11.51 am
Jacob Rees-Mogg (North East Somerset) (Con): The Budget shows that this Government’s policies are beginning to work in the context of what Governments can realistically do to help an economy. The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) suggested a fantasy world in which Governments can send a Chancellor to the Chamber on a Wednesday morning to press a growth button and introduce a new policy that will suddenly do this, that and the next thing. That is what some rather poor economists thought in the 1960s, but they have been proved comprehensively wrong. What Governments can do is set the framework within which businesses and individuals can lead economic growth. Governments cannot of themselves—they even failed to do this in the Soviet Union—create real growth just by the fiat of the Government.
How can we see that the Government’s policy is beginning to work? Two crucial statistics are now available. The first is the reduction in Government spending—the cut from 47.4% of GDP to 43.6%. That is a substantial reduction in the Government’s share of the nation’s income. It has taken some years to achieve and it needs to be reduced further, because, on average, it is very hard for Governments to get more than 38% of GDP in taxation—if it remains at 43%, there will still be a big deficit—but it is a huge move in the right direction to create stability in the economy, which will then allow businesses and individuals to lead economic growth.
Jane Ellison: Does my hon. Friend therefore share my surprise that the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) said from the Opposition Front Bench earlier that the Government were making no progress in rebalancing the economy?
Jacob Rees-Mogg: Opposition Members are talking about their new path. There was a Shining Path in one country at one point, but that was not very successful, although the Opposition are probably looking for the Via Dolorosa. We are definitely making progress.
I want to pick the hon. Member for Glasgow North East (Mr Bain) up on his wonderful reference to the 1930s. I was pleased that he reminded us of our splendid slogans, which I will certainly use in my election campaign.
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I think that this was a “Safety First” Budget, and quite right too. What the country needs is genuine prudence, rather than the prudence of the late ’90s and early 2000s.
Mr Bain: I was referring to the 1920s rather than the 1930s, but I think the point applies. The hon. Gentleman refers to growth, but given that the private and public sectors are retrenching, where will demand in the economy come from for there to be growth?
Jacob Rees-Mogg: There is a union of people whose seats have “North East” in their names and who make helpful interventions. I am extremely grateful to the hon. Gentleman because he leads me right to my next point, which is about the absolute essence of where growth will come from. I refer right hon. and hon. Members to page 56 of the “Economic and fiscal outlook” produced by the Office for Budget Responsibility, which contains charts on household leverage indicators. That is crucial because about three-quarters of the economy is dependent on private consumption. What we needed, and what has taken time, is for household budgets and balance sheets to rebalance at the same point as the Government balance sheet and budget.
In these charts we see that income leverage—interest payments as a percentage of income—is now at an historic low. That is important because it means that households can now afford to spend. Even more important, asset leverage is back alongside historic averages, so households are no longer over-geared in the way they were in 2007 and 2008. I actually think that the figure on household leverage is overstated because there is still a lot of bad debt in the system that the banks have been reluctant to write off because of concerns over their balance sheets. That is what has happened over the past few years. By following stable and sensible policies, the Government have allowed households to shore up their balance sheets, which means that they will now be in a position to begin to spend again should they wish.
Having looked at the big macro picture of two crucial things—Government expenditure under control, and household balance sheets restored—it is worth considering some of the positive detail within the Budget. The £2,000 cut in national insurance for businesses is fantastic. We know that small businesses are the ones that create new jobs—a series of data from the United States show that, on average, large companies shed 1 million jobs a year, while small companies create just over 1 million jobs a year. The reason for that is straightforward: large companies are always looking to cut costs, but small companies are where new ideas are built up. Anything that helps small businesses is welcome and national insurance is a very bad tax on jobs. I hope that ultimately the Government will look at national insurance in the round, but that will need to be in a time of boom, rather than a time of austerity.
The other policy that is relevant to today’s debate, which was opened by my right hon. Friend the Secretary of State for Work and Pensions, is the £10,000 tax threshold. That is a joy to behold because it gets us away from the taxation and benefits merry-go-round where people on low incomes are taxed and then given back some of their own money, once the Government have taken a cut for administration. We want to get that threshold as high as possible so that we do not tax
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people and then give them benefits. We want to get people out of that altogether, and out of the dependency culture that exists when we tax people on low incomes.
This measure has a further benefit if it can be extended and if the national insurance threshold can be raised, because that will reduce the administration of employment. If the national insurance threshold can be raised towards the £10,000 tax threshold, employers will be able to pay their employees without having a big administrative burden on top. I hope the Government will look at that as it would be a fantastic boost to employment. I think it could possibly be paid for simply by shifting the band for employees national insurance into line with the increase that would be made from the current level to £10,000. I accept there would be a gap on employers, but that might be minimised by doing it in the way I suggest.
Thomas Docherty: The hon. Gentleman is making a far more eloquent case than the Chancellor managed for this set of policies. He seems to be saying, however, that we should not have a contributory system towards the welfare state. Is that where his argument is heading?
Jacob Rees-Mogg: No, that is not where I am heading. I am saying that the contributions of people at the lowest end of the pay scales should be minimised.
The hon. Member for Hyndburn (Graham Jones) spoke of the Government’s housing scheme. It is potentially a very exciting scheme, and the most important part of the Budget. There has been some talk of the risk, but I believe there is very little risk. I have had a look at the house prices figures produced by the Land Registry from 2008 to date, and at inflation over the same period. If we combine the two, we see that house prices on the Land Registry index have fallen in real terms by nearly 25% since 2008, which means that the scheme is being introduced at a point when house prices are sustainable, and when the risk to the Government’s balance sheet is limited. The scheme has the great potential not only to allow people to buy properties for the first time or to move into better properties, but all that goes with that, such as refurbishment, extra spending on DIY and so on. The measure could be a boost to consumer expenditure as well as free up the housing market.
I have one caveat to make before I conclude. I am concerned about the general anti-avoidance provision, which may threaten the rule of law. I will speak more about that later.
12.1 pm
Ms Karen Buck (Westminster North) (Lab): We have heard a great deal in the Budget debate—not unreasonably—about public debt, but less about the private sector crisis that generated the public sector debt crisis. We have also heard about the impact of private debt and deleveraging, including from the hon. Member for North East Somerset (Jacob Rees-Mogg). In that context, it might be worth mentioning that private debt and deleveraging are connected with the substantial decline in the number of people who can afford their own homes because of house price inflation in the past decade. That feeds into the core of my argument on the extent to which housing and housing costs have led us to a crisis in the welfare state.
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We have heard less in the debate about flatling growth, the crisis in unemployment and under-employment, and the crisis in real wages and living standards. It is worth noting that real wages fell by 0.7% last year, and that average earnings will have fallen by 2.4% over the course of this Parliament. That fall in purchasing power is contributing to the continued stalling of growth.
Unfortunately, housing costs are at the heart of the living standards crisis, particularly in respect of first-time buyers, younger people, and those in what we call generation rent. Home owners have benefited for a decade or so from low interest rates. The tragedy is that many people are not aware of the fact that low interest rates are sustaining lower mortgages. A third of home owners have interest-only mortgages, and are extremely vulnerable to a future rise in interest rates.
Shelter has demonstrated consistently the crisis in home affordability. Some 7.8 million people struggle to pay their rents and mortgages, and 2.8 million people rely on unauthorised overdrafts and payday loans on a regular basis to cover the cost of their mortgage or rent. With underemployment and the continuing flatlining of real wages, that situation will only get worse.
In turn, that has contributed to a dramatic rise in the number of people who are caught in generation rent—they cannot save for a deposit and cannot get a mortgage because of the high house prices we have seen for generations. Two million more people now rent in the private sector than 10 years ago—26% of all Londoners now rent privately. That driver into the private rented sector has led to an escalation in rents, particularly in London. London rents now average £2,200 a month. Naturally enough, people are unable to afford such bills. That explains why the housing benefit bill has risen. It is due not to Government policy, but to the increased case load in the private rented sector, together with unemployment and flatlining wages. The Government, despite their rhetoric, will spend £12 billion more in real terms on housing benefit in this comprehensive spending review period than the last Government spent under the previous comprehensive spending review. That was the figure before the Office for Budget Responsibility upgraded that expenditure this week.
If I were the Secretary of State for Work and Pensions, I would be furious that the Department for Communities and Local Government had driven up the bills of my Department through its housing policy, with the failure to build and the halving of the affordable housing investment programme, and its rents policy. However, if I were the Secretary of State for Communities and Local Government, I would be equally furious at the extent to which the Department for Work and Pensions policy of capping housing benefit had increased the pressure on my budget, particularly through homelessness. Today, we have heard about a further rise of 10% in homelessness, with an increase of 22% in London. That is not only a human tragedy; it costs money.
Will the Budget proposals address the crisis in housing and housing affordability? No, they will not. David Orr, the chief executive of the National Housing Federation, has said that if the investment had gone into affordable housing supply instead of the mortgage guarantee schemes, it would have delivered 175,000 new homes and a £30 billion boost to the economy. We know that the money is
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available because the Chancellor has secured £13 billion to underpin the mortgage schemes. Those schemes are effectively the rebranding of existing schemes that have not worked over the last two or three years. As other Members have said, the schemes risk inflating a housing bubble.
A consistent theme is emerging not only from the Opposition but from commentators on the right. Even the Daily Mail has said today, “Could the great state mortgage scheme be hijacked by the rich?” The answer is probably yes. It will be a boost to older buyers and second home owners, rather than the young. Mervyn King, of the Bank of England, has warned that the mortgage guarantee is not the answer to the housing crisis. It will stoke up house prices and continue to freeze younger homebuyers out of the housing market, which will keep them locked in generation rent. That will in turn lead to an increased housing benefit bill, which Ministers will scurry to try to cap.
The housing crisis is being exacerbated, not relieved, by Government measures. That has a fundamental impact on private debt, the banking crisis, in-work and out-of-work poverty, work incentives and welfare. The Government inherited an imperfect position on housing supply, but they are making it considerably worse. Beveridge and Keynes, those giants of post-war economics, knew that affordable housing was the key to—
Mr Deputy Speaker (Mr Nigel Evans): Order. I call Stella Creasy.
12.8 pm
Stella Creasy (Walthamstow) (Lab/Co-op): It is an honour to follow my hon. Friend the Member for Westminster North (Ms Buck), whose expertise on these issues is unparalleled. My remarks will focus on two matters: debt and welfare.
Given the landscape that the Budget has put this country into, the Labour party will never again take lessons from Government Members about the management of the public finances and public debt. We will not listen to them seeing that they are borrowing £245 billion more than they planned and will not meet the promises that they have made year after year. We have the embarrassing spectacle of the British Government being a bad partner by delaying the payment of bills and putting people at risk with their contracts, as the OBR makes clear.
While the Government are trying to avoid the debts that they have incurred, the British public cannot avoid the debts that will be incurred as a result of the Budget and the Government’s actions. I tell the House plainly that any financial director of a company who came to the board three years in a row asking for more money, having got their sums wrong, would be sacked, and rightly so. That is the situation in which we are leaving the British public. The British public are struggling.
The hon. Member for Wycombe (Steve Baker) is not in his place, unfortunately. He suggested, in a rather cavalier manner, that the country is awash with suffering. We see that every single day in our local communities. We see people for whom any increase in the personal allowance will be wiped out by cuts to tax credits and child benefit. We see people suffering from pay freeze after pay freeze, when prices have risen five times as fast
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wages. We see people who are feeling the squeeze—those are not my words, but the words of Which?. It talks about a “squeezometer”, with 40% of people feeling the squeeze, and an increase in people who are using credit or overdrafts to make sense of it. In particular, it reports that 9% of people are defaulting on their bills and loans, and that 49% are now worried about their level of debt—that is up by 5% on last month alone.
That is the context in which the Budget needed to make sense. It is in my own community, where 60% to 70% of income is spent on housing costs alone, that we see the struggles we face. The problems raised by my hon. Friend the Member for Westminster North have not been addressed and so will not go away, whether they are problems with the cost of energy, food or transport.
Most people would say that people in my community need to get a job. Many people in my community want to work. Unfortunately, we have a stubbornly high level of unemployment in Walthamstow. We have a much higher level of unemployment than other areas of London, and one of the highest levels of youth unemployment in London. Our rate is 10%, compared to just 6% in London and 7% nationally. That is why our welfare system is so important to the people of Walthamstow—important to ensure that it is fair, supportive and helps people get back into the work they want to do.
That is why I am horrified by the comments of the Secretary of State. We have seen today the revelations that there are targets for sanctions in my local jobcentre. Those targets mean that people, whose behaviour may well be understandable or rational, are still being sanctioned and having their benefits taken away as part of the Work programme, which we know is a terrible failure from the figures we have already seen. It is clear that the sanctions, and how they are being applied, are damaging people’s lives. For the first time we have conclusive proof that that is not by accident, but by design.
The e-mail contains the shocking allegation that staff in my jobcentre are so worried about losing their jobs if they do not sanction people that they are making up reasons to sanction people. What does that mean? That means sanctioning people with family commitments, sanctioning parents who have informal shared custody arrangements, sanctioning people caring for their family members, sanctioning people who may struggle with the English language, and sanctioning people who cannot find an interpreter to go with them.
The e-mail is not the work of one over-enthusiastic member of staff. When it mentions league tables and the role of divisional managers, it is clear that this is not happening by accident. I do not blame the person who sent me this whistleblower e-mail and I do not blame the scared jobcentre staff who are desperate to meet the target for sanctions that they have been told to reach— 25 sanctions per week, when they are only finding six. They are clearly frightened for their own jobs. I blame the Government who are asking everyone but themselves to take the blame for their failed economic policies. They are now setting up my community to fail, just so they can meet their own targets.
That is why the independent review into the use of sanctions in the Work programme is critical. I trusted Ministers when, on Tuesday, they claimed that there are no targets whatsoever. I now see that that means that they are either simply admitting that they do not know
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what goes on in their own Department, or that they were not giving us the full truth on Tuesday in this House. We need an independent review to get to the bottom of this problem, and to understand just how out of control this toxic Work programme is.
On Tuesday, my right hon. Friend the Member for East Ham (Stephen Timms) set out 10 questions for the inquiry. I would add another: are sanctions being made to reach a target to help ensure that the Department for Work and Pensions reaches its own budgetary requirement? The clock is ticking for Ministers to come clean about what is going on, and to stop saying that there are no targets for sanctions in the Department. They admitted to newspapers last night that the whistleblower e-mail that I brought forward was true, yet today the Secretary of State has tried to claim that it is not. The clock is ticking. I urge others not to be frightened and to use the whistleblower legislation to come forward and tell the truth, so that the independent review can hear what is really going on.
This issue is too important. We must get welfare right. We have a system that, yes, offers something for something, and, yes, uses sanctions where appropriate, but this is not appropriate. This is not about behaviour; this is about budgetary targets. This is about telling people, “However hard you are working does not matter to us, we will penalise you.” That is not fair. That is not right. That is not appropriate in the 21st century. It will do nothing to help this country get back on its feet, and the Government should be ashamed that this is happening.
12.14 pm
Heidi Alexander (Lewisham East) (Lab): It is a pleasure to follow two excellent speeches from fellow female Labour London MPs. The hon. Member for North East Somerset (Jacob Rees-Mogg) said that households should now be able to afford to spend. That might be the case for his constituents, but it is not the case for mine. It certainly does not feel that way to them, as they struggle hard to make ends meet on a daily basis.
I want to focus on the importance of jobs and of getting people back to work, and I will pick up on the proposed child care scheme. Two things in particular struck me about Wednesday’s Budget, the first being the level of complacency among the Government about the economic challenges facing the country and the second, no less concerning, being the lack of imagination, leadership and vision in coming up with solutions to get our economy moving and get to people into work.
While thinking about what to say, I read the transcript of the last two days’ Budget debate. The speeches fell into two categories. Government Members welcomed initiatives such as the 1p cut in beer tax and the cancelled rise in fuel duty—all fine, as far as it goes—and Opposition Members talked about the tough reality of their constituents’ lives, about people struggling to make ends meet and to find or stay in work. Government Members would then attack us, claiming that we were talking our country down. I ask myself, “What underlies this difference between the speeches?” There might be an element of political point scoring or a desire to get a headline, but in truth—perhaps I am being too generous—we all see our country through different eyes.
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Our stagnating, flatlining economy affects different parts of the country dramatically differently. When the Chancellor and the Prime Minister slap each other on the back about private sector job creation, I realise that they do not see the queues outside their local jobcentres that I see every week. When the Chancellor argues against capping bankers’ bonuses, I realise that he does not immediately think, as I do, “Hang on a minute. There are hundreds of bankers in this country who will earn more in one year than my father will earn in his lifetime.” When he proposes a scheme to help people buy second homes, I realise he will not be sat in an advice surgery this afternoon, listening to people so far from being able to afford to buy a home, that all they say to me is that they just want to be able to rent a decent property at a price they can afford.
I see little in the Budget that will bring genuine hope to my constituents, particularly those already paying the heaviest price for the mistakes of others. Last month, in Lewisham East, 3,517 people were claiming jobseeker’s allowance, which compares with about 900 in the Prime Minister’s constituency. There are 500 more people on the dole in my constituency than there were in 2010, and youth unemployment and long-term unemployment are up. So where was the good news for those people on Wednesday? The Government have at least listened to the Opposition’s calls for national insurance reductions for small and medium-sized businesses—and about time too—but where is the vision for the jobs of the future?
The Government pay lip service to creating a low-carbon economy, but then fundamentally undermine investment in renewables with other decisions, whether on feed-in tariffs or planning policy. When they talk about removing barriers to work, such as the sky-high costs of child care, they say, “Sorry, you have to wait two and a half years until we introduce it.”
Anything to help people with child care costs is welcome, but it has to be seen in the context of real-terms cuts to tax credits and maternity pay. It is a case of giving with one hand and taking away with the other. According to a Daycare Trust survey, child care costs—whether for nursery care, childminders or after-school clubs—have risen by over 5% in the last year. In London, nursery costs for children under two are 25% higher than elsewhere in the country. In fact, the average cost for nursery care of this sort is £5 an hour, so a full-time working mum buying 50 hours of nursery care a week has to find £14,000 a year. No wonder people say it is like having a second mortgage. Will the Minister say how far the new child care scheme will make inroads into the costs that parents have to pay? How do we know that it will not just drive up prices further? How much of this money is actually new? Child care is one of the biggest barriers to accessing the limited jobs that exist. When I speak to my constituents—by and large, people who are desperate to get back into work—it is clear that what they need is real help with meeting these costs.
The Government’s policies are hurting people. They are not working. Unfortunately, this year’s Budget is too little, too late. The sooner we have a general election and those of us on this side of the House can be in government, the better it will be for my constituents and the country.
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12.21 pm
Tristram Hunt (Stoke-on-Trent Central) (Lab): It is a great pleasure to follow my hon. Friend the Member for Lewisham East (Heidi Alexander). I can only apologise for breaking the gender/London cabal by heading to north Staffordshire and being a male Member of Parliament.
It would be nothing less than churlish not to begin with the keynote policy of this week’s Budget: the climate change levy exemption for the ceramics industry in my constituency and also the steel industry. There is satisfaction at the highest level in the city and among our industrialists for this welcome tax break. Only last night, at the opening of Hanley’s wonderful new bus station, designed by Grimshaw Associates, which is like the inside of a whale—[Interruption]—from Victorian prints—grizzled Labour councillors and old potters were full of admiration for this welcome policy. It will make a genuine difference to the bottom line of companies. They will now be able to hire more people, invest in kit, innovate and design.
Mr Kevan Jones: My hon. Friend is being modest by not paying credit to his campaign for this move. Does he think the people of Stoke-on-Trent should perhaps think of erecting a statute or making a memorial mug to mark his valiant efforts?
Tristram Hunt: I am grateful for my hon. Friend’s interjection. I would also pay tribute to my hon. Friends the Members for Stoke-on-Trent South (Robert Flello), for Stoke-on-Trent North (Joan Walley) and for Newcastle-under-Lyme (Paul Farrelly).
Tristram Hunt: I hope the kilns are firing up as we speak.
I hope this change is part of a broader shift on energy-intensive industries. I think we have realised that we can no longer tax such businesses out of production in the UK. It does no good for our economy or our manufacturing base if we export these jobs. The production then goes abroad, where environmental controls are less rigorous and pollution is often greater, so we increase global carbon emissions and also lose worthwhile jobs. We have already lost the aluminium industry in this country thanks to cumulative taxation and we do not want to see the glass, paper, steel or ceramics industries go the same way.
I also welcomed the new tax regime for shale gas in the Budget. I regard shale as a potentially important new energy source that we need to see exploited in an environmentally sound manner. We are seeing it exploited right around the world. The technology behind it is improving at every stage. People have rightly expressed fears about contamination of water supplies, which are beginning to be addressed, but shale has a potentially paradigm-shifting capacity. What we have seen in America will not necessarily occur in the UK. It is absolutely right that we begin to explore shale—just as the Chinese and other European countries are—both onshore and, potentially, offshore. We need the technology and innovation to do that and we need a suitable taxation system.
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Those involved in shale gas production need to take the communities with them and to have a social licence to produce it, but I urge Ministers to think more creatively. The great loss from North sea oil was that unlike Norway we did not create a sovereign wealth fund out of our oil riches. If we gain riches from shale, should we not consider a sovereign wealth fund? I will leave Ministers to mull on that idea.
While I am focused on industry and energy, let me highlight a contemporary crisis affecting industry here and now. As we speak, gas storage in this country is under 10% and this morning the Bacton gas connection to Belgium broke down. The price of gas hit £1.25 per therm when it is usually about 60p per therm. There is a real danger that kilns will have to close in north Staffordshire and that brickworks will close down, and I do not think that there is the necessary urgency from Ministers in Department of Energy and Climate Change or the Department for Business, Innovation and Skills about what is happening with the gas supply. That points towards a broader issue about gas storage: if we want rebalancing and want our industries to improve, we must ensure that we have a much greater system of gas storage in this country.
I am proud to represent an industrial constituency and I welcome some of the pre-Budget announcements on an industrial strategy, particularly that about the aerospace technology institute. I also welcome the adoption of 81 out of 89 of Lord Heseltine’s recommendations, particularly those on a single local growth fund. That is exactly the devolution of funding we want to see and a rightful acknowledgement that those in town halls often know a great deal more than those in Whitehall. As the Financial Secretary is on the Front Bench, let me say that we look forward to the upcoming announcements on city deals. I know that Stoke-on-Trent and Staffordshire have been working very hard to ensure that the Treasury is happy with what they are doing. It is quite right that the Government have allocated an extra £3 billion for infrastructure.
Behind all that must lie the acknowledgement that it is all too little, too late. The spending on infrastructure should have happened at the beginning of the Parliament, not more than halfway through it. As the Deputy Prime Minister has said, the Government should have not come to power and unleashed such capital spending cuts. The local growth fund could have been managed by regional development agencies, but the Government came in and abolished them. They are now realising that local enterprise partnerships often do not have the capacity and co-ordination to deliver the resources we are asking of them.
We should not have had to wait until the second half of a Parliament for an industrial strategy. In 2007-08, when we were in government, we were beginning to develop a credible industrial strategy that the Government should have continued rather than ripping it up in that terrible June Budget and beginning again. Over the past few years, we have seen a textbook example of how not to manage a recession, which will be taught in universities across the world. This is a catch-up Budget that is trying to undo the mistakes embedded in our economy three years ago.
The austerity agenda has spectacularly failed. Growth has collapsed, debt has mushroomed and the deficit at the end of the Parliament is expected to be £96 billion,
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five times more than the £20 billion the Chancellor expected at the beginning. As my hon. Friend the Member for Walthamstow (Stella Creasy) suggested, any board member who came to a board with such figures would be sent packing. As the shadow Chancellor warned in his celebrated Bloomberg lecture, that is the product of slashing spending, sucking demand out of the economy, the rhetoric of doom and gloom and the undermining of confidence. That is being borne witness to by the remarkable collapse in sterling, which is a sign of weakness, not strength, and by the collapse and loss of our credit rating. The austerity is not working, and, as my hon. Friend the Member for Lewisham East (Heidi Alexander) said, it is just hurting.
As the IMF chief economist suggests, we need a plan B. We need a VAT cut, a house building strategy and concentration on vocational skills and infrastructure. We need a different model, because this one simply is not working. Although I am happy to welcome the micro-element of this Budget in the context of the climate change levy, the macro-element fails spectacularly.
12.29 pm
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op): It is a pleasure to follow the excellent speeches by my hon. Friends the Members for Lewisham East (Heidi Alexander), for Walthamstow (Stella Creasy), and for Stoke-on-Trent Central (Tristram Hunt).
This is truly a triple D-rated Budget that leaves us in more debt than ever before, at risk of a triple dip, and with our credit rating downgraded. It is a Budget once again characterised by unfairness, incompetence and political game playing instead of the national interest. It is unfair, because millions of people face declining living standards while millionaires get a tax cut; it is incompetent, because the Chancellor and the Secretary of State for Business, Innovation and Skills cannot even clarify the details of the spare homes subsidy; and political game playing has seen the Chancellor play fast and loose with departmental spending to even greater political exposure in the short term, regardless of the consequences for front-line services, our international commitments or, indeed, the growth of our economy.
It is not just Opposition Members who say that—it is the Office for Budget Responsibility, which has confirmed that by 2015, people will be worse off than they were in 2010, with real wages set to fall by 2.4% over this Parliament; it is the Institute for Fiscal Studies, which only yesterday accused the Chancellor of “wasting the time” of Whitehall officials and creating “real economic costs” for the country; and, indeed, the Home Secretary, who hit the nail on the head only a couple of weeks ago, when she said:
“It’s not enough to cut budgets and hope for the best.”
I shall focus on page 70 of the Red Book, which details those £7.6 billion-worth of revenue underspends, and £2.1 billion of capital underspends in Government Departments—a staggering £9.8 billion in total. All of that was apparently done so that the Chancellor could present the illusion of a tiny drop in public sector net borrowing and make up for other accounting errors such as the 4G auction, which raised £1 billion less than he promised in the autumn statement. The consequences are serious. Opposition Members have rightly demanded to know which services, which spending, which projects
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and which promises have been delayed or cancelled by Departments ranging from the Department of Health to the Home Office. We need answers, and we need them now.
To take a Department in which I was proud to work, in 2010, the Prime Minister and the Chancellor categorically promised us that they would
“not balance the budget on the back of the world’s poor”.
It appears, however, that that is precisely what they have done this year, with the Department for International Development underspending by a staggering £0.5 billion, which amounts to 8% of its total revenue budget settlement for this year. That might represent a failure to pay our dues to the UN, or make our contribution to the World Bank. Indeed, the Chief Secretary seemed to suggest in TV interviews that some of the world’s poorest countries might not be ready to receive our funding. I very much hope that that proves to be untrue, because I am pretty sure that children who need vital vaccines, education or food are ready to receive our help.
Michael Ellis (Northampton North) (Con): Is it not rather churlish of the hon. Gentleman to make such references, as the Government have been considerably more generous than the Labour Government were in 13 years in office in affirming a 0.7% rate of gross domestic product for international development, which is more generous than almost any other country, yet the hon. Gentleman stands up and—
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I am sure that the hon. Gentleman is hoping to speak later. He must save something to tell the House.
Stephen Doughty: The hon. Gentleman has clearly not looked at the record, because in fact we tripled the aid budget, made a commitment to the 0.7% target and, indeed, made a commitment to a law on 0.7%, which this Government have done, too, but have not put into practice.
The Government will get full credit from me if they meet the 0.7% aid target, but given the revelations on the underspend and the fantasy figures elsewhere in the Budget, why should we accept their assurances? There is another serious consequence of the underspend. We already know the stark facts that the OBR has halved its growth forecast for this year, and downgraded its forecast for next year. Since the comprehensive spending review in 2010, the UK economy has grown by just 0.7%, compared with 5.3% predicted at the time. The economy shrank 0.3% in the last quarter, and we now face the stark prospect—although I seriously hope not— of a triple-dip recession, which is why this forced underspending is deeply irresponsible, as by itself it could further hasten a slip into a triple dip, particularly in the absence of serious measures in the Budget to promote growth.
It is our constituents who will face the consequences, the unfairness and the hardship over the coming months, such as the nearly one in 10 young people locally in Cardiff South and Penarth who now have to claim jobseeker’s allowance and to do so, as I mentioned earlier, for longer. The number of those claiming for 12 months or more is up by 22.6%. Each month of that
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is another month of frustration, anger, hardship, wasted talent and wasted value. Others affected are the constituents whom I met in the east of Cardiff, who have lost their jobs in the construction industry because of this Government’s failure to deliver infrastructure or housing, the disabled couple in Grangetown who fear the bedroom tax, while they see millionaires offered a spare home subsidy and a tax cut worth £100,000, and the hundreds of people fighting for every job vacancy—other hon. Members have described the situation—such as those fighting for a job vacancy in Penarth and in other local businesses.
There could not be a starker representation of the Chancellor’s and the Prime Minister’s Britain than the staggering rise of food banks, which have seen an eye-watering 198% increase in use in Wales in just the past year. No wonder the Prime Minister wants to keep the cameras away on his visit. The reasons for people in Wales having to use food banks say it all: 43% of people going to a food bank say they are doing it because of benefit delays or changes, 25% are doing it because they are on low income, and 10% are doing it because they are in debt. So we see debt rising at the top and debt rising at the bottom. That is life in Tory and Lib Dem Britain.
This Government could have driven forward decisions on infrastructure instead of leaving only seven out of 576 projects completed. They could have used the funds from the 4G auction to pay for new housing. They could have delivered a VAT cut that would have done far more for hard-pressed consumers than small duty cuts, however welcome. They could have invested in jobs and training for our young people, as the Labour Welsh Government have done with Jobs Growth Wales and investment in new apprentices.
As we look outside at the snow today—which, I regret, may mean that I am unable to stay for the closing speeches—and we wonder where the spring is, many of my constituents will be asking the same question on hearing this Budget: when are the sun and the warmth coming back to the economy, faced as they are with the cold wind of this no-change Budget and this no-change Chancellor?
12.36 pm
Lilian Greenwood (Nottingham South) (Lab): I begin by congratulating the Chancellor on getting something right. For months Nottingham beer drinkers, local pubs and our excellent local breweries have been pressing for a review of the tax on beer, and I have raised it with Treasury Ministers on numerous occasions. I am delighted that the Chancellor has taken the decision to cut the price of a pint. I know that the Prime Minister has promised to take action to tackle multi-buy offers on alcoholic drinks. It is not at all clear how he intends to do that, now that his Home Secretary has turned him over on minimum unit pricing, but he has allowed the Chancellor to offer this buy-300-pints-get-one-free deal.
Unfortunately there was not much else to cheer in the Chancellor’s drown-your-sorrows Budget, because he did nothing to address the real challenges facing our economy. He seems oblivious to the need for bold action to kick-start the economy and so create the jobs that we badly need in Nottingham. Yesterday on Radio 4 the Chancellor blamed his dismal economic failure on
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the difficult conditions he has faced as has tried to plot a course towards the peak of growth. But, as any mountaineer knows, there is no such thing as the wrong weather, only the wrong clothes. The Chancellor should have looked at the forecasts and planned for what was coming, rather than adopting a disastrous austerity programme which left the UK to slow down, turn around and start heading back downhill—not once, but twice, with the threat of a triple dip looming.
As the hon. Member for Wycombe (Steve Baker), who is no longer in his place, said earlier, the country is awash with misery. Forecast growth has been halved for 2013 and downgraded for next year too. Borrowing is £245 billion higher than planned. The deficit has barely shifted from last year and will not shift in the 12 months ahead. It has stayed where it is thanks only to some last-minute manipulations which the IFS said “wasted Whitehall time and created real economic costs”.
Unemployment is heading back up, with an extra 99 people in my constituency back on the dole in the past month. Inflation is running well above wage rises, and even those in Nottingham South who do have a job are struggling to make ends meet. For those unable to find work or who are sick or disabled, things are even worse, as they face cuts to services, cuts to council tax support, and the unfair and unworkable bedroom tax, which will leave more than 1,500 of my constituents with nowhere to go. Families are turning to food banks as they struggle to cope with the impact of higher VAT, cuts to tax credits and the freeze on child benefit. The Chancellor promises help with child care, not now when it is needed, but in two and a half years’ time. Families in Nottingham cannot wait for a Labour Government to sort out the economic mess that he has created; they need real help now, not more of the same failing policies.
My constituents are particularly worried by the Chancellor’s shocking complacency when it comes to tackling unemployment. They understand that when young people are out of work, without opportunities, it leaves scars that can last the whole of their working lives. That is why we are calling on the Government to act. We support measures to help small businesses take on extra workers. The employment allowance is welcome, but it will not even begin for another 12 months. Young people in my constituency should not have to spend another year on the dole waiting for the Chancellor to act. They need jobs and opportunities now. It cannot possibly be right to cut taxes for the highest earners in the country, but do nothing for young people trapped on benefits. That is why Labour is calling for a tax on bankers’ bonuses, to fund more than 100,000 jobs for young people—jobs on proper wages with proper training opportunities.
My constituents expect someone to take a job when they are offered one, but they know that under this Government there just are not the jobs that we need, and that is why the benefits bill is going up. Now we have shocking evidence of what we suspected previously: the Government plan to cut that benefit spending and massage the unemployment figures by applying a disgraceful sanctions regime. That is exactly why we need an independent review.
Nottingham needed a plan for jobs and growth on Wednesday. What we got was a “more of the same” Budget from a downgraded Chancellor. We needed real
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help for families on middle and low incomes: we got more of the same failing policies and a huge tax cut for millionaires. The plan has failed completely. Families, pensioners and businesses are paying the price. Nottingham and the country deserve better.
12.41 pm
Mike Gapes (Ilford South) (Lab/Co-op): At times of economic crisis, historically and all over the world, we have seen people moving towards blaming scapegoats, attacking weaker and poorer communities and trying to damage the interests of those who are not in their own environment. Today the potential for this global economic crisis can be seen in Europe with the rise of neo-Nazi groups in countries such as Hungary and Greece in the EU, and potentially in some other countries. We have to remember that it started in 2008 in the United States with the Lehman Brothers collapse, not with a policy determined and decided by the Labour Government in this country, as some Government Members would have us believe. It was a global, western European, north American economic crisis, with terrible consequences that we are still dealing with today.
In the 1930s, at the time of a similar global economic crisis, bold measures were eventually taken by some countries in an attempt to solve the problems. Unfortunately, it was the rearmament and the second world war that led to more people being in work in some other countries. We face real dangers today, and unless the Government and the politicians—not just in this country, but in the rest of Europe—adopt a different approach, we will see some very nasty developments over the coming years. The Government still claim, I think, that we are all in it together, but from references made by other hon. Members here today, we know how the poorest people in this country are being damaged and scapegoated while millionaires get tax cuts.
I do not have time to talk about all the issues I would like to, but I will say one positive thing about the Chancellor’s Budget. I support the Enough Food for Everyone If campaign and am pleased that we still have, at least on paper—it will be interesting to see if it happens in practice, as my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) mentioned, quite pertinently—the commitment to spend 0.7% of GDP on international development and aid projects. Over the past couple of years we have seen some fudging at the edges, as items previously funded from the Foreign and Commonwealth Office budget have been redefined and rebadged so that they now come out of the aid and development budget. Nevertheless, I take the Government’s commitment at face value and hope that over the next two or three years they will resist the pressures from the far right of their party, and from some newspapers, to cut the budget for helping the poorest people in the world’s poorest countries.
I want to touch on some of the points made by my hon. Friend the Member for Walthamstow (Stella Creasy) in what I thought was an absolutely fantastic contribution. She highlighted the problems that are coming out of the Department for Work and Pensions employment service in her constituency. I, too, am a north-east London MP. Some of my constituents have come to me with interesting information in recent weeks. I understand that the DWP staff in north-east London who deal with my constituents have now been told to refer to them no
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longer as “clients” but as “claimants.” There is apparently an instruction to that effect. That clearly changes people’s attitude. The approach is no longer about customer service; it is about dealing with supplicants who are asking for help.
Stella Creasy: My hon. Friend might be interested to know that one of the people mentioned in the leaked e-mail about the conduct in my jobcentre is a regional manager who also covers his part of the borough of Redbridge, which might explain why the issue of sanctions and targets is emerging. I would also like to take this opportunity to apologise to you, Mr Deputy Speaker, for not explaining in my earlier contribution that, owing to a previous commitment, I will unfortunately be unable to stay for the wind-ups, but the Minister can be assured that, even if Members are not here in person, we will all be listening very closely to what he has to say.
Mike Gapes: I am grateful to my hon. Friend for her intervention, which also gives me the opportunity to speak for another minute.
I have been pursuing a number of cases on behalf of my constituents in recent months, and for several weeks now we have received no written responses to any representations we have made to the DWP. The reason was not clear. We received telephone calls, but nothing in writing. We have begun to receive some responses by e-mail, but they are late and do not contain much detail. I do not know whether that is a policy position, because under the previous management of the Department’s services in my area I used to receive detailed written responses to the representations I made in respect of individual cases. The responses are no longer so detailed and they are delayed. I wonder whether that is because of the pressure on staff because of the cuts within the Department, or whether it is because of an attitude that says, “We don’t want MPs to have the information because then they can make effective representations about the inadequacies and failures of the Department.”
I also want to highlight what is happening with levels of unemployment. At a superficial level, because more people are in work the Government are claiming that everything seems to be fine. We have the paradoxical situation in which real living standards and real wages are falling, yet despite the double-dip recession and the flatlining economy more people are in work. However, if we dig into the statistics for the Ilford South constituency this week, we see that between February 2012 and February 2013, although the number of young people unemployed and registered for the claimant count is down, the number over 12 months of people out of work has gone up by 44%. The number of over-25s who have been claiming for more than two years in my constituency has gone up from 140 to 420—a 200% increase in one year. It seems to me that the organisations being used by the Department are concentrating on getting people into low-paid jobs quickly but not on those who might have mental health or alcohol problems, poor work records or a lack of confidence. The difficult cases are there, and they will add up in the future. That is really worrying.
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12.50 pm
Mr Kevan Jones (North Durham) (Lab): It is clear that plan A is not working—growth is down and borrowing is up by £245 billion. The Chancellor can meet the target set by the Office for Budget Responsibility only by doing the equivalent of hiding behind the curtains when the debt man comes, or saying when answering the door, “No, I can’t pay this week; I’ll pay next week.”
As has been mentioned, the OBR also said that people will be worse off in 2015 than they were in 2010. My hon. Friend the Member for Ilford South (Mike Gapes) has just said that the blame game in the early days was “This is all because of the mess Labour left the economy in.” I am sorry, but the Chancellor cannot get away with that after three years in power. Let us also look at the facts. In 1997, the debt inherited by the Labour Government was 42% of GDP, and the figure was 35% in 2008—the last Labour Government actually paid down debt. Debt then went up because of the economic downturn and the massive effect of the world banking crisis in 2008, as my hon. Friend mentioned.
It is also said that there was profligate spending. In 1997, we inherited a 3.9% deficit of GDP, which was down to 2.1% by 2008. I was in the House at the time, but never heard the then Opposition argue that our spending targets were reckless or that we should reduce spending at all. In fact, in some areas—including defence, which I know about—they were asking for more expenditure.
Dr Matthew Offord (Hendon) (Con): Does the hon. Gentleman acknowledge that the Labour Government who came to power in 1997 followed the Conservatives’ spending plans for their first two years? Those plans were laid by my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke); he achieved the reduction in the deficit that the hon. Gentleman mentions.
Mr Jones: Following that logic, the hon. Gentleman cannot argue, as his party has continually done since the last election, that a mess was left by the last Labour Government. The situation was due to the economic downturn.
We are now three years into plan A, and who is to blame now? We have slightly moved away from the Labour party—now it is all Europe’s fault.
Lilian Greenwood: Does my hon. Friend remember that when the Chancellor was in opposition, he specifically said in September 2007:
“The result of adopting these spending totals is that under a Conservative government there will be real increases in spending on public services, year after year”?
He and his party agreed with our plans.
Mr Jones: I totally agree. In defence, for example, the Conservatives called for a larger Navy and larger Army and more expenditure. What have we seen? Cuts, cuts and more cuts.
This morning we again had the nonsense from the Secretary of State for Work and Pensions that somehow if the austerity plan does not continue we will end up like Cyprus—it used to be Greece. The right hon. Gentleman conveniently ignores the fact that the wonderful
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triple A rating, so coveted as the great prize, has now been lost. We need to lay the blame for the country’s problems with this Government.
We used to hear the nonsense about Labour being irresponsible, and not having mended the roof while the sun was shining, but the house has no roof now. All we have seen in the Budget is tinkering at the edges. It is a little like suggesting to someone who has lost the roof that new double glazing should be put in. The important point, which has been made by several colleagues, is about demand in the economy. The way to get the economy going is to stimulate demand, and capital expenditure is one way of doing so. I welcome the announcement of £3 billion of additional capital expenditure, but it is only from 2015, and we need it now.
My hon. Friend the Member for Hyndburn (Graham Jones) rightly referred to the effects of the downturn for housing on other sectors. The emergency Budget slashed housing spending and capital expenditure on schools and so on, and that meant that demand went out of the economy. We are now spending £7.7 billion less than the Labour Government would have spent in the same period. There is an idea that this is somebody else’s fault, but it is not. Deflating the economy and taking demand out of it, while telling everybody that it is in dire straits, will depress demand not only for housing but in other sectors.
The housing proposals in this Budget are very ideological. Am I opposed to encouraging people to buy their own homes? No, I am not. However, it is nonsense to think that someone living in my constituency who has a low-paid job in local government, and is having their pay cut in real terms because of the cap, is going to save up the deposit for a mortgage. It would have been better if the Budget had provided a massive injection of resources into affordable housing and housing for rent. If my local housing provider, Derwentside Homes, was given the ability to borrow money to build new houses, it could do it now. That would provide the housing that we need.
Michael Ellis: Will the hon. Gentleman give way?
My fear about these proposals is that if we do not get right the balance between demand and supply, we will end up with a housing bubble and the sub-prime situation that landed us in this mess in the first place.
The other thing that could make a big difference, as it did in my constituency when we were in power, is investing in improvements to local authority housing and social housing. Cestria Housing spent £67 million on improving local housing. That not only made a real difference to those houses but regenerated the local economy. I agree with one thing that the hon. Member for Wycombe (Steve Baker) said; frankly, most of it was complete nonsense. If this Government really want to get the economy moving, they have the instruments to do it through banks such as RBS. However, RBS is crucifying small businesses in my constituency, including Ambic, which is run by David Potter. He has a very successful business, but he is being absolutely hammered in trying, in effect, to get RBS’s balance sheets down because this Government want to get it off the asset books as quickly as possible.
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Much has been trumpeted about the new cap on the level at which people pay income tax. In my constituency, many low-paid workers will benefit from this, but they will also lose through the bedroom tax, VAT increases, and the loss of child credit. Earlier I challenged the Secretary of State to publish information, constituency by constituency, on how many people were going to gain from this measure. I challenge him again to say how much these individuals are losing through the Government’s welfare cuts.
The welfare cuts that will begin in April will hit some of the poorest parts of the United Kingdom, including my own. The thing about poor people that many Conservatives might not realise is that they do not save money: they spend it. That is not because they are profligate or irresponsible but because they have no choice. These cuts will take money out of poorer communities in North Durham, and in the constituency of my hon. Friend the Member for Easington (Grahame M. Morris), who can ill afford to lose it. Unemployment is rising. As my hon. Friend the Member for Walthamstow (Stella Creasy) said, these people do not want to be unemployed, but there are no jobs. The jobs that are being created are part time, low paid—[Interruption.] The hon. Member for Northampton North (Michael Ellis) says “Rubbish.” He should look at the figures, which show that people are holding down two or three jobs to make ends meet. He will also see that productivity is coming down.
This involves a bigger debate about what type of society we want to live in. I congratulate those who work hard in food banks up and down the country; they are very good and worthwhile citizens. However, I feel very uncomfortable in 2013 living in a society where I have constituents relying on charity and food banks. That is not the type of society that I want to live in. We also all need to be conscious of the fact that, while things might be easy for all of us here, including millionaires such as the Chancellor and other Treasury Ministers, each unemployed person faces individual consequences, and suicides are on the increase because of the economic downturn.
1 pm
Jeremy Corbyn (Islington North) (Lab): I am pleased to be able to take part in this debate. My speech will relate largely to my constituency and my city, but overall the Budget will increase inequality in this country, rather than reduce it. It also contains many inconsistencies, such as spending on a carbon capture scheme while at the same time reducing restrictions on emissions and environmental costs in other industries. We need to be careful about that. If we are serious about protecting the environment, it needs to be an international initiative rather than what I suspect the Chancellor is trying to do, which is to reduce restrictions and conditions in this country, as he is doing with corporation tax. That will lead to a race to the bottom with very damaging consequences for our social infrastructure.
According to the latest unemployment count, 3,700 people in my constituency are on jobseeker’s allowance, 1,000 of whom have been on it for more than a year. Nearly 1,000 young people are also looking for work. At the same time there are enormous problems of inequality throughout London and, indeed, society. If Members look at the tax tables helpfully produced by a
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number of newspapers, they will see that there is no benefit whatsoever in this Budget or the planned tax changes over the next three years for most people on below average, average or even above-average incomes, and that those who earn more than £500,000 a year will gain at least £2,000 a month in most cases, while some will gain considerably more depending on their own personal circumstances.
There is no question but that this Budget will lead to greater inequality in our society, not less. At the bottom end, a lot of people are trying to survive on frozen or reduced wages in part-time work or on zero-hours contracts. At the other end of the scale, those on very high salaries or with large levels of unearned income will do extremely well out of the Budget and they are able to place their money somewhere where they pay much less tax on the savings that they manage to muster. We have to do better than that. I look to a future Labour Government to commit themselves to the principle of reducing inequality in our society, partly through taxation and partly through investment and expenditure that will help the poorest people through social spending.
My main concern—I think this is true of all other London Members—is the housing problems and the housing crisis in London. My borough of Islington is one of the smaller London boroughs, but it has at least 13,000 families on the priority needs list. The council, to its absolute credit, is doing a great deal to build new council housing, which is of high quality, innovative, energy efficient and imaginatively designed, often in restricted and small spaces. However, it is nowhere near meeting the demands and needs of large numbers of people in priority need. Therefore, my borough, like every other borough, puts people into the private sector, where rents are not restricted. The benefit cap will make it impossible for tenants to pay those rents and they will be asked to make a contribution themselves.
A local authority report notes that a large number of our schoolchildren—1,000 of them—are affected by the benefit cap and that, in the worst-case scenarios, some families are being asked to find £200 a week to contribute to their private sector rent. If they are on benefits, it is obviously impossible for them to find that money—it is £10,000 a year. The only way they can be accommodated is to move them out of the borough. Those in my borough are always offered a place in Greater London. Nevertheless, that means disruption for children in schools, and the break-up of family and community networks, which is damaging and corrosive to the whole of our society.
Other boroughs far less concerned about human needs than Islington dump people outside London. A good friend of mine who lives in north Kent tells me of the misery and poverty of large numbers of people who have been dumped in seaside towns such as Margate, in very poor quality, private rented accommodation, far away from their communities, and with obvious damaging effects to children and families as a whole.
How do we deal with the housing crisis in London? One way not to deal with it is what the Chancellor suggested this week: a charter for those with great money and resources to be subsidised into yet more purchasing of private sector homes. It is yet another
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escalator on the house price index, using housing as a form of investment and return on capital, rather than meeting the social needs of people in constituencies such as mine. I ask the Government to think seriously about how the housing benefit cap is being introduced and operated, and about how it acts as an agent for the social cleansing of poor and vulnerable people throughout central London to the London suburbs and further afield. It will not be long before the same process starts to happen in every other constituency in the country. This will not start and end in London; the whole process will go elsewhere.
The Government say, quite rightly, that the housing benefit bill is too big: I agree. The previous Government said it was too big: I agree. Why is it too big? Is it because council rents are so high? No, it is because of the high level of private rents in this country, and the lack of any control or real conditions on the private rented sector. We need legislation to control rents and ensure a fair rent strategy, security of tenure and decent housing for people who desperately need it.
Kelvin Hopkins (Luton North) (Lab): I agree with everything my hon. Friend is saying, but does he agree that a significant proportion of the private rented sector should be municipalised so that it can be improved and proper rents charged?
Jeremy Corbyn: My hon. Friend is right. We need controls on the private rented sector and on the levels of rent charged, but to deal with this housing crisis—and it is a crisis—we must empower local authorities to take over private rented accommodation that is badly run or ludicrously expensive, and also give them enhanced powers to take over the large numbers of empty properties that are part of land banking throughout London. We have the insulting aspect of people in desperate need living in overcrowded accommodation while nearby properties are often deliberately kept vacant by wealthy, often foreign, investors, who see it as land banking for some speculative gain in the future. What is going on is simply wrong. Housing must be a priority and a right for everyone. If every child had somewhere decent, safe and secure to live, that would be a real legacy, not this gift to those who wish to make a great deal of money out of housing speculation, which is what the Budget offers.
1.8 pm
Michael Ellis (Northampton North) (Con): I start by congratulating the Chancellor of the Exchequer. In speech after speech, Labour Members seem to have forgotten the note left by the outgoing Treasury Minister—
Mr Kevan Jones: Not the old chestnut!
Michael Ellis: Oh yes, the old note that was left: “There is no money left.” That is the legacy Labour left this country. After 13 years of a Labour Government who brought this country to its economic knees and a position worse than that of Greece, the Chancellor of the Exchequer and the Treasury team have picked the country up from where it was left, and will continue to do so.
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Dr Offord: I feel that my hon. Friend is being slightly unfair to the shadow Secretary of State for Work and Pensions. He may have left that note, but in a confidential briefing in 2006, the shadow Chancellor and the former Prime Minister were warned that the efficiency of the public sector needed to improve rapidly, and that unless it did, spending growth would slow. The former Prime Minister disregarded that advice, and embarked on a £90 billion spending programme once he became Prime Minister.
Michael Ellis: Exactly. The Labour habit of spending money that the country cannot afford almost brought this country to ruin. The lack of an apology grates, but it is difficult for Labour Front Benchers to offer one, because the team that wrecked the country’s economy and trebled the national debt are still on the Opposition Front Bench.
The Budget has been welcomed by the International Monetary Fund, the OECD, the Bank of England, the CBI, the Institute of Directors and the British Chambers of Commerce—it has been rightly welcomed by everyone who knows what they are talking about as far as the economy of this country is concerned. I say to the Chancellor that he should stick with it. We cannot have a situation in which Labour is allowed to borrow more, or we will end up with a Mili-shambles.
Plan A works. It tackles the appalling structural debt legacy. An IOD official has said:
“Deficit reduction is not an option…it is an absolute necessity”.
The Government started in 2010 with the worst debt to GDP ratio of any country—it was worse than that of Greece. Other countries with better figures than ours in 2010 had been put into special measures by the IMF.
Mr Kevan Jones: In opposition, the Conservative party not only agreed to, and did not question, Labour’s spending, but asked for more. As for the figures he quotes, will he explain to the House the difference between the size of Greece’s economy and that of the UK?
Michael Ellis: In common with most Labour Members, the hon. Gentleman’s understanding of the economy is limited. The reality is that the country’s debt is the responsibility of the Labour Government. However hard Labour Members try to transfer the blame on to the Conservatives, we did not spend that money.
When the current Government took over, £1 for every £4 spent from the public purse went on interest. Borrowing is now £3 billion lower, and the deficit is down by one third. What is Labour’s plan? Labour wants to borrow £200 billion more. I wish we had that money, but we do not have it. That is Labour’s plan.
Meanwhile, the OBR forecasts, post-Budget, 600,000 more jobs in 2013. What is the Labour party doing about jobs? Labour Members pretend that the 1.2 million jobs that have been created are fictional, not real, low-quality and part-time jobs. That is a complete fiction, and they should be embarrassed about it. They should talk the economy up and promote industry, trade, manufacturing and jobs. Are they holding jobs fairs in their constituencies? I have a jobs fair in Northampton North on 17 May. A number of companies will attend. I am doing what
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I can to improve the jobs market, but all we hear from Labour Members is that they will spend and borrow more, and yet they complain.
Corporation tax will be 20%, which is one of the lowest rates in the world. If we had stuck with Labour’s figures, we would have 3p a pint more in beer duty. Not only has that escalator been cancelled, but 1p has been taken off beer duty, but I have sat in Chamber and heard Labour Members criticise even that. They cannot bring themselves to acknowledge positives.
What is more grating is the self-righteousness of Labour Members. They believe that only they can have any compassion or think in any way of the most disadvantaged in society. Well, I have news for them. My colleagues on the Government Benches are equally if not more compassionate. We do not need to be lectured by those who put this country into such debt.
The dramatic fuel duty measures taken by this Chancellor—[Interruption.] If Labour Front-Benchers want to intervene, I am happy to give way.
Grahame M. Morris (Easington) (Lab) rose—
Michael Ellis: I will give way to the hon. Gentleman.
Grahame M. Morris: That is very kind. The hon. Gentleman has given a list of organisations that support the Chancellor’s Budget. I wonder whether he recognises this quotation from the North East chamber of commerce. Although it was pleased to see certain measures that coincided with its priorities, it said that the Chancellor had
“fallen short of providing the raft of measures that businesses and investors need in order to kick-start growth.”
Michael Ellis: The chambers of commerce have accepted that this is an excellent Budget. Of course there are issues that need to be addressed, but we are dealing with a dramatic deficit. Not everything can be done overnight.
The measures that we have taken on fuel duty mean that it will be £7 per tank cheaper to fill an average car, such as a Vauxhall Astra, than it would have been under Labour’s fuel duty plans. Under Labour, fuel duty went up dramatically. It was costing more and more. The Chancellor’s fuel duty cuts will have a dramatic effect on the cost of filling up the average car.
Measures are being taken across the board in very difficult times to improve the economic position that we inherited. All that Labour can do is whinge, whine, moan and be judgmental.
Mr Kevan Jones: Will the hon. Gentleman get a tax cut for earnings over £150,000 and what type of car does he drive?
Michael Ellis: I am quite happy to answer that question. I will not be getting a tax cut and I have been driving the same car—a Toyota Prius with several dents and scratches—since well before I was elected to this House. However, I would not want to spoil the situation for the millionaires on the Labour Front Bench. There are a fair few of them, driving around in their Mercedes.
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Mr Jones: The Toyota Prius is made in Japan. Why is the hon. Gentleman not supporting the UK car industry?
Michael Ellis: Not only does Toyota build cars in the UK, but thanks to the measures taken by the Government, this country is exporting more motor vehicles than it is importing for the first time since 1976. That is a measure of the manufacturing improvements made by this Government. It is just one of this Government’s excellent measures, which is why I support the Chancellor of the Exchequer and the Budget.
1.18 pm
Kelvin Hopkins (Luton North) (Lab): I watched the Chancellor carefully during his speech and he looked to be a very worried man, as if his whole political life was flashing before him because it was not going to last much longer. He was particularly worried when he had to say that the Budget was “fiscally neutral”, when what we need is an expansion for growth and employment.
Labour Front Benchers kindly describe our current situation as the economy “flatlining”. Actually, we are in an ongoing recession. Some 2.5 million people are unemployed. I am considerably older than everybody else in the Chamber and remember the days of full employment. In my youth, unemployment of 2.5 million would have been seen as a catastrophe. At times, unemployment fell to a tenth of its present level. Let us not be too kind to the Government. The economy is not flatlining; we are in an ongoing recession.
We must focus on the continuing economic illiteracy of the Treasury. Its consistent mistakes over decades have put us in this situation. Two years ago, I made a speech in this Chamber in which I referred to the view of Paul Krugman, among others, that the Government were going in precisely the wrong direction. I agreed with him then and I keep repeating that because in politics, one has to repeat things to ensure that they register.
It is instructive to look at the history. There was a similar situation in the 1920s. After the first world war there was big government debt, and the Government introduced what became known as the Geddes axe—pubic expenditure cuts—which drove up unemployment and poverty, and resulted in low growth. At the end of the 1920s—surprise, surprise—deficits were bigger, not smaller. In the 1930s, we had a period, similar to now, when the Conservatives and their friends were in charge. In Prime Minister’s questions, I asked the Prime Minister whether he wanted to be remembered as the President Hoover of our times, whose draconian cuts drove the world, not just America, into the great depression. He made a sarcastic reply—I suppose that was understandable; I was being slightly humorous with him—that I understood later to be a reference to Benny Hill. I would rather refer to John Maynard Keynes and to Paul Krugman, but obviously the Prime Minister is more inspired by the wisdom of Benny Hill.
By contrast, in 1945, government debt was three times what we have now, but we had a sensible Labour Government who ran a full-employment economy. The debt at that time fell dramatically because we had full employment. I have to give credit to the Conservatives, because in the 1950s they carried on with the same sorts of policies. In the 1940s, 1950s and 1960s, we saw full employment most of the time. We had the occasional
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hiccup, but essentially it was a full-employment era. We saw living standards rise and poverty fall, and a much better world than we had ever had before. Indeed, the world was being run so well, I thought we should carry on like that. Instead, somebody reinvented the 19th century, and went back to the kind of neo-liberal policies that were pursued at that time.
Extraordinarily, at that time of full employment, Labour and Conservative Governments competed to build hundreds of thousands, if not millions, of council houses. That all seems to have disappeared now, but it was a very fine and productive competition.
Grahame M. Morris: Would my hon. Friend care to comment on the impact of a house building programme on growth and jobs?
Kelvin Hopkins: A house building programme is exactly what we need. We do not want to increase demand for houses, but supply. If we increase demand without supply, we get house price inflation.
Michael Ellis: Does the hon. Gentleman not accept that, under 13 years of the Labour Government, less social housing was built than at any time since the early 1920s? We are now having to catch up.
Kelvin Hopkins: Throughout that time I was a member of a group called Defend Council Housing, and time and again I urged my hon. Friends on the Front Bench, as indeed did a number of my hon. Friends, to build more council houses, so in a sense I accept that point.
We have seen the policy on the deficit not working—indeed, it will get worse—but we have seen only about a quarter of the promised cuts so far. What will happen in the next three, four or five years—let us say two years, because the Conservatives will only last that long—will make matters worse. The forecasts for the deficit have been out by many billions. The deficit will be £120 billion in each of the next three years, give or take the odd billion. That compares almost exactly with the tax gap, calculated by Richard Murphy, of £120 billion a year. I am not suggesting that we could overcome the tax gap in one year, but we should start to make the billionaires and fat cats pay their taxes properly. We could make a real dent in the deficit and have money to spend to generate the economy.
Jeremy Corbyn: Would my hon. Friend care to comment on the question of tax avoidance and places such as the Channel Islands and other British overseas territories? Is he convinced that what the Chancellor has said will mean that those places will be properly taxed, or will they continue to be places where the wealthy can get away with not paying tax?
Kelvin Hopkins: I remain to be convinced that the Government are serious about dealing with tax avoidance and evasion. We have a revenue problem, not an expenditure problem. We are failing to collect taxes, and what are the Government doing? Successive Governments have cut the number of staff at HMRC. We should be increasing their number, because every additional tax collector collects many times their own salary. We should increase staffing levels at HMRC and start to collect those taxes. That would make a real difference.
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The superficial analogy with personal household incomes has been drawn time and again—“You can’t spend what you don’t earn” and all that. If a person’s or family’s expenditure is greater than their income, we get the Micawber effect, because people finish up in penury, but Governments and economies are not like that. One person’s spending becomes another person’s income, and so on, and we get this circular flow of income, which generates jobs, wealth and tax revenues. Economies do not work like family incomes, as Keynes explained many times in very simple terms. I used to try and explain it to my students as well. Economies are not like households, so I hope that we can dismiss this simplistic analogy with personal incomes.
We have to invest, to start building again and to reflate the economy. We will do that by driving up employment in labour intensive areas, and the most labour intensive sectors are those such as construction and public services. We get much more bang for our buck from investing in those areas than from cutting taxes. The money saved by doing the latter leaks away to the better-off and frequently into tax havens, which brings no benefit to the economy, whereas direct spending on building more houses, for example, has beneficial and rapid effects on the economy. The other great advantage of construction and public services is that they have a low import content, which means that we do not get leakages into imports—not in the first round at least. It is a very sensible way of trying to regenerate the economy.
We also need the right parity for our currency. Successive Governments have been obsessed with keeping the pound “strong”, as they call it—in other words, overvalued—which means that we become uncompetitive. The strongest evidence that we are uncompetitive is our a £1 billion-a-week deficit with the rest of the EU. We should use our advantage in having our own currency to find an appropriate—in other words, lower—parity for sterling, so that we can regain our competitive advantage.
There is much more I wish to say, Mr Deputy Speaker, but I fear I have had my time. Thank you.
1.27 pm
Steve Reed (Croydon North) (Lab): The people of Croydon North were looking to the Chancellor to kick-start the economy with the Budget. With long-term unemployment up again, they need more jobs. With homelessness and overcrowding on the rise, they need more affordable homes. With more children living in poverty, they need action to cut the cost of living. But we saw almost none of this. We will not get more jobs in Croydon North until the Chancellor abandons his failed economic policy, which has prevented the economy from growing.
The OBR has halved this year’s growth forecast, and when the UK’s triple A rating was humiliatingly downgraded, the ratings agency Moody’s cited subdued prospects for growth as a key reason. Growth will come when people start spending again, and we are more likely to get people spending if we put money back in the pockets of people on average and lower incomes. Labour’s proposed temporary VAT cut, which would help to do precisely that, is far more sensible than the Government’s tax cut for millionaires in just over two weeks. The wealthy are more likely to save that money
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or, if they do spend it, to spend it on expensive imports, but as my hon. Friend the Member for North Durham (Mr Jones) said, people who earn less are more likely to spend it in local shops, on everyday goods that sustain local businesses and help the local economy to grow. They do not have enough of a surplus to save, so they end up re-circulating the money in the economy.
Growth will come when the Chancellor starts to invest in decent affordable and social housing. First, however, he cut the affordable house building budget by 60%, and then he refused to intervene early enough as the housing market froze. Housing starts last year fell by 11%, and more than 500,000 people are on the council housing waiting lists in London alone.
As well as boosting new build supply—which he also needs to do—why does the Chancellor not support projects such as the one run by London Youth, which puts unemployed people back to work by training them to bring empty and derelict homes back into use? It creates jobs and homes, as well as saving money in the longer term, but it needs funding to get going on a wider scale.
Growth will come when the Chancellor starts to invest in public infrastructure—the kind of schemes that generate jobs and boost business confidence, so that the private sector starts to invest as well. I saw that effect time and time again when I led a council in south London. In Brixton, we showed how a partnership between public sector landowners and small businesses can regenerate a once declining market in spectacular style, creating jobs, bringing in investment and helping to make the town centre what it is now—one of the fastest growth areas anywhere in London. As co-chair of the Vauxhall-Nine Elms regeneration partnership—which extends all the way from Vauxhall Cross to Battersea power station—we showed how the public sector can lever in private sector investment, in a project that has become the biggest generator of new jobs and new homes anywhere in the country. The Government need to support local government to forge more partnerships like that and offer funding for public sector infrastructure that can get schemes going in areas where land values as not as high as they are on the south bank of the Thames, and I hope very much that they will carry out the Heseltine proposals, including providing adequate funding, so that this can work.
The reason so many people are living on benefits is not that they are skivers or shirkers, as the Chancellor likes to tell us, but that they do not have the opportunities that people such as him took for granted when they were growing up. I meet people in Croydon North week in and week out who are desperate for a job so that they can make more of their lives. I met a young mum on the steps of a supermarket in South Norwood who burst into tears when she told me that she and her husband, both in low-paid work, could no longer make ends meet because of the rising cost of housing, heating and child care, all of which have been made worse by the Government’s decision to clobber them with the strivers tax and a hike in VAT. She told me that they had done everything the Government had asked them to—worked hard for qualifications, got themselves jobs and bought a modest home—but now they felt desperate and abandoned by a Government who do not seem to care. This Government do not offer them aspiration, only desperation.
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Such people are victims of the Chancellor’s failed economic policies. It is not just growth that is down and borrowing that is up; hope is down and despair is up. Year after year, the Chancellor fails to meet his own targets. That is because what he is doing is hurting, but it is not working; yet instead of recognising his failings, he tried to distract attention by demonising and blaming the very people who are the victims of his failure. It is time to change course, because people in Croydon North, like everywhere else, deserve better than this.
1.32 pm
Mr Andy Slaughter (Hammersmith) (Lab): The average price of a house in Hammersmith and Fulham is £653,000. The average price of a flat is £493,000. If costs £770 a week to rent a three-bedroom house, and a one-bedroom flat costs £335 a week. At the same time, according to the most recently published census data, 45% of my constituents live in some form of overcrowding, while 62% live in some form of deprivation. Market rents are four or five times what social rents are, so one can imagine how my constituents greeted the Chancellor’s most recent, desperate attempt to do something with the economy—fuel a house price boom. This is what the Financial Times said about it today:
“The government is encouraging people to leverage themselves up to the hilt in order to buy what is already likely to be overpriced property and, as a result of this policy, is likely to become still more so. This is irresponsible enough. But worse, the government will probably…find itself permanently using its balance sheet to support risky housing finance, as the US has done.”
There is indeed a revolution in housing, welfare and planning in this country, but it has very little to do with the Chancellor’s tinkering earlier this week. It is the actions of the Secretary of State for Work and Pensions, who opened today’s debate, and the Department for Communities and Local Government, along with many Conservative councils, that have made rents unaffordable for 540 households in my constituency on the local housing allowance. Some 2,700 households will be affected by the bedroom tax from next week, and as soon as the benefit changes come in another 800 households will be affected.
Michael Ellis: Will the hon. Gentleman give way?
Mr Slaughter: We have probably heard enough from the hon. Gentleman today. His temporary attendance in the debate and his whipped speech did not do him any credit; I do not think we want any more of that drivel, frankly—[Interruption.] If I need another minute, I might give way later.
The 1% cap and the restriction on crisis loans will make my constituents more dependent on payday loans or pawnbrokers. That is no way to solve the economic crisis that the Government have got themselves into.
House building is at an all-time low. According to figures from the TUC, only 10% of the money from the increase in right to buy has gone back into house building. Only 384 council homes were built in the last three quarters of last year. At the current rates—given the so-called investment in social house building in the Budget, which meets about 1% of demand—it would take more than a century to address demand. At the
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same time, changes through the Localism Act 2011 mean that we no longer have secure tenancies and that affordable rents in housing associations are now up to 80% of market rents—completely unaffordable. On 1 April, my local authority will abolish 90% of its waiting lists and sweep away almost 10,000 people in housing need, some of whom have been waiting for years. The local authority accepts only 6% of the people who apply to it as homeless.
On planning policy, we have plans that allow for the conversion of much-needed employment land to luxury residential use. We have a policy that says that no additional social housing must be built in my constituency and existing social housing can be demolished for development as luxury affordable housing. As the shadow Secretary of State said earlier, there will be costs through the bedroom tax and through evictions, which are going on daily and weekly. There is an opportunity cost in that people are being forced to move from west London to places where there are fewer jobs and there is a huge social cost to the poorest people, who are being dislocated from their communities.
That is who is losing through the Government’s economic and other policies, but who is benefiting? We heard at the beginning of the debate from my hon. Friend the Member for Eltham (Clive Efford), who said that the majority of new properties are being built by foreign investors. About 70% of such properties in the richer parts of London are going to foreign investors and are being used as second properties, rather than first properties.
The people who are benefiting are developers. I note from today’s edition of The Daily Telegraph that
“the planning minister, attended a meeting with some of the country’s biggest property developers hours after”
“speech on Wednesday”
“Property developers have been privately promised that planning laws will be liberalised again”.
Developers are making money out of this—the same people who are the friends of those on the Government Front Bench and the donors to the Conservative party.
The same is happening in health. Hospitals in my constituency are being shut so that private providers can come in and clean up with inferior services, as shown today by the 80% of people who do not support the out-of-hours care they are being offered in exchange for the closure of accident and emergency departments. In my area of justice, cuts in legal aid and restrictions on access to justice have been made to benefit the insurance industry, another major funder of the Tory party. It is in those interests that the Government act. It would be polite to call it a class interest, as it is actually a mate’s interest. It is an act of cronyism.
The Budget does nothing to support poorer people or people on middle incomes and it does nothing to help people in crisis in my constituency. The only people it supports are those who fund the Conservative party and those who already are or soon will be millionaires.
1.39 pm
Grahame M. Morris (Easington) (Lab) rose—
Dr Offord: This will be a sensible contribution.
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Grahame M. Morris: I am sure it will.
I am pleased to follow my hon. Friends, and the closing statement by my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), who linked the snow and the inclement weather to the Budget outlook. He asked where the spring was. Perhaps I should add that this
“is the winter of our discontent”.
This is the coalition Government’s fourth Budget since 2010, including the emergency Budget. We were told that we were out of the danger zone, and the Prime Minister promised that the good news would keep on coming. In reality, growth is down, borrowing is up, and families are paying the bills and picking up the pieces and consequences of the Government’s economic mess.
I want to concentrate on welfare issues, given the subject of today’s debate. At every opportunity, the Government appear to be undermining the economic foundations that are the route to recovery in the most deprived communities in our country. Constraints on family budgets, wage cuts, and decimated social security budgets have led to a loss of confidence, which in turn has pushed demand out of the local economy. The latest figures detailing the impact of Government cuts and benefit changes on those on the lowest incomes show that a single parent working full time on the minimum wage will lose £415 this year; taken with the previous two years, the total loss is nearly £1,000. Over the same period, a single person working full time on the minimum wage will lose £706, and a family with two children, and two parents working, one full time, one part time, will lose £1,197. Those examples do not take into account other cuts that have affected working families. Child tax credit for babies under one was cut from April 2011; and the child trust fund has been cut, as has the health in pregnancy grant and the education maintenance allowance. Housing benefit has been capped, and the bedroom tax will affect more than 1,600 households in my constituency, with an average loss of £728.
Cuts to social security have undermined economic recovery by driving demand out of the local economy in areas such as mine. It is estimated that the changes to social security will take £150 million a year out of the local economy in County Durham. It is my constituents in east Durham who are living with the consequences of the dark shadow cast by the age of austerity that grows longer and longer after every Budget. We need to restore demand, which has been sucked out of the economy by the past three years of austerity. That has had a monumental impact on unemployment in my constituency. Government Members have proclaimed that unemployment has fallen, but in my constituency the claimant count has risen by 900—yes, 900—since the Government came to power in May 2010, and it currently stands at 3,501. As things stand, there is little prospect of reducing the unemployment figures to the pre-recession levels of 2008, when 2,000 fewer people were looking for work in my constituency.
I have absolutely no doubt that austerity is failing, and that the cuts have made it increasingly difficult for people to meet everyday expenditure on life’s basics such as food, energy and housing. With less money in the local economy, it is no wonder that jobs and growth have stalled as a result of the Government strangling demand. The Budget seems to promise a further assault on the welfare state. The prospect of capping annually managed expenditure, a large part of which is spent on
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social security, is frightening for low-income families. A “super cap” limiting social security provision would mean that in times of greatest need benefits could be spread more thinly or restricted, breaking the link between social security provision and need.
I understand that Ministers are considering which areas will be subject to spending caps, but I was interested to read in The Daily Telegraph that housing benefit is a strong contender. As my hon. Friends the Members for Eltham (Clive Efford) and for Westminster North (Ms Buck) have said, the solution is to build more affordable homes for rent and to cap rents in the private sector.
It is a cruel irony that at a time when they are pressing ahead with the unfair and unjust bedroom tax, hitting 1,600 households in my constituency and taking away between £14 and £22 a week from the income of some of the poorest families, the Government propose to underwrite mortgages for properties worth up to £600,000. Ministers should realise the monumental consequences of taking away what they may consider to be relatively small sums, such as £14 a week with the bedroom tax, and the impact that that can have on families and individuals living off low and increasingly limited fixed incomes. The Secretary of State for Work and Pensions demands that the unemployed “get on the bus” to look for work. But what do they do when the Government cut their income to such an extent that they can no longer afford the bus fare, or food to eat, or to heat their home?
It is strange that the Government will penalise my constituents when they are deemed to have a spare bedroom, but seem to be willing to introduce a second home subsidy. We need more social and affordable housing, not a scheme that will drive up house prices, forcing people to take on higher mortgage debt. A £600,000 property is out of reach of the vast majority of people in my constituency and the wider area. It seems a strange priority to underwrite huge mortgages when the Government are telling us that we must withhold welfare payments from those whom the courts found to have been illegally sanctioned.
We all know that the Work programme is not fit for purpose—the Public Accounts Committee told us so. It is clear that welfare under this Government is unfair and in chaos, and I do not think things will change until we have a general election in 2015.
1.46 pm
Mrs Mary Glindon (North Tyneside) (Lab): It is a great honour to follow my hon. Friend the Member for Easington (Grahame M. Morris), who so ably told us of the dire effects that this Budget will have not only on his constituency, but on our native north-east.
Last year the Chancellor told us that his Budget was one that supported working families and those looking for work, unashamedly backed business and was on the side of aspiration. However, a year later it proved to be a Budget that led to the stalling of the economy, the downgrading of the country’s credit rating and more U-turns than can be counted on one hand or perhaps even two hands.
This year, as borrowing is set to be £245 billion more than planned and the OBR has stated that people will be worse off in 2015 than they were in 2010, when the
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Government took office, the Chancellor has trotted out the same lines about aspiration and setting free the aspirations of the nation. I find myself repeating the same lines about how this Budget will adversely affect my most vulnerable constituents, who through no fault of their own have to depend on welfare benefits in one way or another. Last year the Chancellor said that he expected to make further spending cuts of £10 billion by 2016. This year he has raised the amount to £11.5 billion, and as spending on schools and health is to be protected, the welfare budget is bound to be hit.
For the first time, the Chancellor has decided to limit annually managed expenditure, which includes the welfare budget, as well as debt interest and payments to the EU. His main claim for limiting AME is that in order to spend more on the services that we value, including the health service and our armed services, he must cut the growth in spending on the welfare budget. Of course, this stands in stark contrast to the increased tax cuts of £3 billion for the most wealthy in our society.
What will these cuts to welfare involve? We know that all will be revealed in June, but what more can be taken away from the poorest in the country, both the working poor and those who have to rely entirely on benefits? There is speculation that these cuts could realise suggestions flaunted by the Prime Minister in his welfare speech made last summer—things such as paying benefit in kind instead of cash, reducing benefits for the long-term unemployed, and the abolition of housing benefit for the under-25s. But I ask: what do the Government care for the unemployed? Only this week, they pushed the contemptible Jobseekers (Back to Work Schemes) Bill through the Commons. My constituents from all walks of life are firmly against it, and have contacted me with their serous concerns about the Government’s actions. However, a Government who will stoop so low as to take rightful benefits from claimants and force jobseekers into workfare are unlikely to have any conscience when it comes to making deeper cuts and causing further hardship to the worst-off in society.
Moreover, as millions of the poorest workers look forward to being taken out of income tax, they also have to look forward to increased rents because of the bedroom tax, and they will find that they now have to pay more council tax because of changes to local government finance. In reality, they will feel that the Government have robbed Peter to pay Paul. Many low-paid workers are in the public sector, and after a two-year pay freeze will see their pay rise by only 1%. No doubt many of those hard-working people will have aspirations to own their own homes, but poverty pay and loss of tax credits and child benefits will mean that, despite the Chancellor’s Help to Buy scheme, a home of their own remains out of reach.
The Chancellor said that the Budget does not duck our nation’s problems, but I think it compounds them. It is not a Budget for an aspiration nation; it is a Budget that will bring mixed fortunes for people across the United Kingdom. It will not bring the growth needed to see everyone prosper, to see everyone get jobs. The low-paid worker strives hard every day, but their aspirations are often crushed by the need simply to make ends meet, and this Budget will not change that. At the Conservative party conference, the Chancellor said:
“We are still all in this together.”
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His Budget plan does not reflect his words, and it leaves me worried about the economic future of many of my constituents.
1.51 pm
Dr Matthew Offord (Hendon) (Con): I welcome the Budget, which I recognise has been produced in difficult economic times. I should like the Government to make further tax cuts, but I realise that that may not be acceptable to some of our constituents who are feeling the increases in their cost of living. As a consequence, I am pleased that the Chancellor has decided to abolish the 3p rise in a pint of beer. I am also pleased that he has decided to cut the price of a pint by a further 1p. Only last week the Adam and Eve pub in Mill Hill and the Bodhran bar in Hendon thanked me for lobbying the Chancellor to do just that. Perhaps on Sunday night we will all say “Cheers” to the Chancellor.
Those proposals, alongside the abolition of the fuel duty escalator, are welcome. I certainly feel the pressure every time I put petrol in my car, and I know that many of my constituents feel the same as they have e-mailed me to say so. That measure, in conjunction with the freeze in council tax in the London borough of Barnet, is helping my constituents. Most significantly, raising the amount of money that people can earn before paying tax—the personal allowance—to £10,000 is welcome. In my constituency, 49,360 will benefit from paying £700 less in income tax than they did in 2010, and 4,967 will be taken out of tax altogether, which is a very good thing.
It is interesting that in many contributions from Opposition Members, I have heard repeated mentions of the so-called bedroom tax. The use of the word “tax” just goes to show how out of touch Labour Members are. As many people who work in this country will know, tax is levied on income earned. Housing benefit is paid to those who either do not have an income high enough to pay their appropriate accommodation costs, or do not have an income at all. In both those scenarios, if someone finds that they do not have enough income, they need to change their accommodation circumstances. I must make special mention of an hon. Member who spoke about her 17-year-old constituent who will receive a reduced income for his two-bedroom flat. The most shocking aspect of that to Government Members is that the Government are paying a 17-year-old to live in a two-bedroom flat. I wonder how many of my 17-year-old constituents would like a two-bedroom flat paid for for them.
Mr Kevan Jones: Would it not cost the Government a hell of lot more to keep that person in care?
Dr Offord: Yes, of course it would, but I think we need to focus on ensuring that families do not break down, rather than putting someone into care. I know that the circumstances the hon. Gentleman is talking about—[Interruption.] Members are chuntering from a sedentary position, but unless they wish to intervene—
Bridget Phillipson:
We talk about family breakdown, which of course none of us wants to happen, and I do not know the young man’s particular circumstances, but we are dealing with his case now, not what we might like
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to be the case. Surely it is wrong that vulnerable young men like him will be punished by the bedroom tax—call it what you like.
Dr Offord: The young man is 17 years old, and obviously for the past 17 years we have not had a Government who have addressed social issues in our country.
There is no dispute, at least among the serious political parties, that the country has to make difficult financial decisions in order to reduce the deficit. My disappointment is that there are no such proposals coming from Labour Front Benchers. The Labour party’s 2010 election manifesto stated:
“Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.”
However, the shadow Work and Pensions Secretary, who is no longer in his place, was recently forced to concede that the cost of housing benefit, at £20 billion a year, is too high. He has also admitted that the Labour party does not have a solution for that. How can they be a credible Opposition if they cannot tell people where they would make cuts?
The most appealing part of the Budget for my constituents is the proposed help to assist people to get on the housing ladder. My constituency is the victim of its own success. Good schools, green spaces and a comparatively low crime rate for London ensure that many people want to move there. Although I certainly welcome them, they put pressure on the availability of the housing stock. My constituents’ children find it hard to buy a property, or indeed to rent one, when they return from university or go to work. We should not forget that not everyone is given a deed of variation by mummy and daddy that allows them to stay in part of the family’s house in places such as Primrose Hill, ensuring that they never have to go to a job interview or get a proper job in order to put a roof over their heads.
Many of my constituents are forced to move away from their family and friends and the places they grew up in. The Help to Buy scheme will help them, because in my constituency there are huge regeneration schemes in progress. The Beaufort Park and Grahame Park regeneration schemes are transforming the landscape of the social rented sector in Colindale, and the Mill Hill barracks site is also providing homes for people in the area. Only this morning—this explains my absence at the beginning of the debate—I met John Morris and the resident representatives of the West Hendon regeneration scheme. It has been a hugely difficult social sector regeneration scheme that was not progressed by the previous Government. Indeed, I suspect the motives of local Labour politicians who want to keep people in substandard accommodation instead of getting homes built. [Interruption.] From a sedentary position, Mr Morris says that that is disgraceful—
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. The hon. Gentleman must refer to hon. Members by constituency.
Dr Offord:
I apologise, Mr Deputy Speaker. I can only say to the hon. Member for Easington (Grahame M. Morris) that perhaps he would like to see some of the conditions that my constituents experience, and
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then he can conclude whether the previous Member of Parliament, or indeed some of the Labour councillors, did anything to assist them.
Grahame M. Morris: I did not want to intervene, but I really cannot let that pass. As someone who served on a local housing authority for almost 20 years and came into contact with many elected Labour councillors, I can tell the hon. Gentleman that it was a top priority for us to try to ensure decent housing, and I am sure that that philosophy has also applied in Hendon.
Dr Offord: I can assure that hon. Gentleman that in my experience it certainly has not. I certainly would never wish to impugn his reputation, or indeed the work he has done over the past 20 years on the housing authority. I only wish that some of my Labour councillors had the credibility that he has.
Mr Slaughter: Will the hon. Gentleman give way?
Dr Offord: I can only extend to the hon. Gentleman the same courtesy he extended to my hon. Friend the Member for Northampton North (Michael Ellis) and say, “I think we’ve heard enough from you today, thank you.”
All those schemes in my constituency will allow my constituents to get a home near their family and friends, which can only be a good thing. I urge the Government to agree on those proposals as quickly as possible so that my constituents can start buying their first homes. That is a good thing that we can agree will emerge from the Budget.
The Budget rewards those who aspire to work hard and get on. It is for those who want to own their own home in Hendon, or indeed in Easington. It is for those who want to get their first job, to start a business or to save for their retirement. It is a Budget for people who realise that there are no easy answers to our financial problems but that we are on the right track, so let us get on with it.
1.59 pm
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): We have had an interesting debate. There have been 27 Back-Bench speeches, of which 19 have come from Labour Members. There have been passionate speeches. A lot of information has been given about constituencies and constituents’ experience in the real world rather than the world that some on the Government Benches would like to believe exists.
We started off with a typically bullish performance from the Secretary of State for Work and Pensions, who seemed reluctant to accept that, notwithstanding what he tried to claim the Chancellor is doing, in fact the Government will borrow £245 billion more than planned. That borrowing is to deal with failure rather than to invest for future success.
The Government seem to fail to recognise that the situation has happened on their watch. It is not good enough, halfway through a Parliament, for the Government continually to come to the Chamber and harp back to what went on in the past without taking any responsibility whatever for what they are doing and their own actions.
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It is interesting that Government Front Benchers seem to have an obsession with the shadow Chancellor. Perhaps it is because he has been proven to be correct. The economy is flatlining, there is no growth, the deficit targets have been missed, the triple A rating is lost and the Office for Budget Responsibility has confirmed that people will be worse off in 2015 than in 2010. There is no plan—it is more of the same from the downgraded Chancellor, and from the downgraded Government Front Benchers here this afternoon.
We have heard consistently from the Labour Benches about how unfair it is that, while millionaires will be laughing all the way to the bank at the beginning of April, very real cuts are coming for ordinary working people and those who are desperately seeking work.
A number of themes have come through the debate and I want briefly to touch on them before coming to some of the points made by my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne). We heard powerful speeches about living standards, not least from my hon. Friend the Member for North Tyneside (Mrs Glindon), who spoke towards the end of the debate, and from my hon. Friend the Member for Easington (Grahame M. Morris). Both talked about the impact of welfare cuts on their constituents’ and general living standards.
Early in the debate, we heard from my hon. Friends the Members for Houghton and Sunderland South (Bridget Phillipson) and for Lewisham East (Heidi Alexander) about the impact of child care costs on families and how what the Government propose is too little, too late. They mentioned the dangers of changing the carer-to-child ratios, downgrading again the service provided as well as giving with one hand and taking away with the other—promising something that will happen in 2015 while cutting tax credits.
Government—[Interruption.] Government Front Benchers may think that the situation is funny, but I assure them that it is not funny for the families who my hon. Friend the Member for Glasgow North East (Mr Bain) mentioned from his constituency. He knows well the impact of the bedroom tax and the problems there.
Mr Bain: Does my hon. Friend share the anger of my constituent with cerebral palsy, who I visited last Friday? She has a house that has been adapted and she gets physiotherapy in it. She has been asked to pay a bedroom tax of £9.63 a week, while the Secretary of State was unable today to guarantee that millionaires will not benefit from a spare home subsidy as a result of the Budget.
Hon. Members: It is not a tax!
Cathy Jamieson: I hear yet again Government Members saying, “It is not a tax!” The issue is that the charge will have an impact on disabled people, as my hon. Friend just mentioned.
We have yet to be given an explanation about why it is fair that people in those circumstances in constituencies throughout the UK—more than 2,000 in my constituency of Kilmarnock and Loudoun—will be impacted, while millionaires get a tax cut; it also looks as if millionaires may also get a subsidy to buy another home.
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Cathy Jamieson: I will be happy to give way if the Secretary of State can answer that point about unfairness.
Mr Duncan Smith: Will the hon. Lady answer this question? If she is so against this, why is she in favour of people having spare rooms subsidised by the taxpayer? Why did her party’s Government refuse to allow the same thing in relation to private sector social tenancies?
Cathy Jamieson: Once again, the Secretary of State’s question shows just how out of touch this Government are. These are people’s homes, in which many of them have lived—[Interruption.] The Secretary of State can shout from the Front Bench, but he had his opportunity to speak earlier. It is important to reflect back to him the points made by hon. Members when he was not in his place, and that is what I am seeking to do. It is unfair that people who have lived in their homes for many years are now finding that there are no other homes for them to move to. Some people had been given homes under the homeless persons legislation, and some because the homes are suitably adapted for their needs. It is simply not fair to suggest that these people should not be able to continue to live in these homes.
Several hon. Members talked about unemployment and the need for more to be done. My hon. Friends the Members for Lewisham East, Walthamstow (Stella Creasy), for Nottingham South (Lilian Greenwood), for Luton North (Kelvin Hopkins) and for Blaenau Gwent (Nick Smith) highlighted the problems of many more people chasing vacancies in their areas than there are jobs available. The Government consistently say that there have been increasing numbers of people in employment. However, the harsh reality for many people in the constituencies represented by Labour Members who have spoken is that they are not seeing the benefit of that job creation and are finding that jobs are not available, that only part-time jobs are available, or that they are unable to work the number of hours they need to work.
On housing, various circumstances were relayed during the course of the debate. I note that we still have not had an answer from Ministers about the second home subsidy. Will the legislation be constructed in such a way that it will not be possible for people who already own homes to buy another home under this process? Yet again, no answer is forthcoming. Housing was discussed by my hon. Friends the Members for Hammersmith (Mr Slaughter), for Croydon North (Steve Reed), for Islington North (Jeremy Corbyn), for Westminster North (Ms Buck), for North Durham (Mr Jones), for Eltham (Clive Efford) and for Hyndburn (Graham Jones). I list them all because that shows the great strength of feeling about how this Government have got it wrong on housing and have not done enough to bring forward, at an early stage, plans not only to get houses built but to give the construction sector the boost that it needs.
My hon. Friends the Members for Cardiff South and Penarth (Stephen Doughty) and for Ilford South (Mike Gapes) referred to the Department for International Development’s welcome commitment to spend 0.7% of
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GDP, but made the important point that that money has to be spent on aid and should not be diverted anywhere else.
It was suggested that my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) should have a statue erected in his honour because of the amount of work that he has done in his area on energy and climate change issues. As a former sculptor, I would certainly be very keen to see a suitable monument erected somewhere in his constituency.
I want to return to the points raised by my right hon. Friend the Member for Birmingham, Hodge Hill. He made a number of very important points about how this Government have not taken any responsibility for what they are doing under their own watch. He noted how the numbers have been manipulated or massaged—we can use whatever word we like—and how they want to pay this year’s bills next year to ensure that their sums add up. At the same time, borrowing is the same as last year and will be the same next year, too. They also broke their promise to get the deficit down by 2015.
My right hon. Friend highlighted a number of issues with regard to the jobcentre targets, which was also picked up by my hon. Friend the Member for Walthamstow. Will the Exchequer Secretary address some of those issues when he winds up? As my right hon. Friend has pointed out, it has been said that staff were threatened if they did not get the figures down and that they were given a dictionary of certain phrases that they had to look out for whereby people were put on special measures or investigated further if they used those phrases in their job diaries or on their forms.
This is very serious and I have asked Ministers questions about it during previous debates. I received an assurance that there were no targets in the jobcentres, but we have heard evidence today that there seem to be not only targets, but league tables. I cannot imagine why jobcentre staff would say such things if pressure was not being put on them to work in that way. Ministers seem to be saying one thing in public while something else is going on in private behind the scenes. That suggests either that Ministers do not know what is going on, or that they do know but have not been able, for whatever reason, to get the information into the public domain. The Minister needs to answer those questions. For the same reason, it is important that we get the independent review on sanctions, which Ministers were clearly asked to consider in every case in which sanctions were used. We have heard about the many good people working in jobcentres. It has been suggested that they are good people trapped in bad systems, and it is the responsibility of Ministers to address that.
I want to end on a slightly more positive note. We welcome the employment allowance. We want to see the detail and ensure that it moves ahead as quickly as possible. It is something that we have advocated to give more help to small businesses.
Although we welcome some measures, I want to sound a cautionary note on the sickness and absence review in particular. Of course, we support the idea of people getting the help, assistance and medical treatment they need to deal with conditions and to enable them to get back to work if they have been off sick or have been injured. That access to treatment must not, however, be put at risk by further cuts to the NHS and it must not
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take a similar approach to the one we have already shown to be unfair whereby the Department for Work and Pensions, through organisations such as Atos, appears to be treating people in a way that disadvantages rather than assists them.
We have yet to see all the implications of the plan to introduce the single-tier pension. I have been contacted by many women who have already been hit by the change in retirement age and who are now very worried and confused about how the change to the state pension will affect them. They are now even more worried about the new proposals.
We have had a good debate, but the shadow Secretary of State raised a number of issues for which answers are still required and I hope that the Minister will provide them. I would particularly appreciate answers to the points about sanctions and jobcentres that were raised during the debate.
2.14 pm
The Exchequer Secretary to the Treasury (Mr David Gauke): We have had a well-attended and at times lively debate on the Budget, and I will begin by thanking my hon. Friends for their contributions. My hon. Friend the Member for Rochford and Southend East (James Duddridge) spoke about the steps taken in the Budget to help businesses and ensure growth, and he rightly highlighted measures relating to stamp duty for shares on the alternative investment market. My hon. Friend the Member for Braintree (Mr Newmark) highlighted the extension of capital gains tax policy for seed enterprise investment schemes, and I thank him for his excellent work in promoting those schemes. They are an excellent opportunity to enable start-up businesses to expand, and for investors to find good investment opportunities to help grow jobs in this country.
I thank my right hon. Friend the Member for Sutton and Cheam (Paul Burstow), who I know had to depart early. He highlighted the further substantial progress that the Government have made on the personal allowance, benefiting millions of taxpayers and taking many others out of income tax altogether—a contrast to the record that we inherited. He also highlighted the work on social care reform that the Government have progressed, again in contrast with our predecessors. I know that my right hon. Friend was heavily involved in that process.
My hon. Friend the Member for Enfield North (Nick de Bois) highlighted specific matters relating to community investment tax relief. I know that he has had discussions with the Treasury about his ideas, and we welcome his engagement. My hon. Friend the Member for Wycombe (Steve Baker) dealt with monetary policy—an issue in which he takes a close interest—and we are grateful for his views. My hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) highlighted the progress that the Government have already made in dealing with the mess that we inherited, and particularly the fact that we have reduced borrowing by a third since we have been in office.
My hon. Friend the Member for Northampton North (Michael Ellis) highlighted to the House the expression, “There is no money left”, although I have forgotten for the moment who coined that phrase—[Interruption.] I am told that it was Winston Churchill. I was thinking of
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someone else, although there are certain physical similarities. I also thank my hon. Friend the Member for Hendon (Dr Offord) for highlighting some of the long-standing housing issues in Hendon that he is seeking to address.
Lilian Greenwood: Will the Minister give way?
Mr Gauke: I was about to come to the contributions by Labour Members, but I shall give way to the hon. Lady on that point.
Lilian Greenwood: The Minister mentioned housing. Is he as shocked as I am by figures that the Government have released today that show a 12% increase in the number of households with children accepted as homeless in the last year; an 11% increase in those living in temporary accommodation; and a 29% increase in the number of families living in bed and breakfasts? Is that not a disgraceful indictment of this Government?
Mr Gauke: If the hon. Lady is concerned about people on waiting lists or living in overcrowded conditions, she might want to think about what we could do about too many people who have got spare rooms.
We heard a number of speeches from the Labour party, and two points about the fiscal situation were consistently raised. First was the concern that borrowing is higher than we had wanted and expected it to be—borrowing is too high and debt is increasing too fast. We then had a number of speeches that called for more spending and said that we should not worry quite so much about borrowing and should be prepared to borrow more. Remarkably, a number of speeches made both points at the same time, but the reality is that the Labour party believes that the right approach to our current difficulties in the economy is to borrow more. The proposals from the shadow Chancellor involved £33 billion more spending.
The most interesting point in the entire debate was when the hon. Member for Glasgow North East (Mr Bain) called for more spending in a particular area, and my hon. Friend the Member for Battersea (Jane Ellison) intervened to ask how he would do that in a fiscally neutral way. At that point the hon. Gentleman paused and said, “Well, we are on a different path.” He is an articulate and eloquent speaker, but rather than say what that path was, he refused to answer. Labour Members are on the path that dare not speak its name. Their path is simply more borrowing.
Mr Bain: If the Budget is such a great success, why has the National Institute of Economic and Social Research said this afternoon that the Budget will make no impact whatever on increasing growth for the next two years?
Mr Gauke: I will come to the measures on growth in a moment, but let us not ignore the fact that the Labour party’s approach is to spend more and borrow more. How do Labour Members believe that will enable us to get the debt down? It simply is not feasible.
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Mr Newmark: I might be able to help my hon. Friend and the hon. Member for Glasgow North East (Mr Bain). The IFS says that the Labour pathway would cost the country another £200 billion in debt.
Mr Gauke: My hon. Friend is absolutely right to point that out. That would be the consequence of pursuing the policies advocated by Labour. That does not take into account the concerns about what going down that route would do for international confidence and the price we pay for our borrowing—interest rates. Such borrowing would jeopardise the economy.
We have made progress on, for example, unemployment. Since the first quarter of 2010, the private sector has increased by 1.25 million jobs and total employment is up by 890,000 in the period. A number of hon. Members, including the hon. Member for Houghton and Sunderland South (Bridget Phillipson), described the conditions in their constituencies. It is worth pointing out that, in the north-east of England, employment has risen by 1.4% and unemployment has fallen by 1.5% in the past year.
We are therefore making progress, but I will not deny that we, like most major economies in western Europe, do not have the level of growth we would like. Two big challenges face all of us. First, how do we get growth when there is no money left, and secondly, how do we live within our means—what do we do to get the deficit down? To deal with that question, we must first acknowledge that the problem essentially is that spending is too high, and not that taxes are too low.
We must take steps to address that, which means taking difficult decisions, as the Government have done, on departmental spending. Our decisions have, by and large, been opposed by Labour. We have had support on one element of departmental spending—the public sector pay freeze. We have announced that we have had to extend that for a further year into 2015-16, but I am not sure whether Labour supports that policy. I believe that freeze is essential if we are to meet our targets.
We have also had to take steps to reform welfare. I congratulate my right hon. Friend the Secretary of State for Work and Pensions on the leadership he has shown and on his bold vision for reforming welfare. We must address welfare. In the decade before the financial crisis, and despite a growing economy, welfare spending increased by 40% and has continued to rise—it went from 11% of GDP in 2008 to 13% of GDP in 2012. Put simply, welfare spending still costs the UK taxpayer more than £200 billion a year, which is almost £1 in every £3 raised in taxes, and more than the budgets for health, education and defence combined. We need to find savings across the government. Inevitably, savings on welfare need to be part of that. If we are to spend more money on other services, we need to tackle our growing welfare budgets.
As my right hon. Friend the Chancellor explained on Wednesday, the previous public spending framework divided Government spending into two halves: fixed department budgets and annually managed expenditure. We decided in the Budget to introduce a new limit on a significant proportion of the latter. That will be set in a way that allows the automatic stabilisers to operate, but brings control to areas of public spending that have been beyond our control. My right hon. Friend the Chief Secretary to the Treasury will provide an update on that at the spending round.