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4.47 pm
Mrs. Caroline Spelman (Meriden) (Con): I am delighted to have this opportunity to debate the Budget. It is just a shame that the Secretary of State did not start with a moment of contrition and regret, noting that this country is more deeply in recession than its competitors, and that his Government have only themselves to blame for that. It would have been nice if he had opened with a slight reflex to all those who have suffered as a consequence.
The important thing-absolutely-is growth, so the extent to which we successfully deliver growth throughout the country will define our ability to compete with other countries, which emerged from the recession stronger and earlier than we did. In turn, that success or otherwise will define the job opportunities for our children and the public services for our families. With almost half of all jobless people aged 18 to 25, my goodness we have a responsibility to provide that growth for the new generation.
The Budget should have been the blueprint for securing growth and getting our country moving again; it should have been the chance to demonstrate that our country was open for business again, but it was neither: it ducked national debt and sidestepped stimulating growth. It was a missed opportunity, and one for which the country will not thank Ministers.
Let us start with the business community.
Mr. Clive Betts (Sheffield, Attercliffe) (Lab): Will the hon. Lady give way?
Mrs. Spelman: In due course. If the hon. Gentleman does not mind, I shall develop the argument about the business community.
The Secretary of State, as I am sure the hon. Gentleman heard, said that he had helped business, but all the Chancellor had to offer struggling business was a temporary increase in the small business rate relief. That year-long
measure will be a tiny grain of comfort to small businesses, which have seen business rates soar as a result of the botched revaluation. The fact is that the burden of business rates is rising, not falling. It has driven many businesses to the wall, and when the new bills are issued, it will sound the death knell for many more.
Since Labour came to power the average business rate bill has risen, from £6,500 to more than £12,000. Even when that figure is adjusted to real-terms increases, it is still the case that the increase has by far and away outstripped retail prices index inflation. Measures such as ending empty property rate relief and forcing through questionable revaluations have all tightened the ratchet on struggling businesses. Is it not telling that, according to the Budget, business rate revenues are forecast to rise by £1 billion-an increase of 4.2 per cent? How can that possibly be described as helping business? The cost of the temporary increase in rate relief is a fraction of that, coming in at £210 million.
On that basis-let us be very clear-this Budget was proof positive, were it needed, that this Government's priority is increasing tax on businesses. Just as the increase in national insurance is a tax on jobs, which we have pledged to reverse, so the business rate revaluation is a tax on growth. In just a few days' time, the latest business rate revaluation will come into effect. It will send bills soaring through the roof because it is based on the peak of the commercial property market. It will make many businesses no longer eligible for small business rate relief.
Mr. Betts: The hon. Lady mentioned national insurance increases. As far as I understood it, the Conservatives' policy was to concentrate on, and say they were giving greater priority to, cutting the national debt. How does that square with the fact that since the Budget the shadow Chancellor has made one major commitment, which is that if the Conservatives get into power they will not go ahead with the national insurance increase, adding £7 billion to the cost of the debt?
Mrs. Spelman: The hon. Gentleman will have heard the Secretary of State explain that he too, and his Government, would fund some of their priorities from efficiency savings. We recognise the damage that the increase in national insurance will do to our economy at a fragile time, and we have fully costed this proposal.
Many businesses will no longer be eligible for small business rate relief, which, incidentally, we have proposed should be made automatic. The impact on businesses, particularly small businesses such as pubs, which in the rural economy may be the only business in a village, or petrol stations, the cause of which my hon. Friend the Member for Ludlow (Mr. Dunne) has championed, will be disastrously affected, with, no doubt, many being sent to the wall.
In Northern Ireland, the revaluation was postponed because it was accepted that it would be very damaging to economic growth, so why inflict it on England? Do Ministers believe that it will not harm growth prospects in England? They certainly cannot base that belief on any impact assessment, because they have not bothered to do one.
Mr. Denham:
I am sure the hon. Lady will be able to clarify this point. Sixty per cent. of businesses will see their bills fall as a result of the revaluation that she
wishes to postpone. How does she propose to assist those businesses-the majority-whose rates would rise as a result of the policy that she has put forward?
Mrs. Spelman: The rating revaluation was based on commercial property prices in April 2008-pre-credit crunch. How can the Secretary of State possibly claim that its basis is fair or realistic in the difficult environment that we face today? Revaluations are designed to be tax-neutral, but our experience of the Government's implementing a rating revaluation in Wales was that it was not tax-neutral. I therefore stand by the reasons why we would oppose such a flawed revaluation.
Mr. Denham: Will the hon. Lady give way?
Mrs. Spelman: No; I have replied to the Secretary of State's intervention.
By retrospectively charging five years of backdated business rates for struggling port businesses, Ministers are jeopardising firms, jobs, livelihoods and the very viability of many coastal towns. Labour Members will know that to be true if they have port businesses in their area. It is a disgrace. Ministers should stop squabbling among themselves about who is to blame for the mess, and get back to the drawing board and start again. A Conservative Government will call for an immediate halt to the process and consult industry about what steps can be taken to address the matter.
I have to say that taxing jobs and businesses so that they are unable to compete is a very odd way of trying to stimulate economic growth, but is that not the logical consequence of a Government who have long favoured taxing enterprise rather than tackling waste? In few cases has the tax grab been felt more painfully than with the council tax. It was telling that the first announcement on Budget day was yet another increase in council tax, taking the average band D property up to just short of £1,500 a year.
Let us be clear about the background to the latest rise in council tax. When Labour came to power, it inherited a local tax system that worked. As the then Department of the Environment, Transport and the Regions put it in 1998,
"it is working well, has been widely accepted and is generally well understood."
At that time, people paid £751 a year on a band D home. Now they are paying more than twice that, and it is one of the most unpopular taxes they have to pay. Since 1997 council tax has doubled, while front-line services such as bin collections have halved. Does it not stand to reason that people are furious about the extent to which Ministers have abused the council tax? All the eye-catching announcements in Whitehall have too often left council tax payers to foot the bill, one of the most recent and notorious examples being the unfunded and ostensibly uncosted personal care policy announced by the Prime Minister. It is small wonder that this year's council tax increase went down so badly, although someone living in Scotland will benefit from yet another council tax freeze. That will mean that the average bill for a band D property in Scotland is nearly £300 less than for a similar property in England. I do not have a problem with Scotland having a council tax freeze, but
what confounds me and people up and down the country is why Labour Ministers will not let people in England have the same deal.
We have pledged to provide funding so that people in England can have the same council tax freeze as people in Scotland, yet time and time again the Government rule that out. Why? The reason is set out clearly on page 193 of the Red Book. Council tax receipts are forecast to rise by £1 billion this year. That is an additional £1 billion being taken out of the pockets of hard-working families and poured into the gaping black hole of the Government's finances.
What is even more frightening is that the £1 billion figure is just the tip of the iceberg. We know, Ministers know, and most importantly the public know, that Ministers are preparing for an intrusive council tax revaluation and rebanding exercise, which will punish people for making improvements to their homes or just enjoying a room with a view. It has already happened in Wales, where four times as many homes moved up a band as moved down one. Now, thanks to parliamentary answers that prove the point I am making, we know that the same is planned for England unless we have a change of Government. I say that with certainty as we have made clear our pledge to scrap the revaluation. The combination of our council tax freeze and aborting the revaluation could save up to £500 a year in tax on a typical family home.
Mr. Phil Willis (Harrogate and Knaresborough) (LD): I was looking forward to a zero council tax increase in Harrogate this year from the Conservative council. In fact, the increase came out above the national average. Can the hon. Lady explain to me and the rest of the House how she will pay for a zero increase in council tax across the country? I am really quite intrigued about the figures behind that.
Mrs. Spelman: As stated very clearly in our localism green paper, one of our three policy green papers, which I invite the hon. Gentleman to read so that he fully understands the matter, the council tax freeze is an important pledge that we have made. If a local authority pegs its council tax increase to 2.5 per cent. in the financial years April 2011 to April 2012, and April 2012 to April 2013, council grant will be increased from the centre by 2.5 per cent. so that the local authority can bring the council tax increase to zero. That is a fully funded policy.
Mr. Willis: Where will the money come from?
Mrs. Spelman: The hon. Gentleman obviously did not follow the significant exchanges in January, when the Government got egg all over their face for accusing the Conservatives of not being able to fund that pledge. We will fund the policy by cutting Government administration, including, but not solely, Government advertising and consultants. In January, the Treasury sheepishly admitted that its initial costings did not properly take into account the saving to the public purse from lower council tax benefit payment. As the Institute for Fiscal Studies pointed out, the attack on the Conservatives was spurious.
Mrs. Spelman: I will not give way; I want to make some progress.
Let us consider stamp duty. Two and a half years ago, we set out a policy to remove the obligation to pay stamp duty from nine out of 10 first-time buyers by raising the threshold to £250,000. Yet in last week's Budget, a pale imitation of our policy was announced: it is limited to only two years. We can debate the merits of its being temporary, but how telling that the sister policy used to fund it-an increase in stamp duty at the upper end-is permanent. Once it is laid bare, the Budget gives struggling first-time buyers a guaranteed tax rise in two years, and some home owners, particularly those in London, will suffer an immediate, painful and permanent tax increase.
The continuing increases in stamp duty as a result of fiscal drag overlay the increases on page 71 of the Red Book. Combined, the policies mean that the tax burden on home owners grows heavier every day. Is that the way to stimulate growth in our economy? Is a punitive fiscal regime, which serves uncontrolled public spending, really the way to get our economy moving? Our sharp decline in the global league of competitiveness suggests not. The monolithic, state-heavy approach is denying us the dynamism and flexibility we need to compete with other economies. It is holding our country back-some parts even more than others as the gap between south and north has widened. That has happened despite £17 billion being spent on regional development agencies.
That prompts the question whether RDAs, as currently constituted, are the best, most effective and most efficient way of supporting local economies. Could we do better? We can and we must. We therefore believe that RDAs should be replaced with local enterprise partnerships through a series of important changes. Local enterprise partnerships will focus exclusively on delivering business growth and job creation. They will be accountable and take the form of genuine partnerships between local businesses, large and small, and local councils.
Let us consider the geography of local enterprise partnerships. In many parts of the country, the geography of regions is arbitrary and makes no economic sense. We need a more grown-up, flexible approach so that local economic partnerships reflect natural economic boundaries and shared interests.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): What evidence has the hon. Lady got that local business wants those changes rather than the stability of a successful recipe, which has saved, for example, 2,000 jobs at Princess Yachts in my constituency?
Mrs. Spelman:
I have got evidence by asking the business community, of course. The hon. Lady comes from the south-west. If she turns around and speaks to the hon. Member for Stroud (Mr. Drew), I think she will find he would be prepared to point out that Gloucester is nearer the Scottish border than it is to Penzance, and the scale of the south-west region is almost unmanageable. Indeed, it might interest the hon. Lady to know that when I went on a fact-finding mission to the north-east, where, I have always been led to believe, there is the strongest appetite for a regional development agency, I discovered a distinct difference of view in the business
community. People in Newcastle are quite fond of their RDA, because it is located in Newcastle, but the business communities in Sunderland and the Tees valley were quick to tell me that they do not see much activity to help them.
Geography is important, and I reiterate that economic partnerships that reflect natural economic boundaries and shared interests will serve the community best. Those changes would offer an exciting opportunity to improve how we develop local growth. We have an opportunity to sharpen the tools at our disposal by giving the best support through focused, efficient and accountable enterprise partnerships. We do not have those at the moment; instead, we have a compromise, whereby RDAs are unwieldy, overburdened and unaccountable. The Government's last-gasp affection for them owes more to political scaremongering than to any desire to find the best way to support local economies. That is the old-fashioned politics of division, and it is holding us back.
We need the economies in different parts of the country to be performing at the very top of their game. If our country is to stand any chance of catching up with our competitors, we need the engine of our national economy firing on all cylinders, and at the moment it is misfiring. Parts of the country are falling well short of their potential, and we should face up to that fact. We are seeing the impact of that on growth and aspiration.
Under this Government, 26,000 fewer new homes a year have been built than under the previous Conservative Government; home ownership is at its lowest for 20 years; the number of first-time buyers is at its lowest since records began; and the rate of new housing-both social and private-is at its lowest since world war two. That is a symptom of our planning system being broken. The system lacks democratic accountability and environmental sustainability, and it is holding back growth and fostering political alienation. Members on both sides of the House will know that from their postbags. We believe that we can do better by reforming the planning system so that it is more accountable and efficient, and far more capable of delivering the new homes that our country so desperately needs.
Dr. Starkey: I am having some difficulty in following the logic of the hon. Lady's argument. Does she accept that although house building has fallen in the recession, if it were not for Government funding there would be no investment in housing at all? That is not related in the slightest to the planning system, which has not altered as we have gone into recession. Does she accept that during that period, house building has decreased because private finance has withdrawn?
Mrs. Spelman:
The hon. Lady fails to understand that I was talking about the entire 13-year period that her party has been in power. Even before the recession and the credit crunch, the rate of house building was below what it was when the Conservatives were last in Government, and the rate of social house building was half what it was during the last 13 years of the Conservative Administration. This might be unpalatable, but for the hon. Lady's greater benefit I hope she will allow me to reiterate that peacetime house building is at its lowest since 1924; that there are now 26,000 fewer new homes a year than under the Conservatives, taken as an average
over the time that Labour has been in office; that home ownership is at its lowest for 20 years; and that we have the lowest number of first-time buyers since 1970. There may be a variety of reasons for those things, but I suspect that they are not entirely unconnected to the fact that we have had nine different Housing Ministers in the time that her party has overseen house building in our nation.
The Conservatives believe that we can do better. To begin with, we will get rid of the arbitrary and meaningless targets that are conceived in Whitehall and forced on local communities. That top-down, one-size-fits-all approach has toxified the planning system, which has become a war zone in which communities are pitched against regional quangos, often resulting in deadlock. It has led to the green belt being torn up and urban green spaces, such as back gardens, being replaced with blocks of flats that are well beyond the pockets of the people on the housing list who so desperately need the housing.
The number-chasing culture has failed to deliver the kind of affordable homes that young families desperately need. Instead, it has yielded a glut of unsold city-centre luxury apartments and tightly packed units of accommodation that lack the car parking and outside space needed for a young family. That is why the time has come for power to be returned to local people, with the help of those they elect, so that they can define the scale, location and type of new development. It is about drawing people into the decision-making process and giving them a proper platform to be heard. That has to be a more effective way of getting the right kind of homes built in the right places, but we need to give people a stake in local growth. Too often communities feel all the pain, but none of the gain to be had from growth.
We want to change that by matching the council tax raised on new homes for six years-and recognising how we need to increase social housing, we will match it to the tune of 125 per cent. for affordable housing.
Mr. Betts: Is there a fallback position for the hon. Lady's new policy on house building and planning? What happens if these incentives do not work and not enough houses are built to meet housing need? Would a Conservative Government retain any powers to ensure a certain number were built, whatever the results of local referendums in areas throughout the country?
Mrs. Spelman: I know that the hon. Gentleman is interested in local government, housing and planning, and I commend to him our recently published green paper on planning as it makes it clear that in the absence of a local plan, there will be a presumption in favour of sustainable development. I am confident that that will have the effect of getting the homes built that are so desperately needed. These substantial financial incentives, combined with national affordable housing programme grants to help to subsidise construction, and the introduction of local housing trusts, will deliver substantial amounts of affordable housing.
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