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Businesses are very conscious of corporation tax. I have met a number of business people in my area recently. Pritchitt Foods in Newtownards is one of the largest employers in the area, and corporation tax is the biggest factor for that company in trying to make its business work. It is a go-ahead, progressive firm that creates significant employment in my area. It feels that the 4% reduction will go part of the way to addressing its concerns. I have asked the Government about this matter, and I understand that they will be making a statement in October about corporation tax in Northern Ireland. I look forward to seeing whether we can have a
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further reduction, which would help us. We also have the largest energy costs in the whole United Kingdom. I suggest that that also needs to be offset and considered.

I could not let this occasion pass without commenting on child poverty. Wearing my other hat as an Assembly Member in Northern Ireland, I had the opportunity to contribute to an inquiry on the underlying issues. Some 20% of children in Northern Ireland are deprived through poverty. What will happen to those who find themselves in child poverty over the next couple of years? There is some £80 per household for children in Northern Ireland, as against £600 in other parts of the United Kingdom, so child poverty will be much more important to us.

The next days and months will tell us clearly what impact the Budget will have. I am concerned that the welfare savings of £11 billion will devastate the poor. Will the Chancellor look seriously at that?

I think that England and Slovenia have been playing for 15 minutes-I do not know what the score is-and am mindful that some Members will wish to see what is happening, but I want to make one last point, on disability living allowance. When I read of the DLA changes, I was exasperated and deeply concerned, because I felt that they were a direct attack on those who can least face up to such an attack. There are some delays in relation to how the system will be run. Many of the cases that I have fought as an elected representative have been on behalf of those who need DLA-those who have mobility problems, who are getting over cancer operations or who have immobilising diseases. Such cases have involved those with heart problems, and many involve people who have extensive care needs.

Why target a section of the community who basically need that money more than anything else? Do the Government see savings? They may see savings, but I see the people and their needs, as a great many other hon. Members do. I ask the Government to reconsider, and to look carefully at whether they should pursue savings from those who receive DLA. Doing so will impact on a group of people who can least respond and deal with the financial implications. People who are on DLA focus on their health and how to get through the day, as do the people who care for them. If the Government add to that a financial burden by making it hard for them to receive their benefits, their health will be affected. I am not in the business of doing that, and I hope the Government are not.

I rest my case on that point, and I hope that my comments will be taken on board. The Budget delivers some things for us. I am not being critical of all of it, but I am critical of some measures. I ask the Government to take those matters on board. I hope that they will have some better ideas on DLA. We all have to work with the Budget-we cannot do so individually-but the Government need to take on board the needs of those who are less able to face the financial burdens that will come upon them.

3.19 pm

Mr Tobias Ellwood (Bournemouth East) (Con): I welcome you to your place, Mr Deputy Speaker. It is 20 minutes past 3, so I am surprised-but glad-to see you in your seat, because the England game against Slovenia has now started. I know that you have been to Slovenia many times, and it is great to see you here.


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I pay tribute to the hon. Member for Strangford (Jim Shannon) on his passionate and balanced speech. I served in Northern Ireland and am aware not only of many of the challenges that hon. Members face over there, but of the opportunities. It is a pleasure to follow him, and I agree very much about the opportunities in the development and working of the cadets in bringing communities closer together. It is wonderful to see that initiative moving forward.

The hon. Member for Kingston upon Hull North (Diana R. Johnson), who has just walked out the Chamber, made an entirely negative speech. Yes, whichever party won the election would have faced challenges, but how can she stand there and simply demand more money for certain projects in certain parts of the country, without saying where it should come from? Labour Members have failed to understand the consequences of the election result. It was clear that nobody won, so why continue to look back at the manifestos of individual parties and ask, "Why are you now not doing this, or that?" We had to rise to the occasion and ask, "What is needed for the country?" We have to put aside our party differences and meet the challenge, which is to bring about stable government and leadership. The Liberal Democrats and the Conservatives were able to do that, but of course it meant a certain amount of compromise. So it is wrong to harp on about aspects of the manifesto and say, "Why haven't you included this? Why haven't you done that? You've gone against the people who voted for you."

Huw Irranca-Davies rose-

Owen Smith rose-

Mr Ellwood: I see that that has prompted a reaction from Labour Members.

Huw Irranca-Davies: Does the hon. Gentleman accept that in the election there was a fundamental divide over the approach to the economic recovery, which was encapsulated in the manifestos of the two main parties that lost-the Labour party and the Liberal Democrats? The Tories did not win outright either, but those two significant parties both, at the time, agreed with Nick and Vince that we had to delay making the cuts until the recovery was ensured.

Mr Ellwood: I am grateful for that intervention because it gives me licence to underline the fact that, if we are to move into a coalition, there needs to be agreement, and it is a tribute to the parties and the leaders that in a short period they achieved something that, in countries such as Belgium, takes 100 days-forming a coalition grouping while all the horse-trading takes place. Yes, there are compromises and changes that were not expected during the election. However, according to the polls the country supports what we are doing.

Owen Smith: Does the hon. Gentleman think it a minor omission that, although the Conservatives' manifesto said that they would not increase VAT, they have done exactly that and introduced an enormous, £13 billion tax? There was no mention of that before, so should we trust their manifestos in future?

Mr Ellwood: Rather than leave a curt note on the desk of the Chief Secretary to the Treasury, we have given an indication of the real situation in the UK.
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Again, I underline the fact that there are aspects of the coalition agreement we perhaps were not expecting-that should be understood on both sides of the House. I fear that it will remain a Labour tactic to go on about this, perhaps to try to drive a wedge into the coalition. That is dangerous, out of touch and wrong, because the nation said to us, "We don't support any one party outright", but it approves of a coalition and the leadership, and the stability that they and this Budget are providing.

My hon. and good Friend the Member for Harrogate and Knaresborough (Andrew Jones) made an excellent maiden speech. He mentioned Guy Fawkes wandering through his constituency, and I am sure he will make just as big a bang in this place as Guy Fawkes did. I cannot mention Harrogate without also paying tribute to Betty's tea rooms. Those of us who have gone there for conferences will appreciate the delicacies that Betty's provides-I only wish that could be emulated here in the House. The hon. Member for Hemsworth (Jon Trickett), who also is no longer in his place, made the most Marxist speech I have heard in this place for many years. I was waiting to see how long it would be before Maggie was blamed for what has happened over the past 13 years-and that is what we got from him. I was astonished.

This emergency Budget is tough but necessary, difficult but unavoidable. It is not the time for timid steps in the hope that we can tiptoe our way out of recession. We needed a bold statement of intent, mapping out a clear route to recovery and invigorating confidence in our businesses and markets. That is exactly what we got. Three main themes run through the Budget and Red Book. The first is one of responsibility in reducing the deficit over the next five years, mostly through spending cuts but also, yes, through some tax rises. That is the price we must pay for Labour's incompetence and legacy.

Economic growth is the second theme. Measures taken in the Budget are designed to support businesses and stimulate growth, which will help to generate jobs as businesses are able to expand. That will mean cutting red tape, which will free businesses, because removing red tape is the same as introducing a tax cut but without reducing public revenue. It also means preventing Labour's job tax through a rise in national insurance, reducing corporation taxes and improving our infrastructure.

The third theme is fairness. Of course, we are in a period of austerity, but every part of society must make a contribution to paying off our debts. At the same time, however, we must protect the least well-off. Listening to some of the contributions from Opposition Members, one might think that no such initiatives were part of the Budget. However, we have ensured that those earning less than £21,000 in the public sector will not be subject to the pay freeze. We will see a £1,000 increase in the personal tax allowance for low and middle-income earners; and finally we will see a re-linking of the basic state pension and earnings-well overdue and promised for years by Labour, but never acted upon. We will also see a £2 billion commitment to child tax credits for the poorest families, helping to ensure that there is no increase in measured child poverty over the next few years.

These are the tough decisions we need to take. We have to do this to secure our financial markets and ensure that credit agencies do not lose confidence in
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Britain. If we do not, interest rates and inflation will rise, and that is what would lead to the dreaded double-dip recession. I am glad that our triple A rating is now secured, thanks to the Budget.

I will give the Labour Government their due: they acted promptly and expeditiously when the Northern Rock issue broke. But then what happened? We have been left with one of the worst economic inheritances imaginable. They racked up one of the biggest budget deficits in Europe. If that is not shocking enough, our borrowing amounts to unheard sums of money. They continued to live beyond their means, borrowing £1 for every £4 they spent, which led to the doubling of the national debt. I well remember Labour's last Budget, in March 2010. I was sitting in this Chamber waiting for the leadership, initiative and guidance to take us out of this mess. It was the Labour Government's last opportunity before the election to get us out of the mess they created, but it was more about the political, rather than the economic, cycle. The previous Chancellor went as far as announcing £40 billion of cuts, but he did not say where the axe would fall, so he managed to ring-fence a black hole, which was a first in this House.

Significantly, the Labour party really had nothing to say yesterday. The acting leader of the Labour party was almost like a rabbit in the headlights. Labour Members rolled out the same old line, which we have heard time and again-I am sure we will hear it again in the summation today-about "the same old Tories", thereby exhibiting an insane refusal to acknowledge the scale of the economic crisis. We have seen Labour Members attempting endlessly to promote and fight a class war with the Conservatives. That is the direction in which they are now trying to take us, avoiding any notion of mea culpa or of taking responsibility for the mistakes made in the lead-up to the current crisis. That illustrates how out of touch the Labour party has become.

Labour continues to argue that we cannot rip the money out of the economy-through the cuts, the increases, and so forth-and also achieve growth, but I believe that we can. We need to give business and the private sector the space to breathe by reducing national insurance and corporation tax. Those are the measures we need to take. That is what will help us to avoid going into a double-dip recession, allowing our businesses to thrive and employment to grow. Labour's tactic-I am worried about this, because I understand that the unions bankroll Labour to the tune of 60%-is to fight the public sector cuts. That is what we will see as things move forward: these astonishing arguments why, unlike any other part of our society, the public sector should somehow be ring-fenced and not have to share some of the economic pain we are experiencing.

The unions are clearly looking for a fight. I pay tribute to the nurses, doctors, teachers, train drivers-all those who work hard-but let us look at who is now taking over some of the unions: Dave Prentis from Unison, who has pledged to fight the cuts; Christine Blower from the National Union of Teachers, who has enthusiasm for industrial action of some form, as she has made clear; and Paul Kenny from the GMB. Then there is the Unite leader, Len McCluskey-we have all seen what he has done to British Airways-who is seeking re-election. If he gets re-elected, the consequence will be strike after strike, because the public sector unions-not the members, but the unions-do not recognise that we are all in this together.


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Labour's tactic is to blame the global downturn. We hear this all the time: "It's not our fault; this is because of what happened right across the world." However, as I pointed out in an intervention, yes, we are exposed-perhaps more than other countries-because of the size of our financial services sector, which is one of the biggest in the world. That is accepted, but we cannot get away from the fact that the previous Government changed the rules, making it unclear who was responsible for the City back in the late 1990s. That is why we got into the position where banks were lending money they did not have to people who did not understand the situation, and in ways that meant that they could not pay it back. That is what led to the current position.

We cannot blame Freddie Mac, Fannie Mae or the sub-prime market for the fact that, even up to about two years ago, Bradford & Bingley was offering mortgages of more than 125% to people who clearly could not pay them back. I remember when I was at university wandering into Midland bank, as it then was, and seeking a mortgage. I was told that I had to cough up one third of the price of the house. What happened to that rule? It went, and that is why we ended up with more money than houses were worth being lent to people who could not pay it back. That is a British problem, not an international one, and that is what led to the crisis we face now.

I repeat my earlier point: I think Labour are going to adopt the tactic of trying to drive a wedge between the coalition by saying, "The Lib Dems said one thing in the election and the Tories said another." The nation will get bored of it. People want direction-they want leadership and stability-not harping back to what happened prior to the election.

Let us look at the numbers. Our focus is to try to balance the books by 2016. We will cut the structural budget deficit to zero in the next six years. That deficit represents the hole in the public finances that is not expected to be repaired by the economic recovery. That is why we need to take the initiative that we have. Let us look at what the shadow Chancellor has done. I asked him in an intervention whether he supports the Office for Budget Responsibility. I am pleased to say that for the first time, he placed it on the record that he does. However, it is difficult to take anything that he or anybody else on the Labour Front Bench says seriously, given that the OBR reviewed his figures and revised his growth forecast for 2011 from 3.25% to 2.6%.

Ms Angela Eagle (Wallasey) (Lab): As the hon. Gentleman is talking about the Office for Budget Responsibility and its forecasts, will he have the good grace to note that its recent deficit forecasts are considerably lower than those in the March Budget because more money has been collected in taxes? The deficit that the hon. Gentleman is obsessing about is actually 2% of GDP lower than the forecast in the March Budget. Will he have the decency to recognise the other side of the coin, as well as this side of it?

Mary Macleod (Brentford and Isleworth) (Con): The structural deficit is higher.

Mr Ellwood: As my hon. Friend the Member for Brentford and Isleworth (Mary Macleod) says from a sedentary position, the structural deficit is actually higher.


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Let me deal now with total borrowing as stated by the Office for Budget Responsibility. This is now expected to fall by 2.1% of GDP by 2015, or by £37 billion, which is exactly half of what Labour were predicting, and to reach 1.1% by 2016.

Ms Eagle: I wonder whether the hon. Gentleman was listening to the question I asked him. Given that he is quoting one particular forecast from the Office for Budget Responsibility, will he have the good grace to say on the Floor of the House that the size of the current deficit is now 2% of GDP lower than we predicted in the March Budget? The situation in which we find ourselves is not a lot worse than we thought; it is better.

Mr Ellwood: The hon. Lady has put her point on the record. My argument is that it is difficult for us to take what the shadow Chancellor says seriously when he has been looking through rose-tinted glasses for the last 10 years. Time after time, either he or his predecessor, the former Prime Minister, came up with growth forecasts that were well out of touch with what was happening. That is what led us down the path of thinking that the economy was doing much better than it really was. [Interruption.] If the hon. Lady would stop talking, she would hear what I am saying. She must understand that if the previous Government had not kept on expressing the view that the economy was on the mend when it was not, they would have recognised the position and put in place corrections to stop the spending. The first point I made was the fact that her Government were living beyond their means, yet the hon. Lady still sits there and argues, without even having the grace or the courtesy to say sorry to the nation for the mess we are in.

Geoffrey Clifton-Brown: Is it not a bit rich for the hon. Member for Wallasey (Ms Eagle) to claim credit for the deficit not being as bad as we thought it would be when Labour had proposed £40 billion of cuts, but not one pound of them had been costed?

Mr Ellwood: My hon. Friend is absolutely right and makes a powerful point. Let us not forget that we are quibbling-well, not quibbling, but the hon. Lady is making an argument about pretty small sums of money if we consider that this country's total debt is £932 billion. That is a record across Europe, it really is. It currently stands at more than 62% of GDP and is forecast to peak at 70% by 2013-14 and finally to start to fall in 2015-16. This is shocking; it is a cost to the taxpayer to the tune of £43.3 billion in borrowing alone. That is more than the defence budget-an outrageous position to be in. Any business presenting figures like that would be labelled bankrupt.

The OBR forecasts that the UK economy will grow by 1.2% this year and 2.3% in 2011-not what was predicted, as Chancellor said. Unemployment is forecast to rise to a peak of 8.1% this year, while inflation is expected to peak at 2.7% by the end of the year before falling back to the 2% target. What has happened is that we have put in the initiatives to ensure that we keep a cap on unemployment, a cap on inflation and, most importantly, a cap on interest rates. As the markets and financiers agree, if interest rates were forced to go up higher, that is what would lead to the double-dip recession.


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