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Toby Perkins: My hon. Friend effectively anticipates my speech, for which I thank him. He makes a very wise contribution. The reality between 1999 and 2008 was not that the Conservatives were calling on the Labour Government to reduce spending; quite the opposite, they were complaining about all sorts of things that we were not spending enough money on-from police to flood defences and all sorts of other things. Now they sit there and say that we should have known all along what was going to happen. No one can take what they say seriously.
Toby Perkins: Yes, as the shadow Chancellor made clear, we would have maintained spending over the course of this year and put in place a different Budget from that of the Conservatives, along with headline measures about what future spending would be. Of course it was too early for us to have a comprehensive spending review; when the Conservatives were in opposition, did they ever do a comprehensive spending review and tell us every line of the Budget they would have carried out? Of course not. That is the reality of the situation.
My hon. Friends have pointed out that under the former Prime Minister the Labour Government led the rest of the world to the solution when the global economic crisis was at its worst. Labour made the choice to protect jobs, as I said. Just as Labour made a choice-an ethical and a political choice as well as an economic one-so the Chancellor has made his choice with the Budget. He did not choose fairness; he chose to gamble. His gamble is based on an ideology that says that the growth of the public sector somehow constricts the private sector, but it is utterly fallacious to suggest that the success of the one has to be to the detriment of the other and that the role of Government is to keep taxes low for businesses and keep out of the way. That is the wrong choice. That is taking a gamble with the recovery that Labour was delivering in a stable and managed way. It threatens our recovery at a time when the economy is still fragile.
The choice to increase VAT is, of course, regressive. When even the TaxPayers Alliance denigrates the policy as hitting the poor, we really have to listen. This will take approximately twice the amount from the incomes of the bottom 20% as it does from the top 20%, and it will stunt growth. That is acknowledged on page 97 of the Red Book, so the Chancellor is introducing a policy that he knows will stunt growth. As a business owner myself, I know that this tax will directly remove 2.5% from the bottom line of my firm if it were not passed on to my customers.
I also know that cuts in corporation tax are not as important as having a market in which one can make a profit. While the VAT cut introduced by Labour in 2008-09 stimulated growth, this VAT increase will take about £300 out of the average family's pocket at a time
when families are crying out for more help from Government, not less. That will have a knock-on effect on business. The Government seem to think that reducing the corporation tax burden, already historically low on businesses, will stimulate growth, without recognising that the environment in which businesses trade is the most important part of making a profit.
Taking money out of the pockets of consumers also takes money out of the pockets of businesses. It increases redundancies and business failures, and it stunts our ability to grow our way out of recession. For the hundreds of extra businesses that will now struggle to stay afloat, the thought of a cut in corporation tax will merit little more than a mirthless laugh. At every level, the Budget stunts growth. Cutting the allowances on which manufacturing firms were relying, and replacing them with a corporation tax cut over the next few years, will result in businesses being less likely to invest and more likely to focus on bottom-line profits.
The starkest aspect of the Budget, however, was a complete lack of a sense that the Liberal Democrats have been a moderating influence on the Tory plans. Where were the Lib Dem influences in this Budget? Seriously, does anyone in the House believe that if the Budget had been delivered by a Tory majority Administration, the Liberal Democrats would have marched through the Lobby and supported it? I will take that as a no. Where was the £2 billion capital gains tax increase? It was less than halved. Where was the commitment to restrict tax relief on pensioners to the basic rate? It disappeared. Where was the mansion tax? It does not exist. Where were the green taxes? How can one justify a £2 billion bank levy that will be compensated by corporation tax cuts for the banks that caused so much damage? Where was the Robin Hood tax on bank transactions, which would have brought in more than treble the amount?
This was a Tory Budget without a shred of Lib Demery about it. I will applaud the hon. Member for Colchester (Bob Russell) if he sticks to his guns and refuses to vote for it. The Chancellor had a choice: he made the wrong choice, and we will all pay a heavy price for years to come.
Mr Deputy Speaker: Three Members wish to catch my eye, and I intend to call the winding-up speeches at half-past 5. I am sure that Members will wish to show their characteristic generosity in sharing the time.
As a relative newcomer to the Chamber, let me say that we need to remember that there is no such thing as free money. The vast sums that we are discussing have had to be earned by people, and those same people will pay the price for the failed policies of the previous Administration. We should bear in mind the fact that they will be making sacrifices because of Labour's mistakes.
In a former life, I was fortunate enough to be able to run my own business. During 20 years in the private sector, I have enjoyed the ups and downs that go with that territory, as well as sharing the challenges and opportunities that all families face. Given that reality, I recognise that this Budget, and the legacy we have inherited, will hurt people, and will hurt some in their pockets. Obviously, no Chancellor would wish to give such a Budget, but it is the one that any responsible Chancellor would have to give.
We are like the receivers coming in to clear up the chaos left by the previous owners. It falls to us to tell the shareholders, the staff and stakeholders what must be done to save them from bankruptcy. In government, Labour Members were always keen to hold company directors to account for their mistakes, and would often pursue criminal prosecution. I notice that there is not the same alacrity to do so with the right hon. Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling).
In the limited time available, I want to focus on enterprise in the Budget, because my constituents in Enfield North will welcome steps to protect jobs and create an enterprise environment that can create new jobs-and why not? Given the 15% annual increase in the number of jobseeker's allowance claimants under 24 and the 30% drop in the number of vacancies, jobs are clearly a key issue in our area.
By reducing the burden of taxation and regulation, the Budget will give business the confidence to invest in the long term, which is crucial. The hon. Member for Chesterfield (Toby Perkins) suggested that the tax cut for companies would be of no value and would do nothing except, perhaps, create extra profits for those involved. That is nonsense. According to a survey of its members by the Federation of Small Businesses, 42 per cent. of small firms will use savings from tax cuts to invest in growing their businesses, 20% will use them to employ more staff, and some 22% will try to invest in new services and products. We must allow our companies to invest and, in doing so, create jobs.
I welcome the benefits to increase the level of business rate support temporarily for new businesses. We are trying to introduce help in the regions, and the exemption from national insurance for the first 10 employees will certainly be welcome. Let me, however, introduce a note of caution, and ask my colleagues to bear it in mind. I do not want to see the emergence of a series of phoenix companies that may wish to take advantage of the exemption as an aside. This is not the occasion on which to discuss the merits of phoenix companies, but they have the potential to abuse what is otherwise a very welcome policy.
Above all, I welcome the Government's commitment to urging banks to promote small and medium-sized enterprises in particular. That too is crucial. Many people in my constituency and-I declare an interest here-in my own experience have seen the abject failure of banks, some of them owned by the people, in that regard. Many pursue a twin-track approach: they tell us that they are publicly committed to lending to SMEs, while in the real world actively discouraging them from applying for loans. Such disgraceful behaviour should not be allowed to continue without comment. I for one will be watching the banks carefully and holding them to account in the future. Their behaviour explains why,
according to the FSB report, only 18% of its SME membership apply for loans, and only 9% are awarded them. SMEs are being discouraged from applying, and that is distorting the certificates.
Andrew Bingham (High Peak) (Con): I agree with what my hon. Friend has said about the banks. Will he also acknowledge that hard-working counter staff are being criticised by members of the public although they are not to blame for the difficulties that the banks have caused? They have been working very hard, and they are being unfairly criticised.
Nick de Bois: I thank my hon. Friend for highlighting that distinction. Indeed, it does not apply only to those working on the shop floor. Many senior managers are clearly being directed to follow a policy which-I am extremely pleased to note from the Budget-we are prepared to challenge. The Red Book refers to a review of the way in which banks should respond to the need to lend in the future. I realise that Britain needs its banks, but the banks need to play their part openly and honestly, and I look forward to seeing that happen. It is a key part of the proposals outlined in the Red Book.
This is a necessary Budget. It is a tragedy for our country that every 20 years or so Conservative Chancellors must make difficult decisions and accept public unpopularity for sorting out the mess left by their opponents. That has now happened again. I dislike many of the measures in the Budget, but I support them because I dislike even more the idea of our country literally going bankrupt. I hope that many of the tax rises that have been announced will eventually be reversed as our economy grows over the coming years, but our priority now is to stop the country slipping into a spiral of debt-driven decline, to rebuild our businesses, and to create jobs and opportunities to turn our economy round.
Matthew Hancock (West Suffolk) (Con): It is an honour to be able to speak in this debate on what is, by common recognition, a Budget of historic proportions. After the Budget, I bumped into a group of former civil servants who were reminiscing about huge Budgets of the past and where this one came. They talked about the 1981 Budget that has been much discussed in this debate, and the 1970 Budget by Iain Macleod that was never actually delivered because he died before he had the chance to give it. Of course they talked about the big 1950s Budgets of Rab Butler. All those Budgets had something in common: they were Conservative, or mostly Conservative, Budgets that were clearing up the mess left by a previous Labour Administration. This one of course is no different.
The mess created by the Labour Government has not been left at their end. We know from the letter by the former Chief Secretary, of which we will no doubt hear more, that there is no money left. That only repeats a letter sent in 1964 by Reggie Maudling to Jim Callaghan, which said, "Good luck, old cock. Sorry to leave it in such a mess." Here we are at the end of a Labour Government, once again clearing up the mess.
Before we hear too much from Labour Members, we must remember the economic as well as the budgetary consequences of former Labour Administrations. Under the Attlee Administration, unemployment went up by
280,000; under Wilson from 1964-70, unemployment went up by 226,000; under Callaghan, it rose by 479,000; under Blair-Brown, it went up by 460,000. In fact the only Labour Government under which unemployment fell was Ramsay MacDonald's 1924 Administration. I am not sure that that is one that we should follow or one with which Labour Members would want to agree.
Those lessons from history teach us several things. One is that memories of the failure of an Administration run deep. We all remembered for a long time the winter of discontent. We now know that the public recognise that many of the measures proposed in the Budget are Labour cuts because they are the response to the legacy that Labour has left. As my hon. Friend the Member for Enfield North (Nick de Bois) has said, it is a responsible Government who pick up the pieces following the irresponsibility of a Labour Administration who sent us into a recession with the largest budget deficit in the developed world.
Opportunism and oppositionism make life harder in opposition, rather than easier. We have seen so many times from Labour Members today and in the debate on the Queen's Speech the pointed finger and heard their lists of cuts, with almost no recognition of the need to deal with the size of the deficit that existed before the election.
There was one exception to this; the hon. Member for Streatham (Mr Umunna) made what I thought was an extremely thought-provoking speech. But at the end, he accused the Government of having nothing to say about reskilling and helping the unemployed. He was quite literally stumped and sat down after he was intervened on by the Minister who explained some of the proposals that the Government have put forward to help to lower unemployment and improve skills. At that point, the speech quite literally disintegrated. We have seen that repeatedly over the past few days.
Many Labour interventions have been based on accusations that are groundless. One is that the OBR shows a reduction in growth thanks to the Budget, but the OBR itself describes the contrast between two of its forecasts as misleading. It ignores the effect of the reduction in interest rates in the international bond markets that has happened since the election because of the anticipated action to deal with the deficit. Those interest rates have fallen further today. They are now half a point lower than at the election, and the total fall has been more than 10%. That is having a positive impact on companies throughout the country.
As Labour marches to the left, with its lengthy leadership contest meaning that the competition for taking up ever more left-wing positions intensifies, we increasingly find that there is a lack of credibility. The coalition parties are facing up to the seriousness of the situation and supporting measures that may not all be easily palatable. We support them because we see the long-term benefit of turning our country around and getting it back on its feet. There is no way that a position that lacks credibility, and simply attacks every cut and puts forward absolutely no alternatives, will be seen by the public as anything other than sniping from the sidelines.
The centre of the debate is how we get through this difficult period. Lessons from history also teach us that clearing up this mess is crucial to the success of the
Government, and that the bigger argument about turning our economy around and dealing with the problems we face will trump every complaint about an individual problem and each cut. After all, the public are yearning for a stable and secure economy-we have seen the opposite of that in recent years-and this Budget attempts to deliver it.
I strongly believe that the coalition must govern in the national interest. It must eliminate the structural deficit. I was surprised by something the shadow Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), said yesterday. He said that Greece
"took far too long to do what was necessary",
"Had they done it in February, when the problems first became apparent, some, although not all, of those problems might have been avoided."-[ Official Report, 23 June 2010; Vol. 512, c. 312.]
We must eliminate the structural deficit and ensure that growth returns by supporting the enterprise package and the corporation tax cuts and, of course, by stopping the jobs tax, which was an important part of the Budget. We must solve some of the long-term problems we face such as on public sector pensions-I am delighted that John Hutton will be producing a report on reform of public sector pensions.
Many Members have spoken of the impact of the Budget on their constituencies. I know that in my constituency there will be more support for enterprise, lower corporate taxes on successful businesses, more business confidence, which will allow people to create jobs, and lower interest rates for businesses that want to expand.
Vernon Coaker (Gedling) (Lab): On a point of order, Mr Deputy Speaker. Last Thursday, I tabled a written question for named day answer on Monday of this week, to which the Department for Education's response was that it would reply to me as soon as possible. I had asked it to name the schools that had applied for academy status, and I read in today's edition of The Guardian that that list is to be published tomorrow, but I have as yet received no communication from any Minister. I wonder whether at this late stage you have received any request from a Minister to come to the House to explain what is going on in respect of naming the schools that applied for academy status.
Mr Deputy Speaker (Mr Nigel Evans): I thank the hon. Gentleman for notice of that point of order. I have received no such request, but I know that Ministers in successive Governments have worked late into the night and the list might be being typed out as I speak and then be delivered to him. I know that the relevant Minister will want to keep his word, and I am sure that the Government Whip on duty will make sure the message gets through.
Kwasi Kwarteng (Spelthorne) (Con):
I am very grateful to you for calling me to speak in the debate, Mr Deputy Speaker, and I feel privileged to follow my hon. Friends
the Members for West Suffolk (Matthew Hancock) and for Bromsgrove (Sajid Javid), who outlined in their compelling speeches why the Budget is incredibly important. The issue that we have not really focused on enough is the context of the Budget. We all-even Opposition Members-accept that the deficit is too large and that at some point in this Parliament we have to deal with it. The big point of contention between the coalition Government and the Opposition is how soon we should grapple with the deficit.
We forget the fair hopes that we had in 1997 when the then Chancellor of the Exchequer produced his first Budget, entitled "Equipping Britain for our long-term future". That was the message that he wanted to send. That financial statement and Budget report came out in July 1997, and it was in that report that he famously stated his golden rule:
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