Stewart Hosie
Main Page: Stewart Hosie (Scottish National Party - Dundee East)Budget Resolutions and Economic Situation
Stewart Hosie Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Stewart Hosie (Dundee East) (SNP)
As with every Budget, there are some things to welcome. I welcome what the Chancellor said about the European Union. He will not be surprised to get help on that from SNP Members, because we also believe that we are better off in. I also welcome some of what he said about tax evasion and avoidance, and the abolition of class 2 NICs.
When it comes to the self-employed and contractors—people who, in many cases, are taking their first step in forming a new business—I would make the point that the Red Book suggests that there will be £765 million in extra tax due to travel and subsistence changes. It would have been far better to review that regime entirely rather than simply going ahead and doing that.
I welcome the oil and gas changes. The changes to the supplementary charge and petroleum revenue tax are very welcome. I was slightly disappointed by the lack of strategic direction, with no mention of exploration or production allowances, but I am sure discussions are ongoing. Likewise, I welcome the freeze on whisky duty and the freeze on fuel duty, for which we have been calling.
It is one of the small measures, but may I say that we very much welcome the additional money for school sports? I do not know what the Barnett consequentials of that will be, but it provides a useful opportunity for SNP Members to welcome the creation, in the past week, of the 150th school sport hub in Scotland, delivering the necessary additional sport for children.
I have a small point of disagreement with the Chancellor. He prayed in aid the leader of the Scottish branch of the Tory party, to cheers from many Members on his side of the House. It is probably worth noting that, last May, she led the Conservatives to their worst UK election result in 150 years.
The Chancellor rather skipped over his record in the last Parliament on debt, deficit and borrowing. We know he did not meet a single one of his targets. He told us that debt would fall as a share of GDP by 2014-15, that the current account would be in balance this year and that public sector net borrowing would be barely £20 billion. That, of course, did not happen. We warned at the time that debt would not begin to fall as a share of GDP until later, that the current account would not be back in the black until 2017-18, and that public sector net borrowing for this year would be about four times what he promised.
Our judgment is that much of the Chancellor’s failure came about because he strangled the lifeblood from the recovery by cutting too much too quickly, with little or no regard to the consequences—an error he set in stone with the fiscal charter, with its requirement to run a permanent surplus almost irrespective of economic conditions or the effect that cutting more than necessary would have on the prospects for the economy. We have had a very quick look, and we listened to what the Chancellor said, and the current account will not now be back in the black until 2018-19. The targets keep getting pushed back—more broken promises. Borrowing will still be higher in four years’ time than he promised it would be this year. That is the scale of the failure on the key economic metrics. Even in this Parliament, when he has continually been warned about repeating the mistakes of the past, he has done the same today—in many ways with a vengeance.
Capital expenditure is a mixed bag, and I will come on to that. I do not expect the Chancellor to listen to me, but he should listen to the IMF and the OECD. The IMF said that he had done enough to stabilise the Government’s finances—that is questionable—for them to embark on extra investment spending should GDP growth slow. He should take that advice. Only in February, the OECD told him it was revising down its GDP forecast for this year and recommended a commitment to raising public investment, which would boost demand while remaining on a fiscally sustainable path. We would have expected him to listen. We are glad that there is a very modest rise in capital expenditure over the forecast period, but it is actually marked down this year compared with the forecast we got in the autumn statement last winter. That is not consistent with what needs to be done, or with the advice received from others.
It is not all about broken promises on debt, deficit and borrowing. We now have a Chancellor who has done this many times—he has set about replicating the errors he made with his borrowing figures in his trade and export figures for this Parliament. He said previously that he expected to be able to deliver an almost certainly unachievable doubling of exports by 2020, but the OBR told him last year, at the time of the autumn statement, that he would fall short by £350 billion. We looked at the autumn statement, and the impact of net trade on GDP growth will be negative from 2016 through to 2020, and there will be a deficit in the balance of trade current account for the entire period. I am disappointed, because action can be taken. The impact of net trade on GDP growth is no better or worse in every single year of the new forecast period, and the balance of payments current account is actually worse in every single year, even compared with last autumn’s forecast. In the past week or so, we had confirmation of a £92 billion trade deficit and a £125 billion deficit in the trade in goods.
To be fair, those failings are not all the fault of the Chancellor. Some have been embedded in the UK economy for decades, whether on exports, support for innovation and manufacturing, or boosting productivity. They are all inextricably linked. In many ways Labour is the biggest culprit, having lost more than 1 million manufacturing jobs during its time in office—and that was before the recession. But it is the current Government’s failure to address those problems that is really troubling. We would have expected concerted action today on innovation, manufacturing, productivity and work with academia—all the things we are falling behind on internationally, which has led to decline. Manufacturing was 30% of the economy in the 1970s, and today it is 10%; it provided more than 20% of all jobs in the 1980s, and today it is 8%; and it went from more than a quarter of all business investment in the 1990s to barely 15% today.
The Chancellor will argue that some of the tax cuts will allow businesses to keep and invest more of their own money, and I hope that is true, but if he were serious, we should have seen an increase in the budget of the Department for Business, Innovation and Skills. Instead, we have seen the Department’s budget being marked down every single year. We would have seen an announcement on support for innovation, because we know that since 2010 the science budget has been frozen in cash terms, with a real-terms drop of 10%. By 2012, publicly funded science fell to less than 0.5% of GDP, and we can see nothing today that will take us off the bottom of the G8 heap.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman is able to give way if he wishes to do so. The rule is for the first two speeches, after which it is up to the Member speaking. It is up to Stewart Hosie whether he gives way.
Stewart Hosie
In that case, because it is the right hon. Gentleman, I will happily take the intervention.
John Redwood
I am very grateful. Is not the British problem not that we lack great universities, great ideas, great innovation, a large number of patents and a lot of start-ups, but a problem of getting smaller businesses to grow sufficiently and become big businesses that can export to France and Germany? How would the hon. Gentleman tackle that problem?
Stewart Hosie
That is indeed one of the substantial issues, which is why our Government in Scotland have delivered the small business pledge. In return for assistance from Scottish Government agencies, the pledge requires those businesses to seek out and take export opportunities, and to innovate. We have delivered a £78 million fund for innovation to encourage 1,000 new inventions and to allow 1,200 businesses to liaise and work directly with academia. There are many practical ways to solve the problem that the right hon. Gentleman rightly identifies.
We will have to check the fine print about businesses that want to export, but in the Blue Book in the autumn, UKTI’s budget, after a slight rise for 2016-17, was cut by more than £20 million a year. Between 2018-19 and 2019-20, it will be flatlining in cash terms and falling again in real terms. We need to begin to tackle properly the underlying issue of poor productivity. From our perspective, that means delivering inclusive growth—essentially, a fairer and more equal society. We have seen the numbers, and we understand that it is not enough simply to grow the economy to fund public services. We must squeeze inequality out of the system to get the growth we need in the first place.
The Tories have never believed in that, and Labour failed on it for 13 years, and we have seen some of the mistakes repeated today. In the previous Parliament, discretionary consolidation—the balance of cuts and tax rises—went from a ratio of 4:1 to 9:1. What did we see today? Billions taken from people with disabilities, through changes to the personal independence payment, to fund an above-inflation increase in the 40p threshold. The 40p threshold did need to be addressed—I have said it for years—but to have an above-inflation rise while taking billions from the most disabled people in the country is disgraceful and economically wrong. The UK lost 9% of GDP growth due to rising inequality in the two decades from 1990, and the Chancellor is making the same mistakes again.
Some of the business measures that the Chancellor announced are to be welcomed. It was good that the Chancellor mentioned apprenticeships, but what he did not mention, of course, is that many firms—he should know this by now—already pay a 1.5% levy on payroll to the Engineering Construction Industry Training Board for training. The apprenticeship levy was simply an additional tax on jobs. I had hoped the Chancellor would reflect on the comments made following its introduction last year.
Likewise, the Chancellor told us last year that he was counting on a windfall of about £31 billion from the sale of banking, financial and commercial assets, but the OBR told us last year that it would be £24 billion, and there has been little change since then. Clearly, the Lloyds stock will still be privatised, and the Red Book refers, I think, to other sales, but there was absolutely nothing about an anticipated windfall, so it will be interesting to see whether he intends to sell off the family silver in a way that has gone unannounced today.
The Scottish Government’s ability to re-energise the Scottish economy cannot be hamstrung and hampered by decisions taken here. Before today’s statement, we expected that our discretionary budget this Parliament, taking into account the cuts already imposed, would be about £3.9 billion, or 12.5%, lower in real terms than it was in 2010. No matter what has been said, we expected capital spending to be £600 million lower in real terms than in 2010-11, and, based on the autumn statement, we expected that the departmental expenditure limits—DEL—budget would be increased by about 0.7% in cash terms, or a 1% real-terms reduction. We wait with interest to see what the number crunchers tell us the implications of the Budget will be.
This is all about political choices. We said at the election—and we hold to it—that a very modest, 0.5% real-terms increase in expenditure could have released money not just for investment but to make sure that those on benefits did not fall any further behind. That would have been a sensible, humane and productive thing to do, but the Chancellor and the Government have gone against that one more time. He might be able to sell it to some of his Back Benchers, but he has been unable to sell it in Scotland. I fear that that will continue to be the case.