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23 Jun 2010 : Column 333

When I look at what was happening in the early part of this year, my instinct would be to cut the least possible, and to stimulate growth as much as possible. However, there comes a point at which we have to deal with what is before us, rather than what we hoped might be before us. It became clear during the election-and I remember making this point at an all-party hustings-that throughout Europe it was a very different ball game from the one with which we had all been dealing just three, four, or five weeks before, and that we needed to take that into account.

I am therefore predisposed to assume the worst, and to look hard at the core problem. The next piece of guidance derives from my experience of running companies in the hospitality industry. I am not for a moment saying that the relatively small companies that I ran bear comparison to a country, but some of the principles do. I remember taking over two companies that were essentially bankrupt. If the owning shareholders had not guaranteed the finance, they would have gone into administration. In both cases, my job was to turn them round, and I heard arguments about how I should get hold of money and invest it on the one hand, or how I should redress the costs of the company on the other.

When people do not have money-the piggybank is empty, and it is difficult to get money from the banks-they have no choice but to live within their means. I learned that by stabilising company expenditure, and forgoing some investment for the future, I could produce a more stable enterprise. It is the same with this country and the balance of risk. The risk, on the one hand, of failing to take action is that we seriously run out of money, our credit rating is reduced, our borrowing costs go up, and we end up spending far more on debt interest than on health, education or defence. Something would then be imposed on us, as happened with the Labour Government in the 1970s. The risk on the other side is that if we cut too quickly, growth will be stifled and we will take longer to come out of our current situation. Balancing those two risks, I believe that the risk is greater if we do not deal with the deficit, so it needs to be dealt with.

Secondly, is the Budget fair? My right hon. Friend the Secretary of State for Business, Innovation and Skills made an extremely good case for demonstrating that it is-in as much as any pain can be fair. I would far rather be standing here supporting a Budget that gave people lots of money. That would be lovely, but, as the Labour Chief Secretary to the Treasury said, there is no money. So we have to be prudent, and that means that we have to share the pain. The whole point is that everybody will suffer, but we have to ensure that the suffering falls least on the most vulnerable, and most on those who can afford it. Charts A1, A2 and A3 in the Red Book set out exactly how the suffering will fall, and it is perfectly clear from them that those at the bottom will bear the least pain and those at the top bear most.

In my constituency average earnings are £21,000, and table A1 on page 64 shows that after the Budget somebody on £20,000 will be £170 better off, given the amount of income tax and national insurance that they pay. They will pay £170 less than they would have done. Table A2 shows that they will receive £145 less in family tax credit, but when we put the two amounts together we see that they will still be £25 better off. That is not a
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large amount of money, but it makes the point that if we take the Budget in the round, including VAT, which nobody can deny is regressive on its own, we clearly find that the pain is shared, and felt less by those at the bottom than by those at the top. So I conclude that the Budget is fair.

I welcome the Budget. It is not one that I would have liked to have to support. I would have liked to see the coffers full, and to be able to be nice to people-but in the circumstance this is the right Budget, and it is fair.

Owen Smith (Pontypridd) (Lab): Will the hon. Gentleman not also reflect on the fact that those tables do not capture the punitive effect of the forthcoming 25% cut in non-ring-fenced public services on people who most rely on benefits and public services? Those elements in the tables and in the Budget do not really take into account-in the round, as he puts it-the full impact of the cuts that we will see.

John Thurso: The hon. Gentleman makes a very good point. Broadly speaking, 20% to 25% cuts are going to be introduced in this autumn's spending review, and we will need to look at that. However, I find it difficult to take lessons on that from a party that introduced £40 billion of cuts without a single centime being allocated to anything whatever. That is like a bankrupt father promising his children a sackful of presents at Christmas as the bailiffs wheel him out on Christmas eve: it is deeply irresponsible.

Let me turn to the specific measures. I absolutely must commend the Government on their commitment to consider a pilot scheme for a remote rural fuel discount, because year in, year out I made that proposal from the Opposition Benches and the previous Government compared it to the cost of beer and all sorts of other things. My friends in the Conservative party chose to wait and see what would happen, and I am delighted that they did so, because they now agree that my measure should be considered, for which I thank them warmly.

On enterprise, it is critical that we rebalance the economy. First, we must achieve a rebalancing whereby there is more private sector and less public sector. That does not mean that the public sector has to shrink; the private sector has to grow to support the public sector. Secondly, we absolutely have to move our economy away from an utter dependence on financial services, which delivered 25% of tax revenue three years ago, and towards manufacturing industries and technologies and skills-based industries throughout the regions of the United Kingdom.

I am glad that the Government will continue with and enhance the enterprise finance guarantee scheme. However, the scheme has one flaw, which I have highlighted many times: the Catch-22 situation whereby the banks that do not lend then decide whether to include an enterprise in the scheme. There must be some way in which the banks' decisions can be reviewed.

I also commend my right hon. Friend on the action being taken to get non-bank finance into small and medium-sized businesses, but may I gently ask my friends who are now on the Front Bench to look at the papers that I wrote-they were in the Liberal Democrat manifesto-on enterprise funds, and consider whether some of those ideas might help to address how we get equity funding into small businesses? May I also stress
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the importance of the regional growth funds and express the hope that the details of them and how they will work will be brought forward quickly? The concepts of an infrastructure bank and a green investment bank should be brought forward as rapidly as possible, too.

Having looked at the Budget, I conclude that it is not one that I particularly like to see brought in, but it is necessary. There is pain, and it has to be borne, but the Budget is equitable in that the pain falls least on those who have least. Notwithstanding my personal regard for the shadow Chancellor, I really cannot take lessons from him or his party, having listened for nine years from the Opposition Benches to their boasts about the end of boom and bust. We now know that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) was the father of all booms and the mother of all busts. That much-vaunted child, prudence, is lying battered, bloody and bruised in the gutter-and it is this Government who will take her out and restore to health.

2.58 pm

Jim Shannon (Strangford) (DUP): Thank you for calling me, Mr Deputy Speaker. May I, too, congratulate you on being elevated to the position of Deputy Speaker?

Before I came to the House today, I thought about what was I going to say, and I was mindful of that saying, "Whenever the clouds are on the horizon, you can either shelter from the storm or run with the wind." I am conscious that this Government are doing more sheltering from the storm. The question for us, as elected representatives at Westminster, and for our constituents is: is there somewhere to shelter? That is what I shall comment on, but I am also conscious of the comments that I make. I always try to make constructive comments, because that is my nature, but I shall also underline some concerns that I, as an elected representative and MP, believe I am duty bound to mention.

In Northern Ireland, and in Strangford, which I represent, there is a very clear tightening of the belt. The marks are already there, and I just wonder how tight the belt will be by the time the Budget is eventually farmed out to all parts of the United Kingdom and all Departments. We in Northern Ireland are mindful of that in relation to the block budget.

I am very conscious also of the serious economic state that we are in. I am not ignoring it, and neither are the people of the United Kingdom. We all recognise that drastic measures need to be taken, but I have to ask: are they being taken in the right place and taken correctly, and will they adversely affect my constituents and, indeed, those of many other hon. Members who have spoken today? I recognise the need for health and perhaps international development to be ring-fenced, and that the Budget will not necessarily affect those areas. There is some talk about education, or at least some parts of it, remaining untouched as well, but in that case there will have to be cuts in other Departments.

I recognise that this House is very supportive and proud of the armed services as they fight in Afghanistan, Iraq and all over the world. Is a 25% cut in defence fair? The Prime Minister has given a commitment to the soldiers on the front line, wherever the war is taking place. However, if there is to be a 25% cut in defence, someone has to feel the pinch and the pain, and if it is not the soldiers on the front line-and it should not
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be-it has to be those at home. I am pleased that the cut will not affect the front line, but concerned about how it will affect other areas. Will it mean that commanders are pensioned off? Will it affect the MOD in buying equipment? The MOD will look for the best prices, as it probably should, but we do not want spending to be diminished in such a way that its position is undermined.

The cadet forces make a significant contribution across the whole United Kingdom, but particularly in Northern Ireland. It is very important for us in Northern Ireland to have cadet forces that bring the communities together. We have tried to achieve that for years, and we are now seeing the partnership begin to work better than it ever has before. Cadet forces, by their very nature, are drawn from both communities. There are more people from the Roman Catholic side of the community in the cadet forces in Londonderry, which the hon. Member for Foyle (Mark Durkan) represents, as well as in Limavady, Enniskillen and Strabane. That has come about because joining the cadet forces has been attractive to young boys and girls, who recognise that some day they will want to serve in the British Army and the other services, including the Royal Air Force.

I want to highlight lone parents. I welcome the fact that the Government want to encourage them back to work; I think we all want to do that. However, when they have the opportunity to do so, we want them to have the jobs to go to. It is great to have this support in theory, but how does it come about in reality? Do the people have jobs, and are there opportunities and options? I am not sure that there are. I am concerned about the Government's position.

Mark Durkan (Foyle) (SDLP): The hon. Gentleman makes an important point. Does he accept that many of us represent constituencies with large numbers of single parents who are doing valiant work as parents, and that for them the problem is not a lack of work ethic but a lack of work?

Jim Shannon: I thank the hon. Gentleman for his intervention; I wholeheartedly agree with his comments. It is all very well to have the theory of getting lone parents back to work, but if the jobs are not there, that theory is undermined. The Government must consider that.

In Northern Ireland, some 60% of jobs are in the public sector or public sector-dependent. I said this in my maiden speech a fortnight or so ago, but I will say it again because it is very important. I understand that the Government's pledge is to increase private sector jobs and build up that area. However, before anything changes in the public sector, there has to be a private sector that fills the gap, so that those opportunities are there.

I turn to the 2.5% rise in VAT. In the area that I represent, there are a great many small and medium-sized businesses, which by their very nature create a lot of jobs collectively. Individually, that may amount to three, four or five jobs in a family business, but collectively they run into many hundreds, probably thousands. Although the rise is not going to kick in until January 2011, it causes great concern for the area that I represent, and specifically for businesses. Some small businesses may be hanging on by the skin of their teeth, and finding it very hard to get through difficult times, while looking ahead to perhaps another two, three or four
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years of austerity and the associated difficulties. Many businesses will try to absorb the VAT increase rather than pass on the extra prices, which they cannot do-not because they do not want to, but because they cannot do it in the competitive market that they are in. They have to try to take on large multinational businesses that have a bigger market and can therefore absorb such costs.

David Simpson (Upper Bann) (DUP): Does my hon. Friend agree that one of the biggest hindrances for small businesses across the whole United Kingdom, including Northern Ireland, is the level of bureaucracy and red tape that they have to handle, as they are very much hands-on operations? The new coalition Government have promised to remove that, and we need to see the evidence very quickly.

Jim Shannon: I thank my hon. Friend. I wholeheartedly agree, and I can give examples. I represent a very rural constituency. A questionnaire was recently put out to the farming community asking people about the biggest problem they had. They said that it was red tape and bureaucracy. The same applies to those in the fishing industry and those who have small businesses. It seems to be coming at them left, right and centre. Europe has an influence as well. That issue must be addressed very soon.

Let me turn to the position of pensioners. As representatives, we have an opportunity to really feel for people and to see issues they face. My area, like many others, boasts an increasing population of elderly people, and will have its greatest ever number of pensioners in coming years. I am very conscious of how pensioners budget, and how they will cope with a VAT increase on the products that they buy just to keep living. That is extra money that they have to find. Has consideration been given to how the increase will affect pensioners specifically?

There has to be good news in everything, like the curate's egg that is good in parts. It is hard to find enough good parts in this curate's egg, but that is by the way. The fact that the income tax threshold has been raised by £1,000 is good news-I give credit where credit is due. It will benefit some households to the tune of £175, at least, and perhaps more elsewhere.

At the same time, however, there is a negative factor: child benefit will not rise for three years in line with inflation. People will say, "Well, that's how things are, and that's how it has to happen." As someone who keeps his ear close to the ground and understands how these things work-I was not born with a silver spoon in my mouth, and I know how difficult it is for people to make do-I understand that the child tax credit and the working tax credit are critical. Many people visit my office and advice centre, just as they visit many other Members, and I can see what is involved in balancing the books and working out the weekly family budget. These people do not live beyond their means by any standard, but they require tax credits just to survive.

My provincial press today-I bought the papers this morning-gave five or six examples of people who will be affected. They included families with four children, single parents with two children, and some who are self-employed. Those people recognise the need for
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something to be done, but they do not feel particularly in tune with its impact on them. That concerns me, and I have to put it on the record. None of those half a dozen examples in the provincial press or the Belfast Telegraph involved people who would not feel pain over the coming period.

The Government encouraged people to take up tax credits, and they enjoyed a certain quality of life as a result. All of a sudden, that could change. I should like to say something about those in the middle class bracket. When someone is on £35,000 to £40,000 a year, we sometimes think they are doing all right, but half that income might go on their mortgage, and people's hopes for their children and communities are in their houses. I am concerned about the impact on such families of reducing or freezing working tax credits or child tax credits over a three-year period.

The one great commodity over which international wars have been fought-there will probably be many more of them-is oil. The price of oil today is $77.55 a barrel, and prices for oil, diesel and petrol were at their highest three years ago, when a barrel cost $147. Who makes the extra money and extra profit, and how? Clearly, someone is making it. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) referred to the concessionary fuel scheme in his area. I represent a rural area, so I would be keen to know how that works. Perhaps the Government should consider reducing fuel duty to enable people to get over the hard times much more easily than in the past. Elderly people struggle to fill their tanks with oil.

For the fishing industry at Portavogie, which is an important part of Strangford, fuel costs represent 60% of the boats' running costs. A great many of those fishermen are having difficulty getting through the times they face at this moment. There is some talk about European funding, but there have been delays. The hardships that the fishing industry faces are critical, and it may not survive.

I welcome the Government's commitment to reduce corporation tax from 28% to 24%, which is significant. Last week, I met bank officials in my town, and they outlined the measures they would like. By and large, the Government have reflected what the banks wanted. However, what the banks want is not always best, as we have seen over the past year or two. The reduction in corporation tax is good news. The Government have realised that businesses need that help. The Chancellor stated that that is the lowest rate in any major western economy and the best rate in the G20, but the Republic of Ireland's corporation tax is 12%. As Northern Ireland has a land border with the Republic, I suggest that corporation tax should be looked at more sympathetically for us than elsewhere.

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