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I commend the Chancellor’s proposals on pensions. The decision several years ago to raise the state pension by, I think, either 1p or 10p remains a blot on the history of this Government. That was a terrible error of judgment. The measures in this Budget are the right thing to do, however. It is right to raise the winter fuel allowance from £200 to £250, and from £300 to £400 for those over the age of 80. That is exactly the right approach to dealing with spiralling energy costs. It was right, too, to increase child benefit to £20 a week and to bring that forward by a year.
I shall not spend much time dwelling on the environmental aspects of the Budget, partly because the Secretary of State for Environment, Food and Rural Affairs made such an eloquent speech that there is no need for me to repeat everything that he said. I very much agree with what he said, and I am glad that he had the opportunity to put forward those views. Like all hon. Members, I am deeply concerned about climate change, and about what Governments such as ours can do on their own without the support of economies such as India and China. My hon. Friend the Member for Middlesbrough, South and East Cleveland (Dr. Kumar) is the chairman of the all-party British India group. It is all very well to say to the Indian and the Chinese people, through their Governments, that they have to control their growth, while we—and the United States in particular—continue to do what we are doing and to make the ozone layer even thinner and the hole in it even bigger.
This Government are taking the right approach to climate change. I drive a Toyota Prius. I have done so for the last eight months, and I am glad that I bought it before all the Budget changes. I am sure that many people will now be rushing to buy these green cars. It also saves me a lot of money because I do not have to pay the congestion charge. I am not a walking advertisement for Toyota, but I believe that it is important that other car manufacturers follow its lead. The choice of such vehicles on offer at the moment is not that great, as we can see when the ministerial cars rush into Speaker’s Court. Unfortunately, I have got into the wrong car once or twice, believing it to be my own, and surprising the Minister sitting in the front seat. The choice of such vehicles should increase greatly, to allow more opportunity for people to buy them.
This is an excellent Budget. It is the right Budget at the right time, given by the right Chancellor, and I wish the Government well in ensuring that it passes through the House without difficulty.
7.17 pm
Mr. Henry Bellingham (North-West Norfolk) (Con): I am sorry that the right hon. Member for Leicester, East (Keith Vaz) got into the wrong car. His story reminds me of ministerial retirements, when the former Minister gets into the car but nothing happens. At least the right hon. Gentleman got into his own car eventually and drove off. It is always a pleasure to follow him in a debate. I listened to his maiden speech, and he has always been an assiduous campaigner on a number of issues. He touched on many different aspects of the Budget today.
I want to focus on two subjects that affect my constituency deeply. One is small businesses; the other is the plight of pensioners. As many of my colleagues
have pointed out, this Budget was memorable for being very boring, and for having a great deal hidden away. For example, one of the most significant parts of the Budget was not even mentioned by the Chancellor in his Budget speech. That was the raising of the earnings ceiling for national insurance by £100 to £770 a week, which will mean that anyone earning more than £40,000 will pay an extra £520 a year. That stealth tax has been hidden away, and I wonder how many other horrors are lurking in the fine print. Perhaps this is not surprising, however, given that this country has the largest budget deficit in western Europe.
It is tough out there for small businesses at the moment. The report produced by the British Chambers of Commerce in March 2008 stated on page 5:
“Small firms will be particularly vulnerable in an environment in which lenders become more risk averse. Even if official interest rates fall, small firms may find it harder and more expensive than in previous years to borrow. If you add these factors to the UK’s growing regulatory burden—the cumulative cost of new regulation to business since 1998 is now nearly £66 billion—then SMEs are going to find it tougher to grow in the coming year.”
The most recent quarterly survey of the small business trust looked into the barriers to growth, which are consistently cited by small businesses as taxation, employment regulations and business rates. It states:
“For small micro-businesses, taxation is clearly the priority, followed by increased concern over late payment and bad debt. The small businesses employment regulations remain the main barrier to growth, then taxation.”
Unfortunately, although on examination the Budget contains some small plus points for small businesses, at a time when those businesses are facing many serious challenges those plus points are not nearly beneficial enough to wipe out the minus points.
Of course we welcome the further £60 million allocated to the small firms loan guarantee scheme—an excellent scheme, brought in under the previous Conservative Government—which will support a 20 per cent. increase in lending. We also welcome the £12.5 million from the Treasury for a venture capital fund to back women-owned businesses. Furthermore, there is a new £30 million enterprise capital fund to help provide debt and equity finance for small and fast-growing businesses. The Chancellor, in common with previous Chancellors over the last 10 years, has said that the Government are now going to make a real effort to bear down on regulation. Well, we have heard that before. We are also to have a review of Whitehall procurement to see how the 30 per cent. procurement figure can be reached by small businesses.
All that is positive news, and although we are talking about a few tens of millions of pounds here and there—I do not begrudge it—those measures pale into insignificance when compared with the £1 billion hit that small firms will have to take as a consequence of the increase of 21 per cent. in the small firms corporation tax rate. We also need to compare any positive changes with what is happening on the capital gains tax front. CGT on business assets, as announced last year, is going up by 80 per cent. to 18 per cent. Despite the new entrepreneurs relief scheme announced by the Government, that is still very bad news indeed.
Small firms also have bearing down on them like an express train the Government’s plans to hit income shifting or income splitting. Of course I welcome the
delay until next year and the fact that there will be further consultation, but surely after all the Government have done to try and encourage husband and wife businesses and small businesses to incorporate, that is exactly what the Government should not be doing.
I am also very concerned, as is the whole small business community, about the plans announced in the Budget fine print to give tax inspectors the right to turn up unannounced to demand records at a premises without an official warrant. I find that very disturbing. I know that the Government are very keen to give tax inspectors the same powers as customs officials, but they perform very different roles. Customs officials can, quite rightly, bug telephones to intercept letters and e-mails in the fight against drugs and gun crime. I believe that giving tax inspectors this power of entry without an official warrant will undermine trust and confidence in the small firms sector. When combined with the Government’s other plans to require banks, building societies and other third party operations to hand over customer records, we clearly have a recipe for the destruction of confidence in this sector and a worsening of its relationship with the Government.
Small businesses face many particular and difficult challenges in rural areas, so will this Budget help them at all? It may provide a small amount of help at the margin, but it certainly will not help those post offices whose closures are due to be announced later this week. In my constituency, there may be 17, 18, 19 or 20 small post offices closing, in addition to the dozens that have already closed in such areas and in addition to those already closed in towns under the Post Office urban renewal scheme.
We now hear in today’s press that sub-postmasters will not get compensation if they offer within one year lottery or bill payment services or set up private mail or courier services. If they offer those services, they will not receive the compensation, which I find quite disgraceful. I am sure that Opposition Members who represent rural constituencies will feel the same—[Hon. Members: “Hear, hear.”] Why are the Government restricting the trade of sub-postmasters when all they have left is their village shops and of course they want to offer other services?
I feel very strongly that it is not just post offices, but other businesses in rural areas that are suffering. Let us consider pubs or public houses, which are so often the focal point in villages. Up and down the country, 56 pubs are closing every month. They are being sold off for housing or for development and they are faced with many problems arising from the smoking ban, the availability of cheap drink in supermarkets, the impact of the breathalyser and so on. I am not saying that we should not have had some of those changes, but now is not a good time for the Budget’s increases on beer, wines and spirits, which will hit pubs disproportionately and put extra pressure on public house trade.
If I look around my own constituency, I can find umpteen examples of pubs that have closed over the last few years. The Hogshead in King’s Lynn high street closed recently, and in today’s press, the Woolpack in the same town is reported as saying that trade is down by a third. There are many other examples of pubs threatened with closure, although there are one or two
brighter lights. I opened a new refurbished pub last Friday—the Crown in Middleton, which has been bought by an entrepreneurially inclined publican who has three gastro-pubs. He has done a complete refurbishment in that pub and I was extremely impressed by the work he put in. I have no doubt that, with his determination and the staff’s commitment, that pub will be a great success. On the other hand, the outlook is bleak and it will only get worse, thanks to the changes announced by the Chancellor in the Budget.
What about the elderly and pensioners in our constituencies? The hon. Member for Nottingham, South (Alan Simpson) made an excellent speech on that subject and his arguments were reinforced by the hon. Member for Leyton and Wanstead (Harry Cohen). Much of the very good work done by the Warm Front initiative has now been undone—so much so that 4 million households now face fuel poverty.
Many pensioners in my constituency—and in the constituencies of my hon. Friend the Member for Leominster (Bill Wiggin) and my hon. and learned Friend the Member for Torridge and West Devon (Mr. Cox)—are trying to budget more efficiently with pre-paid meters, but are penalised for doing so. That needs to be looked into further. I certainly agreed with the hon. Member for Nottingham, South when he said that the winter fuel payment increases were welcome, but were certainly not likely to make up for the continuing increases in fuel prices.
There is one other measure in the Budget that many pensioners in my constituency will find very difficult to understand—the abolition of the 10 per cent. income tax band, which will have a serious impact. Many pensioners who retired before 65 and are on modest incomes of between £5,700 and £16,500 will be seriously disadvantaged. On an income of £10,000 in 2007-08, they would pay £782 in tax, but the abolition of the 10 per cent. tax band will mean such a pensioner having to pay about £150 more. That is a lot of money for people on fixed incomes. Those are the same people who have been subjected to year-on-year inflation-busting increases in their council tax bills.
I do not blame Norfolk county council, the main precept raiser in Norfolk, as it has been asked to provide many more services and functions with less Government grant. It has been asked to take on those commitments and it is providing those services, but it has been faced with the invidious choice of either cutting services or putting up the council tax. It has gone for modest council tax increases, but year on year, those are inflation-busting. Of course, the increases will hit hardest of all those people on fixed incomes.
In my constituency, those people—the pensioners in particular—will also be hit by the closure of post offices. They have been hit, too, by the increase in motoring costs. Often, their one luxury is going down the pub. That is also being penalised, so their quality of life is deteriorating, but we heard nothing in the Budget that will put their minds at rest, certainly as far as the council tax is concerned. Therefore, I urge Ministers and the Secretary of State to consider devising a scheme to give pensioners a discount on their council tax. That is what my party offered at the last election, and indeed at the election before that. We offered a straightforward non-means-tested discount to pensioners, because we felt the council tax was simply far too great a burden for many millions of people up and down the country.
This has been an interesting debate so far, and it goes on, but as a number of my hon. Friends and Labour Members have pointed out, we live in frightening times. A characteristic of the 2008 Budget is giving with one hand and taking away with the other. Yes, the Government have tried to be green, but the hon. Member for Nottingham, South demolished their green credentials. I hope that I have shown that their small business credentials do not add up to a row of beans. Furthermore, there is little joy for pensioners.
Earlier today, the Prime Minister talked about regulating sovereign funds. Is it not ironic that this country does not have a sovereign fund? Norway has one, as do many other countries around the world. We cannot afford one. It is a sad indictment of the Government and their economic policies over the past 10 years that the fiscal, trade and budgetary positions are at such low ebb just when the sub-prime credit crunch and the worldwide recession are starting to bite.
My right hon. Friend the Member for Witney (Mr. Cameron), the leader of my party, was quite right when he said that this Budget is characterised, above all else, by the general perception of the markets out there that the Government have no room for manoeuvre because they did not put money aside when times were good. Unfortunately, it is our constituents who will suffer, and they will do so because there is not that room for manoeuvre, not least to implement those green policies, which the Government promised us on so many occasions.
7.32 pm
Kelvin Hopkins (Luton, North) (Lab): It is a great pleasure to follow so many good speeches. There are too many to mention, although I shall refer to one in particular: the superb contribution—someone else’s description—from my hon. Friend the Member for Nottingham, South (Alan Simpson). His mastery of the world situation and of the energy world is unparalleled in the Chamber. I am sure that no one feels uncomfortable about my saying that.
I was, 27 years ago, the joint author of a substantial booklet entitled “Energy—A Planned Policy” for the National and Local Government Officers Association. We wrote a lot about renewable energy, and one could read out chapters of that book now and they would sound current, because the things we are saying now we were saying then, all that time ago. We were beginning to become aware of the problems of carbon dioxide in the atmosphere, and we knew that we had to change the way we produced and used our energy. We said all sorts of things at that time.
Depressingly, the money spent by the Government on renewable energy research was tiny at that time, and it was cut just after we published our pamphlet. All these years later, it is not so surprising that Germany has 360 times more installed solar capacity than we have—so much more capacity for a country that is not much bigger than ours—and 10 times more installed wind capacity. Those staggering figures showed that the Germans looked ahead, whereas we did not. We now realise that we are way behind and are trying to catch up.
We are an island surrounded by waves, so we have the potential for tidal power on the Severn and elsewhere—indeed, possibly on the Thames. We have
wind power and all sorts of possibilities. This country is not that sunny compared with Africa or even southern Europe, but we have sufficient sun for solar energy to make a major contribution. However, we have not done that and we are trying to catch up.
I am pleased that my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs has come back to the Chamber to listen to my speech, although he is perhaps here not specifically for that purpose and just happens to have returned while I am speaking. I hope that he will use his influence in the Cabinet to argue for much more radical renewable energy measures, to ensure that we start to make progress and try to catch up with Germany and the others who are so far ahead of us. We need to do so.
I want to talk more broadly about the Budget. Like others, I think it is a “wait and see” Budget. I think that the Chancellor looked over a chasm and thought, “I am not going to do anything too radical today, because tomorrow there may be all sorts of problems, depending on what happens in the American economy in particular.” So, he has made relatively marginal changes—some of them welcome, and I applaud him for that—but done nothing very radical.
If, as seems likely, recession takes hold in America, spreads to the rest of the world and has some effect on us as well, the Chancellor may need to take more radical measures to deal with it, but if we have a recession of any kind, one should expect a spending deficit, because that is what happens in recessions. One does not want a tightening of fiscal policy at the beginning or in the middle of a recession. We should be relaxing fiscal policy, and we may need to do so.
We are now realising that we must re-establish the importance of all the levers of macro-economic policy and put them in the hands of the Government. Interest rates—in theory at least—are with the Bank of England, but it is unthinkable that the Bank would look at just the inflation rate and decide interest rate policies on that basis. It must consider the performance of the economy as a whole. Unusually, I agree with the right hon. Member for Wokingham (Mr. Redwood), who said that the last thing one wants to do in a recession is raise interest rates to deal with inflation. Inflation will be ironed out by the recession.
Much more dangerous than inflation at such times is deflation, as the Japanese found in the 1990s. Falling prices and people abstaining from spending because they anticipate price falls can create a vortex that causes terrible damage to an economy. That must be resisted at all times. Apparently, the Japanese have as a national characteristic a compulsion to save all the time. In recessions, we want people to spend, not save. The Japanese Government apparently gave tokens to poor people to get them to spend—they would not spend money—but they started to save the tokens, so there was a serious problem. Deflation is much more worrying than inflation and the Government should ensure that the Bank of England does not start tightening interest rates at this moment. In my view, interest rates should indeed be considerably more relaxed.
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