I am grateful for the right hon. Gentleman’s welcome for the trilateral process that we have been conducting with Afghanistan and Pakistan. The involvement and support of neighbouring countries is the most important piece of the jigsaw. He was right to point to it, because when it is clear that Pakistan and Afghanistan will

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co-operate more closely together, including on their security, that the whole leadership of Pakistan seeks stability in Afghanistan and that Afghanistan knows it can have a successful peace process only with the support of Pakistan—these things are increasingly clear owing to our trilateral process and the efforts of both Governments—that in itself will be a powerful signal to the Taliban that it is time to take part in a peaceful political process. The opportunity is now there for them to do so.

Other regional support comes through different formats, including the Heart of Asia process—I attended the conference of countries from around Asia which took place in Kabul last June. Through that process we are able to encourage support from other nations in the region as well.

Bob Blackman (Harrow East) (Con): Clearly, the long-term economic stability of Afghanistan is key. Arguably, the chief output from the economy is the poppy crop. Can my right hon. Friend report to the House on what progress has been made to ensure that it is used for beneficial, medical purposes, rather than for the illicit black market trade in drugs?

Mr Hague: The poppy crop is of course, if we are realistic, mainly for the illicit black market trade. Only a small proportion of it would be for the objectives that my hon. Friend rightly talks about. There was an increase in poppy cultivation in some areas last year, brought on, it seems, by the high prices that were available in 2011. Nevertheless, the Government of Afghanistan’s eradication programmes have been expanded successfully. The total area under cultivation last year was about 40,000 hectares less than at the peak. It is therefore fair to say that some progress has been made, but we are a long way from achieving the cultivation of such crops purely for the beneficial and medical uses that my hon. Friend speaks about.

Keith Vaz (Leicester East) (Lab): I thank the Foreign Secretary for his update. Can he tell us what is being done about the criminal gangs that are preying on Afghani citizens, making them pay thousands of euros in order to traffic them from Afghanistan to the border of Greece and Turkey and eventually into the EU? It is an appalling practice that is causing enormous distress, because at the end of the day the Afghani citizens are deported from the EU back to Afghanistan and the cycle starts again. What can we do about that?

Mr Hague: The right hon. Gentleman points to what is a serious problem not only in Afghanistan but in many other countries. Human trafficking of this kind has many sources, in many different parts of the world, particularly in Asia and Africa. We are increasing our law and order co-operation. In fact, my right hon. Friend the Home Secretary visited Afghanistan for the first time a month ago, to talk partly about counter-narcotics co-operation, but also about how we work together on policing and maintaining law and order in future. This issue is a natural part of that work. The right hon. Gentleman rightly draws attention to a serious problem and I will write to him with further details on what we think we can do about it.

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Sir Nick Harvey (North Devon) (LD): Afghanistan has been of great security and strategic significance for centuries. May I echo the Foreign Secretary’s tribute to the work done by British and international personnel, both military and civilian, in recent years to try to ensure the stability of Afghanistan? I broadly share his optimistic view of the future, but some commentators do not. What discussions has he had with his international counterparts on what the international response would be if the situation deteriorated and those historical anxieties recurred?

Mr Hague: Of course the situation remains difficult, as I made clear in my statement, but it is important that responsibility for security should be passed to the Afghans themselves. It is for them to make decisions about their own country. Regarding future support, the international commitments made at the NATO summit in Chicago last year and at the Tokyo summit on development are very strong. Each commitment involves the provision of $4 billion a year, well into the future, to maintain the Afghan national security forces in one case and to contribute to sound economic development in the other. That $8 billion commitment from the international community is a huge one. That is the support it is going to provide, and we now have to help to ensure that the Afghan leadership can make good use of it.

Mr David Winnick (Walsall North) (Lab): May I press the Foreign Secretary on one point? He has pledged that Britain’s combat role will end in 2014. Is that absolutely firm, no matter what occurs or whether the Taliban engage in talks?

Mr Hague: Yes, that has been firm for a long time. The hon. Gentleman will have heard the Prime Minister talking about this, as well as my right hon. Friend the Defence Secretary and me, and he will remember how clear the Prime Minister has been on the matter for a long time. It is in any case the commitment of the whole of ISAF. There are decisions to be made about the presence after that, but that is the end of our combat role. We have already made a commitment to lead the officer training academy afterwards. I have given such enormous attention to building up the Afghan national security forces and a viable Afghan state, as well as pursuing the political process and an Afghan-led peace process, so that we can be absolutely sure about this.

Mr James Gray (North Wiltshire) (Con): The beginning of the end in Afghanistan is a welcome moment indeed, but let us cast our minds forward to what will happen after 2014. Am I right in thinking that the bulk of our training forces will be in the north, in and around Kabul and the officer training base? If so, will we retain any presence in Helmand province, and what will happen to Lashkar Gah and Camp Bastion?

Mr Hague: My hon. Friend is right to suggest that the bulk of the effort will be near Kabul. As I have said, we have made no decisions about any other military presence apart from that after 2014. We will make those decisions in due course, along with our partners in NATO, and we will keep the House updated on that through further statements. Of course, the transition is already taking place in many parts of Helmand. Lashkar Gah, for instance, was one of the first places to undergo

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transition, and other parts of Helmand have been involved in tranches 2 and 3 of the transition process. So even in Helmand, it is increasingly the Afghan forces that have been taking the lead, and they are equipped to do so.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): When does the Foreign Secretary expect the first meetings in Doha to take place between the Taliban and the High Peace Council of Afghanistan? Also, has the UK considered making post-2015 aid dependent on respect for the human rights of women?

Mr Hague: On the hon. Lady’s first question, that will depend on the actions of the Taliban. Afghanistan and Pakistan support the opening of a Taliban political office in Doha, with our encouragement and with the support and readiness of Qatar. The Taliban leadership now need to decide whether they are prepared to take this opportunity to enter into a peaceful political process, or whether they will let it slip by and lose such an opportunity.

As to decisions about development—if my right hon. Friend the Secretary of State for International Development were here, she would prefer to put it in the positive sense—we are committed to development in Afghanistan with the programme of £178 million a year, and women’s rights are an important part of that programme. It is not our normal habit around the world to say, “This aid will be withdrawn unless you do X, Y and Z”. If countries behave in a completely unacceptable way, of course, we have been known to withdraw our assistance.

Rehman Chishti (Gillingham and Rainham) (Con): On the point about commitment by the Governments of Afghanistan and Pakistan, the Foreign Secretary will know that there may be a new Government in Pakistan in May, as there is an election going on, and that within a year there will be a new President in Afghanistan. Have there been discussions with some of the main opposition elements to see if they are committed to this process of working together for national security, peace and stability? Linked to that, will the Foreign Secretary join me in paying tribute to the Government and Parliament of Pakistan for the latter being the first in the history of Pakistan to serve its full term?

Mr Hague: Yes, I readily join in that tribute. This statement was very much focused on Afghanistan rather than on anything internal happening in Pakistan, which explains why I did not mention that earlier, but I absolutely join in that tribute. It is an important milestone in the democracy of Pakistan, which all parties across the House strongly support, that a democratically elected Government have served a full term and that another democratically elected Government of whatever shape or form will follow; that has never happened before in the history of Pakistan. The discussions we have hosted between the Pakistani and Afghan Governments have been broader than comprising just the political leaders, as they have included the military and intelligence leadership of those countries. Wherever possible, we have briefed opposition leaders. Just last week, for instance, I had discussions with the leading member of the opposition parties in Pakistan, Mr Nawaz Sharif. If opposition parties come into office, they will of course have to make their own

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decisions, but I believe there is a strong consensus across government—and, I hope, across political parties—in both countries in support of that.

Several hon. Members rose

Mr Speaker: Order. The Foreign Secretary is as courteous a member of the Cabinet and as fine a parliamentarian as it is possible to find. He cannot be accused of excluding from his answers any matter that could conceivably be of material relevance to any hon. or right hon. Member. I am hoping, however, that we can wrap up this debate by midday, as 37 Members wish to speak in the Budget debate.

Paul Flynn (Newport West) (Lab): I thank and congratulate the Government and the staff at Brize Norton on the very sensitively conceived new facility for receiving the fallen from Afghanistan and on providing some consolation to their loved ones.

Frederick and Kimberly Kagan were at the right hand of General Petraeus during his time in Afghanistan, and they had access to all the secret documents and secret meetings. They were employed not by the Government, the military or Petraeus, but by the defence contractors, who were thought to be hugely influential. As our policy is tied to American policy, should we not look at the influence of defence contractors in prolonging existing wars and fomenting new ones?

Mr Hague: The hon. Gentleman raises a wider issue. I think he can be very confident that the decisions of the United States—and, indeed, of its allies, including the United Kingdom—have been thoroughly consistent throughout the last few years with what I have described: bringing our combat role to an end, transferring responsibility to Afghans and building a peaceful future for Afghanistan. I do not think anyone could accuse President Obama of anything other than that—or of any of the things the hon. Gentleman has just described. The President’s commitment to bringing this about in Afghanistan is abundantly clear, and I do not think he has been influenced against that by any contractors.

Christopher Pincher (Tamworth) (Con): I welcome my right hon. Friend’s report on the further democratic developments in Afghanistan as it moves towards its presidential elections next year, but is he at all concerned by the report in The Times that the first major political figure to announce his candidacy—Mr Daudzai, the President’s former chief of staff—has, in the past, received cash in aid from the Government of Iran?

Mr Hague: I do not think it would be very helpful to the Afghan electoral process for Foreign Ministers in other countries to give a running commentary on each of the candidates as they emerge. My hon. Friend has made his point, but I do not think I will take it any further. In view of your injunction that I should be less informative in my answers, Mr. Speaker, I shall take this opportunity to set an example.

Thomas Docherty (Dunfermline and West Fife) (Lab): I am sure the whole House agrees there should be no drop in the quality of medical care available to personnel after 2014, given that some will be staying behind. Can the Foreign Secretary update the House on the progress

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of talks with the United States about the need to ensure that the air bridge and the medical support continue to be of the present high standard?

Mr Hague: That is an important issue, which the Ministry of Defence continues to pursue. Our facility will be located next to a major United States facility. That will mean that we have access to the best possible medical care, which is the MOD’s intention.

Philip Davies (Shipley) (Con): May I press the Foreign Secretary on a point made by my hon. Friend the Member for Gillingham and Rainham (Rehman Chishti) and touched on by my hon. Friend the Member for Tamworth (Christopher Pincher)? How dependent are the nature and extent of the Government’s involvement in Afghanistan on the outcomes of the elections in Pakistan and Afghanistan this year and next?

Mr Hague: I can assure my hon. Friend that they are not dependent on that. It will be important for us to work with the Governments of Pakistan and Afghanistan, whoever is elected this year and next year, because we have vital strategic interests and it is vitally in our national interests for us to continue to do so; and it is important for whoever stands for election in those countries to know that we are prepared to do so. The imperative to support—in a new and different way, after 2014—the building of peace and prosperity as well as security in Afghanistan will continue, and it is not dependent on those two elections.

Dan Jarvis (Barnsley Central) (Lab): As the Foreign Secretary will know, the original ministerial decision to shift United Kingdom military effort from northern Afghanistan down to Helmand in the south came at a time when the UK was already dedicating a significant effort to operations in Iraq. I am not saying that that decision was right or wrong, but I do think that a mechanism is needed to enable the Government to review such decisions and learn from them. Does the Foreign Secretary agree, and if so, what does he think is the best mechanism for the purpose, in the context of Afghanistan?

Mr Hague: The hon. Gentleman has raised a very interesting issue. The decision to which he refers was made back in 2006, under the last Administration, so I cannot go into too much detail about the making of it. However, it is important for us to learn lessons after any conflict, and we have learnt enormous lessons in Afghanistan as we have gone along, including about such matters as military equipment and tactics. It will be for the House, and for all of us, to take stock when our combat role comes to an end, so I will not commit the Government to some new process of examination or inquiry at this point.

Andrew Stephenson (Pendle) (Con): I welcome my right hon. Friend’s statement. We must never forget the ultimate sacrifice made by so many of our soldiers, including Lance Corporal Jordan Bancroft and Lance Corporal Michael Foley from Pendle, in achieving a sustainable settlement in Afghanistan.

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I also welcome the Prime Minister’s recent trilateral meeting with his Afghan and Pakistani counterparts. Can my right hon. Friend say more about the continuing dialogue with Pakistan? Are there plans for any more trilateral meetings to take place before the Pakistani elections?

Mr Hague: Pakistan is going through a period of caretaker government before the elections. We will of course maintain contact with the caretaker Government, and I will continue to pursue with the caretaker Foreign Minister of Pakistan the trilateral process that I have pursued with the outgoing Foreign Minister, Hina Rabbani Khar, over the past year. I have spoken to the Afghan Foreign Minister in the last 10 days to make sure of Afghanistan’s continuing commitment to the trilateral process. The election in Pakistan will not interrupt that process.

Pete Wishart (Perth and North Perthshire) (SNP): It is 10 years to the day since the illegal invasion of Iraq, yet we have no statement and no debate in this House, even though the Scottish Parliament could debate it. Is that because the Foreign Secretary has sent a memo to senior Cabinet members telling them not to discuss the war—not to mention the war? Did he get away with it?

Mr Hague: It is easy to obey your request, Mr Speaker, by giving a short answer to this question because it is not relevant to the subject we are discussing. This statement is about Afghanistan, and we do not forget our responsibilities to our forces there just because there are controversies about other conflicts in the past.

Oliver Colvile (Plymouth, Sutton and Devonport) (Con): I thank my right hon. Friend for his precise report, and I welcome the idea that we are going to be very supportive of governance in Afghanistan. The key to that is ensuring that an independent judicial system and a corruption-free police force are in place, so is he happy with the progress being made on that? Does he think that when we eventually come out of Afghanistan next year, that will be able to continue?

Mr Hague: It would be going too far to say that I am happy with all the progress made, because a lot more needs to be done to tackle corruption in Afghanistan. At the Tokyo conference last July, the Afghan Government entered into 164 specific different commitments about fighting corruption, and it is very important that they implement all of those. They have started implementing them, and we have seen some prosecutions following the Kabul bank scandal, but more work needs to be done on that as well. My hon. Friend draws attention to a very important subject, on which a beginning has been made—but it is only a beginning.

Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op): Our objectives in Afghanistan have always been noble, but surely there are lessons to learn from how we have pursued them at various times during the conflict. That applies not only to specific decisions, as my hon. Friend the Member for Barnsley Central (Dan Jarvis) mentioned, but to how we have deployed and rotated

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our forces, which initially led to a frequent change of tactics. As we approach 2014, surely the Government are doing some work to assess how our country has fought and managed this conflict.

Mr Hague: A great deal has been learnt under both Governments who have been involved in this as matters have progressed in Afghanistan. We have learnt about military tactics, training and equipment, all of which have been improved as time has gone on. Secondly, at this moment our focus is, of course, on the priorities I have set out: on making sure that our forces come home safely, and that the rest of the help we are giving Afghanistan is properly and effectively supplied. Thirdly, there must be a time for reflection in the round on all these matters, but I have no new announcement to make about that today.

Mr Philip Hollobone (Kettering) (Con): Since 1945, Her Majesty’s Government have had more experience than any other on earth of withdrawing armed forces from theatre, and since the 1840s we have disengaged from Afghanistan several times. Sadly, the countries we have left behind have not always had the most stable of new beginnings. Since we have left Iraq, Iran’s influence over that country has grown exponentially. What is to stop the pernicious influence of Iran taking over in Afghanistan?

Mr Hague: My hon. Friend is right to ask that question. It underlines the importance of building up the Afghans’ capability to look after their own security and to develop their own economy—that is the only sure answer to the excessive interference by, or influence of, any other power in the region. It also shows the

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importance of supporting an Afghan-led peace process with the active co-operation of Pakistan. That is the best hope of bringing about a political settlement and a general peace in Afghanistan that would also then minimise outside interference in Afghan affairs. So those are two central planks of what the Government are trying to do.

Nicola Blackwood (Oxford West and Abingdon) (Con): Yesterday, I met two female Afghan MPs. One had narrowly avoided being killed by a suicide bomber, and the other had been evacuated from her constituency by the UN and ISAF after having the temerity to celebrate international women’s day. Does the Foreign Secretary accept that not all Afghan women are victims, that those are exactly the kind of women we need to work with to ensure that the gains in women’s rights are not lost post-2014, and that an important way to do that is to implement the EU guidelines on human rights defenders in Afghanistan?

Mr Hague: My hon. Friend is absolutely right. The Afghan Government made a series of public commitments at the Tokyo conference in July to uphold the human rights of all Afghan citizens. That includes women, of course, and the promotion and protection of their rights as enshrined in the Afghan constitution. It is vital not only that human rights are upheld, but that human rights defenders are defended and protected, and that the Afghan Government fully implement their commitments on the law on the elimination of violence against women and the convention on the elimination of all forms of discrimination against women. We will try to hold them to all those things.

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Ways and Means

Budget Resolutions and Economic Situation

amendment of the Law

Debate resumed (Order, 20 March).

Question again proposed,

That, —

(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;

(b) for refunding an amount of tax;

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.

12 noon

Ed Balls (Morley and Outwood) (Lab/Co-op): It is the morning after—the cold light of day—and the full reality of this Chancellor of the Exchequer’s fourth Budget is starting to sink in. What a huge disappointment it was; what another wasted opportunity. On growth, on borrowing and on living standards, this Chancellor’s plan has completely failed.

Families, pensioners and businesses are paying the price, but what did we get yesterday? A change of direction? Action to kick-start our flatlining economy? Real help now for families on middle and low incomes? Any recognition from the Chancellor that things have not worked out as he planned? No. All we got was more of the same failing policies. Tweeting, tinkering, but no change, of course. The Chancellor confirmed that he will still go ahead in two weeks’ time with a tax cut for millionaires. We had more of the same failing policies and a long hard road to nowhere from a downgraded Chancellor who looks out of touch and increasingly out of his depth. Surely Britain deserves better than that. What do we have to look forward to this morning?

Mr Alan Reid (Argyll and Bute) (LD): What my constituents on the islands can look forward to next month is fuel duty at 18p a litre less than it would have been if the right hon. Gentleman’s Government had still been in power. Is he not delighted that this Government have reversed his party’s policy and reduced fuel duty by 18p a litre for my island constituents?

Ed Balls: Unfortunately, the hon. Gentleman fought the last election by saying that his constituents should vote Liberal Democrat to stop the Tory VAT bombshell. VAT has gone up, petrol is up as a result and his constituents will make their choice in two years’ time.

What do we have to look forward to this morning? Another painful, contorted and pathos-bathed Budget debate speech from the Business Secretary. I look across at him sitting on the Front Bench and cannot bear to read out once again all those pre-election quotes. You know

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the ones I mean, Mr Deputy Speaker—[Hon. Members: “Go on!”] No, I just cannot bear it. They were the ones in which he warned that the Chancellor’s austerity plan, his VAT rise and his rapid spending cuts would choke off the recovery and make the deficit worse. The Business Secretary knew that this plan would fail and he now knows that he is deeply implicated in its catastrophic economic failure, yet he still does not have the courage to stand up and speak out about it. Long, contorted and fudged essays in the

New Statesman

just will not do. No wonder he was completely ignored in yesterday’s Budget. It is a personal tragedy as well as a national tragedy, but we will hear from the Business Secretary shortly.

Mr Tobias Ellwood (Bournemouth East) (Con): The right hon. Gentleman talks about economic failure. I have the UK annual debt figures going back a few years. When the right hon. Gentleman was in office, the UK debt was £347 billion. Before the crisis struck, it rose to £624 billion. After the crisis it ratcheted up another £200 billion. With this track record, why should the nation trust Labour with Britain’s finances ever again?

Ed Balls: This is the Conservative Member who stated just two months ago that

“the past 2 and a half years have set Britain on the right track.”

The economy flatlined, borrowing stalled and the national debt is rising year by year by year on his Chancellor’s watch. The right track? I can scarcely think what the wrong track would be.

This morning we heard the Deputy Prime Minister on “Call Clegg” attacking the Leader of the Opposition for repeating the same attacks in this year’s Budget response as he used last year. I went back to my opening speech of a year ago, the one following the Chancellor’s third Budget, the omnishambles Budget. We all remember that one, don’t we? This is what I said a year ago:

“The British economy is stagnating, unemployment is rising…the Government’s deficit reduction plans have gone wildly off track, middle and lower-income families and pensioners are facing rising…prices, rising energy bills and falling living standards—and what did the Chancellor do in his Budget yesterday? Did he admit that his economic plan has failed? Did he act to kick-start the stalled recovery?...No.”—[Official Report, 22 March 2012; Vol. 542, c. 957.]

That was a year ago, and the tragedy is that 12 months on the position is even worse. In the words of the great Yogi Berra, it really is déjà vu all over again. It is a groundhog day Budget from a failing and out-of-touch Chancellor.

Twelve months on, living standards are still falling. The Office for Budget Responsibility says that real wages adjusted for inflation will be a full 2.4% lower in 2015 than in 2010—worse off under the Tories. It is groundhog day too because 12 months on, the economy is still flatlining. As recently as the autumn statement, the Chancellor was expecting growth of 1.2% this year, but the OBR has now halved that forecast to just 0.6%—not the right track; the wrong track. At the time of the spending review in autumn 2010 the Chancellor was expecting growth by now of 5.3%. So far it has been just 0.7%, and the stagnation and flatlining continue.

Penny Mordaunt (Portsmouth North) (Con): I would be interested in the right hon. Gentleman’s explanation of why the OBR is forecasting 600,000 more jobs in 2013 than there were a year ago.

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Ed Balls: Perhaps the hon. Lady should also study the book. The interesting thing is that the OBR is also forecasting that unemployment will rise, not fall. More jobs, unemployment rising—maybe there are more people in the country. Does she know what the OBR forecasts net migration to be in the next few years? Tens of thousands? No. Net migration of 140,000 every year. That is what is going on.

It is groundhog day too because, as a result of the present stagnation, the Chancellor’s fiscal plans are even more wildly out of control than they were a year ago. No wonder his fiscal credibility is in tatters. The Chancellor used to claim that the national debt would start to fall in 2015 from a peak of 69.7% of GDP. He now expects it to rise in 2015, to rise in 2016, to rise in 2017 and to hit a staggering not 69.7%, but 85.6% of GDP. And the reason the national debt is rising is that, as the OBR said yesterday, the Chancellor’s deficit reduction plan has stalled. The deficit is now expected to be the same next year as it is this year and as it was last year. It is not a deficit reduction plan anymore. That is why the Chancellor is now set to borrow—[Interruption.] The Chancellor should listen to this. He is now set to borrow £245 billion more than he planned, vastly more than the borrowing he inherited from the Labour Government.

Richard Fuller (Bedford) (Con): While the vast army of PAs behind the shadow Chancellor search for a bullet point on Bedford, let me say that his criticisms are not falling very strongly, in part because his hands are dipped in red—the red ink of years of borrowing and debt. Does he not think that the arguments would be stronger if he moved to one side and gave his seat to the fresh-faced young man sitting next to him, the shadow Secretary of State for Business, Innovation and Skills?

Ed Balls: The voters of Bedford might be disappointed to find out the truth: compared with a year ago, the Chancellor will borrow £29 billion more than he planned this year, £59 billion more next year, £73 billion more the year after and £77 billion more the year after that. Mr Deputy Speaker, if you want to know who the borrowing Chancellor is, it is him. Do you know what he managed to do yesterday in his Budget documentation? He fiddled around and managed to say that borrowing this year is lower than it was last year by £0.1 billion. We know why: as the OBR confirms, the Chancellor and the Chief Secretary to the Treasury, when one would think they would be working on a plan for jobs and growth or reform of the banking system, have been scrabbling around and hacking away at spending in this year in a desperate attempt to try to get the borrowing down.

The detail is set out on page 13 of the OBR document. It shows that, compared even with the autumn statement, tax revenues are down this year by £5 billion but that since December the Chancellor has found a further so-called underspend of £3.4 billion, which he says is not like normal underspends. What does the OBR tell us about that so-called underspend. It states:

“It is very rare for the government to under-spend the departmental plans it has set out less than a year ago by such a wide margin...Our overall forecast of under-spending has a number of elements: money that the Treasury has agreed to allow departments to move into future years;…money that departments thought they

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would spend this year, but which they do not now expect to spend either this year or in the future; and payments (for example to some international institutions) that were due to be made late in the current financial year, but which are being delayed into 2013-14.”

The cheque is in the post, but it will not arrive until after 1 April in order to massage the figures. Who does the OBR say has been hardest hit? The answer is the national health service, which has been cut by over £2 billion this year. At the same time the NHS is losing more than 5,000 nurses, the Treasury scrabbles around to try to save the Chancellor’s face.

Richard Graham (Gloucester) (Con): Yesterday I brought the CEO of a significant medium-sized manufacturer in Gloucester to listen to the Budget statement and the Opposition’s response. He commented afterwards:

“I thought the Government’s commitment to helping business was exactly what is needed for growth and jobs, and I continue to be dismayed that the Opposition remains so theatrical, playing for headlines only, which cannot help any of us.”

Is not it time the shadow Chancellor gave us less theatre and more substance on what he would do to help businesses and growth?

Ed Balls: Falling living standards for families in the hon. Gentleman’s constituency, rising child poverty and families in work seeing their tax credits cut—that is not theatre; that is the real world. As for the national insurance cut for small businesses, that is point 5 of Labour’s five-point plan for jobs and growth. That is the reality.

David Wright (Telford) (Lab): Talking about theatre and the movement of money between financial years, is it not interesting that hospitals in Shropshire have been cancelling operations? One of the chief nurses says that is because of funding cuts in the NHS. I wonder whether it is because of the Chancellor’s fiddle.

Ed Balls: The OBR document is very interesting. It sets out the unusual underspend Department by Department. I do not think that we have yet heard the full truth about what has been going on in the Treasury: the pressure applied in one year to cut spending or to move it to the next year just to fiddle the borrowing figures. I think that we will discover the truth in the coming weeks. For a Government who attack businesses and make late payments to small business, they are the late payment Government.

Has the Chancellor learned nothing over the past 12 months? He used to say that he was sticking to his plan in order to secure the recovery, but then we had the double-dip recession. He used to say that he was sticking to his plan to get the deficit down, but his spending cuts and tax rises have choked off the recovery. As the OBR revealed yesterday, the deficit was basically unchanged last year and will remain unchanged this year and next. Then all he could say was that he had to stick to his plan in order to keep his treasured triple A credit rating, but he has even lost that. The only reason he will not now change course is to avoid his own political humiliation, and that is no reason to stick to a failing plan.

George Freeman (Mid Norfolk) (Con): The right hon. Gentleman alleges that the Government have increased the deficit. I have checked the figures from the Institute

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for Fiscal Studies and the OBR. Will he confirm that when the Government came to power the deficit was 11.2% of GDP and that it is now 7.4%? Is that a rise?

Ed Balls: The Government inherited a deficit reduction plan from the previous Government, but the Chancellor is wildly off track from our plan, which he used to call irresponsible. He is borrowing pretty much a quarter of a trillion pounds more. He said that he would get the deficit down, but the deficit reduction plan has stalled.

I have urged the Chancellor to change course, as in recent months have the International Monetary Fund, The Economist, the Mayor of London, the Business Secretary and the Home Secretary. They have all cast doubt on his plan. But yesterday we got more of the same. How did he describe the Budget? He described it as a “steady-as-she-goes Budget.” Steady as she goes? What kind of ship does he think he is on: the Titanic; the Mary Celeste?

There were some welcome measures. We have consistently called for a tax break for small firms taking on extra workers. The Government are now set to introduce a similar scheme, three years after the shadow Business Secretary and I urged them to. That is a welcome step forward. The Chancellor has finally joined Twitter, five years after I did. Maybe he will find out that his plan is going to fail five years after I worked it out, although by then he will be on the Opposition side of the House.

Yesterday there was no proper plan to kick-start our economy, no bank bonus tax to fund a youth jobs guarantee, no real action to get lending going to small firms, no proper investment in affordable homes and no return of the 10p starting rate to help millions of people, paid for by a mansions tax. Despite the welcome small change of 1p off a pint of beer—buy 320 pints and get one free, which might even be too much for the Foreign Secretary—and even after the increase in the personal allowance, an important point for the Liberal Democrats, families will still be worse off next year compared with this year because of the Chancellor’s tax and benefit changes.

Paul Flynn (Newport West) (Lab): With all the voodoo economics and fiddles that have now been exposed, is not the Treasury exposed as the most disreputable massage parlour in Britain?

Ed Balls: I think it is a little unfair to tease this Chancellor about what goes on late at night in massage parlours. Perhaps he will correct me and tell me that it was not a massage parlour. I will take an intervention if he would like to clarify it; I cannot remember that chapter in the biography.

According to House of Commons Library figures, a one-earner family—[Interruption.] The Chancellor should listen to the reality of his plans and their impact on hard-working families in our country. According to the Library, a one-earner family on £20,000 a year with two children will be £381 a year worse off in 2013 compared with 2010, even with the personal allowance, because that is outweighed by the hit to tax credits for a working family. This is without taking into account the rise in VAT. By 2015, that family on £20,000 will be £600 a year worse off.

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It is not just a case of being worse off under the Tories, but worse off under the Liberal Democrats too. In 16 days’ time, as the Chancellor, with the support of the Business Secretary, rams through the granny tax, the strivers tax and the bedroom tax, he is pressing ahead with a £3 billion tax cut for the very richest people in our country. In two weeks’ time, 13,000 millionaires will get an average tax cut of £100,000 each. Millions are paying more while millionaires get a tax cut.

Damian Collins (Folkestone and Hythe) (Con): The shadow Chancellor is on record as saying that his solution is that we should be borrowing more now. How much more would he borrow on top of what the Chancellor is already borrowing?

Ed Balls: I will quote the Business Secretary. Asked on the “Today” programme, “Won’t that mean more borrowing?”, he replied, “But we are borrowing more.” The Government are borrowing more—it is all here in the OBR document. If they had listened to our plan two years ago, the borrowing would be coming down, and it is not.

Several hon. Members rose

Ed Balls: I will take some more interventions if Members want. Let us have the hon. Member for Bournemouth East (Mr Ellwood) again.

Mr Ellwood: I am grateful to the right hon. Gentleman. He spoke about a deficit reduction plan. What year was he referring to? Was it 2001-02, when the deficit was £0.8 billion, or was it any one of the years leading up to the last year that Labour was in government, when it was a staggering £158 billion? Under the previous Government, the deficit increased in every single year after 2001. Will he tell me in which year his deficit was supposed to kick in?

Ed Balls: I do not want to have to give the hon. Gentleman an economics lesson, although given that he thinks we are on the right track, perhaps he needs one. The Chancellor’s fiscal rule is to balance the current structural budget, excluding investment—[Interruption.] Don’t be so silly. [Interruption.]

Mr Deputy Speaker (Mr Nigel Evans): Order. Can we calm down? Shouting from sedentary positions does not help the debate.

Ed Balls: The economy has flatlined and the national debt is rising year on year, and the hon. Gentleman does not want to know the truth.

Not only is the Chancellor pressing ahead with a tax cut for millionaires; it now seems that his mortgage scheme announced yesterday will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000. From what I have seen so far, the Government are basically saying, “If you’ve got a spare room in a social home you’ll pay the bedroom tax, but if you want a spare home and you can afford it, we’ll help you to buy one.” Are the Government really going to allow millionaires, who will get a tax cut averaging £100,000 in two weeks’ time, to get a taxpayer guarantee if they use that money as a deposit on a house, a second home, or even a buy-to-let house? That

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is not just tax cuts for millionaires; it is subsidised mortgages for millionaires—or should I say a spare homes subsidy? I will take an intervention if the Chancellor wants to clear up the absolute confusion and chaos over this policy. Surely people struggling to get a mortgage—those who want to get their first home—should be the priority for help, not the small number who can potentially afford to buy a second home or a buy-to-let home. We will solve the housing crisis and help first-time buyers only if we finally build the new affordable homes that we said should be built but which he ignored in this Budget.

This is more of the same from a Chancellor who does not even understand the Budget he has announced, as we saw a year ago. I ask him again—is the taxpayer subsidy available for second homes to people with incomes over £100,000 or for buy-to-let properties? Yes or no? If he does not clear it up, the confusion and chaos will continue. Does he want clarify it? Pasties, caravans, churches, skips—and now subsidised second homes for millionaires. It is not “Who Wants To Be A Millionaire?”; it is “Who Wants To Help A Millionaire?” It is not “phone a friend”; it is “cut taxes for your friends.” As for “ask the audience”, he must be hoping that he does not have to ask the electorate any time soon—certainly not after the past 12 months.

What a 12 months it has been for this Chancellor! The omnishambles Budget, the double-dip recession, booed at the Paralympics, forced to upgrade on the train, downgraded by Moody’s, his fascinating biography—and now his colleagues are even speculating that he might have to be replaced by the Foreign Secretary, the Defence Secretary, or even the right hon. Member for Wokingham (Mr Redwood). A year ago they feted him as the next leader of the Tory party; now, according to the Tories, they are touting him as our next man in Brussels. It used to be Calamity Clegg they were sending off to the Commission; now it is Calamity George. Well, we do know he likes a bit of “Whip crack-away, whip crack-away, whip crack-away.” [Interruption.] Are you suggesting that I do not sing it, Mr Deputy Speaker?

A few weeks ago, the Chancellor reportedly told his colleagues at a Cabinet meeting that if they did not make a decision that day they would have to do so after 2015, sitting round the shadow Cabinet table. That is going to be the one forecast that he actually gets right.

Mr Nick Gibb (Bognor Regis and Littlehampton) (Con): This is all very amusing, but not very serious. Is the right hon. Gentleman aware that in his own constituency over the past 12 months unemployment has fallen by 2.5% and youth unemployment has fallen by 12.5%? Why is he complaining about higher borrowing and at the same time advocating higher borrowing? Is it not right that the Chancellor is letting the automatic stabilisers kick in?

Ed Balls: The problem with what the Chancellor is doing this year—cutting in-year spending—is that it is the opposite of the automatic stabilisers. He is cutting spending and the OBR says that it is having a direct impact on economic growth. I sympathise with everybody who loses their job, including the hon. Member for Bognor Regis and Littlehampton (Mr Gibb). In my constituency unemployment has come down, but working families are worse off because of cuts to tax credits, the

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bedroom tax and cuts to child care. The £700 million-a-year tax break for new child care is no compensation for the £7 billion a year cut in support for families.

Andrea Leadsom (South Northamptonshire) (Con): Is the right hon. Gentleman aware that inequality in income has dropped significantly since May 2010?

Ed Balls: I think the hon. Lady may find that that is before the millionaires’ tax cut kicks in in 14 days’ time.

The hon. Member for Bognor Regis and Littlehampton asked whether I am being serious. I am being deadly serious about the failure of this Government’s economic plan. They are failing on growth and on borrowing, and living standards are falling as families and businesses pay the price. I warned the Chancellor two and a half years ago that his plan could not work and that, given that a global hurricane was brewing, it was the wrong time to rip out the foundations of our own house. I told him that monetary policy in a situation akin to that of Japan in the 1990s or of the world in the 1930s could not do the trick to restore growth. I warned him that attempting to have the biggest tax rises and fastest spending cuts in our post-war history, and probably beyond, would backfire and choke off recovery rather than support it.

The Under-Secretary of State for Skills, the hon. Member for West Suffolk (Matthew Hancock) is the Chancellor’s former adviser and he is now a member of the Business Secretary’s ministerial team. He wrote an article in The Times in the autumn of 2010 in which he said—this is the Chancellor’s former adviser—that faster deficit reduction would lead to stronger growth. He said, as the Chancellor has also argued, that this was an example of expansionary fiscal contraction, but fiscal contraction has not been expansionary—it choked off the recovery. If the Chancellor was relying on advisers like the hon. Gentleman, it is no wonder that he got into such trouble.

Bob Blackman (Harrow East) (Con): The shadow Chancellor has made great fun of tax changes and other issues relating to growth. Does he welcome the Government measure that means that next month 36,270 working people in his own constituency will get a tax cut?

Ed Balls: The hon. Gentleman needs to look at the figures and understand the impact on working families in his constituency. The problem with his Chancellor is that he gives with one hand and takes a lot more with the other. A one-earner family on £20,000 and with two children are worse off, even with the personal allowance, by £380 a year because of the cuts to tax credits. Working families are losing out. The Chancellor tried to divide the country into strivers versus shirkers, but we do not hear that any more because it turned out that his shirkers were the working people of this country.

The real tragedy for this Chancellor is that he is set to join a long line of past Chancellors. Philip Snowden, Norman Lamont and now George Osborne—

Mr Deputy Speaker (Mr Nigel Evans): Order. Do not refer to Members by name.

Ed Balls: I apologise, Mr Deputy Speaker.

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Philip Snowden, Lord Lamont and now Chancellor Osborne—[Interruption.] It was not the Lamont name that I got wrong, was it, Mr Deputy Speaker? Philip Snowden, Lord Lamont and now this Chancellor have said, “I will stick to the plan.” Those past Chancellors ignored all the warnings from those who said that the plan would not work. They boasted, “If the medicine’s not hurting, it’s not working,” and ploughed on and on as things got worse and worse, and their careers ended in disaster as their failed policy finally consumed them.

Is that not the truth? This Chancellor is an historian who does not know his history and he does not know his economics, either. He is completely out of his depth—business, the country, his Back Benchers and Cabinet colleagues and the Business Secretary all know it and, in his heart of hearts, I think the Chancellor knows it, too. He was the wrong man for the job at this vital time. He is running out of excuses, he has run out of answers and he is running out of road.

We needed a Budget for growth, jobs and fairness, but we got more of the same. There is no plan for growth, just tax cuts for the rich while everyone else pays the price. This is more of the same failing plan from a downgraded Chancellor—not steady as she goes, but sinking like a stone.

Several hon. Members rose

Mr Deputy Speaker: Order. Thirty-three Members want to take part in this debate and a time limit will be announced following the Business Secretary’s response to the shadow Chancellor, but six to seven minutes would not be too far out.

12.36 pm

The Secretary of State for Business, Innovation and Skills (Vince Cable): I am delighted to speak in support of the Budget and thank the shadow Chancellor for 35 minutes of pantomime. More worryingly for me, I occasionally read in the newspapers that we agree with each other; I am not sure whether he regards that as a bigger slander than I do. I have been trying to find out what it is that I am supposed to agree with and to understand what actually is his plan B. A quick search revealed seven different variants of plan B. In fact, that is almost certainly an understatement, because the shadow Chancellor has had more positions on the economy than there are positions in the “Kama Sutra”.

Let me run through some of the variations that we have heard from the shadow Chancellor over the past couple of years. He started with the big stimulus to the economy that was going to come from the bankers’ bonus tax, which would have imposed a £2 billion tax on a tax base—a bonus pool—of £1.6 billion. He had not realised that, since his time in charge of the City, the bonus pool had shrunk from £14 billion.

The shadow Chancellor then moved on to the five-point plan, which was mostly pretty sensible. It included apprenticeships, which we are already doing on a much bigger scale. He also wanted, I think, £200 million for the regional growth fund. Well, we have given it billions, not hundreds of millions. He then moved on to the reallocation of the money from the 4G auction sale, but it had already been allocated—I have already spent quite a lot of it.

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We have now moved on to trying to understand what plan B actually means today. As far as I can fit it together, it consists of several elements, including a big stimulus from a value added tax cut, stopping Government spending cuts and, somehow out of the alchemy, reducing borrowing. I have tried to work out how this plan was created and am struck by its similarity to the economic strategy being developed by Nigel Farage, although I may be doing the UK Independence party a disservice.

The shadow Chancellor and I have a serious interest in economics. Before we discuss how to deal with this crisis, we have to try to understand how it originated. I think that most serious economists, whether they are in the Keynesian tradition or not, would acknowledge that this is not a cyclical recession. It is what is now called a balance sheet recession, and in order to understand how that happened we need to understand why the balance sheet got so big in the first place and why private sector deleveraging is now happening on such a massive and damaging scale.

This is an uncomfortable set of questions for the shadow Chancellor because, among other things, he has to explain the following. Why was it that in the 50 quarters of growth without inflation, nobody noticed the massive asset bubble in residential and commercial property, which has since burst? He has to explain why households in the UK, which have become heavily over-leveraged, managed in that period to acquire the highest level of personal debt in relation to income of any country in the developed world. He has to explain why a medium-sized bank in Scotland was encouraged and actively supported by his Government in trying to become the biggest bank in the world on the basis of dodgy acquisitions and gambling in its casino operations. He also has to explain why, when his former boss commissioned an excellent study on the banking system in 2000, which explained why there was a cartel operating that was squeezing the life out of small business, his Government did absolutely nothing about it.

We have a major economic crisis caused by balance sheet deleveraging, arising out of a major financial crisis. One would have thought that those on the left would want to talk about a crisis of financial capitalism, but they do not want to talk about it at all. In fact, the shadow Chancellor has a striking resemblance to the lead character in “Fawlty Towers”. Colleagues may remember the episode in which he goes around with great indignation, wanting to have an animated conversation about Germany, but nobody wants to talk about the war. The shadow Chancellor wants to talk about the economic crisis, but not the financial collapse that he presided over.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): The right hon. Gentleman has talked about an asset bubble. What is the Chancellor’s mortgage scheme, other than the hope of an asset bubble to get him out of trouble? What growth or capacity would that add to the economy? The problems of this economy will not be answered by yet another asset bubble. What are the Government trying to do? All that their scheme will do is create another asset bubble.

Vince Cable: There are two elements to the Chancellor’s housing package. The first is the development of the FirstBuy scheme, which will provide £3.5 billion for

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shared ownership. That has been widely welcomed because it will increase the demand for housing and get the housing market going. The other, more ambitious scheme is a form of insurance for mortgages, which has been very successfully applied in Canada, for example, where it prevented a collapse of the market of the kind that occurred here and introduced greater stability. The Chancellor is now consulting on how that scheme should be designed, which is absolutely right.

Helen Goodman (Bishop Auckland) (Lab): The Secretary of State needs to be a champion of the mansion tax, which would be a very sensible thing to do at the moment. Why is he supporting this scheme, which will support the purchase of houses up to the value of £600,000?

Vince Cable: I remain a champion of the mansion tax and will continue to champion it with my colleagues on the Liberal Democrat Benches. The Chancellor is going to consult on how this major reform to the housing market will be implemented. We recognise that there are many complex products in the mortgage market. For example, many parents support their children’s housing acquisitions. Those kinds of transactions have to be properly analysed before the scheme is launched.

Mr David Hanson (Delyn) (Lab): I will be going back to my constituency tonight and would like to give the Budget a fair wind if I could. Will the Secretary of State therefore confirm that the scheme will not apply to second homes or to people who can afford to provide such a subsidy themselves?

Vince Cable: As I said a few moments ago, there are two schemes. The first, which is the development of a scheme that is already operating, most emphatically does not apply to second homes. The major mortgage guarantee scheme is complex and the Chancellor will consult on how to draw the boundaries around eligible mortgages.

Ed Balls: Will the right hon. Gentleman give way?

Vince Cable: Let me just finish this point.

Ed Balls: Will he give way?

Vince Cable: I will in a moment. Let me just deal with the question of the millionaires who benefit. I remember the 13 years that I spent on the Opposition Benches, asking about taxes. Let us remember the situation. We had a 40p top tax rate, we had an 18% capital gains tax, which was widely used for tax avoidance in the private equity industry and elsewhere, and non-dom tax reliefs were completely uncapped. When we challenged that situation, we were told repeatedly by this shadow Chancellor and others, “No, you can’t do that. You’ll frighten away all the bankers who are generating wealth in the City of London.”

Of course we need a more equitable tax system. That is why the Liberal Democrats continue to argue for a mansion tax. But we have a higher rate of income tax at the top than prevailed in any year of the Labour Government.

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Ed Balls: The Business Secretary is a member of the Cabinet and a student of these matters, and he cares a lot about how the economy works. Can he tell us, because he will have been part of the discussions, whether the new mortgage scheme applies to second homes and buy-to-let. Yes or no? He is the Business Secretary; can he answer the question?

Vince Cable: The scheme has not yet been designed in detail. It was typical of the Labour party that it frequently launched into half-baked schemes without thinking about the detail. This is a major change and it will be planned carefully.

Ed Balls: To be absolutely clear, in two weeks’ time millionaires are getting an income tax cut and the new scheme that was introduced yesterday could allow them to use that tax cut to get a taxpayer subsidy for a second home or a buy-to-let, but the Business Secretary cannot tell us—yes or no—whether that will be the case. Is that not an absolute shambles? Is it not set to be totally unfair? It is a spare home subsidy.

Vince Cable: The right hon. Gentleman does not know, and I do not yet know, what the final outcome of this massive scheme will be. To be lectured with righteous indignation by the people who created a massive property bubble that destroyed this country’s economy and wiped out enormous gains in people’s living standards is the most gross hypocrisy.

Let me turn to some of the other issues that the shadow Chancellor raised.

Guy Opperman (Hexham) (Con): The shadow Chancellor took us on an interesting history tour of former Chancellors. Does the Business Secretary recall who it was who advocated light-touch banking regulation, sold our gold and uttered the famous phrase, “No more boom and bust”?

Vince Cable: Yes, I think we do. That bears repetition and the hon. Gentleman has done it very well.

Mr Reid: Was my right hon. Friend as disappointed as I was that the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) intervened and did not thank the Government for the 18p cut in fuel duty that this Government have given his constituents, thanks to campaigns by myself and other Government Members?

Vince Cable: My colleague is absolutely right. He reminds us of two things that the Government have done. One is the freezing of petrol duty. The other is the allowance for remote communities, which he ably represents, as does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil).

Mr MacNeil: Does the Secretary of State agree that the rural fuel derogation should be increased? A 5p cut is not enough; we really need a 10p cut. I am sure that the hon. Member for Argyll and Bute (Mr Reid) would agree with me.

Vince Cable: I am sure that we would have free petrol in a perfect world.

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Let me deal with some of the points of economic substance that have been raised. The first was about job creation. It is true that in the last set of figures there was a very small increase in unemployment. However, that happened against the context of the last three months, in which 130,000 new jobs were created, vacancies rose and redundancies fell. In this Parliament, we have created 1.25 million new private sector jobs. It is difficult to understand why, if the economy is performing as badly as the shadow Chancellor claims, a large number of new private sector companies are creating jobs in that way. There are regions of the country, such as the west midlands, that in the boom periods saw a decline in private sector employment. That is now being comprehensively reversed.

The question put by my hon. Friend the Member for Portsmouth North (Penny Mordaunt) is apposite: why does the Labour party think that 600,000 jobs are being predicted by the OBR in the coming year? We got the ludicrous answer that it has something to do with immigration, but immigration is about the supply of labour, not the demand. Where is the demand coming from, other than a favourable business environment that encourages small companies to establish and grow jobs?

Mr Russell Brown (Dumfries and Galloway) (Lab): We have listened long and hard to the Government about the number of private sector jobs that have been created—it went from 1 million, to 1.2 million, fell back to 1 million for some reason, and yesterday we heard an announcement of 1.25 million new jobs. Will the Secretary of State put in the Library a complete breakdown of those jobs that states where they are located—not just percentage-wise but numbers-wise—which sectors they are in, and the hours that people are working, so that we know exactly what is happening?

Vince Cable: I understand that some of those details were placed in the Library yesterday, and the hon. Gentleman is free to consult them. I hope he is not trying to deny that the phenomenon is taking place.

Julie Hilling (Bolton West) (Lab): It is not clear how many unpaid, workfare jobs are counted among the jobs created. Clearly, they are not jobs created if people are working for nothing. How many of the jobs are like that?

Vince Cable: These are proper jobs, as defined by the Office for National Statistics. I honestly do not know why Opposition Members are trying to deny a genuine piece of good news that affects their constituents.

Sheila Gilmore (Edinburgh East) (Lab): I thought that perhaps the Secretary of State would like to hear the answer to the question, which is actually in the report by the Office for Budget Responsibility. Of jobs described as jobs created over the past year, 14% are unpaid work experience or work placements.

Vince Cable: I do not understand why the Opposition should be hostile to work experience. All our evidence suggests that people who enjoy work experience go on

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to stable employment. It is an extraordinary state of denial when we have a successful process of job creation that the Opposition do not want to acknowledge exists.

Ed Balls: To clear up the Business Secretary’s confusion a few moments ago—I am not sure whether he or the Chancellor have seen this document, but it might be helpful to them—the Treasury has published a document, “Help to Buy: mortgage guarantee”, which makes it clear that the scheme does not apply to buy-to-let properties. A person cannot take out a mortgage for a buy-to-let property; it must be residential. As far as we can see from the document, however, the scheme absolutely does allow second homes. It is a spare homes subsidy. I do not know whether the Business Secretary has seen the document, but perhaps he would like to comment.

Vince Cable: I am glad the right hon. Gentleman felt able to withdraw his earlier allegation that this was about buy-to-let mortgages.

Ed Balls: For absolute clarity, I asked the Chancellor and the Business Secretary whether the scheme applied to buy-to-let properties, and whether it would allow second homes. Neither of them knew. The Business Secretary said that it had not been decided, but in fact the document has been published and states that the scheme does not apply to buy-to-let properties, but it does allow second homes. The accusation stands. Is that true? It is not in the document; are they going to amend it?

The Parliamentary Under-Secretary of State for Skills (Matthew Hancock): Is it in the document or not?

Ed Balls: It is not in the document—[Interruption.]

Mr Deputy Speaker (Mr Nigel Evans): Order. Please make the intervention briefly.

Ed Balls: The document is very clear. Buy-to-let is ruled out but second homes are allowed. That is a fact.

Vince Cable: I think the shadow Chancellor is digging himself into a certain amount of trouble. He refers to a document as fact, but it is actually a consultation document. Rather more sensibly, the shadow Business Secretary yesterday applauded the new housing initiatives. We will proceed with the consultation, and if the shadow Chancellor has any technical criticisms of the tenure arrangements, he can make them in the consultation process and we will listen constructively.

Mr Chuka Umunna (Streatham) (Lab): With the greatest respect to the Business Secretary, he mentioned what I said yesterday, but I said that not knowing that people who want second homes can take advantage of the scheme. He did not know that either.

Vince Cable: The Opposition Front Bench is getting a little silly. Let us leave it to the consultation and see what comes out. I am sure that those imaginary horrors will not be realised.

The second criticism from the Opposition was about the level of borrowing. I was not clear whether the shadow Chancellor regards high levels of borrowing as a good or bad thing—a rather basic question. Is the

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Labour party in favour of more borrowing, or less? The Institute for Fiscal Studies made a thorough comparison between what is likely to happen under the Government’s fiscal plans and what would have happened under the so-called Darling plan. It was a bit perfunctory, but it gave us a framework and concluded that in 2016-17 the level of borrowing under the Labour trajectory would have been £76 billion, but £24 billion under the coalition’s policy. That is after the revisions that have taken place.

As someone brought up in the Keynesian tradition, I think it rather creditable that the Chancellor has responded to a slow-down in the economy by allowing counter-cyclical stabilisers to apply. I am amazed that those on the Opposition Front Bench find that a source of criticism, when it is good, common-sense, practical economics.

Penny Mordaunt: The shadow Chancellor’s speech not only did a grave disservice to the Chancellor, but to Philip Snowden. I declare an interest as my late mother was Jennifer Snowden so I am related to the first Labour Chancellor of the Exchequer. As a consequence I have his biography which states:

“He was raised in an atmosphere which regarded borrowing as an evil and free trade as an essential ingredient of prosperity.”

Does the Business Secretary think that I should loan my copy to Opposition Members?

Vince Cable: We seem to have forgotten, but I think Philip Snowden was the first Labour Chancellor—[Interruption.] Indeed, there have been many others.

Mr Brooks Newmark (Braintree) (Con): My right hon. Friend mentioned a study by the Institute for Fiscal Studies, but the IFS also noted that under the shadow Chancellor’s plan B, the extra cost of borrowing would be another £200 billion. That surely cannot be good for UK plc.

Vince Cable: The hon. Gentleman has obviously found another version of plan B that I did not discover in my search, but I am sure he is right.

Let us consider what has caused this slow-down, which the shadow Chancellor blames on Government policy. The OBR was clear and explicit and stated that the downward revision in our forecast for 2012 is largely accounted for by a reduction in the contribution of net trade. We are operating in a difficult international context—particularly in the eurozone, which accounts for half our exports—and that largely explains the slow-down that has occurred, and the consequential impact on Government debt and borrowing.

We are giving overriding priority to developing British trade in those markets that have been neglected for many years. Over the past two years, led by the Prime Minister, I and other Ministers have gone back time and again to people in the big emerging economies to promote exports and inward investment. That is why our exports to Brazil and India have increased by more than half, and by approximately 100% to China and 130% to Russia. That diversification of our export base is fundamental to getting us out of this crisis. That is what we are doing, and we are succeeding.

Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): I welcome the Secretary of State’s comments, but they appear pretty poor words for companies

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such as Alcan in Northumberland that is going to shut —the Budget did not come soon enough to provide tax breaks for energy-intensive industries. Furthermore, the steel industry in England and Scotland has been losing out to foreign, imported steel in bridge contracts, as my hon. Friend the Member for Scunthorpe (Nic Dakin) mentioned today in business questions.

Vince Cable: That is a serious point and I am sympathetic to it. My colleagues and I have spent a lot of time talking to the EEF, the CBI and other employers groups about the higher costs of energy and how we compensate for it. A compensation package has been through consultation and is being implemented—the cash will be disbursed soon—for the higher cost of the carbon price floor and the EU emissions trading scheme. I fully understand the hon. Gentleman’s concern—he is absolutely right—and we are addressing it.

Tom Blenkinsop: Further to that point, places such as Wilton, which has the largest chemical industry in the country—

Helen Goodman: It is the largest in Europe.

Tom Blenkinsop: As my hon. Friend reminds me, it is the largest in Europe. Wilton has lost out on the carbon capture and storage programme, which would have added 20 or 30 years’ longevity to the capital on site. The north-east is pushing more than any other region in providing exports for the country, and yet the Secretary of State is not providing the financial support for the infrastructure that was provided by the Labour Government.

Vince Cable: A CCS competition is taking place. As the Chancellor pointed out in his Budget, there is a recognition of the problems of energy-intensive industries in the north-east, Scunthorpe and south Wales. They will be given an extra year of support as a result of yesterday’s announcement.

Richard Fuller: I commend my right hon. Friend’s comments on exports—I have seen for myself UK exports to the Nigerian market. Does he agree that getting traditionally reluctant small and medium-sized business to export is key? Does he also agree that the employment allowance will enable some of our small businesses to take on those additional employees to attack those new markets?

Vince Cable: The hon. Gentleman is right on both counts. I was recently in Nigeria supporting that effort. If we are to have momentum, it must come through small and medium-sized companies. Frankly, the export effort in many emerging markets was neglected for most of the past decade—the relationships are not there and must be built up. He is also right that the employment allowance, which will help 400,000 micro-companies, is a big step forward and a big incentive to them to take on that extra member of staff.

In my concluding section, I shall address some of the big strategic choices made in the Budget. We can argue about temporary changes, but it is important that the country has a sense of direction. First, the industrial strategy gives a sense of direction; secondly, the changes

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in money and banking policy are fundamental after the crisis; and thirdly, the tax agenda creates a greater level of fairness.

On the industrial strategy, I was teased earlier about the “compelling vision” for the British economy, but we clearly need a vision of the economy that goes beyond one Parliament and Government, and that stretches decades ahead. That is why we have made the commitment to long-term planning and working in partnership with business in those sectors of the economy that need such a framework. We have produced agreements with the aerospace industry, and will do so with the automotive and biological sciences industries, and with the supply chains in renewable and non-renewable energy, which were desperately hollowed out in the years when manufacturing was neglected under the previous Government. We are trying to rebuild those supply chains.

A Back-Bench colleague made the point that we have an extra 70,000 jobs in manufacturing after 1 million were lost in the decade of the Labour Government. Of course, the industrial strategy is not just about manufacturing; it is about key service sectors such as education and higher education, and professional and financial services, which are equally important in driving exports.

Andrew Gwynne (Denton and Reddish) (Lab): In the right hon. Gentleman’s three years as Secretary of State for Business, Innovation and Skills, he has mastered being an apologist for the Conservative-led Government. May I politely remind him that he was elected in 2010 as a Liberal Democrat on the Liberal Democrat manifesto, in which, on page 15, he says:

“If spending is cut too soon, it would undermine the much-needed recovery”?

He was right then, but does he still believe he was right?

Vince Cable: I recommend that the hon. Gentleman look at the OBR’s figures to see what has happened to Government consumption in the past three years. In 2010, it grew by 0.5%; in 2011, it grew by 2.6%; and last year, it grew by 0.6%. It is true that aspects of Government spending have been cut in a way that has been damaging. The Chancellor has acknowledged, as I have, that capital spending cuts were a mistake. That was the one bit of fiscal consolidation that the Labour Government launched, and it has had damaging consequences, which is why we are now reversing it.

Helen Goodman: That is not how things look from the perspective of the north-east. The Government destroyed regional development agencies. Of the capital spending the Government have introduced, only 0.5% has gone to the north-east. Why?

Vince Cable: Job creation in the north-east is growing more rapidly than it is in many other parts of the country. It is precisely because the north-east has a higher share of exports in its regional gross domestic product than any other region that it is benefiting from the shift that is now taking place to manufacturing.

Mr Umunna: The Secretary of State says that the Government have made a mistake with their capital spending cuts and that they are reversing them—

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presumably, he refers to the extra £3 billion. However, why are he and his colleagues reversing the mistake only from 2015, when the economy needs the support now?

Vince Cable: I answered the hon. Gentleman’s point in Business, Innovation and Skills questions. Some of the increases in capital spending have already taken place. There was a significant increase in the capital outlay on universities, which my colleague the Minister for Universities and Science is seeing through at the moment in the establishment of R and D centres. After the fiasco of further education college building under the previous Government, the current Government are, in a systematic way, restoring the infrastructure of the FE sector.

George Freeman: This week, AstraZeneca announced a global restructuring, in which it committed its advanced manufacturing facility to Macclesfield in Cheshire, and moved its global R and D to Cambridge, with £300 million investment and 2,000 employees. The Government have moved quickly to set up a taskforce to help with the changeover of the old site to an incubator. AstraZeneca has congratulated the Government on their life sciences strategy. May I congratulate the Secretary of State and Lord Heseltine, whose birthday is today, on the leadership that the Conservative and Liberal coalition is giving on a modern industrial policy for new businesses?

Vince Cable: I accept the hon. Gentleman’s congratulations. Life sciences are a key area. It is a difficult sector, because the business model of pharmaceutical companies is changing—they are taking much of their R and D to spin-off companies rather than having it at their headquarters. That has been painful, but my colleague the Chancellor of the Exchequer intervened to help to make the process in his constituency less painful than it otherwise would have been. However, the decision of that large company to have its headquarters and R and D centre in the UK in East Anglia is a vote of confidence in Britain.

I want to make one more point on the industrial strategy. Apart from supporting successful sectors, we must reinforce those elements of the economy that drive long-term growth—meaning, basically, innovation and skills. That is why I and the Under-Secretary of State for Skills who is responsible for apprenticeships are driving enormous growth in apprenticeships, particularly in key areas such as advanced manufacturing skills. It is also why we must invest significantly in innovation. We have therefore established the chain of catapults, and we have the excellent proposal that my colleague the Chancellor made yesterday for the small business research initiative for small business innovation.

Jack Dromey (Birmingham, Erdington) (Lab): The Secretary of State is right that it was a mistake to cut investment in affordable house building. The £4 billion cut in 2010 brought about a collapse in affordable house building. Housing starts were down 11% last year, 70,000 more construction workers are on the dole, and there has been an 8% contraction in construction. If capital investment is key to getting house building and the economy moving, why did the Government not accept the proposal of my right hon. Friend the shadow Chancellor of the Exchequer for investment to build 100,000 affordable

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homes, which would have added 1% to GDP, put 100,000 construction workers back to work, and got the economy moving?

Vince Cable: Why did the Labour party not do that when it was in government? Why was its first proposal for stabilising the budget to cut capital spending, including on affordable housing? If the hon. Gentleman had read the Budget, he would have discovered that, in addition to the housing policies that will affect private mortgages, it included a significant increase in support for affordable housing in the social sector.

The second long-term change relates to money and banking. One of the big features of the post-crisis economies has been the way in which Governments have had to pursue fiscal consolidation—because of the inheritance they received, and ours was worse than most—alongside supportive monetary policy. I made my maiden speech in 1997 in support of the then Chancellor when he made the Bank of England operationally independent. That was an important and good reform. But we have realised over the years that the world has changed. Inflation took no account of the massive asset bubbles that grew up, and the regime was not prepared for the collapse of the financial system and the difficulties we have had rectifying it. That is why it is right that, following on from the very successful, improvised monetary policies that we have experienced, the Chancellor is now consulting on a changed regime, which will be more flexible and take account of the level of unemployment, the level of nominal GDP and other variables that are crucial to long-term growth.

Jim Sheridan (Paisley and Renfrewshire North) (Lab): In the past, the Secretary of State has rightly criticised the banks and bankers for their contribution to the serious financial difficulties we are in. Can he therefore clarify whether he agrees with the Chancellor that bankers’ bonuses should be capped?

Vince Cable: There already are regulations that affect bankers’ bonuses, which we introduced long before the European Parliament and which firmly cap the amount of bonuses that can be paid out in cash, as opposed to stock, which is not redeemable in the short run. That reform has already been made in order to stabilise the banking system.

I agree that the banking crisis did enormous damage. As someone who has probably spent more time thinking and writing about it than most people in the House, I acknowledge that I have underestimated the damage that was done by the collapse of the banking system, especially the crippled, semi-state owned banks—to such an extent that even if we now ordered those banks to lend more, they would be institutionally incapable of doing so. What we have realised is that there are two problems. The first is the problem that has arisen from the banking collapse itself and the de-leveraging that followed it. The other is the fact that over a decade ago the bankers stripped out their capacity for local relationship banking. Effectively, they looted their banks and denuded them of the capacity to engage in sensible business lending. Of course, that was anticipated in the Cruickshank report, which the Labour Government ignored, but it has done serious damage that makes it difficult to revive conventional business lending. We are trying a series of initiatives to do that.

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On Friday, a new tranche of money will be made available for non-bank lending. Today, we had the advanced manufacturing supply chain initiative, which is helping to fund our supply chains. I put in the Library this morning a written ministerial reply on the business bank, which gives a time profile for how that new institution will support challenger banks and new forms of wholesale financing in the banking sector. The Chancellor’s speech yesterday included a positive initiative on equity capital and helping to relieve some of the burdens on companies going to the alternative investment market on the equity side.

Andrew Selous (South West Bedfordshire) (Con): The Secretary of State is right about the loss of relationship banking: we need to put that right. However, will he acknowledge that businesses can fund themselves in two ways? One is to go to the bank and the other is to raise share capital. What the Chancellor did yesterday on AIM shares and ISDX shares—getting rid of stamp duty—is incredibly useful, but does the Secretary of State agree that business owners need education in how to seek out share capital to grow their businesses? That is key.

Vince Cable: My hon. Friend is right. There are a series of bottlenecks in raising risk capital. At the top end, the problem is accessing equity markets, and at the bottom end the problem is in raising angel finance, which is something else that we are trying to support. As it happens, the business bank will have a role not just in lending, but in developing equity markets for small-scale companies.

Andrea Leadsom: I was delighted that recently the Financial Secretary announced a consultation on a new independent payments regulator. Does my right hon. Friend agree that if we are to solve the problem of the lack of bank lending to SMEs, we need a raft of new challenger banks? The best way to achieve that would be full account number portability, which would encourage new entrants into the market.

Vince Cable: My hon. Friend is right, and the details of the Treasury’s proposals on that point are emerging quickly. For the first time in a lifetime, we are now getting serious challenger banks in the UK, such as Aldermore, Metro, Shawbrook and others, which are an important addition. I hope that the Co-op, the Nationwide and other mutuals that are trying to get into this market will also contribute.

Sheila Gilmore: Is not the real problem the collapse in demand in the economy, partly caused by the stripping out of the public sector, why people are not borrowing, why banks are not lending and why companies are sitting on big assets that they are not spending?

Vince Cable: There is a demand in the economy. When the Government come forward with proposals to stimulate demand, as they did in the housing sector, the Opposition jump up and criticise them.

Jim Sheridan: If press reports are to be believed, a banker is about to receive a £17.5 million bonus. If that is correct, what has the cap been set at?

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Vince Cable: I deprecate that and I am surprised that the new chief executive of Barclays, who seemed to have turned over a new leaf, has allowed that to happen on his watch. But of course it is a private bank. It is subject to regulation and the high-paid executives will be properly taxed at a higher rate than ever happened under the Labour Government.

While we achieve long-term change, develop an industrial strategy and change the monetary and credit landscape, people have to have a sense of fairness, which is why some of the basic changes, including taxation reforms, are being made. I reminded the shadow Chancellor a few minutes ago of my 13 years in opposition, pointing to the tax regime that applied under the Labour Government, with lower income tax, lower capital gains tax and more generous treatment of non-dom investors than is occurring under this Government. The Opposition complain about a millionaires’ tax break, but they should remember that in office they created a tax haven for billionaires. That is the legacy that we have had to deal with, and we are dealing with it at the top end of the income and wealth scale, as well as at the bottom with our ambitious proposals to lift low earners out of tax. In 2006, when I was shadow Chancellor, I remember explaining these proposals for the first time, and they were ridiculed by Labour as impractical, unaffordable and a fantasy land. In government, we have now delivered them, and some 2.5 million low-paid workers, many of them women, will pay no income tax when these changes are introduced. That is a major change in the direction of providing incentives and fairness, and I am proud to be associated with that and the other reforms that we are putting through in this Budget.

Several hon. Members rose

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I remind the House that we will have a seven-minute limit on Back-Bench speeches.

1.18 pm

David Wright (Telford) (Lab): It is a pleasure to follow the Business Secretary. He is of course right that there is demand in the economy: it is demand for change. It is significant that last year we had the omnishambles Budget and this year we have had a Budget from a Chancellor imprisoned by his own rhetoric and his own record. What we needed this year was a bold Budget to break us free from the Chancellor’s record of nearly three years of a flatlining economy. We heard a lot about fuel yesterday, and slogans about driving the economy forward. In 2010, the Chancellor said that the economy would grow by more than 2% every year up to 2015, a steady drive on the road to recovery. Well, he has failed. He has not got the UK economy into gear. This debate is about growth. He has failed on growth, and the triple A rating fell off the roof rack on the way.

Budgets tend to unravel as the details are revealed, and we have seen that this afternoon. It is less than a day since the Chancellor sat down, and we have already seen cracks appearing in the second homes subsidy and the Budget as a whole, and I have no doubt that will continue in the coming days. He could have kept it simple. The fact is that for most people the standard of living is under severe pressure. Energy and other everyday

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household bills are rising, wages are stagnant, real wages have fallen since the Government came to power, and those on the lowest incomes and on benefits are seeing their incomes falling. That is bad for them, obviously, but it also sucks demand out of the economy and creates a crisis of confidence.

The priority of this Budget should have been a dash for growth to instil confidence in the UK economy. We have already heard the Business Secretary admit this afternoon that there was a split in the Government on this strategy; a split that still has not been resolved. The Chancellor has never admitted that he got his economic strategy wrong in the way that the Business Secretary did this afternoon. The problem is that the Chancellor is lashed to the mast of austerity. To break free would be a significant admission of his own failure, so the only cry we hear from the Chancellor is “O Canada!” He is hoping that the new Governor of the Bank of England will adopt a pro-growth strategy to dig him out of this hole with a new monetary approach, because the Chancellor cannot come to this Chamber and admit that he got it wrong.

We should dwell for a few moments on the geographical perspective to the health of the UK economy. Within the M25 ring, the London economy is pretty successful. It is patchy in areas, but it is a major engine for our economy. Outside of the M25, the situation is particularly patchy. As a whole the economy is flatlining, but there are significant regional and sub-regional problems that the Budget did not address at all. Basically, the Government have binned their regional economic development strategy—a comprehensive approach to renewing our towns and cities and ensuring growth. Centre for Cities produced its “Cities Outlook 2013” report recently. It said:

“The 64 cities that Outlook assesses account for 53 per cent of businesses, 58 per cent of jobs and 60 per cent of UK economic output. As such, policy that can help to stimulate urban growth by making the most of cities’ distinctive strengths and weaknesses will help stimulate growth of the national economy.”

Telford is one of those 64 cities, and we need help. Unemployment in Telford is stubbornly high at 7%, and a large proportion of the unemployed are aged between 16 and 24. Median rates of gross weekly pay are lower than elsewhere in the west midlands and England. The Budget did nothing at all to help young people. I did not hear the Chancellor talk about the problems faced by young people; it certainly was not a major element of his Budget.

We are not sitting back and doing nothing in Telford. We are trying to make a difference. The Labour council is leading a major drive on apprenticeships, and Telford College of Arts and Technology is working hard to offer training and development in local companies. We are delivering new schools across the borough through the Building Schools for the Future programme—the last great legacy of the previous Labour Government—and providing new learning environments. We are regenerating estates such as Brookside, and are making a significant investment, in partnership with the private sector, in the town centre as part of the Southwater scheme.

What we need now is a Government who are as keen as our Labour council in Telford and Wrekin to make a difference. We need a city deal for Telford. Twenty cities have been asked to bid in the second round of “city deal”, in addition to the major cities that have already

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secured it. We need the flexibility to work with Government to bring in investment. In Telford, Homes and Communities Agency land has been sitting idle since the new town corporation was wound down, and it is ready for development. We could be developing a profit-sharing deal with the Government for those land sites, working together to shift them off the Government ledger, getting investment for housing and infrastructure into our town, and profit-sharing with the Treasury. That would be good for the local community, good for the Treasury and would get the economy moving. I call on the Business Secretary to think about that. I hope he is willing to meet representatives, along with the Secretary of State for Communities and Local Government.

We need a flexible approach to the regional strategy. The Government have totally destroyed their regional approach to economic development. They need to think again about the existence and structure of regional development agencies. I spoke to the business community in Telford after the Budget via a phone-in conference. They told me that they are extremely worried that the local enterprise partnerships are not dynamic or effective enough, and do not knit together different elements across the region.

Telford needs to be driving for growth. We have the capacity to do that, and the Government need to help us. I see nothing in yesterday’s Budget that will help us, and I hope they change course. They could have done a lot things, but a major measure would have been to cut VAT. VAT is sucking demand out of the economy, and they could have moved on that yesterday.

1.25 pm

Mr Tobias Ellwood (Bournemouth East) (Con): It is a pleasure to participate in this important debate.

Labour has had its moment to spell out what it would do. We heard a lot of noise yesterday, and we have heard a lot today. What we thought was Keynesian economics was actually Hayek’s economic policy, because Labour is saying “Let’s do absolutely nothing.” It is welcome news that in the coalition’s fourth Budget, following the biggest financial crisis in our history, the deficit has been reduced by one third, employment is at record levels and private sector jobs are finally replacing those in the public sector by a ratio of 6:1. It is a difficult climate out there.

David Rutley (Macclesfield) (Con): Does my hon. Friend think that one reason why Opposition Members are so gloomy is that they have failed to notice that the International Monetary Fund growth forecast for France and Germany for this year and next is lower than that for the UK?

Mr Ellwood: My hon. Friend makes the point I was about to come on to. We are suffering from international gloom. Along with other major economies around the world, such as France, Germany, Japan and the United States, we are faring better, despite the problems of high oil and commodity prices and the frustratingly slow resolution of the eurozone crisis. That is thanks to the Government’s strategy of monetary and fiscal responsibility, along with supply-side reform.

In layman’s terms, monetary policies reflect the price the Government pay to borrow money and the total supply of money itself. It is thanks to our low interest

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rates that the cost of borrowing for individuals, banks and the Government is low. That helps to keep inflation low and provides the stability that investors need for confidence in the markets. On fiscal policy—how much money goes into the pot through taxes, and what comes out to influence economic activity—this Government are smaller than the previous Government. They have cut waste and are costing the taxpayer less, which is very positive. Indeed, the public sector borrowing requirement is down by a third from its post-war peak, only three years ago, of 11.2% of GDP.

There are many incentives in the Budget to help influence economic activity. I will mention just three main measures: the introduction of the £10,000 personal allowance, which essentially is a £700 tax cut for 24 million people; the new £2,000 employment allowance; and a cut in corporation tax to just 20%, which makes us one of the most competitive economies in the G20. They are all signs that Britain is open again for business.

There is not enough time to go through the other key aspects of the Budget that were mentioned in yesterday’s debate. The Help to Buy scheme, the new mortgage guarantee scheme, the cancellation of the 3p rise in fuel duty and the introduction of tax-free child care are all very welcome. I particularly welcome the £3 billion capital spending commitment and the £1.6 billion of sector-targeted funding, some of which I hope will come to my constituency of Bournemouth East, and to Dorset, which is developing an international reputation in aerospace industries and the digital economy. Indeed, it is nicknamed the silicon beach of south England.

The 0.7% GDP target for overseas development assistance spending is an historic achievement and sends an important message to the rest of the world about our lead role in the international community. Unsurprisingly, given the waste and mismanagement under the last Government, some are sceptical about how the money is being spent, but it is clear how ODA funds can be spent. It matters not who signs the cheques; what matters is what the project does, although traditionally the Department for International Development has signed them. On the modern battlefield, however, it is no longer just about defeating the enemy, but about giving the people who have been liberated the skills to look after themselves. Clearly, war fighting does not qualify for ODA funding—that would be wrong—but peacekeeping and nation-building tasks do.

Bob Stewart (Beckenham) (Con): In 1992-93, when I was sent to Bosnia in a peacekeeping role to deliver humanitarian aid, the cost of my deployment was met by the Ministry of Defence. I felt, and still feel, that the Overseas Development Administration, as DFID was then known, should have paid some of the costs of our operations in the Balkans.

Mr Ellwood: My hon. and gallant Friend’s thinking is the same as the Secretary of State for International Development’s and the Prime Minister’s. Those stabilisation skill sets—post-conflict and nation-building skills—should be funded by DFID but executed by the MOD, because although the budget sits with DFID, it is clear that the MOD is doing incredible work in this post-conflict world. We could have saved £24 billion in Afghanistan and £8 billion in Iraq had we moved from war-fighting

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to peacekeeping far quicker and avoided the delay that followed completion of the fighting. I urge the Chancellor to consider that matter carefully.

Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op): Does the hon. Gentleman think that the Secretary of State for International Development should come here to explain the under-spend, on page 70 of the Red Book, of £500 million in the DFID budget and tell us which projects, programmes, international subscriptions and other things—perhaps relating to peacekeeping—have not been paid this year, but have been stopped in order to sort out the borrowing figures?

Mr Ellwood: Before I reply to that, Mr Deputy Speaker, may I point out that the clock did not stop? I hope you will give me some injury time.

Mr Deputy Speaker (Mr Lindsay Hoyle): The hon. Gentleman will get no injury time, because he has given way twice before.

Mr Ellwood: I stand corrected. I understood that I got an extra minute for the first two interventions and that after that, if someone intervened, the clock stopped.

It is disappointing that we have not heard any answers from Labour. It has offered nothing constructive; in fact, it is in a state of denial. Its strategy seems to be to employ a little inaccuracy and a spot of amnesia, and to avoid a ton of explanation. It is now apparent that under Labour, government was too big, too costly and too inefficient. Labour allowed banks to lend money to people who could not afford it, using financial instruments they did not understand. When the history books are written, it will become apparent just how much damage the former Labour Chancellor and Prime Minister did. He will probably go down as one of the most disastrous Chancellors in history.

The former Chancellor not only doubled national debt, but killed off British competitiveness and introduced the “something for nothing” culture that this Government are now undoing. Labour squandered their 13 years in office, and it is now left to this Government not only to solve the economic mess and make Britain more competitive again, but to simplify the tax system, curb immigration, modernise the benefits system and restore respectability to our pensions system. Labour has proven the adage that occasionally applies in this Chamber: the democratic right to be heard here does not include the right to be taken seriously.

In conclusion, this is a constructive and progressive Budget that will provide a further stimulus to the economy and help hard-hit families and individuals seeking to get on. From my days as a young officer, my philosophy in life has been not to complain about the weather, but to march with determination out of the rain. That analogy holds today, as this Conservative-led Government lead Britain out of the economic storm, while Labour, which created the mess, offers no helpful solutions whatsoever, other than to repeat past mistakes such as encouraging the spending of money we do not have. We will not stop reminding the public of the last Government’s mismanagement of the economy. Whatever speculation there might be about opinion polls, small parties or

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even possible Lib-Lab pacts, the bottom line is clear: either a Miliband or a Cameron will occupy No. 10. I know whom I would prefer to lead the country, and it is not the former adviser to one of the worst Chancellors in history.

Several hon. Members rose

Mr Deputy Speaker: I remind hon. Members that they get two hits with two minutes, but no extra time for interventions after that. Hon. Members should also be aware that every intervention could knock someone off the bottom of the list. If someone is desperate to intervene, therefore, they should understand if they do not get called in the end.

1.35 pm

Pamela Nash (Airdrie and Shotts) (Lab): It is a pleasure to follow the hon. Member for Bournemouth East (Mr Ellwood). Interestingly, he used the analogy of walking out of the bad weather. The Chancellor used exactly the same analogy on Radio 4 this morning, but he blamed the economic weather for everything that was going wrong with the Government’s economic policy.

I am grateful for the opportunity to put forward my constituents’ deep concerns about the Budget. A Budget should speak to the entire country, but when the Chancellor delivered his statement yesterday, he spoke not for one nation, but for individuals, such as the millionaires who will benefit from his top-rate tax cut in just a few days. Today, I shall focus on the impact that the Budget will have on my constituents and the effects that his economic policies have had in Airdrie and Shotts.

The unemployed claimant rate in my constituency stands at 8.4%. That is not only higher than rates in the rest of Scotland and the UK, but much higher than when Labour left office. The same applies to the employment count across Scotland. Today, there are 145,000 jobseeker’s allowance claimants in Scotland—the same as the population of Dundee. This dole queue of people would reach from Edinburgh to Glasgow. The claimant count in my constituency is now three times what it is in the Chancellor’s constituency. In 2007, two people were going for every vacancy, but now 12 people are chasing every job.

Long-term unemployment is also an issue in my constituency. According to the stats, the number of people who have been unemployed for more than a year is up by 52% and the number of young people who have been unemployed for 12 months has risen by 116% in the past year alone. That is not acceptable. Youth unemployment in Scotland is one third higher now than it was in May 2010, with 38,000 young people claiming jobseeker’s allowance in Scotland—more than the entire population of Airdrie. How can it be acceptable that such a large number of young people are blocked from achieving their dreams and aspirations after two years of austerity measures?

The Chancellor called this Budget the aspiration Budget, but not one word of it spoke to young people. These are not faceless statistics; I am speaking about my constituents and people I have grown up with and known my whole life. Just a few days ago, a constituent I went to school with contacted me. He wanted to tell me how much the Government’s policies were affecting him. He served his country in the Army, before returning

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home and working as a security guard on a construction site. Like many of those in the industry, however, he now finds himself unemployed.

Not only does my constituent have to worry about finding a job in an economy facing the increasing likelihood of a triple-dip recession, but he will now be hit by the bedroom tax. He rents a modest two-bedroom home to allow his child to visit him at the weekends, but owing to his current situation he is now dependent on housing benefit and has the choice either of not having his child stay overnight in their own bedroom or being forced to move away from the area in which, like me, he has lived his whole life. How many Government Members truly understand the problems he is facing? When they talk about tough choices, I doubt that any of them ever have to make the decisions that he has to make, choosing between seeing his child and paying the rent.

The case of my constituent is not an isolated one. The National Housing Federation has said that 2,000 people in my constituency are losing out from the bedroom tax. My local authority of North Lanarkshire council has 5,500 tenants who will be affected by it, but at the last count it had just 26 one-bedroom properties available to rent. With those figures, where are those 5,500 people supposed to go? There is nowhere for them to go; they simply face a painful benefit cut. This is an attack on our most vulnerable and on many who are struggling with bills every month and with under-employment, and it is resulting in millions of pounds being taken out of my local economy.

If the Government really want to solve the problem, one of the things they should do is build more houses. That would go a lot further to support growth than the bedroom tax or the mortgage guarantee that was announced yesterday, which is already falling apart at the seams. In Scotland, housing makes up 40% of the construction sector. Every £1 spent on housing generates £3 in the wider economy. It is a no-brainer. Every new home creates two jobs in the construction sector and four in the supply chain. When construction makes up a third of the businesses in my constituency and around one in 10 jobs, hon. Members can see why I was hoping that capital spending in Scotland would be a bit higher than was announced yesterday. The Scottish Government could also do a bit more with the money they already have. Some 40,000 construction jobs have vanished in Scotland since the Scottish National party came to power, and in December more than 14,000 construction workers were still on the dole.

There are things the Government could be doing. For example, my local council—Labour-run North Lanarkshire—is working to help to create private sector jobs through its youth investment programme, which helps small businesses by paying 50% of the cost of employing a young person for the first year. It also has programmes helping older workers to return to work. I hope that the Government might go away and look at that example—I am happy to provide more information on it—to see how simple, practical support is making a difference to help small and medium-sized businesses and create employment just where it is needed.

To conclude, yesterday’s Budget offered none of the helpful measures that I and my constituents were hoping for. We need a change of course to bring growth back into our economy. If this Chancellor will not change course, the next Labour Government will.

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1.42 pm

Mr Nick Gibb (Bognor Regis and Littlehampton) (Con): It is a pleasure to follow the hon. Member for Airdrie and Shotts (Pamela Nash), but I should point out to her that unemployment in her constituency has fallen by 3.8% over the last 12 months and youth unemployment by 9.3%.

I welcome this Budget, in particular the cut in corporation tax to 20% from April 2015; the rise in the personal allowance to £10,000; the cancellation of the planned fuel duty rise; the new measures to counter tax avoidance, particularly the information-sharing agreements that have been reached with the Isle of Man, Guernsey and Jersey; and the abolition of stamp duty on share transactions on small company growth markets, which will help to reverse the bias in the tax system towards debt financing and improve the tax position of equity financing. I also welcome the new remit for the Monetary Policy Committee, which means it can issue guidance about future interest rate expectations. Monetary policy is key to reviving growth, and the fact that the monthly 12-month growth rate of M4—the broad money supply—has been negative since October 2010 demonstrates the need for continued low interest rates.

Above all, I welcome the Government’s continued commitment to fiscal consolidation and restraint in public spending—policies that in my view have been remarkably successful over the last three years in reducing the budget deficit from a staggering £159 billion in 2009-10, or some 11.2% of GDP, to £121 billion in 2011-12, or some 7.9% of GDP. There have been two guiding principles to the Government’s fiscal policy—the fiscal mandate—which says that the structural deficit shall be eliminated within the five-year forecasting horizon. As table B.6 on page 105 of the Red Book makes clear, the cyclically adjusted surplus on current account—that is, the structural deficit—will move into a surplus of 0.1% of GDP by 2016-17, a year ahead of the five-year time horizon. The supplementary target—that the Government’s total accumulated debt should be starting to fall as a percentage of national income by 2015-16—will be met by 2017-18, with a fall from 85.6% of GDP in 2016 to 84.8% in 2017-18. That is two years later than the target; nevertheless, it is forecast to be achieved. The fact that the Chancellor has not tightened the fiscal position further in order to meet the target by 2015-16 is evidence that the Government’s economic policy is far more nuanced than critics suggest.

My right hon. Friend the Business Secretary, in his article in the New Statesman cited a paper by Carmen Reinhart and Kenneth Rogoff that made the important point that

“financial crises are typically followed by slow and difficult recovery.”

Given that Britain had the biggest banking sector relative to GDP of any major country, it is inevitable that Britain’s recovery was going to be slow and difficult. The key is that it is heading in the right direction, which is also the view of most informed commentators, such as the OECD. As it said in its 2013 economic survey of the UK, which was published last month,

“The fiscal stance remains appropriate”.

It went on:

“the Government’s decision in the December 2012 Autumn Statement to continue with its existing consolidation plans and not to override the automatic stabilisers in order to meet the supplementary debt target is appropriate.”

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In other words, the fact that accumulated debt will not start falling as a percentage of GDP until 2017-18 instead of 2015-16 is not only acceptable; it is also a beneficial fiscal stimulus—the automatic stabiliser. As the Institute for Fiscal Studies says in its “Green Budget”,

“since meeting the target would do little to ensure the sustainability of the UK’s public finances, the fact that it looks set to be missed should not, on its own, cause significant concern about fiscal sustainability.”

As my right hon. Friend put it in his article, the Government have been

“sufficiently pragmatic to allow the fiscal consolidation to drift from four years to seven.”

When I listen to the shadow Chancellor arguing that we should spend and borrow more to stimulate demand in the economy, I would argue that because the Government have done that, but through the automatic stabiliser, they maintain the confidence of the capital markets, whereas his approach would not. As a consequence, there are 1.25 million new private sector jobs, while unemployment has fallen over the last 12 months by 4% and youth unemployment by 13%. Indeed, in the shadow Chancellor’s own constituency, unemployment has fallen by 2.5% and youth unemployment by 12.5% over the last year.

To those who argue for stronger spending cuts to fund further tax cuts, I would argue that the fall in public sector employment of 300,000 between 2010 and 2013 represents a sizeable reduction in the state sector, with the IFS forecasting that the figure will fall by 900,000 in total by 2017-18. I would also argue that the cuts in corporation tax are precisely the supply-side tax cuts we need to stimulate the business sector, while the rise in the personal allowance is likely to be the most effective tax reduction measure to boost demand.

If there had been more time, I would have said more about exports and the damage and the threat that the eurozone crises have already caused and may continue to cause to the economy’s growth prospects; about the importance to Conservatives of continuing to maintain strong spending on the NHS, particularly with a growing elderly population and ever more developments in medical science; and more about domestic demand in the economy, which the figures show is strong. In short, I believe it is vital that the Government continue on this rocky road to recovery and do not allow themselves to be pushed off course by siren voices claiming that there are short cuts, which of course there are not.

1.49 pm

Dan Jarvis (Barnsley Central) (Lab): I am grateful for the opportunity to contribute to this important debate at this important time. The Chancellor told us yesterday that his priority was to promote an “aspiration nation” with a Budget for those who want to work hard and get on. I hope he will understand if we are sceptical about his ability to deliver, given that in each of his last three Budgets he set out his key priority and test for the Budget, and in each of those three Budgets, he has failed to deliver.

In 2010, the Chancellor’s priority was tackling the deficit. That Budget was, he said, the Budget to deal with our country’s debts. But what has happened to our country’s debts? Today, national debt as a percentage of

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gross domestic product is not forecast to start falling until 2017-18, and borrowing is forecast to be £245 billion more than planned at the time of the spending review, to pay for the mounting costs of this Government’s economic failure.

In 2011, the Chancellor’s priority was promoting growth. That was the Budget that the Chancellor named the “Budget for growth”. Since 2010, however, the UK economy has grown by just 0.7%, compared with the 5.3% forecast at the time. Last year, the UK endured a double-dip recession and the economy shrank by 0.3% in the final quarter. Only three other G20 countries have grown more slowly than the UK in that time, and the Office for Budget Responsibility’s growth forecast has halved from 1.2% to 0.6% since the autumn statement.

In 2012, the Chancellor placed an emphasis on rewarding those who work. I concede that he has made some progress towards that goal. For the wealthiest in today’s society, there is a huge reward for work—in fact, a £100,000 reward. Unfortunately, it is those who are struggling on low and middle incomes who are suffering, including many people in constituencies such as mine.

Barnsley is a town with a proud history and it should have a bright future, but each week, I see what the Chancellor failed to address yesterday: a lack of opportunity, a lack of growth in our economy and a lack of vision from a Government who are more interested in running the country than in changing it. According to the latest figures for my constituency, the number of people claiming jobseeker’s allowance is at its highest since May 2010, at 7.8%. The figure for young people claiming JSA is 13.7%.

Duncan Hames (Chippenham) (LD): Unemployment is an important matter, and it is important that our constituents should have jobs. Is the hon. Gentleman trying to tell us through those statistics that unemployment in his constituency was higher under the last Labour Government than it is today?

Dan Jarvis: I was simply stating a matter of fact: unemployment in my constituency is higher now than it was in May 2010. The number of young people claiming jobseeker’s allowance is now 13.7%, which is higher than it was in 2010. Those people in my constituency want to work, to provide for their families and to earn a living. They want to get on the housing ladder, to save for their old age and to contribute to our town, but the jobs are simply not available.

Yesterday, we heard the Chancellor set out his latest scheme to provide growth: a new infrastructure plan. During the course of this Parliament, we have already heard about the Government’s national infrastructure plan—in 2010, 2011 and 2012. Despite the promises, however, infrastructure spending in the public and private sectors has fallen, year on year, according to the Office for National Statistics. Frankly, my response to this latest announcement is, “We’ll believe it when we see it.”

A lack of growth has a multitude of effects, and they are being felt most acutely by our low and middle income families. Utility bills are rising, the price of food is rising and fuel costs are rising, all at the same time as wages are stagnating. A typical low income family will see their net income fall by 15% by 2020, while the wealthiest households will see their living standards grow.

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Fairness has been the one consistent priority for the Chancellor in every Budget since 2010, yet fairness is the area in which he is failing to deliver the most. This Government’s favoured slogan, “We’re all in this together”, simply does not ring true as inequality deepens and the Chancellor’s policies target those who have the least to give. It cannot be right that millions of ordinary families are being forced to pay more for this Government’s economic failure, through cuts to tax credits, child benefit and maternity pay and through the bedroom tax, while at the same time, the most well off in society are set to receive an average £100,000 tax cut.

The Budget, and the Chancellor’s record, have failed to secure economic recovery, and that is certainly not fair. We have had three Budgets and three failures. On every economic test that the Chancellor has set himself, he has fallen short. On deficit reduction, on growth, on rewarding those who work and on fairness, he has failed those who need the Government the most. Despite numerous opportunities and calls to change course from the Opposition and from Members within his own party and even from members of the Cabinet, the Government continue on a reckless course that is serving only to prolong the economic crisis, and it is people in my constituency of Barnsley Central who, sadly, will pay the price of this failure.

1.56 pm

Andrew Griffiths (Burton) (Con): I recognise that time is short so I will do my level best to keep my comments as brief as possible. I speak as the Member of Parliament for Burton, the home of British brewing, and as the chairman of the all-party parliamentary beer group. It is therefore incumbent on me to put on record my thanks, and those of the brewing industry, for the Chancellor’s momentous decision yesterday to scrap the beer duty escalator and cut beer duty by 1p. We cannot underestimate the importance of the decision for brewers, for publicans and for beer drinkers across the country.

In his speech today, the shadow Chancellor dismissed the 1p cut in a bit of a flippant way, but I think that the 1,745 people who are employed in brewing and pubs in his constituency will be hugely grateful to the Chancellor, who has shown himself to be on the side of the publicans and beer drinkers of this country. The previous Chancellor of the Exchequer appeared on posters in pubs up and down the country stating that he was “barred from this pub”, because his Government had chosen to introduce the beer duty escalator, which has resulted in beer duty rising by an incredible 42% since 2008. That has contributed to the closure of many of our communities’ pubs in that period.

I am therefore delighted to support a coalition Government who have done more for brewers and pubs than any other Government for a generation. I went to the House of Commons Library yesterday and spoke to the Treasury expert. I asked him when a Chancellor had last cut the duty on beer. He replied, “Mr Griffiths, this might take some time, as it was so long ago. I shall have to go away and research it.” He came back with the answer: Derick Heathcoat-Amory was the last Chancellor to cut the duty on beer, in 1959. Someone who was just old enough to enjoy a pint of great British beer at that reduced price in 1959 would now be 72 years old.

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It is important to applaud the campaign that has led to these changes. As the chairman of the all-party parliamentary beer group, I want to thank colleagues from all across the House who have supported it. Members on both sides have worked incredibly hard on behalf of their brewers, publicans and beer lovers. We all recognise the importance of the community pub and the role it plays in the heart of our constituencies. This measure provides us with a real opportunity to support those pubs.

David Rutley: I join many others in paying tribute to the great work my hon. Friend has taken forward. I received one tweet yesterday from the Wharf in Macclesfield saying this was

“a good Budget for pubs, the brewing trade and all industry”.

Has my hon. Friend received similar plaudits from people across the country?

Andrew Griffiths: I thank my hon. Friend for the support he has given to pubs and breweries as part of this campaign. I agree: I have been overwhelmed by the number of publicans, brewers and members of the Campaign for Real Ale and beer lovers who have welcomed this announcement. He quotes one brewer and I will quote another—Belinda Sutton from Elgood & Sons in Wisbech in Cambridgeshire who said:

“The result could be the saving of our brewery, as this was just what we needed to…stimulate trade in our pubs and hopefully increase production.”

That is so important: every brewery and every pub in our constituency are important employers, so it is fantastic that we can give them this boost. I am absolutely sure that when this cut is introduced on Sunday, beer drinkers across the country will be raising a glass to the Chancellor and toasting his health.

I am hugely sorry that the Economic Secretary is not in his place on the Front Bench, as we owe him a huge debt of gratitude. Within days of him becoming a Minister—I think it was his first ministerial duty—he spoke in a Backbench Business Committee debate to which many Members contributed. He said then that he was listening. He is a listening Minister who has listened on behalf of pubs and brewers across the land.

I would also like to pay tribute to CAMRA and its thousands of supporters who took part in this campaign and who participated in the mass lobby organised by Emily Ryan and Jonathan Mail to explain to Members of Parliament just how important their community pubs and great British beer are to them. I commend, too, the work of the Beer and Pub Association, which works tirelessly to build a bright future for pubs and breweries across the country.

I end my comments there. Let me just say that this is a great Budget for brewers, a great Budget for beer and a great Budget for beer drinkers in Britain.

2.2 pm

Jim Sheridan (Paisley and Renfrewshire North) (Lab): I want to raise an issue that is close to my heart—the Scotch whisky industry—not just because it is an excellent tipple when taken responsibly and because I am chair of the all-party group on Scotch whisky, but, more importantly, because that industry provides hundreds, if not thousands, of jobs in this country.

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The Chancellor suggested yesterday that he was cutting beer duty to help boost pubs, yet as 40% of pub sales come from spirits and wine, his duty increases on Scotch whisky and other drinks mean that when it comes to pubs, he has given with one hand and taken back with the other.

Andrew Griffiths: Will the hon. Gentleman give way?

Jim Sheridan: No, I do not have time.

Like the Chancellor, I wish to see British businesses succeed to help to secure British jobs. The Chancellor talked about the opportunity for UK business that a successful free trade agreement would bring. He talked about backing businesses that are a global success. For the Government and the European Commission, improved market access and reduced discrimination are priorities for the Indian free trade agreement talks. In a spectacular lack of joined-up government, in one speech the Chancellor has attacked Scotch whisky—the one industry that is currently investing for international growth to India and elsewhere—by increasing discrimination against it here at home.

Andrew Griffiths: Will the hon. Gentleman give way?

Jim Sheridan: No.

What sort of signal does that send to overseas markets? British ambassadors around the world who are trying to help Scotch gain fairer trading conditions will be shaking their heads at the example set by our own Chancellor here in this country. This industry accounts for 25% of UK food and drink exports, generating some £134 a second for the UK balance of trade, yet the Chancellor’s only action is to penalise it in its home market. The UK is the third largest market for Scotch whisky in the world, and some companies depend on the UK market for success.

Andrew Griffiths rose

Jim Sheridan: As I have said, this industry employs people in areas where few alternative jobs exist. The Chancellor threatens jobs in such areas, as the Chief Secretary presumably told him. [Interruption.]

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Mr Griffiths, you have already spoken. The Member does not want to give way and we do not need a running commentary from the Back Benches.

Jim Sheridan: Thank you, Mr Deputy Speaker. I have been heckled by better.

Perhaps the Chancellor will explain to pensioners enjoying a dram why they should have to pay 48% more duty for the alcohol they enjoy than their neighbours who prefer a beer. Only three countries in the EU penalise Scotch whisky more than the UK does. It is time to halt the duty escalator for all and to start backing, not penalising, our successful industries.