Paragraph 2.40 is on charitable giving. The Chancellor suggested that philanthropy in a person’s lifetime should be subject to a limit of 25% of their income in any year.
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I can imagine circumstances in which someone would have a very high income in one year, perhaps through the sale of an asset that is not protected by capital gains tax relief. If somebody gets £1 million over and above their normal income and wants to give away two thirds of it, what is the Chancellor thinking of in saying that they can give away only a quarter? It seems to me that we ought to have the same ability to give away our earnings as we have to give away our assets in death.
I ask the Chancellor, when he has his consultation with philanthropists, to ask a number of well-known philanthropists—without giving their names—how they would react to that. For people with established charitable funds, such as Dame Vivien Duffield, who gives fantastic support to charity, there is no problem, but there is a problem for people who, by chance, have a very high income for one year or a number of years and who want to give away a lot of money. That is a matter that the House should consider, but I would like to hear the Government’s response to a consultation before taking up the matter further.
I also have a question, not for answer immediately, about the lifetime limit on savings for self-invested pensions. The limit has come down from £1.8 million to £1.5 million. That does not affect me personally—not on my salary. However, somebody who has got to £1.6 million can now write in and say, “Please protect this amount.” What happens if the value of their investment goes up by 15% in the next five years? Or by 150%? Will they lose 55% of that increase? They have to take the risk that the amount of money might go down, but if it goes up, the Chancellor will say, “I will have more than half of that.” I may misunderstand the provision, and I am not saying that it was new in yesterday’s Budget, but it does matter and we ought to give it some consideration.
I welcome the provisions on employee ownership and the enterprise management initiative, some of which are really interesting.
I am not absolutely certain that I understand the gift aid and charitable giving provisions completely, but they are to be welcomed. Simplification matters, and the headline title in the Red Book is, “A fairer, more efficient and simpler tax system”. I should like to talk about that.
Some of the accusations that the Opposition have made about the so-called granny tax are exaggerated, and we have to realise that we need to get more people to have more provision for their old age. The Government are right to say that £140 should be the minimum pension level, but we need to apologise to people who did not have the chance to receive that. They often worked for much longer than the current qualifying period, but get lower pensions and are more likely to have to get means-tested support. It is unfair to them when we make things better for people in the future, and we have to apologise to those most affected.
I want to ask the Minister why we use the retail prices index for some things that people have to pay and the consumer prices index for some things that people receive. People can rightly go through the Government’s provisions and ask whether there is a philosophy to that or whether it is just what is now called fiscal consolidation, which means, “We’ll take all we can and pay out as little as we can.” That is a perfectly reasonable attitude for the Government to take, but would they like to say openly what the philosophy is?
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I end by saying something about child benefit. I ran a campaign in the early 1970s to bring in family allowance for the first child, and I ran a campaign against Denis Healey when he said, “There’s no need to increase family allowance or child benefit—look at the married man’s tax allowance.” Half of that allowance went to people who had no children, and half of it went to people who had working spouses, so it was the least well directed way of supporting those caring for children.
Some of the arguments put forward over the past year, since we first heard about the proposal to cut child benefit for a certain number of people, have been grossly insulting. The idea that someone on £20,000 a year or less will support a person on £120,000 is nonsense. I saw one bit of paper suggesting that I could write to my constituents explaining why people with between £60,000 and £800,000 a year in earnings were being subsidised by the poor, but the difference between the taxation of someone earning £800,000 and someone earning £20,000 would pay for child benefit over and over again. The advantage of child benefit is that people register to get it when they are entitled, and stop getting it when their child ceases to be of eligible age. The amount of family formation, reformation and deformation, and the number of times people change or lose their jobs, will cause a lot of problems.
I say to the Government that whatever they get through this year against my wishes, they should not stick to this mistake. Amalgamating the value of the child tax allowance and the family allowance was right, and child benefit was the right way of doing it. It puts money in the purse more often than in the wallet. The Government are making a mistake, although less of a mistake than when the announcement was made a year ago. If they would like to have a serious debate about the matter, please count me in.
2.58 pm
David Simpson (Upper Bann) (DUP): I agree with a lot of what my hon. Friend the Member for Foyle (Mark Durkan) said about welfare cuts, regional pay and the £25 billion that the Government will provide to allow some banks—five at the moment, I believe—to help businesses. I trust that banks at home will take up that offer as well, because it would make a lot of difference to companies there.
I know that this was a very difficult Budget for the Chancellor, but I believe that some better decisions could have been made than the ones that we heard yesterday. First, I would like to deal with the corporation tax cuts to 24% and then to 22% by 2014. The Northern Ireland perspective, of course, is that we are in direct competition with the Irish Republic for investment. A former chief executive of the Republic’s Industrial Development Agency once remarked:
“In the battle to attract overseas investment to Ireland, no financial weapon has been more important than tax in convincing new industry to locate here. It remains the IDA’s unique selling point, giving Ireland a critical advantage in winning new investment.”
The measure in the Budget, therefore, is certainly welcome from Northern Ireland’s perspective.
Of course, not every business in Northern Ireland is liable for corporation tax and in a position to benefit—only 3% of businesses pay it. Some 99% of our businesses in Northern Ireland are small businesses. The measure is welcome news for those who will benefit, but it will have
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no impact on the overwhelming number of our businesses in our business community. That is why I welcome measures such as the proposal to allow the smallest businesses to move to a cash-based tax calculation. That simplification of the process could help up to 126,000 small businesses in Northern Ireland.
In the local press in Northern Ireland, the Federation of Small Businesses welcomed the Budget, but expressed disappointment that there were no plans to set up at the heart of government a small business administration to champion small businesses. Perhaps we will see that later.
I also welcome the devolution of air passenger duty, which will be included in the Finance (No. 4) Bill. That measure will allow the Northern Ireland Executive to set their own rate for long-haul direct flights—we have competed against the Republic of Ireland on that, so the measure will also help our investment strategy. The proposal for loans for young people to start their own businesses is another welcome part of the Budget.
Fuel duty, however, is one of the biggest problems that we have in Northern Ireland, especially for road hauliers. Because we rely so much on road transport to deliver our goods, fuel duty is causing a major problem. It is bitterly disappointing to people across the whole United Kingdom that the Government have decided to go ahead with the 3p duty increase, which will happen in August. I understand that in doing so, the Government will bring into their coffers somewhere in the region of £800 million from the motorist. Although the Government will get a lot of money from the measure, it will cause a lot of difficulty for those working people who must travel by car or another vehicle to their place of work. It is causing major difficulties.
Bob Stewart (Beckenham) (Con): I support what the hon. Gentleman says about fuel duty in Northern Ireland. In my many times there, the one thing that always struck me was the scarcity of railways. There just is no railway system, and therefore everything must go by road. It is very sad, but the duty has an impact on Northern Ireland.
David Simpson: I thank the hon. Gentleman for his comments. That is one difficulty we have in Northern Ireland because for 40 years of the troubles, the infrastructure investment was not there. We are only now playing catch-up. Perhaps some day when he comes across to the Province, we will have a new railway link from Belfast International to the centre of Belfast, which will be beneficial. It could be some way off, but perhaps we will achieve it.
Many people will welcome the tax credit measure to be introduced for the video games, animation and high-end TV industries. The Northern Ireland Executive have tried to promote that sector for some considerable time. Of course, Northern Ireland has seen significant investment in the sector, especially in film production. I hope there will be added benefits to be derived from this announcement. Recently, it was announced in the press that the series “The Game of Thrones”, which was made in Belfast, is to return shortly to film a new series.
In a passing comment, the Chancellor mentioned an enterprise zone for Northern Ireland. I would welcome that, if we could just find out from someone what is
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meant by an enterprise zone in Northern Ireland. The Secretary of State tells us that it is an enterprise zone for the whole of Northern Ireland. When we tease it out, some will say that it is going back to the 1980s, when there were different enterprise zones across Northern Ireland. We are yet to have any beef on the bones, and we need that if we are to determine exactly what is meant.
One of the issues that has continually acted as a brake on business is the endless red tape and planning laws, and I welcome the announcement in the Budget that we will perhaps see a quicker response to businesses when they apply to expand their premises. Of course, it is a devolved matter for the Executive, but I am sure that the Minister in Northern Ireland will see fit to fall into line in order to create an environment that is helpful for businesses in Northern Ireland. We also have the dreaded dead hand of EU regulation. I urge the coalition to have a firm hand when it comes to all the directives and regulation that the EU imposes on businesses. That needs to be addressed and, frankly speaking, the coalition needs to tell the EU where to get off. This is the United Kingdom, and we make our own decisions for our businesses and companies.
Although there are some plusses in the Budget, there are of course some negatives, but I wish the Government well with it. I hope that the Government can turn around the fortunes of the United Kingdom, and that we can see the people of this United Kingdom having a better standard of living.
3.7 pm
Stephen Metcalfe (South Basildon and East Thurrock) (Con): I am pleased to have an opportunity to contribute to this most important debate. Before I start, I put on record my appreciation to my right hon. Friend the Chancellor for his statement yesterday, for putting growth at the heart of the Budget, for unashamedly backing business, and for rewarding hard-working families. Those are the areas I want to focus on, but first I want to talk a little about the cut from 50% to 45% in the top rate of tax.
I have to say that I did not campaign for the cut and I was surprised to see it in the Budget, although that does not mean I do not welcome it. As a Conservative, I believe that all taxes should be as low as possible so that everyone can keep as much of their money as possible and spend it how they wish. But I recognise that at a time of national austerity, when public sector workers are experiencing a pay freeze and then very modest pay increases, and ordinary families are struggling with high fuel and energy prices, giving what appears to be a tax cut for the wealthiest in society seems to make no sense. Our hearts say this cannot be right, but if we use our heads, look at the hard facts and stop listening to the class war rhetoric of the Opposition, it begins to make a little more sense.
The 50% tax rate left Britain isolated as the country with the highest income tax rate in the G20—higher than our competitors such as the United States and countries in Europe. It made Britain a less attractive place for wealth and job creators to set up and do business. It encouraged the wealthiest in society to be more creative about where in the world they paid their tax. It saw £16 billion of income deliberately shifted into a previous tax year, meaning that the total take
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from the 50% rate was only around £l billion. It did not raise the levels of income expected and it made Britain less competitive.
Richard Fuller (Bedford) (Con): My hon. Friend is making a lot of sense. Would he also draw Members’ attention to the HMRC report and the chart on page 23 showing that even with a 45p tax rate we will still have the highest tax rate for top earners in the OECD and G20?
Stephen Metcalfe: I think my hon. Friend has just done that.
The higher tax rate made Britain less competitive, and if we are less competitive, it means less growth, fewer jobs, reduced prospects for economic recovery and fewer tax cuts for the rest of us. Despite the perception, therefore, that this cut benefits the wealthiest, I believe that it benefits us all. Having a top rate of 50% rather than 45% raises only £100 million in direct tax, whereas the other Budget measures introduced yesterday raise five times that amount—£500 million.
We should not listen to Labour on this matter. Its aim is to reignite the class war and divide Britain along the lines of envy for its own political gain. I want to say to the people of South Basildon and East Thurrock, “Ask yourself this simple question: what is in the best interests of you and your family? If you answer economic growth, better job prospects, low interest rates or lower taxes, welcome this change, because it goes some way to delivering those aims.” On its own, however, it is only a small step. To achieve real growth, we need more, and I am pleased that we are getting more. The Chancellor both confirmed existing growth measures and announced new ones. As a member of the Science and Technology Committee, I am pleased that the science budget is receiving continued support. Investment in science and technology is vital if we are to emerge from financial austerity. New technologies, deployed for our own economic gain, can provide both jobs and growth. I therefore welcome the maintenance of the £4.6 billion science budget. I believe—I think the Chancellor does too—that science and technology form the basis of our future competitiveness.
Investment in sectors that Britain excels in is also vital. Investments such as in the Francis Crick Institute at St Pancras, the establishment of a UK centre for aerodynamics, which will encourage innovation in the aircraft industry and help design and commercialise new ideas for decades to come, and the £100 million of support, alongside the private sector, for investment in major new university research facilities are important parts of that support.
Also important are the changes to research and development tax credits to encourage businesses to invest in innovation and technology. We also need to improve links with small businesses and the research base to assist in the commercialisation of research and, I hope, capture the value that can come from that. These will be the key drivers of economic growth, and the Government should continue to strive to create the best possible operating environment in which this can take place to encourage greater investment and international interest. We want the international research community to see the UK as the best place to invest in science and technology. I am therefore pleased that the Science and
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Technology Committee will be looking at how we can bridge the valley of death—the chasm between concept and commercialisation.
This goes wider than just science-based businesses, however. We want all businesses to see the UK as the best place to set up and do business, and I welcome the measures that the Chancellor has taken to ensure that this becomes a reality. The reductions in corporation tax, the introduction of corporation tax relief for video games, animation and high-end television, and the investment in broadband provision and infrastructure are all welcome additions to the growth programme.
Mr Iain Wright: Notwithstanding the 1% cut in corporation tax, what impact will the 5.6% rise in business rates have on growing businesses and economic growth?
Stephen Metcalfe: Obviously, any rise in cost base will have an impact, but we are working hard to reduce that to the absolute minimum, and we are putting in place a framework around which businesses can grow that will mitigate the 5.6% rise.
We all welcome the investment in infrastructure, which will be a driver for growth, although I add the caveat that I and my constituents remain wholly unconvinced that an airport in the Thames estuary is the right solution to maintaining our hub status. I would therefore encourage the Government to listen to my hon. Friend the Member for Solihull (Lorely Burt), who made a very good bid for that increased capacity in Birmingham.
I also want to put in a plea for small and medium-sized enterprises. In 2009, they accounted for 49% of private sector turnover. SMEs are vital to the economy. Cutting corporation tax, abolishing Labour’s job tax and offering support through the national loan guarantee scheme are all welcome, I am sure. However, if SMEs are to operate at their full potential, regulation, red tape and bureaucracy must be cut. They have been strangling the economy for too long. I am therefore encouraged to see measures that will allow greater freedoms for businesses in this area. My right hon. Friend the Chancellor’s announcement yesterday that he plans to reduce the number of UK SMEs required to undertake an audit and to reduce the burden of financial accounting for UK businesses has to be welcome. I hope that the consultation on a new cash basis for calculating tax, which the Federation of Small Businesses has welcomed, will benefit many small and micro-businesses, allowing them to concentrate on growing their businesses, rather than spending time, money and effort fulfilling requirements that were designed for much larger businesses.
Bob Stewart: As an expert, my hon. Friend will be able to confirm this, but I have heard that about 10% of what small businesses do is taken up with bureaucracy—filling in forms, and so on. Does he agree that we need to avoid that?
Stephen Metcalfe: My hon. Friend makes a good point. It varies from sector to sector, but that is not an unrealistic figure.
Finally, in the short time I have left, I want to talk about jobs. Businesses are vital for growth, but they are equally vital for tackling unemployment. I am delighted to see that unemployment is beginning to stabilise.
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Dealing with unemployment, through the building business and enterprise loans, will allow jobseekers to start their own businesses and unleash a new generation of entrepreneurs. However, we should not forget that our existing small and medium-sized enterprises have the potential to deliver sustained employment. We should redouble our efforts to create confidence for businesses to take on staff. I therefore reiterate my call to make it easier for firms to hire staff in the knowledge that employment regulation will support them if things do not work out.
As we emerge from the deepest recession in living memory, I applaud the Government’s commitment to addressing an over-leveraged economy, an unsustainable budget deficit and a broken model of growth, inherited from the previous Administration. Our plan of fiscal responsibility has allowed the UK to surge ahead of the curve. We have become a safe haven in the sovereign debt storm. As a result, we have been able to deliver record low interest rates for families, businesses and taxpayers, yet still remove millions of people from paying any tax at all, by increasing the tax threshold. Although we are not immune from events taking place on our own doorstep, we can—as this Government are demonstrating—steer this country out of a financial quagmire and deliver growth, employment and a future brighter than any alternative the Opposition may offer.
3.17 pm
Jack Dromey (Birmingham, Erdington) (Lab): Just about the only announcement that was not flagged up in advance of the Budget yesterday was the £3 billion granny tax grab, which means that those men and women in my constituency who built Birmingham and Britain, who are coming up to retirement next year, will face a cut in what they had hoped and planned for of £314.
There are many laughable examples from the historical lexicon of the politically disingenuous—for example, the spokesman in the dying days of the Nixon Administration who said at the height of Watergate that “all statements heretofore issued are now considered to be inoperative”—but to describe this granny tax grab as “simplification” takes some beating. There is one thing that the Business Secretary and I have in common: we are both follicly challenged. Neither of us detains hairdressers for too long. Following yesterday’s Budget announcement, the next time I go to Imad’s, the barbers on Slade road, I will ask for my hair not to be cut, but to be “simplified”.
Why has this happened? Quite simply, it is a granny tax grab to fund a £40,000 tax cut for 14,000 millionaires.
Sir Peter Bottomley: The Labour Government were in power for about 150 months. For fewer than two of those 150 months they had the 50p tax rate. Why?
Jack Dromey: I will contrast the record of our Government with the record of the hon. Gentleman’s Government, any time. After 13 years of a Labour Government, Britain was a stronger, fairer, better country. We have now been given a Bullingdon Budget whose first priority is millionaires, by a Cabinet who are oblivious to the consequences.
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Jacob Rees-Mogg (North East Somerset) (Con) rose —
Jack Dromey: I give way to the hon. Member for Downton Abbey.
Jacob Rees-Mogg: I am extremely grateful for that substantial promotion in my class standing. Will the hon. Gentleman explain why, when tax rates were cut in 1979 and again by Nigel Lawson, that led to more revenue coming in? This point has been ignored by the Labour party.
Mr Deputy Speaker (Mr Lindsay Hoyle): Just before the hon. Member for Birmingham, Erdington (Jack Dromey) resumes his speech, I want to make sure that he meant North East Somerset.
Jack Dromey: I stand corrected, Mr Deputy Speaker.
This Government are oblivious to the consequences of their actions. I am proud to represent Birmingham, Erdington. It is a constituency that is rich in talent but it is one of the 12 poorest in Britain. I see what too many Conservative Members shut their eyes to, which is the pain being felt in such constituencies as a consequence of the Government’s actions. Let us take as an example the hard-working Castle Vale family who have two wonderful children and earn just over £20,000. They face a £253 cut to their tax credits in April. Let us consider the one in four young people in Kingstanding who are unemployed. They are desperate for a job, but the Budget offers them no hope. Alongside the victims of the shameful changes to housing benefit and the changes in the Welfare Reform Act 2012, there are 1,333 households in my constituency who are now facing the iniquitous consequences of the bedroom tax.
Grotesque unfairness runs through everything that this Government do. For example, let us contrast how Birmingham and Wokingham have been treated. High-need, high-unemployment Birmingham has had £313 million of cuts to its local budget over the past two years, resulting in every citizen in Birmingham losing £164. In leafy Wokingham, the figure is £19. Whether we are talking about police budgets, fire budgets or the voluntary sector, why have the Government got it in for cities such as Birmingham? They should be standing by such cities; at a time of rising unemployment, they need more help, not less.
Now we are to have regional pay. I declare an interest, in that I have led many national bargaining arrangements in the national health service, in local government and in the Ministry of Defence. I worked with some Conservative Members when they performed various ministerial duties in that regard. For example, I was chair of the MOD unions at a time when a Conservative Minister was chair for the Government side. Anyone who has experience of national bargaining knows that it is efficient, that it is increasingly flexible in its approach and, crucially, that it is fair. The Government’s proposal will say to nurses, teachers, doctors, firefighters and home carers in Birmingham that they are worth less than their counterparts in Surrey.
Angie Bray: Does the hon. Gentleman’s dislike of regional variations mean that he does not support his own party’s take on the possibility of regional benefits?
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Jack Dromey: We would never introduce the kind of unfair flexibility—if I can call it that—that the Government are now promoting. The simple reality is that hard-hit areas will be hit even harder in the next stages, be they in Wales, the north-east, the north-west, Birmingham or Northern Ireland.
In the time remaining to me, let me deal with something that commanded but a passing reference in yesterday’s Budget—housing. We have the biggest housing crisis in a generation. Millions of people in Britain are in need of a decent home at a price that they can afford. About 2.8 million people are on council waiting lists, 30,000 of them in the city of Birmingham. Owing to the combination of this Government’s economic mismanagement and the failure of their housing policies, this crisis gets worse by the day.
House building was down by 11% over the first 18 months of this Government in comparison with the last 18 months of the Labour Government. It was the vainglorious boast of the Housing Minister who gives hubris a bad name that he would beat Labour “hands down” year on year, but that is not what is now happening. Homelessness is up, with families presenting themselves as homeless up by 14%. Rough sleeping is up 23%, yet it fell by 70% under the Labour Government. We have a mortgage market where millions struggle to get a mortgage. Scottish Widows estimates the average age of unassisted first-time buyers to be going up from 37 to 40 to 44. We have a private rented sector growing rapidly which is characterised by soaring rents and, all too often, abuse of tenants.
What, then, of the “housing revolution” announced by the Government in November last year? All I would say is that if we had a house for every press statement issued before and after that time, we would not have a housing crisis. The Prime Minister and the Deputy Prime Minister donned wellies and went to a building site to say that all would be well. What came out the following day, however, was that as a consequence of the £4 billion cut instituted by the Chancellor in October 2010, affordable house building had collapsed by 99% throughout England.
What of the new homes bonus? It is both inefficient and unfair, while our planning system is being thrown into chaos by the Government.
Richard Fuller: The hon. Gentleman is talking about the building of affordable homes. Does he not regard it as appalling that, under the last Labour Government, the building of social houses went down by 25%?
Jack Dromey: Under our Government, there were 2 million new homes, 1 million more mortgage holders and half a million more affordable homes, and 1.6 million homes were renovated under our decent homes programme. Has housing been at centre stage as much as it should have been under successive Governments for 25 years? No, but I will compare our record any time with the failure of this Government.
In conclusion, housing matters. Housing matters to the economy. Housing matters to health, as evidence of the damage done by poor or overcrowded housing confirms. Housing matters to educational attainment. Kids are held back at school because they live in damp or overcrowded housing. That is why urgent action on housing matters. That is what we did in 2008, after
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the bankers’ collapse, with our kick-start programme, which had 110,000 homes built, creating 70,000 jobs and 3,000 apprenticeships. That is why we are absolutely right to say that we need a repeat of the bank bonus tax to build tens of thousands of homes, to create jobs for unemployed building workers and to create apprenticeships and hope for the young people of my constituency. I see the consequences of the Government’s actions every day, and I know what my constituency wants. It wants to put people back to work to build that which the community so badly needs—homes.
3.28 pm
Mr Sam Gyimah (East Surrey) (Con): Listening to today’s debate, I have heard little from Opposition Members to dissuade me from the conclusion I arrived at yesterday after hearing the Chancellor’s speech: that this is a fiscally responsible and fair Budget, but one that continues to build the foundations for our long-term growth and prosperity. What the Government are doing for growth and prosperity will be the focus of my speech. First, however, I want to make a few comments about fiscal responsibility allied to fairness.
I am pleased that the Chancellor chose to stick to the plan—a framework within which all the Government’s decisions are being made. At the beginning of this Parliament, the Chancellor made the right decision, to pay the debts of the past and, after a decade of uncontrolled borrowing, to tighten our belts. It is encouraging that the Chancellor continues to stick to that plan, which was initially unfashionable but has now entered the international mainstream.
The task facing us is not easy, and it will continue to be challenging. The gap between how much we earn and therefore take in and how much we spend has fallen from £156 billion—an all-time high, set just before the coalition came to office—to £126 billion. We have therefore made a lot of progress in balancing the books, but we must not take our foot off the gas, which is why I am glad the Chancellor continues to stick to his plan in this Budget.
It is interesting that Opposition Members no longer call for a plan B. A year or so ago not a day would pass without their calling for that. They are no longer calling for it because plan A is working: the deficit is falling and we are beginning to see private sector-led job creation. That is why the Chancellor is right to stick to his plan and to focus on being fiscally responsible. Very few western Governments could these days have announced the Budget that he has just delivered, and he has been able to achieve that because of his past decisions.
Steve McCabe (Birmingham, Selly Oak) (Lab): The hon. Gentleman says plan A is working. Does he agree that it must have been an oversight not to mention at the outset that it would result in damaging growth and therefore pushing up unemployment and the costs of some areas of borrowing?
Mr Gyimah:
It is precisely because plan A is working that in this Budget we can afford to lift 2 million people out of tax—2 million people who were penalised by the 10p tax introduced by the last Labour Government. Because plan A is working, 24 million of the 30 million workers in the UK can get a tax cut—a very important
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tax cut in very difficult times. The hon. Member for Birmingham, Erdington (Jack Dromey) said that he would compare his record with our record any day. I say to him that we are lifting 2 million of the poorest people out of tax, while the previous Labour Government penalised them. Our record certainly stands up to scrutiny on that.
Labour has now quietly dropped its plan B, and is instead opportunistically opposing our measure on the 50p tax rate. However, Labour does not say that it would reinstate that rate if it were elected to office tomorrow. It is also saying it would somehow give child benefit to higher rate tax payers.
Mark Durkan: If the need for deficit reduction was the justification for the temporary nature of the 50p tax rate and the withdrawal of child benefit, why has the 50p tax rate remained a temporary measure while the withdrawal of child benefit will be permanent?
Mr Gyimah: All three main parties agreed that the 50p tax rate was to be a temporary measure. Also, we must ensure that any tax that is imposed actually raises the required revenue for the Government coffers. If it does not do so, it would be irresponsible of a Government to carry on with that tax just because it is good politics. It is right for the Government to set that tax at a rate that discourages avoidance and encourages people to pay.
Fairness must not be the only test of this Budget. Economic growth is also very important. In truth, the Chancellor has very limited room for manoeuvre, and it is good that we have nevertheless done quite a lot for hard-working people, giving back to them more of their hard-earned cash. However, only economic growth will lift the prosperity of all of us. Today, we focus on who are the winners and losers from this Budget, but growth is the most important theme.
I was therefore encouraged to hear the Business Secretary talk about access to finance from the banks. My party colleagues and I know that more borrowing, spending and debt is not the way to get economic growth and to create jobs. We believe that the way to achieve that is through encouraging a spirit of enterprise and adventure, but we cannot encourage that unless we ensure that finance gets into the real economy.
One of the biggest challenges we face in coming out of the 2008 financial crisis is the concentration in our banking system. Some 90% of small business lending is concentrated among five banks. No matter what they say, that means that there is little price competition and it is important that the Government do a lot to ensure that we can get money into the real economy. That is why I welcome credit easing, because by using the Government’s balance sheet to enable banks to borrow and lend to businesses, we enable a situation whereby even if a business had a 1% interest rate discount, it could refresh loans that may otherwise not be refreshed.
Richard Fuller: My hon. Friend is talking about credit easing and the use of banks. Does he not also think there is scope for considering alternative mechanisms to provide financing to our small businesses?
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Mr Gyimah: I very much agree with my hon. Friend that credit easing is a temporary measure. In the long term, the Government have to change the lending landscape for small businesses—that is the point I was driving at. We cannot continue to rely on five major banks, which is why I welcomed the business finance partnership, a £1.2 billion fund that the Government are using to support non-bank lending institutions that are closer to small businesses. Many of these are peer-to-peer lenders, such as MarketInvoice or Funding Circle, or more traditional institutions such as M&G Investments. It is absolutely right to diversify the lending landscape, so that businesses in my constituency and in many others do not just have to rely on the same bank manager and, more importantly, the computer, which will say no to them when they try to refresh a loan or get the credit that they need.
I welcome the fact that the Budget realises that debt finance should not be the only source of finance for businesses. Equity finance is very important, especially in the context of businesses that do not have the cash flows or the revenues to support debt. That is why I welcome a lot of the flexibility associated with the enterprise investment scheme, venture capital trusts and the seed enterprise investment scheme. Those are all schemes in the Budget that would not make the headlines; nobody is going to focus on them because they do not immediately tell people who are the winners and losers in the Budget. However, it is those measures that will ensure that individuals who want to take risk, to start businesses and to build up their companies are capable of doing so. Whether we are talking about The White Company, lastminute.com or The Body Shop, it is these British success stories that will get us out of where we are at the moment.
What would I like to see as the Chancellor reflects on his Budget, and I hope, takes it further? On the diversification of the lending landscape in this country, we need to be very careful not to stifle innovation as we examine banking regulation. So much of what we are doing on banking regulation is about dealing with the crisis of the past. We should make sure that, in doing so, we do not freeze our banking system in aspic so that new, enterprising and innovative companies that can get credit to small businesses fail to thrive. The Government have announced £20 billion of credit easing, but we probably need to consider doing more in that direction to help businesses.
Mr Iain Wright: Does the hon. Gentleman think that the massive downgrading in business investment growth forecasts over the medium term is a sign that plan A is working?
Mr Gyimah:
Anyone who has been in business before, as the hon. Gentleman has—he was an accountant—and as I have been, will know that one of the most important things is confidence. For businesses to gain confidence, they need to know, first, that the Government are going to create an environment of certainty in which they can operate. They also need to know that the Government are going to balance their books and to create the right environment in which to invest. Lowering corporation tax is a clear signal that we are going to be creating the right environment for businesses to operate in. I am confident that once we have that macro-economic framework right, businesses will have the confidence to invest. It is only through business investment that we
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will generate the growth and the jobs that all Government Members want and are fighting for. The Chancellor is on the right side of this argument, because we cannot do this through more borrowing, more spending and more debt—that is more of the same and it is all I have heard from Labour Members today.
3.39 pm
Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): The hon. Member for East Surrey (Mr Gyimah) might be persuaded that plan A is working but I can tell him that, even if it is working in his constituency and the rest of Surrey, it certainly is not working in Scotland. I hope to demonstrate that in my remarks. The truth of the matter is that we appear to be living, even in this Chamber, in two different worlds. Let us ignore the fact that, despite all the efforts of the Government and all the leaks that we debated earlier, we face a Budget that represents the reality of what the coalition means. This Government and this Budget will be remembered for cutting the top rate of tax for the rich while putting the boot into pensioners. I have already spoken to a number of my constituents and I have absolutely no doubt that that is their view.
It might seem odd for me to refer to a Foreign Secretary during a Budget speech, but some hon. Members might recall that some years ago a young representative at the Conservative party conference—a 16-year-old by the name of William Hague—addressed the conference, saying:
“Half of you won’t be here in 30 or 40 years”.
That may well be true, but what are we seeing in the Budget for the half who are left? While £30,000 a year is freely given to millionaires, the Chancellor is seeking to end age-related tax allowances, despite the evidence from HMRC, which says that 4.4 million pensioners will be £83 a year worse off in the long term. How can anyone defend that and give us the kind of nonsense we have heard about the so-called class war?
Let me address the real economy in our constituencies, which I believe the Chancellor had a wonderful opportunity to address but missed. Unemployment is by far the biggest problem we are now facing, certainly in constituencies such as mine where there has been a 54% rise in long- term unemployment and an 80% increase in youth unemployment. A league table of every constituency in Britain was produced last week, relating alcohol abuse to mortality, and it is with great regret that I have to say that my constituency came out as No. 1. Almost every professional who was consulted on those figures made the point that we cannot ignore poverty and its implications; we cannot ignore unemployment and what it means; we cannot say to young people that there are no jobs for them, whatever educational qualifications they might have attained, and not expect the kind of reaction that I have just described. Nearly a quarter of 16 to 24-year-olds in the UK are unemployed. That is a wholly unacceptable statistic and I make the point that we are talking not just about statistics but about people.
We can see from the unemployment figures that are available that in the UK there was a 22,000 increase in unemployment among women in the last quarter alone. I am seeing that in my constituency. Women are the bedrock of our society, as we are rightly told. They are at the heart of our families, whom the Government in earlier days told us were one of their priorities. Well, there is little evidence for that.
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We need to restore the future jobs fund—initiative after initiative has been annulled by this Government—and we need to look at new opportunities in fresh sunrise industries, which I am happy to say exist in my constituency, particularly in solar energy. I welcomed what my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller) said a few moments ago, but I did not welcome the Government’s change to feed-in tariffs, which is frankly too deep and too fast. Home owners who seek to go along with developments in this sector now face soaring energy costs, and burgeoning industries such as AVC Sky in my constituency face enormous difficulties, which is bad for home owners, bad for jobs and bad for growth. The Government’s rhetoric is simply not matched by their actions, especially when the Government tell us that they are the greenest Government ever.
Mr Deputy Speaker—I beg your pardon, Mr Speaker; I welcome you to the Chair. We saw at points during the Budget speech yesterday Liberal Democrat Members waving their Order Papers. Were they waving them at the kind of measures that I describe?
Lorely Burt: We were waving our Order Papers with delight at the fact that our coalition Government are bringing the tax threshold towards our £10,000 target faster than we could ever have hoped.
Mr Clarke: They were waving their Order Papers at some of the most miserable measures that I have heard in the House. They reminded me of Jim Callaghan’s comment when he found that the Scottish National party—which is not even represented here today—was working with Mrs Thatcher to bring down his Government. He referred to SNP Members as “Turkeys voting for an early Christmas”, and deservedly in their case.
I wrote to the Prime Minister recently to draw his attention to the fact that Korean shipbuilders are given preferred bidder status for Royal Navy tankers, with almost £500 million involved. It simply cannot be right that, as we defend our country, as we should, defence orders exclude British and especially Scottish firms that are willing, able and skilled enough to respond to the task. I want to ensure that highly skilled workers are kept working for our nation’s security and for our people’s safety.
I finish with a reference to the Chancellor’s announcement of a £12 billion cut in welfare—a shameful figure that the Liberal Democrats were also cheering. That is added to the Remploy closures, which have never been fully explained. Hundreds of disabled people will be thrown straight on the dole. Two thirds of Remploy factories will close. We are seeing on top of that changes in benefits that are very much to the disadvantage of people with disabilities and their carers and families. We are seeing disadvantages even to disabled children and their families. It is not fair, not acceptable, and the Government deserve to be rejected and hounded by the British people.
Mr Speaker: Order. Angie Bray will be the next speaker, but before calling the hon. Lady I inform the House that, in view of the large number of Members seeking to contribute, the time limit for Back-Bench speeches will now be five minutes, with immediate effect.
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3.49 pm
Angie Bray (Ealing Central and Acton) (Con): A little over a year ago I stood here and drew the Chancellor’s attention to the level of debt hanging over the heads of every single voter in my constituency. The amount—the generous legacy the Labour Government bequeathed to the people of Ealing and Acton—was an astonishing £37,000. I asked the Treasury team for reassurance that they were committed to putting that right. The answer was a resounding yes. Yesterday, a year on, the Chancellor’s Budget reconfirmed that. By sticking to his original plan he is reducing the structural deficit every day and lessening the burden on my constituents, their children and their children’s children.
Many of my constituents own their own businesses locally. The Budget will encourage them because it sends out the crystal-clear message that the Government are behind them and back aspiration, new ideas and creativity. Now these businesses know that from next month their corporation tax bill will be reduced to 24% and that it will drop still further to 22% by 2014, and hopefully 20% thereafter. They know that London’s coffers will be boosted to the tune of £70 million by a new development fund to attract new business and jobs and that the national loan guarantee scheme will step up to the plate and make bank loans easier by making them cheaper.
When those measures are allied to the reduction in the top rate of income tax to 45% from next year, it is clear that the Government are serious about supporting enterprise and encouraging aspiration. Long-term measures such as those help to instil confidence and encourage businesses to take the bold decisions needed to thrive. Only by allowing them to thrive will we create the conditions for growth and go some way to addressing the related problems of getting more of our young people into work and improving our communities.
Young people in my constituency can be encouraged, too. The Chancellor announced the introduction of enterprise loans to help 18 to 24-year-olds to set up and grow their own businesses. They will get the opportunity to pitch their ideas before a panel and, if they have a viable business plan, get a cash injection of between £5,000 and £10,000 to help them start up. So often it is the young, creative, positive ideas people who are stymied by a wall of red tape when they try to start up on their own. In the long term, schemes such as that can go some way to bridging the gap between great ideas and the start of a great business.
Already in my constituency I know of a number of set-ups that could benefit from that kind of scheme. The Doughnut Factory in Acton is supported by a number of organisations, including Action Acton and the university of West London. It is a creative hub where local entrepreneurs can rent affordable office space. Many of the young people based there would be eager to pitch their plans. I spent a happy morning there meeting a group of young, enthusiastic students, all looking to start their own businesses, the very people that that scheme is aimed at helping. It is just the latest in a raft of hugely positive measures that the Government have already introduced to help young people: the upcoming youth contract, the Work programme, a dramatic increase in apprenticeship places and the national citizen service for 16-year-olds, which is now entering into its second year.
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The real headline news from the Budget has to be the largest real increase in the personal tax allowance for 30 years. An additional 840,000 people will be lifted out of income tax, meaning that altogether the Government will have taken 2 million people on the lowest incomes out of tax altogether. The personal tax allowance will go up to over £9,000, and we are well on our way to our target of taking everyone earning up to £10,000 out of tax. Of course, even those earning above that stand to benefit as well. That will help a great many of my hard-working constituents. It is also part of the Government’s overall strategy, sitting alongside the benefit reforms that ensure that work always pays.
London has done well out of the Budget. The Chancellor announced vital cash for London rail; £15 million for Transport for London, specifically for cycle safety; accelerated broadband; more support for the enterprise zones—please can we have one in west London?—new funds to help young people into work; and £70 million for the Mayor to help London businesses grow. As I have said, London has done well out of this Budget. Enterprise and aspiration have done well out of this Budget. In tough times, this is the right Budget for the country.
3.54 pm
Nick Smith (Blaenau Gwent) (Lab): In my maiden speech almost two years ago, I highlighted my constituency’s strengths: our beautiful land and strong sense of community; a pride in our radical past of Chartism and of Nye Bevan, who established the NHS; and its hard-working people, who started our industrial revolution. I highlighted also its challenges and, particularly, high unemployment and a creaking infrastructure that is badly in need of significant investment. Sadly, unemployment is even higher now and, in particular, almost 20% of our 18 to 24-year-olds are on the dole—a shocking figure for young people.
In Blaenau Gwent there are 18 decent and talented people chasing every advertised vacancy, so job creation, transport infrastructure and growth are still top of our agenda. Sadly, the Budget showed that they are not the Government’s top priorities, and we see no coherent strategy for jobs and growth. The UK Government must do more. We need investment in jobs and growth, and we need it now.
The fact is that we are losing jobs faster than we are creating them. Everybody I speak to about regeneration in Blaenau Gwent, in the public and private sectors, stresses the importance of good transport links. Being in the east of Wales, we have good access to the rest of the UK, but we need adequate infrastructure—both road and rail—to deliver the benefits of that access, and that is why I am campaigning for both.
Work to improve the Heads of the Valleys road is under way, and, although the work is disruptive in the short term, when it is complete we will see the benefits. Thankfully it started before the Government proposed linking road improvements to new tolls. Welsh business would also be given a real boost if the Severn crossing’s toll was axed.
Rail electrification to Cardiff is going ahead, and that is good. The Ebbw Vale to Cardiff line was resurrected under Labour, and it is now so successful that carriages are jam-packed and locals call it the “Bombay Express”, but it needs a more frequent service and a line upgrade. In the Budget the Government state that they are working
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with the Welsh Government on the electrification of the valley lines, with final proposals due this summer. The Ebbw Vale to Cardiff line must be included to give a boost to the place that, because of our high unemployment and related deprivation, needs it so much.
The Welsh Business Minister, Edwina Hart, has committed £2 million to the development of a world-class motor racing circuit in Blaenau Gwent, and that could lead to a £200 million investment and create 1,000 jobs —a real game changer for our area. I had hoped that the Chancellor would support this opportunity, hailed by some as the UK version of the famous German Nürburgring track, but from his statement yesterday it appears that Deeside in north Wales will be the only Welsh enterprise zone to benefit from enhanced capital allowances. Will the Minister please clear that up?
Such tax treatments are focused on plant and equipment costs, not on the infrastructure itself, but capital allowances need to attract individual as well as corporate investors. That would help kick-start those exciting automotive plans for Blaenau Gwent, and the Government should think much more creatively about enhanced capital allowances for business growth.
In the Welsh valleys we punch above our weight in terms of the number of brave men and women recruited to our armed services, so I welcome the measures in the Budget which improve military accommodation and help with council tax rebates and with forces families’ welfare. They are an important part of the military covenant and are supported by both sides of the House.
I should also comment on the Budget proposals affecting fuel prices. A stonemason in my constituency travels from job to job in his 4x4, but with the cost of fuel he thinks that he would be better off out of work, and that cannot be right. Many in Wales will also be fearful of the proposals for regional public sector pay, which would hit women hard in particular, and teachers and nurses especially.
Blaenau Gwent deserves more than this damp squib of a Budget. In the future can we see real Budget leadership on growth and improved transport infrastructure, and on support for business development and public health? Then Blaenau Gwent and Wales will be able to play their part in boosting our economy and make a further positive contribution to our UK budget.
3.58 pm
Andrew Griffiths (Burton) (Con): It is a pleasure to take part in this debate and to listen to the contributions. I was particularly pleased to listen to the speech made by the hon. Member for Birmingham, Erdington (Jack Dromey), who is no longer in his place. In his usual articulate and erudite manner, he opposed every single measure that the Government had brought forward to cut the deficit. He opposed changes to welfare, to benefits and to housing, yet he had not a single idea about how his party would begin to cut the deficit—the terrible legacy that we were left by the last Government.
I pay tribute to the Chancellor and the Treasury team for yesterday’s Budget announcement. I wanted a Budget that was good for business and hard-working families, and I feel that I got that. Thousands of families will be lifted out of paying tax as a result of yesterday’s announcement. It is important that that measure is particularly beneficial to women, who tend more to be
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part-time or low paid workers. A measure that lifts people out of paying tax is particularly helpful to the women in our society, and that is a good thing.
Now I come to the “but”, both as the MP for Burton and chair of the all-party group on beer. The Chancellor said that he intended to make no changes to the duty regime. That was a little disingenuous, shall we say, as he knew—and I knew, and brewers up and down the country knew—that that meant an increase of 5% on beer duty because of the continuation of Labour’s beer duty escalator. That is putting jobs and livelihoods at risk.
In the past four years, beer duty has increased by 42% in this country. Our beer duty is now the highest in Europe—eight times higher than France, 10 times higher than Spain and 11 times higher than Germany. We pay 40% of all Europe’s beer duty, yet we represent only 13% of its beer consumption.
We have seen a 52% increase in duty over recent years, yet only a 10% increase in revenue and, as a result, a 25% drop in beer sales in this country. Yet beer is a great British product. Some 80% of beer drunk in this country is brewed here. There are 800 breweries across the country, which employ people in all our constituencies. Compare that with the wine we drink, 90% of which is imported, and we see the unfairness of the current duty regime. Yesterday’s announcement will cost an average pub about £2,800. I commend the 106 MPs who signed the early-day motion in support of freezing beer duty.
I turn to the unfairness in how the system treats beer and cider. Cider pays half the duty of a 4% beer, and at high strength—8%—beer pays four times the duty on cider. That means that breweries and pubs suffer. The cider industry tells us that the reason is the increased costs in running an orchard and growing apples for cider.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): Why, in the hon. Gentleman’s opinion, is there such discrimination in the coalition in favour of cider?
Andrew Griffiths: I should say that what I meant when I spoke about the Chancellor was a lack of clarity in relation to yesterday’s statement.
I have with me a private and confidential presentation—
Neil Parish (Tiverton and Honiton) (Con): I welcome what my hon. Friend is saying about beer, but I am worried that he is suddenly targeting cider. There is a great amount of cider in my constituency, and I would be worried if he wanted extra tax on it.
Andrew Griffiths: I assure my hon. Friend that I am not targeting cider; what I want is fairness in the system.
The presentation I mentioned, which is used by the makers of Stella Cidre, clearly states the differences in duty. It says that the duty per hectolitre paid on Stella Artois, at 5% strength, is £86.60, the duty paid on Strongbow is £36.01, and that there is a difference of £50.59. At the top it says: “Why cider? Favourable duty position resulting in margin opportunity”. As a result of our taxation system, we are penalising beer. Every time somebody chooses to have a pint of cider rather than a pint of beer, the Treasury loses 50p. All we are calling for is some fairness in the system.
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Last week at Prime Minister’s Questions, I asked the Deputy Prime Minister what measures he had in place for beer, and he said that he wanted to support community pubs. The best way to do that is to give beer a break. We want a fair taxation system that recognises the importance that beer, as a lower-strength drink, can have in our society. We want recognition of the efforts that brewers are making in relation to responsible drinking and reducing the alcohol by volume of their products. I commend the Government for their work on the 2.8% strength beers that were introduced recently. We recognise that the community pub is at the heart of the big society and that it has an important part to play in all our communities. I urge the Treasury to look at this again and work out what we can do to give British beer and British pubs a fair break.
4.6 pm
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): The Chancellor’s Budget speech painted a positive picture, in some ways, of what his policies are doing for the UK economy. However, although some businesses in my constituency are doing well, at the grass roots, among small businesses, I find a lot of people who are very worried about the future of their businesses, and that many of those who have been struggling to survive over the past year are now on the brink. I am sure that my constituency experience is typical of that of many Members in constituencies up and down the country.
That is why the Chancellor has made a dramatic mistake by rejecting Labour Members’ call for a temporary cut in VAT, which could have provided an immediate boost to businesses, created jobs and provided real relief for those on the lowest incomes. On the main street in my constituency, there are all sorts of shops, offices and other types of businesses, and I am genuinely worried that many of them are in great danger of going over the cliff edge if there is not an immediate boost to the economy such as a reduction in VAT. The temporary VAT reduction that Labour introduced at the end of its period in government certainly had that effect, and another temporary reduction would be an important boost for all types of businesses, but particularly small businesses, in my constituency and up and down the country.
Kwasi Kwarteng (Spelthorne) (Con): The hon. Gentleman talks enthusiastically about businesses. Do not the measures in the Budget to cut corporation tax support business?
Mark Lazarowicz: The measures on corporation tax will have a beneficial effect on some businesses, but not so much for the smallest businesses. I am particularly concerned about the small businesses in a fragile situation in many parts of my constituency, which does not, relatively speaking, have very high unemployment overall, although some areas do have high unemployment.
First, we need a general 2.5% reduction in VAT that would benefit all types of businesses, as well as relieving people on low incomes, in particular, from the difficulties in which they find themselves as a result of the general economic situation and the policies of this Government. We also need targeted cuts in VAT. It is extremely disappointing that yet again the Government have rejected the call, not only from Labour Members but from
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organisations such as the Cut the VAT Coalition, which has called for VAT on home maintenance, repair and improvement work to be cut to 5%. That would not only be a boost for the depressed construction sector but would create work for joiners, plumbers, electricians and painters, and opportunities for young unemployed people looking for their first job.
Of course, one has ask how one would pay for a temporary cut in VAT. If the argument is that the top rate of tax is being cut because it will bring in more income by encouraging economic activity—a fairly dubious argument in my view—surely temporary cuts in VAT of the kind that I and my party have argued for are much more likely to lead to an immediate increase in economic activity than the cut to the top rate that is proposed in the Budget.
Neil Parish: I am interested in why you say that it is dubious to cut the rate from 50% to 45%, when in 13 years of your Government, you did not put it up from 40% to 50%.
Mr Speaker: I am extremely grateful to the hon. Gentleman, but I am not sure why he refers to my Government. There should be no reference to my Government in these matters.
Neil Parish: I meant the Government of which the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) was a member.
Mr Speaker: I am sure that that is what the hon. Gentleman meant. It would be good in future if that is what he said.
Mark Lazarowicz: Those points were covered earlier in the debate.
I want to highlight the problems for businesses in my constituency. I say again that a cut in VAT would certainly make a difference for businesses in my constituency that are on the brink. Such a reduction in VAT would increase business activity, increase sales, increase the taxation income of the Exchequer and decrease unemployment, with a consequent cut in spending on benefits. The boost for smaller retailers and smaller companies in the construction sector would have other beneficial effects. From my constituency office, which is in a street that is still relatively well occupied, I can see shops and businesses closing and the resulting cycle of deterioration not only in the local economy, but in the local environment. I can see that happening in my constituency. That is why I believe that the temporary reduction in VAT that we have called for would be a great boost not just for business, but for the wider economy.
There were some announcements in the Budget that will benefit my constituency. There was confirmation that Edinburgh will be one of the cities that will benefit from superfast broadband and the green investment bank was also mentioned. However, those two announcements have been made a number of times already. The announcement about superfast broadband for Edinburgh and a number of other cities was made at the end of last year. The fact that the Chancellor chose to highlight those innovations again only goes to show the lack of imagination in the Budget when it comes to
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growth. We could have had a Budget for jobs and growth. Instead, we had a Budget with very few specific policies. That is regrettable and it is bad for the country.
I hope that the Government will change course and reduce VAT, if not in this Budget, then at a later stage, to support smaller businesses in the construction sector, which would benefit greatly from such a change.
4.12 pm
Kwasi Kwarteng (Spelthorne) (Con): I am pleased to have the opportunity to speak in the Budget debate, because we had a significant Budget yesterday.
We have to consider what the Chancellor said in the Budget in the context of 10 years of Labour profligacy in public spending and in the context of the international economy. The Office for Budget Responsibility has been clear about the problems that face the British economy. There are structural problems caused by too much debt, which in turn was caused by too much spending. It is clear to everyone that spending more money or running a greater deficit would not help to get us out of this situation. The Government are doing what they set out to do and they are reducing the deficit. The Budget yesterday was a step in the right direction. We are trying to cut regulation and to encourage enterprise and aspiration. All that was clear in the Budget.
I would like to talk about tax cuts. The most significant tax cuts in yesterday’s Budget were not at the top end of the income scale, but at the lower end. It was an historic step to take hundreds of thousands of people out of taxation. It is striking that in this debate, the Labour party has made no comment about that. It has not given us the courtesy of saying that it agrees with the proposal, nor has it opposed it, yet it was the most significant move in the Budget.
There were other, perhaps more controversial moves, such as cutting taxes for wealthier citizens and subjects, which have created some debate. It is received wisdom, I think, that high taxes did not stimulate economic growth. Some Members will remember that there was a 98% super-tax in the 1970s, and we were a very highly taxed nation. Other Members were here when Nigel Lawson cut the top rate of tax from 60% to 40%. That was so successful that in 12 years, Labour did not touch it. It always accepted that 40% was a reasonable and good tax rate, not because it was friendly to the rich but because Labour’s leadership realised that there needed to be incentives to make the economy grow.
Mr Speaker: Order. I think the hon. Gentleman was referring to his noble Friend the Lord Lawson of Blaby. It would be good to preserve some of the courtesies of the House.
Kwasi Kwarteng: Indeed. I am very grateful to you, Mr Speaker, for putting me in my place. I will refer to him with proper courtesy with his title. The Budget in which he cut the top rate—the 1987 one, I believe—was the most significant in recent years, and only latterly have a series of political games been played and has the top rate been increased. Other Members have referred to that, and it is an elephant trap that the Government have mercifully dodged.
We have to consider the Budget in its national context, but also in an international context. It is no good our having worthy debates here without referring to what is
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going on in the rest of the world. I was very pleased to see that the Chancellor had finally realised that aviation capacity in the south-east is a massively important issue. The fastest-growing cities in the world need to have more connections. We will not be able to make money or trade with them without connections, and the Chancellor’s step of recognising the problem is mature and bold.
While we are focusing on spending and regulation, we have to realise that other parts of the world such as China, India, Brazil and places in the middle east such as Dubai have favourable regimes for business. If we are to compete seriously with those countries and their regimes, we will have to do an awful lot more even than we are doing to make ourselves competitive.
The Budget was excellent and a step in the right direction, although we need to do more to meet the targets that we have set ourselves. The Office for Budget Responsibility has said that it is looking for 3% growth in 2015 and, to meet that, we will have work an awful lot harder.
4.17 pm
Steve McCabe (Birmingham, Selly Oak) (Lab): I begin by apologising to you, Mr Speaker, to the respective Front Benchers and to other colleagues for the fact that I will not be here for the end of the debate. No discourtesy is intended, but I have a pressing constituency engagement.
As I listened to the tail end of the Business Secretary’s speech, I heard him outline the many problems confronting the economy and he cited the banks as one of the remaining problems. It strikes me that for that reason, it is important that Government Members try to appreciate that my constituents in Selly Oak, who work long hours for low pay or care for sick children or elderly relatives, will struggle to understand why one of the key tax give-aways in the Budget will amount to £325,000 a year for one of our leading bankers. He is hardly on his uppers, so people will find that very difficult to understand.
If the central argument about the 50p tax rate is that it has not raised much, that is because people have been avoiding it. The decision to cut the rate amounts to rewarding and reinforcing tax avoidance behaviour. What will prevent the group of people involved from trying to avoid the next band of tax? That is the problem—the Government are saying, “Because they avoided it, we’re going to reward them.”
I now turn to something that the Chancellor did not address. One of the most pressing problems of this age is youth unemployment—all hon. Members share that concern—and I was surprised the Chancellor did not take advantage of the opportunity in the Budget to do a bit more. The Government like to tell us about the number of apprenticeships, but most of those are not for people in the 16 to 18 age range. The vast majority that have been created tend to be for older people. There was an opportunity in the Budget to offer more incentives to small businesses to take on young people, but it was missed. Successful manufacturing companies in my patch such as B.H. Leake, Birmingham Powder Coatings and Cameron Price have all told me that they would like to take on a young person or apprentice, but they find the system extremely complex and apprenticeships difficult to fund. Something to improve that would have been welcome indeed.
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I welcome the news on the loan guarantee. I hope the initiative is more successful than others. Quantitative easing has given the banks plenty of money; the problem is that they are still not passing it on to small companies. In the same vein, I welcome the proposals to give support to the computer games and animation industries. That is a really good thing that the Chancellor has done. I hope we get the details of how it will work soon, and that it will not turn out to be mired in complexity and red tape, because that would be a tremendous setback.
There is another area in which the Chancellor could have helped young people. National Express is keen on a travel card for young people. It has been in talks with the Government and was directed to the National Apprenticeship Service, which directed it to learning providers, who said, “We don’t have the budget. Go back to the NAS.” There is quite a lot of evidence that the cost of travel inhibits young people from finding the jobs they are looking for. Anything we can do on that front, Minister, would be most welcome.
I shall conclude by mentioning one other thing. I was relieved that the Chancellor said there will be a White Paper on social care. We cannot afford for that issue to be kicked into the long grass. If it is not tackled in the next year or so, it will not happen in this Parliament, and we will not address the problem.
4.22 pm
Jackie Doyle-Price (Thurrock) (Con): I am grateful for the opportunity to contribute to this debate and congratulate the Government on their increase of the personal tax allowance. I believe that a defining characteristic of the coalition Government is that we are taking so many more people who can least afford it out of paying tax altogether. It is an achievement of which we can be proud, and which reflects on both parties in the coalition. The measure also reflects the fact that Government Members have the right values when it comes to deciding who carries the burden of paying for public services. It should not be the lowest paid. We need to reward work and encourage aspiration.
The Opposition response has been predictable and disappointing. I was reminded why I got involved in politics in the first place many years ago when I heard the language of class war and envy being expressed by Opposition Members. They say, “Same old Tories,” but I say, “Same old socialists.” We have heard today the final nail going into the coffin of new Labour. The socialists are back in charge.
Let us be clear. The Government inherited an economy in which the state was borrowing more than it could afford. We certainly were not living within our means. The Chancellor’s achievement is that he has been able to reduce borrowing and establish credibility in the eyes of the markets, with the result that we retain confidence and continue to benefit from low interest rates. Our constituents benefit from lower mortgages.
I wholeheartedly welcome the Government’s decision to issue a statement to each taxpayer to explain how much of their tax is going on various areas of spending. It will strengthen the accountability of Government to the taxpayers. We on these Benches never forget that it is taxpayers’ money and we need to make sure that
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taxpayers have the opportunity to judge whether we are spending their money wisely and delivering the outcomes they wish to see.
What we really need now to move our economy on is a strategy for growth and job creation, and I wish to focus my remarks on those elements. I welcome the Government’s commitment to reviewing airport capacity in the south-east as that is clearly important for our international competitiveness. There has been a growing enthusiasm for a Thames estuary airport, most notably on the part of the Mayor of London. I have to put on notice my firm opposition to such a proposition. My objection is really that the Thames estuary reaches out to the rest of the world by ship and sea. In fact, the motto of the borough of Thurrock is “By Thames to all the Peoples of the World”. I want to retain the Thames estuary as a shipping centre, not as a centre for an airport.
The west London advocates of such an airport seem to think that north Kent and south Essex are economic wastelands waiting to be transformed, but nothing could be further from the truth. While the docks in east London have gone, they have moved east to accommodate the ever-larger ships. The ports in Thurrock are thriving and growing. The investment by DP World at Shell Haven and by Forth Ports at Tilbury docks mean that this sector will go from strength to strength. Within a couple of years, Thurrock will be the port capital of this country and it will strengthen the port of London and cement Thurrock’s role as a major logistics hub.
The debate about the future of a hub airport would have severe implications for Heathrow, if the new airport were constructed. The economic dislocation caused by such a move would be seismic. It would cost jobs and shift business: it would be displacement, not new economic activity. I hope very much that the review will consider what more can be done for Heathrow.
Lorely Burt: I totally agree with my hon. Friend about the inadvisability of a further airport in her lovely constituency. Does she agree that we already have the capacity in the west midlands—Birmingham international airport has 40 million spare passenger places?
Jackie Doyle-Price: I thank my hon. Friend for that intervention and I think a lot could be done by just increasing connectivity between existing airport capacity.
In the little time I have left I wish to address the issue of energy. The Chancellor has given notice that he will bring forward an energy strategy to look at what can be done to encourage more gas-fired power generation. I want to put on record a plea for biomass-fuelled generation to be given greater prominence in our energy mix. As part of a shift to more energy generation from renewables, we have had considerable emphasis on solar and wind, but when it comes to generating serious quantities of energy, biomass is clearly a great way forward. We are heading towards a situation in which a number of coal-fired stations will need to close due to their non-compliance with the large combustion plants directive from the EU. These stations are sitting on top of connections to the national grid and we could do much more to encourage energy companies to look at whether they can replace the redundant coal-fired plants with new plants that generate from biomass. That is something that the power station in Tilbury, run by RWE npower, is determined to do.
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Opposition Members have mentioned regional pay. We already have regional pay. I live but two miles away from the boundary with London so public sector workers in my constituency are less well off than their London counterparts as they do not receive London weighting. We do not struggle to fill those public sector jobs. Public sector wages lag far behind those in the private sector in my constituency, and we need to encourage that elsewhere because we need to ensure that we are attracting the best talent into private sector jobs.
4.29 pm
Alex Cunningham (Stockton North) (Lab): I am proud to be a socialist, although hopefully not such an old one.
The rich will get richer and the poor will get poorer—the Tory party has very clearly reverted to type, putting the needs of the wealthy first while abandoning the poor, whether they are working or not. Even the Chancellor’s favourite red-top newspaper, which today portrayed him as Wallace, agrees and says that he has put money in “The Wrong Trousers”. Yes, Mr Speaker, women wear trousers! The Prime Minister, himself a man with young children and a working wife, once promised that he would make this country the most family-friendly in Europe, but this week’s Budget will make life even more difficult for ordinary, hard-working families—not that he knows what it means to struggle to feed a family.
Yesterday, I met Terry Fullerton from Holme House prison immediately after the Budget. He pointed out that the tax cut for many of the super rich, such as bankers, celebrities and others, is about the same as the starting salary for a prison officer. It is also several thousand pounds more than the average annual wage in my constituency. That is not fair.
Brendan Cox, director of policy and advocacy at Save the Children, said that some had called it a Robin Hood Budget. He said:
“Robin Hood was known for hitting his target. If help to the poorest was his aim, the Chancellor will be known for missing his.”
The Institute for Fiscal Studies says that an average family will be £530 a year worse off after the Chancellor’s tax and benefit changes. On top of that, the poorest 20% of households will see their incomes fall by about 1.5% in 2012-13, scuppering any chances of meeting coalition targets of reducing child poverty.
Sheila Gilmore: Will my hon. Friend comment on the fact that, as detailed in the Budget, the cut in the 50% rate will mean the Exchequer forgoing £3 billion of income, whereas it would cost £500 million to reverse the cut to working tax credits for people about to lose it because they only work 16 hours a week? Which does he think is the better choice?
Alex Cunningham: I am sure that my hon. Friend knows exactly what my choice would be—it would be on the part of working families.
I have mentioned the 1.5% cut. It might sound paltry, but even if it represents as little as £1 or less per week, it is still worth a lot for those on a low income who need to feed a family. It will also be the poorest families who are, or will be, hardest hit through the uprating of benefits in line with the consumer prices index rather
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than the retail prices index, through higher food and fuel costs, through the freezes to child benefit and working tax credit, and through the time-limiting of employment and support allowance.
We must not forget that for low-paid workers inflation is not 3.4%, as it was yesterday, but nearer 10%, because they spend proportionately more on food, fuel and transport. The Government’s raising of the personal tax allowance is welcome but sadly does nothing to help the one third of the adult population, including part-time workers and pensioners, who are too poor to pay income tax, yet still have to face those same challenges.
Angela Smith: Does my hon. Friend agree that the threat of £10 billion of further spending cuts to welfare after 2014 will only exacerbate the problems he is describing?
Alex Cunningham: I agree with my hon. Friend. I have people streaming through the doors of my surgeries, and e-mailing and phoning my surgeries, saying how worried they are now, let alone about the impact of £10 billion of cuts in the future.
In the borough of Stockton-on-Tees, 23% of children already live in poverty, and the Child Poverty Action Group has highlighted that the jobs shortage in the north-east region, exacerbated by further public sector jobs losses, will lead to even greater rises in child poverty. Quite simply, unless parents can access and remain in work, the economy will struggle to return to sustained growth and child poverty levels will be hard to reduce.
The Government’s changes to tax credit rules mean that 2,500 families with more than 5,000 children in the Tees valley alone, working between 16 and 24 hours a week, will have to work at least 24 hours a week or lose that working tax credit. That is as much as £3,870. What research have the Secretary of State for Work and Pensions and the Government done to find out how many people will be able to find those extra hours? Surely he understands that it is deeply unfair that a family already on a low income will lose vital cash to feed their families because their employer cannot provide them with more hours.
What about women? Some 72% of the Government’s changes to tax and benefits adversely affect women, and with 46% of working women being employed in the public sector in the north-east, they are bearing the brunt of the Government’s enforced public sector job losses. The number of women in work across north-east England has already fallen by 19,000, with unemployment among women increasing at twice the rate of men in recent times. I saw no hope whatever in the Budget that the hundreds of young people in my constituency would get the help to secure long-term employment. The Chancellor spoke of skills, but not how they would be delivered. He certainly did not talk about jobs for those young people.
I have tried to concentrate on poverty and the substantial increase in the number of families and individuals who are now facing the toughest of times. We desperately need economic policies that will deliver the jobs and growth that our people need. We do not want to see more and more people forced out of work in the coming months. We do not want to see pensioners penalised by having their personal tax allowance frozen. We do not want to see any growth in the number of soup kitchens and food banks springing up across the country, including
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at the New Life family centre in my constituency. We do not want to see women bear the brunt of the unfair cuts and rules being imposed on them. The Budget, read out to much cheering from the Tories and their Lib Dem allies yesterday, will not help to deliver any fairness whatever in our society; nor will it provide the platform on which to grow our economy.
4.35 pm
Pauline Latham (Mid Derbyshire) (Con): I would like to congratulate the Chancellor and his team on producing an innovative Budget in difficult times, but none the less a Budget for business and hard-working families. We need more jobs, more employment and more businesses set-up, because we cannot borrow our way out of a crisis, as Labour would like us to do. Rather, we have to earn our way out of this situation.
I find it strange that Opposition Members are so miserable all the time. All they can do is pour scorn and misery on what is a very good Budget. There are so many things in the Budget that are good for Britain and good for hard-working families, but Opposition Members never seem to be able to see it. The hon. Member for Blaenau Gwent (Nick Smith) is no longer in his place, but I was pleased that he mentioned the measures dealing with future armed forces spending, such as the doubling of the service accommodation relief for families and the welfare grant, along with council tax relief. I am sure that everybody in the House, including Opposition Members, will welcome anything that helps our hard-working service people, who are out there fighting for this country. However, apart from the hon. Gentleman, I have not heard anybody else mention the fact that the Chancellor is doing that.
There are so many positive things in the Budget that it is difficult to pick them out.
Mr Gordon Marsden (Blackpool South) (Lab): Do try.
Pauline Latham: The hon. Gentleman should not worry; I will try, although I am disappointed that I have only five minutes to do so.
The Growing Places fund for the local enterprise partnership in my area will bring in an additional £8.5 million, which will be a tremendous boost to the area. Nobody over there on the Opposition Benches really seems to be all that pleased about the largest increase in the personal allowance for 30 years, which I find staggering. I would have thought that they would support the measure, which will take a lot of people out of tax altogether; indeed, 24 million people in this country will benefit from that.
Mr Iain Wright: The hon. Lady has mentioned the personal allowance and talked about those of us on the Opposition Benches being miserable. Does she think that the 16,994 pensioners in her constituency will be miserable as a result of the actions in yesterday’s Budget?
Pauline Latham:
I do not know how you have calculated that for my constituency, because I am not even sure you know where it is. We are looking after pensioners. They will not be losing what you are talking about.
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They are getting a bigger increase than ever from the triple lock, and we are increasing their allowances. There will possibly be a year when some people will have to pay slightly more tax, but not the majority. Most people will not be spending any more money, and they will certainly not be losing any more money next year compared with this year, so you might like to look a little more carefully at what we are doing.
Mr Speaker: Order. I gently remind the hon. Lady, as I did the hon. Member for Tiverton and Honiton (Neil Parish) earlier, that we direct debate through the Chair. I am not involved in these arguments.
Pauline Latham: I do apologise, Mr Speaker.
The change to child benefit is also something that we should welcome, as it shows that the Chancellor has listened to what people out there have been saying. There will not be a cliff edge, as people have suggested, and no one earning £50,000 or less will lose anything. Only when people earn more than £60,000, which is quite a lot of money, will they lose their child benefit.
Kate Green: None the less, would the hon. Lady acknowledge that the Chancellor has been unable to resolve the anomaly whereby a couple earning £98,000 between them might be able to keep their child benefit, while a single parent on an income of £49,500 would not?
Pauline Latham: What the Chancellor has done is prevented us from having to go through a huge amount of paperwork that would have cost the country an awful lot of money. People might say, “Oh, but we don’t live together. We used to, but we are no longer together.” There will be so many loopholes, but he has done a good thing by going up to £60,000. I think that the majority of people in this country would agree with that, although of course Labour Members will not.
Chris Leslie (Nottingham East) (Lab/Co-op): Will the hon. Lady give way?
Pauline Latham: I will not, as I do not have much time left.
We have not heard much about the rate of corporation tax going down significantly, yet that will benefit small businesses in particular. We need those businesses to thrive and to employ more people. The Chancellor has also introduced the new enterprise allowance and enterprise loans, which will help more people, particularly women, to start up businesses. That will give those businesses an opportunity to flourish and to take on more people to work for them.
No one has mentioned the fact that the national planning policy framework is to be published shortly. The increase in construction that that will bring will significantly help the country to move out of recession. There will be protections for the countryside, for the green belt, for national parks, for sites of special scientific interest and for areas of outstanding natural beauty, despite the doom-makers on the Opposition Benches trying to persuade people otherwise.
I am very pleased to see the introduction of an above-the-line research and development tax credit. In my area, Rolls-Royce, Toyota, JCB and Bombardier employ a lot of people from my constituency, and they
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will benefit from such a measure. We must remember that Rolls-Royce is doing exceptionally well in the aerospace industry in our area. We have not heard much about the investment decision by GlaxoSmithKline, which is a direct result of the Government’s policies. It would not have decided to spend that money in this country if the Government had not come up with the solutions that they put forward yesterday.
I would, however, like to put in two pleas to the Ministers. I would like Derby and the area of Derbyshire around it to be considered as one of the areas that will benefit from high-speed broadband. There is a part of my constituency in Derby that used to be the largest private housing estate in Europe, and it has some of the slowest broadband speeds around. I would like to put in a bid for Derby to be a recipient of any improvements. I should also like to point out that the electrification of the midland main line was missing from the Budget statement. I would have liked to have heard that in this Budget, but perhaps it is in the pipeline and the Chancellor will bring forward those plans in the future.
4.43 pm
Angela Smith (Penistone and Stocksbridge) (Lab): This is a millionaires’ Budget delivered by a Cabinet dominated by millionaires. It is regressive in what it does with tax, but it is equally a Budget that will do little, if anything, to deliver the jobs and growth that the economy needs. Exactly a year ago, the Chancellor told the House that he had just
“put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
He told us that we would see the economy turn the corner in this financial year, that positive growth figures were forecast, and that unemployment would stabilise as the private sector rose to the challenge as the public sector retracted.
Mr William Bain (Glasgow North East) (Lab): Is my hon. Friend aware that the OBR is predicting that the effect of this Budget will be to increase unemployment by 100,000 this year and next?
Angela Smith: I agree with my hon. Friend; unemployment already stands at 2.67 million, and youth unemployment is at a record level.
Despite the Chancellor’s predictions a year ago, things have turned out very differently in the real world. As we enter spring 2012, it is clear that the British economy is flatlining, and the OBR is forecasting just 0.8% growth for 2012.
In effect, the economy will continue to flatline. The Government have conceded that they will overshoot their borrowing target by £150 billion. Consumer confidence is also at a record low. As people see their income squeezed while VAT increases push prices up and inflation runs ahead of wages, many are fearful for the future. VAT costs a family an average of £450 a year, and while the increase in personal allowances reduces tax for the low paid, that is completely outweighed by the VAT rise, cuts to tax credits and higher fuel duty—again, smoothed over by the Chancellor yesterday.
The major beneficiaries of this Budget are, of course, those 14,000 people earning £1 million or more, who are receiving a tax cut of more than £40,000 a year.
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Some 300,000—just 2% of earners in the UK—will benefit overall from the cut of the top rate to 45%, yet just 4,000 houses a year are sold for more than £2 million. That means that the vast majority of those who gain from this tax cut for the richest will be totally unaffected by the rise in stamp duty to 7%.
Sheila Gilmore: What we hear from the Government is that if people are avoiding those taxes, we should just give up on it. Is there are any reason, however, in my hon. Friend’s opinion, why we cannot bring in measures to clamp down on tax avoidance while retaining the 50p tax rate?
Angela Smith: I completely agree with my hon. Friend, and I shall come to the point a little later.
To put the tax reductions for top-rate earners in context, we need to understand that these are people who earn £2,900 a week—that is right, each week. That is more than an average worker in Sheffield earns in a month. It is quite ironic, is it not, that this Government should believe that the best way to make the poor work is to cut their income, while at the same time believing that the best way to get the rich to work harder is to boost their income. The reduction is also a massive gamble. As Jonathan Freedland points out in The Guardian, today, it is built on
“a hoped-for influx of returning top-rate taxpayers: to most people that looks like giving up hard cash in return for a wish.”
Since when has tackling tax avoidance qualified as a tax increase for the rich?
Pensioners are also hard hit. The granny tax—the £3 billion raid on pensioners by freezing their personal allowance—will mean that people who turn 65 next year will lose out by £314. On average, 4.5 million pensioners will lose £84 a year from next April.
One has to ask what influence the Deputy Prime Minister has had on this Tory Budget, when the personal allowance increase delivers less than the recent increase in VAT, so it amounts to a tax cut for the rich. Let us not forget that the Chancellor has pencilled in more tax increases for after 2014 and a further £10 billion cut in welfare costs. To people out there, that means even further potential cuts to child benefit, pension credit and tax credit.
In difficult times—and these are difficult times for many families—a Budget needs to be fair, and it needs to give people hope. Is it fair that a one-earner family on £55,000 will lose much of their child benefit, while a couple on as much as £99,000 can keep every penny of it?
As for jobs and growth, as the Business Secretary has said, this Government do not have
“a compelling vision of where the country is heading”.
For once, I agree with the Business Secretary. There are no measures of substance in the Budget to help rebalance our economy, either geographically or structurally.
Last year, the Chancellor told us he had put fuel in the tank of the economy. Unfortunately, he put the wrong fuel in the tank and the economy has stalled. If he does not do something soon for the many in this country, the economy will not only continue to splutter along, failing to fire on all cylinders, but will continue irreparably to damage the lives of those who need jobs and growth to improve their life chances.
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4.49 pm
Mr William Cash (Stone) (Con): I welcome many aspects of the Conservative parts of this Budget, including its emphasis on the need to encourage small businesses, enterprise and research and development, and its encouragement of economic growth, which is the key to everything. I welcome the simpler cash accounts system, which will bring significant benefits to small businesses, and the R and D tax credit system, as well as the seed investment programme for start-ups, which is very important. The patent box arrangements will be very useful, too, as will the proposals for young enterprise loans. Indeed, I recently attended an event in my constituency at which young people from Alleyne’s school in Stone were selling produce, based on proper commercial principles. They were learning key enterprise skills, therefore, and it would be wonderful if they could have access to some loans as well, to enable them to continue in that virtuous direction.
I welcome the reductions in corporation tax. In fact, I believe we should aim to reduce it to 15% by 2020, as the Institute of Directors proposes. I also approve of the proposals to reorganise personal allowances. That will be enormously beneficial to many people. However, despite the statements made this morning, I remain slightly concerned about the situation of pensioners. I am not yet convinced on that issue, so I think we shall have to tease it out during our deliberations on the Finance Bill.
I remain deeply worried about fuel duty. I do not think we should increase it at all. At least £31 billion comes into the Exchequer as a result of that duty, and 60% of the price at the pump is represented by taxation. Therefore, more positive policies were required. I would have liked fuel duty to have been reduced, and certainly not increased.
There will be no economic growth unless we have proper private enterprise, as that is what pays for every penny received by the public sector. There is no money except for what comes from reasonably taxed private enterprise. We must therefore ensure that we are truly competitive, and if that requires reducing our tax rates, that is the direction in which we must go.
I am deeply concerned about the failure to deal with the problem of over-regulation. I have read the Red Book, and it does not fill me with a great deal of confidence. On page 43, under the heading “Exports and inward investment”, there are a few comments about export finance. The next heading on that page is:
“Making the UK the best place in Europe to start, finance and grow a business”.
George Freeman: The best place in the world, surely?
Mr Cash: My hon. Friend anticipates what I was about to say: the UK should be the best place for businesses in the entire world, not just Europe.
That is very important. Especially given the current eurozone crisis, we cannot carry on kidding ourselves that our future depends on our trade with Europe. It is an important part of our trading relationships, but it is a failing part. Our balance of payments figures show that in just one year the deficit in our trade with the other European Union member states has risen from £14 billion to £46 billion. I understand the figures will be revised on 28 March. I trust the figures for 2010-11 will not show that the deficit is worse still.
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The previous Government put all their eggs in the European basket. This Government, to their credit, are beginning to refocus their trading relations with the rest of the world. We have a monumental opportunity to be able to get that straight in terms of—
Madam Deputy Speaker (Dawn Primarolo): Order. Time is up.
4.54 pm
Mr William Bain (Glasgow North East) (Lab): In the past 24 hours, many people have attempted to provide a description of this Budget. Some have compared it to Lord Lawson’s giveaway Budget in 1988, others to the orthodox Budget of Philip Snowden in 1931, but in entrenching the disastrous mistakes in fiscal policy of its two immediate predecessors perhaps this Budget will deserve to be known as the great stagnation Budget. Despite the measures unveiled by the Chancellor yesterday, the verdict of the Office for Budget Responsibility was that they will make no difference to the levels of growth in this country in the next two years.
Angela Smith: Does my hon. Friend agree with The Guardian, which said this morning that the Liberals will live to regret the fact that they have moved so far away in principle from the Lloyd George Budget of 1909?
Mr Bain: My hon. Friend is entirely right. Staggeringly, in that year the Liberals introduced one of the most progressive Budgets—the people’s Budget. This Budget certainly does not compare to that remotely; it is a highly regressive Budget, as the Institute for Fiscal Studies has confirmed this afternoon.
The effects of this Budget are likely to be 100,000 more job losses—20,000 more in the public sector; £150 billion more borrowing than that forecast in June 2010; and a substantial rise in inequality across the country. Having choked off growth in the past two years, and having weakened both public and private sector demand with austerity cuts that strip eight times more public consumption from the economy this year and nine times more next year than even the eurozone average, the Chancellor is presiding over the weakest recovery from recession since the 1870s.
In addition, as the OBR revealed yesterday, despite the Chancellor’s rhetoric on diversifying the economy and promoting manufacturing, his plan for growth is based on the share of private consumption more than trebling, from 12% to 37.5% this year alone; half of all the new growth in the next five years is forecast to come from consumption. This is not an export-led recovery, but debt-fuelled consumption to maintain stagnant output, at a time when consumer spending has fallen in the UK by 0.8% in the past year. Small wonder that the OECD has found that domestic demand in Britain has slumped. It rose by 2.7% in 2010, when Labour was in government, but fell by 0.2% this year, under this Chancellor. The figure is massively below the 2012 OECD average increase in economic demand of 1.4%. It shows the crisis of the lack of demand that is in our economy, which the Chancellor did not begin to tackle yesterday.
On growth, the Chancellor has given up on fiscal policy as a lever of driving demand, even when the credit ratings agencies, the International Monetary Fund and his US counterpart warn him not to. We face a jobs
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crisis, and in a crisis of this magnitude, we need fiscal and monetary policy to work in concert to grow the economy out of a slump.
Angela Smith: Is it not also the case that the current use of monetary policy to drive growth—quantitative easing—is driving the markets but not necessarily the growth that this country needs?
Mr Bain: That is precisely the point that many small businesses up and down the country are making. What we should have had yesterday was a facility to securitise loans to small businesses and have them indemnified by the Treasury. That would mean that the quantitative easing money could flow directly from the Bank of England into small and medium-sized businesses, and not simply on to the balance sheets of the banks. That would have made a huge difference. As many businesses have said, the credit easing scheme launched by the Chancellor with great fanfare on Tuesday will barely scratch the surface of the £190 billion shortfall in credit financing from which our businesses are suffering at the moment.
The Chancellor is refusing to learn the lessons from Japan in the 1990s. He is placing all his eggs in the basket of long-term low interest rates, but in Japan that led only to a decade of stagnation because of similarly catastrophic mistakes in cutting spending too far and too fast.
Even on its own terms, the Budget was a failure for business, with levels of business investment £48 billion below their peak of 2008 and business investment growth having been slashed from 7.7% to just 0.7% in the OBR’s latest forecast. There should have been innovative ideas about promoting long-term investment; there should have been plans for a national investment bank; there should have been plans to bring forward more infrastructure spending; there should have been plans to enhance and boost the borrowing powers of the UK Green investment bank, which will not have those until 2016 because of the Chancellor’s failure on growth. But in yesterday’s Budget, sadly, there were no ideas that would really make a difference to business.
Shamefully, the Chancellor never even mentioned, much less produced, a plan to tackle youth unemployment. With 1 million young people out of work across the United Kingdom and with the figure approaching one in four in Scotland, he should have announced measures for a proper national insurance holiday for small and medium-sized firms employing young people. He should have repeated the bank bonus tax to help to create 150,000 youth jobs. He should have announced a temporary VAT cut, which would have boosted consumer demand, and he should have cut VAT for home repairs and maintenance to give the construction sector a much needed lift.
The test on which this Budget is found most wanting is that of fairness. We are told that the wealthiest 3% of the population require massive fiscal incentives to reward hard work, but it is a different approach when it comes to those on lower incomes or pensioners who have saved for their retirement. The poor are told to work harder and do extra hours of work that are not available in the depressed economy, but 14,000 millionaires will receive a permanent tax cut of £40,000. This Budget is highly regressive and I urge Members to vote against it on Monday.
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We are told that the Chancellor has advised the Prime Minister on matters strategic, instead of focusing on the crisis of demand made in No. 11 Downing street—a flatlining economy, slumping business investment, rising unemployment and soaring inequality. The country will not forget that yesterday was the day when the part-time Chancellor produced a bit-part Budget.
5.2 pm
George Freeman (Mid Norfolk) (Con): I congratulate the Treasury team on a Budget that I believe will come to be seen as an historic Budget that will put Britain back on track for sustainable economic recovery. I want to say something in the time available about the problem we inherited, because it bears repeating, about the challenge we face and about the opportunity that I believe we can and should be optimistic and ambitious in tackling. The problem has been well chronicled, but the views and ignorance displayed by Opposition Members in this afternoon’s debate suggest that we need to repeat it for them.
We have inherited from the Labour party the worst deficit and debt crisis in this country’s peacetime history; a structural deficit that would have been a crisis alone; an annual deficit from Labour’s historical explosion in public spending; a crisis in the situation with debt as a percentage of gross domestic product; and interest payments that are set to rise, if we have not tackled them, by £76 billion a year—£1 in every £4 the Government spend. As a result, there is a deep fiscal crisis, with tax increases and restraint on public spending hitting every family in the country, and a legacy of rising unemployment because of the credit crunch and bank financing for small businesses. Most powerfully of all, and most damningly after 13 years, there was the unsustainable economic model—a labour boom fuelled on cheap credit and cheap immigrant labour and a consumer boom that Labour knew was unsustainable. Worst of all, perhaps, there is a deep crisis of trust and confidence in political economy and in the belief and faith that the Government can do anything about it.
The challenge is to restore some credibility and confidence, first, in the capital markets through the coalition’s programme for tackling the deficit, and secondly in the boardrooms and businesses of Britain that are the only true mechanism for sustainable recovery. There is also a need to restore credibility and confidence in relation to the entrepreneurs we will need to take the risks to drive growth and the citizens and consumers of this nation so they can have faith again. That requires a new economic model, which my right hon. Friend the Chancellor spoke passionately about yesterday—a model for sustainable recovery. We cannot borrow and spend our way out of a debt crisis.
Recovery needs to be sustainable not just in terms of avoiding the mistakes of boom and bust. We must produce the things that people around the world want to buy and we must have a clean economy in terms of resources and the environment. Recovery needs to be sustainable in the sense that our public services must be financed in a sustainable way. Every pound that we in this place claim as government money has to be earned by citizens and businesses and taken from them, and we should never forget it. At heart, that means that the coalition’s programme for a rebalanced economy must shift from over-dependence on the public sector to the
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private sector, from London and the south-east to the cities and the regions and to the real businesses of this country that can drive sustainable growth. I congratulate the Treasury team on keeping interest rates low, paying off the debt and supporting business. We have the most competitive corporation tax regime.
Mr Bain: Will the hon. Gentleman give way?
George Freeman: I am going to plough on if I may. The move on the top rate of income tax from 50p to 45p has set a clear direction.
Angela Smith: Will the hon. Gentleman at least acknowledge that a significant proportion of the private sector jobs created are part-time and in that sense are doing much less than he suggests to drive growth in the economy?
George Freeman: If my constituents were given the choice between a part-time job in a sustainable private sector business or a full-time job in the public sector that was not sustainable, I know which they would choose.
More than 600,000 new jobs have been created in the private sector since the election.
Mike Weatherley (Hove) (Con): Will my hon. Friend welcome with me the measures for the video games industry, which are so important to Brighton and Hove, protect jobs in this country and stop them going abroad?
George Freeman: My hon. Friend makes an excellent point with which I entirely agree.
If I had only one small complaint about the Budget it was that, for reasons I well understand, the Government were unable to do anything to relieve the pain of rural fuel prices in areas such as my constituency, where the cost of living is an acute problem. I urge the Government to look at what might be done to relieve the effect of fuel prices on the rural economy.
I said that I would touch on why I believe that this country can begin to be optimistic about our future. The Government have begun to set out a credible and coherent plan for long-term economic recovery based on a model of trading again around the world. There is a high rate of growth in the emerging nations—the so-called BRIC nations, Brazil, Russia, India and China—and with the pace of globalisation and the explosion in those markets, if this country can set out a model of producing and selling the things that those countries need, we will be on the road to a secure recovery.
Last year saw the publication of the foresight report, which set out how the world population is rising to 9 billion, which will drive huge demand for life sciences such as food science, biomedicine and energy and environmental science. The Government have set out over the past 18 months a long-term strategy to unlock that science and research base and tackle the problems of sustainable development around the world. That is a sustainable model for us as well as for other countries.
There is a huge opportunity for the UK to trade on our great strengths and to unlock the power of the City and financial services sector to back and build the
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companies and businesses of tomorrow in the sectors of tomorrow. So I support—it is worth repeating—the measures that the Government have taken, especially in the Department for Business, Innovation and Skills, including the Green investment bank, new sources of finance for infrastructure, the enterprise zones, the competitive tax regime and the £20 billion of credit easing, allied with the reforms to welfare, schools, universities and science and research. The Government are setting out a modern industrial policy for a modern innovation economy. Will it work, I hear you ask, Madam Deputy Speaker? Well, it is already working. The programme has been welcomed by the Office for Budget Responsibility, the Institute for Fiscal Studies, the World Bank and the International Monetary Fund. Even the BBC’s business editor last night said that the Budget had had the most positive response of any Budget he could recall. If any more proof were needed, today one of the world’s great businesses, GlaxoSmithKline, announced a major £500 million investment in the UK, directly citing yesterday’s Budget as a reason. It is an historic Budget that will put us on track for a long-term recovery.
5.9 pm
Kate Green (Stretford and Urmston) (Lab): All Budgets have a tendency to create both winners and losers, but this Budget, unlike others, appears to create winners and losers in an inconsistent and illogical manner and without any clarity of guiding values or objectives.
Mr Bain: My hon. Friend is showing her customary generosity in giving way. I anticipate that she might make the point that 70% of the cuts in tax credits will affect people in the lower half of the income scale, but the Resolution Foundation determined yesterday that 70% of the gain from the change in the personal allowance will go to people in the top half of the income scale.
Kate Green: My hon. Friend does indeed anticipate my first point. Although there is of course an attraction in lifting more people at the bottom of the wage spectrum out of tax, it makes little sense to introduce a measure that still favours more men than women when women have already lost out under previous Budgets and spending announcements.
Mr Tom Clarke: On that point, which I dealt with briefly in my speech, is it not a great worry that female unemployment has risen by 22,000 in the past year, adding to the problems that were already there?
Kate Green: It is of deep concern to me, as I am sure it is to you, Madam Deputy Speaker, that female unemployment is now the highest it has been in a quarter of a century and that it was female unemployment that rose most rapidly in the last quarter, considerably outstripping what is happening to men.
I find it difficult to understand the fairness or logic of introducing a higher tax threshold that lifts some low-paid workers out of tax while at the same time disincentivising many other low-paid workers who are seeing their tax credits frozen or lost altogether if they cannot reach sufficient hours, to the extent that work will become hardly worthwhile for them at all. I cannot see the logic of the Government telling pensioners that on the one hand they will give to them through the triple lock, which I welcome, but with the other hand they will take
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away from them by raising the threshold and bringing 230,000 of them into tax, while at the same time trying to take people in low-paid work out of tax.
I am struggling to understand how a Government who said that they wanted to be fair and to operate a system that was simple can have arrived at the decision they reached on child benefit, according to which a couple with an income just short of £100,000 will be able to keep all their child benefit but another couple where only one member of the household has an income, but it is in excess of £50,000, will not. How can that be fair? How can a system be simple when it starts to claw back at the rate of 1% for every £100? How will people know where they stand in relation to their child benefit entitlement, and where is the incentive to work more and earn more in such a context?
I am struggling to understand why a Government who want to be progressive, who say that that is their reason for moving away from universal child benefit, which I hugely regret—I want to put on record that I absolutely stand by universal child benefit—and who say that they think there needs to be more progressivity, as they see it, in the way they administer child benefit, then introduce less progressivity in income tax by cutting the top rate from 50p to 45p when, as the OBR has said, there is considerable uncertainty that such a measure will deliver the tax receipts that the Government seem to believe will be brought into the Exchequer. With respect, I think that the Chancellor was a little over-optimistic in his analysis of the OBR’s comments on the likely efficacy of that measure, and it is also unclear to business commentators that the measure will be good for our economy.
Let us be clear that our corporation tax, even before this Government took office, was by no means among the highest in the developed world. I am interested in how a Government who make great play of seeing small businesses as the future of increasing employment, who want to reduce corporation tax, who are on a downward trajectory in relation to it and who want to enable small businesses to employ more workers have failed to notice that the very smallest businesses are completely unaffected by the cut in corporation tax because they already have a tax rate of only 20%. What are the Government doing to support those businesses when what they would really like is effective measures on employers’ national insurance contributions, something that again the Government have managed to address only in a most limited way?
Lorely Burt: What we are doing for small businesses, which will alleviate many administrative difficulties, is introducing measures such as cash accounting on cash flow, so we are working hard to help them in every way we can. We are also amalgamating national insurance with the other forms of tax paid so that only one lot of tax is collected.
Kate Green:
It is not that everything the Government are doing is necessarily bad, but overall it is woefully insufficient in relation to business and not what the smallest businesses have been talking to me—or I suspect to the hon. Lady in her constituency—about. They have been talking about employers’ national insurance contributions, business rates and their concerns about the rise in VAT, which means that there is pressure on
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their turnover, but in the Chancellor’s statement yesterday the Government had nothing to say about any of those issues.
I should like to say a little about welfare and pensions. On welfare, I share with many of my right hon. and hon. Friends the deep concern that, after £18 billion of social security and tax credit cuts already from this Government, the lowest-income households in this country now face a further £10 billion of cuts. That will mean a hit on disability benefits and on the benefits that enable people to reach basic living standards. When the Government publish on people’s tax statements, as they say they will, a breakdown of where their spending has gone, I hope that they show in great detail who the losers are from that welfare spending. A broad-brush statement, “This is what is spent on welfare,” will not tell people that carers, the disabled and people raising children are actually the losers, so I hope that such information appears on the tax statements that the Government produce.
Finally, the Government propose to keep the state pension age under review in line with rising longevity. That, too, is a measure that will deliver greater inequality, because it will penalise most of all the poorest, who already have poorer health outcomes and poorer life expectancy, and those doing manual and hard, physical jobs. So buried in the detail there is considerable injustice, unfairness and inconsistency, and I shall vote against the Budget on Monday.
5.17 pm
Stephen Gilbert (St Austell and Newquay) (LD): I welcome a Budget which shows that the coalition Government remain determined to tackle the deficit and to drive growth and job creation throughout the country, and that we will deliver tax cuts for millions of hard-working people and demand from the wealthiest in our society that they pay their fair share. This really is a Budget for millions of ordinary families throughout the country who are struggling to make ends meet, not a Budget for millionaires.
I welcome in particular, of course, the increase in the personal income tax threshold, the largest increase for a generation and a thoroughly progressive policy. It has gone from the front page of the Liberal Democrat manifesto and been turned into action under the coalition Government, and both parties deserve credit for introducing it. In terms of helping the families whom I represent in Cornwall, the measure sits alongside a freeze in council tax and the Government’s determination to tackle the injustice of water bills throughout the duchy. Some 19,300 people in Cornwall will be taken out of paying income tax, and more than 4,000 in my constituency alone will no longer pay it. I thoroughly commend the measure to the House and hope that in future years the Chancellor will be able to go further and faster.
Angela Smith: Will the hon. Gentleman not at least acknowledge, as my hon. Friend the Member for Glasgow North East (Mr Bain) said earlier, that the biggest beneficiaries of the increase in the tax allowance will be higher-income earners, not the lowest-income earners?
Stephen Gilbert:
It is a bit rich when the Labour party talks about benefits to higher rate taxpayers, given that it abolished the 10p rate of tax, making 5 million of the
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lowest paid pay more tax. The coalition Government are taking the lowest paid out of tax, and that is a better direction of travel for the people whom I represent—and, I am sure, those whom the hon. Lady represents as well.
I am also keen to welcome the measures in the Budget to drive business growth—the cutting of red tape on small and medium-sized firms; the introduction of cash accounting; the enterprise management incentive scheme; and the fact that the Government are making available £20 billion-worth of additional funding to ensure that businesses across our country, from which will come the growth that will get us out of our financial difficulties, have the money to invest, expand and grow.
Alex Cunningham: The hon. Gentleman has talked about investment. If the 50p tax rate had been retained, there would be more money for investment. The Chancellor said that the rate was making little impact on the amount of money coming into the Exchequer. If it was making so little money, could he not have just done away with it altogether—or is it actually a real source of income for the Government and the Exchequer?
Stephen Gilbert: Again, there is an obsession for a policy that Labour implemented only during the last 37 days of its Government. If it was so keen on the 50p rate, why did that not last for 13 years under Labour, rather than 37 days? This is nonsense from the Labour party.
Some of the measures to improve finance for small and medium-sized enterprises will build on some of the other mechanisms that the Government have introduced in Cornwall to try to drive the Cornish economy. I am thinking of the enterprise zone at Newquay airport, the Cornwall and Isles of Scilly local enterprise partnership, the fact that Cornwall will be the first county—not just in the United Kingdom, but across Europe—to have access to superfast broadband across its entire length, and the commitment to renewable energy generation as a way of driving some of the job creation of the future.
I also welcome the measures on housing growth that the Chancellor announced. Government and Opposition Members recognise that there is a serious housing crisis in the country. We need to get on and build our way out of it to ensure that we meet the aspirations of those, many from my generation, who simply want to start their lives with their partners, but are unable to do so because they do not have access to stable, decent and affordable accommodation.
In my remaining time, however, I would like to put a few concerns on the record. The first is about alcohol taxation. Duty on beer has gone up by 42% in the past four years. As my hon. Friend the Member for Burton (Andrew Griffiths), who is not in his seat, said earlier, the community pub is at the heart of many areas, including many of Cornwall’s villages. Community pubs serve a useful function, employing 300,000 young people across the country. When the Government bring forward their alcohol strategy, I hope to see some redress from the burden that beer taxation has taken on in recent years.
I am also concerned that air passenger duty has gone up by 360% over seven years. When I talk to the manager of Newquay airport, he tells me that that is having an impact on its ability to continue to drive custom.
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I share the concern of my hon. Friend the Member for Stone (Mr Cash) about fuel taxation in rural areas. An innovative scheme is being trialled in the Isles of Scilly and other places, but the Government need to consider again whether the balance is right.
I have two final points. I disagree with my hon. Friend the Member for Sevenoaks (Michael Fallon), who thinks that the introduction of regional pay will be a welcome move. Far from it—it runs the risk of institutionalising some of the inequalities in regions, such as Cornwall, with above-average housing costs and below-average wages. I have deep concerns about this proposal, as do my hon. Friends on the Liberal Democrat Benches.
Finally, I turn to an issue that is exercising my countrymen in Cornwall. There is some ambiguity about whether the increase to 20% in VAT on hot food will include pasties that are served from bakeries. The Minister will no doubt be aware that the pasty is not only a staple, hearty meal but, in effect, employs thousands of people and brings millions of pounds into the Cornish economy. Will he give some clarity on whether we can avoid a pasty tax?
5.25 pm
Sheila Gilmore (Edinburgh East) (Lab): The altruism of the high-paid is remarkable. If they are not paying tax because of successful avoidance measures, their delight at the rate reduction requires some explanation. Perhaps they agree with the Chancellor’s statement that they will pay more tax as a result; if so, their delight is clearly because they are ready to pay more tax than they were previously.
Mr Bain: I wonder whether my hon. Friend has had an opportunity to consider what the Institute for Fiscal Studies has said this afternoon—that there is a one in three chance that the Treasury will recoup only 30% of the £2.9 billion in the Red Book that relates to behavioural changes and to people moving from the 50p to the 45p rate. Does not that bear out her point?
Sheila Gilmore: It definitely does.
Of course, that may not have been what people were cheering. They may have been cheering in relief at not having to do tiresome tax avoidance planning all the time. If the HMRC’s calculations are correct, high-paid employees are a bit like highway robbers who are holding a musket up to the rest of us and saying, “If you tax us, we are going to take our ball away and not play any more.”
Mr Tom Clarke: Is my hon. Friend as concerned as I am that the Government seem to pay little attention to HMRC’s informed views?