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Many of my hon. Friends have already raised their objections to the Budget. I share all those objections. As was pointed out by my hon. Friend the Member for Telford (David Wright), the Budget attempted to rewrite
history, completely ignoring the world economic crisis. This is the first Budget of the 21st century that hits those who are worst off the hardest. Contrary to what was said by the hon. Member for Ealing Central and Acton (Angie Bray), who used the phrase "needs must", the Tories told us throughout the election campaign that there would be no cuts in front-line services. There is no possibility of cuts of more than 25% in Government Departments without front-line services taking a hit.
I want to focus on two very different elements of the Budget which will have a negative impact on my constituency. The first is the appalling news that the Sure Start maternity grant is to be restricted to the first child. That raises a number of obvious problems, not least the moral hazard of cutting benefits for low-income families and their newborn babies when they need help most.
It seems obvious that, in the interests of all of us, children from low-income families should be supported as much as possible. The proposal in the Budget is less than clear. Will the restriction of the grant to a first child mean that those who did not take the benefit when they had their first child and are now having their second cannot receive it, even if they need it? That seems particularly likely to happen in a number of instances, especially following the recession. Moreover, the Budget seems to make no provision for a number of "blended" families. What of the mother with her first child who is the father's third? Will that family be eligible for the grant? What of families in which a child is born while an older baby is still using the necessary equipment, and what of twins?
The Government will undoubtedly attempt to justify the cut by saying that the grant is intended to buy permanent equipment such as prams, cots and sterilisers, items that will last and can be used for siblings, but what their decision fails to recognise is that a great deal of the grant is used after the baby is born to offset the high cost of looking after a newborn child. The grant is often spent on nappies, milk, other food products, clothes, medicine, and any number of other perishable items that cannot be used for more than one child.
Furthermore, while it is somewhat more likely that a family with a second child will already have the necessary equipment, it is by no means reasonable to make such an assumption. That is especially true of low-income families who will often buy cheaper, less durable equipment that simply will not last long enough to be used by later siblings. Even if it were reasonable to assume that a pram, for example, could be used for a second child as well as a first, what of the third or fourth? The estimated cost of bringing up a baby during its first year is £4,000. I know from speaking to many constituents that the £500 Sure Start maternity grant has afforded babies in Wavertree a better welcome to our world.
Robert Halfon (Harlow) (Con): The hon. Lady talked about cuts to front-line services in her constituency and I understand her wanting to protect those services, but why even in the boom times did her Government cut front-line services in my constituency, such as closing down the Territorial Army centre, cutting the budget of Harlow college by £1.6 million and closing down the Inland Revenue office? Why are Labour cuts ignored and Tory cuts condemned?
Luciana Berger: I thank the hon. Gentleman for his comments but I do not agree with them. My point was that the Conservatives campaigned during the election on a pledge that they would not cut front-line services. That will not now be the case.
Toby Perkins: Does my hon. Friend share my confusion? Have we not been told for the past six weeks that the Labour Government spent too much money? It appears now that we were cutting all the time. Is she as confused as I am as to the policy of the Government?
Mr Tom Harris (Glasgow South) (Lab): My hon. Friend is making a powerful and significant contribution in talking about the difficulties that younger parents in particular have in bringing up their first and second children. What conclusions does she draw about the Conservatives' approach to those difficulties from the fact that Conservative Members are mocking her and laughing when she is trying to make a serious point about the difficulty and cost of bringing up children?
On Tuesday, the Chancellor said that his Budget would protect the most vulnerable. I urge the Government to address the question of what limiting support to the firstborn will mean in practice. No family that needs help should miss out and, contrary to the Chancellor's declaration, this cut will affect rather than protect the most vulnerable.
The second very different element of the Budget I wish to raise is the remarkably short-sighted decision not to introduce tax relief for the UK video games industry, which makes a valuable contribution to the UK economy: in 2009, it generated £2 billion of sales, added approximately £1 billion to the UK's GDP, raised over £400 million for HM Treasury in tax revenues, and employed more than 28,000 people. It is an export-oriented, high-tech, highly skilled, low-carbon industry.
As we speak, the best developers are leaving the UK and going to Canada and the USA. The UK lost 700 jobs in the sector from 2008-09; a full 7% of its work force. That not only is harmful to the UK industry and to games already in production but means that some games that would otherwise have been made in the UK are made elsewhere.
Why are so many of the video games industry work force leaving the UK at a time when global video game sales grew by 24%. between 2007-09? Why has the UK games development industry fallen from the third largest in the world based on revenue in 2006 to fifth place in 2009? It is because the UK's principal competitors in Australia, Canada, China, France, South Korea, Singapore and the USA all received national or regional state tax breaks for games production. For example, in Montreal, Quebec, there is a five-year income tax holiday for foreign specialists and research and development tax credits cover 20% to 35% of qualifying expenditure.
Other competitive nations have taken a strategic decision that the video games sector is a key element of their economy. Research carried out by TIGA, the trade association representing the UK games industry, indicates that over five years games tax relief would create or save
3,550 graduate-level jobs, increase and safeguard £457 million in new development expenditure and save development expenditure that would be lost without tax relief. Most significantly, introducing games tax relief would increase and protect £415 million in new and saved tax receipts for HM Treasury-far outweighing the £192 million that games tax relief would cost.
Can the Minister explain why it is stated in table 2.1 of the Red Book that the non-introduction of video games tax relief would raise an additional £190 million over the next five years? How was that figure arrived at?
In my constituency and across Liverpool there are a number of video games developers: Genemation, Bizarre Creations, Magenta Software and Playbox. Sony Computer Entertainment, based at Wavertree technology park, employs more than 600 people. Games developed over the past 15 years in north-west England alone have produced and sold over 100 million units, equating to over £3 billion in revenue.
We have an outstanding record for vision and originality of games, but it is clear to me from having spoken to a number of people in the industry that there is a deep sense of frustration. All they want is a level playing field so that we can at least maintain the UK's position, if not grow the sector, so that jobs are retained and we can compete on a fair basis.
The video games sector is an important and growing knowledge-based industry. More than a third of the work force are carrying out graduate-level jobs in games development. Average salaries exceed £30,000, which is above the national average of £22,000. There is absolutely no doubt that a cultural revolution is taking place in the games sector, whether in serious games such as educational programmes and defence training simulators or recreational games.
Interactive media industries are with us for the next century and we should be doing all we can to support the sector to be a world leader in the field. Just as we have film tax relief in the UK, the Government should uphold the commitment both coalition parties made before the election to have a games tax relief. Britain has traditionally been a leader in the field of video games development, and in many ways it still is. However, we cannot compete without the same tax incentive system that is in place in other countries.
Throughout the Chancellor's speech on Tuesday, he kept on repeating that his Budget was an accelerated decrease in the structural deficit, but as I have shown through reference to just two of the cuts announced, it is actually an accelerated attack on families. It is an accelerated attack on those who are most vulnerable, on business and on growth and jobs. I will be voting against it next week.
Jeremy Lefroy (Stafford) (Con):
May I welcome you to the Chair, Mr Deputy Speaker? May I also congratulate those Members who have made their maiden speeches today: my hon. Friends the Members for Staffordshire Moorlands (Karen Bradley), for Hendon (Mr Offord) and for Camborne and Redruth (George Eustice) and
the hon. Member for Kingston upon Hull East (Karl Turner)? We have heard some excellent speeches, and I was particularly pleased to hear from my hon. Friend the Member for Staffordshire Moorlands, whose constituency I often have the pleasure of walking through on my very rare days off these days.
I wish to speak briefly about business finance. Some Members have talked about the lack of discussion of growth today, and growth is clearly vital for our economy. Members have referred to the importance of the private sector and of private sector investment taking us out of the situation we are in and creating jobs and tax revenues.
"are fundamental to the economic recovery and to tackling unemployment",
and I listened with interest to the remarks of the hon. Member for Liverpool, Wavertree (Luciana Berger) about tax relief on video games. However, some SMEs continue to have problems accessing the affordable finance that they need.
It is important to put that statement in context. According to figures from the Institute of Directors, in 2001, 45% of its members were financing their businesses through bank loans and 40% through overdrafts. A recent survey shows that now only 28% do so through bank loans, 36% through overdrafts and 20% to some extent through credit cards. That is not a sustainable model for SME finance when we are looking to SMEs to be the engine that pulls us into the strong growth necessary both to tackle the scourge of unemployment and to generate the tax revenues that we so desperately need.
Why have things changed so much? An IOD survey of 1,045 directors earlier this year was revealing. It showed that 57% of businesses seeking bank finance in 2009-10 were rejected by their banks. Perhaps even more discouraging was the fact that 83% of those declined bank finance were not even offered information on the previous Government's and the current Government's enterprise finance guarantee. Indeed, personal guarantees were sometimes asked for even when the enterprise finance guarantee was offered.
The Government have increased the enterprise finance guarantee facility by £200 million for the current year to support additional lending of up to £700 million. I welcome that, but it is clear that implementation is key. The EFG will not help small and medium-sized enterprises if the participating banks do not make their customers fully aware of it. Neither will it help if the procedures are lengthy. Profitable SMEs often run into short-term cash-flow difficulties-I recently came across one such instance in my constituency-and swift and decisive help is needed in such cases. I therefore welcome the processing target, which is mentioned in the Red Book, of 20 business days for all major lenders participating in the EFG. Indeed, I think that serious lenders could do considerably better.
Although the EFG is welcome, it will not fix the problem of the lack of bank finance. The announcement that the Government will publish a Green Paper on business finance before the summer recess is an important and clear sign that they understand the situation, but we need action from banks now. Their reputation has been tarnished in recent years, and I do not make that
point with any satisfaction because they are not the only people in that position. What better way for British banking to restore its reputation than to provide most of the finance that UK SMEs need to carry out the task of profitably creating jobs and generating tax revenues?
Bank loans and overdrafts are not enough. SMEs also need greater access to riskier capital, particularly equity and quasi-equity, but the UK has not excelled in that area. The new or growing business cannot necessarily provide security for loans, so more unsecured finance is desperately needed. I therefore welcome the growth capital fund that the Government will create as part of the existing £237 million programme of enterprise capital funds. I credit the previous Government with recognising the importance of such funding and I am delighted that this Government will build on that work.
Those amounts are necessarily small. It is the Government's role to take the lead, but they cannot and do not shoulder the whole burden. In north Staffordshire, we have the Michelin development fund, which was set up by the tyre company to provide unsecured finance to local SMEs, with the specific remit of creating sustainable jobs in profitable businesses. There is also the North Staffordshire Risk Capital Fund, which invests in businesses in my constituency. It is a public-private partnership, with investment from local businesses, individuals and the regional development fund. It was set up with a 10-year life and is drawing to a close. We must ensure that it is renewed or replenished, because it performs a vital role. I will do everything I can to assist with that. In south Staffordshire, we have the Black Country Reinvestment Society, which supports firms in Stafford with secured and unsecured funding.
I believe that Members of Parliament on both sides of the House have a vital role to play in encouraging such funds to form and grow in our constituencies. In my working life in business, over more than 25 years, the greatest pleasure was in creating new and lasting jobs, and the times of most distress were when someone had to be made redundant. Working with local people to create or support such funds gives us the chance to play a direct role in helping SMEs to do the job that they want to do and that we so desperately need them to do.
Mr Chuka Umunna (Streatham) (Lab): I have listened with interest to the various speeches made today and I do not think anybody denies the need to reduce the deficit. Neither do I think that my fellow Labour Members think that the answers all lie with government, but the big decisions that we are taking at the moment are about judgment and the direction in which we think economic strategy should go.
I want to pose some questions on those issues, because it is clear, on any analysis, that this Budget is going to hit everybody. My own view, which is obviously not shared on the other side of the House, is that it will hit the poorest and most vulnerable people in society hardest. How can it not, given the figures that we are looking at? The IFS data for 2012-13 leave no doubt of the Budget's regressive nature. They make it clear for all to see: indeed, the Financial Times said yesterday that
"the result of cuts in government services will be felt more on Nottingham's estates than by the Notting Hill set."
There has been a lot of talk in the Chamber today about comparisons with the situations in Greece and Canada, but in my view they are false. I think that the most appropriate comparison in many respects is a domestic one, and it was touched on by the hon. Member for Cities of London and Westminster (Mr Field). He is no longer in his place but he made a very interesting speech, in which he compared the present situation with the approach adopted by Geoffrey Howe and Margaret Thatcher. In fact, the Culture Secretary has been talking up the appropriateness of making comparisons with the Thatcher Budget of 1981 and the general economic strategy of that Conservative Government.
There are differences-we are in a different time, and the economic circumstances are not the same-but what is being done with this Budget has strong parallels with what was done in the early 1980s. Geoffrey Howe raised VAT from 8% to 15% in 1979, following an election campaign in which he said that his party had absolutely no intention of hiking up the tax. Today, of course, the Chancellor has raised VAT from 17.5% to 20%, following an election campaign in which he-and his coalition partners in particular-said that they had no plans to increase VAT.
Geoffrey Howe slashed benefits in the 1980s: the 1981 Budget made sickness benefits and unemployment benefits taxable, and unemployment benefit for the over-60s was reduced. The Chancellor today has done similar things today: among many other things, he has cut child benefit and disability living allowance, and reduced tax credits for young parents earning just £15,000 each.
The reactions from the national commentariat are similar too. In 1981, 364 economists signed a letter to The Times warning that the Thatcher Government's policies would deepen recession and threaten social and political stability. In April this year, 80 economists signed a letter to The Times warning that the current Tory Government's approach would lead to job losses that would affect spending and confidence and tip us back into recession.
Surprisingly, Washington in some respects took a more cautious approach, then as now. In 1981, just after Geoffrey Howe's Budget, President Reagan signed the Economic Recovery Tax Act to stimulate US consumption. This month, President Obama wrote to the Prime Minister and other G20 leaders to remind them of the dangers of withdrawing stimulus and engaging in fiscal consolidation too quickly.
What were the effects of the approach adopted by Geoffrey Howe in the 1980s? I can describe what they were in my constituency, in which I am proud to say that I have lived all my life. In April 1981 my mother was out shopping with my sister and me in the middle of Brixton when the riots broke out. I was too young-just two and half-to be able to remember what happened, but my mother remembers it well, and it was terrifying.
Soon after those riots, Lord Scarman was appointed to hold an inquiry into what caused them. It is well known that racism in the police at the time was a major factor, and the rioting was attributed to a loss of confidence in the police among significant sections of the population in my constituency and the other two constituencies in the Brixton area. However, although the report said that
"the social conditions in Brixton do not provide an excuse for disorder"
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