“What a surprise I had on March 15. I called in at the Wavertree Jobs Fair…half expecting to have the car park to myself as Mr Cameron’s Welfare State dependents were supposed to be too busy watching daytime TV recovering from the dole fuelled bender from the night before. What I actually found was those desperate for the chance of a job, or even training for a job, packing the place to the rafters.”
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The fantastic turnout reinforced the fact that people who are out of work are not shirkers, but the real problem is that there are not enough jobs. Even if we filled every one of those 500 job and apprenticeship opportunities available at the jobs fair, three quarters of those who attended would still have missed out.
We have learned today that 2.52 million people are still out of work, with youth unemployment at almost 1 million again. There are still more than five people chasing every job vacancy, and even those who can find work still have to accept lower living standards.
Alison McGovern: I hope that my hon. Friend will also comment at some point on apprenticeships and on the fact that part of the reason for the shortage of jobs in her constituency, and the mismatch of Government spin, is the rebadging of existing jobs as new apprenticeships. Does she not think that the Government should come clean about that?
Luciana Berger: I have spoken on a number of occasions on the issue of youth apprenticeships, particularly those for people under the age of 19. We have seen a decrease in the number of such apprenticeships. As my hon. Friend says, there is also the issue of the rebadging of different types of jobs. The House will have heard many a representation from the Labour Benches about the Government’s consistent claim to have created 1 million jobs in the private sector, but we know that many of those jobs are simply public sector jobs that have been rebadged.
There has also been a shift in the kind of jobs available. The number of people working in full-time jobs fell in the last quarter. It is now down 378,000 since the beginning of the 2008 recession, while the number of people in part-time work has risen by 572,000 in that period. Since the general election, people have taken an average £1,200 pay cut because jobs are so hard to come by.
Charlie Elphicke: If jobs are so hard to come by, why does the hon. Lady think that the Office for Budget Responsibility is predicting that 600,000 more jobs will be created next year, and why have we seen 1 million more private sector jobs since the election?
Luciana Berger: I thank the hon. Gentleman for his intervention, but I refer him to the comments that I have just made about the rebadging of public sector jobs. Many fact checks have been done to determine what those jobs actually are, as the intervention from my hon. Friend the Member for Wirral South (Alison McGovern) highlighted. Many of them are now apprenticeships. We also know that many of the assessments by the OBR have had to be downgraded because its estimates have often been too optimistic.
It is in the context of this maelstrom of frozen wages, rising prices and reduced opportunity that the Government are making some of the most draconian cuts to our public services and welfare, despite the fact that the OBR has said that those cuts are reducing growth in our economy. The cumulative impact of the cuts has been to widen the gap between the richest and the poorest, and to ask the most vulnerable and disadvantaged in our society to pick up the bill for the Chancellor’s mismanagement of the economy.
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Today should not have been about more of the same; it should have been about changing course. If this had been a Labour Budget, we would have acted to boost confidence, create jobs and support struggling businesses. We need to bring forward long-term infrastructure investment in schools and transport, and we need to use the money raised from the 4G mobile spectrum auction to build thousands of affordable homes—getting builders back to work, creating the homes we need and strengthening our economy for the future. Alongside that, we would have cut VAT temporarily, including to 5% on home repairs, maintenance and improvement, which would have helped the energy efficiency side of our economy. The result would have been a plan for a steadier and more balanced pace of deficit reduction with measures that support our economy and create jobs now.
Government Members say that we cannot do that because it would mean more borrowing. They neglect to mention that it is their policies that are already leading to much higher borrowing. The Government and this Chancellor are already borrowing £212 billion more than they said they would to plug the holes in our public finances caused by a flatlining economy and a higher unemployment bill. The Government argument seems to be, “We will not borrow to grow the economy, but we will borrow to shrink it”. Instead, the real question is not whether we should borrow or not, but what we are borrowing for. Are we going to continue to borrow to pay the cost of the Tory Government’s economic failure and to keep people at home out of work or are we going to act to support those small businesses that want to invest in new equipment, to kick-start house building, to support research and development and investment in low-carbon energy and high-tech manufacturing with a proper plan to get people into work? In other words, we need a real plan for jobs and growth, which would be fairer, more successful in getting the deficit down and make Britain better off for the future.
Mr Iain Wright (Hartlepool) (Lab): On a point of order, Mr Speaker. It says on page 93 of the Red Book:
“The Government will…publish the Business Bank’s first business strategy”
this coming Friday, on 22 March. Given that you, Mr Speaker, have been very clear that important announcements should be made first to this House, and given that it is my understanding that the Secretary of State for Business, Innovation and Skills will open tomorrow’s Budget debate, can you give me any guidance about the powers you have either for the publication to be brought forward to tomorrow to allow hon. Members to question the Secretary of State when he is at the Dispatch Box during the debate or to provide for an oral statement to be made to the House on Friday morning? Mr Speaker, how can we question the Government on this important topic?
Mr Speaker:
I am grateful to the hon. Gentleman for his point of order. I do not have formal powers in this regard and have only just had notice of what the hon. Gentleman sought to raise. What I would say to him is as follows: first, the Secretary of State will have heard—or will soon hear—of the point of order, and it is perfectly open to him to adjust his plans accordingly if he judges
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it appropriate to do so. Secondly, my sense is that this is a matter that can reasonably be expected to be raised in the debate, and the versatility, not to mention the indefatigability, of the hon. Gentleman as a parliamentarian, suggests to me that he himself is likely to do so. As to whether a statement or a publication intended for Friday will be brought forward, I cannot say, but Ministers will have heard what the hon. Gentleman has said, and I will keep an eye on the matter.
4.33 pm
Geoffrey Clifton-Brown (The Cotswolds) (Con): I am very pleased to catch your eye in this debate, Mr Speaker, and I ask you and the House to forgive me for breaking the usual convention in that I beg leave to leave the Chamber immediately after this speech because I have to chair a Committee upstairs. I would normally stay to listen to the following speaker.
I commend my right hon. Friend the Chancellor for his Budget, particularly for getting the macro-economic situation right. I would like to quote again from the Library note cited by my hon. Friend the Member for Hertsmere (Mr Clappison), who is no longer in his place. He quoted figures showing that the deficit is already down by a third and that net borrowing as a percentage of GDP is set to fall to 5% in 2015-16 and 2.2% in 2017-18. Those figures are taken from the Red Book. What is absolutely staggering is the fact that the last Labour Government inherited a figure from us of just 0.7% in 1997, which rose to a whopping 11.2%—this is contained in the Library note—in 2009-10. If there were ever any doubt about the fact that the last Labour Government—under the stewardship of the shadow Chancellor—were at the root of all our present economic problems, those figures would prove it to be the case. In absolute terms, our borrowing rose from £5.8 million a year to £158.9 million in the last year for which Labour was in office.
I believe that, surprisingly, the current employment situation shines a bright light on our economy. It was interesting to hear the Chancellor say this afternoon that the private sector was creating six jobs for every job lost in the public sector. We have already created more than 1 million jobs in the private sector in the two years since the last general election. It was also useful and, indeed, heartening to hear the Chancellor estimate that 600,000 jobs would be created in the next year alone. We are creating more jobs than France, the Netherlands, Japan and the United States, and we are outstripped only by Germany in this respect.
Lindsay Roy (Glenrothes) (Lab): It is welcome that there are additional jobs in the private sector, and we commend that, but has the hon. Gentleman any idea how many jobs have been lost in the private sector?
Geoffrey Clifton-Brown: I think someone is telling me that 400,000 jobs have been lost in the private sector. However, I am talking about net job creation, which amounts to just over 1 million. That is the important figure. Of course, in a dynamic economy some jobs will always be lost and some will be gained, but as long as more are being gained than lost, we are on the right side of the argument.
The Chancellor mentioned that the eurozone had contracted by 0.6% in the last quarter. That, of course, is one of the reasons why our economy is so difficult to
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repair. As the Red Book makes clear, 42% of our exports go to the eurozone and 16% go to the United States. Both the eurozone and the United States are experiencing little growth, and the economy of the eurozone is contracting. However, there are some bright spots. Between 2009 and 2012, our exports of goods to Brazil, Russia, India and China increased by 49%, 133%, 59% and 96% respectively. Last year, indeed, we were the only country in Europe that managed to increase its exports to China. The international markets have endorsed the Chancellor’s policy in the form of our 10-year bond yields, which, according to the table in the Red Book, would be virtually the lowest in the eurozone, outstripped only by those in Germany.
I am struck by the fact that, according to KPMG’s table, Britain is the best place in which to do business—better than Switzerland, the United States and France. However, I must issue a small caveat to my hon. Friend the Exchequer Secretary. I fear that we are in danger of losing some of our foreign direct investment, the inward investment that sustains 40% of our GDP. Until recently we were in a fortunate position, in that 70% of all the European corporate headquarters were based within 75 miles of Heathrow, but owing to our current indecision about where our major hub airport should be located, we are losing those corporate headquarters by the day. I think that we should persuade all parties to agree that whatever Sir Howard Davies comes up with in relation to the hub airport should be implemented as soon as possible after the next election, so that we do not lose that international place. Let me also say that, while I fully support High Speed 2, our most expensive engineering project ever, the route should not be designed in isolation from the location of our major hub airport.
I warmly welcome some of the factors that KPMG identifies as making Britain one of the best places in which to do business. I particularly welcome the Chancellor’s announcement today that all corporation tax, whether on large or small companies, is set to fall to 20%. I think that that is a huge achievement, and I think that it will continue to encourage companies to come to this country. I also welcome the fact that the first £2,000 of national insurance will be left in the pockets of the companies themselves. I welcome the fact that the small business rate will be continued and that the Chancellor is abolishing the fuel duty rise this autumn. All those are seen as welcome steps to encourage employment. I particularly welcome the fact that well over half a million new apprenticeships have been established this year, including 570 in my constituency—that is a 63% increase on the figure for the year before.
I welcome my right hon. Friend the Prime Minister’s initiative at the G8 and G20 to make sure that although we lower the rate of corporation tax, we require companies that make profits in a country to pay a reasonable rate of tax on the profits in that country. Our measure will help not only this country, but countries in the third world, which often have difficulty collecting corporation tax from big multinational companies on profits made in them. As the Chancellor said today, these rules—these international tax treaties—were written in the 1920s, and their updating is well overdue.
Let me deal with some more domestic issues. As chairman of the all-party group on wine and spirits, I welcome the Chancellor’s announcement that the beer duty will fall in this Budget. However, his announcement
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that the 2% alcohol escalator will continue will mean that wine duty will have increased by 50% since 2008, while the duty on spirits will have increased by 48%. The industry supports 2 million jobs, many of them for young people in the hospitality industry, and it contributes £16 billion-worth of duties. There are signs that that is beginning to decline because of the rise in the duty escalator. Alcohol consumption has fallen by 13% since 2004 because of the responsible measures the industry has taken. Until now, the duty on beer and wine per unit of alcohol has been broadly taxed the same. In 1983, the European Court of Justice warned the UK that it is illegal for the UK to tax wine and beer at different rates, because they are seen as competing products. There must now be a real risk of a legal challenge, and I ask the Exchequer Secretary to consider this matter seriously to see whether something can be done about it before the Finance Act is introduced.
In conclusion, there are many things to welcome in this Budget. For individuals who want to work hard and keep more of their own money, I warmly welcome the fact that anybody earning less than £10,000 will not pay tax. We are helping people to buy their own house, and I have only one thing to warn the Exchequer Secretary about on that. As he and others will have realised, house prices in central London are rising very fast—they are literally increasing by the day—and I hope that these measures will not lead to a housing boom in London. We are also helping people with the cost of living, helping people with their pensions and their retirement, and helping people to keep their hard-earned life savings from being removed to pay for the cost of their elderly care. There is a huge amount to welcome in this Budget, but it has not been welcomed by the carping Labour party, which caused many of our economic problems in the first place.
Mr Speaker: I must say to the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) that it is deeply irregular for a Member to toddle out of the Chamber immediately upon the conclusion of his speech in expectation—and anticipation, no doubt—of a very important engagement. I dare say that he is leaving the Chamber in order to chair the Committee of Selection meeting at 4.45 pm. It is true that that is a most burdensome and important responsibility, but had I known that he would be doing that immediately afterwards, I would not have called him. I put it to him politely that there is a much greater responsibility upon him to sit in the Chamber and listen to the hon. Member for Great Grimsby (Austin Mitchell). If he does have to go, I suppose that we will have to tolerate it, but I hope he will toddle back immediately afterwards.
Geoffrey Clifton-Brown: I did actually mention this to the Deputy Speaker when he was in the Chair before you, Mr Speaker. I said that I would be more than happy to be called at any time later in the evening. So I will be guided by whether you want me to stay or to go to chair the Committee, Mr Speaker.
Mr Speaker:
The hon. Gentleman has acted in good faith and that is respected. If his colleagues are expecting him, so be it. What I politely ask, because the tradition in the House is an important one, is that if he feels able he comes back to listen to other parts of the debate, as that would be appreciated by the House. We do not
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wish to detain him now if his colleagues are waiting for him, and we recognise that he meant well by the House. The hon. Member for Great Grimsby will have one fewer member of his audience.
4.44 pm
Austin Mitchell (Great Grimsby) (Lab): I was rather upset when I found that I need not have bothered coming to listen to the Chancellor’s petulant prose because I could have read it all in the Evening Standard, stayed in bed and not suffered the indignity of coming along early. I remember—few will—that the last Chancellor who spilled the entire contents of a Budget to the Evening Standard was Dr Hugh Dalton in 1947. He promptly resigned, which is an example that I commend to the Chancellor, as it deserves to be followed.
As I decided to come to the Chamber, I was rewarded by seeing the Chancellor excel himself in some ways. All the trailers and the headlines in the newspapers said that the Budget was going to be boring, mean, “bleak”—the Financial Times said that—with no change, and grim. In fact, it lived down to all those trailing adjectives: it was a no-change Budget in a declining economy. The main cause of anxiety among Labour Members is the fact that the Chancellor has obstinately adhered to a set of policies that have not worked—conspicuously so—and which have damaged the country’s prospects. It is a Budget proposed for a nation in comparative decline. We have missed out on 4% of GDP—the economy has shrunk that much since 2008—and we have missed out on all the normal growth that would have occurred since then. That is a huge loss in the economy: a smaller economy is bearing a heavier burden of debt. It is difficult, in that situation, for an economy to keep the standards, the services, the social welfare and the spending of a decent society.
Moreover, that economy cannot pay its way in the world. We have a huge and, until the current recession, escalating balance of payments deficit. In such cases, people either have to borrow overseas to finance the deficit, or they have to sell assets at home. We have been selling assets apace in this country: we have sold companies—we must be the most colonised industrial economy in the world as a result of foreign takeovers, which earn fees for the City. We have sold farms, houses and anything that moves. We have set ourselves up as “Tax Haven on Thames”, and international capital and funny money—the funny funds and their manipulators—have been encouraged to come here on the promise that they will pay low taxes. They can go in for all sorts of tax evasion schemes, such as those that the Public Accounts Committee has unearthed, with only soft-touch regulation. In fact, all that companies that come to the UK to fiddle their taxes have to fear is my right hon. Friend the Member for Barking (Margaret Hodge) and the Public Accounts Committee, which has unearthed what has been going on. That must induce terror in them, but the Government have not done anything about it.
Even today’s measures are small beer compared with the scale of the problem of tax evasion and avoidance. We are an economy hung down with debt, and that is true of the state and of companies, particularly those that have been taken over by private equity and loaded down with debt, and of individuals. People are not
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spending on the high street, and there is no demand so the shops are closing. Who is going to invest in an economy in that state, when there is no prospect of profit because demand is so low? Who is going to buy houses in an economy in that state, as people do not have any prospect of keeping their job for a long period? Uncertainty creates the problem.
The banks are not lending, and we have relied on the Bank of England to do the heavy lifting by effectively printing money, but that money has all gone to the banks, which stash it away in their reserves and do not loan it. The Bank of England’s monetary policy cannot replace fiscal policy: the Government must bear their share of the heavy lifting, and not leave it all to the Bank of England. I am glad to hear that the rubric of the Bank of England is going to be changed, and I hope that it includes economic growth and competitiveness. Too much has been left to the Bank, and too little has been done by the Government.
That is the economy today, and it is a disastrous situation, as confirmed by the report by the Institute for Fiscal Studies. We are bumping along the bottom, and we are heading for a triple-dip recession. That is the picture that the Chancellor should have dealt with, but he failed to do anything. The good things that he did were postponed to 2014 or 2015 in many cases. The Budget is not adequate to deal with the problem.
What we need to do is spend. That is the only way out of a recession like this. A litany of how we must not borrow more and that borrowing is evil is all very well, but borrowing for public purposes is very different from borrowing for private purposes. Borrowing to spend for public purposes creates an economic stimulus and stimulates growth, and that is what we have to do. It is the only way out of the present situation. I am sorry to go on about it, but to Government Members’ taunts about whether we would borrow more, I say yes, we must borrow more. We must borrow to spend to do things to stimulate the economy, to stimulate the animal instincts, as they are called, of the cautious capitalists in this country, to get growth going. Once we get growth going, the problem solves itself. We can only pay off debt in an economy that is growing, as Labour did in our first two or three years of office. We paid off an enormous amount of debt because the economy was growing. We can do that again, but only with growth. We cannot do it by deflation, because deflation increases debt. Deflation means we have to pay for unemployment: we receive fewer taxes and have to cover all the costs of companies going bust and all the weaknesses of the economy. There is an increase in debts from deflation, but there is an increase in the ability to pay off debt from expansion. We therefore have to borrow to expand.
I welcome the Chancellor’s measures on housing, but they are all about owner-occupiers. The big need at present is to provide houses for the two fifths of our population who cannot afford to buy them and to whom the banks will not lend. The mortgages are not forthcoming in any case, but those people are so impoverished that they need public housing to rent. That is what we need to build primarily. Why not have a massive housing programme—300,000 houses over two years? We are already building 100,000 houses fewer than this community needs, and it is those who cannot afford to buy, and who particularly need housing, who are suffering the pain of the housing crisis and the
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present housing shortage. Borrow, spend, build houses, invest in the future, invest in green energy, which like ICT in the ’80s is the coming future; borrow and spend, stimulate and grow—that is the only way out, but the Chancellor proposed none of that and that is why the Budget is such a failure.
4.52 pm
Gavin Williamson (South Staffordshire) (Con): It is always a great pleasure to follow the hon. Member for Great Grimsby (Austin Mitchell) with his candour and honesty in saying that Labour would always want to spend more. Many of my constituents and most of the country recognise that Labour always wants to spend more. I always found it most unusual when, before entering the House, I used to listen to the Budget statements of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) who professed his devotion to prudence. On the Floor of the House he would constantly hammer home the importance of prudence, and how it was central to everything that he did. If he loved prudence that much, he must have been cheating on prudence with someone who was very reckless, as all the money was spent. The destruction that he has wrought on the economy has been vast.
The Chancellor has aimed to set out a plan to continue to support British business and British families. It is not possible to create an economy overnight that has business confidence. It is not possible to build an economy overnight where there is a massive investment in technology and engineering—it has to be done over time. That is why we should all welcome the Chancellor’s continued moves to bring down corporation tax, from 28% to 21% last year, and 20% going forward.
The constant drive to lower corporation tax will build confidence across the globe that Britain is a place in which to invest. Page 41 of the Red Book shows the dramatic change in business confidence in the UK. In 2007 it was rated at just under 30%, and as recently as 2009, it was rated at under 20%, whereas if we look at comparator countries, such as Ireland, the Netherlands and Switzerland, we see that the percentage ratings were between the mid-80s and the mid-70s. That confidence has totally changed how people view the United Kingdom’s tax competitiveness. Indeed, we have seen the growth of confidence that Britain is a good place to invest as a tax competitive area: it moved from below 20% in 2009 to above 70% in 2012.
Only the other day I met representatives of Caterpillar, a major investor and employer in the United Kingdom. They said that what international businesses need is certainty. They need confidence that the tax regime will not constantly change and that if they invest in this country, their investment will be safe. They reported that that confidence is starting to return, because it is quite clear that the Government want to deliver a low rate of corporate taxation, and it is not going to go down one year and then up the next; the trend is to reduce it continuously. That is what international business wants and that is what will benefit Britain.
Another measure that I do not think has been commented on so far, but which will be of great value to all businesses, especially those in engineering and manufacturing, is the increase in R and D tax credits by up to 10%. Members in all parts of the House talk passionately about the need to promote and encourage
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engineering and manufacturing. If we want to do that, we must promote and encourage the R and D that is so vital for their success. We in the Chamber—on both sides, I believe—recognise that technology and the people going into those industries are absolutely vital to rebalancing our economy, and so too are the changes to R and D tax credits, both in the way they are accounted for and the amount of money that companies can get back.
In South Staffordshire, we are fortunate enough to have had a great amount of economic success, with rapidly falling unemployment, and major investment coming into the area. Over the past three years we have had announcements of £550 million of investment in the constituency, half a billion of which is coming from Jaguar Land Rover. We see that manufacturing success not only in South Staffordshire but right across the west midlands, and it is being driven and supported not only by R and D tax credits but by the Government’s approach to apprenticeships, taxation and the regional growth fund, which is creating key incentives not only for businesses currently domiciled in the UK but for those that want to invest in Britain or in the European area.
I firmly believe that the measures that have been taken on R and D tax credits are to be welcomed. I also think that the work that is being done on the Technology Strategy Board is making a solid difference by helping businesses of varying sizes, whether they employ a few hundred people or many thousands, to access universities and different areas of funding in order to take the risk and develop the ideas and products that will make Britain more competitive in future.
The issue of financing has been touched on. The hon. Member for Hackney South and Shoreditch (Meg Hillier) talked about lending, particularly to small businesses. I have to say that she and I are, to a certain extent, in agreement on one thing she mentioned. She touched on the Government’s strategy of funding for lending. Currently, that is available to banks, but we should be looking at how we can make it much more widely available, because it would be easy to expand it to all financial institutions.
In my constituency, many businesses are served by the Black Country Reinvestment Society, a mutual that helps many small and medium-sized businesses to get the funding that they would not otherwise get from banks. I think that by changing the funding for lending scheme we would be able to help many similar organisations right across the country.
Charlie Elphicke: Does my hon. Friend think that in this country we do not make enough of mutual finance providers and that we should make more of them?
Gavin Williamson: My hon. Friend is absolutely right. We need to be more imaginative in how we get finance to the small businesses that want to grow.
A little less than a year ago, I had an Adjournment debate on the need to get rid of the beer duty escalator. I am incredibly pleased that the Chancellor has reduced beer duty by 1p. It might not sound much, but it will make a real difference to the 83 pubs in my constituency and to the three small breweries in Kinver, Enville and Essington that are employing people in my constituency. I hope that this will act as a stimulus not only to the brewing industry but to the pub industry right across South Staffordshire, across the west midlands, and across
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the country. It is my firm belief that this Budget has not only been good for brewers, manufacturers and business, but good for Britain.
Mr Speaker: It is a pleasure to welcome the return of the Chairman of the Committee of Selection; I thank him for coming back to the Chamber so quickly. I call Alison McGovern.
5.1 pm
Alison McGovern (Wirral South) (Lab): Thank you, Mr Speaker. I am pleased to have caught your eye in this debate on today’s Budget.
I want to talk about three issues: interest rates, under-employment and the place of young people in our economy. Before I do so, let me be clear that in today’s Budget we heard conclusively that the Government have failed on every economic test they set themselves. We heard the Chancellor having to announce those debt figures. How he must feel he has let himself down, but he has not just let himself down; he has let the whole country down. He is not just the downgraded Chancellor; he has now had to come and tell us how much more he is borrowing.
The Bank of England has kept interest rates at a historic low. The Chancellor had more to tell us about the framework within which the Bank of England operates. When he was talking about the arrangements for setting interest rates in the Monetary Policy Committee, I noticed that some Government Members’ eyes were glazing over slightly, so let me give them a warning. The Prime Minister has lauded the low interest rates, and he is right to do so, because, frankly, it is the only thing that has gone right. In fact, the Government’s saving grace of low interest rates has resulted from the use of the one economic tool that is not under their own management. While the Governor of the Bank of England has got his foot to the floor in holding interest rates low to try to support the economy, the Chancellor keeps slamming on the brakes. Is it any wonder that we are seeing such poor growth? Under the Chancellor’s stewardship, we should have had growth of about 5.5%; in fact, it has been less than 1%.
It is important that the Bank of England uses its economic tools properly. What the Chancellor said about having a broader remit and taking the long-term view on interest rates is extremely important, and I welcome that discussion. But let us be clear that using monetary policy in this way will not help rebalancing; in order to achieve this, we need serious investment. Government Members need not take my word for it; they need only listen to the Business Secretary, who has clearly been listening to the shadow Chancellor, because they seem to be in agreement that we need a different plan. When the Chancellor made his announcement about the national insurance position of small companies, I wondered whether he had taken a leaf out of the shadow Chancellor’s book and it was an announcement about the Government’s commencing our five-point plan. The Minister is giving me a tentative smile, and being a cheerful soul I will take that positively. Before Government Members talk in too-positive terms about the Budget and the level of income tax, they should worry about food prices, house prices, housing costs, and the real value of the money in people’s pockets.
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The Government must address under-employment. Sadly, unemployment has gone up today, but we should be grateful that, despite the fallout from the crash, it has not reached the extreme levels of Greece and Spain. Some people say that they cannot understand why unemployment is not worse when growth is next to zero. In fact, the Chancellor said today that it continues to be a surprise. I do not know why he thinks that, because what is going on is under-employment. People cannot get the hours they want.
I have asked Ministers about under-employment on three occasions in the past month and they have not provided an answer. I have asked the Minister of State, Department for Work and Pensions, the hon. Member for Fareham (Mr Hoban), and the Leader of the House, and on 25 February the Chancellor dismissed out of hand my concern about under-employment. Nobody in government seems to accept that it is a problem. They talk about their 1 million new jobs, but I believe that up to a fifth of them could be the result of reclassification.
On the growth in part-time work, my constituents tell me that they cannot get the hours they want. I hope that I have made it abundantly clear to Ministers that this is a massive problem.
Luciana Berger: Has my hon. Friend, like me, heard stories of local supermarkets receiving more than 30 applications for increased hours in order to meet the new requirements for tax credits? The unavailability of those hours means that people are struggling to get by as a result of the decrease in tax credits.
Alison McGovern: Of course I have. I thank my hon. Friend for flagging up the issue of the changes made to tax credits, which mean that people now have to work for 24 hours, rather than 16 hours. That alteration has added insult to injury and disintegrated work incentives.
All Ministers need to do is look at their own labour force survey, which shows that between 2008 and 2012 under-employment went up from just over 2 million to just over 3 million. Do Ministers read the labour force survey? They should do so if not. Spare capacity in our economy is causing real problems. Not only does it hold back our economic development, but it causes real unhappiness.
Hon. Members may remember the Prime Minister talking about a general well-being index when he came into office, but I dread to think what its results would be given people’s misery at not being able to get all the hours they want at work in order to put food on the table for their family.
On the subject of unhappiness, I must mention youth unemployment. Just under 500,000 young people are claiming the dole. Treasury Ministers need to speak to people at the Department for Work and Pensions and find out what on earth is going on. They cancelled the successful future jobs fund in favour of the failed Work programme; the Government’s claims about apprenticeships are, as has been said, simply a rebadging exercise; and the DWP itself knows that its policies are failing. I have asked questions about the Department’s business planning projections, which show that the number of people under 24 to whom it will have to pay the dole before the end of this Parliament is going to increase. That is a disaster for our country. We need a better policy to help young people get into the labour market.
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In the time remaining, I want to say what I think that policy should be. We have hammered local authorities despite the fact that it is basic economics to understand that unemployment forms in clusters. Specific localities face significant unemployment, especially among young people, who want a place in the labour market.
Andrew Gwynne (Denton and Reddish) (Lab): Is my hon. Friend as concerned as I am that the areas that will be hardest hit by local government cuts are those that tend to have the highest levels of unemployment?
Alison McGovern: That is precisely my concern. In fact, there is a correlation between the level of unemployment in a particular local authority area and the extreme nature of the cut it faces—the more people out of work, the bigger the cut. That makes no sense at all when we all know that some of the most successful back-to-work programmes have been led not by central Government, but by local authorities, which understand much better than Whitehall the barriers that people face in getting into work.
I cannot emphasise enough how the hammering of local authorities has impeded our ability to get young people into work. That is especially true of Merseyside. The biggest barrier to the economic development of Merseyside and the Liverpool city region is the skill level. We need a positive, proactive, local approach to improve people’s skills and help them get back to work. We heard nothing from the Chancellor about that problem in his Budget.
If the Chancellor were here, I would ask him whether he realises the damage that he is doing. I hope that the Exchequer Secretary will pass on that question. Constituent after constituent comes to my surgery despondent about their chances of getting a decent job. They want desperately to work more hours, but are not able to get them. I ask Ministers to come with me to Jobcentre Plus in Bromborough and meet the people there who are depressed and despondent. I ask Ministers to think about whether they could have done better today. They are already adopting some of Labour’s five-point plan. Could they not adopt some of our other policies too? I think that they could have done better today. My constituents deserve a lot better.
5.11 pm
Andrew Selous (South West Bedfordshire) (Con): We have heard significant news today that we had not heard before. The first piece of news is that the deficit has been cut not by a quarter, but by a third. We know that the conditions are tough, but that is further proof that the Government are making progress with clearing up the absolute mess that we inherited from the Labour party.
We also heard that the economy has created not just 1 million net new private sector jobs under this Government, but 1.25 million. That is six extra private sector jobs for every job that we have unfortunately had to lose in the public sector. We learned that in the west midlands, more private sector jobs have been created in the three years of this Government than were created in the last 10 years of the Labour Government. When Opposition Members talk about unemployment, which Government Members are desperately concerned about, they should recognise that this Government are delivering jobs in the face of considerable economic adversity.
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It is this Government who understand that we need to be an aspiration nation. Some Opposition Members laughed when the Chancellor used that phrase in his Budget speech, which was desperately sad. Government Members understand that nations rise when people rise. We are in a global race and no one owes us a living. That is why we have to make ourselves competitive in the world markets.
Mr Kevan Jones (North Durham) (Lab): I am very impressed with the hon. Gentleman’s whipped speech. What is aspirational about the situation of a constituent of mine who has just been made unemployed, has gone out and got himself a part-time job in a local petrol station, and will be hit by the bedroom tax?
Andrew Selous: The Government have created 1.25 million net private sector jobs. The hon. Gentleman’s constituent will probably be able to do two extra hours a week at the minimum wage to deal with that situation. He could also let out his room or downsize to an appropriate sized property. There are a number of things that his constituent is able to do.
I praise the Government hugely for abolishing stamp duty on AIM and ISDX shares. I do not believe that any other Member has mentioned that. Members from all parts of the House talk about the difficulties that businesses have in raising loan finance. We all recognise that, but that is only one of the two ways in which businesses can get money to grow. The other is to get share capital. Every school knows that if it has a good nursery underneath it, it will have a good supply of children. Exactly the same is true of stock markets. If we can help our small and growing companies, which provide so much job creation, to raise share capital, which means that they do not have to pay back money in a fixed period and can decide when to pay as well as the level of dividends to pay, that is hugely helpful, so the change for AIM and the junior ISDX market is incredibly important and very welcome. The stock exchange estimates that there will be between 40 and 50 initial public offerings in high-tech businesses as a result of the move and Deloitte has estimated that that will create some 38,000 jobs.
The second measure for which I want to praise the Chancellor is that on ultra-low emission vehicles. In just one small sentence in the Budget speech, the Chancellor said that he would support the manufacture of ultra-low emission vehicles with new tax incentives in this country. That is absolutely right. We make the Nissan LEAF in this country, in Sunderland, but the Vauxhall Ampera is made in the United States. I want electric vehicles and other ultra-low emission vehicles to be made in this country to help British workers stay in jobs. I do not think anybody in this House anticipated the scale of the change as we move to ultra-low emission vehicles. I want those jobs in this country and do not want to see the industrial advantage going to China, Denmark, Israel or any of the other countries that are making major moves in this area.
I hugely welcome the announcements on shale gas. It is disappointing that in the time it has taken Cuadrilla to get one exploratory rig up and going in Lancashire, 72 have been got going in Argentina. I know that the excellent Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for South
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Holland and The Deepings (Mr Hayes), who is on the Front Bench, understands that and will drive the policy forward with the passion for which he is well known and well regarded across the House.
The Government understand the importance of business competitiveness. As I said, no one owes this country a living, which is why I hugely welcome the decrease in corporation tax. Is it not good to look through the Budget book and see that the United Kingdom will have the lowest rate of corporation tax of all our major G20 competitors? By 2015, it will be lower than that of South Korea, Germany, France, China, India, Brazil or the United States of America. That is exactly what we need to do to keep business successful in this country.
The employment allowance that the Chancellor announced at the end of his speech is unbelievably well targeted. It will take off the tax on jobs, which the Opposition, had they been elected at the last election, would have increased. Think of the damage that would have done. It is the Government who understand that we get more people into work if we tax jobs less, so that move is to be welcomed. My colleagues on these Benches have mentioned the KPMG report that said that this country is the most competitive in the world in which to set up, start and run a business. That is hugely to be welcomed.
The measures in the Budget on home ownership are excellent and hugely to be welcomed. Government Members understand and support the desire of people to own their own homes. That is a thoroughly Conservative aspiration and it is one we want to see extended to as many of our constituents as we possibly can. The Help to Buy scheme and the mortgage guarantee scheme are excellent in that regard and I am pleased that my local authority, Central Bedfordshire council, is rising to the challenge and looking to build some 6,000 houses to the north of Houghton Regis in my constituency. That is exactly what it should be doing.
I am hugely pleased to see the Chancellor support the proposals in the Heseltine review. The document contained 89 proposals, 81 of which are being supported by the Government. That is excellent. Local authorities have a lot to add in this regard, as do local further education colleges and university technical colleges. I am proud to have one of those colleges in my constituency. For example, Central Bedfordshire council has worked out where unemployment is slightly higher and where the new jobs are and will be setting up transport between the two with the wheels to work scheme. It will not just leave it to bus companies and so on but will take practical measures to get unemployed people to where the jobs are further to drive down unemployment. I am pleased that unemployment is lower in my constituency than it was at the general election.
My constituents will also hugely welcome the significant increase in the personal allowance to £10,000, brought in by a Conservative Chancellor. It is hugely welcomed by Government Members. It clearly makes sense: rather than taxing people and giving them back some of their own money in tax credits, we believe in letting people on low incomes have more dignity by letting them keep more of the money that they earn in the first place. That is absolutely right.
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The measures on fuel duty will be hugely welcomed and I refer the House to what I said earlier about ultra-low emission vehicles. I know that pubs in my constituency will be delighted with the measures on beer duty.
The one area to which I would like the Government to attend before too long is the transferable tax allowance, and I will conclude with a quote from the Prime Minister:
“What is so backward looking in a country where we have social breakdown and social problems of saying that committed relationships, encouraging people to come together and stay together is a bad thing? Of course it isn’t, it’s not outdated if you look around the European Union, if you look around the OECD, we’re almost alone in not recognising marriage in the tax system. And why do we think, why do we think that with our appalling record of family breakdown that somehow we are in the right position and everyone else is in the wrong position…they’ve got it right and we have got it wrong.”
We need to change that. The Prime Minister was right then, and he is right now.
5.20 pm
Mr Adrian Bailey (West Bromwich West) (Lab/Co-op): I think I could summarise the Budget with a slightly nautical metaphor: the message from the bridge to the economic engine room is, “Steady as we sink.” The Budget does not recognise the scale of this country’s problems, and although some of the measures that have been announced may be good in a micro sense, they are totally inadequate to combat the macro problems that we have.
Let me go back to the months immediately after the May 2010 general election and the emergency Budget. Although under the Labour Government we had had economic growth, the budget deficit and inflation were falling and employment was rising, and we were told that that was extremely dangerous. The Chancellor conjured up an apocalyptic vision of an economy that was about to be devastated by a reduction in our triple A rating.
Three years on, we have lost our triple A rating, the economy is at best stagnating and at worst falling, we are having to borrow more and inflation is rising, yet we are told that it is all so good that we must have it for several more years. I feel that the electorate—like me—are beginning to doubt the credibility of that argument. I recognise that the carefully choreographed political narrative that was built up after 2010 had some traction, but that traction is going as a result of the incompetence and lack of vision displayed by the Chancellor since then.
Andrew Selous: Does the hon. Gentleman recognise that the Government’s borrowing costs have fallen since we lost our triple A rating, precisely because the international markets believe in the credibility of the Government’s economic policy?
Mr Bailey:
I think those costs have dropped by 0.15%, which the public might think—well, shall we say that they have had to bear a huge sacrifice for a minimal improvement and drop in interest rates? I am concerned—this point has not been mentioned by anyone in the House, including those on the Front Benches—that the Government’s current predictions are based on December figures from the Office for Budget Responsibility. We might think that that is okay, but since May 2010 the OBR’s predictions have been conspicuously inaccurate
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and over-optimistic. If its predictions for the next two years are equally inaccurate and over-optimistic, we are in real trouble. That may not be the case, but if we look at the Library research papers, most other independent commentators and assessors of our economic position predict a lower rate of growth than the OBR. That is of concern and underlines the Chancellor’s failure to put in place measures to combat that issue.
On the opportunities available currently in the economy, the emergency Budget, in order to be successful and meet the Chancellor’s targets, was predicated on an assumption of exceptionally high investment and exports. Since then, the eurozone has had problems. It takes 47% of our exports but is the lowest-growing export market.
Andrew Gwynne: My hon. Friend is right to mention the May 2010 indicators. One crucial indicator before the emergency Budget showed that investor and consumer confidence were returning to the economy.
Mr Bailey: Absolutely—as I have said, the Chancellor’s apocalyptic utterances frightened many people into paying off their debts and not spending, which had an impact on consumer spending and subsequently on business.
If our largest export market is stagnating, we look abroad to Brazil, Russia, India and China. The Government have done good work on expanding our exports to the BRIC countries, but they are less than a tenth of our exports to Europe. Anyone who has the idea that we can transform our economy simply by expanding our exports to BRIC countries is living in cloud cuckoo land. I do not mean to say that expanding our exports to BRIC countries is not necessary, but it will not in itself turn the economy around.
We have heard a lot in the debate about the impact of corporation tax and making this country an attractive place for inward investment, but the reality is that investment is stagnating. Industry tells me that, above all, it wants a coherent, co-ordinated and focused Government response. The Prime Minister went, with his entourage of business men, to China, Brazil, India and so on to bang the drum for Britain—I am glad he did so—and the Chancellor has announced the lowest rate of corporation tax for companies investing in this country. However, those things are no good if, at the same time, the Home Secretary—we recognise that the Prime Minister has his problems with her—implements a visa regime that deters people from those countries who want to invest here. That is totally incoherent and economically illiterate.
I welcome some measures, such as those on construction, but the Government’s current construction programme is only a fraction of the Labour Government’s programme. The Government’s programme will take a long time to materialise in terms of economic growth and consumer expenditure.
I also welcome the Government’s investment in the Technology Strategy Board and the catapult centres, which have enormous potential. That leads me to a debate that the Government should have but are not having on how best to invest our scarce resources. All the evidence I get from industry, and particularly from manufacturing industry, says we need more money to be spent on high-quality research and development and implementation. Catapult centres would do that, and we need more money spent on them.
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However, we also need more money to be spent on investment allowances rather than on corporation tax. It bothers me that the Government believe almost as an article of faith that a reduction in corporation tax will stimulate inward investment, but they are not considering whether there is a better way of spending that money on alternative ways of investing in British companies. Manufacturers say that investment in R and D is a much more attractive and economically beneficial way of stimulating the investment we need in this country. A large amount of money will be forgone with the reduction in corporation tax. Would that money not be better spent by providing better investment allowances, which will enable British companies to invest, employ and export more, and generally to contribute to the economy? A lot of companies that invest here do not pay much tax anyway, and those that might come could as equally be attracted by an attractive investment allowance regime as a reduction in corporation tax. So far, the evidence in favour of a reduction in corporation tax is not strong, which is why we are not seeing the level of investment that the Government had hoped for.
Low-carbon vehicles are important to the north-east and to my own area in the west midlands, and the motor industry is investing in them. I welcome the Chancellor’s announcement of a commitment to that. However, previous announcements in previous Budgets, particularly on company car taxation and the write-off threshold, have caused confusion and actually delayed investment in this area. I hope that in the Budget and in the Red Book there are indications that that will change, and that we will have the level of commitment and certainty that will encourage our motor industry to continue its investment in this area and become a world leader in an expanded market.
5.31 pm
Charlie Elphicke (Dover) (Con): I welcome the Budget, which is a continued step in the right direction. To understand the road that has been travelled, we need to understand where we have come from. There seems to be more than a whiff of denial from the Opposition regarding the difficulties facing the country.
I should start by saying that at first, the Labour Government ran the economy along broadly sensible lines and stuck to the previous Conservative Government’s spending plans. Until about 2001, everything was going well and the economy was being run responsibly. Overspending and excessive borrowing began from that time onwards, and that is where the rot set in. The former Chancellor—and later Prime Minister—the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had the opportunity to have his way and pursue his economic policies, and that is where things went wrong. There was too much debt. Too much growth was illusory and too much borrowing took place. When the music finally stopped in 2008, it hit this country very hard.
Mr Kevan Jones: The hon. Gentleman was not in the House at the time, but if he stops listening to central office party propaganda and remembers the history, he will know that the former Chancellor actually paid down debt, for example, through 3G licences. At no time in opposition did the hon. Gentleman’s party argue for less public expenditure in a single area.
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Charlie Elphicke: The hon. Gentleman is right about the 3G licences, but the taps were then turned on and public spending rose. We had a structural deficit and we were seriously exposed when the crisis struck in 2008. We can see that from the statistics relating to the previous Parliament. We inherited a structural deficit of 11.2%—an enormous level of borrowing. We inherited a massive rise in unemployment, as measured by the claimant count—it went up by 80%. Youth unemployment went up by 78% under the jobseeker’s allowance claimant count. Those were staggering rises and real concerns. It is all very well for the Labour party to say that there is a continual problem with unemployment. It is, of course, a concern to us all in our constituencies, but youth unemployment has been coming down. Unemployment has stabilised and we have not seen the rise that we saw under the previous Government.
Let us look at what this Government have achieved: 1.25 million new private sector jobs and 1 million new apprenticeships. The deficit is now down by a third. Rather than the structural deficit of 11.2% that we inherited, it is down to 7.4% of GDP today and moving in the right direction. We have had record low borrowing costs. The Opposition’s idea that we should borrow more to borrow less will take us one way and one way only—to higher interest rates. The hard-won fiscal credibility that this Chancellor and this Government have achieved is greatly valued by every mortgage holder in this country.
Luciana Berger: Will the hon. Gentleman remind the House how many more billions the Chancellor is borrowing on top of what he said he would?
Charlie Elphicke: I thank the hon. Lady for reminding me to point out that the Institute for Fiscal Studies said that the Labour party, under its plans, would be spending £200 billion more, so she should be careful before indulging in fantasy economics.
We also need to look at the Government’s welfare reforms, which will do more to make work pay, and education reforms, which will help Britons get the skills they need to compete in the global race. The Government are right to help those who want to work hard, get on and do really well. We hear from Labour Members about the difficulties faced by, and the squeeze on, many hard-working families, but they forget to say that this is nothing new. According to the Office for National Statistics’ family spending survey, disposable income in real terms was £600 in 2000-01 and was £600 at the last general election—it has not moved in real terms for about a decade. The challenge is that families have been squeezed for quite some time. The Labour party forgets that the economy was shielded by the boom of borrowing and debt and that, as a result, those difficulties were glossed over for too long.
It is right that the Government are now getting the house in order and doing more to help hard-pressed families and households. For example, council tax in Kent has been frozen for three years, whereas under Labour it doubled; fuel duty is now 13p lower than Labour planned; and as a result of the £10,000 personal allowance to be introduced next year, many will pay £700 less tax than under Labour’s plan, which will help average families and take 2.7 million out of tax altogether. I also welcome the axing of the beer duty escalator and the 1% outright cut in beer duty. The Government have
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got the right priorities and are moving in the right direction. Their plans for child care will help families up and down the country who, with the rise of joint working over many years, have found things very difficult.
On business, we need to get the country growing as quickly as possible, but we get growth and jobs not from Government, but from the private sector, enterprise and businesses. The Government have done the right thing in giving an awful lot of help to small businesses, but I want us to go a bit further. We have had the new employment allowance and the seed investment allowance, but I would like us to consider a “get set and grow” scheme, under which somebody could set up a new business and have a two-year holiday from all company filings, corporation tax and employers’ national insurance, light or no employment law and other measures. That way, somebody setting up a business could focus on running it, rather than on ticking boxes, filling in forms and dealing with paperwork. That kind of change would provide real assistance to people who want to get going and do really well.
Studies by the OECD, particularly the “Fostering Entrepreneurship and Firm Creation as a Driver of Growth in a Global Economy” in 2004, show that enterprise formation, growth and entrepreneurship are strongly linked. I hope that the Chancellor and the Government will look more closely at measures to make it easier to set up a business to a certain turnover threshold or certain period of time. As I said, the new employment allowance and the massive national insurance reduction for many businesses are a big step in the right direction, but I would like us to go further.
I also welcome the measures to deal with tax avoidance. Too much corporation tax avoidance has gone on for too long. It grew up over many years. Tax law was not kept fit for purpose in the internet age, and the Government have taken the right action through their general anti-avoidance provisions and their work on the international tax system.
Personally, I would like us to go further and see whether we can reduce corporation tax still more by restricting tax reliefs, which would put our home businesses and multinational businesses from overseas on a much clearer, more level playing field. We should look at minimising deductions for interest and royalties, along with other deductions that are available in the tax system, and restricting transfer pricing. We should also look at the rules on tax presence and whether there is a branch or establishment in the UK, and say to companies such as Amazon, “You’re not really abroad; you’re trading in the UK and you should be taxed as such,” and the international rules should be changed accordingly. That would be the right direction of travel, because we would have an even lower rate of corporation tax than we do today or than we plan to have, and a level playing field for businesses at home and those from overseas.
The last thing I want to say—this will surprise Opposition Members—is how much I agreed with capital gains tax being at 10% for businesses. That was a real spur to entrepreneurs and perhaps the only policy of the former Prime Minister that I agreed with. I regret that the rate has become 28%. We ought to look at how we can foster entrepreneurship, so that entrepreneurs can not only set up businesses and get them going, but sell them and get new businesses going. It is the serial entrepreneurs who are the real wealth creators in this country—the people who drive small businesses, job creation and enterprise
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creation. The more we can get the tax system to be their friend—to be on their side and support them in what they do—the more we will drive the economy forward and create more jobs for the future.
5.41 pm
Angela Smith (Penistone and Stocksbridge) (Lab): It is a pleasure to follow the hon. Member for Dover (Charlie Elphicke).
We heard a lot in today’s Budget statement about the “aspiration nation”, but back in 2010 we were told that we could judge the Chancellor by his record and his economic tests. I agree with the Chancellor: we should judge him by his own economic tests, especially now that he has been in his job for three long years. Back in 2010, he told us that he would ensure macro-economic stability by maintaining the UK’s triple A rating. Well, we all know what happened to that, with Moody’s downgrading the Government’s status last month. Back in 2010, he also told us that he would rebalance the economy, creating the conditions for higher exports. A quick look at the statistics shows exports falling in monetary terms and the balance of trade deficit increasing as a percentage of GDP. Quite clearly the UK’s trade with the rest of the world is no success story, despite the 25% devaluation of sterling.
Another promise was that the Chancellor would get people working and reduce youth unemployment. Unfortunately for the blighted lives of the young, he has completely failed on that, too. There are now almost 75,000 extra young people out of work compared with 2010. Worse still, although the Government make a virtue out of the fact that overall unemployment remains static, they need to consider the fact that, without growth, it means that more people are creating less wealth and the country is becoming less productive.
Mel Stride (Central Devon) (Con): The hon. Lady is quite right to focus on employment. Will she congratulate the Government on arriving at a position where we now have around 30 million people in employment, which is the largest number on record?
Angela Smith: But the country is becoming less productive. In fact, productivity has declined by 2.4% over the last year, storing up massive problems for the future.
On borrowing, the Chancellor told us that national debt would be falling as a percentage of GDP by 2015-16 and that he would bring down the deficit. It is no secret now that he will miss the first target by a mile, with the OBR saying that debt will not start falling as a share of GDP until at least 2017-18. As for borrowing, it was 6.6% higher for the first 10 months of the 2012-13 financial year than for the same period in 2011-12.
Alison McGovern: Is my hon. Friend as worried as I am that so far the Chancellor does not have a very good record at hitting the OBR forecasts? Let us not rely on him for hope.
Angela Smith: I completely agree with my hon. Friend. Indeed, when it comes to growth, the Chancellor stood at the Dispatch Box in 2010 and confidently told the House that by this financial year the economy would be on the mend, with growth forecast at 2.8%, but we now know that his forecast was out by 2.5 %. Today, he had to downgrade growth for this year yet again, to 0.6%.
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We have a downgraded Chancellor who has sucked demand out of the economy with his ill-thought-through VAT hike and his draconian cuts to public spending. Those cuts have gone too far, too fast. If the latest estimates are right, spending cuts have so far wiped 1.4% of growth out of the economy, and the biggest cuts are yet to come. But at least the millionaires of Sheffield and Barnsley will have extra money in their pockets this April when the 50p tax rate is abolished.
The measures that the Chancellor has introduced today will go nowhere near to addressing the problems that he has caused. Instead of plan B, we have inadequate measures that do not even go halfway towards addressing the problems facing the country. The child care package announced yesterday, for instance, is designed to help hard-pressed working families, but unfortunately it will not come into operation until after the next general election. Once again, it is jam tomorrow. There is not much on offer for the parents and families struggling with the costs of child care today.
There is no doubt that house buyers might be thankful for the help being offered today, but a quick look at the Chancellor’s record on housing does not bode well. This is the same Chancellor who, in 2011, unveiled what was termed a “radical and unashamedly ambitious” strategy to give the housing industry a “shot in the arm”. My right hon. Friend the Leader of the Opposition referred to this earlier. At the heart of that strategy was a scheme which the Chancellor claimed would help 100,000 to people to buy their own homes. To date, just 1,500 people have realised that dream. That is a 1.5% success rate, which is almost as bad as the Work programme—or as good, depending on which way we look at it.
A year later, we had what was described as the Government
“rolling its sleeves up and doing all it can”.
That included introducing a £10 billion guarantee scheme which, while welcome, has yet to deliver a single penny of support for house building. It took the Government six months to release details of the scheme, and it will not be open to receive bids until April this year. Last year, housing starts fell by 11% to below 100,000, which is less than half the number required to meet housing need, and I am not convinced that the help announced today will kick-start the stagnant housing market.
Then we come to infrastructure. The £3 billion a year—£15 billion over the next decade—is nowhere near what we need to invest in roads, schools, transport and housing if we are going to get the economy growing again and build for our economic future. If, as now seems possible, we are entering the third recession in as many years, we needed to see something much more dramatic today. However, the Chancellor has failed to deliver.
Let us take VAT as another example. The Opposition have said that he should temporarily reverse his VAT hike, because consumers need help and they need it now. Reversing the hike would have alleviated some of the pain they are feeling, and it would have helped the pound in their pocket go a little further.
Ian Swales (Redcar) (LD): Will the hon. Lady give way?
Angela Smith: No! [Interruption.] I have given way twice and I am not giving way again. I do apologise.
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The Chancellor should also dramatically reverse the cut he made to the last Labour Government’s capital spending plans, given that spending is now £12.8 billion lower, year on year, than Labour planned. At a time when the economy is barely moving forward, we need the Government to invest. We need to get the builders back to work, to create the homes to give first-time buyers the future they are looking for. In the process, we need to strengthen our economy. For every 100,000 homes built, 1% is added to our gross domestic product, but this is about more than that. There are millions on council waiting lists, there are first-time buyers who cannot get on to the housing ladder, and homelessness has rocketed. Building houses is good not only for the economy but for society, too. Before it is too late, we need to prevent another lost generation from being scarred by unemployment, by guaranteeing every young person who has been out of work for a year or more a job, funded by the tax on bank bonuses that I mentioned earlier.
It is never too late for this Chancellor to change course. Consumers need to be given confidence to spend again; companies need the confidence to invest again; banks need to lend again to small companies that desperately need finance to invest. The country is in desperate need of infrastructure investment. High Speed 2 is welcome, but we are not going to get HS2 for some time yet. We need that infrastructure now. There are many other road and other transport schemes, and how many primary schools do we need? We know that in every part of the country, pressure on places is increasing; we need to get those schools built. By doing that, we could help to kick-start the economy. The Government need to increase their tax receipts to pay for quality, efficiently produced public goods and services.
Unfortunately, this Chancellor seems to be stuck in a rut—a self-defeating ideological rut of austerity piled on austerity. It is a rut that could, I believe, mean many years of sub-normal growth, with the economy settling at a level much lower than its potential would allow. For ordinary people, that will mean living with high unemployment, falling living standards and the continual deterioration of many of the public services on which our constituents depend. The Chancellor should change course now—decisively and with confidence—before the damage being inflicted on the UK economy becomes even more deeply entrenched and damages us permanently.
5.51 pm
Sir Tony Baldry (Banbury) (Con): I welcome the fact that this Budget is a continuation of this Chancellor’s five-year plan and not a rupture. I welcome the fact that the Chancellor has succeeded in reducing public spending, whereas total state spending under Labour rose by an extraordinary 60%. I welcome the fact that, notwithstanding the broader economic challenges, whatever way one looks at the statistics, they tell us that the private sector under this Government has been steadily creating new jobs as fast—indeed, faster—than the public sector has been shedding them. I welcome the fact that under this Government the deficit is down by a third and businesses have created more than 1.25 million new jobs.
I welcome the proposals in the Budget to enhance competitiveness. There is little point in solving today’s problem if one is not preparing for tomorrow’s future.
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We all have to recognise that Britain is in a global race with countries such as China, Brazil and India and that we have to become more competitive if we wish to remain ahead and among the leaders in the global race—a point very well made in Lord Heseltine’s report “No Stone Unturned”. I welcome the Government’s response to his proposals and his report, which made far-reaching recommendations for stimulating economic growth and engaging the private sector and the spirit of enterprise in the great cities and regions of our countries. As Lord Heseltine put it in the foreword to his report:
“Huge infrastructure demands and hungry institutional funds—link them. Excellence in industry, commerce, academia—extend it. England’s cities pulsing with energy—unleash it.”
I think we would all support that.
May I point out to the House that Lord Heseltine is 80 today? As he was a long-standing and distinguished Oxfordshire Member of Parliament, I am sure the whole House would want to wish him a very happy birthday. If we all have as much energy at 80 as he does, we will be doing very well indeed.
I welcome the Chancellor’s proposals to bring forward infrastructure spending and to spend substantial amounts on speeding up important infrastructure projects. Targeting infrastructure spending, of course, helps boost economic growth. In my constituency, projects such as the east-west rail link, rail electrification, the upgrading of junction 9 of the M40 have already been announced; importantly, an extra £3 billion a year is being invested in infrastructure projects across the country.
I welcome what the Government and the Budget are doing to give support for house builders, for first-time buyers wanting to get mortgages and also for “second steppers” wanting to move up the housing ladder. The news on building construction is extremely important. Housing is key to growth, and builders are not going to build houses unless they can sell them, so I welcome the fact that the Government are allocating more than £3.5 billion to support those who want to get on, or move up, the housing ladder. The Government will provide up to 20% of the equity to help anyone who wants to buy a new-built home, and for three years from January next year, they will also provide a new guarantee to help lenders offer more people 80% to 90% loan-to-value mortgages. All that is good news for house builders, and will help more people to move on to and up the housing ladder.
As I pointed out on Monday to the Secretary of State for Communities and Local Government, in my constituency we want more houses to be built. We want people to be able to build their own homes, we want more social housing, we want more building on the former Ministry of Defence brownfield land at Bicester, and indeed we want Bicester to become a new garden city.
I welcome the support for small and medium-sized businesses. I am glad to say that my constituency is part of a dynamic economy, but it consists largely of successful small and medium-sized businesses. Small companies want to grow, but they often identify their lack of access to finance and long-term capital as a key barrier to their growth. They will benefit not only from the fact that corporation tax is already due to fall to 21% next year—with the result that Britain is now at the top of the list in surveys of desirable places in which to do business—but from today’s announcement that it will
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fall to 20% in April 2015, which means that the United Kingdom will have a lower business tax rate than any other major economy in the world. That will help to fulfil the commitment to make Britain the most attractive tax regime for business in the G20.
I welcome the fact that the Government are cutting the jobs tax of every business, and the fact that businesses will be able to hire one extra person on a salary of £22,400 or four people working full time on the minimum wage without paying any national insurance. That means that 450,000 small businesses—a third of all employers—will pay no jobs tax at all.
Mr Jenkin: What does my hon. Friend make of the fact that Ireland has a 12% corporation tax rate, although it has had to inflict on itself far more austere economic policies than we have had to inflict on ourselves because it is in the euro? Should we not be emulating Ireland?
Sir Tony Baldry: I think that we are making very good progress in reducing the burdens on businesses. I hope that my hon. Friend will applaud that, because I believe that it will enhance the UK’s competitiveness.
Mel Stride: May I point out, in a slight rejoinder to that last intervention and to be fair to the Chancellor, that corporation tax is 40% in the United States, 31% in France and 29% in Germany? I think that the fact that it is heading down towards 20% represents quite an achievement.
Sir Tony Baldry: I have learned over the years not to spend too long “rejoinding” to my hon. Friend the Member for Harwich and North Essex (Mr Jenkin). The whole House knows that he is generally trying to tease. When we can get him on message, the Chancellor will be doing really well.
I welcome the fact that the Chancellor is fast-tracking existing plans to raise the personal allowance of taxable income to £10,000, and that that will now happen next year. It means that 2 million of the lowest earners will not pay tax once the target has been reached, and that is good news for all our lower-paid constituents.
I welcome the scrapping of the fuel duty rise that was scheduled for the autumn, Pump prices will now be 13p per litre lower than they would have been if Labour’s plans had been implemented. I think everyone acknowledges that, while the Chancellor needs to raise some revenue duty, fuel duty is a “tax on everything”, and imposes a significant burden on small business owners and rural families. This is a welcome move for everyone.
I welcome the fact that the Chancellor has scrapped the beer duty escalator which would have increased the price of a pint of beer by 3p next month, and is cutting beer duty by a further 1p. That means that beer will be 4p a pint cheaper than it would have been following the implementation of Labour’s plans. It is excellent news for every village and community pub in my constituency, it is good news for brewers such as Hook Norton, and it is good news for beer drinkers.
We should bear in mind that—quite rightly—the richest 20% in the nation are making the greatest contribution to budget deficit reduction. Indeed, in every year of the current Parliament, the richest will bear a larger share of our nation’s tax revenues than
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they did in any one of the 13 years of the last Labour Government. So the Chancellor is ensuring that fairness is at the heart of this Budget.
This Budget is intended to help people who want to work hard and to get on. It will rightly continue the painstaking work of getting right what went so badly wrong in the British economy. Obviously, everyone is frustrated that that is taking longer than any of us hoped. Although there are no easy answers, I think every fair-minded person would acknowledge that we are making progress and that this Budget will help to keep Britain on the right tracks.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I am going to try to get everyone in, but if there are interventions, I will have to reduce the time limit. I do not want to do that, so let us try to hold back on the interventions, as that will help other Members.
6 pm
Geraint Davies (Swansea West) (Lab/Co-op): This is very much more a fudge-it than a Budget. It is a fiscally neutral programme that just takes money from the poorest and gives it to the squeezed middle in a somewhat cynical way. It is part of the Tory journey to a weak and divided Britain. This Budget does contain a few good things, such as the mortgage deposits idea. I would probably support that, although we need to build more houses as well as helping people to get mortgages. I would also support an employment allowance. Apart from that, this Budget falls within the general envelope of economic failure. The debt to GDP ratio is set to rise from 55% in 2010 to 85% in 2015, and that is why we have lost our triple A rating. The way to get rid of such a debt to GDP ratio is to reduce the debt, which is what is happening, with the poor being hit hardest, and/or to increase the GDP—the growth. There has been a marked failure by this Tory Government to generate any growth at all.
In sharp contrast, the Labour party had a great 10 years of unprecedented growth between 1998 and 2008—GDP grew by 37%. It is no wonder the debt to GDP ratio was falling. That was a fantastic economic record of growth, but we then hit the 2008 financial sub-prime debt tsunami from the United States. We ended up with a deficit, moving into 2010, two thirds of which was from the bankers and a third of which was from our pump-priming—investing more than we were earning. Obama and the previous Labour Prime Minister provided the fiscal stimulus, which avoided a world depression. We had a shallow recession which was moving into fragile growth, but then the new Chancellor came along and announced half a million job cuts, consumer demand fell through the floor and we have had zero growth since. It has been a complete catastrophe.
The Government say, “Oh, we have an extra million jobs”, yet there is no overall production growth. That implies that productivity per person has fallen. That is the great economic failure. Why is it falling? It is because we are not investing sufficiently in skills and productive capacity. If we ask any sensible business person, he or she will tell us that to grow we have to invest—in skills, in capacity, in products and in sales—rather than cutting everything all the time. There is a difference between
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borrowing to invest in productive capability and capacity, and borrowing simply to fund more and more people on the dole, which is the old Tory story. Debt is going up and it is the cost of failure, not the cost of success. What we need is investment in skills, infrastructure and housing—the Mayor of London mentioned that.
If we look abroad at the great emerging economies that are hurtling forward as we are bobbling along at the bottom, we see that Brazil is investing $5.3 billion in biotech and renewable energy. We see a much bigger amount coming from China’s development bank. That is because China is bigger, but again this is patient money being rewarded in economic growth and economic success. The case is the same for public sector research and development in the United States. When we do the analysis of where the global players will come, we find that they will come to clusters of research and development and skills. I am glad that the European Investment Bank is investing in a second campus in Swansea to bring investment there. I hope that the Government will invest in super-connectivity for Swansea, and a lot of businesses have written to the Chancellor about that.
What certainly will not make a difference is changing the rate of corporation tax from 21% to 20%. That simply takes out 5% of the income from corporation tax. If, as has been said, the United States has a 40% rate, Germany’s is 29% and France’s is 33%, we already have a competitive advantage. This move is just giving away money when it should be invested in focused research and development capacity that might get international capital and jobs to migrate here. This approach is completely farcical. That deals with the economy.
As regards society and fairness, we are just punishing the poor for the bankers’ errors. As a result, cuts are hitting the poorest hardest. There is a welfare freeze; council tax rebates have been cut; and the bedroom tax has been introduced, as well as universal credit and the Work programme: 890,000 people have been forced to pretend to work, and if they do not turn up because their child is ill they are sanctioned, they do not receive any income for weeks on end, and they end up at a food bank. That is the direction of travel: punishing the poor hardest for being poor.
The bedroom tax is not going to work. In Swansea, they are already thinking about knocking down walls so that people are not decanted into the private sector, which costs more, leaving empty public sector houses. It makes no moral or economic sense. We do not seem to care about the poorest, given the situation regarding child poverty and the knock-on effect in schools, crime and so on. The Government are going to pay tenants who must pay their housing benefit directly to landlords. There is little money so it will mean arrears. We are asking people to access universal credit online, when a quarter of people are functionally illiterate. They cannot even follow the “Yellow Pages”, so they will not be able to get their money. Two thirds of people subject to the bedroom tax are disabled, so the measure is cruel, callous and unthinking.
We know that the poorest spend most and are more likely to create growth, so that leads to a difficult situation. We all welcome the fact that the tax threshold has been increased to £10,000, which will give people £13.70 a week, which is about the same as the £14 that people subject to the bedroom tax will lose as a result of
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that tax. One measure costs £12 billion; the other will allegedly save half a billion pounds, so it will not really save anything.
We are moving money to the squeezed middle, but meanwhile millionaires are getting away with it. They will move their money into the next tax year, which is why the Prime Minister gets up on his hind legs and tells us, “A 50p tax would raise less”, as he knows that his millionaire mates will move their income into the next tax year. What is most despicable is the fact that this cynical divide and rule between workers and shirkers, between strivers and skivers—the undeserving poor, Victorian values, the workhouse—is the new Tory party in action, not delivering a future that works and cares but a future that does not work and does not care: a divided and weak Britain, rather than a united, strong Britain with one nation in mind, which is what we need in future.
6.7 pm
Mr Bernard Jenkin (Harwich and North Essex) (Con): The speech by the hon. Member for Swansea West (Geraint Davies) reminded me of the cartoon in Private Eye called “Great Bores of Today”. He recited a litany of all the clichés that we expect from the Labour party. I would simply say that the Labour party’s determination to oppose the abolition of the extra room subsidy paid by the housing benefit system shows that it is determined to make sure that there should be no reform of the welfare budget whatsoever. It opposes every single measure to try to restrain expenditure on welfare, which takes up over a third of Government spending. [Interruption.] I notice, Mr Deputy Speaker, that it is getting rather noisy on the Opposition Benches; I shall try not to provoke them any further.
I rarely remember, if at all, a Chancellor rising to deliver his Budget statement against a background of such dire and low expectations about what he could achieve. I am pleased to reassure my hon. Friend the Member for Banbury (Sir Tony Baldry), who has just left the Chamber, that I am happy to commend the Chancellor’s Budget statement. He had incredibly little flexibility at his disposal, but the Budget contains a number of really imaginative measures, particularly the supply side reforms that always help to stimulate economic growth. In whatever economy they are tried, such measures prove to be effective. The reduction in corporation tax is another step in the right direction; the abolition of employers’ national insurance for small employers is a huge step in the right direction; and the limitation on capital gains tax for business is a very good step in the right direction.
I also very much welcome the substantial implementation of the Heseltine review. The Select Committee on Public Administration, which I chair, took evidence from Lord Heseltine, who gave a very good account of many of the things that could and should be done to make the use of public money much more effective away from London, as well as championing things like swifter decisions on infrastructure, such as airport capacity. I commend the review, and I hope yet that the Government will speed up the decision about airport capacity, which is so vital for the health of London as a global city.
My right hon. Friend’s statement also reflected an extraordinary determination to follow through and to continue what he started, and not to be diverted by
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those who somehow think it would be easier and more effective for the Government to start borrowing more money and spending more money, as though that was a painless way of reviving the economy. It is extraordinary that we have to go back to the lessons that we thought the Labour party had learnt in the 1980s—that we cannot spend our way out of trouble. It has forgotten all the lessons that made it electable under Tony Blair, and I suspect that that makes it unelectable now.
The real question at the heart of the Budget was raised not by the Leader of the Opposition but by a number of right hon. and hon. Members, including one or two Members of Her Majesty’s official Opposition, but not from the Front Bench, and that is growth. The real question that hangs over the Budget is whether we believe the growth forecast. Hitherto, we have been disappointed, and that is because energy costs are so high; it is because of excessive banking regulation pouring out of the EU on to the City of London, which happens to be our biggest export earner and our biggest generator of tax revenue; it is because the banks are not lending because the Government have increased the capital ratios for banks when they should perhaps have been reducing them; it is because quantitative easing might make bank lending cheap for the Government, but it does not necessarily make it easier for the banks to rebuild their balances; and it is because of the burden of high taxation.
I commend the Budget for its consistency and determination, but the question is whether the pace of economic reform that my right hon. Friend is introducing is fast enough. It may yet prove beneficial and necessary to accelerate the spending reductions, the reductions in taxation and the supply side measures, and accelerate even further the infrastructure investment that is so necessary to get the economy to grow. If we find ourselves once again set back by economic forecasts that have not been delivered, we will have to begin to ask ourselves not how we just let ourselves off the lead and start spending money that we have not got and borrowing even more money that we cannot afford to borrow, placing the burden on future generations, but how we start taking additional pain now to avoid greater agony in the future and greater agony for our children and our children’s children.
I remind the House that it is not just that the Government inherited a very difficult situation. I commend chart 1.8 on page 21 of the Red Book. At the peak of the economic cycle in 2007, the structural deficit was more than 5%. As soon as the economy went into reverse after the crash, it quickly became apparent that the previous Government had vastly overextended themselves and had vastly increased public expenditure beyond what we could afford, so that public expenditure peaked at over 50% of GDP, the previous Government having inherited public spending at below 40% of GDP. It was that expenditure that was unfunded, even at the peak of the economic cycle, which is why we now face such a dire economic situation. I commend the Chancellor of the Exchequer for taking this as seriously as he has and setting it out to the House so truthfully. I hope that his forecasts will be delivered.
6.14 pm
Alison Seabeck (Plymouth, Moor View) (Lab): I preface my remarks with my usual declaration of an indirect interest.
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It is always a pleasure to follow the hon. Member for Harwich and North Essex (Mr Jenkin), although I do not agree with much of his analysis, other than the fact that things are not happening as quickly as they should be. I think that the Chancellor has probably had a number of sleepless nights leading up to today’s Budget statement, with the nightmares of Budgets past haunting him—grannies, churches and caravans swirling around in the dead of night. He should also be worrying about the men, women and children whose lives are affected by every tax change and spending cut that he and his Government have introduced and the effects they are having on the public at large. They are certainly giving me sleepless nights—nights disturbed by e-mails at 2.30 am from people desperately worried about how they will make ends meet.
The Chancellor gave a number of excuses for the dire position the country finds itself in, all of which we have heard before and none of which is terribly convincing. However, the one finger of blame he did not point was the one that could be pointed at his boss, the Prime Minister. He is the man whose failure to manage his Cabinet colleagues’ behaviour, announcements or policy direction has left the Chancellor desperately seeking changes to support the grand plan, plan A—A for austerity or for agony, as the hon. Member for Harwich and North Essex mentioned.
There is the failure of the Secretary of State for Work and Pensions to get a grip of welfare reform, because he did not carry out a proper evidence-based assessment of the implications, which is costing the Treasury dear and causing untold misery. There is the failure of the Secretary of State for Communities and Local Government over the past two and a half years to push through any effective policy on the affordable homes we desperately need. There is also the failure of the Department for Transport to deliver infrastructure to get the country moving. All those failures are contributing in one way or another to the lack of growth in the UK economy.
Indeed, the Red Book’s section on infrastructure states:
“The Government will reform its approach to infrastructure delivery, including creating an enhanced central cadre of commercial specialists”.
It states that by the summer of 2013 the Government will get around to
“establishing new infrastructure capacity plans for key government departments.”
It really is surprising that by later this year, more than three years into this Parliament, they might just about get around to developing a plan.
All those failures are contributing to the lack of growth, growth that was there in 2010 when the Chancellor took the reins of office. Yes, it was fragile, but the Government’s decision to come in and, like a bull in a china shop, smash everything that was in place before, regardless of whether or not it was delivering, was just plain stupid and, frankly, arrogant.
Plymouth city council, because of its strong local leadership—it is now Labour-led—has now grasped the nettle and is delivering on its promise to find jobs for our young people through the 1000 Club. That is local government working closely with local businesses to achieve a shared aim. They are acting in the face of a loss of income of around £16 million a year, money that
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is being taken out of our economy because of the cumulative effect of the cuts in the tax and benefits systems. Of course tackling abuse in the system is important, but devastating local economies because of a rigid commitment to austerity is not.
We will see a wider impact of cutting family incomes in such a deep and devastating way: local shops closing and other businesses struggling. Poor people spend their money locally, so removing millions of pounds from cities and towns across the country will do absolutely nothing to boost growth. These changes are not just damaging growth; we have also seen a fall in average weekly earnings, as set out clearly in the OBR’s report.
It would be churlish of me not to welcome yet another attempt to kick-start the housing market and get it moving, but it is oh so very late. All the other myriad schemes we have seen have failed, and I think that this, too, risks failing to deliver, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) pointed out. Given that the Kickstart scheme was working under the previous Labour Government, why did the incoming Government see fit simply to wipe it out? Why did they not look at the problems facing the housing market and accept that some schemes were helping? Any proposal needs to be de-risked for the developer; then we will genuinely see things pick up and more houses built. Developers do have the capacity to build, and that is exactly what we saw under Labour’s scheme.
My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) expressed reasonable concerns about the nature of these schemes, however, and she was right to do so. We will need to ensure that the Help to Buy scheme is absolutely watertight against people who are trying to buy en masse, and there is a whole range of other questions on which we will need to look at the detail. I would certainly welcome an attempt to get second-steppers off and moving. We also need to think about the impact on house prices in general and whether there will be some unsettling of the market as a result of this scheme. The Federation of Master Builders—we must remember that smaller builders generally deliver about a third of all new homes, often in rural areas—has welcomed the scheme but does not think that it goes far enough or will help them to deliver energy efficient homes. Like Labour Members, it believes that a VAT cut would have been much more effective in revitalising home repair and maintenance, and the energy efficiency market.
In the south-west, we have been pressing for infrastructure projects in road and rail to support our local economies, plus investment to maintain Plymouth’s vital air link. We have seen little progress, despite the rhetoric. Of course, the news about Hinkley is welcome; at last that seems to be making progress. The British Chambers of Commerce has already said today that the developments in this Budget are too little, too late. We need this work now, not in 2016, 2017 or 2018. In so many ways, this Budget is a case of “This year, next year, some time, never.” Working families with children will not really benefit. The tax break on child care is likely to be of greater interest to people on higher incomes. So many decisions are being shoved back, towards and beyond the next general election.
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The Government’s economic policy is not making sense. We need a steady and more balanced plan in which the cuts that have to be made are seen to be fair and proportionate and the same rules apply to tax breaks. Fairness in adversity is something that people understand; what they do not understand is why some sections of our community are getting such a kicking from this Government.
6.22 pm
Penny Mordaunt (Portsmouth North) (Con): I start by paying tribute to all the businesses in my constituency, and up and down the country, for all the jobs and opportunities they have created in the past few years. To have created six jobs in the private sector for every one lost in the public sector is one hell of an achievement. When the coalition came to power, in my constituency there were eight jobseeker’s allowance claimants per vacancy; now there are fewer than two per vacancy. Today’s announcements on cutting corporation tax to the lowest level in the G7 and on the employment allowance, which will see 450,000 business pay no jobs tax at all, are very welcome. Welcome, too, will be the measures the Chancellor announced on the cost of living—particularly, for my constituents, fuel duty. We have spent an enormous sum on holding duty levels down. A litre of petrol is 13p cheaper under this Government than it would have been under the previous Government. That has been money well spent for families and businesses.
I welcome the help on child care costs that has been announced in the past few days. Usually when the word “vouchers” is mentioned I come out in a rash, as vouchers tend to favour Sir Humphrey as opposed to the people who are most likely to benefit from them but are perhaps least likely to be able to navigate their way through a complex bureaucratic system to obtain them. I am very pleased about the care that has clearly been taken in assessing many different ways of administering this scheme, and I am very optimistic about it.
I want to concentrate on the measures we are introducing to help those on low incomes and those most in need. In 2009 the Prime Minister highlighted the plight of a single mother of two earning £150 a week who kept only 4p of every additional pound she earned due to the withdrawal of benefits and the additional taxes that she would suffer. Visibly angry, he told a Conservative party conference:
“Labour…have the arrogance to think that they are the ones who will fight poverty and deprivation…Who made the poorest poorer?... No, not the wicked Tories…you, Labour”.
The Prime Minister’s critique captured how we all felt. We were exasperated not only at Labour’s economic incompetence, which had disadvantaged the poorest, whether they were single mums taxed at 96%, baffled pensioners not collecting their credits or parents driven into poverty by working tax credit maladministration, but that Labour was doing it while hypocritically proclaiming itself to be the monopolistic guardian of the most vulnerable in our society. Its self-congratulation despite the misery of the demographic it proclaimed as its social constituency was insulting on so many levels. That outrage was also felt outside the conference hall, in my constituency and across the country.
In government the Conservatives have delivered. Some £30 billion has been saved from the welfare budget and the amount that used to be doled out in error and
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fraudulent claims will be spent on something useful—getting people back into work—and those who do work will not be penalised like that single mother.
Our values are right. If we do not believe that the poorest are best served by our policies, we might as well give up and go and do something else. The next time Labour Members line up to ask the Prime Minister or one of his colleagues to look at a particular casualty of the spare room subsidy, he should demand to know what the hell those MPs have done to assist their constituent. Have they tried to obtain a share of the locally administered £30 million, which has been set aside to ensure that those with a qualifying need for a spare room get one? How did that go? The “bedroom tax” label deployed by Labour and, I am afraid to say, the class war displayed in the Leader of the Opposition’s speech today, say more about Labour than about us. Labour is still to engage with any serious thinking about the challenges facing this country or how we can help its most vulnerable citizens in particular.
By contrast, we are reforming welfare, tackling the abuses perpetrated by payday loan companies, simplifying the tax system and taking millions out of paying tax altogether. I am particularly pleased with the Chancellor’s announcement to increase the income tax threshold to £10,000, which will lift 30 million people out of paying tax altogether. Given that the average wage in my constituency is £22,000, there will be a lot of delighted people there. Those on the minimum wage will pay less than half the tax they paid under the Labour Government.
Wearing my hat as the chair of the all-party group on ageing and older people, I also welcome the new flat-rate pension and the cap on social care. The Chancellor is right to protect pensioners, who are often wrongly portrayed as rolling in it. The older someone gets, the more their cost of living increases. I am also delighted that we have been able to do more for the victims of Equitable Life. The Chancellor was correct in saying that that is the right thing to do. I am also very pleased that Combat Stress will benefit from the LIBOR fines. It is a wonderful organisation that does very important work.
In the brief time I have left, I want to say something about the Evening Standard. I feel obliged to say it because its editor is a former hack at The Portsmouth Evening News and, in my view, a person of great integrity. I think that a mistake has been made by the Evening Standard today and to claim otherwise does it a great disservice. The editor issued an apology to Mr Speaker, the House and the Chancellor while he was still on his feet. However, given that Opposition Members are still exercised about it, I shall finish by mentioning a tweet sent today by Charlie Whelan, who was salmon fishing while following the Budget. He said that even if it was a leak we should not worry about it, because he used to do it all the time.
6.29 pm
Barry Gardiner (Brent North) (Lab): Socrates called it eudaemonia—living well. He thought of it as the ultimate arete or virtue. In some respects, that is what Budget day is all about: how we can allocate the nation’s resources so that more people can live well. However, when Socrates spoke of eudaemonia, he would never have confused it with prosperity. He thought of it as a state of human flourishing. The Chancellor clearly thinks of it as mere human affluence.
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Well-being may be a function of economic activity, but if so, it is not a direct or simple one. One need only reflect that a specific loss of income is much more damaging to well-being than the corresponding gain is beneficial to it. The bedroom tax that reduces my constituents’ incomes has a far greater impact on their well-being negatively than a corresponding tax credit would have positively. That is because other concepts such as security, equality and justice really do matter. For human beings to live well—to flourish—we require all of those.
Our economy must therefore be structured to provide not just so-called flexibility of the labour force, but security of employment. It must minimise the inequality between the bankers’ million-pound bonuses and the savers at risk of losing part of their life savings to bail out Mediterranean countries. It must explain the justice of someone earning £150,000 still getting £1,200 per child in child care, when a mother in my constituency who cannot find more than 15 hours of work a week gets none.
A good Budget is not just about the distribution of national wealth; it is about the management of society’s resources to enable its citizens to flourish as one nation. On that measure, today’s Budget has failed. Today’s Budget is the Budget of a Chancellor who has painted himself into a corner and then run out of paint. He has been wedded to austerity so obstinately and for so long that when he finally is seduced by the noble Lord Heseltine to share an illicit tryst with growth, he lacks the wherewithal to invest properly.
This Chancellor has been wedded not to prudence, but to patience. Year on year, we have been told that the prospect of economic growth and recovery has receded once more over the horizon, always remaining just four years away. In 2010, he forecast that by today, the economy would have grown by 5.3%; it has grown by just 0.7%. In 2010, he forecast that his austerity plan would stop us going into a double-dip recession; we have been teetering on the brink of a triple dip. In 2010, he told us solemnly that austerity was the only way to avoid losing our triple A rating; we now know that it has helped us to lose it.
Believe no one else about this Chancellor. Judge him by his own words. Judge him by his own U-turns. Growth is lower, real wages are lower, public sector net borrowing is £212 billion more than he forecast and debt as a percentage of GDP is up to 76.8%, when he forecast that it would be 69.7%. The Government’s target of debt reduction by the end of this Parliament is now absolutely unachievable.
The real trouble with the Budget is not that it will fail to achieve its growth objective over the five-year cycle of the political process; it is that the five-year cycle itself bears scant relation to the cycles of the resources that we must manage if we are to create sustainable well-being for our citizens. The Chancellor has engaged in a civil war in this Government against any understanding of true stewardship of our natural resources. Oh yes, he can spot a domestic credit bubble in our housing market, but he is incapable of seeing the far greater danger of an annual global consumption of natural resources that it takes our planet one year and four months to replace. That is a credit bubble of terminal proportions not just for our economy, but for our species.
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By the time a child born on this Budget day is eligible to vote, the world will require 45% more energy, 30% more fresh water and 50% more food. This child will be part of the generation that will see the global population move from 7 billion to 10 billion. How do we enable this child to flourish? Do we become the most selfish generation of the most selfish species in our planet’s history, or do we become the generation that understood that justice and sustainability are essentially the same thing? If we want peace in the world, we must create justice. If we want justice, we must live sustainably.
This Chancellor’s old mantra was cut, tax and grow, so what if he has changed it for Heseltine’s grow, tax and spend? If he has not learned that growth must be sustainable, it will all end up in the same mess. In a world of 7 billion people, growth can be sustainable only if it is predicated on advances that bring increased productivity and greater efficiency in the use of resource. For the world to continue to achieve a 3% per annum growth target and to maintain a trajectory that keeps carbon emissions below the 2° threshold, we must increase our productivity per tonne of carbon emitted 15 times over, yet this is the Chancellor who has fought tooth and nail to stop us having a decarbonisation target in the Energy Bill.
The Chancellor is oblivious to the argument, regardless of who makes it—friend or foe, politician or industry. Two weeks ago, six of the largest multinational investors in the UK infrastructure wrote to him. Mitsubishi, Alstom, Doosan, Gamesa, Vestas and Areva have interests that span gas, clean coal, carbon capture and storage, nuclear and renewables. They told the Chancellor of their strong support for the early introduction of the 2030 decarbonisation target and warned:
“We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines.”
They explained that supply chain investment decisions depend on reasonable assurances from manufacturers that a production facility built this decade at a cost of millions will have an adequate market for its products well into the 2020s. They told him:
“Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R and D and produce fewer new jobs.”
The hon. Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, began the debate from the Back Benches with the extraordinary claim that low-carbon policies are exporting jobs and that green measures are adding 20% to our fuel bills. He should know that energy efficiency measures cost 15%, not 20%, of our energy bills and that the low-carbon sector has provided one third of all economic growth in the UK and is our fastest growing sector, creating thousands of new jobs. The Chancellor and his friends need to begin to recognise that green growth is the surest way through our economic problems, not the contributor to them. Fundamental to that is an understanding of sustainability. Last year, the EEF manufacturers’ body sounded a warning about the risk—
Mr Deputy Speaker (Mr Nigel Evans): Order.
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6.37 pm
Neil Carmichael (Stroud) (Con): It is a pleasure to follow the hon. Member for Brent North (Barry Gardiner).
The Budget is first and foremost a Budget for the global competition that Britain is in. It equips Britain to compete properly with our partners and the rest of the world, including the BRIC economies. The second important element of the Budget is that it is about aspiration and the people who want to participate in that competition, as signalled by some of the measures on small and medium-sized enterprises. I want to talk first about the fiscal challenge and how it looks now before I move on to monetary activism, which is an appropriate phrase.
On the fiscal challenge, I welcome the fact that the NHS, Department for International Development and education revenue have all been protected. That is absolutely right and how things should be. Of course, it means there will be cuts elsewhere and a different state will emerge as regards our priorities in two or three years’ time, but that will prepare the ground for the entrepreneurial private sector growth that is so urgently needed in the immediate future.
On monetary activism, it is good that the Monetary Policy Committee has a new role in inflation, interest rates and growth. That will give us a lot of hope and the ability to think ahead more as we hear news and announcements vis-à-vis the inflation and interest rates. Linking them together is welcome.
The third really important issue, and the one I want to talk about most, is the supply side, which is so important to the prospects of the real economy. First, however, let me welcome the reduction in beer duty, the increase in the personal tax allowance to £10,000, and the measures to encourage people to buy their own houses. All those things are part of the aspiration that I mentioned.
On the supply-side argument, there is a test: we have a lot of problems, but does the Budget help those problems and come up with solutions to make them less significant, or even turn them into solutions? Our first problem is that we are not exporting enough. We have exported a large number of cars and produced 1.5 million of them, yet only 30% of those cars are constructed in Britain—they are assembled here, but their parts are often imported. My first question is whether the Budget will improve the supply chain by ensuring that it is more localised and therefore forms a greater part of the economic growth needed by the economy. I think the answer to that is yes, because measures such as the business bank and so on add up to appropriate support for small and medium-sized enterprises.
My second question is about credit—tooling-up for new projects is an expensive activity, especially for SMEs that need to get their hands on appropriate money. High street banks are not always the best place for that, and I like the idea that the business bank will effectively reinforce and assist new forms of investment in SMEs from private and innovative areas. That will give a huge boost to an SME’s ability to get the investment necessary to develop its products. The answer to my second question is yes.
We also have a problem with regional underperformance. That is a significant issue for Britain and Lord Heseltine’s report focuses on it well. His idea for local enterprise
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partnerships to have core funding is powerful and will mean that they can really focus on areas that are of interest to them and which they know about. I think we will be seeing much more forensic activity at that level, and around our cities and other areas where there are local enterprise partnerships. In Bristol, which is near Gloucestershire, or even in Gloucestershire itself, I can see how that would be useful. Such a measure is a recognition of regional underperformance, so again the answer is yes, the Budget actually helps.
Another area of concern is the profile of SMEs, which I have been thinking about for a long time. We have a large number of SMEs, many of which are extraordinarily small. They perform an important role in innovating and inventing but do not always have the critical mass to tackle large supply-chain issues. We must encourage smaller firms to become bigger ones. Does the Budget help with that? Yes, I think it does. Changes to corporation tax and basically having one rate may, I think, encourage small firms that in the past have seen the advantage of using two different forms of corporation tax to come together. Other reasons why firms might enlarge or unify include the industrial strategy, which is already part of our overall plans to boost aerospace. I would like to see that move into the automotive sector, which needs the same sort of treatment.
The final point that bothers me is that, although we have already found jobs for one and a quarter million people in the private sector—a fantastic achievement—our productivity has not increased by as much as we had hoped. The Bank of England’s report on inflation from February 2013 makes that point well. We must worry about how to improve the skills available to our work force—those already working and those who are going to start working—so that we get that extra boost to productivity. The Budget does good things in that respect. For example, it introduces the Technology Strategy Board and boosts sector councils. Both measures, and the Government’s strident determination to improve skills in our colleges and schools, are excellent.
Lord Heseltine was right to recommend that the Government make a huge effort to ensure that we have high standards and good quality courses that demand academic achievement in our colleges. That is what will encourage people to do the work and decrease the productivity gap, which has plagued our economy for too long.
In summary, the Budget is good for Britain and good for those problems.
6.45 pm
Diana Johnson (Kingston upon Hull North) (Lab): I was hoping that the Budget would produce a plan for jobs, growth and investment. I was hoping that it would help areas such as mine, and help to rebalance the economy between the south and the north. I was hoping that it would address the problems of my constituents in Hull North and the problems that are becoming far too apparent in other areas of the country. We are becoming “food bank” Britain. That sits badly with other policies the Government are pursuing, such as giving tax cuts to millionaires and fighting hard in Europe to protect bankers’ bonuses.
Jobs are the key issue in my constituency. The latest statistics available show that more than 40 jobseekers go after every vacancy. Today’s figures show that there is
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12% unemployment in my constituency against a national average of just over 5%. Young people are particularly hit by unemployment problems. Despite the good work that the local council does with the private sector to try to get young people into work, it is proving difficult to do that. The Work programme has a success rate of 0.83% in my constituency. Jobs are the key to ensuring that my city has a future.
The Chancellor said that 1.25 million private sector jobs have been created, but in my area in the past few months, more than 1,000 private sector jobs have gone from big names such as Kimberly-Clark and Seven Seas. There were job losses in Hull following the underspend on the Warm Front scheme—Hull was one of the bases for the scheme. We need policies that will work throughout the country and not just in specific areas.
The Chancellor said that, for every public sector job that had gone, six private sector jobs were created, but those jobs are often temporary, part-time or zero-hour contracts. A part-time job in Poundland is not the type of job we want in our economy. We want high-skilled, good-quality jobs. I am told that more people will be employed in “McJobs” at McDonalds than in the British Army. That says we are not getting our priorities right.
The Government’s response is the idea that employers have a national insurance contribution reduction of £2,000. That is welcome—the idea is similar to ideas in the five-point plan, which the Labour party has been talking about for many years. However, the managing director of PAT Testing Expert Ltd in Hull has said that the measure is a reduction, not a cut, which is what he was hoping for. The business community is saying that the measure is not quite what they were hoping for.
Overall, the Budget has failed. There is nothing on the skills agenda, which is so important in ensuring that our people have the skills they need to get the jobs for the future. Last night, the caravan industry told the BBC in my region that it needs help in getting investment. The Minister will know jolly well that, come April, there will be 5% VAT on caravans, which was part of the deal that had to be cobbled together after the omnishambles of the previous Budget. The industry is getting no help.
There is nothing in the Budget about business rates. There is nothing on roads or the work that needs doing in my area on the A63—I note that, in the autumn statement, work was planned for the port in Thurrock, which is in the south. The money available for infrastructure is all post-2015. There will be £3 billion, but it will be too little, too late.
The Budget contains no support for the renewables industry, which is where the real potential for growth lies. In my city, we have been trying desperately to get Siemens to build and manufacture wind turbines, so that lack of support is very disappointing.
While there is much in the Heseltine report that it is important to commend, it is disappointing that the Government have not accepted some of the recommendations on the need to protect British innovation and enterprise. As I understand it, there is nothing about the commitment to strengthening local chambers of commerce, which are important organisations for local economies. I am concerned that the single pot might not become available until 2015. Again, that is too late: we need the help now.
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On overseas students, our universities’ export of quality education has been vital, with potential for further growth. However, the Government need to get their act together. A lot of overseas students are put off coming to this country by the messages the Government send out on immigration. That is a great shame. The university of Hull has a large number of overseas students and wants to see more of them. It is disappointing that the Government seem to be facing both ways on this issue.
On housing, although I welcome some of the initiatives the Government have brought forward, there are a lot of questions to ask about how they will work and not be abused. More importantly for my constituents, there was absolutely nothing in the Budget about flood insurance. If flood insurance is not available after the summer when the statement of principles comes to an end, that could blight the housing market in large parts of the country. There has been no agreement. As I understand it, the Treasury is standing in the way of an agreement between the Association of British Insurers and the Government. It will not ensure that money is available in the first few years of any new scheme and underwrite it if there are bad floods, such as those in Hull in 2007. That is shameful. My constituents are finding it very difficult to get house insurance now. If they cannot get house insurance after the summer, the housing market in Hull and in other parts of the country that have suffered from flooding in recent years will be in dire straits. The Government need to address this situation urgently. It will become a powerful issue if it is not addressed properly.
The Government talk a lot about how they want the economy to start to improve, but it is clear that growth has been downgraded, there is more borrowing, unemployment is starting to go up—3,000 of the 7,000 rise in the number of job losses announced today were in Yorkshire and the Humber—and millionaires are getting a tax cut in just a few days’ time. The Government have got their priorities wrong.
Mr Deputy Speaker (Mr Nigel Evans): Order. The last speech is by Emma Reynolds. Emma, I will not put the clock on you, but if you are still speaking at 7 pm, I will you interrupt you as gently as I can.
6.53 pm
Emma Reynolds (Wolverhampton North East) (Lab): It is an honour and pleasure to follow my hon. Friend the Member for Kingston upon Hull North (Diana Johnson). I want to start my speech by welcoming one element of the Budget, but then I want to set out why I think it fails three key tests of economic competence, fairness and equality. Let me start with the positives.
As the chair of the all-party group on aerospace, I welcome the announcement made earlier this week, and in the Budget today, that the Government, alongside industry, are creating the aerospace technology institute, which will support investment in vital areas of R and D. Aerospace is a long-term industry, and it takes 15 years to develop a product. It is crucial that long-term sustained investment and cross-party support is in place, so I welcome today’s announcement. Another important factor for the industry is our continued membership of
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the European Union. If the UK were to leave the EU, it would be disastrous for the aerospace industry, and many other industries throughout the country.
In addition to the aerospace cluster in Wolverhampton, there is another chink of light and optimism on which I want to comment. Jaguar Land Rover has already committed to substantial investment on the edge of Wolverhampton and has just announced that it will almost double that investment, which is a real shot in the arm for the city and will create 1,400 jobs directly and many more in the supply chain and wider economy. That demonstrates the strategic foresight of the regional policy and the regional development policy during our time in government. Had it not been for Advantage West Midlands investing in and decontaminating that site and designating it as a strategic investment site, the Jaguar Land Rover investment, and the many other investments in that site, would not be benefiting constituents in the city.
That said, however, I remain deeply concerned about the local economy in Wolverhampton. The Government’s economic policies fail three key tests. Will they kick-start the economy? Will those with the broadest shoulders bear the greatest burden? Will their economic policies lead to a more equal society? First, it is clear to me and many millions of people that the Government are failing the test of economic competence. They destroyed consumer and business confidence, sucked demand out of the economy and failed to tackle the crisis in living standards. I welcome some of the announcements—for example, on the cancellation of the beer duty escalator and the fuel duty—but this is simply too little, too late.
Inflation is high and rising, wages are falling in real terms and, as a result, firms do not have the confidence to invest and are sitting on big surpluses. There is no growth, very little investment and exports are disappointing. I know that Government Members moan about the eurozone, but France and Germany are outperforming our economy. In the past two years, Germany’s has grown by 3.6% and France’s by 1.5%. The Government have choked off the recovery, the economy is stuck in a rut and the Government seem powerless to do anything about it. This bizarre notion of expansionary fiscal contraction has not worked. They need to think again, but unfortunately they are not.
The changes to take place in 11 days demonstrate that the Budget will fail the fairness test. Some of the poorest people in Wolverhampton, many of whom want to move to smaller council properties, will lose, on average, £728 a year. The Government have ignored the fact that there is very little alternative accommodation available and that the ties people have to their local communities are incredibly important. Many other changes will entrench the inequalities not only in Wolverhampton, but in the rest of the country. In Wolverhampton, for every mile someone travels from the west of the city to the east, they lose a year in life expectancy. The difference between the poorest street in my constituency and the richest street in the country is incredibly stark, but the gap will only get wider, because the Government were incredibly arrogant in last year’s Budget in cutting taxes for the richest people in the country, essentially giving 13,000 millionaires a 100% tax cut.
The third test is of inequality. It is not just that deepening inequality is a bad thing in and of itself—one reason I came into politics was that I wanted to live in a
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more equal society—but Richard Wilkinson has compellingly argued that unequal societies also perform worse than more equal societies on many other fronts. For example, they have better life expectancies, less childhood obesity and lower crime levels. For that reason, the Government’s economic policies are bad not only in respect of unequal outcomes, but for the quality of life of everyone in the country and for our future.
I regret to say that the Government’s economic policies fail the tests of economic competence—more of the same simply will not work—of fairness and of whether they will create a better and less unequal society. I am very disappointed with the Budget.
Ordered, That the debate be now adjourned.—(Karen Bradley.)
Debate to be resumed tomorrow.