The Economy

Tom Blenkinsop Excerpts

Tuesday 11th December 2012 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I congratulate my hon. Friends the Members for Middlesbrough (Andy McDonald), for Croydon North (Steve Reed) and for Rotherham (Sarah Champion), who gave three excellent speeches and demonstrated the great capabilities and talent coming into the parliamentary Labour party and which we hope to see more of in 2015.

The economy has been weakened by poor decisions by the Chancellor leading to declining growth, so borrowing is higher, which means that the public debt is worse. While public spending totals are similar to those in the March Budget, tax revenue forecasts are far more pessimistic. The Office for Budget Responsibility suggests that by 2015-16 tax receipts will be £662 billion instead of £692 billion. That is a 4% overestimation, as corporation tax, income tax and VAT at 20% have not brought in and will not bring in the tax take expected. That £30 billion shortfall translates into a £30 billion rise in public sector net borrowing.

In every year except 2012-13 borrowing is higher, and the gap grows over time. This year’s figures are flattered by the £3.5 billion sale of the spectrum for 4G, which is yet to occur, and by the £5 billion tax deal with Switzerland. Let us look at the Chancellor’s much lauded

“largest tax evasion settlement in UK history”.

It is anticipated by the Chancellor to bring in more than £5 billion over the next six years, although the OBR described that clearly as “highly uncertain” because of the lack of information about the value of the assets held by UK citizens in Switzerland. Indeed, the Treasury has stated:

“The final stage of the ratification process is expected to be concluded shortly, but there remains a possibility that the Swiss government will have to hold a referendum on the agreement… This is therefore a significant fiscal risk to the forecast.”

The Treasury added:

“The estimated revenue raised by this measure is also highly uncertain as there is little hard information about the value of UK individuals’ financial assets in Switzerland, and how these individuals will respond to the policy.”

Apart from those settlements, by 2015-16 three years of higher borrowing will push up public sector net debt by £67 billion, or 4%. The Chancellor’s own rules state that public debt as a share of national income must fall by 2015-16. To pass that test, the growth in public debt must be lower than growth in cash or nominal GDP.

In March, the OBR massaged its nominal GDP growth forecast up to 5.7% in 2015-16 alone, in order just to exceed the 5.3% rise forecast in public sector net debt. Now the OBR has slashed its GDP growth forecast for that year to 4.6%. No matter how much the Chancellor likes to fudge and fiddle the figures, he cannot massage down the 5.9% hike in debt forecast by the OBR for 2015-16. The chances of his meeting the terms of his own debt rule have taken only two and a half years to be completely destroyed by the growth-strangling policies he now wishes desperately to reverse, as we saw with the U-turn on capital allowances. The Chancellor says he has missed his debt rule by a fraction and that he will retain the 2015-16 debt target, even though it will now be impossible to hit.

The public finances are now difficult to compare with those under previous Budgets because the statistics are affected by large transfers of cash or classification changes. In fact, the Chancellor’s raid on surplus funds sitting in the Bank of England originates from his quantitative easing programme. The OBR says the surpluses are temporary, so although the Chancellor’s cash grab flatters headline public borrowing figures by some £12.3 billion in 2013-14, future Governments will have to repay the Bank of England an estimated £6 billion to £7 billion in 2021-22 for this Chancellor’s record purchasing of our own bonds. Without that cash grab, the Chancellor would have broken not just his fiscal rule—which he clearly has—but his debt target for 2016-17 and his deficit promises.

Here we are, going into 2013, and all the Chancellor can say is that we need another five years to deal with the deficit problem. That is exactly the same statement he made in June 2010—a stagnant sentence for a stagnated economy, stifled by a part-time Chancellor. This is an autumn statement following autumn statements and Budgets for the last two and a half years, all of which have failed to meet any of the stated aims of the Chancellor’s original objective. Two and a half years later, we are still five years away from the total eradication of the deficit. This Government will have accrued more debt in five years than in the entire 13 years of Labour’s rule. Under this Chancellor’s watch, in 2015 the UK will unfortunately hold the worst public sector net deficit in the west, according to OBR and IMF figures.

Was the autumn statement a growth strategy? No. Is this a deficit and debt-reducing strategy? No. Is this a strategy for borrowing? Yes it is, and on the backs of the low and middle-income workers—borrowing for failure, not for investment.

[Richard Drax]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, I will not.

Can the Chancellor guarantee that we will borrow at a low interest rate because we will still have a triple A rating? No. The very cornerstone on which this coalition is premised has been utterly flawed. As a result, a recovering economy in May 2010 has been so damaged that we have witnessed a double-dip recession, with the strong likelihood that it will become a triple-dip recession—something that the Secretary of State for Business, Innovation and Skills had to admit only this Sunday was a distinct possibility. In essence, the Chancellor is on the brink of exchanging the triple A credit rating he inherited from Labour—and which he prized most of all—for a potential triple dip of his own making.

Autumn Statement

Tom Blenkinsop Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

I will get back to my hon. Friend about the specific point about the bid for new housing in Gloucester. More broadly, we are investing more capital in housing development. We are also standing alongside families trying to buy their first home with our Firstbuy shared equity scheme, and we are also providing guarantees to registered social landlords not only to build social housing, but to build housing for the private rented sector. So in all sorts of ways we are helping the people of Gloucester, and I will look specifically at what more we can do to help.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The corporation tax take, VAT take, income tax take and growth are all lower than the OBR predicted in March. The Chancellor is forecast to accrue an increase in national debt in five years greater than Labour accrued in 13 years. Moreover, from now till 2013 the International Labour Organisation unemployment rate increases by 0.2%, as is stated on page 86, table B.1, so how are more people predicted to get jobs when the OBR says completely the opposite?

[Mr Osborne]

I would advise the hon. Gentleman to look at that table on employment. It shows employment going up by 1 million.

Income Tax

Tom Blenkinsop Excerpts

Wednesday 28th November 2012 Commons Chamber

[Mr Gauke]

In the Office for Budget Responsibility assessment there is a tax cut of £100 million that goes to those who are paying the 50p rate.

In the same Budget package, however, there are measures to deal with stamp duty avoidance on properties over £2 million, a stamp duty increase on properties over £2 million, which is bringing in revenue, and caps on reliefs directed at high-earning individuals. So who is paying the stamp duty and not benefiting from the reliefs as before? They are high-earning individuals. They are paying for the cut in the 50p rate five times over as a consequence of the measures announced in the last Budget. That is the explanation to the hon. Lady’s constituents, and mine, of how the cut is being funded.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will the Exchequer Secretary confirm that the expectations in the OBR’s assessment in March on income tax and VAT receipts are not being met?

[Mr Gauke]

The hon. Gentleman tempts me down that route, but we have an autumn statement next week on that matter, when we will hear the OBR numbers.

Oral Answers to Questions

Tom Blenkinsop Excerpts

Tuesday 6th November 2012 Commons Chamber

[Mr Gauke]

There will be a range of options—the minimum is 2,000, and the maximum is 50,000—but this is not going to be a matter that is compulsory. It will not be the right answer for every business, but there are some businesses that need flexibility to find employee status somewhere between a full employee and someone who is self-employed such as a partner, as many hundreds of thousands of people are. I think that it is a sensible, pragmatic response.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

5. What the level of public sector net borrowing was in the (a) first six months of 2012-13 and (b) equivalent period in 2011-12.

[The Financial Secretary to the Treasury (Greg Clark)]

Public sector net borrowing totalled £37 billion in the first six months of 2012-13, compared with £62.4 billion in the equivalent period in 2011-12. However, income and expenditure vary throughout any year, and it is too early to draw firm conclusions about the year as a whole.

[Tom Blenkinsop]

Between 2010 and 2015, debt will increase under the coalition by £465 billion in just five years in real terms. How much of that debt is due to an increase in borrowing for higher welfare benefit costs as a result of the Chancellor’s double-dip recession?

[Greg Clark]

I am amazed that the hon. Gentleman has the temerity to talk about debt when the legacy of the previous Government has made it clear that it has been the worst in the G7. The Office for Budget Responsibility has said that the changes in Government spending have directly added to gross domestic product, and have helped matters, rather than subtract from it.

Unemployment (North-east)

Tom Blenkinsop Excerpts

Wednesday 20th June 2012 Westminster Hall

[Mr Wright]

My hon. Friend is right. I will come to the terrible issue of youth unemployment in a moment. Let me just mention further unwanted, gloomy news on the jobs front in recent months.

The closure of the Rio Tinto Alcan plant, with the loss of 515 jobs directly and the threat to 3,000 jobs in the supply chain, is a major blow to the economy of south-east Northumberland. My hon. Friend the Member for Blyth Valley (Mr Campbell) is in attendance and I have spoken to my hon. Friend the Member for Wansbeck (Ian Lavery) today, who wanted to attend, but is hoping to catch Mr Speaker’s eye in the debate on Remploy.

The closure of the BAe factory on Scotswood road in the constituency of my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah) brings to an end a century of remarkable industrial innovation on the banks of the Tyne. The factory was started by that astonishing, underrated Victorian entrepreneur, William Armstrong. However, far from looking to the past, the closure undermines the vital links between British military capability and manufacturing and industrial capacity.

The growth in long-term unemployment and youth unemployment is of particular concern. I have mentioned that to hon. Friends. The north-east has far too often been permanently scarred by people being on the dole for many months and years, or by young people leaving school or college unable to find work. That was so in the 1980s, when the closure of the steelworks, shipyards and coal mines left an unwanted and enduring legacy of poor health, lower life expectancy, poverty and family breakdown, making it more difficult for the economy to bounce back into prosperity once the recovery starts.

The longer a person is out of work, the easier it is for them to lose skills and experience, and the more difficult it is to get back into work. That is especially true when more and more people have more recently lost their jobs, and therefore have more recent experience in the job market.

In Hartlepool, the number of people who have been claiming JSA for more than 12 months has risen in the past year by more than 245%. One in four young men under the age of 24 are out of work in Hartlepool. Such figures are not sustainable economically, socially or ethically. I fear that we are repeating the policies and mistakes of the 1980s and that there will, once again, be a lost generation of young people unable to fulfil their massive potential, believing that the only way they can get a proper career is by leaving the north-east altogether.

We have had good news. Only this week a new retailer announced the creation of 150 jobs in Hartlepool, but overall the job situation is gloomy and set to get worse. The Centre for Economics and Business Research forecasts that unemployment in the north-east will rise to 12% this year and to 13% by 2016, largely as a result of further and deeper public sector redundancies.

Government policy is making the unemployment situation in the north-east much worse. The Government’s insistence that public sector redundancies are necessary and that private sector employment will somehow bloom in the face of these cuts is naive and economically ignorant at best, or is cynically and deliberately driven for ideological and political purposes. If Ministers—or Whips—genuinely believe that the public and private sectors are separate and distinct entities, and never the twain shall meet, that shows a profound misunderstanding of how the modern economy works.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

My hon. Friend makes a compelling argument. In my area of the north-east, in Teesside and East Cleveland, three areas worry me: cuts in Army, Navy and Royal Air Force troop numbers—mine is a big recruitment area for them—the three-year zenith in the contraction of manufacturing, which affects the north-east more than other regions, and public sector cuts.

As my hon. Friend just mentioned, the Government’s ideological view that there is a private sector and a public sector goes against every piece of economics since Galbraith in the 1960s and undermines any economic recovery that we have desperately fought for.

[Mr Wright]

My hon. Friend is right. I know that he remembers Galbraith in the ’60s.

Some 84,000 jobs have been lost in the construction industry, in part due to stopping the schools building programme, road schemes and social housing, which were all socially and economically necessary, because they boost productivity, efficiency and economic capability in the long term and, in the short term, in the worst and most severe global financial crisis ever, help to provide skills and capacity in the construction sector.

The Government fail to accept the basic economic point that, for every £1 of public money spent on construction activities, almost £3 of private sector money is generated back into the local economy, in terms of jobs, the supply chain and construction.

Changes to the Budget

Tom Blenkinsop Excerpts

Monday 11th June 2012 Commons Chamber

[Mr Gauke]

I am not sure that that particular policy announcement will necessarily do my hon. Friend any good, but he is absolutely right to ask the Government to continue to focus on the big issues that the country faces, and we will do so.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Given that other applications of VAT are being U-turned, why is its application to sports nutrition products not being U-turned as well?

[Mr Gauke]

We think it right for sports nutrition products to be subject to the standard rate of VAT. VAT should be a broadly based tax, and we believe that our policy addresses an anomaly in the system that needed to be dealt with.

Business and the Economy

Tom Blenkinsop Excerpts

Monday 14th May 2012 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

There has been a lot of doom and gloom today, I must say. I was sure that someone on the Government Benches would mention the fact that retail sales bounced back by 1.8% in March 2012. The House of Commons research paper, “Economic Indicators, May 2012”, states on page 20 that that was down to the fact that:

“Unusually high automotive fuel sales were a major contributor to retail sales growth in March.”

I think everyone in the Chamber knows why that was.

So many chief executives have been sacked in recent weeks for failing to deliver the performance promised by their high salaries that we might think the brief reference to directors’ pay in the Gracious Speech was unnecessary, or more appropriate to current Ministers. Apart from that, there was little in the Gracious Speech about business, investment, employment or growth. In fact, since the speech last week, the Government’s lack of vision for business has degenerated into an attack on entrepreneurs.

Aviva, Trinity Mirror and AstraZeneca shareholders have recently indicated that they have had enough of their chief executive officers. Why now? It is obvious that those shareholders sensed that they were beginning to lose control of the companies that they owned. The parallels between business and the Government are only negative in that respect. More importantly, is that situation just about executive pay, or is it a further indicator of corporate financial hoarding? Shareholders are savers who want great returns, of course, but what are the Government doing to get shareholders to increase their intention to part with their profits for further business investment? The real economic impasse is in getting companies to part with their hoarded billions of pounds, and that was not addressed in the Gracious Speech.

BT recently paid off a considerable deficit in its pension scheme. It paid £3 billion by the end of March and will make nine annual payments of £325 million. BAE Systems had a £2.1 billion cash pile, yet in the past two years it has cut 22,000 jobs, 3,000 of them in the UK, while returning £2.2 billion to shareholders. The story is similar at the oil services company AMEC, which ended 2011 with £521 million of cash and unveiled a £400 million share buy-back programme. Last year, shareholders’ dividends paid by listed companies jumped by 19% to a record £67.8 billion, according to Capita Registrars, and they are expected to hit a new high of £75 billion this year. Jonathan Bye, chairman of the Food and Drink Federation’s SME forum, says:

“Companies like Nichols have plenty of cash…the irony is that the big manufacturers are sitting on cash because they just don’t know how to use it.”

After this Gracious Speech, they still will not.

The Government’s ideological strategy is to focus on an enterprise and regulatory reform Bill that is supposed to reduce burdens on businesses by repealing unnecessary legislation and limiting state inspections. The argument is the same as ever—shrink the state, deregulate and get out of the way of the private sector. They say that it worked perfectly in the years following the 1990s recession and the early 1930s depression. It is expansionary fiscal contraction, the antithesis of Keynesian stimulus spending.

We have had two years of this already. Despite the evidence provided by the double-dip recession, of which Opposition Members forewarned, the resounding message of the Gracious Speech is “more of the same”.

[Sheila Gilmore]

It is interesting that my hon. Friend mentions the parallel with the 1930s. One parallel that worries me is that, as in the 1930s, there is a huge difference between different parts of the country. Does that perhaps explain why so many members of the Government are apparently unaware of the effects of the recession—they represent parts of the country that are not suffering as badly as others?

[Tom Blenkinsop]

My hon. Friend makes an excellent point. Before the general election, the now Prime Minister stated that the north-east economy needed serious rebalancing. Actually, the north-east is the lead region for exports, with more than £13 billion a year. If the Labour Government got everything so economically wrong, why, despite the overarching burden of the public sector, has the north-east managed to beat every other region in the country? I am bemused, foiled and perplexed by that one. The Prime Minister might want to come to the Dispatch Box on Wednesday and explain it to the workers of Alcan and other industrial workers in the north-east let down by the current economic policy.

Business investment is actually shrinking, and in the final three months of 2011 fell by a whopping 5.6%. It is the single biggest drag on economic growth, with a negative gravitational pull of 0.5%. Business investment is still more than 15% below its pre-recession peak in 2008. Unlike in the 1990s recovery, when private sector hiring employed four people for every one public sector job cut, business recruitment is extraordinarily weak. For evidence of that, we only have to look at the private sector last year. Admittedly, it took on 226,000 staff in full-time but mostly part-time positions, yet figures from the Office for National Statistics show that 270,000 public workers were laid off. The Government’s official forecaster, the Office for Budget Responsibility, said that 2012 should be the year of the business renaissance. Of the weak 0.7% growth the OBR expects the UK to eke out over the next 12 months, 0.6% is scheduled to come from business investment—the single largest contributor.

We have been here before. Last year, the OBR forecast that business investment would deliver 6.7% growth, but it did not. Instead, it shrank by 2%. According to the Bank of England, 2012 is not looking very encouraging either, despite the OBR’s optimism. Its recent agents survey for February found that

“investment intentions continued to weaken, suggesting little growth in spending on capital over the next 12 months”.

That is mirrored by Barclays Capital’s Simon Hayes, who said that the OBR’s projections required a level of spending not seen in 30 years.

Essentially, my point is that the Queen’s Speech does not introduce any policy or legislation to enable this Parliament to get hold of the £750 billion of cash under the corporate mattress to invest in Britain and ensure we have a genuine rebalancing of our national economy.

Budget (North-East)

Tom Blenkinsop Excerpts

Tuesday 17th April 2012 Westminster Hall

[James Wharton (Stockton South) (Con)]

Thank you, Sir Roger. It is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Gateshead (Ian Mearns) on his passionate speech and on securing such an important debate. The issue is important to all of us who represent the north-east, in whichever party.

It is important to be clear that the north-east is not a basket case. It is not the end of the world and it is not a place where economic activity does not exist. There are many good signs of progress and economic success in our region. Unemployment in the north-east has been falling for the past two months, against the trend in much of the country, in what Members will agree is a difficult economic climate. There are many examples of significant good news stories, such as the relighting at the weekend of the SSI blast furnace on Teesside. That is very good and positive news, due in no small part to the sterling work of my hon. Friend the Member for Redcar (Ian Swales), who has fought long and hard to see steel-making return to that part of our region.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Will the hon. Gentleman also acknowledge that the work to get SSI to purchase the Corus steel plant began in the summer of 2009 and was largely due to the work of the trade union on the site, which led the “Save our steel” campaign, in conjunction with Labour Ministers, who regularly met plant representatives, unlike this Government’s Ministers, who refused to meet work forces at Rio Tinto Alcan and—these are not in the north-east—at steel sites in Kent, such as Thamesteel?

[James Wharton]

The hon. Gentleman’s generosity in wanting to ensure that everybody who played a part is adequately recognised is testament to his character. The unions played a significant role, as did the Government of the day, when the plant’s closure was announced, as have the Government of today, in delivering the success. It is something about which we can all be pleased in our region and I welcome the hon. Gentleman’s comments.

We have also received the good news that Hitachi will come to Newton Aycliffe to build trains. Nissan has announced that more jobs are being created and more work being done. In my constituency, Nifco has just opened a new factory in Eaglescliffe—a smaller but none the less significant manufacturing investment—and is already considering options for expansion because it is doing well.

More than 47,000 private sector jobs have been announced in the regional media since the last election. Articles in the press report what is said and announced, the levels of investment and the positive news, yet all too often all we hear are the negatives. I am sure that we all agree on a cross-party basis that it is important to take every opportunity to talk up our region and make it clear to anyone who is considering investing there that we are open for business and looking to do business, and that we welcome investment and we want to see the jobs and growth it would create.

--- Later in debate ---

[Ian Swales]

I am sure the Minister will respond to that.

Of course our region needs specific help. I welcome the extra £1 billion for the regional growth fund, which has already helped 93 companies in the north-east and is targeted specifically at regions such as ours. Last week’s announcement of help for up to 1,000 jobs in Wallsend in the offshore wind industry was especially welcome.

These occasions usually include a lament from the Opposition for the RDA. However, I shed few tears for an organisation that, in the two years before the general election, spent £148 million on 96 projects in which the directors had to declare an interest, spent nearly £400,000 on gagging orders for 12 staff, and, according to Experian, left Hartlepool, Middlesbrough, and Redcar and Cleveland as the three areas of the country, out of 324, least able to cope with austerity.

[Tom Blenkinsop]

Will the hon. Gentleman give way?

[Ian Swales]

I have given way twice already.

I congratulate the Tees Valley LEP on the excellent start it has made and I welcome the further £11 million in the Growing Places fund announced for north-east LEPs.

The press has picked up on certain items in the Budget, so I will finish with three questions to the Minister. I have spoken to the directors of Greggs. Will the so-called pasty tax not move rather than remove the anomalies? I do not relish asking the Greggs staff to feel the temperature of my sausage roll before deciding the price. Secondly, to those worried about charitable giving, tax relief on charitable contributions that would otherwise be taxed at 50% effectively means the Government will match donations pound for pound. Should that use of taxpayers’ money really be unlimited? Thirdly, how do the Opposition justify a situation in which young people on the minimum wage, who are trying to make their way in life, are paying £600 more in tax than their grannies who are on the same income? As we move towards a threshold of £10,000 for all, is that not a matter of fairness? Budgets cannot please all the people all the time, but help for business and the big reduction in tax for basic rate taxpayers means that this one has a lot going for it.

[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate my hon. Friend the Member for Gateshead (Ian Mearns) on securing the debate.

People talk about investment in the region, and three examples of investment have been mentioned. GlaxoSmithKline in Cumbria, which also has a plant in the constituency of my hon. Friend the Member for Bishop Auckland (Helen Goodman), SSI in Redcar, and Hitachi in my constituency have one thing in common: they would not be there were it not for a Labour Government. They were the result of initiatives established and settled under a Labour Government and which came to fruition after the general election. From personal experience, I know how much time and effort went in to ensure that Hitachi came to the north-east of England—it was not certain that it would.

I set a “We are all in this together” test for the Budget, and it did not pass that test. Some 57,000 households in the north-east will lose tax credits. I met a young mother at the weekend with twins—two little boys—who will start school in September. She has lost more than £300 in tax credits every month. That is a lot of money for someone with a young family. I know that 940,000 people will be better off under the new tax threshold, but let us not forget that the Institute for Fiscal Studies has said that the changes coming in this month will mean that on average they will be £511 worse off.

[Tom Blenkinsop]

My hon. Friend gave three examples of programmes starting under the Labour Government: SSI, Hitachi and GSK. That is also the case with DigitalCity in Middlesbrough, where public-led investment increased private-led investment. The hon. Member for Redcar (Ian Swales) referred to information from Experian in relation to Middlesbrough, Hartlepool and Redcar being the hardest-hit areas, but those statistics related not to the RDA, but to an investigation post this Government’s autumn statement.

[Phil Wilson]

My hon. Friend is right. That proves how much we have to celebrate what the previous Labour Government did for the north-east of England. The hon. Member for Redcar (Ian Swales) mentioned the minimum wage. The minimum wage has been frozen for people under the age of 21. It has gone up by only 11p this year as a consequence of the decisions made by this Government. At the same time, 4,000 to 5,000 taxpayers on the 50p tax rate in the region will on average receive a tax cut of £10,000 each. If that does not show that we are not all in this together, I do not know what does. The Government put VAT on pasties, but they did not put VAT on caviar.

The 40p tax rate has been ignored by many people. The threshold has been reduced from £42,475 to £41,450, so that 300,000 people will be brought into the 40p tax rate. How many more people will lose a proportion of their child benefit because of the reduction in that threshold? Will the Minister indicate whether she knows that figure? By reducing the threshold, the number of people paying the 40p tax rate in the region has gone up by 8%. There are now nearly 110,000 people paying the 40p tax rate. Little by little, the Government’s fairness agenda is being found out—actually, we are not all in this together.

I am very concerned about regional pay. The hon. Member for Stockton South (James Wharton) mentioned the flexibility in local pay in the court system, but we reduced the number of bands from 40-odd to five; we did not increase the number of bands. The latest survey by the TUC states that 68%—more than two thirds—of Conservative voters do not believe that regional pay in the public sector will boost jobs in the private sector.

The Budget is divisive. It is also complacent. It does nothing for growth, not just in the north-east of England, but in the rest of the country.

Budget Resolutions and Economic Situation

Tom Blenkinsop Excerpts

Friday 23rd March 2012 Commons Chamber

[Richard Harrington]

This has been like the show, “Who Wants To Be A Millionaire?”—a question is asked, there is an advert break, and everybody is waiting for the answer. My quiz show might be called, “Who used to want to be a millionaire but now is a Member of Parliament?” I shall endeavour to continue after the commercial break in the spirit in which I started, by asking hon. Members to consider what growth in the economy means.

As a Johnny-come-lately to professional politics and prior to that having been in business for 30 years in various ways, successfully and, I have to say, unsuccessfully, it seems to me that growth often means something different to politicians, people who work in think-tanks, journalists and people who work in public affairs. For economists it is easy to consider growth as a statistic—0.5%, 0.8% or negative growth, on which Opposition Members and Government Members take different views.

For me, growth is a collective decision by individuals, whether they are business owners, people who want to start a business, or the management of a large company. In a capitalist society—there is a general consensus that the profit motive is what drives private enterprise—business people must make the decision to start or expand their business. Growth in the economy is the collection of such decisions. It is Government’s role and the role of this Budget to facilitate that.

[Tom Blenkinsop]

When?

[Richard Harrington]

Now. Unfortunately that was not the case with the situation we inherited, with a huge deficit and the economy plummeting. Opposition Members should remember what I said—that growth is not a statistic. If we are to get growth, it requires a collective series of decisions by people to expand their businesses and start other businesses.

The predecessors of the current Opposition believed in a different type of economy. They believed in a socialist economy. They believed that Governments, by nationalising businesses or taking investment decisions themselves, could make a fundamental decision, people would do things because they were told to do so by Government and the result would be a growing economy. Society has taken the decision—and this is the general consensus among nearly everyone in the House—that growth will come from private enterprise.

If growth comes from private enterprise, we must accept that that comes from people accepting all the aggravation, mortgaging their houses, setting up businesses, employing people and taking very little money out during much of the growth period of the business. What makes them want to do that is the fact that they want to get rich themselves. I am fine with that. If they pay their taxes—I am certainly against tax avoidance and all the legal and illegal schemes to do that—and if they employ people who pay their taxes, it is right that they should keep the majority of what they earn. I hope that when criticising the reduction from 50% to 45%, hon. Members on both sides of the House will bear that in mind. I believe that that ambition is the core of growth in this country and I commend the Chancellor for progress in this respect.

--- Later in debate ---

[Gregg McClymont]

As the hon. Gentleman knows, whatever the situation when this Government took office, they are now, by their own estimates, going to borrow £150 billion more than they estimated, so they are adding debt upon debt, with no growth to show for it.

[Tom Blenkinsop]

If it was such a bad period, why are corporates storing £750 billion under the mattress and not investing? Is that not a demand issue?

--- Later in debate ---

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

This Budget plans for £155 billion of deficit reduction by 2016-17, including £126 billion of spending cuts. The amount of cuts being pushed up into the next Parliament has grown, so the Conservatives and Liberal Democrats are currently planning to go to the next election promising to cut spending by at least £47 billion in the first two years of the next Parliament, on top of the cuts continuing throughout this Parliament, while giving top earners a tax break.

The OBR has again downgraded its estimate of the economy’s sustainable growth rate. As of June 2010, it thought the rate over this Parliament would be 2.1% to 2.35%. The OBR still expects the sustainable growth rate to pick up over the next couple of years. It believes that 2.3% is doable with the Budget measures; I do not think so. Even if it is right, which it consistently has not been, the growth will be jobless growth, with a high dole bill to pay. The Chancellor, therefore, should be trying everything in his power to get the sustainable growth rate up, but he is not. At the moment, cutting spending is almost the only thing he is doing.

Although the OBR has made few changes to its headline growth forecast, it has changed the expected composition of that growth. The Government are keen on talking up exports and investment, but the OBR’s estimate is that the UK’s recovery will be dependent on the consumer. The OBR’s growth forecast for 2012 to 2016 is spilt into two categories only: private consumption and everything else. Quietly, private consumption is expected to be a crucial driver of Britain’s growth in the years ahead. In November, the OBR expected 12.5% of all growth in 2012 to come from private consumption. It has now revised that up to 37.5%. That is a massive change in just five months. Indeed, over the next five years to 2016, the OBR now expects more than half of all growth to come from private consumption. Hon. Members will remember that that is the “wrong” sort of growth, according to Government Members previously. The OBR believes that in four of the next five years, consumption will add more to gross domestic product than net trade, and consumption is expected to be a more important driver of growth and business investment in every year of the forecast.

For all the Government’s talk of exports and business investment-led recoveries, the forecast now suggests that they are banking on a return to consumer-led growth while simultaneously condemning it and laying absolutely no foundation for it. They privately count on consumer growth, yet politically condemn it. What tells us that consumer-led growth is not coming from current Government policy? According to the Office for National Statistics, hopes for growth from the wider UK economy in the first quarter of the year were dealt a further blow as retail sales volumes were revised down to 0.3% growth from an initial estimate of 0.9%.

The Chancellor also said the Budget is about business, but the real policy should have been getting UK businesses to part with their hoarded billions of pounds in cash, and getting banks to lend. The Chancellor has not addressed that hoarding. Today, BT paid off a considerable deficit regarding its pension scheme—£3 billion by the end of the month and nine annual payments of £325 million. BAE Systems has a £2.1 billion cash pile, but in the past two years has cut 22,000 jobs, including 3,000 in the UK, while returning £2.2 billion to shareholders. The story is similar at Apple and AMEC, which ended 2011 with £521 million of cash and unveiled a £400 million share buy-back programme.

It is a familiar tale across the country. Last year, shareholder dividends from listed companies jumped 19% to a record £67.8 billion, according to Capita Registrars, and are expected to hit a new high of £75 billion this year. After nearly two years of this Government, something has clearly gone wrong. The last 15 months saw the UK economy contract. Business investment is shrinking. In the final three months of 2011, it fell by 5.6%—the single biggest drag on growth, pulling the economy down by 0.5 percentage points. Business investment is still more than 15% below its pre-recession peak. Last year, the OBR forecast business investment to deliver 6.7% growth. It did not; it shrank by 2%.

According to the Bank of England, 2012 is not looking encouraging either, despite the OBR’s hopes. The Bank’s most recent agents’ survey from February found:

“Investment intentions continued to weaken, suggesting little growth in spending on capital over the next twelve months”.

John Hawksworth, of PricewaterhouseCoopers, says that he cannot see a recovery in business investment until 2013. Simon Hayes, of Barclays Capital, says that the OBR’s projections require a level of spending not seen in 30 years. Most pointedly of all, BAE has made it clear that business will not invest if it cannot make the returns. At the moment, the numbers simply do not add up.

Corporate balance sheets are brimming with cash. According to official data, UK companies are tucking away about £70 billion a year, which is twice as much as before the crisis. Some analysts have estimated the total stash of cash under the corporate mattress at £750 billion. Investing just £20 billion of that in the UK would deliver 1% of growth.

We need a Budget for households, but unfortunately the Government are wedded to supply-side economics. Until we have demand policies, that money simply will not be spent.

Living Standards

Tom Blenkinsop Excerpts

Monday 5th March 2012 Commons Chamber

[Mr Gauke]

If we had pursued the policy advocated by the Opposition, our market rates and gilt yields would be going up and we would be facing a very significant problem. We have record low interest rates at present. That does not necessarily mean mortgage rates will remain at their current levels for ever across the board, but the fact is that the tough steps we have taken have ensured that interest rates are much lower than they would otherwise be, which is to the advantage of both mortgage holders and businesses looking for finance.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

We have debated this question before, and it was clear that quantitative easing is what has led to the reduction in interest rates. The recent £50 billion of quantitative easing has, in effect, been an attack on pension funds; it has wiped out almost a quarter of private pension funds compared with the situation before the last general election. Will the Minister confirm that further credit easing will also affect private pension funds?

[Mr Gauke]

Credit easing will benefit businesses. I should also point out that the current low interest-rate trend was in place before the additional quantitative easing undertaken by the Bank of England.

The simple truth is that the Opposition have no credible response to the economic challenges we face. It took the coalition Government five days to come together in the national interest to forge a joint commitment and approach to tackle the deficit, yet 18 months later the Opposition remain confused and conflicted. Every now and again a member of the shadow Cabinet—even the shadow Chief Secretary—crops up to say they will be fiscally credible but, in practice, they oppose welfare reform, for instance, and say it affects the poorest, even when a household receives more than £26,000 a year. They also oppose reforming universal benefits, even though that protects the richest, and they oppose anything that affects the squeezed middle. Clearly, their economic plan involves more spending, more borrowing and more debt.

However many Opposition days they have, and however many economic policy relaunches they make, it is clear that Labour was irresponsible in government and is irrelevant in opposition. We are fixing the failures of the past and are repairing our economy. This Government are committed to supporting families across the country through difficult economic times.

It is, of course, a tough challenge to secure our economic stability and lay the foundations for sustainable growth, but we are determined to restore the UK’s prosperity, and we will put fairness at the heart of our recovery by protecting living standards for our poorest and most vulnerable families, by lifting millions out of tax, by taking steps to reduce the cost of living and by refocusing welfare on those who need it most. Yes, that means that those on the highest incomes will bear the heaviest burden as we pull together to tackle the deficit, but it is absolutely right that those who can contribute the most do so.

A fair and sustainable recovery demands leadership, and that is exactly what this Government are providing. It is this coalition Government alone who are determined to face up to today’s economic challenges, and to build tomorrow’s fair, prosperous and sustainable economy.