Cost of Living: Energy and Housing

Stephen Metcalfe Excerpts

Thursday 5th June 2014 Commons Chamber

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

Thank you, Mr Deputy Speaker, for calling me to speak in this important debate following Her Majesty’s most Gracious Speech yesterday—a speech which truly shows that we are on the side of the vast majority of hard-working, decent, law-abiding, responsible people. It is a speech which, despite what the Opposition say, continues to demonstrate that this Government are dedicated to securing our country’s long-term economic future.

The range and depth of Bills announced shows that there is no let-up in our commitment to put right the failures of the previous Government, and builds on what this Government have already achieved. For the Opposition to have any credibility, they need to accept the failures of the past and just say sorry. Until they do, no one should ever trust them again with the finances of this country. Their weak attempt to frame this parliamentary Session as lacking substance is misguided and shows the desperation of their own argument. As John Longworth, director general of the British Chambers of Commerce, said:

“Businesses across Britain will be relieved to see that the government has opted for a streamlined legislative programme, meaning ministers can devote more time to delivering the best possible environment for economic growth and enterprise. Businesses hold governments accountable not for how many bills they pass, but for what they actually deliver.”

I agree. There is much to be welcomed, and it is not about quantity but quality. It is also not just about what we say here and what is in the speech but what we do and achieve in the next 11 months.

We have already achieved a lot. When this Government came to power, the future of our country was by no means certain. We were in the throes of Labour’s great recession, borrowing billions of pounds to bridge the gap between income and expenditure; confidence was at an all-time low; and, to top it all, we were informed by the former Chief Secretary, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), through his now infamous note, that “there’s no money left”. It was against this backdrop—this toxic economic inheritance—that the new Government had to set about rebuilding and rebalancing our economy. We abandoned the plans of the previous Government for more borrowing, more spending and more tax in exchange for a real long-term economic plan that is delivering growth, employment, and a brighter future than we might have dared to expect. Yesterday’s Queen’s Speech builds on that.

[Huw Irranca-Davies]

In his very outspoken welcoming of the Queen’s Speech, will the hon. Gentleman reflect on a situation that I am sure affects his constituents as well as mine, whereby as many as one in six agency workers now work under the so-called Swedish derogation, which means that some of them are being paid £135 less for doing the same job as the people standing next to them? Is that how we should be rebuilding the economy?

[Stephen Metcalfe]

The hon. Gentleman makes a valuable point. There are still challenges to be tackled. I am not saying that the recovery is perfect. There is a long way to go and we need to do a lot more, but the fact that we are on the right road has to be welcomed.

There are challenges—there is no doubt about that—and one of them is the overall cost of living, but we are serious about tackling that by taking the decisions to resolve these issues, decisions that have been blocked at every turn by Labour. I accept that there is a cost of living challenge—we have to; it is a reality—but we were always going to have this problem until our long-term economic plan was in place and seen to be working. Whichever way you cut it, as a nation we were spending more than we were earning and borrowing the difference, and that is what had to come to a stop. We cannot keep spending more than we earn. Anyone who has ever got into trouble with their credit card or overdraft knows that at some point they have to stop spending and face reality. That is what we did when we got into government—we faced reality and we stopped spending so much. Anyone who has ever used a credit card or an overdraft to fund their lifestyle knows that when they rein in expenditure and start paying back their bills they do not have as much money to spend. That is the situation we found ourselves in as a nation. Despite the toxic economic inheritance we received, we have managed the reductions in spending in a cautious and measured way. It has not been without pain, but if we had not taken the decisions we have, things could have been so much worse than they have been and are.

How do we tackle the continuing cost of living challenge? I believe there are three ways to do that. First, we can put off the inevitable, keep borrowing and spending, and hope something will turn up. Secondly, we can take an interventionist approach and try to con people that we can freeze energy prices, cap rents, and renationalise the railways. Thirdly, we can do what this Government have done: take the hard decisions, pull our head out of the sand, and tackle the problem head on. The best way to deal with the challenge is to create growth and jobs and to rebalance the economy so that wages rise at least in line with costs, and, in the meantime, to mitigate the impact of the readjustment as best we can. For example, we have raised the threshold at which people begin to pay tax so that low-paid workers who are least able to weather the economic storm can keep more of their money. That measure alone has saved 26 million people £705 each per year.

We have demonstrated to the markets that we are serious about paying down the debts and closing the deficit. This has potentially saved mortgage holders over £1,000 for every percentage point by which mortgages could have risen. We have frozen council tax so that after five years people are paying the same as they were in 2010, saving them hundreds of pounds. We should compare that with the doubling of council tax that took place under the previous Government. We have frozen the fuel duty escalator, making fuel now 20p per litre cheaper than it would have been under the previous Government’s plans. We have created jobs so that people have the security of an income. We have created 1.5 million new jobs and now have more people in work than ever before in our history. I could go on .

However, all of the above does not mean I am oblivious to the challenges people continue to face each and every day. That is why I warmly welcome all the Bills announced in the Gracious Speech, including the Childcare Payments Bill, which will help people to meet the cost of child care; the infrastructure Bill, which will enable us to source cheaper local energy; and the pensions Bill, which will show that we trust people to do the right thing with the money they have saved.

Above all, I welcome the small business, enterprise and employment Bill. As many in this House will know, in my previous life I worked in my own family printing business. I can therefore confirm that running your own small business is tough—always has been and probably always will be. If we can do anything to make it easier, then we must, and this Bill goes a long way towards achieving that. People might ask what small businesses have to do directly with the cost of living. I sometimes think we forget how important our small and medium-sized business sector is. It is the powerhouse of the British economy and—dare I say it?—the backbone of our society. Not until the SME sector is truly thriving will we be able fully to tackle the cost of living challenge. There are 4.9 million small businesses in the UK. If even only half of them employed one extra person, we could wipe out unemployment in a stroke.

That is why this Bill is so important, and I am not the only one who thinks so—the Federation of Small Business and the British Chambers of Commerce have also welcomed it. John Allan, the FSB’s national chairman, said:

“The Small Business Bill, announced today in the Queen’s Speech, reflects the growing recognition of the role small businesses have to play in driving forward the economy and the need to do all we can to support them in that effort.”

John Longworth, director general of the BCC, said:

“Simplifying life for small or growing businesses should be an objective shared across all political parties.”

That is what I believe we are delivering. A number of significant measures in the Bill will go a long way towards helping small businesses and thus helping them to support their staff in tackling the rising cost of living. Unlike Governments or public bodies, SMEs can pay their staff only what the company earns, and until they can earn more they cannot pay more.

The first measure that will have a significant impact on the success of our businesses is the renewed focus on late payment. As I said in my debate on this topic 18 months ago, small businesses should not be acting as the bank for large business. A recent survey of FSB members found that 51% of large company invoices were paid late. That is outrageous. It is blocking tens of billions of pounds that could be pumped back into the economy for the benefit of the majority and not the minority. Make no mistake: this is not asking companies to settle their invoices before the due date; it is just asking them to settle them at the agreed terms, whether 30, 60 or 90 days—that is a private arrangement. Paying on time could significantly increase the profits of small businesses. Businesses often function on overdrafts because of the money they are owed. If they did not have to fund an overdraft, they would undoubtedly have more money for wages and investment. Late payment of invoices costs money, affects cash flow, increases overdrafts, causes anxiety, and demotivates businesses so that they do not invest. Anything we can do to improve the situation by toughening up the prompt payment code is very welcome, but if it does not work, please expect me to come back here and call for yet further action. We cannot take our foot off the accelerator on this one.

[Mary Macleod (Brentford and Isleworth) (Con)]

Is my hon. Friend disappointed, as I am, that the Queen’s Speech did not say anything about a full review of business rates? I am sure that he has been very conscious of this issue and businesses in my constituency talk about it all the time. We fundamentally need a full review of business rates in order to come up with a fairer tax.

[Stephen Metcalfe]

I agree that we need to look at that. The steps we have taken to ease rates for small businesses have been welcomed by businesses in my constituency, but we need to do more and a full review, perhaps with some safeguards for those businesses that may not be able to weather an increase in rates, is certainly something we should consider.

The second area of the small business Bill that I particularly welcome relates to the fact that, despite what banks tells us, small and medium-sized businesses still find it very hard to access competitively priced finance. Every time I visit my local shopping area or business park, someone tells me of the problems they have getting finance in order to grow and invest. I welcome the steps the Government have already taken to ease access to finance, such as the introduction of the business bank, but it is now time to go further, which is why I welcome the steps to force banks to refer businesses to other providers.

We are told that, for many first-time small business borrowers, the rejection rate from banks is about 50%, often simply because the bank’s risk assessment process is so rigid or the sector profile is so inflexible that a small or growing business is rejected out of hand, regardless of how viable or sustainable it is. Therefore, it is only right that they can be referred to other banks and alternative providers with different business models. If the provision fails to improve access to finance, I will again call for more direct action to support our vital SME network.

The third measure I particularly welcome is the commitment to level the playing field. As John Longworth has said:

“The vast majority of law-abiding businesses will also favour a clampdown on rogue employers who do not pay the National Minimum Wage”.

Of course those businesses will agree with that. The vast majority of SME owners and operators are decent, caring people who often act as the second welfare system, helping employees cover unexpected costs through loans or advance wages, avoiding other sources of lending. They also often help their staff with financial planning and managing their finances. That is because the vast majority of SMEs recognise that their greatest asset is their staff. For those who do not recognise that and who want to take advantage, it is right that we crack down and make everyone play by the same rules.

I believe that those measures, combined with many others in that and other Bills announced yesterday, will go a long way to help to tackle the cost of living challenge. It is a challenge that we have to rise to, and I believe that we are doing that. It is not easy—no one ever said it would be—but I am sure that, despite the challenges faced and the pain we have endured, there is only one Government who can rise to the challenges we still face, only one Government with a long-term economic plan to secure our future, and only one Government with a parliamentary programme that builds on our achievements. That is this Government and they should be supported.