apprenticeships by 2020 and the use of the German funding model, where large employers pay a levy towards the cost of training.

We also need to make sure that schools deliver the best possible education across the country, which means delivering on one of the key commitments of the Conservative manifesto: fairer funding for all our schools. In a time of overall budget constraint this has never been more urgent, and I look forward to seeing the detail for delivering that in the next spending review. I was pleased to see fairer funding highlighted up-front in the executive summary of the productivity plan.

One of the most welcome changes in the Budget was the creation of the new roads fund predicating vehicle excise duty revenues to investment in our roads. I recently held a debate on the vital priority of upgrading Worcester’s southern link road, including the Carrington bridge, a key bottleneck in our area. Any Government committed to local growth will want to fund such projects.

We need to keep focusing on holding down the cost of travel. That is why I particularly welcome the extension of the fuel duty freeze that the Conservatives in government have now maintained over five years. So many of my constituents are concerned about this and so many businesses have told me what a massive issue it is for them that it has been something I have campaigned on in each year of my parliamentary career. Fuel costs contribute to the cost of living for everyone, whether or not they drive a car, and the price of food in our supermarkets is one of the things that would be higher and less affordable if Labour had had its way and fuel duty was higher. I also believe that the Treasury benefits from holding down fuel duty over the long term as economic activity increases.

Beyond transport, higher productivity will require businesses to have the confidence to keep investing, and the decisions to keep bringing down corporation tax and to maintain the UK’s world-beating research and development tax credit offer and extend capital allowances each have a vital role to play.

[Richard Fuller]

Does my hon. Friend agree that it is not just the specific measures that are valuable to the economy? The record over a number of years of setting a trajectory of lower taxation for businesses assists all of us, creating jobs and increasing the wealth of the country.

[Mr Walker]

My hon. Friend is absolutely right about the track record of delivery and the confidence that that gives business to invest over the long term.

The biggest change we can make to help people with the cost of living is to ensure they are paid better and keep more of what they earn. The Budget takes this further by delivering a national living wage. I welcome the fact that not only is this key social reform being delivered by a Conservative Government, but that the Government are taking steps to help to ensure that businesses, particularly small ones, have the help they need to deliver it. The extension of the employment allowance by a further £1,000 and the reduction in corporation tax will help to make sure that businesses can play their part. I hope the Chancellor will consider carefully how the charitable sector and the care system can be supported in adjusting to this change.

The Opposition have made much of the changes to tax credits. One would think from hearing some Opposition Members’ speeches that in altering this system we were taking on a core principle of the post-war consensus and the welfare state. In fact this invention of Gordon Brown has always been problematic. As the right hon. Member for Birkenhead (Frank Field) has pointed out repeatedly, the limited resources of Government can be better used in targeted support for early intervention and in helping troubled families than in a subsidy for employers to pay low wages. The growth of its cost from £1 billion when it was launched to £30 billion today is clearly unsustainable. The right hon. and learned Member for Camberwell and Peckham (Ms Harman), who is currently leading the Labour party, was right in thinking this is a change it should support, and it is a shame that the contenders for the leadership and those on the Labour Front Bench do not share her vision.

I welcome this Budget as a boost to local growth and look forward to supporting it in delivering a more prosperous, better paid and more productive Britain.

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[Richard Fuller (Bedford) (Con)]

It is a pleasure to follow an extremely gracious maiden speech by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald). I particularly noted his kind words for the staff of the Houses of Parliament, which I thought was a particularly noteworthy thing to put in one’s maiden speech, and his kindness to his namesake who took his seat on the aeroplane. The hon. Gentleman follows a man, Gregg McClymont, who was probably one of the most intelligent Members and was one of the most fair-minded, so he certainly has big shoes to fill. He has made a very good start with his maiden speech today.

For me, the test of the Budget is whether it fits with what the good people of Bedford and Kempston talked to me about during the election campaign. As mine was a marginal seat where people had a straight choice between Labour and Conservative, and obviously chose Conservative, I listened intently to what they had to say. Their first and most abiding thought was that they appreciated the need to continue with the Government’s economic policies. They appreciated the stability that those policies had brought to their lives after the tremendous fears about the economy at the time of the 2010 election, when it could have gone either way for the United Kingdom. They appreciated the need for deficit reduction and understood the fundamental point that it is unfair on our children and grandchildren for this generation to continue to live beyond its means, and that somehow, in the fairest way possible, the Government have to find their way to getting the books in balance and to starting to repay the debts. That is the trajectory that was outlined in the Budget.

The second thing that people in Bedford and Kempston told me was that they understood the need for welfare reform and benefit reform to be at the centre of the changes that would be made. As my hon. Friend the Member for Cannock Chase (Amanda Milling) said, for many people, the idea that a benefit cap of £26,000 is somehow fair to them, when they pay their taxes—the median income in Bedford is £19,000—does not strike them as fair. People in Bedford will think that the Government’s proposals in the Budget to reduce the benefit cap, both in London and separately outside London, are fair. They will also see changes such as the limiting of child tax credit to two children, the introduction of a maximum income for staying in council housing and the changes to housing benefit as fair and reasonable.

[Alison Thewliss]

Does the hon. Gentleman consider it fair that a woman who has been raped will have to declare that to Her Majesty’s Revenue and Customs and the Department for Work and Pensions to qualify for her child to receive tax credits?

[Richard Fuller]

The hon. Lady repeats a point that one of her colleagues made in an earlier day of the debates on the Budget. We need to examine in this debate the broad range of the impact of the Government’s policies. When the Government make any change, they are moving big blocks around—that is one reason why I am a Conservative, actually. When that happens, there will be specific examples of an impact on people’s lives that the general policy was not supposed to have. The hon. Lady should raise those instances directly with Ministers, so that changes can be considered. However, we should not undermine the entire sweep of Government policy because of a particular example. I have found the Government reasonable in understanding the need for certain changes to benefit policies if they have a deleterious impact on individuals.

[Emily Thornberry]

The hon. Gentleman is making a thoughtful, although wrong, speech.

If a constituent of mine were a single parent with two children and met up with a man who had a child, would the hon. Gentleman advise her not to get together with that man because they would then have three children and be subject to cuts in their benefits?

[Richard Fuller]

It is not the role of an MP to advise an individual constituent on their life choices. That is their decision. With respect, the role of an MP is to analyse and scrutinise Government policies to see whether, in the round, they will provide the changes that the British public think are fair and reasonable. Against that test the deficit reduction policies, with welfare reform at their core, accord with what I heard on the streets of Bedford and Kempston. I hope that when the hon. Lady’s party has finished tearing itself apart at its parliamentary Labour party meeting, it will come together and see that it is worth supporting the welfare reforms.

I wish to say a few words about the Government’s proposals on pay. A lot of hon. Members have mentioned the interaction between the introduction of a national living wage and the changes to tax credits. That is an important debate to have, but I hope that Members of all parties will give the Chancellor credit for grasping that important nettle. At some point, the era of corporate welfare, with the taxpayer subsidising wages, had to be brought to a close. The cost to the Exchequer and the taxpayer was getting larger and larger. We were sending terrible signals to employers about what they should do about pay rates, and terrible signals to people in work that if they chose to improve their wages by getting extra skills or training, all their extra pay would be taken away because of changes in benefits. The change needed to be made, so I look to the Opposition to bring forward more thoughtful responses in the weeks ahead. They should have the grace to say that the change is important and that, overall, they support it.

As a Conservative, I say to my party’s Front Benchers that we have not yet seen the impact of tax credits following the recent recession. There is an argument that in the previous recession, during which the Government had a tremendous record of overseeing growth in jobs, tax credits had a beneficial impact in dampening the impact of the recession. They made people more willing to accept reduced hours, because their income was increased by tax credits, so employment could stay high. I urge the Government not to get too ideological about the transition from tax credits to the national living wage, and to be cautious about the impact on businesses on a sector by sector basis.

I welcome my right hon. Friend the Secretary of State’s comments about housing policy. There has been tremendous take-up of Help to Buy in Bedford—one of the highest proportions in the country. The extension of the right to buy to social landlords will be particularly welcome in Bedford. Between 1991 and 2001 the decline in home ownership there was 10%, compared with 4% in the rest of the country, because in 1991 the council put all the housing stock into a social landlord. Since then, the most significant increase in household wealth has been through people buying their own home. For 20 years, a large proportion of people in my constituency were denied access to one of the most fundamental ways in which they could have provided a better future for their children, because they were denied the right to buy. The change to the right to buy has been presented thoughtfully, and I encourage the Government to move it forward.

This afternoon I have heard the progressives and socialists on the Opposition Benches say that they do not support the national living wage, poor people getting a pay rise or people in council houses having a cut in their rent, and that they would deny people on low incomes the chance to buy their home. The right to buy has been one of the most successful policies that any Conservative Government have ever introduced, and I hope that the Government will move forward with it later this year.

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[Catherine West (Hornsey and Wood Green) (Lab)]

I am very pleased to be speaking in the Budget debate. The Chancellor’s announcement on the increase in the minimum wage, mistakenly called a living wage, raised the issue of low pay. That is a debate we all welcome. Sadly, when it is combined with high housing costs and cuts to working tax credits, families in my constituency will be worse off. I will not vote in favour of this Tory Budget. Not only will many families be worse off following the Chancellor’s Budget; it has failed to address the deeper issue of social mobility.

This was not a good Budget for young people. For younger people, it is becoming more expensive to attend further education or to secure well-paid employment, and it is much more difficult for them to get on to the housing ladder. The employment training levy, to be levied against workplaces, could provide much needed workplace training opportunities. However, coupled with the proposed cuts to further education due in the autumn, training programmes could be at risk—one step forward, two steps back. Converting student maintenance grants into student personal debt will increase the debt of our young students further. In one case I know of, a student will leave a local university with £56,000 of personal debt—hardly a good start to a career for a young professional.

Preventing under-24-year-olds from gaining access to housing benefit could lead to long-term homelessness problems among a small but needy group of youngsters— many of the rough sleeping population are in this critical age group—creating not just personal misery, but further cost to the NHS in later years.

The cost and availability of childcare is a major block to productivity, and in high value areas such as London it is becoming prohibitively expensive. Childcare cuts to Sure Start and children’s centres undermine the Government’s excellent 30-hour childcare commitment, slowing down parents’ return to work and preventing the return to work of much needed skilled workers. Assessments show that returning women to work in London would be a real spur to the economy. Unfortunately, owing to the prohibitive cost of childcare and lack of childcare places following cuts to Sure Start and children’s centres, we have a false economy.

Renting in the private rented sector is now prohibitively expensive. A family would need a household income of £75,000 per annum to rent a modest three-bedroom property in Finsbury Park in my constituency. This is unaffordable and represents a failure of the housing market to support local families. By spending such a high proportion of income on housing costs, people are unable to save eventually to get on to the housing ladder. The average age of first-time buyers is going up every year in London. We are becoming not just a city of renters, but a nation of renters. Many of our children are in low-quality, high-cost housing with no hope of remaining in the local area to look after us in our older age.

While some elements of the Budget, such as applying the brakes on buy-to-let property, might have benefits, they are undermined by a failure to announce more new affordable housing and by the regressive right-to-buy housing association discounts, which set us back decades on housing supply. We must address the supply issue; it is critical.

Furthermore, pay freezes in public sector employment will be bad for young people. We know we have a crisis in retaining teachers, particularly in English and maths. We know we have a problem retaining nursing staff in our A&Es and our local hospitals. This pay freeze for the public sector is detrimental. Unless young people have access to unlimited family funds for their education, housing and training, they face a bleak future under this Tory Chancellor.

[Richard Fuller]

The hon. Lady has listed a number of steps that would lead to an increase in expenditure to cover some of the important topics she mentioned. Does she accept, however, the overall need, while we are borrowing over £70 billion a year, to reduce expenditure more each year so we can get back into balance? Does she accept that general trend in principle?

[Catherine West]

Let me deal with aspects of the question of expenditure in turn. First, the employment training levy is being levied on small businesses by your Government. It is not a Labour proposal, but I support it because it is about investing in the workplace. Secondly, the position on student maintenance grants amounts to cost shunting—taking the costs from the university and putting them on to the individual. I referred to a case of a student owing £56,000, so instead of it sitting on the balance books of the Chancellor, it is sitting on those of the individual, which is a bad thing. Thirdly, we spent £60 billion on housing benefit over the last Parliament. We should have invested more of that in new build housing. We should not forget that council housing is not a cost. It is a net contributor to the economy because the rent is so low that housing benefit is not payable on many council properties. Housing benefit is mainly payable in the private rented sector. By investing in social homes, we will be saving the housing benefit bill in the longer term. Finally, on childcare, your own pledge by your own Government is 30 hours per week—