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Responses such as that give me confidence in the future. I am aware that there will be undulations and
oscillations in the economy, but capitalism is cyclical. However, the Chancellor and his Treasury team have tried to smooth some of those undulations over the past 10 years. I think that they have done well, in general terms, and the outlookas far as one can ever tell the futureis relatively rosy.
I turn now to tax credits for research and development. I represent a west midlands constituency to which manufacturing is very important. The hon. Member for Dundee, East will recognise what I mean. The Government can do only so much, without returning to the discredited days of a nationalised manufacturing industry. A tiny minority of people in my area wanted to return to that after the closure of Coventrys Peugeot plant, and an even smaller minority wanted it after what happened with Rover in Birmingham. Both closures were devastating, but even so they were handled very well.
If we are not to renationalise, we need to encourage R and D through the use of tax credits. What is the UKs role in the global economy? I believe that we are a niche marketer in certain sectors. For instance, 8.5 per cent. of our economy is devoted to finance matters, and we are also a niche market in Formula 1 racing, which has a manufacturing crossover.
On a global scale, then, the UK is a niche marketer. Our population amounts to one fortieth of the combined populations of China and India, the two most populous countries in the world. To succeed as a niche marketer, the UK must, as has been noted, put the intellectual property rights regime in order, because it goes hand in hand with R and D: no one will develop new products if the ideasand the profitsare going to be ripped off by someone else.
A little remarked-on element of the Budget is that the R and D tax credit for small and medium-size companies is to rise from 150 to 175 per cent. Not only that but, from April 2008, the tax credit for non-SMEs is to rise from 125 to 130 per cent. That is not a huge increase, but it sends the message that the Government are open for business on R and D. Moreover, the Budget contains investment incentives, with the annual investment allowance and the proposed reformation of the capital allowances regime. All of that is very helpful. Even when corporation tax is cut to below the EU27 per cent. average, as it is in the Budget, we still have to hope that companies stay in the UK and come to this country and invest for jobs and productivity. We can hurl dry economic statistics back and forth across the Chamber, but we are talking about peoples lives.
This is the sixth Budget debate in which I have participated on Budget day. There is usually a barrage of criticism and comments from the Conservatives about productivity and Government debt, coupled with stories of doom and gloom, but after 10 years, they are running out of steam [ Interruption. ] The hon. Member for Ribble Valley (Mr. Evans) is laughing, so we may hear something later, but so far we have heard hardly anything about productivity and not much about Government debt.
The right hon. Member for Wokingham referred to productivity, but only in one undefined sensewe had to infer the definition. In fact, he was talking about output per hour worked. That is an important measure, but we must also consider the output of the economy as a whole and the output per annum per person of
working age. When we have such a high employment rate and such a high proportion of people of working age in workthe number of people in the UK labour force is at a historically high 29 millionthe actual pie is bigger. Taken in the round our economy is more productive, so there is a bigger pie to divide. Of course, output per hour worked is important, although I accept that there are questions about the statistics on how much growth there has been and how much we have faltered, but the total pie to be divided among people resident in the UK continues to expand.
High productivity is continuing and, as far as I am aware, gross national income per capita in the UK remains in advance of Germanys. I think our gross domestic product per capita is ahead of Germanys, too. Fifteen years ago, if we had told most people in western Europe that the UK would overtake its European competitors in terms of per capita GDPor gross national income per capita, which is a slightly different measure although both are measures of prosperitythey would have said, We think youre wrong. Were not expecting a war in western Europe and we cannot see how else that would come about. I admit that I would have said the same: Chances of us thrashing Germany economically in 15 years time? Nah, wouldnt put my money on that. Not that I am a betting person.
Some of the reasons for that growth are what my hon. Friend the Economic Secretary would call exogenousexternal factorsbut some of them are due to what has been done by the Government and the Treasury team over the past 10 years. That is not to say that things are perfect, but taken in the round we have gone in the right direction in terms of peoples lives and the prosperity of our country.
Mr. Mark Field: I cannot let the hon. Gentlemans remarks go without some comment, not least because my mother is German and I visited Germany many times in the 1970s, 1980s and 1990s. One of the issues for that country was the sheer cost of reunification. Much more important in the UK, as German politicians and business men would confirm, were the micro-economic changes of the 1980s under the Thatcher Government, which made a fundamental difference for our future competitiveness. I hope the hon. Gentleman will give credit where it is due for the work that has been done not just in the past 10 years but in the past 25.
I accept that there were some positive changes under the 18 years of Conservative government. There is one with which Labour Members certainly agree: workers were allowed to strikewithout a seven-day ballot noticefor safety reasons. There may have been economic positives as well, but, blow me down, I can never quite bring them to mind when I am asked questions such as that by the hon. Gentleman, for whom I have a great deal of time, and his colleagues. I can never quite remember all the positives, but I can rememberperhaps this crowds out the positivesa whole lot of negatives, be they the interest rates or the high unemployment. I could recite them all and Members on both sides of the House
could recite them all. Whether one agrees with them or nota lot of Opposition Members do not, but Government Members dowe could all recite them. There were all kinds of negatives. Taking things in the round and trying to be even-handed with the hon. Gentleman, the negatives certainly outweighed the positives, in as much as there were any positives.
Mr. Stewart Jackson (Peterborough) (Con): I wonder whether the hon. Gentleman became a Labour Member of Parliament to witness a Labour Chancellor increasing the tax burden on those who earn leastunder £17,000in order to curry favour with middle England.
Rob Marris: This Budget is good for those at the lower end of the income tax scale as it were, because of what has happened with tax credits and so on. I refer the hon. Gentleman to page 208 of the Budget book in terms of what has happened with income tax. Yes, there are people who will lose because of the abolition of the 10p rate, but there are people skewed towards the bottom end of the income scale who will gain, so the measures are redistributive and I support that. I think that most Labour MPs, if not all of them, would support redistribution from the upper end of the income scale towards the lower end of the income scale. I am comfortable with that as a Labour MP.
I want to move on from some of the macro-economic stuff to pay tribute to the speech of my hon. Friend the Member for Nottingham, South (Alan Simpson) on climate change. He made a couple of remarks on what I might unashamedly call my specialist subject, or aspect, of climate change: adapting to its effects. But apart from those couple of remarks, all his speechit was very worthy and good and I agreed with quite a lot of itwas about dealing with the causes of climate change and what we can do to cut emissions in this country and encourage people to generate their own electricity, and all those kinds of things. He did not deal with adapting to the effects of climate change.
We have a crazy situation in this country, whereby, when we talk about climate change in public or parliamentary debateswhether we are talking about it in some kind of ecological context, or in a Treasury context, as we are todaywe talk about the aspect that is beyond our control on a world scale: causes. The United Kingdom is responsible for 2 per cent. of world emissions of greenhouse gases. That is twice as high as it should be given that we have 1 per cent. of the population. However, in order to slow down and reverse climate change we need international agreement and action. The Government have a great record on trying to achieve that, but they have not really achieved it so far in relation to China, India, or the USA. The public debate is skewed in as much as we discuss that which is beyond our control, but we do not discuss that which is entirely within our control: dealing with the effects of climate change.
The effects of climate change are already upon us. One can see that by looking at how early the daffodils came out this year, or whatever measure one wants to take. Whether one looks at anecdotal evidence, or the hard science, we already have the effects of climate change, but we do not talk about what measures,
including fiscal measures, that we can use to adapt to the climate change that we already have and that, according to the preponderance of scientific knowledge, we will have for at least the next 40 years, even if the world gets its act together and stops pumping out nearly as many greenhouse gases as it does now. If we stopped pumping out those gases tomorrow, we would still have to deal with the effects of climate change. They would grow roughly on a bell curve over 20 years and then start to come downthat is if we stopped all the greenhouse gas emissions, or the excess ones, tomorrow, which is not going to happen.
Mr. Brooks Newmark (Braintree) (Con): I am somewhat curious, although I sympathise with what the hon. Gentleman is saying. What aspect of the Chancellors Budget will change the behaviour of consumers, whom the hon. Gentleman sees as causing the greenhouse gases, rather than measures as merely revenue-collecting mechanisms?
Rob Marris: With respect to the hon. Gentleman, he appears to be completely missing the point that I am making. I am talking not about the causes side of the equation, although I have referred to it by saying that we spend too much of the available time talking about it, but about the effects side of the equation. I think that when the hon. Gentleman talks about changing behaviour, he is referring to, for example, people flying less. I am saying not that he advocates that, but that that is the sort of behaviour change to which he is referring. However, that is on the causes side of the equation; I am talking about the effects side of the equation.
Mr. Newmark: We are talking about the Budget, and in addressing the Budget one should examine what the Chancellor is doing to change the behaviour that has led to the effects about which the hon. Gentleman talks. I would thus once again like to ask him what aspect of the Budget will change the way in which people behave, rather than charge already-rich people with 4x4s a few extra pounds that the Chancellor can shove into his coffers.
Rob Marris: I humbly suggest that the hon. Gentleman should make his speech and let me make mine. I am not talking about causesthat is not the point that I am trying to make. If he wishes to speak about causes and behaviour, he will be very welcome to do so, if he can catch the eye of the Speaker or Deputy Speaker. I am talking about effects. There is something in the Budget about effects. It is not enough, but I will go on to speak about it.
Last Thursday, the Minister for Climate Change and the Environment and I went to a conference in Oxford that was held by the UK Climate Impacts Programme. It was very weird for me to go to a conference in the morning that was held at my wifes old college and then to go to a community meeting in the evening that was held at her old primary school, although that seemed to bookend the day nicely. UKCIP is doing wonderful work on climate impactsthis is on the effects side of the equationalthough I think that it is underfunded, so I hope that the comprehensive spending review will address that. The Organisation for Economic Co-operation and Development places us as a world
leader in addressing the effects and impacts of climate changethe adaptation, as the scientists call itbut we need to do far more.
Many of the issues that we need to address relate to water. Summer droughts will increase, as will winter flooding. It is likely that coastal erosion will increase, as will coastal flooding caused by higher tides. Sadly, I think that that took place in north Norfolk last night. We need to address the effects of those changes, whether that is by building better sea defences, larger diameter storm sewers to take away excess winter rains, or more reservoirs. There is a whole host of stuff that we could do, although I will not go into it nowanyone who is especially interested can look up in Hansard my previous speeches on the matter. UKCIP is driving forward, with an incredible amount of regional involvement, all the stuff that is going on below the surface on adapting to climate change that we never really talk about in the House.
Mr. Newmark: Let me address the effects that the hon. Gentleman is talking about. In my constituency of Braintree, the village of Coggeshall faces severe flooding. However, when we ask the Department for Environment, Food and Rural Affairs for money for flood defences, we are told that it is not available. What aspect of the Budget showed that the Chancellor might be allocating more for better flood defences in this country?
Rob Marris: That ultimately is a matter for the Department for Environment, Food and Rural Affairs. In the past 10 years, under this Government, the flood defence budget has increased by about 35 per cent. in real terms. I hope that the hon. Gentleman and the House will forgive me if I am wrong, but I quote that figure from memory. That budget has gone up markedly, but I agree with the hon. Gentleman that it needs to go up more. I have said that to the Government on a number of occasions, and I hope that they are listening.
Climate change and international development are mentioned in the Budget, and that is very important, because historically, principally over the past 200 years, we in the rich north and west of the world have produced a great deal of pollution and greenhouse gases, and we have adversely affected the climate around the world. The area worst affected is, crudely speaking, in the belt between the tropics. We caused the problem, and we are feeling the effects in our country. The Government should do more to deal with those effects, although they are already doing some stuff, but we have caused problems elsewhere in the world, too. We invade countries, steal their people through slavery, steal their raw materials, and leave them with the heritage of a ruined climate and no economic development. I am delighted that there is money for the problem in the Budget; to some extent, it is only symbolic money, but I am delighted that the Chancellor has recognised the issue in the Budget.
The Government recognises the need to urgently do more both to mitigate climate change and to help developing countries adapt to its impact.
The Government will allocate £50 million from the fund to help tackle deforestation in the Congo basin, led by Nobel prize winner Wangari Maathai.
The chink in the Treasurys armour, if I may say so to Ministers, is that it should do more on adapting to the effects of climate change. We need to take action internationally, because we bear responsibility as a rich, formerly imperialist western country. We also need to do more within the United Kingdom, and I hope that the Government can do more.
I am delighted to say that clause 37 of the Governments draft Climate Change Bill incorporates the proposal set out in my ten-minute Bill, which I have now withdrawn, for periodic reporting to Parliament of steps taken by the Government to address the effects of climate change. We are starting to move, but I urge the Treasury team to do more in that respect. It is right that we should talk about our international leadership and responsibility on the causes side of the equationthat is, in respect of emissions, greenhouse gases and so on. However, we must not neglect the side of the equation that is totally within our control as a sovereign countrythe need to deal with the effects of climate change.
Mr. Nigel Evans (Ribble Valley) (Con): I do not know how much carbon was emitted during the speech made by the hon. Member for Wolverhampton, South-West (Rob Marris), but a lot of trees would need to be planted to offset it. This was supposed to be the green Budget, but it is the Chancellor who thought that we were all green, and that we would buy everything that was said at the Dispatch Box. Perhaps we should change Budget day completely, and just publish the Red Book. We would all sit down and read it, and then we would all be able to work out for ourselves what was in it. We would not have all the spin, or have some points excluded, or have the fast delivery of some announcements. That delivery means that it is only when we sit down and work it out that we realise, That was a couple of billion of pounds that was just spoken about.
It is amazing how much emphasis was put on the finale of the Budget speech, about the 2p cut in the basic rate, but the simplification of the tax rates, which means the disappearance of the 10p rate, was rattled through. When we sit down and work through all the tax changes in the Budget, including the national insurance contribution threshold rise, we realise that overall there has been an increase in taxation, and an increase in business taxation, too.
Sammy Wilson: Does the hon. Gentleman accept that on page 301 of the Red Book, the line that deals with increase in taxes on income and wealth shows that over the next year there will be a change of 8 per cent., while the Chancellor is predicting growth of 2 to 3 per cent., so the real burden of taxation will increase?
Mr. Evans: The hon. Member for Nottingham, South (Alan Simpson) spoke about cheat infidelity, which would enable people to offset their cheating behaviour. We should do the same with something called cheat Budget: one announcement is made to make it look as if everything will be okay, but the devil is in the detail, which shows that there will be an overall increase. I remember that after one Budget, The Daily Telegraph chose to examine the impact on four families, but two days later it had to come back and reassess the position. Its original assessment was based on what the Chancellor said, but when it looked at the detail of the Budget, the impact on all the families was worse. The Budget should be far more transparent. When the Chancellor announces something, he should say what the overall impact will be. We ought to know how much money the disappearance of the 10p rate, as well as the increased thresholds for national insurance, will raise.
Mr. Newmark: Does my hon. Friend not agree that this is another classic case of the Chancellor giving something away with one hand but clawing back even more money with the other? A case in point is the impact on a single person without children earning £16,000 as an NHS maternity care assistant, or a police community support officer, who will pay more in tax but fail to gain from the tax credits touted by the Chancellor.
Mr. Evans: As in all cases, there are winners and losers. For the Chancellor to suggest that everyone will win in the Budget, and to dress up the 2p reduction as an additional bonus, is a somewhat dishonest portrayal of what the Budget is all about. There was one win-win situationthe landfill tax and the increase in the aggregates levy mean that the Chancellor will earn money when a hole is created, and then earn more money when the hole is filled up. That is one environmental measure that puts him in a win-win situation.
My hon. Friend the Member for Braintree (Mr. Newmark) said that the wealthy could afford the tax on 4x4s, but in the main, 4x4s in the Ribble Valley are working farm vehicles. The hard-pressed dairy farmers on my patch earn small sums of moneysome of them earn less than £13,000; if we counted up the hours that they work they would not even earn the minimum wagewhile milk production costs have increased, and the money that they obtain for their products has been reduced for various reasons, including the strength of the supermarkets. It is not right that their working vehicles should be taxed even more, and I urge the Government, even at this late stage, to exclude from the tax increase 4x4s used as farming vehicles.
Daniel Kawczynski (Shrewsbury and Atcham) (Con): As chairman of the all-party group on dairy farmers, may I reinforce the points made by my hon. Friend? All the hard-working Shropshire farmers in my constituency who are struggling to make a living will be badly hit by the tax on 4x4s, which they need for their work.
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