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Ways and Means
Budget Resolutions and Economic Situation
amendment of The Law
Debate resumed (Order, 24 March).
That-
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide-
(a) for zero-rating or exempting a supply, acquisition or importation,
(b) for refunding an amount of tax,
(c) for any relief, other than a relief that-
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
4.25 pm
The Secretary of State for Communities and Local Government (Mr. John Denham): This country has faced the deepest recession in living memory and the Budget outlines how we will secure the recovery and the future in a way that is sustainable and fair. The Budget is a new growth plan for the future. At its heart is a £2.5 billion one-off growth package to help small business, promote innovation and invest in national infrastructure and key skills. It is a Budget to secure the recovery, tackle borrowing and invest in our industrial future. It continues targeted support for businesses and families where and when it is needed and it sets out how we will stick to our plan to halve the deficit within four years.
When the global recession hit, we faced a choice as a Government: to stand aside and leave the economy to the markets or to step in and protect people from the worst effects. The Opposition could have joined us, but they did not. They turned their backs on people up and down the country. Their do-nothing approach would have left communities to fend for themselves. They were wrong then and they are wrong today, and they would put the recovery at risk.
There are signs of desperation from the Opposition. Two months ago, they said that not doing more on the deficit was "moral cowardliness." We then heard from them about spending promises on the married man's allowance, tax give-aways for the richest estates, selling off the banks at a discount rate rather than getting taxpayers' money back, and last week they implied that there would be billons extra to increase personal allowances. Today, it is national insurance contributions. They are promising the impossible: tax cuts, deficit cuts and spending commitments all at the same time. It is an incompetent economic plan that would put the recovery at risk.
My right hon. Friend the Chancellor made the tough decision to put an extra penny on national insurance, but that will come into effect only in April 2011, after
the recovery is secured, and 60 per cent. of the revenue from our fair tax increases comes from the wealthiest 5 per cent.
We took action during the recession. We stepped in because we believe that it is Government's responsibility to help people during difficult times. That is why we have helped businesses, allowing them to spread more than £5 billion of tax over a more affordable period through the time-to-pay service. It is why extra job advisers and other measures are in place, so that unemployment is running at 500,000 less than that expected by independent forecasters last year. It is why we put in place help for people struggling with their mortgages, through which 330,000 families received help or advice over the past year.
Government action has helped people get through the recession, and businesses and families have been prepared to tighten their belts and take tough decisions. A strong competitive global economy for the future cannot rely on only one area or business model, but should rely on a diverse economy where everyone can play their part and has the opportunities they want. The Budget outlines how the Government will build that new recovery.
The Opposition do not have a growth strategy. We know that the shadow Business Secretary said a few days ago that the words "industrial strategy" send a shiver down his spine. Renewing our infrastructure is a vital part of the recovery. A strong country and a strong economy need a strong and modern infrastructure. Our transport, water, waste, communications and energy infrastructure needs to be built for recovery and to pave the way for a low-carbon economy. We need to invest in that modern infrastructure.
We can renew regional economies, renew and reinvent the manufacturing base, and build new competitive strengths in technologies, services and creative industries by investing in the skills, research and technologies that support them. The Government have already invested heavily in infrastructure, with more than £150 billion invested in transport networks over the past decade, and we have now set out plans for a new high-speed rail network. The "Strategy for national infrastructure", which was published last week, gives an overview of the current state of the UK's infrastructure. It identifies the challenges and opportunities, and sets out the areas for action. We will create a green investment bank to invest in low-carbon infrastructure, particularly in transport and energy, and we will invest an additional £250 million in making further progress on the managed motorways programme and other transport projects.
The Government have always sought to ensure that all parts of the country benefit from economic growth. Their action and investment have helped to narrow the gap between the most deprived neighbourhoods and the national average on health, crime, education and worklessness. Ten years of public investment and the creation of the regional development agencies have paid huge dividends-restoring our universities and science base to world status and closing a lot of the backlog in investment in Britain's transport system and infrastructure. There has been huge investment in apprenticeships and skills, and we are a far stronger country because of that, as we work to secure the recovery.
Supporting strong regions and regional recovery is not the policy of the Opposition, however, who are committed to scrapping the RDAs. That would threaten regional economic recovery, put at risk the strategic investment in jobs that the RDAs are helping to create, and bring uncertainty when every business group says that we need to build confidence. Every area of the country should share in the increased prosperity that will come with recovery, so Regional Ministers will have a bigger role in promoting growth to make sure that their areas benefit. They will be supported by a regional growth fund that is to be established by the RDAs to promote investment and support growth. Strong city regions will have more autonomy and freedom to promote growth, and accelerated development zones will be piloted to support projects that deliver key infrastructure and commercial development in our cities.
The Budget will ensure that there are opportunities for all as we recover from recession, and no one will be left behind. We will support low-income households by increasing the national minimum wage to £5.93, and we will increase support for families. We will extend the young person's guarantee beyond March 2011 to ensure that young people continue to be guaranteed training, work experience or a future jobs fund job if they cannot find work within six months. Everyone should have the opportunity to work and to thrive in their job, and no one should be left to a life on benefits. Today, my right hon. Friend the Secretary of State for Work and Pensions has published a Command Paper that sets out how we will guarantee help for people who do not find employment after two years and how we will introduce more individual and personalised help to people who are looking for a job.
In the recession of the 1990s, repossessions soared and the building industry took years to recover. Last year, we committed more than £2 billion to building an additional 20,000 new affordable homes for rent and low-cost sale and 20,000 homes on privately developed sites. The Opposition opposed the measures that will create and protect 45,000 jobs and 3,000 apprenticeships. When we made it a condition that apprenticeships should be created when public money is used to build new housing, the shadow Minister for Housing said it was "ridiculous" and "counter-productive". Housing investment of £7.5 billion, over two years, will fund the building of up to 112,000 affordable homes to rent and buy and about 15,000 private sector homes. It will also support an estimated 160,000 jobs directly in the construction and related industries and will create 3,000 apprenticeships, as I have said.
Dr. Phyllis Starkey (Milton Keynes, South-West) (Lab): My right hon. Friend will be aware that when the Select Committee on Communities and Local Government had a one-off sitting on housing and the credit crunch, all the witnesses from the house building and housing association sectors clearly welcomed what the Government were doing and said that it was not enough. Can he think of anyone from the house building sector who thinks that the Government should cut back their support for construction?
Mr. Denham:
My hon. Friend, who chairs that Select Committee, makes an important point. I am not aware of a single voice in the housing industry who believes that investment in housing should have been cut last
year. It is fair, however, to point out that, in January 2009, the right hon. Member for Witney (Mr. Cameron), the Leader of the Opposition, called for a cut of more than £1 billion in my Department's budget, nearly all of which-about £800 million-would have fallen on the housing programme. If the official Opposition's policies had been followed, far from building more houses, as we have done, there would have been fewer houses.
It would be interesting to find out whether any hon. Member believes that the country would be stronger today if those thousands of homes had not been started and if the thousands of people employed to build them had been out of work. I cannot see a single Member in the Chamber who thinks that the country would have been better off if we had not invested in those houses, yet the Conservative party's policy was that those houses should not have been built, that people should not have been employed and that apprenticeships should not have been created. All the rolling of eyes in the world cannot get away from the fact that that was, and remains, Conservative party policy. I am pleased that we have created jobs and that we are building homes for families in the future, and that has helped this country to get through the recession.
Looking to the future, the need for new affordable housing has only been intensified by the recession, so we will need to ensure-we set out how we will do this in the Budget-that local authorities allocate the land needed to support recovery in house building. That is in stark contrast to the approach of the hon. Member for Meriden (Mrs. Spelman), who wrote to local authorities to urge them to resist plans to allocate land for housing, although that has been widely condemned by everyone associated with housing and the construction industry. Withdrawing the fiscal stimulus early, as the Conservatives propose, would cut house building by perhaps half, because 40 to 45 per cent. of all recent new-starts have depended on public investment.
We need to take further measures to boost the housing market. We are introducing a two-year stamp duty holiday for first-time buyers for homes costing up to £250,000, which will help nine out of 10 first-time buyers. However, to pay for that, we will introduce an additional 5 per cent. stamp duty rate for homes costing more than £1 million-that is a fair approach. By reforming the council house finance system, we will let councils fund and run their own local housing stock. Some 10 per cent. extra will be released for maintenance so that homes do not fall below the decent homes standard again, and capacity will be provided to build 10,000 new council homes a year by 2014-15.
The Government believe that cutting the deficit does not mean damaging the front-line services on which people rely. The Budget continued our commitment to making £11 billion of savings a year by 2012-13 through greater efficiency and streamlining government, which includes £8 billion of savings set out in the operational efficiency programme. Local government can deliver savings of £2.1 billion towards that total in areas including greater collaborative procurement, increased back-office efficiency and the greater use of shared services. Up to £100 million can be saved by reducing energy usage in local authorities. My Department will identify savings of £200 million to be delivered in 2012-13, including through operational efficiency, work to reform our arm's length bodies, and a new approach to the regional tier of government.
Our public services must be as efficient, responsive and citizen-focused as possible. Through Total Place we are establishing the most radical changes in the delivery of public services for many years. We have high expectations of our public services. We want higher quality services that are more tailored to individual needs but more cost-effective, but not the bleak vision of the Conservative party's proposals for Ryanair councils under which people pay once in council tax and again in top-up charges for a decent service.
Mr. Michael Ancram (Devizes) (Con): The right hon. Gentleman spoke about efficiency savings. I quite see that savings can be made through greater efficiency, but why do we have to wait two years to start making those savings?
Mr. Denham: The answer, of course, is that action to produce efficiency savings is already well under way. In the current spending review-we are about to enter its third year-there is £35 billion-worth of efficiency savings. More than £5 billion of that will come from the local government sector, for which I am responsible. The programme of making efficiency savings is well established and will continue to develop; next year, we will continue to increase the savings that we make. Clearly, some savings take more time than that to be put in place. The development of greater shared services cannot be done on day one; these things have to be planned. That is why the Government have in place a credible programme of efficiency savings that we are delivering now, in this spending review, and we have set out further operational efficiency savings in the Budget. I think that the right hon. and learned Gentleman will give the Government credit for the consistency with which we have approached the drive for efficiency savings across local government and other public services.
Total Place has demonstrated the great value that can be gained for citizens and taxpayers by putting the customer at the heart of service design, and by working together to improve the outcomes of services and eliminate waste and duplication. In the Budget report, we set out a reduction in targets and in ring-fencing, and further reforms to the inspection system. That will be for all local government, but we have also set out two ways forward for local areas, local government and other public services. First, there is the single offer, where we encourage local authorities and other public services to have a pooled budget and to look at the redesign of services right across their local areas. Secondly, there are areas where local government and other partners may want to take a different approach to, for example, the provision of services for children, offenders or elderly people; again, they will have greater freedom to deliver and design services locally. Those approaches will produce radical changes in service delivery. They will produce better services for people, and they will offer greater possibilities for efficiency savings.
As we grow through recovery, the Budget sets out the Government's support for business. For expenditure incurred from April 2010, we will double the threshold for the annual investment allowance to £100,000 a year from £50,000. On capital gains tax, we will extend the entrepreneur's relief from the first £1 million to the first £2 million of gains made over a lifetime. We will work with industry on modifications to the enterprise investment scheme and venture capital trusts.
The Opposition are intent on scrapping capital allowances, but that would cripple the chances of advanced manufacturing developing here in Britain. It is no wonder that the Engineering Employers Federation has said that the move would be "a disaster", and today warned that it would mean businesses having
"to think twice about investing in the UK."
We have supported small and medium-sized enterprises throughout the downturn, and will do more to support them in recovery. UK Finance for Growth will oversee more than £4 billion of SME finance products created by the Government to support small and medium enterprises. That includes the growth capital fund, for which £200 million of cornerstone investment has been raised so far from the private sector and Government. There will be a generous temporary increase to the level of small business rate relief. We expect more than 500,000 businesses in England to benefit, many by well over £1,000, and approximately 345,000 businesses will pay no rates. The Opposition have proposed postponing the business rates revaluation, which would increase business rates for 60 per cent. of businesses in this country from April.
The Budget pledged to reduce the barriers to public procurement for SMEs. If the whole public sector increased the amount of procurement that went to smaller businesses through the supply chain by 15 per cent., it would mean up to an extra £15 billion of business.
Of course, Britain is home to strong businesses and investment, and is a leading centre for research and innovation. The Government will support innovation in the UK even when finances are tight. The pre-Budget report announced that we would reduce the rate of corporation tax on income from patents to ensure that the UK remains an attractive place for innovative industries. We will invest up to £25 million in the university enterprise capital fund to provide crucial early-stage funding for promoting university innovations. The Budget confirmed £30 million of investment for an institute of web science, a joint venture that is to be based at Southampton and Oxford universities, ensuring that the UK remains at the forefront of internet development.
The future economy depends on the students of today, and we are taking a long-term view of growth by investing in skills in the Budget. A £270 million modernisation fund will enable universities to identify and deliver efficiencies over the next four years and fund 20,000 extra undergraduate places on courses starting in 2010-11. The Budget also provides updates on wide-ranging improvements to enterprise education, including £15 million to extend it to further education colleges and primary schools.
The future economy must be a low-carbon economy. Taking action on climate change will generate new business opportunities and highly skilled jobs in the sectors of the future, and modernising the UK's energy infrastructure will be the key to laying the foundations for sustainable growth. The green investment bank will support new energy projects, with an initial focus on offshore wind electricity generation, and we will help millions of people save money and energy by developing pay-as-you-save financing arrangements.
That is a positive programme for our country, but the Opposition-with their opposition to industrial activism, regional development agencies and regional investment,
and their plans to abolish allowances, reduce reliefs and penalise firms that want to make serious investment in the low-carbon industries currently developing here in the UK-do not share it.
The Budget that my right hon. Friend the Chancellor introduced last week is realistic and optimistic. It is realistic about the challenges ahead, which is why it sets out a clear plan to more than halve the deficit over four years; and it is optimistic about Britain's strengths, which have seen us through recession and will build a better economy through infrastructure and growth in recovery. That is why we will not heed the calls from the Opposition to cut now and risk recovery; to cut now and risk a double-dip recession; or to cut public spending, just as they did in the 1980s and '90s, when the recession was still under way, so that unemployment kept rising for months and years after the recession finished. We will not heed their calls to undermine business confidence and threaten jobs. That is the Conservative way, which failed the country before and would do so again.
I have outlined the Government's plans for growth, and for supporting new jobs, businesses, families and the economy. We must secure the recovery, not put it at risk; we must support new industries and future jobs; we must protect front-line services, not cut them; and we must stand up for the many, not the few. I commend this Budget to the House.
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