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Stewart Hosie: I am glad that the hon. Gentleman has done the four-year forecast and the average for me, but the point is the same: there is very little money in what ought to be an initiative with the potential, at least, to deliver some significant economic investment.
We need targeted measures, and one measure that the Chancellor could have introduced today was targeted help for the computer games industry. A targeted tax break was suggested previously but pulled from the previous Budget. Debates in the Scottish Parliament have backed it, and debates in Westminster have had all-party support, but he rejected the idea in 2010 and rejected it today. He did say, however, that he would improve the intellectual property regime and increase the small companies R and D tax credit, and I look to understand from the Government at some point whether there is a specific way in which the video games industry and other growing high-tech industries might access it, and access it in an appropriate way that protects them and grows them in future.
In terms of targeted measures, we also believe that there was a compelling case for the Scottish Government to be given responsibility for the administration and revenues of the Crown Estate in Scotland, given the focus in Scotland and the UK on driving a low-carbon economy and the existing responsibilities for marine planning and economic development. This Budget provided the Chancellor with the opportunity to indicate that he was prepared to do that through Government amendments to the Scotland Bill, but no commitment was made.
The Chancellor could also have demonstrated—another small targeted measure—that he was prepared to adjust the tax treatment of participants and sponsors at the Commonwealth games in Glasgow in 2014 so that there was equality of treatment with participants and sponsors at the Olympic games in 2012. I know that the Scottish Government and others have contacted him on the matter, because it is important to the overall success of the 2014 games and to the economic regeneration of the east end of Glasgow, so I am deeply disappointed that, in a Budget when he had the opportunity to talk about parity of tax treatment, he did not take it.
I know also that, following the abolition of the end-year flexibility agreements with the devolved Administrations, a new system was to be introduced and the Chancellor intended to set out details in this Budget. They might be tucked away in a document I have not read, but there was no mention made of that at all, or of whether a new end-year cash reserve could be established so that end-year flexibility was maintained in a way that was beneficial not just to the Scottish Administration, but to Wales and to Northern Ireland.
The Chancellor spoke a lot about the green economy and about several measures that he intends to take, and, as the Economic Secretary and the Chancellor know, there is still accrued £195 million of fossil fuel levy that only the Scottish Government can use. It ought to be released, but under the current rules it cannot without a comparable claw-back from the block grant. This was the opportunity for the Chancellor to release those funds, but he missed it.
That is particularly disappointing in relation to the announcement about the green investment bank, which was supposed to be the alternative. In November 2010, in the Treasury Committee, I asked the Chancellor what
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the timing was for its establishment, and he said that he wanted to get it up and running as soon as possible. He said that he hoped to come forward with proposals on how it was going to be structured between now and Christmas and that he would have set aside money to go into the bank in the comprehensive spending review. It is therefore hugely depressing that we have to wait another year, until 2012, before it can start to function. Given the press coverage that I am sure we have all seen, it looks as though it will be 2015 before it is fully operational.
A further green disappointment is that there was no mention whatsoever of green individual savings accounts—a key Tory policy to be introduced within two years as a way of helping savers to benefit from the growth of the green economy, because the billions raised from their sale would fund the state-backed green investment bank. Yet it seems that because of objections they are to be dropped, choking off a funding stream that would have channelled an estimated £2 billion a year into green technologies. I do not know if the shutdown of green ISAs is part of a wider move to curtail the potential operations of the green bank before it is even set up, but it is extremely worrying. Finally on green issues, the carbon floor price was mentioned. I understand from those who know more about that than I do that it is, in effect, a secret subsidy to the nuclear industry, which is anything but green.
The Chancellor said that this was a Budget for growth, but growth will be stifled if the banks do not lend, and if he takes no action on alcohol duty. Growth will be restricted by his failure to reassess the cuts in capital expenditure, and the opportunity of enterprise zones will be squandered without the proper application of capital allowances. Growth sectors such as the games industry will be damaged by the refusal to introduce tax breaks. Growth in the green economy will be slowed because of the refusal to release funds from the fossil fuel levy, and investment in our green future will be reduced because of delays in setting up the green bank. The Chancellor took an hour to shuffle £10 million. It was a profoundly wasted opportunity when he could have done so much more.
4.37 pm
Joseph Johnson (Orpington) (Con): It is an honour to follow in the slipstream of the new Member for Barnsley Central (Dan Jarvis), who has executed an elegant parachute jump into the Chamber. His forceful and powerful speech was a reminder of how important it is, at a time when the country is making ever greater demands on its armed forces, that we hear the voices of our servicemen and women from all parts of the Chamber.
Thus far we have touched several times on the critical role that the bond markets are playing in framing the budgetary policy of this coalition Government. The hon. Member for Middlesbrough (Sir Stuart Bell), who is no longer in the Chamber, asked when it was that bond markets acquired this pivotal role in our national economic policy making. If I may venture an answer, I think that the views of rating agencies became impossible to ignore when towards the middle of the previous decade—before the onset of the financial crisis—the British Government
“lost control of public spending”
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in three key Government Departments: Health, Education and Defence. Those are not my words or views but those of Sir Nicholas Macpherson, the permanent secretary of Her Majesty’s Treasury, as expressed in a hearing of the Public Accounts Committee not so long ago; they are available in the Committee report if people wish to have a look.
It is also important for the hon. Member for Middlesbrough to realise that we live in a globalised financial market, and if one cannot fund one’s borrowing requirements from captive domestic sources, inevitably one is forced upon the mercies of the international capital markets, and that is exactly where we find ourselves today.
Mr Kevan Jones: I know that the Conservatives are peddling the line that we are in hock to foreign banks, but does the hon. Gentleman not realise that only about 35% of our gilts and debts are held abroad? Greece is always held up as the big pariah, and its figure is nearly 70%. The hon. Gentleman’s argument is frankly complete nonsense.
Joseph Johnson: I thank the hon. Gentleman for that elegantly expressed critique. It is a significant proportion of our borrowing. It is not the totality, and I never said that it was. However, if our marginal investor, whom we need to supply that additional pound of borrowing, is setting the price for our borrowing, that determines the rate at which we finance ourselves. It is as simple as that. That is straightforward marginal pricing through supply and demand.
Mr Jones: Will the hon. Gentleman give way?
Joseph Johnson: No, I will carry on for a little.
In my view, it is only thanks to the resolve and determination of this Government that we have sufficient credibility with the bond markets to have delivered a Budget for growth. The Budget includes an acceleration of the plans to cut corporation tax, which will give a much-needed boost to Britain’s international competitiveness. I am particularly pleased by that because at a time when countries need to compete ever more aggressively to attract highly skilled labour, the UK is increasingly being seen not just as a high-tax economy, but as one with a highly complex and unwieldy tax system. The World Economic Forum’s global competitiveness report for 2011 ranked the UK tax regime the 95th most competitive out of 135 countries—almost at the bottom of the world rankings. That sends out a terrible signal to global business.
The UK tax regime was once viewed as an asset and I am glad that the Government are proceeding with plans to make it an asset once again. I fully support the Chancellor’s plans to give Britain the most competitive business tax regime of any major western economy, and to reverse our slide down the global competitiveness rankings. Already, the coalition Government have reversed planned increases in payroll taxes and lowered small business rates. As we heard from the Chancellor this afternoon, they will accelerate reductions in corporation tax so that by 2014, the rate falls to 23%—the lowest ever rate in this country and the lowest in the G7. That is something that we should celebrate if we are serious about enterprise and entrepreneurialism in this country.
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I also welcome the Chancellor’s decision to analyse closely whether the top rate of tax is yield positive or negative for the British economy. It is worth considering whether it is deterring investment, thereby losing us more revenue than it is bringing in. A more competitive, simpler and more stable tax regime is an essential precondition for growth and will ultimately be better for everybody in this country, rich and poor alike.
When countries that had public finances in a comparable state to ours last May are still fighting off the terrible spectre of sovereign debt default, it would be terrible folly to slow the pace of what is widely regarded as a necessary fiscal consolidation. Our policies are under intense scrutiny by the international bond markets, to which we are paying £120 million in interest daily. We cannot afford for our borrowing costs to rise, as they have elsewhere. We are paying 3.6% in the gilt markets on our staggering public debt. Other countries are paying rates closer to 8% or 9%, and Greece is paying a staggering 12.6%. We simply cannot afford to be complacent, as the Governor of the Bank of England made clear in a recent hearing of the Treasury Committee, at which he stated firmly that UK gilt rates would rise by three percentage points if we backtracked from the course of fiscal consolidation that we have outlined.
Mr Jones: I wish the hon. Gentleman would do some homework before he makes accusations, and not just swallow the central office lines on such things. He does not tell the House that less than 20% of our debt needs to be repaid in the next three years, whereas Greece and other countries need to repay 36% or 37% of their debt in the next three years. The idea that we have an instant crisis is wrong. Can he tell me when a UK Government have ever defaulted on a gilt payment?
Joseph Johnson: There are problems when a country has a stock of debt as massive as ours. Even with the Government’s plans for fiscal consolidation, it will not start declining for some years to come. Under the Labour Government our stock of debt would have peaked at about 80% of gross domestic product, but under the current Government’s plans it will peak somewhere below 70%—69%, I think I recall. [Hon. Members: “71%.”] Either 69% or 71%. Such a massive stock of debt means that every year, we have to refinance several hundred billion pounds of Government debt. Even if it is not all the debt, that is still a very substantial amount of money.
Richard Fuller: Perhaps my hon. Friend will be interested to read on page 25 of the debt and reserves management report issued today that the gap in the five-year forward rate on debt borrowing is at its highest point for 10 years. That reflects the fact that the market is buying only short-term debt. One of the few assets of this country that the last Government did not sell down the river was the long-dated debt that we have compared with other countries. If we had carried on with their policies, even that would have been lost as a result of their profligacy and waste.
Joseph Johnson: That is a very good point. Markets can turn on a dime if they detect backsliding, and that is not what they are getting from this Government.
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Chris Bryant (Rhondda) (Lab): The Conservatives spend all their time suggesting that this is just a national problem. The hon. Gentleman cited the possibility of our debt being 71% of GDP, but in Germany the figure is 79%, in France it is 75%, in Italy it is 116% and in Japan it is 194%. These problems came to every country in the world, and my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) was not responsible for all of them.
Joseph Johnson: Markets can turn on a dime if they detect backsliding. Recovering lost confidence would require much bigger cuts to public spending than the credible ones that the Government have outlined. Evidence for that is in abundant supply in countries on the periphery of the eurozone. Despite the agreement on the post-2013 European stability mechanism, concerns about the underlying solvency of the most vulnerable countries—Portugal, Ireland and Greece—are growing.
Jim Fitzpatrick (Poplar and Limehouse) (Lab): I am terribly sorry to interrupt the hon. Gentleman, but will he respond later in his speech to the question that my hon. Friend the Member for Rhondda (Chris Bryant) asked him?
Joseph Johnson: I did not touch on it directly because the reply is obvious. Yes, other countries have large debts, but that does not mean that we do not have an urgent need to reduce the scope of our borrowing and our national interest payments.
Sajid Javid: The hon. Member for Rhondda (Chris Bryant) should recognise that every country’s situation is different. He mentions Japan, whose debt might be about 190% of GDP, but it is also the largest creditor nation in the world. Only about 5% of its total debt stock is held by foreign investors. The situation is quite different in our case.
Joseph Johnson: That is an excellent point.
As my right hon. Friend the Member for Wokingham (Mr Redwood) said earlier, Portugal’s position is particularly precarious at the moment because opposition parties there, much like here, have refused to back the austerity measures needed to help the country avoid a bail-out. That could force Portugal further down the international bail-out route that was first trodden by Greece last spring and then by Ireland at the end of last year. Portugal’s 10-year Government bond yields rose comfortably above 8% yesterday, for the first time since the start of the crisis, reflecting plunging market confidence in the resolve of that country’s political class. That cannot be said of the occupants of Nos. 10 and 11 Downing street.
Mr Kevan Jones: The hon. Gentleman uses Greece, but my hon. Friend the Member for Rhondda (Chris Bryant) makes a very good point: we must look at countries individually. Our economy is larger than Portugal’s or Greece’s and completely different in other ways. In addition, countries such as those have a tradition of being unable to implement fiscal reductions, unlike ours. The basic, simple point is this: £5,000 is a lot to owe for someone earning £10,000, but it is a completely different thing for the hon. Member for Richmond Park (Zac Goldsmith) or other such people to owe that much.
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Joseph Johnson: I am not sure which of those many points to focus on. Greece’s economy is of course very different from ours, and we have a history of repaying our creditors in full, on time and when we say we will. We do not want to lose that reputation, which is why it is so important that the Government stick to their plans to bring our public finances back on to a sustainable path. We cannot compromise or jeopardise our standing in the international financial markets.
Jacob Rees-Mogg (North East Somerset) (Con): Does not the fact that £332 billion needs to be raised on the gilt market over the next two years, which at an extra 3% would be £9 billion a year of extra interest, show the utterly cavalier approach of Opposition Members in their recent interventions?
Joseph Johnson: Absolutely—their way of looking at our borrowing requirements is completely irresponsible. To think that we should pay more than £120 million a day in interest, which we are currently paying, is utterly absurd.
Chris Bryant: Incidentally, it is interesting to hear the hon. Member for North East Somerset (Jacob Rees-Mogg) condemn cavaliers. I thought he was one in the 17th century.
Many countries whose debt is a higher share of gross domestic product than the UK’s are not cutting anywhere near as fast as we are. Of all 29 major industrialised countries, only one is cutting faster than us: Greece.
Joseph Johnson: The hon. Gentleman may be a great economic expert, but he might find that the world’s foremost economists and international financial organisations, from the International Monetary Fund to the OECD—the entire gamut of respected economic thought—see this fiscal consolidation as necessary. There is no backsliding, which I applaud.
Before those interventions, I was saying that Portugal is moving ever closer to becoming the third eurozone periphery country to need a bail-out. Borrowing costs are again rising to a new euro-era high in Ireland, which desperately needs eurozone members at tomorrow’s summit to reach a political compromise on revised lending terms.
By contrast, Britain is a different story, thanks to the credible policies in the emergency Budget last June and the policies announced in October’s spending review. There is no sign whatever of any funding problems in the gilts market—quite the opposite—and we must prize that achievement. We have saved our triple A credit rating, which was under threat of downgrade in the last months of the previous Government, and kept our borrowing costs close to historic lows.
The coalition Government have earned the respect of the international capital markets and have their confidence, because the combination of a tight fiscal and a loose monetary policy remains the best chance of avoiding a sovereign debt crisis while ensuring acceptable increases in GDP. Britain simply could not for long run a budget deficit of 11% of GDP—the second highest in the OECD—without taking the unacceptable risk of losing the confidence of the bond markets. Almost a year on, the wisdom of taking decisive action to reduce the risk of sovereign debt crisis is obvious to all except perhaps
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Labour Members. Even Gavyn Davies, the Labour-supporting economist, conceded in yesterday’s
Financial Times
that getting the deficit down was a “defensible decision”.
A debt crisis would have been disastrous for growth and unemployment, as many European nations are now discovering. Furthermore, unlike those countries, Britain can, and is, using monetary and exchange rate policy to offset the fiscal tightening, as my right hon. Friend the Member for Wokingham said. I hope that that will keep the economy recovering.
As I have said, all manner of international bodies, from the IMF to the OECD, are unanimous in urging the Chancellor to stay the fiscal course that he has so consistently outlined for this country. Yes, real GDP growth may have dipped temporarily as consumers’ expenditure has been weakened, and today’s growth forecasts for 2011 from the Office for Budget Responsibility may be a little lower than we would have liked. However—
Alison McGovern (Wirral South) (Lab) rose —
Joseph Johnson: I will continue, if I may.
However, business surveys have been much stronger than the official data, and the Institute for Fiscal Studies says that the chances of a double-dip recession are no more than 20%. Even Gavyn Davies, the great Labour-supporting economist, admits that this figure is
“not high enough to jettison the government’s main strategy, with the loss of credibility which that would imply.”
Mr Davies is, of course, completely right. Maintaining the current policy remains the best bet for Britain in the medium to long term, and that is what matters most.
4.55 pm
Diana Johnson (Kingston upon Hull North) (Lab): Let me start by paying tribute to my hon. Friend the Member for Barnsley Central (Dan Jarvis) on making an excellent maiden speech. He talked about the spirit and aspiration of the people of Barnsley. I know that he will make a very good Member of Parliament and will certainly bring that spirit and aspiration to the House of Commons. Let me also say what pleasure I took in the election result in Barnsley. Seeing the good people of Yorkshire give the Liberal Democrats a real pasting—they put them in sixth place and made them lose their deposit—was enormously pleasurable.
The Chancellor talked about the necessity for growth across sectors and across the country. He also said that growth should be properly shared across all parts of the country. I want to talk about growth and the impact on the regions, and particularly the Yorkshire region and the sub-region in the Humber. We recently had some good news in Hull, which is that Siemens will hopefully set up a manufacturing site in east Hull to build wind turbines. That will result in about 10,000 jobs, which is excellent news for Hull and the Humber region. Like all Members across the House, I want a growing economy, high-skilled jobs for all the people in this country, and a well-educated and well-skilled work force. We have a history in Hull, having lost the fishing industry in years gone by, and other historic employment issues that we still need to address, so growth is important for my constituents and my city.
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However, it is important that we take an economic reality check and ask what the Budget will actually deliver. The key thing—this has been mentioned by many hon. Members across the Chamber—is that the growth forecast was down last year, it was down this year and it is down the year after. The hopes and aspirations of all my constituents have been dashed by what has happened since this coalition Government came into power.
I want to set this debate in the context of what it means for my city of Hull. Since last May, £20 million has disappeared from Hull’s local economy because of the coalition’s council cuts. We will see £25 million leaving the NHS in Hull, while £160 million has already gone because plans for the regeneration project in Orchard Park have been axed. Hull’s housing pathfinder funding has gone. There is zero decent homes funding for the next three years. Some £21 million has been cut from Hull’s Building Schools for the Future programme, and the university of Hull is getting a 5% funding cut.
There are major cuts to services across the piece in the public sector in Hull, which has a direct impact on the private sector. I fail to understand why the coalition does not see that cutting the public sector to the extent that it is will not help growth, but produce even more problems.
Richard Fuller: Does the hon. Lady acknowledge that the country has record debts, and if so, which public expenditure cuts would she make?
Diana Johnson: I am concerned that our economy should grow, and I am trying to set into context—
Diana Johnson: Will the hon. Gentleman just let me finish? I paid him the respect of listening to his question; I would appreciate it if he would listen to what I have to say.
One way of getting out of the problems that we have experienced as a result of the bankers’ problems—not the Labour Government’s problems, as the hon. Member for Southend West (Mr Amess) tried to suggest—is to grow the economy. I am with the coalition Government on the need for a growth strategy for the economy, but the measures that have been taken so far will not help to grow the economy in Hull and the Humber.
Richard Fuller: Will the hon. Lady give way?
Diana Johnson: No, I want to carry on making the point about why there is a real need in Yorkshire and, in particular, the Humber to grow the economy. The measures that have been taken are not helping. The result of all that money being taken out of my city is that construction jobs are going and we shall not have the training or the apprenticeships that the Chancellor has talked about. For the first time, we have seen compulsory redundancies at BAE Systems, a major private sector employer just outside Hull on which many of my constituents rely for skilled jobs. It is a place where people want to work, but private sector jobs are being lost there.
The abolition of the regional development agency, Yorkshire Forward, is a huge loss to the region and to the building up of the regional economy. The coalition
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has introduced local enterprise partnerships to assist regeneration. We all agree that we need to regenerate areas such as East Yorkshire and the Humber, and Yorkshire Forward was doing a very good job of building up the economy. The Government’s answer was to remove the RDA and create a regional growth fund. Now, whenever a question is raised about where funding can be accessed, we are told to go to the regional growth fund. The housing pathfinder has been scrapped, and the Prime Minister told my hon. Friend the Member for Kingston upon Hull East (Karl Turner) to go to the regional growth fund for money. It seems to me that the fund must already have been spent about 100 times over. It is just ridiculous.
Alison McGovern: Does my hon. Friend acknowledge, as I do, that the impact of these policies is borne out by the numbers, as the growth forecasts are downgraded?
Diana Johnson: That is absolutely clear.
The proposal for a business-led solution to deal with economic growth in the regions appears sensible. In my area, however, local authority politicians on Conservative-led East Yorkshire council and Liberal Democrat-led Hull council have been squabbling among themselves. The business leaders have made it clear that they want a pan-Humber LEP that will bring the economy together on the north and south banks of the Humber. As I said, we have had the wonderful announcement from Siemens on the future of renewable energy in our area, but because of the way in which the local councils in East Riding and Hull are behaving, the business community has been left without an LEP; the Business Secretary would not agree to one because it did not have the support of the business community.
This just shows that the Government’s approach is flawed. My area desperately needs economic growth, yet it has been left with no LEP and with the council in Hull squabbling with the councils on the south bank of the Humber. We have great potential for growth in the renewable energy sector, but there is no co-ordinating force. The idea is that LEPs will lead us into the growth strategy that we all want to see, but that is not going to happen in my area.
Mr Stewart Jackson: I fear that the hon. Lady might be suffering from selective amnesia. My recollection is that, in 13 years of a Labour Government, the per capita public expenditure for the people of Hull was significantly higher than for most parts of the UK—it was certainly in the top quartile—yet educational attainment, housing, skills and health outcomes were all in the bottom quartile. Why does she think that was?
Diana Johnson: I am sure the hon. Gentleman will be delighted to know that, because of the additional funding that the Labour Government put in from 1997, huge strides were made in education in my city, with more children achieving at GCSE level and more young people going on to college and university. That is important because it links into the growth strategy. Unless we have an educated, skilled work force, employers will not be attracted into the area. I disagree with the hon. Gentleman.
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What the Chancellor announced today is a return to the 1980s. As mentioned earlier, the detail on the enterprise zones is very sketchy and it looks like only limited resources will be available to the 21 areas granted this status. Hull, however, is not in the initial 10 announced today, which is very disappointing because Hull and the Humber is one area where I would have hoped the Government would see the need to invest in and support the economy for it to grow.
The Financial Secretary to the Treasury (Mr Mark Hoban): I am delighted that the hon. Lady is so supportive of our policy on enterprise zones. Perhaps she can encourage her local LEP to bid in the next round for one of them to be based in Humber and then to make a compelling case for the Humber to benefit from the policy.
Diana Johnson: With the greatest respect, if the Minister had listened to what I said, he would know that the Conservatives and Liberal Democrats who run the local authorities in my region cannot agree on an LEP, so there is not one. There is no procedure whereby anyone can lobby the Government for an enterprise zone. I question what will be delivered for local communities through an enterprise zone, and I also question how this policy fits with the localism agenda that the coalition is so keen to promote, whereby local areas are supposed to decide for themselves what they want to do and what best fits their particular needs. I question the announcement today, what it will mean and how it will help areas like the Humber.
I am also intrigued by this start-up Britain initiative. How is that going to help Yorkshire businesses? How is it going to help businesses in the Hull area? This start-up business sounds like a roadshow; I understand that the Prime Minister is going to tour around the country with some business leaders. If that is part of the growth strategy, then we have a long way to go.
Is this really a Budget for growth? I am concerned about some of the announcements that roll back people’s rights at work. A race to the bottom is not part of a sensible progressive growth strategy for our economy. We want high-skill jobs; we want a highly trained work force; and we want people treated properly in the workplace. Under the Labour Government, we married up social justice and economic efficiency from 1997 up until 2008, when we had the crisis with the bankers.
I am also concerned that women will lose out in this Budget. I was disturbed at Treasury questions yesterday when one of my hon. Friends raised the issue of how measures taken by the Treasury team were affecting women, only to have it dismissed along the lines of “We cannot possibly provide that information. We can only drill down to a household level. We can’t be gender specific.” In this day and age, the Treasury can be gender specific and should come clean on what these measures will mean for women and families.
Young people in Hull is another important issue. We are seeing a lost generation of NEETS—those not in education, employment or training. The coalition policies to remove education maintenance allowance and treble university fees will mean more and more young people deciding not to get the skills and the education that we all want them to have. It is a retrograde step when the Government pursue such an agenda against our young people.
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Mr Sam Gyimah (East Surrey) (Con): I am listening to what the hon. Lady says about young people not being given the skills they need and about NEETs. I do not know whether she was here earlier this afternoon when the Chancellor announced £200 million for 50,000 extra apprenticeships, which are targeted specifically at those young people who need training and skills to be able to get on the employment ladder.
Diana Johnson: Like all hon. Members, I think apprenticeships are an excellent idea. Employers in Hull, however, will tell anyone that the new criteria that have to be fulfilled to take on an apprentice mean that many of the young people cannot get into the workplace. They may be with a training provider, but actually finding an apprenticeship with a business is proving very difficult. I do not know where these 250,000 apprenticeships are going to come from. If the Government can do this, I say “Excellent, we are all supportive,” but to be honest, you are in la-la land—[Interruption.]—or, indeed, in the land of green ginger, which is another very good example.
Mr Deputy Speaker (Mr Nigel Evans): When the hon. Lady said “you are in la-la land”, she was, of course, referring to me!
Diana Johnson: I meant no disrespect to you, Mr Deputy Speaker. Of course, I did not mean that.
Let me bring my remarks to a conclusion.
Mr Marcus Jones (Nuneaton) (Con): The hon. Lady said that employers did not seem to want to take up the offer of apprenticeships. She is entirely wrong. The Government’s current scheme, which will generate a further 40,000 apprenticeships over the next couple of years, is over-subscribed. How can she square that with what she said?
Diana Johnson: With respect to the hon. Gentleman, that is not what I said. Employers in Hull tell me that the opportunities available to their businesses are limited because growth is so restricted, and that they therefore cannot take on apprentices. Meanwhile, providers tell me that they bring young people into the training centres, but then cannot find the apprenticeship places that would enable them to do their training.
There have been a good many academic debates today about what the Budget means—about bond markets and so forth—but in practical terms, for our constituents up and down the country, the real issues are connected with the cost of living. The rate of inflation in this country is now the highest in western Europe, people are worried about whether they will have jobs in the coming months, and there are problems with fuel duty. I am glad that the Government have been able to reduce fuel duty by 1p, but I find it rather ironic that the Conservatives are not able to challenge the European Union on VAT and derogation. Surely this is an opportunity for a party that is for ever wanting to take pot shots at the EU to do something constructive.
I believe that the deep cuts that are being made now will lead to social costs in the long term. It is dreadful that the coalition Government are targeting their cuts at communities in some of the most deprived areas, and at the most deprived and vulnerable groups in those
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communities. For instance, Hull city council’s early years service is being scrapped. We shall have no officers, no support for our nurseries, and no support for children in nurseries who have special educational needs, because the early intervention grant that the Government said would cover the cost of children’s centres and support for children under five does not do what it says on the tin. We shall end up with buildings that are open, with caretakers and receptionists, but with no children in them.
As I have said, the coalition Government’s cuts will store up a great many problems for the future. They utter plenty of fine words about the need for early intervention and support for families and communities, but they do not deliver the finance.
The Government strike me as a group of deficit deceivers and growth deniers who are making our country a less fair and secure place in which to live. Until 2008, the spending commitments of the right hon. Member for Tatton (Mr Osborne) matched those of the Labour Government across the board. Only when the banking crisis arrived did the then Opposition take a different approach. The Liberal Democrat council in Hull took the view that the Labour Government should be spending far more on Hull, but now Kingston upon Hull council is losing 9% of its budget, while Kingston upon Thames is losing 3%. That is not fair. The Chancellor may stand up and talk about a fair Budget, but this is not a fair Budget; neither is it a Budget for growth.
Mr Deputy Speaker (Mr Nigel Evans): Order. By convention, there are no time limits on speeches on Budget day, but many Members still want to take part in the debate. Any Member who speaks at excessive length—for more than about eight minutes, that is—will prevent others from contributing. I ask Members please to show some restraint. There will be other opportunities for them to speak during subsequent Budget debates.
5.14 pm
Richard Harrington (Watford) (Con): I assure you, Mr Deputy Speaker, that I will stick to the guidelines you have given. In fact, uniquely both in this House and in life generally, I find that I am speechless after listening to the hon. Member for Kingston upon Hull North (Diana Johnson). There is a holiday attraction somewhere called la-la land. I cannot remember who mentioned it but, obviously, it is nothing to do with Kingston upon Hull North. The picture the hon. Lady painted forgets who has been in power for the last 13 years and who has been responsible for a bloated public sector and a starved private sector, as well as for unemployment and all the other problems that many people, including the Chancellor, have spoken about today.
Matthew Hancock (West Suffolk) (Con): Is my hon. Friend as confused as I am given that the previous speaker started her speech by saying there are new jobs at Siemens in Hull, thereby showing that manufacturing is expanding under this new Government?
Richard Harrington: My hon. Friend makes a good point, but we heard about Siemens so long ago that it had slipped my mind.
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I shall restrict my comments to my experiences in business of dealing with the economy, and the experiences of my constituents and their businesses in Watford. Watford is not dissimilar to Kingston upon Hull. It has significant unemployment and shares all the same problems as many other parts of the country. Notwithstanding the Chancellor’s commendable statement today, the most significant factor in encouraging businesses to invest is the general macro-economic situation. Therefore, the most important aspects of this Budget and the last Budget are the measures for reducing the deficit.
Alison McGovern: The hon. Gentleman is making his speech in his usual eloquent style. Will he comment on why the growth forecasts have been revised downwards?
Richard Harrington: The comments that the hon. Lady somewhat generously applied to my erudition can also be applied to hers. To respond to her question on growth forecasts, we cannot select one figure and say that it makes a fundamental difference, because assessments of growth must be made over a period of time. In my experience, the most important factor for growth is the confidence people have in the economy, and that will definitely come about because of the Government’s sensible approach, as opposed to the reckless irresponsibility of their predecessor.
Angie Bray (Ealing Central and Acton) (Con): Is it not the case that in almost every recession that this country has had to fight its way out of, there have been choppy times and there has never been a smooth upward trajectory? It is always the case that some quarters are better than others.
Richard Harrington: With the possible exception of the la-la land factor, my hon. Friend is absolutely right.
I want to talk about some specific factors that are important to business people, and therefore important to growth. There is a lot of talk about banks and the availability of capital, and about what the Government should do and what they have not done. Again, I want to comment based on my experiences in the constituency. The bank lending situation is getting better; there is no doubt about that, as the loans are beginning to come through. In Watford alone, under the enterprise finance guarantee loan scheme, 23 companies have already borrowed money amounting to £4 million. That is a comparatively small sample and it reassures me for the future that this scheme, which is to be expanded, does work, and that it does so in a comparatively short period of time.
It is very fortunate for us that interest rates are low, but the decisions made by businesses do not change when fluctuations are minor, such as 1% up or 2% down. Their decisions do change when the situation reaches a ludicrous point; I was once left with a loan on which I was paying 2% over base when the base rate was 15%. Variations such as 1%, 3% or 5% make little difference. Again, what matters is confidence in the economy and confidence that the Chancellor has done the right thing today. So I must encourage what the Government are doing on the fundamentals, because people and businesses will want to borrow money only when there is confidence in the future and confidence that we are doing the right thing.
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My next point relates to the availability of skilled staff. Despite the fact that 3.7% of people in Watford—more than 2,000 people—are on jobseeker’s allowance and 700 or 800 young people there are not in education, employment or training, I visit factories and businesses that cannot recruit staff of the right calibre every week. A few weeks ago, I visited Davin Optronics, a manufacturing company that uses skilled labour to make lenses—it deals with complicated stuff. Its fear was that its work force were getting older and younger people did not want to join manufacturing businesses. That is a fundamental issue and we have to change attitudes.
Helen Goodman: How does the hon. Gentleman reconcile that situation with his Government’s policy on tuition fees and the fact that this week children in this country are being told that they cannot take three sciences at GCSE because of the cuts to school budgets?
Richard Harrington: The hon. Lady and I were at university at broadly the same time, so we were very privileged. We could debate tuition fees for hours, but no matter what one’s arguments on that, the new regime has not changed the current situation and we are, thus, dealing with Labour’s policy on tuition fees at the moment. I would be happy to debate tuition fees with her on another occasion, but the real issue is that we have young people and older people who are unemployed, and we have vacancies in jobs that people will not go into. The Government’s efforts on work experience for young people—today’s announcement on that was tremendous—and on expanding the apprenticeships scheme are very important, as are the technical universities. I commend those efforts because we must have a work force who have the right skills. That is not solely about graduates; it is also about people who are leaving school and are doing apprenticeships and further education courses. What the Government are doing to help will change the availability of staff.
Mr Kevan Jones: Will the hon. Gentleman give way?
Richard Harrington: No, I must make progress.
I normally agree with everything said by my right hon. Friend the Member for Wokingham (Mr Redwood), who is not in his place, and one might think that, as a Conservative Member, I would have an overwhelming interest in bureaucracy, labour laws, red tape and obstacles to business and that dealing with those things would be my top priority. However, important though they are, I think that they are secondary to the macro-economic factors—they are secondary to stability and the feeling of confidence. Germany is a classic example of that, because despite its labour laws and the fact that it has lots of regulation, manufacturing industry works well there. So I am very pleased that we are concentrating on the other issues.
I am keeping in mind your earlier comments, Mr Deputy Speaker, but I just wish to remind hon. Members that Watford is an average kind of constituency and so has 3,000 businesses, with eight being roughly the average number of people employed in them—these are predominantly small businesses. I believe that this Budget will help the long-term confidence for them, despite short-term growth forecasts, and so it is a Budget very much for the small business. It is also a Budget for the
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larger business, given the corporation tax measures. However, more importantly, it is a Budget for ordinary people and for their prospects. I believe that it is the best Budget that we could have, given the mess that the Government were left.
Mr Deputy Speaker (Mr Nigel Evans): I thank the hon. Gentleman for his time restraint.
5.23 pm
Rachel Reeves (Leeds West) (Lab): It is a privilege to speak in the same debate as my hon. Friend the Member for Barnsley Central (Dan Jarvis)—the new Member for that constituency—who will be a credit both to his constituents and to this House. We should listen carefully to his words and his warnings.
Today’s Budget is equally noticeable for what it does and does not include, because the Chancellor has not heeded the many warnings showing that the Government’s economic policies are not working. Gross domestic product figures for the last quarter of 2010 showed that our economy contracted by 0.6%. Government Members blamed the snow, but it snowed in Germany, yet its economy grew by 0.4%, and it snowed in the United States of America, yet its economy grew by 0.7%. The difference is that we are cutting too fast and too deep and they are not.
Another warning can be found in last week’s unemployment figures, which showed that unemployment is the highest it has been for 17 years and that youth unemployment is the highest on record. The OBR today showed that unemployment is set to rise to 8.2% this year and 8.1% next year—higher than it was even at the height of the recession. House prices continue to fall and yesterday we learned that the consumer prices index has increased to 4.4% and the retail prices index to 5.5%. There are many warnings that the Government’s policies are not working.
Mr Stewart Jackson: I have a quick question for the hon. Lady. Why, on the “Daily Politics” show approximately three hours ago, was she unable to name one measure in this Budget that Labour Front Benchers would vote against?
Rachel Reeves: We would like to vote, for example, on the bank bonus levy and other components of the Budget. My right hon. Friend the Member for Doncaster North (Edward Miliband) set out today that we will consider areas of growth in “The Plan for Growth” green book. There are areas where we want to work with the Government but also areas where we disagree with what they are doing.
Given the warnings I have mentioned, it is hardly surprising that the independent OBR has today downgraded its growth forecast for 2011 to 1.7% and has revised growth for next year to 2.5%. Let us put that in context. Before the Chancellor’s first Budget last year, the OBR predicted growth in 2011 of 2.6%. That forecast has now been downgraded three times—to 2.3%, 2.1% and today to 1.7%. Every time the Chancellor gets to the Dispatch Box, the OBR has to downgrade its growth forecasts.
The Government will say that the only way to get growth back on track is to reduce the deficit, but we have also seen today that the OBR’s borrowing forecast is expected to be £44.5 billion higher over this Parliament
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as a result of lower growth and higher unemployment. Despite today’s opportunity to think again, however, the Chancellor will still not accept that plan A is not going to plan.
Although the Chancellor has no plan for growth, his implicit plan B, I think, was looser monetary policy, yet today’s Monetary Policy Committee minutes show a further split over whether to increase rates and yesterday’s inflation data show more pressure for a rate rise. Plan B is looking as forlorn as plan A, with householders likely to see a mortgage rate rise by the summer.
We have heard many times today that the Government cannot change course, but that is a fallacy. Jonathan Portes, the new director of the National Institute of Economic and Social Research, recently said that that intransigence
“relies on an odd view of market psychology, one that says markets have more confidence in governments that never adjust policy, even when it is sensible…history suggests the opposite: that the real hit to credibility comes from sticking to unsustainable policies”.
He is right. Now is the time—more than ever—for the Government to rethink their plan, which is sapping jobs and growth out of the economy.
We need to begin to build the Britain of the future, because confidence in UK plc requires a belief that we have a competitive economy that productively employs its resources, draws on our strengths across the sectors and regions and invests in science, skills, technology and infrastructure. Today’s Budget, however, does nothing to foster investment or hope. Although I welcome “The Plan for Growth”, which has been published today, and the announcements to relieve us of a further increase in fuel prices and to provide help for first-time buyers, the Chancellor could and should have done more.
Most of all, although the Chancellor has said repeatedly that he will be tough on the banks, page 103 of the Red Book shows that the bank bonus tax brought in £3.5 billion in 2010 whereas the bank levy will bring in just £1.9 billion this year. There is no guarantee that the banks will lend any more to small businesses because the Government agreed gross lending targets and no net lending targets. No wonder the Treasury spokesperson for the Liberal Democrats in the Lords, Lord Oakeshott, resigned, saying that if this was tough action, his name was Bob Diamond. The Government have washed their hands of any responsibility to help small businesses, which are being hit hard by the banks’ actions.
There are other areas where the Chancellor could have acted today. We need a plan for green jobs and there is still the potential for Britain to be a world leader, as my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) pointed out earlier, in the green technologies of the future, but the market requires certainty and we are losing the initiative to countries that are willing to provide it. We need action, not just words, on the green investment bank, yet today we found out that it will not be fully operational until 2015.
We need regional economic strategies. The regional growth fund is estimated to be 10 times over-subscribed, and with a two-thirds cut to regional economic investment, cities and towns across Britain are missing out on opportunities to grow and diversify their economies. We risk another overheating in London and the south-east while the potential powerhouses of the north of England
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are being left behind. Although I welcome the enterprise zones, the evidence from the 1980s shows that such approaches move, rather than create, jobs. Of course, the funding for enterprise zones is a fraction of what the regional development agencies had to spend.
Mr Kevan Jones: Does my hon. Friend agree that because the enterprise zones are being imposed on regions, unlike in London where the Mayor will decide where they are, entire areas of the north-east such as Northumberland and Durham will be completely excluded from them and the little help they will bring?
Rachel Reeves: I do agree. Of course, only half the plans were announced today, which was disappointing.
We need an approach to business taxation that fosters growth. Although the Government have trumpeted the cut in corporation tax, it has so far been funded at the expense of investment and manufacturing allowances, so while big businesses have benefited from a tax cut, start-up and investment-intensive firms have seen their taxes rise. If we are to create the jobs of the future, we need today’s entrepreneurs to innovate and that is where the limited funds should be targeted.
We also need greater investment in skills and education. Last year, 8 million people graduated from universities in China and India. No other country is cutting investment in universities, reducing the teaching grant by 80% and cancelling partnerships between business and universities, but that is what the Government are doing.
Last week, we heard that the youth unemployment figure is approaching 1 million and it beggars belief that the future jobs fund is closing its doors in the same month that youth unemployment has risen yet again. One in five young people—more in my constituency—now claims unemployment benefit. Today’s unemployment figures are likely to rise further and today’s Budget is bad news for young people up and down the country.
The public recognise the need for austerity, but they also want to know that the Government have learnt lessons from the crisis and are determined to build a fairer and more sustainable economic future. Britain could be a world leader in the jobs, technologies and industries of the future but only if the Government support growth. Today was the Chancellor’s opportunity to show that he understands the needs of businesses and families, but the OBR’s verdict was to downgrade growth for the third time in 2011 and for next year as well. The Government have ignored the wake-up calls. This Budget is a missed opportunity and I urge the Chancellor and his colleagues to think again about what is really needed to ensure that we emerge from this recession with a stronger, fairer economy for everyone in the country.
Mr Deputy Speaker (Mr Nigel Evans): Thank you for your time restraint.
5.32 pm
Mr Stewart Jackson (Peterborough) (Con): It is a pleasure to follow the hon. Member for Leeds West (Rachel Reeves), but I am tempted to say that hers was a bit of a Blue Peter speech—here is one I prepared earlier. I am not sure that she has done anything other than regurgitate the line from the Whips Office.
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Rachel Reeves: The main thrust of my speech was to point out that growth had been downgraded and we did not know that until today. It was only when we heard the Budget that we knew that growth had been downgraded, for the third time in a row, to 1.7%, so I could not have written it earlier.
Mr Jackson: I know that the hon. Lady has some expertise on these issues. She can rest assured that my criticism will be confined mainly to the Leader of the Opposition, who delivered a master class in opportunism and vacuity. His loquacity was in inverse proportion to his intellectual insight. In his 15 minutes of speaking, no policy whatever was articulated.
The Budget is supported by the OECD, the International Monetary Fund and business leaders such as the deputy director of the CBI, John Cridland, and David Frost of the British Chambers of Commerce. It is about the Government putting in place the conditions for sustainable, balanced economic growth. Let us remember that the Institute for Fiscal Studies still says that public finances remain in a critical condition, but we have had no alternative whatever from Her Majesty’s Opposition. Indeed, we might have to call in Professor Brian Cox, the noted cosmologist, to search for the black hole where the Labour economic policy should be.
Helen Goodman: Will the hon. Gentleman give way?
Mr Jackson: I will make some progress; I am sure that I can let the hon. Lady in a bit later. The priorities of the Budget are primarily to reduce the deficit; rebalance the economy, which was left out of kilter by the Labour Government, with an over-concentration on financial services, the housing market and public expenditure; reform public services; and grow, via initiatives such as the green investment bank, green expertise, knowledge, skills and jobs. If I may give a plug, yesterday a collaboration was announced between Peterborough city council and Cranfield university on a centre for renewable energy and biofuels, to be based in Peterborough.
We need to move towards a high-wage, low-taxation economy with less pressure on household incomes, and the Budget provides a road map for that. No one denies that we have had to make some very tough decisions in the comprehensive spending review and in last year’s emergency Budget. There were real-terms cuts in departmental expenditure; the cut to departmental expenditure will be, on average, 11%. However, we should remember that between 1998 and 2010, there was a real-terms increase in budgets in each Department of anything between 2% and 8%. The fiscal tightening between now and 2015-16 will mean that we have to reduce public expenditure and put taxes up, with capital gains tax, tobacco, fuel, the bank levy, consumer prices indexation and child benefit affected. Contrary to received wisdom among Opposition Members, the richest 2% will be hit hardest by the tax benefit and other changes.
What choice do we have? Labour’s poisonous legacy and debt millstone left us with simply no alternative. In 2010-11, we had to borrow about £140 billion—perhaps around £10 billion less than expected. Only Ireland has a bigger cyclically adjusted deficit. Labour ran a structural deficit some seven years before the banking crisis in 2007-08, and we entered the financial crisis with the largest structural deficit in the G7. The national debt
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doubled between 1997 and 2010. In May last year, we were at significant risk of a downgrading in our international credit rating, with a catastrophic impact on public services, business and consumer confidence, a long period of stagflation, and a contraction in the economy.
Rachel Reeves: I want to enlighten the hon. Gentleman with two facts. First, in 1996, just before the Labour Government came into power, there was a structural budget deficit of 4%, whereas it was 2.5% in 2007. Secondly, he compares the UK economy with that of Greece, but does he recognise the figures that show that although bond yields in Greece increased from 7% to 12% between January and May 2010, in the UK, before the Conservatives came to power, they were falling?
Mr Jackson: The hon. Lady will know that the markets have recognised that the fiscal consolidation that the Government had to put in place as part of a policy of growth in the private sector and consolidation in the public sector has resulted in a lessening of the pressures in the gilt markets, with gilt yields down to 3.53% since May last year, and every 1% is £1 billion of interest payment. Of course, that is change in the pocket to Labour Members; we are spending £120 million on debt every day.
Helen Goodman: Will the hon. Gentleman give way?
Mr Jackson: No, not at this moment.
To put that in context, £95 million could have been spent on schools each day, but we are servicing Labour’s debt, and we could be spending £35 million on police, £25 million on social care, and £90 million on defence. The entire budget deficit that the Labour party ran up in government is £42.7 billion. That is 40 Type 45 destroyers, 33 Astute class submarines, 42,700 MRI scans, or 1.3 million nurses. That is the reality of the appalling profligacy and mismanagement of the Labour Government. We do not hear alternatives. We hear a policy that is dishonest, incoherent and irresponsible. The right hon. Member for Morley and Outwood (Ed Balls) shares very few values, I imagine, with the former US President Ronald Reagan, who once said, “I am not worried about the deficit. It is big enough to take care of itself.” That sums up the Labour party’s attitude in government, and the deficit denial on the Opposition Benches now.
Even some sensible and pragmatic Labour supporters are troubled by the incoherence and the substitution of political opportunism for a realistic alternative policy. The erstwhile Cabinet member, the right hon. Member for Salford and Eccles (Hazel Blears), said at the weekend:
“The public expects us to at least give a broad direction—but I think they are worried that we haven’t been as clear as we ought to be.”
The former general secretary of the Labour party, Peter Watt, went further. In a rebuke to the institutionalised deficit denial of the shadow Chancellor, Mr Watt said on the labour-uncut website that Labour
“is . . . a highly toxic brand. . . we are still opposing every cut . . .It might make us feel better and win some short term popularity. But it isn’t an answer to the charge that we had become economically illiterate and had allowed massive overspending.”
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If there is one lesson that I can offer the Labour party from our long period in opposition, it is this: rarely is it enough to be populist to win the respect of the electorate. That rarely forms the basis of a credible election strategy.
Helen Goodman: Is the hon. Gentleman satisfied with a Budget to which the oil and gas industry responded this afternoon by expressing its shock and stating that the investment climate has been seriously damaged and the Budget will drive jobs away from this country?
Mr Jackson: That is one viewpoint from one group of people. Others, such as Baker Tilly, the tax accountants, say that it is an excellent Budget. So do the CBI, the OECD, other industry groups, house builders and others. [Interruption.]I am glad the hon. Lady thinks it is humorous that people are supporting my right hon. Friend’s Budget.
Gareth Johnson (Dartford) (Con): One group of people who will welcome the measures in the Budget today is motorists. Does my hon. Friend agree that the measures cutting fuel prices ensure that petrol prices will not only not affect motorists directly, but will not have an impact on the price of goods in the shop, which in turn will assist middle England?
Mr Jackson: My hon. Friend makes an apposite point. I lobbied the Chancellor myself, I campaigned for the policy and I am glad that he has listened to the views of people, many of whom rely on the car to travel to work. It is a matter of public record that had Labour been re-elected in May last year, petrol prices would have been going up an extra 6p. That would be the price of Labour’s profligacy.
I am delighted that we are taking more poor working people out of tax, and that we are creating local enterprise zones to drive regeneration in some of the more difficult economic areas of Britain. I am delighted, too, that we are tackling corporation tax and creating conditions in which business wants to relocate to the UK and create jobs.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): But does the hon. Gentleman not realise the great damage the Budget has done by saying to investors, “You come to the United Kingdom, you invest in success, you employ 450,000 people, you make 20% of the Exchequer’s corporation tax, and then, once you have made all that investment, the Government move the goalposts and whack up a huge extra tax on your industry”?
Mr Jackson: I fully understand and respect the hon. Gentleman’s constituency interests. Were I in his position, I would make the same points. Clearly, when we are in a less than benign financial situation, clearing up the abysmal mess left by the Labour Government, we have to make difficult value judgments. To govern is to choose, and sometimes the choices made will not please everyone. I understand and respect the hon. Gentleman’s views, and I am sure the Chancellor and the Treasury Front-Bench team have heard his views.
Dame Anne Begg: Will the hon. Gentleman give way?
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Mr Jackson: No, I do not have time. Although other Members spoke for much longer, I will have to finish quickly.
I am delighted about the permissive nature of the reforms to the planning system and about the desperately needed initiatives for first-time buyers. It was extremely important that the mortgage market review of the Financial Services Authority was not going to choke off first-time buyers. Some figures show that 37 is now the average age at which young—less young—men and women buy their first homes. We had a significant housing boom in the 1990s and 2000s and need to encourage the house building industry to build more homes without choking off house prices or the capacity of young people to own houses and flats.
I am also delighted that residential estate investment trusts will be looked at. We need to clarify the regulations relating to brownfield remediation, which is an important part of bringing back into use residential and commercial sites. In future Budgets we need to think carefully about giving tax incentives for saving to first-time buyers so that they can build up moneys for a deposit in preparation for buying a home. We also need to look at stamp duty land tax. I am pleased that we are beginning to look at self-invested personal pensions in relation to people’s capacity to invest in the housing market.
In conclusion, the Government have had the courage and determination to take tough decisions and to prepare the ground for economic recovery. A credible plan to deal with our record budget deficit is an absolute precondition for growth. The Chancellor is right to strive for a balanced Budget and a firm and consistent strategy that will deliver for ordinary families in my constituency and across the country lower taxes, more jobs, better living standards and a renaissance in our international competitiveness. That is the only way to achieve future prosperity, which is why on Tuesday I will be supporting the Budget.
Mr Deputy Speaker (Mr Nigel Evans): Order. The debate will finish promptly at 7 pm.
5.47 pm
Mr Kevan Jones (North Durham) (Lab): I was going to say that it was a pleasure to follow the hon. Member for Peterborough (Mr Jackson), but we have heard a succession of speeches from Government Members that were not only economically illiterate, but stuck to the rhetoric pumped out during the general election. They seem unable to get away from that rhetoric even when the reality of what this country is facing hits them. We heard a rant from the hon. Member for Southend West (Mr Amess) and, frankly, a very strange speech from the hon. Member for Orpington (Joseph Johnson), who clearly had read something about the gilt market but did not quite understand how it works.
I congratulate my hon. Friend the Member for Barnsley Central (Dan Jarvis) on an excellent maiden speech. I think he will be a great asset to the House. He is a man of great courage in both his private and personal life and in the service of this country. I look forward to many more contributions of the standard he gave today.
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I would like to focus on two issues: the lack of a policy for growth in the Budget and how that will not affect positively the economy of the north-east of England. Growth figures for the last quarter of 2010 show that the economy contracted by 0.6%, as was mentioned by my hon. Friend the Member for Leeds West (Rachel Reeves). The Government blamed snow for that, but she eloquently pointed out some great examples of economies that grew despite having weather that was far worse than it was in this country.
On top of that, last week we saw a 17-year high in unemployment, set against a continuing fall in house prices and an increase in inflation to 4.4%. It would not take an astrologer, as was mentioned earlier, or a genius to work out that the OBR was going to have to downgrade its growth forecast today. Initially, it said that growth would be 2.6%; then, that it would be 2.1%; and today, that it will be 1.7%. The lack of growth is the main risk to our economy, and let us be honest, the Budget was spun so much that we could have read or predicted most of it before the Chancellor even stood up at the Dispatch Box today to announce it.
The Government also say that the key thing they have to do is to reduce borrowing, but borrowing is now going up, so even by their standards the economic pill is clearly not working. What is happening now is both risky and dangerous to the UK economy, and, although history cannot be repeated precisely, we need to look back, because one of the key lessons we have learned from the 1920s and ’30s is that recovery from large financial crises is delicate, slow and stuttering. Now, as a precise result of this Government’s policies since May, growth is down and unemployment, borrowing and inflation are up.
Rachel Reeves: Does my hon. Friend agree with me and the chief economist of the International Monetary Fund, Olivier Blanchard, who says:
“Unless advanced countries can count on stronger private demand, both domestic and foreign, they will find it difficult to achieve fiscal consolidation”?
Mr Jones: Yes. That is the entire flaw in the Government’s policy: the idea that they can cut public expenditure as deeply and savagely as they are going to, and that somehow jobs will be created in the private sector—something that will just not happen. It might happen in parts of the economy, but there is certainly no indication that it will happen in my region. In fact, the situation is even worse, because Durham university’s model shows that taking out 20% of the public services will lead to 50,000 jobs going in the north-east, with 20,000 of them actually in the private sector. Replacing those jobs, in addition to the 30,000 in the public sector, is going to be very difficult.
Sammy Wilson: Does the hon. Gentleman accept that, if the growth figures are wrong, the impact will be magnified and multiplied the further one moves away from the south-east of England? The impact on regions of the United Kingdom will be much more severe if the Chancellor has got it wrong.
Mr Jones:
The hon. Gentleman makes a very good point, but do the Conservatives care? No, I do not think they do. We saw that in the 1980s and early 1990s in the
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north-east of England. His constituents will face similar problems to constituents in the north-east, given the contraction of public sector jobs, which will have a direct impact on the private sector. Trying to attract business and growth to those areas will be very difficult, and I fear that we could have a two-speed Britain: a reasonably prosperous south-east of England, but stagnant or even declining regions, such as the north-east and Northern Ireland. Does the Conservative party care about that? No, I do not think it does.
Sir Alan Beith (Berwick-upon-Tweed) (LD): How does the hon. Gentleman deal with the fact that, even with Labour’s slower rate of deficit reduction, he could not have avoided a significant decrease in the number of public sector jobs to meet his party’s own projections of how it would reduce the deficit?
Mr Jones: I find that hard to stomach, coming from the right hon. Gentleman, because he is giving succour to the proposals before us, which could damage the north-east economy more severely than even those in Thatcher’s day. He is looking both ways, as a Liberal saying one thing in the region, and then coming here and supporting and voting for a Conservative Government who are putting the proposals forward. [ Interruption. ] I will tell him exactly why. What we would not have done is put forward his and his party’s ludicrous proposal to abolish the regional development agency, One North East.
The right hon. Gentleman now has to defend his ludicrous policy on local enterprise partnerships, which I shall come to later. He struggled to get re-elected this time; I doubt whether the voters of Berwick will re-elect him if he stands next time. It is important to remember that none of this could have happened without the Liberal Democrats blindly going along and supporting those savage cuts, which will have a terrible effect on a region I know he actually cares deeply about.
Another major aspect of the current economic situation is inflation. The Bank of England is stuck between a rock and hard place. Interest rates are as low as they can go, and quantitative easing is continuing, yet the inflation target is way above where it should be. It is difficult to know what the Bank will do.
We continue to hear, as we have heard several times this afternoon, that there is no alternative to this approach. I am sorry, but there is a definite alternative. We also hear that the fact that we are in this mess is all down to a Labour Government—that only Britain went through the recession in 2008, while the rest of the world did not, and that we got into the position we did only because of Labour’s reckless spending and financial management. I want to put some facts on the record. Conservative Members use a lot of rhetoric and soundbites; the famous one from the Prime Minister was that Labour did not mend the roof while the sun was shining. In fact, we did, because when we came to power in 1997, the level of debt was nearly 50% and we reduced it. I remember the tremendous debate within my party when we sold off the 3G licences. People said that we should use that money to fund public expenditure, but the then Chancellor took the very good decision to drive down the level of debt. That left us, going into the economic downturn, in the strong position of having the lowest debt, unemployment and inflation in the G7, and the highest investment from overseas.
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Was it right to transform and invest in our public services over those 13 years? Yes, it was. They have been transformed in many parts of this country, certainly in my constituency. When I was first elected in 2001, the hospital in Chester-le-Street was in the old workhouse. We now have a brand-new hospital in Chester-le-street, as well as three others in the area. We have six or seven new primary care centres in County Durham. That is a direct result of public investment. When the economic crisis hit, did we have to respond to that by borrowing? Yes, we did. Was it the right thing to do? Yes, it was.
At the time of the crisis at Northern Rock, if we had followed what the Conservatives, including the current Chancellor of the Exchequer, wanted to do, which was basically to let it fold, we would have had a far worse situation, with a banking crisis that would have devastated not only Northern Rock but every other bank. The then Chancellor put in place a package to support banks, subsidise mortgages, cut VAT, fund apprenticeships, and give people money to buy new cars and stimulate the economy—and it worked. If people want to look for the evidence for that, there is the growth of the economy in the months prior to, and just after, the general election.
Contrast that with what we have now—a Government who do not have a growth strategy and are wedded to a strategy that they feel it would be politically weak to go away from, repeating time and again that there is no alternative. I ask Conservative Members to reflect on what they would have done at that time. Last weekend, the Chancellor said that we were in this financial state because of a decade of over-expenditure by the Labour party. Well, the Conservatives supported our spending targets right up until 2008, so they cannot have it both ways. I ask them to look at the facts rather than what central office spun during the election campaign, which, unfortunately, some of them are continuing to repeat.
Sajid Javid: I am glad that the hon. Gentleman said that one should look at the facts. Is he aware that the spending cuts over this parliamentary period are only 3.7%—0.9% a year—in real terms, which is lower than the spending cuts that were implemented by Denis Healey, a former Chancellor? On that basis, would he still describe them as swingeing, drastic or tough cuts?
Mr Jones: I am sorry, but yes I would. If hon. Members are going to make comparisons, they should compare like with like. Whoever writes the central office briefings does one thing all the time. They compare our economy with that of Greece or, as the hon. Gentleman just did, they compare the British economy today with that of the 1970s. That is complete nonsense.
The central point—some Liberal Democrats are starting to wake up to this, including the Deputy Prime Minister—is that although there is a need and a desire to reduce the deficit, there is also an ideological drive to have a smaller state and to put into practice the ideological prejudices that the Conservatives have yearned to implement for many years. The people of this country will suffer from that. Is there an alternative? Yes, there certainly is.
Mr Greg Knight (East Yorkshire) (Con): This trip down memory lane is very interesting, but, if he does not support the expenditure cuts, will the hon. Gentleman tell us how much more he thinks we as a nation should be borrowing?
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Mr Jones: Something that the central office spin machine does very well, and which Thatcher did, is somehow to compare the national economy to somebody’s personal expenditure. Can we afford to borrow at the moment? Yes, we can. Borrowing to invest in infrastructure and other things is the right thing to do, and is exactly what we were doing in government. We are increasingly borrowing not to invest in the economy and infrastructure and to add to the country’s economic power, but to support unemployment. That is exactly what the Major Government found in their dying days.
It is important to recognise that unemployment in the north-east has reached 10.2%, and that is before the real effects of the public expenditure cuts work their way through. The idea of economic zones or business development zones, or whatever they are called, was announced in the Budget, along with the local enterprise partnerships. One North East was very successful in regenerating the north-east economy. It actually moved the economy away from the public sector and grew the private sector. It had real money. It had £180 million a year, and worked with the local university sector and local authorities to spend European regional development funding. The LEPs have no money attached and the regional growth fund has £1.4 billion to be competed for around the country. Today, we have the enterprise zones.
Mrs Mary Glindon (North Tyneside) (Lab): The Government have said that they want enterprise zones to support real growth and long-term sustainability. Does my hon. Friend agree that the announcement of an enterprise zone for Tyneside means little for growth or sustainability when the Transport Secretary has said that he will not provide funding for the much-needed upgrade of the A19 Silverlink interchange, which businesses have told politicians is essential for the economic development of Tyneside and the wider region?
Mr Deputy Speaker (Mr Nigel Evans): Order. The interventions are becoming very long. I have said that we are under real time constraints, as Mr Jones knows as well.
Mr Jones: I do know that, Mr Deputy Speaker, but it is important to get these things on the record.
My hon. Friend the Member for North Tyneside (Mrs Glindon) makes a good point. The two enterprise zones for the north-east will be in Tyneside and the Tees valley. That important piece of infrastructure is somehow supposed to be funded by the private sector, but that is exactly the kind of public expenditure that should be going into the region to create jobs and regenerate infrastructure. My concern about the enterprise zones is that places such as Durham and Northumberland have been left out. If we look back at the old enterprise zones, we see that all we got from them was a shovelling around of businesses and artificial borders. The zones will make it very difficult to attract inward investment to Durham and Northumberland.
As has been said, page 42 of the Red Book shows that funding for the 22 enterprise zones will add up to about £1 million each over their lifetime, which will not in any way help the regeneration of either Tyneside or Teesside. We will have the talking shops of the local enterprise partnerships, but no real money to do anything.
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The disastrous situation at the moment is that we have £106 million of European regional development fund but no money for One North East, local authorities or universities to match fund projects. The Government’s regional strategy is in a complete and utter mess, and the Budget will do nothing to assist.
One issue that has already been raised is—
Mr Gyimah: So why raise it again?
Mr Jones: Does the hon. Gentleman want to intervene?
Mr Gyimah: The hon. Gentleman said that the point he was about to make had already been raised a number of times, so I was asking why he was raising it again.
Mr Jones: If the hon. Gentleman continues, I might go on for a bit longer, so he must be clever and not do so.
As my hon. Friend the Member for Aberdeen South (Dame Anne Begg) said, it has been billed that the Government have somehow saved the motorist by reducing tax by 1p, but the effects of paying for that will be disastrous for the oil industry in this country, including Scotland. They will be disastrous for the north-east, as it relies heavily on Teesside and Tyneside to supply the expanding gas and oil fields, which need long-term investment. It is completely and utterly irresponsible to throw a spanner into the works of the investment in developing some of the most difficult oil and gas fields in the North sea.
Dame Anne Begg: Does my hon. Friend agree that the danger of today’s proposals is that they might fatally undermine the whole North sea offshore sector, which is fragile anyway because the geology makes it difficult to get the oil out? As a result, the country may lose even more money, because the sector is a huge taxpayer. As my neighbouring MP, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), said, 20% of all corporation tax is paid by the industry. What is being done today could put that in jeopardy.
Mr Jones: I agree, and there will also be a direct impact on jobs in oil exploration and in the booming oil supply business in Tyneside and Teesside. The short-term measure to try to get the Government out of a political fix on petrol prices will cause deep and long-term damage to jobs in the north-east and in my hon. Friend’s constituency.
The first-time buyer scheme, which the Red Book states will cost £250 million for just one year, will not help the north-east in any great way, because it will clearly be concentrated where a large number of houses are being built—the south-east and other areas. Because the Government have removed housing targets and affected social landlords’ ability to build new houses through the ham-fisted way in which they have structured the financing of social house building, I doubt whether there will be much effect on the north-east.
I also note that none of the £200 million additional investment in regional railways will go further than Leeds. Investment schemes for railways in the north-east—I have been calling for extra capacity for people to commute into Tyneside from Chester-le-Street and other places—will clearly not be forthcoming.
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Finally, I wish to mention armed forces pay. The Chancellor said that there would be a £250 uplift for those in the armed forces earning less than £21,000. I remind the House that that is from the same Government who have frozen armed forces pay for the next two years. In addition, they have changed the calculation from RPI to CPI, which will cost many thousands of servicemen and women huge sums of money over the coming years. The Government should not be proud of that. I get rather annoyed because if the previous Government had done that, when I was a Defence Minister, the Conservatives and Liberal Democrats would have howled us down and called us a disgrace.
Is this a Budget for growth? No, it is not. Will it help the north-east of England? No, it will not. Under the confused regional policy that is proposed, which is supported by the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) and his Liberal Democrat colleagues in the north-east, we will find that as the country’s economy declines and contracts, regions such as ours will go from the very bad position that they are in now to an even worse one.
6.10 pm
Mr Marcus Jones (Nuneaton) (Con): I will be a Jones who shows some brevity out of courtesy for his colleagues on both sides of the House.
I welcome the Chancellor’s Budget and congratulate him on it, because this is a difficult time to be a Chancellor and to deliver a Budget, as it will be for the rest of this Parliament. As much as Opposition Members like to deny it, the Chancellor is constrained by the straitjacket of the deficit and the debt left behind by Labour. We must view the Budget in context. We are paying £120 million a day in interest alone on our debt—£43 billion this year, which is more than we spend on the armed forces, the Foreign Office and the Department for International Development combined—which is a scandal.
I therefore commend the Chancellor for what is, in the circumstances, a first-rate Budget. It goes some way to recognising the financial pain that is being felt in the country, and serves to set a clear tone for the business community. This Government take businesses far more seriously. They recognise that people and businesses and not the state create jobs—sustainable jobs—and that if we are not serious about business, the country cannot sustain in a settled fashion the important public services on which we all rely.
There are positives in the Budget for individuals and businesses, but I shall also respectfully mention one or two concerns about it. I welcome the announcement on fuel, which is currently the biggest issue for my constituents. People will tonight breathe a sigh of relief that the 5p a litre increase programmed into the Budget by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), has been deferred. I am delighted that that has happened. People will also breathe a sigh of relief that the Government recognised the importance of that, and decided to get off the escalator at the right time, unlike the previous Government, who did not know when to get off, as we saw in 2000 when our fuel depots were blockaded by truckers and angry motorists, which I hope will not happen now.
Mr David Hanson (Delyn) (Lab): Will the hon. Gentleman give way?
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Mr Jones: I am not giving way, I am afraid, because certain Members have taken far too long in the debate, thereby stifling others.
I am delighted that the personal tax allowance has been increased to more than £8,000 this coming year. It is vital that we free people from the shackles of tax, particularly those on lower incomes. It is excellent that 1.1 million people will be lifted out of income tax altogether—[ Interruption. ] The hon. Member for Stretford and Urmston (Kate Green) does not understand. The previous Government shackled people to income tax. They increased the minimum wage way above inflation year on year, but they did not increase the personal allowance, which meant that more and more people were sucked into income tax.
Kate Green: Will the hon. Gentleman give way?
Mr Jones: No. I am not giving way to the hon. Lady.
Moving on, I welcome the help that we are giving first-time buyers, although I would ask those on the Front Bench to consider a couple of issues. Can we build the properties that we need to sustain the scheme quickly enough? Would it be better to extend the scheme to older properties, as well as new-build properties? First-time buyers are the lifeblood of the property market and of any chain. I acknowledge that the policy will do a lot of good for the building industry, but we also need to put in place measures to ensure that the property market can sustain itself. Currently it is under intense pressure. Expanding the policy to cover the property market as a whole will do a lot of good and improve the situation for the industries that rely on it.
I make a plea for the Chancellor to look at stamp duty land tax in his next couple of Budgets, because it is quite punitive in terms of the slab rate, particularly up at the £250,000 threshold. Over this Parliament, if not during the next one, we need to look at putting in place changes to stamp duty land tax that result in more marginal rates, just as we have different levels of income tax.
I also make a plea for anything that is done in the property market to be implemented as quickly as is practically possible. Back in 2008, the Labour Government introduced a stamp duty holiday, but if I recall rightly, they suggested in the press that they were doing so about six or eight weeks before it was actually implemented. That had a dramatic and devastating effect on the property market and those involved in it during that interim period. Therefore, we need to ensure that we are expeditious in implementing policies.
This has been a great Budget for business, within the constraints that the Government face. I would like to mention fuel again. Many small and medium-sized hauliers in my constituency are struggling to cope with increases in the price of fuel. In the main, they have to pay for fuel at the pump, but they are not paid by those for whom they work for 60 to 90 days. I am sure that they will welcome the Chancellor’s announcement today.
Regulation is one of the biggest banes of business, particularly small and medium-sized businesses, and costs them £80 billion a year, so they will welcome a reduction in red tape and regulation. They will also welcome the fact that the Prime Minister is looking to reduce regulation in the European Union to make it
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more competitive as a whole, which is vital. I hope that Government Members will continue to press the Chancellor and the Prime Minister to ensure that those plans bear fruit, because they are important to freeing up our businesses and allowing them to expand and employ more people.
I want to mention the beer and pub industry. I am slightly disappointed that in today’s Budget we have not sought to do anything about the beer duty escalator introduced by the previous Government. Since 2008, beer duty has increased by 26%. Unfortunately, we have not looked to soften that blow today. However, I hope that those on the Front Bench will listen to what I am saying and look to soften the blow for both the brewing industry and the pub industry. We have hundreds of thousands of pubs closing every year. Our great British pub is under pressure, and we should look to support it. I hope those on the Front Bench will take that on board.
Finally, I want to mention the advances that we are making on skills, which are vital to ensuring that our work force can sustain the jobs that we will hopefully help to create in the economy with the additional measures that the Chancellor has mentioned this afternoon. It is fantastic that we will have another 250,000 apprenticeships over the next four years. I am heartened by that, because young people have for so long been cast adrift, and this will help to bring them into employment and training in a sustainable way, and also in a way that will perhaps enable them to garner the knowledge to create their own businesses one day and employ others, which is what we have seen over many years.
I welcome the university training colleges, and I am sure that the large industrial companies in the west midlands will welcome that approach. I hope that it will help people to acquire the skills to fill what those companies are describing at the moment as a void. Companies such as Jaguar Land Rover want to expand greatly, and they need a supply of skills to sustain any such expansion. They need skills from local people in the west midlands. We do not want to bring in people from other countries to fill that void.
Given the constraints that the Government are having to work under—it was far from a golden legacy that we inherited from Labour—this is a positive Budget with good intentions for business and for creating jobs with substance. It also contains measures to bring back to this country the prosperity that has been badly needed for many years.
6.21 pm
Alison McGovern (Wirral South) (Lab): It is an honour to participate in the debate in which my hon. Friend the Member for Barnsley Central (Dan Jarvis) made his maiden speech. He made a really excellent contribution.
I want to comment on two aspects of the Chancellor’s statement: first, on inflation and the cost of living that people in Wirral and elsewhere are facing; secondly, on young people and employment. On inflation and the cost of living, we all need to acknowledge the global pressures that are causing price increases in the shops. Those pressures, including what is happening in the middle east and the price of food and other basic
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materials, make it more important that we get our policy right domestically. We have recently seen CPI inflation rise to 4.4% and RPI inflation rise to 5.5% in the UK, yet inflation for the EU as a whole is 2.8%. This picture of increased prices must also be taken into consideration in the context of our constituents whose wages are being held down. People have not seen an increase in their pay packets, but they are seeing price increases in the shops.
What is causing this inflation? I am well aware of the structure for setting interest rates and controlling price increases, and I look to the Governor of the Bank of England for an explanation as to why inflation has moved away from the targets. He says that
“three factors can account for the current high level of inflation: the rise in VAT relative to a year ago, the continuing consequences of the fall in sterling in late 2007 and 2008, and recent increases in commodity prices”.
He cites the Tory tax hike as having played a part in building inflation. My worry is not just about inflation this year, however; it is about people’s expectations of building inflation and the permanent hit that they will have on families.
John Thurso (Caithness, Sutherland and Easter Ross) (LD): Will the hon. Lady give way?
Alison McGovern: I will not, if the hon. Gentleman does not mind; I am conscious that other Members want to speak.
Labour rightly instigated a temporary reduction in the rate of VAT to help us through the downturn, but I am now worried because the Tory-led Government have implemented a permanent hike in the prices that ordinary people in my constituency face in the shops. That is clearly having a huge impact on our economy and threatening future growth, as has been illustrated by the reduction in the growth forecast.
On the increase in commodity prices which has also caused inflation, the Chancellor said in his statement that the UK would seek to have an impact on those prices through the G20. It is therefore incumbent on Ministers to explain how they are going to engage with our international partners to achieve that. There is no doubt that those worldwide events are having an impact on the streets of Bromborough, Bebbington, Heswall and New Ferry in my constituency, and I would like to know what action the Government are going to take in that regard.
I shall deal briefly with young people and employment. I know that Members across the House care about the issue, but we need to bring some words of caution to the debate. The Chancellor rightly reserved extra funds for the future training of apprentices, but money reserved does not equal apprentices hired. Other factors are necessary for getting young people into employment. The first, business confidence, is vital: businesses must have the confidence to invest. I refer hon. Members to what I said about the in-built inflationary expectations in the economy and what they might do to investment. It is a matter of great concern. A second necessary factor is growth, and it is worrying to see growth forecasts revised downwards. The Chancellor might have said that this was a Budget for growth, but I feel that it was all words and very little action. A final necessary factor is a change in culture, whereby businesses
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feel that it is their role to bring on the next generation. The current generation at work should be allowed to share their skills in the informal setting of the workplace to bring on the next generation.
I highlight, as always, the role of my own local authority. Wirral has shown great leadership in the sphere of encouraging small and medium-sized businesses to take on apprentices. However, the local authority cuts, which have been much greater in our area than in others, have put Wirral’s ability to play this role in jeopardy. The Government need to think about how they will bring about this change of culture in practice rather than simply reserve the funds and say they are there if business wants to take them.
Finally, I fear that Britain is seeing the end of any interventionist role for the Government. I feel strongly that the future jobs fund was an excellent answer to youth unemployment, but the Government have withdrawn from it. They say they are reserving funds for apprentices, but they are doing little more than that to encourage businesses to invest. We are also seeing inflationary pressures on the cost of living, which the Governor of the Bank of England relates to the rise in VAT. This is a price hike that hard-pressed families in Wirral and elsewhere can little afford. On those two issues that I have prioritised, I would like to see Ministers taking much more action.
Mr Deputy Speaker (Mr Nigel Evans): I thank the hon. Lady for her time restraint.
6.27 pm
Richard Fuller (Bedford) (Con): May I draw your attention, Mr Deputy Speaker, and that of other hon. Members to the Register of Members’ Financial Interests and to my interests in venture capital and small businesses? I would also like to join others in praising the hon. Member for Barnsley Central (Dan Jarvis) for his maiden speech, which I thought was eloquent, relevant and insightful.
Unfortunately, I cannot apply those three adjectives to the speech of the Leader of the Opposition, which is a great shame. When I listened to the right hon. Member for Doncaster North (Edward Miliband) during Monday’s debate on the UN resolution, I thought he spoke as a serious statesman on behalf of not only his own party, but the whole country. Today, however, I am afraid that his speech was more like a pantomime act than a serious contribution. I hope that the shadow Chancellor will provide a better and more insightful response tomorrow. It is a shame because the people of Bedford and Kempston want to hear not what is not going to be done, but what is going to be done. They heard very clearly from the Chancellor what he was going to do.
It is not my job to tell Opposition Members to do their job, but I think it is time that we heard from them what they would do, which I did not hear. Up until the last speech by the hon. Member for Wirral South (Alison McGovern), I had not heard that at all. If Members are challenged and accept that there is a deficit, it is important for them honestly to come forward and say what steps and measures they would cut. They should not just throw out the next unfunded commitment in response. That does not help achieve consensus in what are very difficult times.
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In addition, we are done a disservice because Labour Members’ failure to atone makes their constant outcries sound like a masquerade of keening by discredited professional mourners of the past. It would be much more insightful if they were able credibly to engage in the issue of how to get the deficit back under control. As their own unofficial website, labour uncut says, their current strategy of
“Hang on, I haven’t decided”
does not answer the needs of the time.
Mr Gyimah: I think that Labour has a plan. As we discovered from its press conference last week, the plan is to repeat last year’s bank bonus tax and spend the £2 billion that it raises in 10 different ways.
Richard Fuller: I shall be interested to see how Opposition Members respond to what my hon. Friend has said.
I would subject the Budget to the tests specified by the hon. Member for Barnsley Central: the impact that it will have on the most vulnerable, and what it will do for growth. It is difficult to introduce deficit reduction measures that do not disadvantage the poorest. What the hon. Member for Wirral South said about the impact of rising prices on people who were not receiving increases in their pay packets was absolutely right. I say to Ministers that—not necessarily for the purposes of the current year, but certainly as we look forward to next year and the year after that—we must think very carefully about what we will do for public sector workers who have experienced a pay freeze in at least one year, and in some cases in a number of years. Members on both sides of the House will want to hear a little more about that.
As I said earlier when I intervened on the hon. Member for Aberdeen South (Dame Anne Begg), the issue of the mobility component of disability living allowance is also of vital interest to Members in all parts of the House. We must ensure that we protect the most vulnerable people in our care homes. I have met the Minister responsible for the disabled—the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller)—on many occasions, and I know that she shares my passionate interest in that subject.
In the context of protecting the most vulnerable, let me first urge Ministers to continue to give full support to the welfare reform measures that are being pushed through by the Secretary of State for Work and Pensions. The universal credit will be of major, long-term, significant and beneficial advantage to low-paid and poor people in our country, and it is a measure that those on the Treasury Bench should support in the years ahead.
Secondly, I should have liked to hear a little more about support for our charities. I was very pleased to hear about the £550 million of support that the Chancellor was offering to them in the form of various benefits, but I should have liked him to be more radical. There are many steps that we can take to ease the rules and regulations and break down some of the barriers that prevent social investment from various sources. We should be a bit more open in relation to the way in which money can flow from social investment to outcomes and social impact bonds. I should have liked to hear about personal tax deductions for charitable donations, and I should very much like the Treasury—either directly
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or through the big society bank—to help charities to procure local government services. They need that support to arm them in their continuing battles with bureaucracies.
The Budget expresses strong support for those who wish to invest in our small businesses. It strongly supports angel investment and mentoring. Small businesses and entrepreneurs want support from people—from local people who may have started up their own businesses—and we will seek to provide it in Bedford and Kempston. We will seek to bring together successful local business people who can provide financial support through the advantages offered by the Budget in terms of angel investment, and through mentoring to provide guidance and advice so that small businesses can grow.
The Budget challenges us. As many other Members have said, we are about to be tested, and to go through very difficult times. It is important for Members on both sides of the House to argue constructively, but we should also rest on the great creativity and ingenuity of our small business people and entrepreneurs, because they offer the future that will achieve growth in this country.
Mr Deputy Speaker (Mr Nigel Evans): I thank the hon. Gentleman for exercising time restraint.
6.33 pm
Barry Gardiner (Brent North) (Lab): I shall try to honour the time constraints that you have imposed Mr Deputy Speaker.
Today the United Kingdom has the highest inflation since the days of Margaret Thatcher. The RPI stands at 5.5% and the CPI at 4.4%. Today the United Kingdom has seen the Chancellor announce a lowering of the growth forecast from the 2.6% predicted by the Office for Budget Responsibility last year and the 2.3% in the last Budget to 1.7% today. Today the United Kingdom has the highest unemployment since 1984, when John Major had just taken over from Margaret Thatcher. This is not a Budget for growth into the future. It is a Budget that will take us back to the future of Margaret Thatcher and John Major.
Inflation at 5.5% has a devastating impact on families in the UK, as £1 in every £20 that they earn is now lost. For example, the Secretary of State for Environment, Food and Rural Affairs gave up an enormous 24% of her departmental budget to the Treasury over this spending period, but inflation has now turned that into a real-terms cut of 31%. Have Treasury Ministers commissioned, or do they intend to commission, any research into the capacity of Departments to deliver on their performance indicators, given the effects of rising inflation on the departmental spending cuts that have already been incurred?
It is risible that this Budget has been delivered by a Government who style themselves the greenest ever. The establishment of the green investment bank has been delayed until 2012, and it is still unclear whether it can fully function as a bank or whether it will simply be a glorified fund. The carbon reduction commitment has already outraged the CBI and British business. Instead of rewarding energy-efficient businesses and returning £1 billion to business, as the Labour Government proposed when we introduced the scheme, the Treasury has shifted
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the goalposts and taken all of the money to itself. I had thought that the implementation of the scheme had been delayed until 2012-13, and that was certainly what was announced to business, but I see from measure O in table 2.2 on page 44 of the Red Book that the Government are now forecasting £715 million of revenue to the Treasury in 2011-12 from that scheme that only goes live in 2012-13. I ask Treasury Ministers to reconcile that anomaly.
The carbon floor price appears on the face of it to be a positive green measure, but in fact it betrays the lack of coherence in Government thinking on this area. The Government’s electricity market reform recognises the need to incentivise 18 GWe of new generation capacity in the UK by 2024. That is the equivalent of £200 billion of investment between now and 2020. As Ministers know, much of this generation capacity will come from gas. At a stroke, the Government have pushed away the very investors they sought to attract. They are now likely to encourage more imports and external dependency. Why should European generators generate in the UK when they can generate abroad with no such tax upon them, and then benefit from higher UK prices by use of the interconnectors? One element of the Government’s energy market reform strategy has been to increase the use of interconnectors. As a result of this step, investment will be pushed into France, Belgium and the Netherlands. There is incoherence at the heart of the Government’s thinking on this matter.
I did not support the Government in the Lobby on Monday night in the vote on military action in Libya. I pay tribute to our armed services, and to their valour and the work they do, but I cannot support the cost of the military escapade taking place in Libya, and I look to what could have been achieved if the funds being expended there were instead being expended around the rest of our country.
Mr Kevan Jones: Will my hon. Friend give way?
Barry Gardiner: No, I will not.
One Tomahawk missile costs £350,000, and 140 of them were launched in the first 48 hours of the attack, which amounts to a cost of £50 million. It is estimated that the cost of prosecuting this military conflict is £6 million each day. The cost of one day of action in Libya could restore in its entirety the £2.25 million of cuts in children’s services forced on my community in Brent by this Liberal-Conservative coalition Government. One month in Libya could protect children’s services across the whole of London. Nine months in Libya could protect children’s services across the entire UK. Aneurin Bevan once said that priorities is the language of socialism. Those are my priorities and that is why I will oppose this Budget.
6.40 pm
Sajid Javid (Bromsgrove) (Con): I congratulate the hon. and gallant Member for Barnsley Central (Dan Jarvis) on an excellent maiden speech.
I would describe this Budget as healthily underwhelming. I say “healthily” because it recognises that private sector growth is crucial to our future prosperity. I say “underwhelming” because it reiterates the need to continue our fiscal consolidation, and I congratulate the Chancellor
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on keeping on course with that. The Budget recognises the terrible economic inheritance that this Government were given. Our first Budget was a rescue mission, whereas this Budget is about a desire to build on the foundations for economic growth. Our budget deficit was 11% of GDP—it still is, because the cuts have not yet really begun—and the largest of any major country. Our national debt grew by 150% over the 13 years of the Labour Government to £893 billion by the time they left office. If we add the costs of the banking interventions to that, we find that our national debt is more than £2.1 trillion, according to the Office for National Statistics. That means that our debt as a percentage of GDP is on a par with that of both Lebanon and Jamaica. Our interest rate costs are £120 million a day and £43 billion in total this year, and they will rise each and every year in this Parliament to £66.8 billion. Although Labour Members may be in denial, I am glad to see that the International Monetary Fund, the OECD, the CBI and the Institute for Fiscal Studies are not.
What compounds our problems and the need for this continued fiscal consolidation is the very uncertain global outlook. The eurozone is still in trouble, as I found when I checked the bond market yields of some eurozone countries this morning. Despite the bail-outs, Greece’s yields are more than 13% and Ireland’s are more than 10%. Portugal is going through a parliamentary test today, and its yields are more than 7.85%. Our five-year bond yields are at 2.37%, despite our having the largest budget deficit of all the countries that I just mentioned. The emerging markets are also causing particular problems for our growth prospects, with things slowing down in China, India, Brazil and Russia—China has hiked rates twice in the past few months. We have relied on economic growth in that country to help our own export industry, so we need to keep an eye on the situation.
Lastly, as has been mentioned, in particular by the hon. Member for Wirral South (Alison McGovern), there is concern about global inflation. Clearly inflation has been caused primarily by rises in the price of oil, metals and food, but in the UK, in particular, devaluation has had an impact. It has had a positive impact on exports, but it tends to import inflation too. What has not been mentioned today is the potential impact of quantitative easing—the policy of buying up to £200 billion of both corporate bonds and gilts. That has an impact on the money supply in this country and it is doubtless having an impact on inflation.
With RPI inflation at 5.5%—the figure was published yesterday—and our gilt rate at 2.37%, the real rate of return is negative on our bond markets and that is a very fragile situation for the markets. To put that into context, the last time that RPI inflation was at that level was in 1991. At that time, our five-year gilt rate was at 10.09%. Clearly if the markets woke up one day and decided that they were not going to accept such low negative interest rates any more, we would be in a much worse predicament. That underlines the need for continued fiscal consolidation.
On the Budget itself, I note that the Red Book shows that spending continues to increase in cash terms from £694 billion to £744 billion by the end of this Parliament and that in real terms the actual fall in public spending is 3.7%. I do not want to belittle such a decline in real terms, but it is certainly not the type of savage cut that
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has been mentioned by certain commentators and by Opposition Members. In fact, it is about 0.9% a year, less than the cuts made by Denis Healey when he was Chancellor.
I particularly welcome the Chancellor’s announcement that he will consider merging the operation of national insurance and income tax. National insurance was introduced by David Lloyd George 100 years ago on the contributory principle, which hardly applies to national insurance today. It makes absolute sense to consider merging its operation with that of income tax so that we can reduce administration and compliance costs and increase transparency. Many times in the past, a Chancellor has stood at the Dispatch Box on Budget day and said that he is not increasing income taxes but has gone on to increase national insurance. That transparency will be welcome and in future it might lead to greater downward pressure from the general public on personal tax levels.
That measure would also add to the simplification of our tax code, which is critical, especially when it comes to helping businesses. Our tax code has doubled in size since 1997, with a guide almost 2,000 pages long, and it is equivalent to 10 copies of Tolstoy’s novel, “War and Peace”.
Last year, I welcomed the Chancellor’s commitment that the 50p income tax rate will not be a permanent feature of the tax system and I urge him, when he reviews the tax rate, to consider it in the same way as he considered capital gains tax when it was raised from 18% to 28%. A dynamic analysis was carried out at that time and perhaps such an analysis could be done of the 50p rate to show that it does not bring in any extra tax from richer members of society. Perhaps if it is cut back down to 40%, the rich will pay more in tax.
The Chancellor made a number of excellent announcements on growth. Time limits me from mentioning them all, but I want to highlight a few, particularly the moratorium for small businesses with fewer than 10 employees. I hope that we can consider ways to deal with regulations from the EU more constructively. I note that the EU agency workers directive, if and when it comes into force, will cost businesses in Britain almost £1.5 billion a year. Although the Government have a one-in, one-out policy, if that is successful it will only keep regulation at current levels. I hope that it will become a one-in, two-out policy. I welcome the enterprise zones and the decision to speed up planning decisions and ensure that they are made within one year. I also welcome the decision to increase the enterprise investment scheme allowance from 20% to 30% as well as the increase in entrepreneurs’ relief and the cut in corporation tax.
The policies that will truly promote growth are those that the Government have started to implement in some of their key plans in other Departments. In education, we will get young people to focus once again on core subjects and, in the context of reskilling our young people, I welcome the announcement that we will increase the number of apprenticeships and build on the good work done by the Minister for Further Education, Skills and Lifelong Learning by adding another 50,000 apprenticeship places by the end of the Parliament. So, 250,000 new apprenticeships will have been created by this Government by the end of the Parliament. I welcome the decision in the context of welfare to introduce the
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universal credit, which will ensure that it will always pay anyone on out-of-work benefits to be in work rather than out of work.
In conclusion, the Budget deals with our fiscal overstretch and promotes growth in tandem with other Government policies. I commend it to the House.
6.49 pm
Stella Creasy (Walthamstow) (Lab/Co-op): I share other Members’ pleasure in talking in a debate that has had so much heat and also the light of the maiden speech made by my hon. Friend the Member for Barnsley Central (Dan Jarvis).
I want to speak about a question that has been puzzling me for some time. How can the Government be so keen to show that they are tough on the national debt yet so blind to the growing crisis of personal debt that their policies are stoking? Families across Britain today will have listened to the Chancellor and wondered if he really understands the financial pressures they face—if he really has, as he said, done all he can to help them—because of the perfect storm of challenges hitting millions of homes across the country. Thanks to the VAT rise that he introduced, average families will pay an extra £300 to £450 a year in VAT and pensioners will pay an extra £275. Also, the benefits that help many families, such as tax credits and child benefit, are no longer there for them. That is a key concern for many of my constituents who have large families and who just tip into the higher tax bracket because of the London weighting on their wages.
Thanks to the Chancellor’s cuts, our economic recovery is stalling, which is why 8% of our working-age population is now unemployed. That is the highest level since 1994 and is set to rise further. Those people are in a job market in which 10 people are chasing every job and the situation is worse in London, with nearly 13 people chasing every job in my constituency. As a result of the cuts in the public sector, 130,000 people lost their job last year and another 170,000 families have members who are on redundancy notices. Buried in today’s papers are predictions that another 130,000 people will be made unemployed next year. Even those who are managing to stay in work are getting less because of the public sector pay freeze. The consumer prices index and the retail prices index are rising, reflecting the growing cost of living as clothes, food, energy and travel all cost more.
We are already seeing the impact of those problems. According to the Consumer Credit Counselling Service, London has the highest demand in the country for debt advice. Nationally, half of its clients gave unemployment or reduced income as the reason for their debt problems. In 2008-09 there were twice as many crisis loan applications as in 2006-07 and half of those applicants made two or more applications. Barnardo’s has reported a rise of 20% in the number of applications for its emergency loans for families and the UK now has one of the highest levels of personal debt of any country in the world.
There are 60 million credit cards in circulation in our country, for 14% of which customers can afford to make only the minimum payment. We should be extremely alarmed by what some people are using their credit
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cards to pay for. Shelter has highlighted the fact that one in 12 households in London is using credit cards to pay for mortgage or rent. Across Britain, the figure is one in 20 families. In the face of the changes the Government are making to our economy, families across Britain are struggling to make ends meet. That is vital to our economic recovery because, as we all know, credit is key to that recovery. Recently released figures show how consumer confidence is falling. People are not buying and spending in the way that our economy needs them to if it is to recover, but we should care about that and about personal debt not only because of the figures and the economic conditions but because millions of families now live with the fear of debt.
Half of all British households are worried about their debts and how they are going to pay them. Some 44% of households find that there is too much month at the end of their money and try as they might they cannot make what they earn cover what they need to spend. The problem is only going to get worse. In a recent survey, 43% of people said that they expected their personal financial situation to deteriorate over the next six months. This is not about buying new TVs or fancy holidays—it is about families struggling to feed their kids, pay their bus fares or keep their car going so they can get to work. It is about people having to cut corners or shift money from one credit card to another, chasing deals. It is about people worrying about paying their mortgage, affording school uniforms, arguing about debt and suffering sleepless nights. It is about people wasting time applying for jobs when so many jobs no longer exist.
I judge today’s Budget by what it will do to address those problems and to help families across Britain to make ends meet, not least because 20% of those who say they are struggling blame the recent tax rises for that. As the Institute for Fiscal Studies has said today, the Budget is giving with one hand and taking away lots with the other. The crippling impact of the rise in VAT will more than cancel out any change in the income tax threshold. Rather than offering corporation tax cuts to big business, we need to do more to get jobs and growth back into our economy. We need to put the needs of those families first but instead the Government are privatising personal debt.
At a time when people need help accessing credit to keep a roof over their head, the Government are taking away their options for help, with potentially disastrous consequences. They are taking away the social fund and capping the number of crisis loans for living expenses to just three a year, at a time when even more families are struggling.
I welcome the support that the Government have given for credit unions, but it will take a generation for them to become regarded as a serious, mainstream way for families across the country to access credit. As we all know from our surgeries and our conversations on the street, in these difficult economic circumstances, our banks are refusing to lend to businesses and individuals. The truth is that, with no real help in the Budget, there is very little option for many in our communities apart from the high-cost credit market, one of the few areas of our economy that is growing under this Government. Legal loan sharks are profiting from the perfect storm of rising living costs and falling wage packets for families across the country. Those people need our help now, not in the future.
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Already, a quarter of payday loan customers cannot borrow from anyone else. They are sitting targets for such companies, whose business models rely on locking people into borrowing at an extortionate yet legal rate, so that what seems like a short-term solution to financial problems quickly becomes a long-term debt. We know that there has been a fourfold increase in payday lending since the recession began, and that due to a lack of regulation in the market in the UK, The Money Shop, Wonga, Provident, BrightHouse and other companies are expanding across the country at an alarming rate. Indeed, they have already pointed to the Government’s policies as increasing their customer base.
The problem will only get worse, as the Institute for Fiscal Studies predicts that households’ real incomes will be lower than they would have been without the recession. The Governor of the Bank of England predicts that real incomes will stagnate because of the weak condition of the labour market. That means that there are likely to be more and more families in the year ahead finding that they cannot keep their heads above water financially, but the Government have yet to lift a finger to help them. Even if the Government will not do anything that the Office for Budget Responsibility says will increase growth in the economy—we know that the plans put forward today have already been factored into the OBR’s growth predictions—they could at least take action on the cost of credit.
Back in February, I warned of the problem, as Members across the House called for a cap on the cost of credit. The Government sought to do what they could to delay taking action. Today, I am giving notice that I will be seeking support for a similar measure in response to the Budget. We can learn the lessons of windfall taxes that targeted the behaviours of particular companies. I want the Budget to review whether the set of companies that I am talking about ought to have their tax systems changed to discourage them from behaving as they do. If the Government will not regulate them, perhaps it is time to use the tax system to deal with legal loan sharks, just as we do with cigarettes and their toxic impact on our communities.
I hope to secure support from across the House for making such a measure part of the Budget, and to challenge the Government not to continue to sit on their hands when there are growing levels of personal debt crippling families in our communities. Introducing such a measure in the Budget could, for some families, be the difference between getting into hundreds of pounds of debt and thousands of pounds of debt. That could be a massively welcome relief for the families who are looking at today’s Budget and finding little to help them to make ends meet, and who are therefore having to turn to such companies.
We know that debt in itself can become a barrier to finding employment, as the emotional consequences and financial penalties become too much to bear. If we do not act to protect the poorest communities from unaffordable credit measures, we will all pay through higher welfare bills, lower spending and a lack of growth in the economy. I hope that the Chancellor and his Treasury team are listening to the needs of those families, and I hope that the Government will finally act to end legal loan sharking, so that we can at least get some good news out of today. I do not believe that they have done all that they can to help families who are struggling
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with the cost of living. If they will not listen to me, perhaps they will listen to a famous lady who I know has been an inspiration to many Government Members. She once argued that if a person could understand the problems of running a home, they were closer to understanding the problems of running a country. The Budget shows that the Government understand neither, and the British people will suffer all the more for it.
Chris Williamson (Derby North) (Lab): Does my hon. Friend agree that at a time when so many more people in society will face huge debts, it is wrong for Derby city council to cut the welfare rights and debt advice provision for local people in my city?
Stella Creasy: My hon. Friend makes an important point. There are families struggling to understand what options are open to them. It is vital to support debt advocacy services. That is why I proposed that in my Consumer Credit (Regulation and Advice) Bill and why it is all the more pity that the Government sought to delay action on that measure—
7 pm
The debate stood adjourned (Standing Order No. 9( 3 ) ) .
Ordered, That the debate be resumed tomorrow.