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Steve Brine (Winchester) (Con): My right hon. Friend spoke a lot last week about the next generation and Chancellors who always said yes. One thing he said yes to last week that was very much welcomed by many young people in Southampton and across the south was the backing of the new children’s hospital in Southampton with £2 million of match-funding. That is what looking after the next generation looks like. May I say thank you on behalf of many people across the south?

Mr Osborne: My hon. Friend campaigned tirelessly for that extra money for the hospital in Southampton—he raised the matter countless times in the Chamber. That shows that, if Members persevere on getting the vital services for their local constituency, the Government listen and deliver for them in this Chamber.

Several hon. Members rose

Mr Osborne: Let me make a couple more points and then I will take another intervention.

Yesterday, the Leader of the Opposition stood at the Dispatch Box to reply to my right hon. Friend the Prime Minister. People have focused on what the Leader of the Opposition failed to say, but I am focused on what he did say. He said we should not be reducing taxes on business. In other words, he thinks the answer to the challenge of low productivity and of growth in an uncertain world is that taxes on business should be higher. I totally disagree with that approach. That is Labour’s answer these days: pile the taxes on business and increase the basic rate of income tax on working people, as they propose in Scotland. Again, the price would not be paid by Labour Members. It would be paid by the young people who cannot get jobs—they cannot get jobs in countries where business taxes are too high and where enterprise is stifled. It would be paid by people who work in our public services, whose resources would be drained as the economy became more and more uncompetitive. It would be paid by the whole country, as living standards declined and the nation got poorer.

If that is the Budget hon. Members want, they should vote in the No Lobby tonight. If they want a small business Budget that cuts taxes for small firms, takes 600,000 businesses out of paying business rates, and reforms commercial property tax so that small premises pay less, that is the Budget we are voting on tonight. If they want an enterprise Budget that boosts investment in our small and medium-sized firms, with lower CGT, dramatically reduces burdens on our vital oil and gas industry, and gives us the lowest headline business tax rates of any of our competitors, that is the Budget we are voting on tonight. If they want a one nation Budget that increases the resources for education, supports children’s healthcare, devolves power across our nation and builds infrastructure for our future, that is the Budget we are voting on tonight. If they want a Budget for working people, that helps them to save for their future, freezes their fuel duty and cuts income tax so they keep more of the money they earn, that is the Budget we are voting on tonight.

It is a Budget that delivers security, that helps the next generation and that backs working people. It is a one nation, compassionate Conservative Budget, and I ask the House to support it tonight.

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1.36 pm

John McDonnell (Hayes and Harlington) (Lab): I beg to move amendment (b), in paragraph (2), after “tax”, insert—

“(except in relation to value added tax on insulation, solar panels and any other category of energy-saving material or their installation)”.

I and my party share the sentiments expressed by the Chancellor and those across the House in condemnation of what happened in Brussels today. Our thoughts and prayers are with the victims and their families. We support the security measures, of course, taken by the Government and say to the people of Belgium that we stand with them.

I am glad to see the Chancellor has at least turned up today. Let me make it clear from the outset that, in my view, and I believe the view of many others, the behaviour of the Chancellor over the last 11 days calls into question his fitness for the office he now holds. I also believe that it certainly calls into question his fitness for any leading office in government. What we have seen is not the actions of a Chancellor, a senior Government Minister, but the grubby, incompetent manipulations of a political chancer.

For the record, let us go back to last Friday week. The Chancellor personally forced through cuts in personal independence payments. The statement issued by the Government that Friday on PIPs was not a consultation and not a suggestion; it was a statement of policy. Personal independence payments are the benefits that, for many disabled people, make life worth living. They help them get to work. They help them have some normality in their lives. Often, they keep people out of residential care. The Chancellor was willing to cut away that vital support to some of the poorest and most disadvantaged members of our community. Do not tell us that we are all in this together.

Kevin Brennan (Cardiff West) (Lab): Would it not at the very least help to dispel the impression that the Chancellor is acting in his own political interests, rather than in the national economic interest, if he made it clear today that he was not going to stand for the leadership of the Tory party so that he could concentrate on his job as Chancellor of the Exchequer?

John McDonnell: The reason I refer back to fitness for office is because many of us know the distress that has been caused to so many people over the past week.

James Cartlidge: The hon. Gentleman makes a very personal point about fitness for office on the day of a major terrorist attack. Will he withdraw his previous support for terrorist organisations that have attacked this country?

John McDonnell: Mr Speaker, you heard me share the sentiments of the whole House on the issue of Belgium. To bring that into the debate as a political point at this stage is unacceptable. [Interruption.]

Mr Speaker: Order. I made it clear earlier that attempts to shout the Chancellor down were unacceptable. That was made very, very clear and I do not think anybody would doubt or deny it. I make it similarly clear that no

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attempt in this Chamber will be successful if it is an attempt to shout down the shadow Chancellor. Get the message: it ain’t gonna happen.

John McDonnell: On that Friday before last, there was outrage among disability groups—the Multiple Sclerosis Society, Parkinson’s UK and Disability Rights UK. Why? Because all of them, like many of us, had gone through that process of agreeing the criteria—at least coming to some compromise on what would constitute the criteria for access to this benefit. But Chancellor moved the goalposts, those already agreed through consultation. Disabled people and their families have been sick with worry about the threats to their benefits.

Tom Tugendhat (Tonbridge and Malling) (Con): The hon. Gentleman has called into question the morality of the leadership of my right hon. Friend the Chancellor, but would the hon. Gentleman please discuss with this House the morality that allows him to stand with bombers who murdered my friends in Northern Ireland and to question the integrity of the Chancellor? [Interruption.]

Mr Speaker: Order. Before we proceed further, perhaps I can just say to the House, on my own account and on the basis of sound procedural advice, that we must stick to the matter of the Budget. [Interruption.] Order. I do not require any comeback or any comment, agreement or disagreement. Let us proceed in a seemly manner with the debate. That is in the House’s interest, and that is what the country has a right to expect.

John McDonnell: This is a challenge to the judgment of the Chancellor.

Clive Efford (Eltham) (Lab): During the Chancellor’s opening speech, we heard him say that the Government have legislated to make £12 billion-worth of savings within the welfare budget. That means that this £4.4 billion attack on PIP was in addition, and it was based neither on social justice nor on compassion. Does that not show that this Government are mean-minded and prepared to attack people who have disabilities? It is not necessary to make these cuts in welfare and they should guarantee that they are not going to return with this cut.

John McDonnell: The proposals that came forward did not just shock those on our side of the House; they shocked many Members from across the whole of the House with their brutality.

Christopher Pincher: Will the shadow Chancellor give way?

John McDonnell: No, I have given way enough—I will come back to the hon. Gentleman.

There is scheduled to be a 6% real-terms decline in spending on disability benefits between 2015 and 2020. After that Friday, when we reached the Wednesday of the Budget, we discovered that these cuts to disabled people were being made to pay for capital gains tax cuts benefiting the richest 5% in our society and for corporation tax cuts. Of course, a deep feeling of unfairness was felt in this House, among Members in all parts of it. I welcome the expression of concern by the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith)

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during that period and his conversion to our cause of opposing these benefit cuts. But the first person to call attention to the scandalous targeting of people with disabilities was my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). She rightly said, in response to the announcement:

“In coming to this decision, the Tories are yet again ignoring the views of disabled people, carers and experts in the field, trying to press ahead with changes, just two years since the introduction of the system.”

After it became clear that the cuts to PIP were planned as a way to fund tax cuts for the wealthy, my right hon. Friend the leader of the Labour party made this issue a key part of his excellent response to the Budget last week, and he was not alone in doing so. My hon. Friend the Members for Ilford North (Wes Streeting) and for Nottingham East (Chris Leslie) were among several Opposition Members who pressed the Chancellor on the issue, as I did when opening the Budget debate last Thursday. I want to give thanks to everyone on our Benches and across the House who has helped to force this rethink and helped end the worry that thousands of disabled people have been experiencing in the past week.

Andrew Bridgen (North West Leicestershire) (Con): The shadow Chancellor is right about U-turns being embarrassing, but I remember his embarrassing U-turn on the fiscal responsibility charter. Does he regard himself at the moment as a socialist or a Marxist, and does he agree that all that the politics of the far left offers people is an equal share of misery?

John McDonnell: This is a debate about the threat of cuts facing some of the most vulnerable people in our society. This is not a time for engaging in student union politics in this Chamber.

By Friday of last week, the Chancellor was facing so much criticism that he needed to find someone to blame. So, in one of the most despicable acts we have witnessed in recent political history, the Chancellor sent out his large team of spin doctors to try to lay the blame on the former Secretary of State for Work and Pensions, the right hon. Member for Chingford and Woodford Green. That was a disgraceful act of betrayal of one of the Chancellor’s own Cabinet colleagues to save his own skin and his leadership hopes.

Pete Wishart (Perth and North Perthshire) (SNP): Will the shadow Chancellor give way?

John McDonnell indicated assent.

James Cleverly (Braintree) (Con): Will he give way? [Hon. Members: “Ooh!”]

Mr Speaker: Order. [Interruption.] Order. Leave me to deal with this. Mr Cleverly, I have known you for years and you have always struck me as a very polite fellow. You are getting over-excited, young man. You will have an opportunity to intervene, perhaps in due course, but you don’t do it like that. Learn from a few old hands.

Pete Wishart: I am surprised that the shadow Chancellor is taken in by some of the crocodile tears from the Tories and this concern for the disabled. Surely he

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agrees that this is nothing to do with the Tories’ new-found concern for the disabled in this country—it is all about their euro civil war?

John McDonnell: Let me move on. I appreciate the point made. The betrayal was why the right hon. Member for Chingford and Woodford Green resigned. I have not agreed with a single policy that he has brought forward, but I do not doubt his sincerity in the policies that he has pursued.

Dr Rupa Huq (Ealing Central and Acton) (Lab): Does my hon. Friend not agree with the words of the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith) that this Chancellor’s policies are

“in danger of drifting in a direction that divides society rather than unites it”?

Was the right hon. Gentleman not right when he said that?

John McDonnell: I believe that the right hon. Gentleman’s interview on the Marr programme on Sunday expressed a profound concern that he had about the unfairness of the Budget, and we agreed with this. As I said, I have not agreed with a single policy he has pursued, but I do not doubt his sincerity. The right hon. Gentleman saw—

James Cleverly: Will the hon. Gentleman give way?

John McDonnell: I will in a minute. There is no need to shout out so loud again.

The right hon. Gentleman saw the unfairness of the PIP cuts to disabled people in the Budget. As he said, it is a Budget that benefits high earners. He also saw himself being set up by his own Cabinet colleague.

Catherine McKinnell (Newcastle upon Tyne North) (Lab): The shadow Chancellor is right to say he does not agree with the former Secretary of State’s policies. Indeed, even with the U-turn on PIP disabled people are still left distressed by the reforms that will still be going through. Will he join me in urging the Chancellor and the new Secretary of State for Work and Pensions to look again at this very flawed process?

John McDonnell: I fully concur. The same week that this was being discussed, ESA was being cut by £30 a week.

James Cleverly: I thank the hon. Gentleman. He has been speaking now for 14 minutes. He has criticised Conservative Members for making this about politics and people, but I was just wondering when he will actually get around to talking about any of the Budget proposals.

John McDonnell: The role of the Opposition is to hold the Government to account. We are holding this Chancellor to account for a potential attack on disabled people that I believe would have devastated their lives.

What I find most disgraceful through all of this is that there has been no word of apology from the Chancellor or any Conservative Member. Apologise, I say. I say apologise for the pain and anguish he has caused disabled people and their families in the past

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two weeks. We all make mistakes. I understand that. But when you make a mistake and correct it, you should at least apologise.

Anna Turley (Redcar) (Lab/Co-op): Does my hon. Friend share my view that the most distressing thing the former Secretary of State said this weekend was the point he made about

“it doesn’t matter because they don’t vote for us”?

Is there not a constant thread running through everything—from the bedroom tax, local government cuts to this Budget—that this is a deeply political Government who do not care unless people vote Tory?

John McDonnell: I find a form of electoral politics, where you target a vulnerable group in society just because they do not vote for you, unacceptable. Not a word of apology! One nation Conservativism? It is a contradiction in terms.

Chris Philp: May I remind the shadow Chancellor that the richest 20% are now paying 52% of all income tax, which is up from 49%, and that the national living wage is putting money into the pockets of our country’s poorest citizens?

John McDonnell: The hon. Gentleman refers only to income tax. If he had looked at last weekend’s analysis of the overall cuts and what has happened with regard to tax and benefits, he would have seen that it is actually the poorest decile who are paying the most. The two groups hit hardest are young women with children and older women with caring responsibilities. Some 81% of the cuts are falling on women. This is a discriminatory Budget.

Chi Onwurah (Newcastle upon Tyne Central) (Lab): We are pleased that the Chancellor has found that the PIP cuts are a cut too far, even for this ideological Government. Does the shadow Chancellor agree that characterising all benefits claimants as workshy, stay-in-bed, lazy scroungers, which the Chancellor of the Exchequer has done on many occasions, contributes to an atmosphere in which it is acceptable to enrich the better off at the cost of the poorest among us?

John McDonnell: That language has been used by the Conservative party. Let me return to the Budget. The hon. Member for Braintree (James Cleverly), who has now left us, asked me to return to the Budget, so let me press on.

Even worse, there is still no certainty about further welfare cuts. We were told yesterday by the new Secretary of State for Work and Pensions—this was repeated today—that there were to be no further cuts to welfare in this Parliament. Within minutes, the Treasury were briefing to correct the Secretary of State, as that then became “no planned cuts”. There is complete confusion—chaos on chaos. Nobody believes or has any confidence in the mealy-mouthed assurances that are being given today.

Steve Brine: Will the hon. Gentleman give way?

John McDonnell: In a second.

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The PIP withdrawal now leaves a £4.4 billion hole in the Chancellor’s Budget, as has been consistently pointed out by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper).

Steve Brine: Will the hon. Gentleman give way?

John McDonnell: Let me finish this point.

The simple fact is that the sums in the Budget, as my right hon. Friend pointed out, simply do not add up anymore. They simply do not compute.

Yvette Cooper: The shadow Chancellor will be aware that page 26 of the Red Book states that the Chancellor will set out plans to meet the welfare cap by this autumn, and that page 198 of the OBR report says that that will require further welfare savings of £3 billion a year. Did he hear the Chancellor say clearly this afternoon that he was going to ditch the plans for £3 billion a year of additional welfare cuts by the end of this Parliament?

John McDonnell: Cuts upon cuts, and who to? The most vulnerable in our society.

Steve Brine: I believe that the shadow Chancellor and the Leader of the Opposition, with whom I have served on Select Committees, are decent men. The shadow Chancellor said five minutes ago that he did not agree with a single policy introduced by the former Secretary of State for Work and Pensions during his time in office. Given the shadow Chancellor’s new fiscal responsibility, with the new rules he announced just a week or so ago, will he tell the House—people will be looking to him, because he is the shadow Chancellor—whether he would keep the welfare cap? If he cannot tell me that, will he tell me just one single saving that he could make from the welfare budget?

John McDonnell: We supported the welfare cap. I find it ironic that that point is being made on behalf of a Government who are not meeting their own welfare cap. They are breaching it and then moving it up. They are moving the goalposts again.

Let us be clear that the £4.4 billion black hole in the Chancellor’s Budget means either further cuts in departmental budgets and to benefits, or stealth taxes. No solution has been announced today. We are told that all this will be resolved by the autumn. Between now and then, no public sector job, benefit or service will be safe.

Tim Farron: The hon. Gentleman is right that the Chancellor has a £4.4 billion black hole that needs to be filled by cuts to public services or by stealth taxes, but that is in existence only because the Chancellor has set himself a false target. Does the hon. Gentleman agree that the real problem at the heart of the Chancellor’s credibility is the fiscal charter?

John McDonnell: I am grateful for the hon. Gentleman’s intervention and I will come back to that point in due course. I realise we are under pressure of time, Mr Speaker, so I will try to be as brief as I can.

The Chancellor’s political manoeuvring has real consequences. The drama over Budget week has clouded a further astounding revelation about his behaviour.

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His former Government colleague, David Laws, revealed at the weekend that the Chancellor pressurised senior officials to reduce their estimates of the funding needed to maintain the NHS. We discovered that the Chancellor had forced through a cut of almost half the funding—this was independently assessed—needed by the NHS. The result is that the NHS and hospital trusts around the country cannot plan. They are facing a crisis: waiting times are rising, staff are under intense pressure and morale is at rock bottom. At the start of the year, the NHS recorded its worst ever performance as services struggled to cope with demand. It is now facing its biggest funding crisis for a generation and that is putting patient care at risk.

Sammy Wilson (East Antrim) (DUP): Does not the welfare cap, and support for it, suggest that if welfare spending goes up, we will have to revisit that spending? At that stage, would the shadow Chancellor cease to support the cap, or would he support measures to keep within it?

John McDonnell: We support a welfare cap, and we believe we have better policies—building homes, for example, rather than spending money on housing benefit—that would enable us to meet it.

Nothing in the Budget says that the NHS can find £22 billion in savings over the next few years. The idea is pure fantasy written into the Budget. It is typical of this Chancellor to opt for spin and presentation over addressing the real problems. He needs to stop living in fantasy land and to start being honest with the public over his own numbers.

Michael Ellis (Northampton North) (Con) rose—

John McDonnell: I have been extremely generous in giving way, but we are running out of time.

On schools, this was far from a Budget for the next generation, as the Chancellor claimed. Not only is the plan to turn every school in the country into an academy unpopular with parents and teachers, but we now know that schools face an 8% real-terms cut in their funding. This is the first time since the 1990s that schools’ funding has been cut.

As the hon. Member for Westmorland and Lonsdale (Tim Farron) said, at the heart of all this failure is the Chancellor’s economic incompetence. His huge mistake was to force through a fiscal rule that has proved to be unworkable. Against all sound economic advice, he put politics above economics and imposed a fiscal rule that now, like his Budget sums, simply does not add up. Virtually every target he set himself has been missed. On the deficit, which he promised would be eradicated last year, he has failed. The debt was supposed to be falling, but it is rising.

Rushanara Ali (Bethnal Green and Bow) (Lab): The former Work and Pensions Secretary described the cuts to PIP as deeply unfair when juxtaposed against tax cuts for the wealthy. Does my hon. Friend agree that the Chancellor should consider scrapping that tax decrease for the wealthy to help to fill the £4.4 billion black hole, which might help to improve his competence?

John McDonnell: That is the sort of proposal we should be considering and voting for today.

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Several hon. Members rose

John McDonnell: I want to finish the next section of my speech. I am straining your patience, Mr Speaker, so I shall press on.

The Chancellor is set to leave our children with £1.7 trillion of Government debt. Hundreds of billions have been borrowed under his watch. The welfare cap, which the hon. Member for East Antrim (Sammy Wilson) mentioned, is set to be breached each year until 2020. The OBR confirmed to the Treasury Committee that it would be breached by £20 billion over five years. The Chancellor has broken two of his own rules already. The third—the overall surplus—now hangs by a thread, and only with some seriously creative accounting will he meet it.

Meanwhile, across the country, the Chancellor’s economic approach is failing, as was evidenced by last week’s OBR report: forecast for growth—down; forecast for wages—down; forecast for productivity—down; and forecast for business investment—down again. Why will he not take responsibility for the last six years?

Antoinette Sandbach (Eddisbury) (Con): Does the hon. Gentleman celebrate the fact that 1,700 of the lowest paid in my constituency will be taken out of tax altogether as a result of the Budget, and that 1.3 million of the lowest paid have already been taken out of tax altogether in this Parliament?

John McDonnell: That is why we support the increase in the lower-rate threshold, but we have concerns that shifting the thresholds in that way actually benefits higher earners too much.

At the bottom of the Budget is a Chancellor who, as some have mentioned, is more interested in his political career than the welfare of disabled people, and more interested in becoming the leader of his party than in the health of our economy. He is not a Chancellor but a political chancer. I pay tribute to colleagues on both sides of the House who forced him to U-turn on his proposed cuts to disabled people.

This is not a one-nation, compassionate Budget—nobody believes that—but a Budget shot through with unfairness at its heart. Even one of the Chancellor’s own Cabinet colleagues last week denounced it as fundamentally divisive and unfair. It is not a competent Budget. It fell apart within a couple of days, and the Chancellor still cannot explain how he will fill the £4 billion hole. This is not a Budget for the long term either—a long-term economic plan that lasts three days? It is a Budget built around short-term political tactics and it has backfired spectacularly. They used to say that a week was a long time in politics but, under this Chancellor, a weekend is the length of a long-term economic plan. What a failure!

This is not a Budget for the economy or the country, either, but one that is constructed around self-imposed austerity. It is about politics—incompetent politics at that —not economics, and it has blown up in the Chancellor’s face. For the sake of his party—he might think about that—and certainly for the sake of the country, it is time for him to go.

2.6 pm

Mr Kenneth Clarke (Rushcliffe) (Con): I congratulate my right hon. Friend the Chancellor on reviving the tradition of the Chancellor speaking on the last day of

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the Budget debate. It is one of the many things that my successor, Gordon Brown, should not have abandoned. I think we will agree it has enlivened the debate very considerably, compared with what usually happens. I also congratulate him on his extremely effective and spirited performance in defence of his Budget. He rightly took pleasure in his achievements so far in his term as Chancellor.

It is remarkable that we are having such a lively debate on the Budget at a time when, as we have just discovered from listening to the shadow Chancellor, there is absolutely no alternative economic strategy or policy on offer—no doubt my party will make up for that lack of challenge in its own curious way, but meanwhile I congratulate the Chancellor on where he has got so far.

In case the Chancellor is worried about the controversy surrounding the Budget, let me tell him that it is not unusual. I have been here so long that I have seen much worse. Geoffrey Howe’s 1981 Budget was extremely controversial, and passions ran higher, and far more seriously, than they have on this occasion. Nigel Lawson had his Budget speech interrupted, and the House was suspended because of disorder, when he tried to cut the taxes on the higher paid.

I had merely one defeat on a Finance Bill. I lost to a rebellion on the Floor of the House. My mitigation was that it was not my proposal—it was Norman Lamont who proposed VAT on domestic fuel—although I still think it was perfectly sensible. I immediately came back with more tax proposals to get the revenue I had lost, but my right hon. Friend is quite right to wait for events between now and the autumn statement and then to continue the fiscal discipline he has rightly maintained so far.

Geraint Davies: The right hon. and learned Gentleman probably knows that the Royal College of Physicians has announced that 40,000 people are dying a year, at a cost of £20 billion, from diesel emissions and pollution. Does he think the Chancellor should reconsider promoting green transport, public health and savings and rebalancing the tariffs on electric, diesel, hydrogen and petrol in order to save lives and money?

Mr Clarke: We have been extremely active on that front, but scientific knowledge is moving on. I remember when diesel was positively subsidised by Governments because it was thought to be more environmentally friendly. In a more appropriate debate, those issues are well worth pursuing. I understand the problem. I turn to what the Chancellor has to devote himself to: the Budget judgment and its implications for the economy. The Chancellor accepted, as he has to, that that is his principal responsibility. The Chancellor has the most difficult job in government, because he has to spend all his time challenging all the lobbies that demand extra expenditure and challenging his colleagues to find savings or improvements in the budgets of their Departments in order to close the gap.

What this Chancellor has not done is take a short-term view at any stage. That is why he has achieved such remarkable economic success. What I liked about his Budget speech was when he stressed how it was for

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future generations. What he said a few moments ago—a soundbite, if I may say so, which I had not heard before: there is no social justice without sound finance—is one of the best summations of one-nation Conservatism I have heard for a very long time.

Keith Vaz (Leicester East) (Lab) rose

Mr Clarke: I shall be in trouble with the Speaker and everyone else who wants to speak if I give way. Otherwise I would love to give way to the right hon. Gentleman.

Mr Speaker: Let me say to the right hon. and learned Gentleman that he has never been in trouble with the Speaker.

Mr Clarke: I am trying to be reasonably concise rather than too expansive. I apologise to the right hon. Member for Leicester East (Keith Vaz).

I tried to think of what I would have done had I been Chancellor in the present situation. Before the Budget was delivered, I expected a much tougher Budget. Thank the Lord that I am not in my right hon. Friend’s position; I never had to face problems of the kind that he inherited from his predecessor. My instincts are classic, traditional stuff for anyone for whom the iron of the Treasury has entered the soul. This is the first Budget after an election, we have not made fast enough progress in eliminating the deficit and debt, and we will not have sound future progress with a modern rebalanced economy unless we have done that, so my first thoughts would have been to get on with it.

I would have introduced a Budget, as I frequently did in my time, raising taxes and cutting public expenditure. I am glad to hear, for reasons that I shall return to later, that my right hon. Friend has committed himself to his continuing long-term objective, and has decided to pause. I thought this was going to be a popular Budget. People speculate as to why we chose an easier path. [Interruption.] The Chancellor has in the short term relaxed fiscal policy. It is good that the Bank of England is retaining a very relaxed monetary policy, but it will tighten it if we were to abandon fiscal discipline. In the short term, my right hon. Friend has lowered taxation and lowered Department spending targets for cuts. He has eased off on public spending and lowered taxation. I was surprised by that.

I assume that this was partly caused by the considerable uncertainty that the economy faces. No one has addressed that issue in any of these debates, although the Chancellor did in his Budget speech. The global economy is slowing down, and mainly as a consequence of that, the British economy is slowing down. The uncertainties for our economic prospects over 2016 are very concerning. There are many uncertainties, all of which would threaten most of the developed economies if things go wrong. We still do not know whether China, for example, is going to achieve a soft landing; I think it will. In the emerging markets—there are associated problems with emerging market debt—there is volatility and some unsoundness in the financial world.

And there is the risk of Brexit. I am very glad that the Governor of the Bank of England decided to reassure people by setting out publicly that he was prepared to take action if we had a flight of capital from this country should people be alarmed about the referendum.

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So far, such risk has led only to a big decline in the value of sterling and the freezing of most people’s investment plans. One would be a bit of an idiot to invest in the British economy in anything that had the slightest risk when we do not know what the circumstances and trading patterns are going to be in six months’ time.

I assume one reason why my right hon. Friend took a more relaxed view than a traditional Chancellor would have done and did not make those big spending cuts or increase taxation—in fact, he eased taxation for businesses and the low-paid—was to avoid the mistake of being too severe when circumstances might well worsen as the year goes on. That underlines the point that, in the long term, one cannot forecast and fix these kind of things further forward.

A great deal of the debate around the Budget centred on the forecasts and the Office for Budget Responsibility. The fact that the OBR’s forecasts keep changing so rapidly just underlines what I am saying about the uncertainties for the immediate future. Fortunately, thanks to my right hon. Friend, the British economy has been the fastest growing developed economy in the last 12 months, and we are probably less at risk than most others. However, the fact remains that this was a time to be cautious. Personally, I would have maintained the squeeze—it has all been put off until the latter half of this Parliament, and into the next if we are not careful—because so long as the economy continues to grow, and there is a reasonable prospect that it will, we should not be running a deficit of this percentage of GDP, piling up more debt for our successors.

My doubt is whether this pause was totally justified. I accept that it probably was; but certainly we must resume things. I listened to a shadow Chancellor who plainly does not have an idea in his head about how he would save any money or do anything other than continue spending and borrowing. It is totally profligate stuff, as we have seen very much in the past.

I am very glad that my right hon. Friend made the changes to business taxation. When I was in office, I put up taxes, but I never put up business taxes because I was trying to encourage growth. We still need to make our economy stronger, so it is welcome that the Chancellor stepped in, keeping our corporation tax level at a competitive rate. I particularly welcome the help he has given to small and medium-sized businesses. Encouraging business is, of course, the best way of protecting ourselves against economic risks for the future in this uncertain world.

My right hon. Friend has not been wholly generous towards big business. He and the Government have been leading in the OECD on attempts to tackle the problem of tax evasion and tax avoidance on the part of big multinational companies. He has incorporated the first serious attempt for a long time to attack the problems of tax relief on interest when it is exploited and misused, on royalties and on past losses. I get told a lot about how the Chancellor should be collecting more from big international companies, but no Government have done a blind thing about tackling this tax avoidance for the past 20 years. This Government are leading international discussion towards agreement, which is what is needed, and in this Budget, the Chancellor has started to act.

We are told that we are relieving tax on the rich, but everybody knows—I certainly know, and not just from the newspapers—that the Treasury has been looking at

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the idea of doing more on tax relief for the wealthy when they contribute to their pension funds. If they have very high earnings, tax relief on pension funds is the way of avoiding tax and it is a great way of ensuring that 45% tax is not paid on a very considerable part of one’s income. That was the case, but we have now put a cap on it. I feel that we are still rather too generous, but in today’s politics that was another lobby, and when someone leaked it, it was seen off by the pensions industry in about 10 days flat. So my right hon. Friend was not allowed—on that occasion, I suspect, because of fear about what would happen on this side of the House—to proceed with fairly modest changes in tax relief for the rich.

As far as other tax moves that my right hon. Friend has made, on personal allowances and the thresholds for the higher rate, because the higher paid—the rich—now pay such a huge proportion of tax, it is almost impossible for Chancellors to ease the tax burden on the low-paid and the ordinary citizen without its being possible to demonstrate mathematically that they have done quite a lot for the rich as well. If Chancellors bought that argument every year, they would never move the threshold at which people start to pay tax, and they would never raise the 40% rate for the people who are currently in modest jobs and find that they are subject to a marginal rate of 40% because Gordon Brown started the habit of freezing the threshold in order to secure stealth taxation. Raising these thresholds is welcome, and I am glad that my right hon. Friend felt able to do it.

Other measures should be seriously canvassed. The pensioner benefits, to which I am entitled, are discussed every now and again. I am always told that we have put things in a manifesto, but I have yet to meet a candidate or an elector who read the last general election manifesto, which, although it seems to contain considerable detail, was certainly not crucial to my constituency victory, or, I suspect, to anyone else’s. We have ruled out ever raising income tax, ever raising national insurance, ever raising VAT; we appear to have ruled out doing anything at all that would stop the very wealthiest people having free bus passes and receiving the winter fuel allowance. I am not going to advocate the breaking of manifesto pledges, but I know of no prosperous pensioners, and certainly none who are in full-time employment like me, who would object to, at the very least, those benefits being made taxable.

I think that there is a case for considering those measures and various alternatives, but I will not risk going into it any further, first for reasons of time, and secondly because, given today’s populist politics, I fear that if I do, some lobby yet unknown to me will descend on me in the next two or three days in order to mount a campaign, through our ridiculous media, to blow that case out of the water.

Of course we must judge the Budget on its own merits, and I understand why my right hon. Friend has got to where he is. No two Chancellors have ever done the same in respect of every measure. Within our system, a Chancellor makes an overall judgment, and this Chancellor retains my full confidence: I am prepared to support his judgment.

I have another reason for supporting my right hon. Friend’s judgment. As I have already said, the present Government are in a strange position. Absolutely no alternative proposition is being advanced by anyone

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outside. Some pundits, and, as a result, some politicians, seem to believe that we are wrong to maintain our target of a balanced budget over the cycle, or however we choose to put it. They suggest that, actually, there are no problems, and the answer is simply always to run a deficit, on and on and on. After all, it is free money. It is a bit troublesome that interest rates might return to normality one day, but meanwhile, just let it pile up: it will sort itself out.

People on the far right say “Tax cuts, that is all you want. Tax cuts will inspire such tremendous entrepreneurship that jobs will be created, wealth will be created, and it will all be paid back. You will not be in debt for long.” On the left, the argument is “Boost every welfare payment, increase public spending on every public service, and that will generate such demand from the grateful taxpayer recipients that they will pump it into the economy, and it will pay for itself.” That is Mickey Mouse economics, as practised by the last Labour Government, and it got us into this trouble that we are still—thanks to my right hon. Friend—getting out of now.

As for my final reason for backing my right hon. Friend’s judgment, his record, after eight Budgets and six years, is absolutely amazing. I must concede, having been one of his competitors at one point, that he is far the most successful departmental Minister in this Government to date. If anyone had said, when he took over the state of affairs that he took over more than eight Budgets ago, that he would stand here, in charge of the fastest growing economy in the developed world, with near-full employment and with employment at record-breaking heights, able to demonstrate the steadily improving state of not only the public finances but the condition of the poor, as well as the alleviation of social problems across the country, that person would not have been believed. It is a quite remarkable performance.

So I back my right hon. Friend’s judgment. I am also delighted that he is helping us all to avert the risk of Brexit in the forthcoming referendum, because, if the public were so ill advised to vote for it, that would be the only thing that could really send this economic recovery off the rails in a big way.

Several hon. Members rose

Mr Speaker: Order. Before I call the spokesman for the Scottish National party, it may be convenient for the House to know that, owing to the level of demand among those wishing to contribute to the debate, a five-minute limit on Back-Bench speeches will have to take effect immediately after his own speech.

2.26 pm

George Kerevan (East Lothian) (SNP): Let me begin by associating the SNP with the words of the Chancellor and the shadow Chancellor in expressing sympathy for the people of Belgium—Flemish, Walloon, and recent immigrants—at this tragic hour.

I must give the Chancellor his due. He gave us a bravura performance: in my view, a more assured and more interesting performance than we were given last week. However, I am always worried when he goes into

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his expansive, emotional mode. What is he hiding? We know what he hid last week, which was the fact that he would have to come back and tear up his Budget and create a new one, but what did he hide this week? He hid what he always hides and never addresses: the crucial issue of productivity. Without productivity growth, there can be no tax growth, no jobs growth and no wage growth. The truth is that, under this Chancellor, productivity has risen at an annual average of 0.1%. Since the top of the boom in 2007, the cumulative increase in UK productivity has been less than 1%. That is the Chancellor’s failure.

I have great respect for the Chancellor, but he is not a Chancellor who ever had a real job. He is not a Chancellor who ever worked in the private sector. He is not a Chancellor who ever had to lie awake at night—as I have, and as, I am sure, have many other Members on both sides of the House—and worry about how to pay the next wage bill. This Chancellor is an intellectual Chancellor: that is his problem.

Chris Philp: I have spent the last 15 years setting up and running businesses. As someone who has done that, I am glad that it is this Chancellor who is sitting in that seat, because he is the man who has created jobs and helped businesses like mine! [Interruption.]

Mr Speaker: Order. May I just say, for the benefit of the House, that moderation and good humour are the precepts of “Erskine May”. Members on both sides of the House can learn from the right hon. and learned Member for Rushcliffe (Mr Clarke), who has just given a textbook example of a robust speech made with good humour. Many Opposition Members can do the same, and new Members could learn from them.

George Kerevan: Thank you, Mr Speaker. I serve on the Treasury Committee with the hon. Member for Croydon South (Chris Philp), and I did not take what he said personally.

If we do not get productivity, what happens? We do not get growth. The right hon. and learned Member for Rushcliffe (Mr Clarke) gave us a wise presentation, as he normally does, but he slipped up a little. He said that, under this Chancellor, the United Kingdom had experienced the fastest growth in the developed world. That is not true. As he phrased it, it is not true—unless, of course, Australia is not developed; unless, of course, the United States is not developed; unless, of course, Sweden is not developed; unless, of course, Korea is not developed; unless, of course, Spain is not developed. All those countries experienced faster GDP growth than the UK in 2015, largely because they experienced faster productivity growth. That is what this Chancellor has not delivered. That is not what this Budget contains. And that is this Budget’s weakness.

If we look at the failure of productivity growth in the UK under this Chancellor, we see that productivity is lagging in practically every commercial and industrial sector. Crucially, productivity has been falling by an average of 1% a year in the financial services industry—our flagship industry, our key service industry, the industry that is leading our service exports. This Chancellor has devoted a lot of time and effort to reconstructing the financial services sector—I grant him that—but what have we got? Falling productivity. According to the

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Office for National Statistics, productivity in the British financial sector, including insurance, is now behind the level of financial services productivity in France and Italy. That is not a great record, Chancellor. Here is the bottom line: if we do not have productivity growth, the cash economy will not grow, wages will not grow and income to the Treasury will therefore not grow.

Marcus Fysh (Yeovil) (Con): Does the hon. Gentleman not recognise that there is a lot in this Budget to improve the performance of the economy? Does he not agree that a massive cut in business rates will deliver exactly the productivity that he is talking about?

George Kerevan: I utterly accept that point. This is at the core of what I am saying. The kind of business rate cuts for small companies that the Chancellor has belatedly introduced in this Budget have long been available in Scotland. What has happened to productivity in Scotland? Despite the Scottish Government’s limited drivers for economic growth, productivity in Scotland has gone up 4.4% since the recession. That is more than four times what this Chancellor has managed to deliver. In Scotland, our limited tax powers have forced us to concentrate on the supply side, and my bill of fare against the Chancellor is that he does not do that. Yes, there are lots of bits and pieces in the Budget that I welcome—particularly the move to clamp down on transfer pricing in multinational companies—but in the end, there is no strategy. The Chancellor has no strategy apart from his rendezvous with 2020 and trying to run a budget surplus.

Sammy Wilson: Does the hon. Gentleman accept that he is perhaps being a bit harsh? There are many supply-side measures in this Budget, including improved investment in infrastructure and the digital economy and cuts in corporation tax and business rates, all of which should help investment and therefore increase productivity.

George Kerevan: Indeed, and I welcome all the supply-side measures, but—[Interruption.] Wait for it! We have had five Budgets in the past 15 months. Why did those measures not appear in the last four of them? In fact, if we count today as well as last week, we have had six Budgets in that time. Why did those measures not appear before? This is not about the Treasury officials, who are bright men and women; this is about the fact that there is no strategy apart from trying to run a budget surplus in a particular year, because the Chancellor knows that if he does not deliver in 2020, what is left of his reputation after this week will be in shreds.

Mr Steve Baker (Wycombe) (Con): I should like to draw the hon. Gentleman’s attention to page 2 of the Red Book. It states:

“This is precisely why the UK has been working through its long-term economic plan. Since 2010 the plan has been focussed on reducing the deficit, while delivering the supply side reforms necessary to improve long-term productivity growth.”

Will he at least concede that the Chancellor has in his Red Book precisely the kind of strategy that he is criticising him for not possessing?

George Kerevan: I cannot accept that. There is a tension in the Chancellor’s mind. It is like good and evil sitting on either shoulder. One side is telling him to run a budget surplus, because that is an easy road to take.

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That is not badly thought out. Given the number of rules that Chancellors have thought up over the years and then failed to implement, running a budget surplus is an extremely simple rule. It is just too crude, however. That argument vies with the supply-side strategy.

Following on from the question from the hon. Member for Wycombe (Mr Baker), another friend from the Treasury Select Committee, let us look at what the Office for Budget Responsibility says in its report about how the Budget supply-side measures will work. It states:

“We also expect smaller positive contributions to potential output growth over the next five years from population growth, while average hours worked are expected to trend down over time.”

With a decrease in average hours, in input and in population growth, where is the productivity increase going to come from? I should like to hear the answer from the Chancellor.

Geraint Davies: Does the hon. Gentleman agree that we have such hopeless productivity growth because our research and development is very low, by international standards, as is infrastructure investment? Also, the rights and security of people in work are now low, making it easier for them to be sacked. In Germany, where people can stay in work, employers have to invest in their productivity because they cannot get rid of them. Here, however, we are destroying rights and creating short-term, low-paid jobs, which is resulting in lower productivity.

George Kerevan: I could not agree more with the points made by all three hon. Members who have intervened on me.

The Red Book also shows that public sector net investment—capital investment in the public sector—is set to fall for the next four years. I have to ask Conservative Members this question. With industry in trouble and manufacturing contracting, as it has done in the past quarter, how will it help productivity if we have to cut public sector net investment in the capital side of the economy in order for the Chancellor to meet his rendezvous with destiny in 2020 and have his budget surplus? We need investment in capital in order to have productivity—that is where it comes from.

It is interesting to see what the OBR thinks we will have to do in order to get the books to balance. It believes that UK private sector business investment will have to make up the difference. It believes that private business investment will come to the rescue and contribute a quarter of the expenditure contribution to GDP growth in the period to 2020 in order to achieve the Chancellor’s fabled budget surplus. So, to make all the sums work, there has to be growth. Where is the growth coming from? According to the OBR, a quarter of all the potential expenditure in the economy between now and 2020 has to come from business investment. [Interruption.] Bear with me as I go through the numbers, because they are important. According to the OBR, business will have to contribute 0.6 percentage points each year to GDP in order for the economy to grow sufficiently to deliver the taxes to enable the Chancellor’s budget to come into balance.

There is only one problem. Historically, from 1990 to 2008—that is, throughout the boom period—the level of investment that British business managed to achieve

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as a percentage of GDP annually was 0.3, which is precisely half what the OBR thinks that business will have to invest between now and 2020 if the Chancellor’s numbers are to work. That is not going to happen.

David Rutley (Macclesfield) (Con): The hon. Gentleman says that the Chancellor lacks strategy, but that is clearly not the case. He was clearly not listening to the same Budget speech that I was listening to. That speech included supply-side measures, with business taxes going down and infrastructure being improved. We are seeing massive Government investment in the northern powerhouse to tackle the challenges, and private sector investment is coming in on the back of it, including £1 billion of investment in Manchester airport over the next 10 years. Is not that the sort of leverage that the Government should be seeking?

George Kerevan: If the hon. Gentleman had been listening carefully instead of following his script, he would understand that I am in favour of all the supply-side measures that we can get, because that is how we get growth. I am simply pointing out that the Budget figures that we have been presented with in the Red Book, alongside the OBR’s independent analysis, suggest that business investment will have to be double the level of its historical average, at a time when the global economy is slowing, in order for the Budget numbers to work. That is not going to happen.

The hon. Member for Macclesfield (David Rutley) made a reasonable point, however, and I shall follow on from it by asking: how do we boost business investment? The Budget includes a cut in corporation tax, yet our rate is already the lowest in the G20. How can a further cut produce any more inward investment? The incentive is already the biggest it is going to be, so cutting it even more at the margins will not increase incentive. That will just waste funds. Even with that—I have raised this in the House before—because there is so little outlet for investment at the moment, much of companies’ profits from reduced corporation tax is going into share buy-backs, which is a complete waste of time because it does not add to productivity.

The other tax issue in the Budget is the cut in capital gains tax. There is an argument for cutting capital gains tax, but here’s the point: which Chancellor raised capital gains tax in 2010? It was the Chancellor who is sitting there. Where is the long-term plan in raising it and then lowering it? The confusion of signals is exactly why businesses are not investing. They do not know what taxes will be from one Budget to another, which, at the moment, is every three months. [Interruption.]

David Rutley: I thank the hon. Gentleman for giving way. I was not seeking to make a point, but I will now. The Chancellor has clearly demonstrated that he has his public finances under control—[Interruption.] The deficit is massively down and he is now in a position to take forward the changes to which the hon. Member for East Lothian (George Kerevan) refers.

Madam Deputy Speaker (Natascha Engel): Order. The hon. Member for East Lothian (George Kerevan) has been on his feet for 15 minutes and is taking an

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awful lot of interventions—he is very generous like that —but over 40 Members want to speak and I do not think that I am going to get everybody in. If he limits the number of interventions he takes, I will be very grateful.

George Kerevan: As ever, Madam Deputy Speaker, I am at your service and the service of the House. I will come to my final point, because I am sure that we will be discussing this at the next Budget in another three months.

The Chancellor talks about living beyond our means. He prioritises the budget surplus. He talks about intergenerational fairness. He says that if we do not get overall national debt down, it will be a burden on future generations. Let us test that and go back to the late 1940s and 1950s, when the national debt as a share of GDP was more than twice what it is now and was coasting at over 200% at one point. For most of the ’50s it was 150%, which is twice what we have at the moment. Where did it come from? It came from Governments, particularly Conservative Governments, borrowing money. Most of the rise in national debt did not come during world war two, but during the late ’40s and early ’50s as we tried to rebuild Britain’s infrastructure following the depredation of the war. Harold Macmillan was building a million houses a year. We invested and the national debt was pushed up.

Here is the thing: if huge national debts weigh heavily on future generations, let us look forward. What happened to baby boomers such as the right hon. and learned Member for Rushcliffe and me? Our generation has houses and pensions. We have benefited from state-funded investment in national infrastructure. The whole notion that investing and running up a budget deficit places a burden on future generations is not historically true. Did the economy grow fast in the ’50s and early ’60s? Yes, it did.

Here is my final point and my message for the Chancellor to reflect on: when trying to control public spending, what matters is what it is spent on. Harold Macmillan and the Conservative Governments of the 1950s invested in infrastructure. This Chancellor is borrowing to invest in current spending, which gets blown away by the wind, and if we do that, we fail. It is no wonder that the Chancellor wants his rendezvous with destiny in 2020. He wants to pretend that he can run a budget surplus. It may never happen. Even if it does for one year, it is unsustainable. The Chancellor does not understand business or how the economy works. He pretends he does and talks a good game, but he has not delivered productivity, which is the core thing that we need in this country.

2.44 pm

Mrs Maria Miller (Basingstoke) (Con): It is a great pleasure to follow the hon. Member for East Lothian (George Kerevan), who always speaks so eloquently, but I must say that I disagree with absolutely every word he said. Boosting productivity is at the heart of this Government’s Budget, which is plain for everybody to see. My right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) said that the global economy is slowing down and that we need to be fighting fit for the future. This Budget will help put Britain in that place.

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I pay tribute to the Chancellor for delivering such a strong Budget, but what we should all do first is pay tribute to our nation’s wealth creators. It is them, not us sitting here in Parliament, who have put Britain back on top with one of the world’s strongest economies. They are the farmers whom I met last week in Hampshire. They are the partners who run the new John Lewis store in my constituency. They are small and medium-sized businesses up and down the country. They are people like Beryl Huntingdon, who runs Absolutely Offices, or Graham Murphy, who runs RDT. They are the people, innovators and entrepreneurs putting Britain back on top. We must acknowledge their immense hard work in getting our country into the position it is now in.

Catherine McKinnell: Will the right hon. Lady give way?

Mrs Miller: If the hon. Lady will forgive me, I want to make progress because of the number of people who want to contribute.

The Government have recognised their role in creating the right conditions for business success. They have created an environment in which businesses feel confident about investing by putting in place the right reductions in business and job taxes to encourage growth and success. They have put in place the right infrastructure investment—the £100 billion going into infrastructure over this Parliament, including Crossrail 2, which will do so much to reduce pressure on other parts of the rail network, such as the Wessex route, which affects many hon. Members and is well over capacity. The Budget is also investing in people, underlined by the commitment to 3 million new apprenticeships by 2020, including 5,000, some of which will be degree level, in my constituency at the Basingstoke College of Technology.

People are the biggest asset of most organisations. According to the CBI, some of the biggest challenges facing business in the UK today are retaining top talent and getting appropriately skilled staff. We may have record employment levels, which is to be applauded, and the highest number of women in work, but if we are to be fighting fit for the future, we must get the best out of every single member of our community. While much has been done, there is still more to do, particularly on women’s role in the workforce.

Record numbers of women are in work and the Chancellor is to be congratulated on that, particularly because of the investment he secured for doubling the amount of free childcare. There are 2 million women who would like to be in work and 1 million working women who would like to work more, but they cannot find the right jobs. Some 41% of women in this country work part time, many because they cannot get hold of the right flexible work that fits around their family and caring responsibilities. I gently draw the Chancellor’s attention to the second report of the Women and Equalities Committee, which is all about one of the Government’s great aspirations: to eliminate the gender pay gap in a generation. We can do that if all jobs are more flexible, if men are better able to share care in their family life, and if there are national pathways for women to get back into work.

I also draw the Chancellor’s attention to an Equality and Human Rights Commission report, published today, on the level of maternity discrimination that 77% of pregnant mothers and people on maternity leave are

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enduring. We are not making the best use of women in this country, and I would like the Government to pledge to take active steps to change the situation, so that every woman can do a job that they want to do in order to make the biggest contribution they can to boosting productivity in this country.

2.48 pm

Paula Sherriff (Dewsbury) (Lab): I rise to speak to amendment (a), tabled in my name and those of the hon. Members for Glasgow Central (Alison Thewliss) and for Berwick-upon-Tweed (Mrs Trevelyan) and my hon. Friend the Member for Leeds North West (Greg Mulholland). I served on the Finance Bill Committee with the hon. Member for Glasgow Central last year, and it was during that Bill’s passage that she and I first tabled amendments on this issue. I hope that we will finally see them reflected in legislation this year.

I thank the hon. Member for Berwick-upon-Tweed, who, as a Government Back Bencher, co-sponsored the amendment, and my right hon. and hon. Friends who have given their support, but it is the campaigning work of so many others outside this Chamber that has driven us forward, including more than 300,000 people who signed Laura Coryton’s petition on the issue. The campaign against the tampon tax will serve as an inspiration. It is an example of how grassroots campaigns and Back-Bench Members can make a positive change at the highest level.

It is one of the absurdities of our tax regime that tampons and sanitary towels are treated as luxuries, when periods are simply a fact of life for women. Last week, we heard appalling reports from food banks about how women, who were unable to afford tampons, were resorting to using newspapers and socks.

Mrs Miller: Will the hon. Lady join me in thanking the Financial Secretary, who is in his place, for all his hard work in taking the fight directly to the European Union and in negotiating the change that the Government have put on the table today?

Paula Sherriff: I do thank the Financial Secretary in the same way that I thank everybody who has supported this long-standing campaign.

It cannot be acceptable that women are having to use socks and newspapers as a substitute for sanitary protection. I hope that, as well as cutting prices across the board, we can ensure that all women have access to the protection that they need.

This campaign is not just about money. It is about time that we removed the stigma attached to the basic facts of women’s lives. The Prime Minister said yesterday that he will always remember explaining this issue to the 27 Heads of Government at the European Council. The fact that they had to address this issue directly is itself a great step forward for women.

I am glad that the Government have now taken on board the campaign’s message. It makes me the first Opposition Back-Bench MP successfully to move an amendment to a Budget resolution. If nothing else, I will at least achieve lasting fame as a parliamentary pub quiz answer. That does not mean that our work is done here. There are a couple of outstanding issues that I hope the Minister can address.

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Most pressingly, there is the question over what will happen to those women’s charities that have benefited from the tampon tax fund since the autumn statement back in November. I hope the Minister will confirm today that even after the tax is scrapped he will continue to provide the financial support that they so desperately need.

We will also need to take the final step by legislating for the measure the Finance Bill, and at European level. It would be fitting if this House could pass those amendments before the referendum in June, and I hope that the Minister can commit to that timetable today. On the latter point, I hope that he will be back at the Dispatch Box tomorrow with the expected announcement of the EU VAT action plan.

There is also a challenge to ensure that women get the full benefit of the tax cut, and that the cut does not simply result in increased profits for the manufacturers and retailers of sanitary products. I am writing to them on that matter myself, and I encourage the Government to join me. Those companies might be able to provide part of the answer to the issue of future funding for women’s charities. I hope that it would not be too much of a test of our powers of persuasion to encourage them to advertise women’s charities on their packaging, and make donations themselves. Women have no choice but to pay companies for their products, and I hope that those companies will make the choice to help pay for our services.

Alison Thewliss (Glasgow Central) (SNP): I thank my honourable sister for giving way on this point. I thank her for her support and for the work that we have done on this. I fully support what she is suggesting about the charitable giving from the sale of packets of tampons and sanitary towels. Does she accept that the definition of sanitary products needs to be widened slightly to cover items such as breast pads for mothers who breast feed, maternity pads for women who have just had children and incontinence pads, which are not always available to people free of VAT?

Paula Sherriff: I thank the hon. Lady for her intervention, and I very much look forward to campaigning with her on the issues that she has just mentioned.

This evening we have the opportunity to make right an historic injustice by making clear our intent to abolish VAT on female sanitary products. The amendment allows us to do just that, and I hope that the whole House will support it.

2.54 pm

Graham Evans (Weaver Vale) (Con): Thank you, Madam Deputy Speaker, for calling me to speak in this very important debate. It is a pleasure to follow the hon. Member for Dewsbury (Paula Sherriff), to whom I pay tribute. Given the mark that she has made on this place—I am pretty sure that I speak for the whole House in this regard—she will be more than just an answer in a future pub quiz. It is also a pleasure to follow my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke). He is certainly still a big beast. He was a big beast in the Treasury and he is now turning out to be a bit of a national treasure on the Government Benches.

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This Budget puts the next generation first—I have to declare an interest here, as I have three young children—and it continues our long-term plan to reduce the deficit and achieve a surplus, and sets out the long-term solutions to long-term problems to ensure that Britain is in a strong economic position for the future.

Thanks to the work of my constituency neighbour, my right hon. Friend the Chancellor, Britain is set to be the fastest-growing economy in the G7, with the Office for Budget Responsibility predicting growth rates in excess of 2% for the remainder of this Parliament. [Interruption.] We are still the envy of the European Union, and we are stronger together. The challenges that the country faces are growing: global stock markets have had the worst start to the year for 45 years, prospects for emerging markets have worsened, and the sharp fall in the price of oil and commodities has contributed to lower global growth.

Eight years ago, the UK was one of the worst prepared countries to face the financial crisis. Today, it is one of the best prepared. We have fixed the roof while the sun was shining. Against that backdrop of global uncertainty, this Budget delivers security for hard-working taxpayers. Small businesses are the engine room of our country. They account for 99% of all private sector businesses, employing 15 million people—60% of all private sector employment. The combined annual turnover of SMEs was £1.8 trillion last year, nearly half of all private sector turnover in the United Kingdom.

Along with many small businesses across Weaver Vale, I welcomed the announcement in last week’s statement that business rate relief would be doubled permanently. Businesses with a rateable value of £12,000 and below will receive 100% relief. Some 600,000 small businesses across the country will now pay no business rates whatsoever.

Simon Danczuk (Rochdale) (Ind): On that point, I also welcome the fact that, from 2017, 600,000 small businesses will be taken out of business rates, but it does not happen for a year. Retail business rate relief, which is worth £1,500, has also been abolished, but small shop owners will still have to pay that £1,500 for the next 12 months. Is that not disappointing?

Graham Evans: I bow to the greater knowledge of the hon. Gentleman, who does a great job as a small business owner in Rochdale. We cannot do everything at the same time, but overall I welcome this Budget. I am sure that he, too, welcomes the overall message to small businesses as they receive help with those reliefs.

Businesses with a property rateable value between £12,000 and £15,000 will receive tapered relief. Two thousand properties in Halton Borough Council and 7,000 properties in Cheshire West and Chester have a rateable value of below £15,000 and will all benefit substantially from the changes.

Building a northern powerhouse and rebalancing the national economy is a core part of this Government’s economic strategy. In 2015, over half a million more businesses were established outside London and the south-east than in 2010. A third of new businesses are in the northern powerhouse, and the overwhelming evidence is that those new businesses are creating more and more jobs.

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In my constituency of Weaver Vale, unemployment is down by 57% since 2010. Almost three quarters of the growth in employment has been in full-time jobs, and real wages are rising strongly. Since 2010, there have been around 4,000 new housing starts in Cheshire West and Chester, and just under 2,000 new starts in the Halton and Runcorn area.

Nationally, housing starts are at their highest levels since 2008, and are up by 91% when compared with the low point in 2009. Local authorities will be able to access the £1.2 billion starter home land fund to help prepare more brownfield sites for starter homes, such as the legacy brownfield sites from ICI in Northwich in my constituency. This Government are helping generations of younger people in their 20s and 30s to buy their first home. Crucially, they are protecting our green belt while at the same time helping more young people to get on the property ladder.

The UK was the fastest growing major advanced economy in 2014, the second fastest in 2015 and it is forecast by the OECD to be the fastest growing in 2016. Under Labour, £1 in every £4 spent by the Government was borrowed, which was absolutely outrageous. Now it is £1 in every £14. The deficit has been cut by two thirds, and we will run a surplus by the end of this Parliament.

This Budget moves Britain from a high-tax, high-welfare, low-wage economy to a high-wage, low-tax, low-welfare economy. Next year, the long-awaited Mersey gateway bridge will be opened by a Conservative Government—and a Conservative Chancellor has made that happen. That reminds the world, if it ever needed reminding, that Great Britain and the north of England are open for business.

2.59 pm

Mr Iain Wright (Hartlepool) (Lab): I would like, if I may, to advance the argument made by the hon. Member for East Lothian (George Kerevan) about the downgrading of productivity. Productivity was the central economic challenge of this Parliament—so said the Chancellor last year. A failure to address the productivity gap between ourselves and our main economic rivals would undermine our competitiveness and reduce living standards, so to address that, the Government published their productivity plan in July 2015.

In our inquiry into the plan—our first in this Parliament—my Select Committee found it to be somewhat worthy but vague, and without the firm delivery and implementation measures needed truly to address the productivity challenge. Of course, it is difficult for any Government to turn around something as substantial and structural as the productivity gap, especially only nine months after the publication of their report, but the downgrade to productivity in last week’s Budget reinforces the Committee’s view that although many measures in the plan were welcome, collectively they did not constitute a radical departure or step change that would really help to boost productivity. Crucially, as the OBR stated in its report last week:

“Lower productivity growth means lower forecasts for labour income and company profits, and thus also for consumer spending and business investment. In aggregate, this reduces tax receipts significantly.”

Productivity improvements require a long-term and sustained approach to business investment, yet the Red Book shows how much business investment—that engine

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that will power better competitiveness, increase wealth creation and employment generation and, ultimately, bring about higher wages and rising living standards—has stalled. Real business investment fell in the final quarter of last year. The manufacturing sector in our country is in recession. The OBR forecasts that business investment will be 2.6% in 2016, a massive 4.9 percentage points weaker than only four months ago at the time of the autumn statement.

The Government are not helping through their policies. The Chancellor should be encouraging firms to invest in the latest technology, plant and machinery to ensure that they can compete with the most modern kit anywhere in the world, as well as investing in research and innovation to ensure that British-based firms are coming forward with the goods, services and products that the world wants to buy.

Robert Jenrick (Newark) (Con): Is that not exactly why the Chancellor has cut corporation tax and capital gains tax: to encourage companies of all sizes, particularly small and medium-sized businesses, to invest in research and development, new products and the jobs of the future?

Mr Wright: I would suggest that the approach on capital gains tax is contrary to having a long-term economic plan, as it encourages short termism—people do not scale up, but sell out quickly. That is a major structural concern.

To a large extent, the Chancellor has done positive things in this Parliament to encourage investment. In particular, the changes to the annual investment allowances are very welcome and will allow firms to invest with greater certainty. Other countries, however, are doing much more, and Britain risks missing out. Addressing the huge disincentive in business rates for firms wanting to invest in new plant and machinery should have been at the very top of the Chancellor’s list, and although the changes to business rates for small businesses were welcome and constituted the largest tax cut of this Budget, it seems ridiculous that the Chancellor did not resolve the ludicrous situation whereby a firm faces a larger tax bill in the form of higher business rates by choosing to invest in new plant and machinery. For a Government who pledged to do all they can to rebalance the economy towards manufacturing and specifically, in the past six or seven months or so, to help the hard-hit British steel industry, the omission of that single measure from the Budget was a significant blow for industry, particularly the steel industry, which wanted the Government to give a favourable signal to invest.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): It seems that there is only one club in the Conservative golf bag for tackling productivity, and that is tax alone. The Conservatives have to face up to infrastructure, to the low-wage economy and to the lack of housing. Owner occupancy is at a 20-year low and house building is low as well. Workers need houses, and if that growth does not happen, combined with infrastructure, productivity will remain low.

Mr Wright: The hon. Gentleman makes an important point about infrastructure, and there was very little in the Budget to address that. Earlier, I mentioned the

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possibility of rebalancing. In 2012, we were promised an export-led recovery, and the Government announced proudly a target of £1 trillion of exports by 2020. I am all for ambition and for stretching targets, but given the Government’s limited ability to shift the needle on the value of exports by companies, that ambition seemed at best somewhat misplaced and, at worst, even very foolish.

The OBR stated last week that the Government will miss its target by 36%, which is £357 billion, and that net trade will actually be a drag on economic growth for every single year of this Parliament, but there was nothing in this Budget to boost exports. The word “exports” did not even pass the Chancellor’s lips in his statement on Wednesday and it was not mentioned again this morning. Does that mean that the Government have shelved that target? Will Ministers consider providing assistance and encouragement in the form of export vouchers so that firms from Britain can invest and export?

A further way to boost productivity is by investing in skills, and the flagship skills policy of this Government is the target of 3 million apprenticeships by 2020, funded through the apprenticeships levy. Now, only 2% of larger firms will pay that, so what will happen to the other 98% of firms, as well as the detail of the levy? We were promised by the Minister for Skills in the run-up to the Budget that all would be revealed, including this new shiny model, in the Chancellor’s Budget statement, but for a Budget billed as putting the next generation first, there was precious little detail about how the apprenticeships levy—only 12 months from its start—will operate in practice. As with exports, the word “apprenticeships” was not even mentioned by the Chancellor.

Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP): Does the hon. Gentleman agree that one of the biggest drags skillswise on productivity in our economy is at the intermediate and higher intermediate skill levels? We have had this problem for more than 30 years.

Mr Wright: The hon. Gentleman makes an important point. My point is that by trying to ramp up the quantity of apprenticeships while making a major—possibly the major—change to the institutional architecture of apprenticeship delivery, the Government risk missing their target and that, as a result, the skills policy in this country will be affected adversely.

Budgets are rarely remembered past a couple of weeks or months. This one will be remembered, but for all the wrong reasons: incompetence, callousness, clumsiness and the resignation of a Cabinet Minister. It is also concerning that it will be remembered for downgraded productivity and a failure to address it, leading to lower economic growth, relatively falling living standards, lower tax receipts and deteriorating public finances. The Budget has helped to make this country somewhat poorer.

3.7 pm

Mr Steve Baker (Wycombe) (Con): I rise to support the Budget and, in particular, to welcome the Government’s supply-side reforms. This has been a dramatic Budget, and I would be failing the Government if I did not concentrate on the areas of drama. First, on the disability

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reforms, the challenge before the Government is clear: to deliver a policy that we can all be proud to defend in our constituencies and in front of any objective scrutiny. I do not think we would have been able to do that if the Government had not wisely made the decisions that they have over the past few days.

When I look at page 150 of the OBR’s report, on the successive forecasts for spending on disability benefits, I can see that the Government’s envelope within which to deliver this humane disability policy is very clear. When we came to power in 2010, the Government were spending £12 billion on disability benefits, which rose to £16 billion by now, which is an increase of a third. The figure is forecast, with the reversal of the PIP measures, to reach £18 billion by 2020-21. It is clear that the Government have an envelope within which to work to ensure that we have a world-class policy that any of us can defend, even in an environment of fierce and partisan political attack.

I signed the two amendments on VAT to highlight the extent to which VAT is controlled by our membership of the European Union. Neither amendment has legislative effect. I congratulate the hon. Member for Dewsbury (Paula Sherriff) on her amendment, which, as she said, makes clear our intent to zero rate tampons and other sanitary products. Of course, both amendments are pursuant to Government policy, and this is the bitter irony of our membership of the EU. We had to have a dramatic row over VAT in the context of an EU referendum in order to secure the following commitment from the European Council:

“The European Council notes that the Commission intends to publish shortly a communication on an action plan on VAT. It welcomes the intention of the Commission to include proposals for increased flexibility for Member States with respect to reduced rates of VAT, which would provide the option to Member States of VAT zero rating for sanitary products.”

That is welcome, and it is clear that the Government’s policy and the House’s wish is that sanitary products should be zero-rated. It is welcome that the Government have secured this change of EU policy but, particularly as a participant in the campaign, I do not want us to have an EU membership referendum every time we want a different policy on our second largest tax.

Mr Kenneth Clarke: Will my hon. Friend accept that British Governments have always supported the idea of having an EU framework on VAT? Otherwise, the problem is that there is pressure on Governments to compete with each other in lowering the tax on selected products when they think that their manufacturers or producers will benefit. Also, it is very difficult to operate an open trade area if everybody is going for competitively different tax rates. If we go too far down that path, the main beneficiaries are smugglers.

Mr Baker: My right hon. and learned Friend raises some interesting points and, although I am grateful for the additional minute for my speech that he has given me, I cannot touch on all of them. He illustrates the difficulty of operating a customs union among interventionist nation states. The old doctrines of liberalism did not require that one got rid of non-trade barriers, for the most part. There were no non-trade barriers because laissez-faire was the norm. I abridge an argument that could be made at much greater length, but at the heart of the exchange that we have just had is the difficulty

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involved in interventionist nation states attempting to engage in free trade. In a world of globalisation, air travel and the internet, we need some degree of harmonisation on a global scale, provided that that enjoys democratic consent. That is probably a subject for another debate, but I am grateful to my right hon. and learned Friend for his intervention.

Until the VAT directive 2006/112/EC is changed, it will be technically unlawful under EU law for any amendment to be introduced in UK law, even if it is not applied and takes effect in the future. That is the situation that we face. It is similar to the situation concerning insulation products, on which a judgment in the European Court of Justice on 4 June 2015 ruled that

“The United Kingdom cannot apply, with respect to all housing, a reduced rate of VAT to the supply and installation of energy-saving materials, since that rate is reserved solely to transactions relating to social housing.”

That is the position in law while we are in the EU. Although I hear what my right hon. and learned Friend says, it is a fact that while we remain in the EU, we cannot control what is currently our second-biggest tax. I am grateful that we have had this opportunity to put this part of the EU membership debate on the public record and have it discussed in the media. I am particularly grateful that the Government will not be opposing either amendment. If there is a Division, I shall certainly vote for amendment (a) and I shall probably abstain on amendment (b).

Perhaps the most dramatic aspect of the Budget is a subject that I have talked about at every Budget. It is a subject that I mentioned in my maiden speech—the insane state of monetary policy all around the world. If the European Central Bank was printing €80 billion of new money every month in paper and shipping it around the continent in articulated lorries, it would already have destroyed faith in paper currency. Yet, because the process is one of buying Government and corporate bonds, we simply notice a recirculation of money and celebrate the coarse aggregate results. In 25 seconds, I cannot give a lecture on capital-based macro-economics—[Hon. Members: “Oh!”] If Opposition Members would like to call a Back-Bench debate on the subject in their own time, I would be glad to give them the lesson. I welcome this Budget, but its dramatic consequences will be felt much later as a result of easy money.

3.14 pm

Rachel Reeves (Leeds West) (Lab): The Budget was a story of missed targets for the Chancellor and missed opportunities for our country and, like the Budget of 2012, it is rapidly turning into a total mess. I am pleased to see some of the U-turns, but much more is needed.

I associate myself with the remarks of my hon. Friend the Member for Hartlepool (Mr Wright), the Chair of the Business, Innovation and Skills Committee. He spoke powerfully about the importance of rebalancing our economy. That is so much needed, especially after some of the numbers we saw in the Budget last week. As a result of the lower productivity, the lower exports and the other things my hon. Friend spoke about, economic growth has been revised down for every single year of this Parliament. A staggering £71 billion has been knocked off our tax revenues. As a result, the Government are now set to borrow an extra £38 billion over the next five years. That is why, after breaking his promise to clear

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the deficit in the last Parliament, the Chancellor has now broken his pledge to bring the debt down as a share of GDP in this Parliament as well.

Mr Stewart Jackson (Peterborough) (Con): Would the hon. Lady’s argument not have a lot more weight and credibility had her party—as she well knows because of her position on the Front Bench—not opposed every single one of the £83 billion-worth of welfare cuts that had to be made in the wake of the 2010 fiscal inheritance?

Rachel Reeves: I wonder whether the hon. Gentleman still thinks we should go ahead with the cuts to personal independence payments. It certainly sounds like it from those remarks.

Let me deal with the specific issues surrounding personal independence payments and the impact that this Government have had on disabled people. While the fiasco is unfolding around us, let us remember the broader points. This is a Government—the Chancellor, the Prime Minister, the former Secretary of State for Work and Pensions and the current Secretary of State for Work and Pensions—who forced through the bedroom tax, affecting 500,000 people, the majority of them disabled, by about £700 a year. This is the Government who forced through the closure of the independent living fund. This is the Government who forced through cuts to employment and support allowance only last summer, affecting 500,000 people and worth about £30 a week or £1,500 a year. The U-turn on personal independence payments, although welcome, is only a fraction of the damage and the pain that the Government have caused to disabled people in all our constituencies.

Let us be clear what this U-turn means. The new Secretary of State for Work and Pensions came to the Chamber yesterday and said that the Government are not going back to the welfare bill and to disabled people for further cuts. But in the course of yesterday’s statement, that was watered down a little. The Government now have “no plans” to come back to the welfare budget and disability benefits. That is reminiscent of when they had no plans to increase VAT and all the other things they had no plans to do, until they did them and until they hurt the people who least need to be hurt.

When the Chief Secretary winds up the debate this evening, I would like to hear whether there are no plans, or whether the Government can guarantee that there will be no further cuts to the welfare budget or to the benefits of disabled people. We know that there is a black hole of £4.4 billion in the public finances. If it is not the wealthy and not disabled people, who is going to pay the price? Are there going to be further cuts to education, health, defence and our police? Will there be further increases in taxes—on VAT and taxes for ordinary working people? Something has to give and we need some answers about the black hole in the Budget that we are voting on, although we do not know what it means. What does it mean for all those different groups of people?

As the Chair of the Office for Budget Responsibility told us at the Treasury Committee meeting this morning, the issue is not just that there is a £4.4 billion black hole in the social security budget, but that the Government have failed to meet their welfare cap. They are going to fail in every year of this Parliament, by a staggering £20 billion—£20 billion more on social security spending

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in this Parliament than the Government set out, a further black hole in their public finances. Why did they get into this mess in the first place? It is because they wanted to cut taxes for the wealthiest in society. They wanted to cut capital gains tax, increase the threshold before people started paying the 40p rate of tax, and increase the ISA limit from £15,000 to £20,000 so that we can all save the full £20,000 a year tax free. That is great for those who have the money, but most of our constituents are lucky to earn £20,000 a year, let alone put it away in savings. That is why the Government raided the social security budget yet again to give tax cuts to their friends, the wealthiest and the most privileged in our society.

Last week’s Budget could have been different. For example, the Government could have put more money into infrastructure investment. In my constituency, we are paying a heavy price for the floods on 26 December. The Chancellor said earlier that I should have welcomed the money for flood defences, but in 2011 the Government cancelled a flood defence scheme in Leeds worth £135 million. Last week, they announced £35 million for Leeds. Well, I am sorry for not thanking the Chancellor, but an offer of £35 million rather than £135 million is not really worth the thanks, and the businesses in my constituency will pay a heavy price if the rains come again.

Rachael Maskell (York Central) (Lab/Co-op): I was with the Environment Agency just last night, and it told me it will not have sufficient funds to put in place measures—particularly catchment management measures —to prevent future flooding.

Rachel Reeves: Last week, the Government announced £150 million for York, Calder Valley, Leeds and Cumbria. However, as I said, the scheme that was cancelled in Leeds was worth £135 million, and that £150 million is for flood defences, flood resilience and flood maintenance. Yet again, the Government are short-changing people who need them to step up to the mark, as our volunteers in York and Leeds and across the north of England did when the rains fell, the rivers rose and buildings—houses and businesses—were flooded.

Last week’s Budget could have been different. It could have been a different Budget for disabled people. It could have been a Budget that helped ordinary working people and the most vulnerable in our society. It could have been a Budget that put money into the northern powerhouse and the infrastructure that we need. However, it was a different Budget, because this Government have different priorities. That is why we need a Labour Government on the side of ordinary working people and the most vulnerable in our society.

3.21 pm

Mr Stewart Jackson (Peterborough) (Con): The hon. Member for Leeds West (Rachel Reeves) made a strong case, but, unfortunately, it is desperately flawed. As she knows, the fact of the matter is that, in the 13 years of the Labour Government, the gap between the richest 10% and the poorest 10% widened. During her party’s period in government, we had record numbers of children in workless households, and unemployment, including youth unemployment, rose.

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Graham Evans: My hon. Friend is making a powerful point. During 13 years of Labour, many gaps were created, but particularly the north-south divide. Does he therefore welcome the Chancellor’s announcement of the High Speed 3 line from Manchester to Leeds, which will significantly cut train times—by 30 minutes?

Mr Jackson: I do. My hon. Friend is absolutely right. The fact of the matter is that this Government are taking the difficult decisions on infrastructure—on things such as nuclear power and airport capacity.

Wes Streeting: Will the hon. Gentleman give way?

Mr Jackson: I will not at the moment, but I might later.

The previous Labour Government, in very benign economic circumstances—mainly driven, of course, by debt and borrowing—failed to take those decisions.

I welcome the Budget in general terms—of course, I took issue with the Chancellor’s comments about Brexit, and I think the OBR’s anodyne comments on Brexit were misrepresented. However, there were some good things in the Budget, which was not a redistributive Budget from poor to rich, but largely a redistributive-neutral Budget, as the Institute for Fiscal Studies said.

Mr MacNeil: Will the hon. Gentleman give way?

Mr Jackson: I will not at the moment.

I welcome the lifetime ISA. I welcome the tax crackdown on offshore property developers and transfer pricing. It was good to see the changes in the personal allowance, which will take many of my constituents out of tax.

Indeed, my constituency is in a very fortunate position, and I pay tribute to the Chancellor for delivering nothing short of a jobs miracle. We have seen the largest reduction in youth unemployment in the history of my seat—and probably in England as a whole—at over 70%, and there has been a more than 60% reduction in adult unemployment. We also have record numbers of apprenticeships. That is taking people out of poverty. That is the great record of this Government.

The decision to resile from the commitment on PIP was absolutely right. There is a moral, social equity issue—[Hon. Members: “A U-turn.”] It is a U-turn—that was well spotted by Labour Members. However, it was absolutely right to make that decision. It was right for my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) to point up the juxtaposition of tax reductions for well-off people and the change in PIP. However, it ill behoves Labour Members to lecture the Government, when they voted against every welfare change in the last Parliament. What would they have done, and what would they do now? It is incumbent on the Opposition to come through with a coherent, comprehensive alternative on fiscal policy, public expenditure and tax.

Let me raise two issues that have caused me some concern with the Budget. The problem the Government have encountered, which we have discussed over the last few days, has given rise to a proper debate about intergenerational fairness. We need to look again at pensioner benefits. We cannot discuss welfare without looking at things such as the triple lock and pensioners

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benefits. I rarely agree with my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), but he is absolutely right that we cannot see these things in a vacuum, and it is important that we look again at means-testing and pensioner benefits. It is morally wrong to make large transfers of wealth from the young to the old. There has to be a consensus on this issue.

One suggestion I would make is that, if we are going to means-test pensioner benefits, we should perhaps link that to the most acute societal issue we have at the moment, which is adult social care. We should have co-ordination and integration between acute district hospitals and the provision of care and housing for older people. I think there are older pensioners who would understand that, and it is something the Treasury needs to go forward with and look at very seriously.

The second concern is that, as we speak, Cambridgeshire County Council—it is not my local authority, because Peterborough City Council is a unitary authority—is looking at the devolution plans for East Anglia. At the moment, those do not stack up. We have not had enough information—in some senses, I am reprising the comments of my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham) yesterday—and we need more. The proposal has been rushed to get it in the Budget statement. It needs to be finessed. We need to carry businesses with us. Neither local enterprise partnership agrees with it. The majority of councils are, at best, ambivalent, and that includes Cambridge City Council, which has rejected it. We need to look at this proposal again.

Mr Anderson: Will the hon. Gentleman give way?

Mr Jackson: I will not at the moment.

It may be that there are synergies between Lowestoft and Peterborough, or between Norwich and Ipswich, but I have yet to see them. Let us have more information about funding, governance, infrastructure spending, the role of an executive mayor and what will happen to the existing local government structure. I am not against this in principle, but we cannot promise £30 billion of spending over the next 30 years without more facts. We need to see those, and that is the challenge I give to those on the Treasury Front Bench.

3.28 pm

Catherine McKinnell (Newcastle upon Tyne North) (Lab): We learned many things from last week’s Budget, and we have learned perhaps even more from the fallout since. However, the overriding message we seem to be getting is that, six years into his job, the Chancellor cannot keep a promise and does not seem to learn from his past shambolic Budget mistakes. He promised to balance the books by last year, to get debt falling as a percentage of GDP each year and to keep welfare spending within his welfare cap, but on virtually all of his own fiscal targets, as the independent Office for Budget Responsibility confirmed last week, he has failed to deliver.

Of course, this Government’s shortcomings go much further than the Chancellor’s own meaningless targets. A mere six months ago, the Prime Minister told his party conference that he would govern according to “one nation, modern, compassionate” Conservatism. This is the same Prime Minister who last week cheered

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on a Budget that cut capital gains tax, raised the threshold for the 40p rate, further cut corporation tax, and would see the poorest losing about £1,500 a year in the next few years while some of the richest gain £200. To top it off, the Chancellor pledged to slash disability benefits by up to £1.3 billion a year, which the OBR estimated would lead to some 370,000 disabled people losing an average of £3,500 a year.

Robert Jenrick: I want to give some context on the important point about capital gains tax that is being made by the Opposition. Jim Callaghan created capital gains tax when he was Chancellor in 1965, but it has always been lower under Labour Chancellors than under Conservative Chancellors. Even after this change, capital gains tax will be 2% higher under this Chancellor than it was under Alistair Darling, and indeed Gordon Brown in the previous Labour Government.

Catherine McKinnell: I do not understand the hon. Gentleman’s point. He is digressing on details of capital gains tax when the point I am clearly making is about the context in which the cut has been made, where the burden of this Budget very much falls on the poorest and the most vulnerable in our society. If that is compassionate Conservatism, bring the nasty party back!

I am pleased and relieved that the Government have backed down on this issue within less than a week. However, I am angry that those people who rely on the personal independence payment, including 1,100 people in Newcastle upon Tyne North, have endured days and weeks of huge anxiety about how they would cope if this level of support was cut. It is unforgivable. I remain equally concerned about how the existing reforms to PIP are quite clearly failing disabled people. Constituents continue to get in touch with me following my recent question to the Prime Minister because they have been told that they are no longer eligible for a Motability vehicle despite its clearly being the only means by which they can leave the house, or indeed get to work. The new PIP assessment is fundamentally flawed. I strongly urge the Work and Pensions Secretary and the Chief Secretary to the Treasury to revisit this issue with fresh eyes and look at reforming the current PIP changes before they embark on any further welfare reform.

Despite the Chancellor’s so-called

“revolution in the way we govern England”,

with the pledge last May to give local areas greater control over local transport, housing, skills and healthcare, it appears that he does not place the same faith in local communities when it comes to our schools. Last week’s Budget confirmed that, far from handing control to local communities, the Government are about to embark on the greatest ever centralisation of our schools system, which will see an end to the role, now a century old, of democratically accountable local authorities as the stewards of our children’s education. My Front-Bench colleagues have already highlighted the glaring black hole in the finances of this plan—£560 million—which raises questions about the extent to which the schools budget will be raided to make up the shortfall.

Mr Jim Cunningham (Coventry South) (Lab): My hon. Friend mentions the schools budget. I do not know whether she is aware that in Coventry one or two

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academies are already in serious trouble because of falling numbers as a result of certain changes in the education budgets.

Catherine McKinnell: I appreciate my hon. Friend’s point. It is not just local academies that are in trouble—there are some much bigger and more serious questions that we need to raise. First, why are the Government doing this? There is no proof whatsoever that academies, per se, raise educational standards. It is a distraction that schools now need to focus on this rather than on their educational attainment. Secondly, how will the Government enable the local political leadership to drive up standards and work together, as worked so effectively with the London Challenge, if the power and decision making is so centralised in Whitehall?

Is the Department for Education even fit for purpose to deal with over 20,000 schools across the country—about 3,400 secondaries and almost 17,000 primaries? There are signs that it is already struggling with its current workload of 4,000 schools. As the Education Committee, of which I am a member, recently uncovered, the Department could not even deliver its annual accounts to Parliament in time and required a statutory extension, and there remains doubt as to when it will ever be able to present them. This mass rush to conversion will only add to the current mess. We need only look at the fiasco of the free schools application process, where there is no clear rhyme or reason to the Department’s decisions to authorise new schools.

We see a Department in disarray. Of particular concern for my constituents is how the forced academisation process will fit alongside the large-scale programme of house building that is planned for our area. As a result of the coalition’s national planning policy framework, some 21,000 new homes are expected to be built in Newcastle by 2030, a large proportion of which will be in my constituency. That will require new school capacity, but who will be the guiding mind that will match and create that new school capacity in an area that will be controlled by Whitehall? Newcastle City Council already finds itself in the impossible position of being unable to establish new community schools to cope with existing demand. How on earth will it be able to deliver the right school places across Newcastle upon Tyne North when every school is accountable to the Secretary of State?

Finally, in addition to the fact that apprenticeships were not mentioned in the Chancellor’s Budget even though we were promised that they would be, another glaring omission was the lack of any announcement about how the Government intend to protect our regional airports from the impact of devolving air passenger duty to Scotland. That is crucial to Newcastle airport, which supports 12,000 jobs in the region, and through which £300 million of goods are exported every year. All talk of a northern powerhouse will be completely undermined if the Chancellor fails to deal with the issue urgently.

3.35 pm

Chloe Smith (Norwich North) (Con): It is a pleasure to follow the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). This Budget, like my right hon. Friend the Chancellor’s previous Budgets,

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helps to create jobs. That is the right thing to do, which is why I continue to support the strategy of lowering business taxes to encourage growth. The corporation tax cut will benefit 1 million companies in Britain, and the business rates measure will help 600,000 small businesses. Cutting capital gains tax, as my hon. Friend the Member for Newark (Robert Jenrick) has carefully laid out, will help to boost enterprise. Reforming stamp duty and abolishing national insurance contributions will help the smallest businesses of all.

The Government have my wholehearted support in putting the next generation first. Our philosophy in the Conservative party is that debt is the most unethical thing of all to leave to the next generation, and I am proud that we continue to pay down the country’s debts; to reduce spending, which cannot possibly have the consent of those who are yet to come; and to steer towards a surplus, which will put the public finances in the strongest position for today’s youngest.

Making it feasible for young people to buy a home or to save in a pension is crucial to intergenerational fairness, which is why I think that the lifetime ISA in this Budget is a positive thing. It should be seen alongside all the other measures that are already helping people in every corner of this country to get their first home. Ultimately, building homes is the most important way to provide homes at a price that can be afforded, and I urge the Chancellor and Housing Ministers to continue to build.

Mr Anderson: With the average pay for somebody on a zero-hours contract at £189 a week, how does the hon. Lady expect them to save in an ISA or buy a house?

Chloe Smith: I make two points to the hon. Gentleman. First, the percentage of people on zero-hours contracts remains about 2.5% of all who are in work. Secondly, as he will know from the small print of the Budget, for every £4 that somebody saves, the Chancellor will put in £1. That means that at the rate that the hon. Gentleman cites, for example, it is possible to consider taking up a savings product.

It is vital that those who come out of education and skills training have every possible opportunity, which is why the Budget is right to keep up job creation and investment in infrastructure. It is also crucial that we try to represent the values of the next generation. Generation Y —my own generation—and those coming after us value enterprise. Many will set up their own businesses, and many will work in a totally different pattern over their lifetime, so the Budget is smart to turn attention to the growing army of the self-employed. Many of the smallest businesses of all will welcome a drop in their NIC burden.

Richard Fuller (Bedford) (Con): Will my hon. Friend use this opportunity to congratulate the Government on the start-up loans scheme, which has done so much to help young people to go into business and fulfil their entrepreneurial objectives?

Chloe Smith: I certainly will, and I welcome my hon. Friend’s reminder of that. I am sure he will agree with me on my next point, which is that we should also prize the ethical approach to business of many of those entrepreneurs. We should welcome the measures in the

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Budget that begin to make sense of taxing multinationals in the 21st century. The Government have my full support in ensuring that our tax system demands and gets a fair contribution from companies large and small, domestic and global.

Let me turn to the welfare measures in the Budget. As is well documented, Generation Y has a sceptical approach to the welfare state, and support for the welfare state has steadily declined by generation. We should therefore remind ourselves of the basic principles of what welfare is for. It is a safety net for when we are unable to look after ourselves, perhaps because of sickness, old age or disability. It is a safety net that we will all need in one way or another, so we all have a responsibility to maintain it. Because we are going to live longer on average than previous generations, we need to make sure it is affordable for the future. We also, of course, expect the richest to pay most. In summary, we need a sensible method of working out who needs most support and how to get it to them.

I did not support the measures announced in the Budget seeking to reduce support for the disabled through PIP. The manifesto on which I and my hon. Friends stood at the last election made it clear that we would spend less on welfare, but that we would do so by protecting the most vulnerable. I have supported the Government’s welfare reforms since 2010, principally because they put work first. Universal credit puts work first, as does the most recent reform of the rate for those who are on employment and support allowance and can work. In the 21st century, we should not write off people from work and independence; the policy of spending more on helping people to work despite a disability or a health condition is right.

In some cases, our welfare reforms have been about injustice in other ways, such as in relation to the removal of the spare room subsidy. For example, the pay to stay policy in our current Housing and Planning Bill will relieve taxpayers of subsidising the housing of those who may well earn more than they do, such as, dare I say it, the leader of Norwich City Council. These reforms are about fairness for taxpayers who foot the bill for a benefit they themselves could not expect to enjoy.

I am in the Chamber today to speak up for many constituents who simply want us to use limited resources to provide properly for those who need support. I helped constituents to record their concerns during the consultation on aids and appliances, and I am very pleased that my right hon. Friend the new Secretary of State for Work and Pensions has stopped that measure. We should protect the disabled and make savings elsewhere.

Our manifesto clearly pledged us to back pensioners. At some point in the future, however, we will have to look again at universal benefits. As I have said, the welfare state is a safety net, which means that pensioners need a decent income. That is why I wholeheartedly support the triple lock. But it does not necessarily mean that the most well-off pensioners need benefits as well, as my hon. Friend the Member for Peterborough (Mr Jackson) and my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) have already argued. When others are more in need—and, indeed, when there must be a balance with other generations—is it right to maintain such policies?

A Mrs Brown recently wrote to the Norwich Evening News letters page:

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“Excuse me, but as a baby boomer I was…brought up in post-war abject poverty. We got an apple or orange for Christmas...I worked for everything I have. We never had credit and only had anything we could pay for or we went without.”

She is of course right. I deeply respect her and all my constituents, from any generation, who have worked hard and done the right thing. I am making an argument for fairness in the future, for helping those who most need it and for balance between the generations.

3.43 pm

Susan Elan Jones (Clwyd South) (Lab): It is a pleasure to follow other speakers in this Budget debate.

There is not a single Member of the House who has not received scores of letters in the past couple of weeks from people deeply concerned by what the Budget proposed on personal independence payments. Let me give the House just one example from my constituency. A woman living in a rural area, about 15 miles from the nearest railway station, was about to lose her Motability vehicle, which she uses to get to work, and she has a pretty severe disability.

I think it is abhorrent and extraordinary that the changes—we welcome them, whether they be resiled from, U-turned or whatever—have come about because of the internal workings of the Tory party, not because of the requirements of people in the most need and those of disabled people across our country. There is no morality in the way that decision was made, and the Government should hang their head in shame for all that has happened in the past few days.

On infrastructure, others have noticed—indeed, my hon. Friend the Member for Leeds West (Rachel Reeves) wrote an article about it—that according to latest figures from the National Infrastructure Pipeline, which monitors public and private sector projects at more than £50 million, only 114 of 565 major projects are under construction. In 2013 The Economist published an article entitled, “Let’s try to catch up with Mali”, which noted that OECD figures showed how low Britain ranks for infrastructure investment, including for rail, roads, airports and energy.

The Government now claim, as the Chancellor said, to be opening the door for growth in north Wales, but it is difficult to open a door to anything if people cannot get there. All the rhetoric about a northern powerhouse matters precious little if we do not deal with things such as tackling accident blackspots and single-track highways on both sides of the A483 and A5, or if we do not make it quicker and safer to travel on both sides of the border. We must also start speeding away with HS2 to Crewe, which will transform the economies of north and mid-Wales, and we need more direct trains to London on the Wrexham to Shrewsbury line to take the pressure off the Chester line and give us better connectivity. We should sort out a proper north Wales train infrastructure to Manchester and Liverpool airports, and we should consider what should be happening with 4G. I was intrigued to see astronaut Tim Peake out in space wishing us all a happy St David’s day, because he would not have managed to do that if he had been on a mobile phone in Llandrillo.

The hon. Member for Norwich North (Chloe Smith) spoke about an ethical dimension for corporate taxation, but one issue that the Government did not consider in the Budget—although they needed to—is the insidious

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closure of banks across our country. In Wales, 130 bank branches have closed or will close over the next five years. That is simply unacceptable, and those banks that close their branches are not paying anything back to wider society.

My final point is about measures on philanthropy or rather the lack of them in the Budget. Gordon Brown introduced millennium gift aid in a previous Budget, and if the right hon. and learned Member for Rushcliffe (Mr Clarke) were here now, he would say how either he or John Major introduced the initial gift aid proposals in 1990. There was no mention of anything to do with philanthropy in this Budget, however, and it is time to consider that issue in greater detail. That might involve the implementation of a gift aid package for text donations, or another look at corporate philanthropy—those are just some of the measures that I am trying to fit into a five-minute speech on a mixed Budget.

Finally, in my last few seconds, I welcome what the Chancellor said about EU membership. There are three MPs in Denbighshire. I might be the only one who welcomes the stay-in vote, but I do.

3.48 pm

Rishi Sunak (Richmond (Yorks)) (Con): I am grateful for the opportunity to support this one nation, responsible and pro-enterprise Budget. Tucked among the beautiful Yorkshire dales in my constituency is a thriving community that is built on the jobs provided by our small and medium-sized businesses—businesses such as the Wensleydale Creamery, whose cheese has taken a slice of Yorkshire to kitchen tables around the globe, or Tennants Auctioneers, a fourth-generation family business that is now one of the UK’s largest private auction houses.

Before I arrived in this place, I spent my career investing around the world in companies such as those, and providing the capital to help them grow. I am delighted that this Budget recognises what my own experience has taught me: for growing SMEs, there are few more important ingredients for success than solid access to finance. Indeed, there are few more important ingredients for our nation’s success than growing SMEs. Small and medium-sized businesses account for more than half of private sector employment. They are responsible for three quarters of the jobs created since the recession. They are also delivering social justice—the unemployed are six times more likely to find work with a smaller company.

Those companies need the fuel of deep capital markets to power their growth, but despite improvements, it is still not always easy for SMEs to get the funding they need. The challenges they face fall into two distinct categories: debt and equity. For debt finance, companies can go either to banks or to the corporate bond market, but our bond markets are underdeveloped. Europe’s economy is the same size as that of the United States, yet its bond market is only a third as big, which means that our companies are too reliant on banks for their debt needs. Indeed, they are four times more reliant on banks than their American counterparts. At a time when banks are rightly deleveraging, the reality for British companies is that far too many loan applications go without success.

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There are also problems for companies wishing to access equity finance. Although we are a European leader, the UK’s venture capital market still has room to grow. Adjusted for GDP, the US’s VC market is seven times the size of the UK’s. We also lag behind Sweden, South Africa, Ireland and Israel. That matters because equity is the kind of capital that SMEs need to grow beyond their early stages. Thanks in part to the policies of this Chancellor, our nation has become one of the world’s start-up capitals, but we must now focus our energy on growing those start-ups, for just 3% of British companies manage to expand beyond 10 employees, which is half the success rate of companies in the United States.

The Government have consistently shown that they understand those challenges, which is why they created the seed enterprise investment scheme, which has helped more than 3,000 companies to raise early-stage finance; why they launched the funding for lending programme to ease credit for SMEs; and why they fund the British Business Bank to power our growing companies.

Neil Parish (Tiverton and Honiton) (Con): I agree wholeheartedly with my hon. Friend. Getting enough capital, and venture capital in particular, and allowing small businesses to grow, especially those that traditional banking systems do not necessarily support, is key to stimulating more growth in our economy. I very much welcome his comments.

Rishi Sunak: I am grateful to my colleague, the Chair of the Select Committee on Environment, Food and Rural Affairs, for those comments. I will go on to some of those points in due course.

I am delighted that the Budget goes even further to encourage investment in our businesses and our job creators. I am confident that reducing capital gains tax rates together with a brand-new 10% rate for long-term investments in private businesses will unlock millions in much needed funding. From speaking with investors this past week, it is clear that those policies have cut through and generated a fresh wave of enthusiasm for investing in British companies. On debt, I welcome the Budget’s further help for businesses rejected by traditional banks, which will now more easily be able to access alternative providers of finance.

Whether it is cheesemakers in the Yorkshire dales or FinTech companies in Old Street, the Chancellor has always backed the aspirations of Britain’s growing companies. By continuing to close the tax loopholes that Labour left open, the Budget has another message: Britain is becoming not only the best place to do business, but the fairest place to do business. This is a Budget for the little guy, for a new generation of British ideas, and for a country where the rules do not bend for big balance sheets. It is a responsible, one nation, pro-enterprise Budget that will get our companies the vital funding they need to unleash their potential, and I commend it wholeheartedly to the House.

3.54 pm

Karin Smyth (Bristol South) (Lab): I want to focus on apprenticeships and the levy, which is key to opportunities for young people in Bristol South. I support the 3 million target by 2020. It is an ambitious target but we should be ambitious for our young people.