House of Commons
Tuesday 22 June 2010
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Business before Questions
London Local Authorities and Transport for London (No. 2) Bill [Lords]
Lords message (15 June) relating to the Bill considered.
That this House concurs with the Lords in their Resolution.—(The Chairman of Ways and Means.)
Transport for London (Supplemental Toll Provisions) Bill [Lords]
Lords message (15 June) relating to the Bill considered.
That this House concurs with the Lords in their Resolution.—(The Chairman of Ways and Means.)
Oral Answers to Questions
Deputy Prime Minister
The Deputy Prime Minister was asked—
Alternative Vote System
The Government have made clear their intention to introduce legislation providing for a national referendum on the alternative vote for future elections to the House of Commons. The appropriate timetable for that legislation and the subsequent referendum is currently being considered within Government. Further details will be announced to the House in due course.
The coalition agreement is clear. We want to proceed with the preparations for a referendum, giving people the choice to choose a new electoral system—the alternative vote system—and, in parallel, to proceed with a review of boundaries. Reviewing boundaries in this country is not a new thing. If the hon. Gentleman would care to look back at the Parliamentary Constituencies Act 1986, which establishes the provisions for reviews of boundaries, he will see that the legislation imposes a requirement on us to keep the size of the House of Commons lower than it currently is, and to have greater equality between the sizes of constituencies. I do not think that anybody will quibble with the principle that people’s votes should count equally, wherever they so happen to live.
Will my right hon. Friend give an undertaking that there will be no move to hold a referendum on voting reform on the same day as any other elections, after the ruling given by the House of Lords Select Committee on the Constitution, which said:
“we recommend there should be a presumption against holding referendums on the same day as elections”?
As I have said, we will shortly come forward—I hope to do so well before the summer recess—to set out our plans for a referendum to give people in this country the choice to choose, if they so wish, to change the electoral system to an alternative vote system.
May I welcome the right hon. Gentleman to his position and give thanks to him for implementing a Labour party manifesto commitment that was not in the Conservative or Liberal Democrat manifestos? Will he reflect on the fact that in February the Liberal Democrats in this House proposed that an additional question—on the single transferable vote—should be asked in any referendum? If that was proposed again by his colleagues on the Liberal Democrat Benches, would he vote for or against it?
This from a party that back in 1997 had a manifesto commitment to hold a referendum on a change to the electoral system. The previous Government had 13 years to do that, and they did absolutely nothing. I am delighted that the right hon. Gentleman, having sat on his hands for 13 years, is finally displaying some urgency about getting on with the political reforms that his Government failed to deliver. Our coalition agreement is absolutely clear: we are going to hold a referendum on whether people want to have a new electoral system—the alternative vote system.
My right hon. Friend the Deputy Prime Minister and I have been working with colleagues across Government to develop our proposals, and we will announce them to the House shortly.
I absolutely agree with my hon. Friend. My right hon. Friend the Prime Minister wants to bring forward those proposals—he will be the first Prime Minister who has given away the power to seek a Dissolution of this House at his choosing—and to give that power to this House, which is a promise that the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) made but never delivered on.
Independent Parliamentary Standards Authority
A number of hon. Members have submitted a number of written questions, which I have answered, and I was also pleased to listen to their representations in the very full Westminster Hall debate last Wednesday.
Is the Minister aware that, as a result of the policy created by IPSA, many loyal and dedicated members of staff face the prospect of redundancy or, at the very least, of savage cuts in their wages, terms and conditions. Will the Minister tell us what plans he has to ensure that hon. Members’ staff are protected and not unfairly punished as a result of the expenses scandal?
I am grateful to the hon. Gentleman for that question. He will know that Ministers have policy responsibility for IPSA, but are not responsible for its internal workings. He will also know that my right hon. Friend the Leader of the House has been making sure that, where the IPSA rules make it difficult for Members of Parliament to carry out their duties, information on those rules is made available. He will also know that, next week, the Speaker’s Committee on IPSA will have its first meeting. A motion on today’s Order Paper provides for the appointment of five Members to that Committee. At that meeting, they will consider how there can be accountability to this House.
Since last Wednesday’s Westminster Hall debate, in which the right hon. Member for Tonbridge and Malling (Sir John Stanley) made it clear that IPSA was in breach of parliamentary privilege, what action has the Minister taken to ensure that IPSA is not in breach of parliamentary privilege?
My right hon. Friend the Member for Tonbridge and Malling asked me whether I would advise the Standards and Privileges Committee, but that is not a matter for members of the Government. The hon. Member for Colchester (Bob Russell) himself will be appointed, if the House so desires it, to the Speaker’s Committee on IPSA, and I know he will use his undoubted skills to make sure that IPSA is given correct advice so that Members of this House can do their jobs to the standards our constituents require.
I am grateful, Mr Speaker. Labour Members clearly do not want to listen to answers to their questions. The answer is that we want to make sure that no single party in this House is able to seek a Dissolution for its own party political advantage. That is why the coalition agreement makes the provision that it does.
Is it not an outrage that the Deputy Prime Minister makes such a transparent attempt to rig the way in which this House of Commons holds the Government to account? What an outrage that he sold his soul to the Conservatives to ensure that he is in office, even when his own colleagues try to undo the mess.
I was having trouble detecting a question in that rather intemperate rant, Mr Speaker. I have already made it clear that my right hon. Friend the Prime Minister, who chose to walk in at exactly that moment, was the first Prime Minister to give away the power to seek a Dissolution of this House. He has given away his own power and given it back to this House. The hon. Gentleman should be grateful for that move forward.
The hon. Gentleman should know that our proposal is about improving the powers of this House; it does not change the rules for the confidence procedures—[Hon. Members: “Answer.”] If Opposition Members listen, I will. This will be taken through on the Floor of the House and the hon. Gentleman, along with all his hon. Friends, will have the opportunity to debate it in detail then.
It is nice to get a welcome from time to time from the Opposition Benches.
The Government have announced that legislation will be introduced to provide for the creation of fewer and more equal-sized constituencies. Further details will be announced in due course, and Parliament will have the opportunity to debate the provisions in full.
Clearly, in line with existing legislation dating back to 1986, it is right for us to continue to provide for more equal constituencies in this country. [Interruption.] Here in London, for instance, Hackney South and Shoreditch has an electorate of just 57,204, while a few miles down the road, on the other side of London, Croydon North has 22,615 more voters. Its electorate is more than a third larger. That cannot be right.
On 7 June, the right hon. Gentleman told the House that he accepted the case for smaller island and heavily rural constituencies in the north of Scotland, which happened to be Liberal Democrat. Does he also accept that in urban areas there is a very heavy case load of constituents, that it is growing, and that in every urban area there are tens of thousands of citizens who are not on the electoral register and who ought to be taken into account in these calculations?
I have a simple question. Why is the right hon. Gentleman so frightened of equal-sized seats? It is extraordinary. Why does he not go back to first principles? Why is it that all he wants to do is indulge in special pleading?
There are issues of principle at stake. It is right, as the 1986 Act sets out, that we should have more equal constituencies. It is right that we should bring the size of the House of Commons down. We have a more oversized lower Chamber than any other bicameral system in the developed world. It is right, of course, that the boundary review should be conducted independently, as it will be. I do not understand for the life of me what is wrong with that.
Let me make it clear that on this side of the House there is no issue about ensuring that constituencies, as far as possible, are of equal size, and there never has been. The issue is about ensuring that that process is conducted in a fair way, and that full account is taken of the 3.5 million citizens who, according to what the Electoral Commission said in March, are not currently registered to vote. It is surely fair to ensure that those individuals are taken into account in the electoral calculations.
I am as concerned as the right hon. Gentleman about the fact that there are 3.5 million people—[Interruption.] Well, what did you do about it for 13 years? You created the problem in the first place, and now, within a few weeks, you are complaining about it.
Let me repeat that I hear what the right hon. Gentleman says, and I understand the strength of feeling. Of course the review should be conducted independently, and of course it should be conducted fairly. I think that it is fair to have constituencies in which people’s votes are equal regardless of where they live in the country. If the right hon. Gentleman wants to work co-operatively—[Interruption.] I know that it is extremely unpopular for any Labour Member, as was recently shown in the case of the former Secretary of State for Defence, to reach out a hand to work in co-operation with this coalition Government. Lord Prescott gets his ermine in a twist, and says that it is collaboration. What kind of new politics is that?
T1. If he will make a statement on his ministerial responsibilities. (3367)
As Deputy Prime Minister, I support the Prime Minister in the oversight of the full range of Government policy and initiatives. I have taken particular responsibilities for co-ordinating the Government’s domestic policies through my chairmanship of the Cabinet Sub-Committee on home affairs. Within the Government, I am responsible for our ambitious programme of political and constitutional reform, supported in this House by my colleague the Parliamentary Secretary, Cabinet Office, the hon. Member for Forest of Dean (Mr Harper).
In view of the Deputy Prime Minister’s reference to a supporting role, may I quote him directly? He has said:
“We need to invest in the kind of things… which create jobs for our young people”
Do not last week’s cuts in support for young people and for Sheffield Forgemasters demonstrate that the Deputy Prime Minister is powerless within Government?
As a Sheffield MP, I suspect that I know Sheffield Forgemasters a lot better than the right hon. Gentleman does, and I will be meeting the chairman and chief executive again this Friday in Sheffield. [Interruption.] Let us be clear: this is an outstanding company—it is a great company. [Interruption.] No, the new owners have been quite open about why they sought a Government loan—because, as they have publicly stated, they felt the terms they were receiving from banks were not good enough and because they did not want to dilute their own shareholdings in the company. Do I think it is the role of Government to help out owners of companies who do not want to dilute their own shareholdings? No, I do not. Every Member of this House could identify companies that are struggling more than Sheffield Forgemasters and that would also like to receive a Government loan. To support manufacturing, we must support skills, we must invest in infrastructure and we must get the banks lending. That is what we will do; that is what Labour failed to do.
T2. Does the Deputy Prime Minister agree that as part of his broader constitutional package, there is an opportunity to codify and formalise the relationship between central and local government in order to promote and solidify the coalition Government’s localist agenda? (3368)
I strongly agree with my hon. Friend. The push for greater decentralisation, after years and years of grotesque centralisation under a Labour Government, is one of the most important changes that this coalition Government will usher in in the years ahead.
Four days before the general election the right hon. Gentleman asked in an interview in The Independent newspaper:
“What is this big society?”,
and then said it is
“a well-oiled PR machine, but basically it’s disguising fake change. It’s hollow. There’s nothing in it.”
Does he still hold that view about a fundamental philosophy of the Conservative party?
I hold that view that it is important to give people back their liberty where it has been taken away from them, that it is important to give them back privacy where that has been taken away from them, and that it is important to give back power to communities where that has been taken away from them. That is the kind of liberal society I believe in.
T3. The Liberal Democrat election manifesto, “Change that works for you”, says:“The European Union has evolved significantly since the last public vote on membership over thirty years ago. Liberal Democrats therefore remain committed to an in/out referendum.”I do not know whether that works for you, Mr Speaker, but it certainly works for me. Is that what we are going to do? (3369)
Unlikely alliances abound, Mr Speaker. I am grateful to my hon. Friend for that question. As he knows, the coalition agreement sets out very clearly that we will not agree to any further transfer of powers from this Parliament, and from London and Whitehall to Brussels and Strasbourg, and if there were any proposal to do so, we will introduce legislation this autumn—a referendum lock—that will guarantee that the British people finally have their say.
As I said, we are all concerned, on both sides of this House, that 3.5 million people are not on the electoral register. I say again, however, that if the right hon. Gentleman is so concerned now, why did he not voice his concerns when he was in government? His Government legislated to introduce individual electoral registration, but they did it at a very leisurely pace that will not actually lead to compulsory electoral registration during this Parliament. [Hon. Members: “Answer the question.”] I am. That is why we are looking at whether we can accelerate individual electoral registration.
T4. My right hon. Friend rightly wants new steps to ensure that lobbying is legitimate advocacy, not undue influencing. Will he please extend the scope of his review to deal with the revolving door between top officials in Whitehall and big corporations? Will he consider restrictions beyond those already in place to ensure that public procurement rip-offs cannot be brought through the revolving door? (3370)
We will bring forward proposals on lobbying. Lobbying is a legitimate activity as long as it is out in the open, and we will ensure that there is a statutory register of all lobbyists so that that is completely above board and entirely transparent. My right hon. Friend the Prime Minister has introduced a new code for Ministers and for special advisers which will make sure that the period of time between special advisers in particular leaving Government and then seeking employment in lobbying companies is significantly lengthened.
It is an important constitutional change—I recognise that. We believe that it is right to separate the power to pass a motion of no confidence in a Government from the power to pass a motion of Dissolution. Let us be clear about why we are doing this. We are doing it because we want to introduce fixed-term Parliaments. My right hon. Friend the Prime Minister is the first Prime Minister to give up his power to dissolve Parliament. I should have thought that the right hon. Gentleman and all Members of the House would welcome that change. However, we all understand that the proposed 55% figure is controversial. It is up for discussion and scrutiny, and if the case is made that another figure might be better, of course we are open to those arguments.
T5. Does the Deputy Prime Minister not find it astonishing that some Members of this House do not believe that every vote should have equal value? People in Harlow and the villages hope that their say at the ballot box will one day have as much weight as everyone else’s, with fairer and more equal-sized constituencies. (3371)
I agree with my hon. Friend. We have a general problem. The Labour party has leapt from being in government, where it created endless problems, to coming into opposition and airbrushing those problems from the record altogether. Labour Members used to talk about fairness, reform and constitutional change. They now talk about manufacturing, but manufacturing declined three times faster under Labour than it did under previous Conservative Administrations.
That is a matter for the Budget. As the Chancellor of the Exchequer has already announced, a former Secretary of State for Defence will be providing a review of public sector pensions. I think it is right to look at the fundamental balance between pension entitlements in the private sector, which have been cut back and have changed very dramatically—many people in the private sector, too, have been working shorter hours and taking, in effect, pay cuts—and the pension entitlements due to those in the public sector. It is the fair thing to do to look at pensions in the round. That is what this Government will do and what the hon. Lady’s Government failed to do for more than a decade.
T6. The Deputy Prime Minister will be aware that every time we change the voting system, such as the introduction of proportional representation to European Parliament elections, the turnout goes down. That is probably one of the biggest challenges he faces. What solution can we find to ensure that turnout remains high when we introduce new electoral systems? (3372)
I am not sure whether there is such an intimate link between electoral systems and turnout. Turnout seems to me to be dependent on whether the contest is close and whether there are issues being debated in the election contest that engage people. That is something that those on both sides of the House should always strive to do at election time.
T7. I have heard the Deputy Prime Minister say that he is concerned that 3.5 million people are missing from the register, including groups such as those with learning disabilities, but I have not heard what he is going to do about it, apart from individual registration, which might make the problem worse. What is he going to do to ensure that those numbers go up on the electoral register? (3373)
It is clearly a complex problem or, I assume, the hon. Lady and her Government would have done something about it in the past 13 years. I think that individual electoral registration is the absolute key, but as we said in the debate here on another occasion, it is crucial to make sure that individual electoral registration is properly resourced and is conducted with care. If it is done too quickly and is not resourced properly, she is right that there is a risk of making the problem worse. That is something that we must avoid at all costs.
T8. I welcome my right hon. Friend’s review of the workings of the upper House. Does he agree that perhaps the time has come to consider the fact that the hereditary principle is wrong on principle? (3374)
T9. May I draw the Deputy Prime Minister’s attention to the “Crimewatch” most wanted list? Second on the list is one Michael Brown, wanted for defrauding £8 million from former Manchester United chairman Martin Edwards. He also donated £2 million in cash to the Lib Dems in 2005. Does the Deputy Prime Minister have any information about his whereabouts and if so will he call the City of London police or Crimestoppers in confidence on 0800 555 111? (3375)
Talk about the great disappeared—where is the former Prime Minister and where are all the leadership candidates? The contest for the Labour party leadership increasingly resembles a political version of “Big Brother”. They are just talking to themselves. The rest of the country lost interest ages ago and just wants it to finish.
T10. Once claiming to be the political arm of the British people, now Labour are the defenders of rotten boroughs and pocket boroughs under trade union sponsorship. Will the Deputy Prime Minister bring forward a great reform Bill so that we can have a people’s Parliament fit for the new millennium? (3376)
I certainly agree with the zeal with which my hon. Friend wishes us to pursue political and constitutional reform. It remains extraordinary that a party that used to call itself progressive and a party of reform failed to do anything fundamentally to reform our politics. We will now do it because the Labour Government failed to do so.
The right hon. Gentleman made reference to the leisurely time scale for the introduction of individual registration, but it was a long time scale to ensure that the missing 3.5 million people were back on the register before the introduction of individual registration. If he is to speed up one—the introduction of individual registration—will he speed up the other and get those 3.5 million people back on the register?
As I said, we need to proceed with care and make sure that the system is properly resourced. As the hon. Gentleman rightly said, the present timetable is for voluntary individual registration to continue until, I think, 2015 before a compulsory phase is introduced. We are actively looking at whether that is feasible and justifiable and whether we can resource an acceleration of the timetable. We have not yet decided on that.
We will be establishing a commission—[Hon. Members: “Ooh!”] Does the jeer indicate impatience for action? Is that right—we want a bit of action? Well, that’s what we saw over the last decade and a bit.
We will be establishing a commission to examine the West Lothian question.
The Attorney-General was asked—
Crown Prosecution Service (South-west)
May I first pay tribute to my predecessors Baroness Scotland and Vera Baird QC? The Solicitor-General and I both hope that we will be able to follow their tradition in our dealings with Parliament.
The last area performance inspection of the CPS Devon and Cornwall by Her Majesty’s Crown Prosecution Service inspectorate was in July 2007. Performance was rated as good, an improvement on the previous assessment in 2005, which rated the area as poor. There is a structure for monitoring area performance, including regular performance meetings between the chief operating officer of the CPS and the area chief Crown prosecutor. The performance of CPS Devon and Cornwall for 2009-10 was assessed as poor in one indicator—proceeds of crime—good in four of 11 indicators and excellent in another four of 11 indicators.
I am grateful to my right hon. and learned Friend for his comprehensive response. Will he encourage the Crown Prosecution Service to leave behind its tick-box obsession with conviction rates, become more robust in prosecuting the perpetrators of low-level crime and antisocial behaviour and help to restore public confidence in the criminal justice system?
I am very much aware that my hon. Friend has taken a close personal interest in this issue in his area. He will understand that each case must be scrutinised by a prosecutor under the tests set out in the code for Crown prosecutors. There is a duty in each case to keep that under review, in accordance with the evidence available. In some cases, if the police provide more information, that can result in a charge having to be reduced and, in some cases, lesser pleas accepted. But I agree with my hon. Friend that errors can happen, and if a case is brought to his attention that troubles him in this respect, he should, of course, contact me or the Solicitor-General and we will ensure that it is inquired into.
Does the right hon. and learned Gentleman agree that the success of the CPS cannot always be judged by prosecution and, indeed, conviction rates? May I urge him to look at what has been done in Bristol to tackle the problem of on-street sex work? We are using conditional cautions, and the CPS is working with projects such as One25 to try to tackle the root cause of the problem, rather than just taking it through the courts over and again.
Yes, I entirely agree with the hon. Lady. Good work is being done by the CPS, in conjunction with the police, to try to ensure that crime of that nature is reduced without necessarily going through the courts. Equally, it is right to say—the CPS understands this very well—that the use of conditional cautions must not serve as a device to avoid proper convictions being recorded in court against people who ought to be brought before the courts.
May I begin by congratulating the hon. Gentleman on his election?
The Government take domestic violence very seriously. The Law Officers support the work that the Crown Prosecution Service is undertaking to increase the rate of prosecution in such cases. The increase in the provision of specialist domestic violence courts, the training of all CPS prosecutors in domestic violence cases and improvements in support and safety for victims have all led to an increase in the rate of prosecutions leading to a conviction. The CPS works with other agencies to ensure that, where possible, the evidence is available to prosecute such cases effectively.
It is estimated that about 750,000 children witness domestic violence during any given year. Clearly, a great deal needs to be done to ensure not only that those children are protected, but that, if appropriate, they can give evidence in courts in such a way that does not frighten them and that leads to proper convictions being arrived at. The hon. Gentleman makes a good point that will certainly be considered further.
It depends on what my hon. Friend means by the phrase “recourse to public funds”. A number of victims will be protected or assisted by independent domestic violence advisers. We now have 141 specialist domestic violence courts. As she will know from her private practice as a family lawyer, people can be assisted in a number of ways. The main thing is to ensure that they know what is available and that they can be assisted before, during and after the court hearing.
I have had discussions with the Director of Public Prosecutions on a range of criminal matters and will continue to do so as and when issues arise. Rape is one of the most serious and damaging of all crimes, and I support the current work that the Crown Prosecution Service is undertaking with other agencies to improve the way in which prosecutions are conducted and victims are treated in such cases. If there are to be any changes to the law or procedure in respect of rape trials—for example, the introduction of anonymity for defendants in such cases—as my right hon. and learned Friend the Lord Chancellor made clear last week, they will take place only after the issues involved have been fully researched and debated. The views of all those with relevant knowledge and expertise, including the Director of Public Prosecutions, will be fully taken into account.
Victims of rape need to feel confident that those accused of rape will be treated as serious offenders. Does the Attorney-General agree that extending anonymity to those defendants will stop victims coming forward and send a signal that it will be difficult to accuse people?
I do not think that it will in any way lessen the seriousness of the matter; on the contrary, it will emphasise the seriousness. The hon. Gentleman should bear in mind that anonymity for defendants in rape cases existed between 1976 and 1988. Indeed, I defended rape cases over that period and saw that trials were conducted without difficulty and with no lessening of the gravity of the offence. However, such matters can and will be debated, and if they are debated with a proper emphasis on detail, I believe that we will reach the right solutions.
If we go down the road of balancing victim anonymity with anonymity for the person accused, is not the important consideration that if the prosecution has good reason to believe that evidence will be brought to light if the identity is known, it should be possible to waive anonymity?
Yes; my right hon. Friend makes an important point. I have no doubt that that issue is one of those that can be examined. It is worth bearing in mind that the existing anonymity for complainants has the consequence, for example, that there are occasions when a history of false complaints made to someone other than the police does not come to light before a trial takes place. However, that has not been put forward as an argument for removing anonymity for complainant victims. He is correct, however, that such matters can all be looked at properly when we examine this area of the law.
May I begin by welcoming the right hon. and learned Gentleman and the Solicitor-General to their posts—it must be like going back to chambers? I also thank the right hon. and learned Gentleman for the kind words about his predecessors that he set out at the beginning of Question Time, which were gratefully received by Labour Members.
There has been a lot of confusion about this area of policy. The right hon. and learned Gentleman has, like several of his colleagues, spoken about the matter as if we were conducting a debate, but I remind him that the coalition agreement states that anonymity will be extended to defendants in rape cases. Will he lead the Government from the front by admitting that they have got this wrong, accepting that they have made a mistake and dropping this disastrous and retrograde policy?
I am grateful for the hon. Lady’s welcome; indeed, I welcome her to her role of shadowing the Law Officers in the House. She will be aware that my role is to provide legal advice about policy decisions made by the Government, and she can be reassured that I will ensure that exactly that happens.
As for this policy, my right hon. and learned Friend the Lord Chancellor made it clear when answering questions last week that he wished to engage in a debate to examine this procedure and area of the law, which have caused concern. That is exactly what I invite the House to do, in the spirit in which such debate should be conducted.
Crown Prosecution Service
I have absolutely no doubt that my hon. Friend, who is my parliamentary neighbour, will give his own encouragement to his local CPS. A lot has been done, although a great deal more can be done, and I am sure that, between us, we will keep Northamptonshire CPS up to the mark.
I welcome the Solicitor-General, who is my near neighbour, to his new post.
When Members of Parliament write to the CPS to make representations on behalf of constituents about cases that it is considering, are there any guidelines on how long it should take the chief Crown prosecutor to write back to them?
All letters from Members of Parliament, whether to the headquarters of the Crown Prosecution Service, or to the chief Crown prosecutor for a particular area should be answered speedily. Occasionally, work has to be done to provide a full answer, and I am sure that the right hon. Gentleman, whom I thank for his kind remarks, will understand that it is better to receive a thorough answer a few days late than a half answer on time.
In 2009-10, the full cost incurred by the Crown Prosecution Service of in-house advocate deployment in the Crown court was £18,552,313. The CPS estimates that it would have cost £27,833,588, excluding VAT and fees, to use self-employed advocates for that work, representing a saving of £9,281,275, excluding VAT. I acknowledge that the methodology for calculating the cost of Crown advocate deployment has been disputed by the Bar Council. I understand that discussions are taking place between the CPS and the Bar Council to try to resolve the matter and to look more generally at sustaining the role of self-employed advocates in the Crown court.
I can reassure my hon. Friend that there is widespread recognition, including by the CPS itself, that the referral bar has an important role to play in the prosecution of offences, and that that must be sustained. It is my intention, working with the head of the CPS, to ensure that that happens.
Again, I congratulate the hon. Gentleman on his election to the House. Records of representations received by local CPS offices are not kept centrally. I can tell him, however, that the Director of Public Prosecutions has not received any recent representations on steps to increase the rate of prosecutions in cases of domestic violence.
That is a wide question that I do not have time to answer, except in an Adjournment debate. As I said in my answers to the hon. Gentleman’s hon. Friends at the beginning of Question Time, the Government take domestic violence every bit as seriously as the previous Government. It is worth noting, however, that the Domestic Violence, Crime and Victims Act 2004 included a power to introduce restraining orders. Until I reminded the then Government during the course of debates on the Coroners and Justice Act 2009 of those powers, they did nothing about introducing restraining orders for four or five years. Their record was therefore rather patchy.
Electoral Commission Committee
The hon. Member for South West Devon, representing the Speaker's Committee on the Electoral Commission was asked—
Boundary Review (Constituencies)
The Electoral Commission has no statutory responsibilities in relation to parliamentary constituency boundaries, which are the responsibility of the four boundary commissions for the United Kingdom. The Electoral Commission has therefore had no discussions with Ministers about the timing of the next parliamentary boundary review.
Will the hon. Gentleman make sure that the Electoral Commission makes representations to boundary commissioners and, indeed, to Ministers to ensure that before any boundary review takes place, registration in constituencies rises and that activity is under way to increase it so that the 3.5 million people who are missing are put back on the register, and that any future boundaries truly reflect those who live within constituency boundaries?
I will obviously pass on the right hon. Gentleman’s comments to the Electoral Commission but, as I said, it has no responsibility for the boundary review. It is, however, concerned about low voter registration, and it estimates that between 8% and 9% of the eligible population in England and Wales is not registered. It is working with electoral registration officers and others to try to improve the position.
The hon. Member for Banbury, representing the Church Commissioners, was asked—
Before I answer that question, may I pay tribute to my predecessor, the hon. Member for Middlesbrough (Sir Stuart Bell)? He has been the longest serving Second Church Estates Commissioner ever, and he did an excellent job. The legislation to enable women to become bishops reaches the General Synod’s equivalent of Report early next month in York. Depending on what is decided there, the legislation will then go to the 44 diocesan synods, and I understand that the earliest date that the General Synod can take a final decision, and when the matter can eventually come before the House, is 2012.
I welcome the hon. Gentleman to his new role. Does he not agree that the intervention of the two archbishops, with their proposal on the legislation to enable women to become bishops, will create a two-tier system of bishops? Women will no doubt be on the lower tier, and does that not send out completely the wrong message from the established Church of this country about the role of women bishops?
I thank the hon. Lady for her kind words at the beginning of her question. There are clear majorities in the General Synod in favour of women becoming bishops, but, as the proposals by the Archbishops of Canterbury and York yesterday demonstrated, there are still efforts to try to find ways to reconcile those who have deep-held opposition to the measure. Under legislation, it is important that the Church decides the way forward, and we should give it the space to do so. However, it is also very important that the Church hears the voices of this House about how we see those matters, because ultimately the issue will have to come back to this House.
Church Repairs (VAT)
The General Synod at its February meeting made it clear how important it feels the listed places of worship scheme is. The scheme has managed to rebate some £12 million back to listed churches each year, and that is particularly important when a system has not yet been found for the European Union to remove VAT on repairs to listed places of worship.
May I congratulate my hon. Friend on his appointment and pay tribute to his predecessor? Will my hon. Friend look at removing the anomaly between the high rate of VAT on church repairs and the zero rate of VAT on new buildings? Will he, indeed, campaign for a lower rate of VAT throughout the European Union—[Interruption.]
Order. Before the hon. Gentleman replies, I must say that there is still quite a hubbub from Government Back Benchers, and it is being contributed to by members of the Government. Surely they want to hear the answers from the Second Church Estates Commissioner.
I remind any colleagues interrupting that it was Gladstone who observed that the most important business of the House was Prayers at the start of the day.
My hon. Friend has been an assiduous campaigner in supporting repairs for church buildings, and the simple fact is that each year the Church of England spends £110 million on repairing and renovating listed churches. The vast majority of that money comes from church congregations and local communities, and, even in these straitened times, we have to come to a collective view on whether we are going to maintain that very important part of our national fabric and heritage.
Electoral Commission Committee
The hon. Member for South West Devon, representing the Speaker's Committee on the Electoral Commission was asked—
The Electoral Commission is concerned about the levels of voter registration in the United Kingdom, including Scotland, and it has met the electoral registration officers who took part in its recent research. It has met also all electoral registration officers in Scotland to discuss the recent findings and to seek improvements in Scotland’s registration levels.
I am grateful to the hon. Gentleman for his reply. He will be aware that the report revealed that more than 100,000 of Glasgow’s citizens were not registered. That is three times the entire electorate of Orkney and Shetland. Will the Electoral Commission request an urgent meeting with the Secretary of State for Scotland to ensure that proper resources are now provided as a matter of urgency in order to resolve that disgraceful position?
I shall certainly pass on the hon. Lady’s comments to the Electoral Commission, but it is already working with electoral registration officers in Glasgow. She is right to point out that the recent research demonstrated worrying levels of voter registration, and it seems that that has been going on for some time. Everyone is working hard to try to put that matter right, but the primary focus is on the electoral registration officers in Glasgow. However, I shall pass her comments on to the Electoral Commission.
Close of Polls (Voting)
5. What recent representations the Electoral Commission has received on whether ballot papers may be issued to those within the precincts of polling stations at 10 pm on polling day who signify their intention to vote. (3391)
The Electoral Commission informs me that it has received representations from voters, candidates, political parties, returning officers, Members of Parliament and professional bodies regarding queues at some polling stations on 6 May. In its urgent report, published two weeks after the general election, the commission identified a total of 27 polling stations in 16 constituencies where it was able to confirm that there were problems with queues at the close of poll. At least 1,200 people were affected. The commission has recommended that the law should be changed to make it clear that any elector who is entitled to vote and who is in the queue to enter the polling station at the close of poll will be allowed to vote. This will require primary legislation.
I thank the hon. Gentleman for his answer. He is also aware that the Electoral Commission has indicated that legislation to ensure that voters within the precinct receive a ballot paper could take the form of a one-clause piece of legislation—an amendment to the Representation of the People Act 2000. Will he press the Government to ensure that time is made available for this urgent piece of legislation early in this Session to ensure that those who present themselves for voting at a polling station do indeed get their ballot papers?
It is not for me to press the Government on any issue, but I am sure that those who are sitting on the Front Bench today will have heard the hon. Gentleman’s representations. This is a matter of concern. The Electoral Commission is of the view that primary legislation is required; and certainly, in its discussions with the Government, it will be urging them to respond in an appropriate manner.
The hon. Member for Banbury, representing the Church Commissioners, was asked—
Listed Places of Worship
Members of the Archbishops Council’s church buildings division have already had initial, very useful meetings with Ministers in the Department for Communities and Local Government and with Treasury Ministers, and we hope that those constructive meetings will continue.
I have had many representations from local churches whose congregations are struggling to meet the cost of repairs and are dependent on this scheme continuing. In his discussions with the Government, will the hon. Gentleman emphasise that the beauty of the scheme, which was brought in by the previous Government, is that it applies to all listed places of worship, not just those that are eligible for things such as the heritage lottery grant?
The hon. Lady makes a good point. As I said in my reply to my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), as a society we have to take a decision about how we maintain what is a very important part of our national built heritage. There are 16,000 parish churches throughout this country. English Heritage estimates that it would cost £800 million a year to maintain them properly; at present, we are spending only about £100 million, most of which comes from local communities and congregations.
I am beginning to get to grips with the responsibilities of this post, which was established by the Ecclesiastical Commissioners Act 1850. I would say at this stage that I will try to have the same broad approach to answering questions on behalf of the Church as did my predecessor. I hope that I can be a helpful conduit between the Church and this House, and this House and the Church.
My hon. Friend is admirably suited to following the hon. Member for Middlesbrough (Sir Stuart Bell) in this post. Will he pass back to the Synod the fact that we look forward in this House to having bishops chosen on merit, recognising that sex is not merit and that the Synod can throw out proposals that it does not like?
Electoral ComMission committee
The hon. Member for South West Devon, representing the Speaker’s Committee on the Electoral Commission, was asked—
Overseas Donations (Political Parties)
The Political Parties and Elections Act 2009 strengthens the commission’s investigatory powers, subject to the necessary secondary legislation, which is currently before Parliament. The commission has recently consulted on its proposed enforcement policy, which sets out how it intends to exercise those powers, and has received a number of representations in response to the consultation.
Michael Ashcroft and his pals spent £250,000 trying to remove me from my seat. [Interruption.] I am pleased to report to the House that Labour increased its majority. Why is the Electoral Commission unable to find out how much of Ashcroft’s money comes from abroad, why does the Tory party refuse to help it, and why does the commission not have the powers to hold the Tory party accountable for its failure to reveal precisely where the Ashcroft money comes from?
In all the hubbub, I could not quite hear whether the hon. Gentleman was saying Lord Ashcroft or Lord Paul.
The hon. Gentleman knows that individual investigatory matters are not brought before the Speaker’s Committee. I am aware, however, that he has made a complaint, and the Electoral Commission will respond to it in due course.
Boundary Review (Constituencies)
Sorry for the delay, Mr Speaker; I thought we had moved on to the Budget.
The Electoral Commission informs me that it has received a number of representations from the public, elected representatives and others about proposals for the review of parliamentary constituency boundaries. However, as the commission has no statutory responsibilities in relation to those boundaries, any representations that it has received on the proposals have been referred to the relevant parliamentary boundary commission.
I am grateful to the hon. Gentleman. Further to the point made earlier by the right hon. Member for Delyn (Mr Hanson), given the fact that there are variations in registration across the country, will the hon. Gentleman make representations to Ministers in view of the impact that those variations will have on future boundaries?
Close of Polls (Voting)
The Electoral Commission informs me that it has received representations from voters, candidates, political parties, returning officers, Members of Parliament and professional bodies regarding queues at some polling stations on 6 May. In its urgent report published two weeks ago after the general election, the commission identified a total of 27 polling stations in 16 constituencies where it was able to confirm that there were problems with queues at the close of the poll.
Will the hon. Gentleman ask his Committee to write urgently to the Ministers responsible, so that we can put right the legislation that currently prevents people who turn up to vote in time from being able to do so? That could and ought to be done this year, and with the Committee’s support it will be.
I will now announce the result of the ballot held today for the election of the Chair of the Backbench Business Committee. Natascha Engel received 202 votes; Sir Alan Haselhurst received 173 votes. Natascha Engel is elected Chair of the Committee, and I congratulate her upon her election.
Ways and Means
Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that at the end of the Chancellor’s speech, copies of the Budget resolutions will be available to them in the Vote Office. For the benefit of new Members, I add that it is not appropriate, or allowed, to intervene on either the Chancellor or the Leader of the Opposition.
This emergency Budget deals decisively with our country’s record debts. It pays for the past, and it plans for the future. It supports a strong, enterprise-led recovery, it rewards work and it protects the most vulnerable in our society. Yes, it is tough, but it is also fair.
This is an emergency Budget, so let me speak plainly about the emergency that we face. The coalition Government have inherited from their predecessors the largest budget deficit of any economy in Europe, with the single exception of Ireland. One pound in every four we spend is being borrowed. What we have not inherited from our predecessors is a credible plan to reduce their record deficit—this at the very moment when fear about the sustainability of sovereign debt is the greatest risk to the recovery of European economies. Questions that were asked about the liquidity and solvency of banking systems are now being asked about the liquidity and solvency of some of the Governments who stand behind those banks. I do not want those questions ever to be asked of this country. That is why we have set a brisk pace since taking office.
In the past seven weeks, we have announced, conducted and completed a review of this year’s spending and identified £6 billion of savings. We have announced, established and received the report of the independent Office for Budget Responsibility. The power that the Chancellor has enjoyed for centuries to determine the growth and fiscal forecasts now resides with an independent body immune to the temptations of the political cycle. And we have examined, decided on and in some cases halted the mass of unfunded commitments, IOUs and overcommitted reserves that greeted us on entering office.
This is early, determined action, and it has earned us credibility in international markets. It has meant that our promise to deal decisively with the deficit has been listened to. Market interest rates for Britain have fallen over the past seven weeks, while those of many of our European neighbours have risen. Those lower market interest rates are already supporting our recovery.
But unless we now deliver on that promise of action with concrete measures, that credibility—so hard won in recent weeks—will be lost. The consequence for Britain would be severe: higher interest rates, more business failures, sharper rises in unemployment, and potentially even a catastrophic loss of confidence and the end of the recovery. We cannot let that happen. This Budget is needed to deal with our country’s debts. This Budget is needed to give confidence to our economy. This is the unavoidable Budget.
I am not going to hide hard choices from the British people or bury them in the small print of the Budget documents. The British public are going to hear them straight from me, here at this Dispatch Box. Our policy is to raise from the ruins of an economy built on debt a new, balanced economy, where we save, invest and export; an economy where the state does not take almost half of all our national income, crowding out private endeavour; an economy not overly reliant on the success of one industry, financial services—important as they are—but where all industries grow; an economy where prosperity is shared among all sections of society and all parts of the country. In this Budget, everyone will be asked to contribute. But in return, we make this commitment: everyone will share in the rewards when we succeed. When we say that we are all in this together, we mean it.
The first challenge for this Budget is to set the fiscal mandate—in other words, our overall objective for the public finances. The previous Government had two fiscal rules, one for debt and one for the current Budget. They were supposed to force Chancellors to set aside money in the good years so that they could borrow sustainably when the economy turned down. They completely failed in that task.
As this is the last Budget in which this golden rule will appear, I would like to be the last Chancellor to report on it. We are set to miss the golden rule in this cycle by £485 billion. We now know the intrinsic weakness in backward-looking fiscal rules: past prudence was an excuse for future irresponsibility; and the judge of the rules was the very same Chancellor they were supposed to be restraining. We propose a more credible approach.
Our fiscal mandate will be forward-looking, and the judge of whether we are on course to meet it will be not the Chancellor, but the independent Office for Budget Responsibility. On behalf of the House, I thank Sir Alan Budd and his fellow committee members, Geoffrey Dicks and Graham Parker, for their highly professional effort. In the space of just seven weeks, I believe we have established the Office for Budget Responsibility as a permanent improvement to economic policy making and the transparency of government. The legislation to put the office on a statutory footing will now be drawn up and I hope it will command all-party support.
I now turn to what that fiscal mandate will be. The view of the international community was clearly expressed at the latest G20 meeting, and we will be taking the same message to the G20 summit in Toronto this weekend. Surplus countries should do more to support global demand. So we welcome China’s announcement to come off the dollar peg. At the same time, the international community believes countries with high fiscal deficits need to accelerate the pace of fiscal consolidation. That is precisely what we now propose to do. The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget. This mandate is structural, to give us flexibility to respond to external shocks; current, to protect the most productive public investment; and credible, because the OBR, not the Chancellor, will decide on the output gap.
In order to place our fiscal credibility beyond doubt, this mandate will be supplemented by a fixed target for debt, which in this Parliament is to ensure that debt is falling as a percentage share of GDP by 2015-16. I can confirm that, on the basis of the measures to be announced in this Budget, the judgment of the OBR, which we published today, is that we are on track to meet those goals. Indeed, I can tell the House that, because we have taken a cautious approach, we are set to meet them one year earlier, in 2014-15. To put it another way, we are on track to have debt falling and a balanced structural current budget by the end of this Parliament.
At this point in the Budget speech, the Chancellor would normally read out their own set of economic and fiscal forecasts, and they normally tell the House more about the political cycle than the economic one. Those days have gone for good. Instead, I will give the House the latest forecasts from the independent OBR, taking into account the measures in the Budget.
Growth in the UK economy for the coming five years is estimated to be 1.2% this year and 2.3% next year; then 2.8% in 2012 followed by 2.9% in 2013; and then 2.7% in both 2014 and 2015. Consumer price inflation is expected to reach 2.7% by the end of the year before returning to target in the medium term, and let me take this opportunity to confirm that the inflation target remains at 2% as measured on the consumer prices index.
The unemployment rate is forecast by the OBR to peak this year at 8.1% and then fall for each of the next four years to reach 6.1% in 2015. Some have suggested that there is a choice between dealing with our debts and going for growth. That is a false choice. The crisis in the eurozone shows that unless we deal with our debts, there will be no growth. These forecasts demonstrate that a credible plan to cut our budget deficit goes hand in hand with a steady and sustained economic recovery, with low inflation and falling unemployment. What is more, the forecast shows a gradual rebalancing of the economy, with business investment and exports playing a greater role and Government spending and debt-fuelled consumption a smaller role—a sustainable private sector recovery built on a new model of economic growth, instead of pumping the debt bubble back up.
Part of the reason, as we have always argued, is that tighter fiscal policy can enable interest rates to stay lower for longer. As the Governor of the Bank of England confirmed this week at the Mansion House:
“If prospects for growth were to weaken, the outlook for inflation would probably be lower and monetary policy could then respond”.
The subject of interest rates brings me to say this about attempts to compare directly last week’s forecasts with this one. As the OBR notes in today’s Budget document, any such comparison would be “misleading”, because last week’s forecast included the lower interest rates that expectations of this week’s Budget have already brought about. So, as Sir Alan has written, actually to follow the fiscal path set out by the previous Government
“would lead to higher interest rates and…lower economic activity”
than his forecast showed.
Let me now turn to the measures in the Budget designed to deliver this accelerated reduction in the structural deficit. The coalition believes that the bulk of the reduction must come from lower spending rather than higher taxes. The country has overspent; it has not been under-taxed. Our approach is supported by the international evidence, compiled by the OECD, the International Monetary Fund and others, which found that consolidations delivered through lower spending are more effective at correcting deficits and boosting growth than consolidations delivered through tax increases.
That is the origin of our 80:20 rule of thumb—roughly, 80% through lower spending and 20% through higher taxes. This evidence has been available in the Treasury for some time, but was published only in a redacted form by the previous Government. We intend to follow international best practice and the Treasury’s own analysis. My measures today mean that 77% of the total consolidation will be achieved through spending reductions and 23% through tax increases. I believe this gets the balance right.
I now turn to the OBR’s fiscal forecasts. As a result of the measures I will announce today, public sector net borrowing will be £149 billion this year, falling to £116 billion next year, £89 billion in 2012-13 and £60 billion in 2013-14. By 2014-15, borrowing reaches £37 billion—exactly half the amount forecast in the March Budget—and in 2015-16, borrowing falls further to £20 billion. As a share of the economy, borrowing will fall from 10.1% of GDP this year to just 1.1% in 2015-16.
We now know, thanks to the OBR forecast, that the structural current deficit is significantly larger than we were told—0.8% of GDP or £12 billion higher next year. Thanks to my action today, the structural current balance will be minus 4.8% of GDP this year. That deficit will then be eliminated to plus 0.3% in 2014-15 and plus 0.8% in 2015-16. In other words, it will be in surplus.
Public sector net debt, as a share of GDP, will be 62% this year, before peaking at 70% in 2013-14. Because of our action today, it then begins to fall, to 69% in 2014-15 and then 67% in 2015-16, whereas under the plans we inherited, debt would have increased in every full year of this Parliament. The House will want to know that, as a result of our measures, debt interest payments will be £3 billion a year lower by the end of this Parliament than they would have been.
I have one further announcement to make regarding macro-economic policy. I can confirm that, as set out in the coalition agreement, the Government will not be joining the euro in this Parliament. I have therefore abolished the Treasury’s Euro Preparations Unit—yes, one does exist—and the official concerned has been redeployed to more productive activities.
Let me now turn to my other decisions on public spending. The state today accounts for almost half of all national income, which is completely unsustainable. All parties in the House now accept that spending needs to be cut, and we have made a start, but we need to go much further if we are to meet our fiscal mandate and see debt falling by the end of this Parliament. Today we are setting out the overall path of public spending that will achieve that.
Let me begin with current spending. Current expenditure will rise from £637 billion in 2010-11 to £711 billion in 2015-16. Although this is an increase, the House should remember that we inherit a rapidly rising bill for debt interest—a bill that will not start falling until the debt itself starts to fall. Debt interest payments alone will cost the taxpayer a quarter of a trillion pounds over this period. One of my predecessors used to call this spending the costs of social failure, but I say it is the price of economic failure. Compared with the plans set out by the previous Government, I am announcing today additional current expenditure reductions of £30 billion a year by 2014-15. The plans for public investment we inherit from our predecessors envisage a steep drop from £69 billion last year to £46 billion in 2014-15.
After the initial in-year reductions, the question we have been faced with is how much further to go on capital spending. Well-judged capital spending by Government can help provide the new infrastructure our economy needs to compete in the modern world. It supports the transport links we need to trade our goods, the equipment we need to defend our country and the facilities we need to provide quality public services. I think an error was made in the early 1990s when the then Government cut capital spending too much—perhaps because it is easier to stop new things being built than to cut the budgets of existing programmes.
We have faced many tough choices about the areas in which we should make additional savings, but I have decided that capital spending should not be one of them. There will be no further reductions in capital spending totals in this Budget, but we will make careful choices about how that capital is spent. The absolute priority will be projects with a significant economic return to the country. Assessing what those projects are will be an important part of the autumn spending review.
The Government can also dispose of assets that should rightly be in private ownership. Yesterday, we launched the sale of High Speed 1. We will look at how to dispose of our shareholding of NATS, the air traffic control services. We will aim to sell the student loan book and look at options around early repayment for individuals, and we will resolve the future of the Tote—at last. My right hon. Friend the Secretary of State for Business, Innovation and Skills will also facilitate a private capital injection into the Royal Mail Group, something that has been long overdue.
Before I turn to discuss departmental budgets, I need to say something first about another area of spending—the civil list. The civil list is the Government’s support for Her Majesty the Queen in her duties as Head of State, and I am sure that everyone in this House will want to join me in recognising the Queen’s loyal service and immense contribution to public life. The amount provided by the civil list has remained unchanged over the past 20 years, at £7.9 million. This has required careful management. Because of inflation, the annual payment is today worth only a quarter of what it was 20 years ago. I can announce that, with the full agreement of the Queen, the civil list will remain frozen at £7.9 million for the coming year, and I will propose a new means of consolidated support for Her Majesty for the future at a later date.
In addition, the royal household has agreed that, in future, civil list expenditure will be subject to the same audit scrutiny as other Government expenditure, through the National Audit Office and the Public Accounts Committee of this House of Commons. I believe that this will mean clear accountability in this House and that it will strengthen public confidence.
Let me turn now to my decisions on departmental expenditure limits. In recent years, Chancellors have been reluctant to explain what their total spending projections will mean for Whitehall Departments, and that is entirely self-defeating. It normally takes people at the Institute for Fiscal Studies less than 24 hours to work it out for themselves and let the public know the truth. I will save them the effort.
We have inherited from the previous Government spending plans to cut departmental budgets by £44 billion a year by 2014-15. This implies an average real reduction for unprotected Departments of 20%—not that this was ever said, or a single pound of cuts to programmes even identified. Because the structural deficit is worse than we were told, my Budget today implies further reductions in departmental spending of £17 billion by 2014-15. We have committed to providing the NHS with real increases throughout the Parliament, and we will honour our international aid obligations to the poorest in the world. Once these are taken into account, the Budget figures imply that other Departments will face an average real cut of around 25% over four years. Clearly, if we can find any additional savings to social security and welfare beyond those that I will outline shortly, then that will greatly relieve the pressure on these Departments and that 25% figure.
Of course, not all Departments will receive the same settlement. I recognise, for example, the particular pressures on our education system and on defence. Final departmental settlements, and the final split between departmental expenditure and annually managed expenditure on welfare, will be set in the spending review. Rather than follow the usual practice of keeping the date of that review a secret until a few weeks before it happens, let me tell the House that it will be presented on Wednesday 20 October.
A further way that we can ease the pressure on public services is to agree that we need to restrain public sector pay in these difficult times, and we need to do something about the spiralling costs of public sector pensions. Many millions of people in the private sector have in the past couple of years seen their pay frozen, their hours reduced and their pension benefits restricted. They have accepted that, because they knew that the alternative in many cases was further job losses. The public sector was insulated from those pressures but now faces a similar trade-off. I know that there are many dedicated public sector workers who work very hard and did not cause this recession, but they must share the burden as we pay to clean it up. The truth is that the country was living beyond its means when the recession came, and if we do not tackle pay and pensions, more jobs will be lost.
That is why the Government are asking the public sector to accept a two-year pay freeze, but we will protect the lowest paid. In the past, I have said that we would be able to exclude the 1 million public sector workers earning less than £18,000 from a one-year pay freeze. Today, because we have had to ask for a two-year pay freeze, I extend the protection to cover the 1.7 million public servants who earn less than £21,000 a year. Together, they make up 28% of the public sector work force. They will each receive a flat pay rise worth £250 in both years, so that those on the very lowest salaries will get a proportionately larger rise. In recognition of our armed services who are risking their lives for us all in Afghanistan, we have also doubled the operational allowance to £4,800. We have asked Will Hutton to draw up plans for fairer pay across the public sector without increasing the overall pay bill, so that those at the top of organisations are paid no more than 20 times the salaries of those at the bottom. The culture of excessive pay at the very top of the public sector simply has to end.
We also need to deal with the cost of public service pensions. This is one of the greatest long-term pressures facing our nation’s finances. The OBR today publishes figures showing that by 2015-16 we will be spending over £10 billion a year simply to meet the gap between pension contributions and payments to the unfunded pensions that they support. That is why I have asked John Hutton to carry out an investigation. As the Work and Pensions Secretary in the previous Government, he brings experience and an unbiased approach. He will provide an interim report in September this year to help inform any decisions required for the spending review, and a full report in time for next year’s Budget.
The Government will also accelerate the increase in the state pension age to 66. A call for evidence will be launched later this week, and we will consult on whether to phase out the default retirement age.
Let me now address the largest bill in Government—the welfare bill. It is simply not possible to deal with a budget deficit of this size without undertaking lasting reform of welfare. It has been a key component of most successful fiscal consolidations elsewhere in the world and, around Europe, countries are now tackling their benefits bill. Germany has already announced €30 billion-worth of cuts to welfare spending, and others are taking similar steps.
Here in Britain, the explosion in welfare costs contributed to the growing structural budget deficit in the middle part of this decade. Total welfare spending has increased from £132 billion 10 years ago to £192 billion today. That represents a real-terms increase of a staggering 45%, and it is one of the reasons why there is no money left. It has also left an increasing number of our fellow citizens trapped on out-of-work benefits for the whole of their lives. A greater proportion of our children grow up in workless households than any other country in Europe. We are wasting the talents of millions, and spending billions on it in the process, so we will increase the incentives to work, and reduce the incentives to stay out of work. We will focus our benefits more towards those in need, and we will end some one-off payments that the country cannot afford any more.
First, we need to put the whole welfare system on a more sustainable and affordable footing. So from next year, with the exception of the state pension and pension credit, we will switch to a system where we uprate benefits, tax credits and public service pensions in line with consumer prices rather than retail prices. The consumer prices index not only reflects everyday prices better, but it is of course now the inflation measure targeted by the Bank of England. This will save over £6 billion a year by the end of the Parliament. I believe that this is a fairer approach than a benefits freeze. In time for the next Budget, we will also publish proposals to move the indexation in the tax system from RPI to CPI in a way that protects revenues.
Tackling spiralling welfare costs means also addressing the bill for tax credits. Spending on tax credits has increased from £18 billion in 2003 to £30 billion this year, and that is an unsustainable rise. There are over 150,000 families with incomes over £50,000 receiving tax credits. Taking into account the various disregards means that families earning up to £83,000 are eligible for this means-tested benefit. The country simply cannot afford this any more.
We need to target tax credits on those who need the help most, so we will reduce payments to families earning over £40,000 next year and then align the thresholds for the child and family element. We will increase the taper rate at which awards are reduced, and remove the baby element for new children from April 2011. We will remove the one-off payment to new workers over 50 from April 2012, and reduce the income disregard from £25,000 to £10,000, and then to £5,000. We will introduce an income disregard for income falls, reduce backdating from three months to one month, and we will not introduce the pre-election promise of a new tax credit element for infants.
Sadly, there are further benefits that this country cannot afford. We will abolish the poorly targeted health in pregnancy grant from April 2011. At the same time, we will restrict the Sure Start maternity grant to the first child only, and we will expect lone parents to look for work when their youngest child goes to school. We have decided that we simply cannot afford to extend the saving gateway, and we have also had to take a difficult decision about child benefit. I have received many proposals about this benefit. Some have suggested that we means-test it; others that we tax it. All these proposals involve issues of fairness.
The benefit is usually claimed by the mother. To tax it would mean that working mothers received less than the non-working partner of higher earners. To means-test it, we would have to create a massively complex new system to assess household incomes. I do not propose to do those things. I know that many working people feel that their child benefit is the one thing that they get without asking from the state. So instead, to control costs, we have decided to freeze child benefit for the next three years. This is a tough decision, but I believe that it strikes the right balance between keeping intact this popular universal benefit, while ensuring that everyone across the income scale makes a contribution to helping our country reduce its debts.
That brings me to another universal benefit: disability living allowance. It is right that people who are disabled are helped to lead a life of dignity. We will continue to support them, and we will not reduce the rate at which this benefit is paid. However, three times as many people claim it today than when it was introduced 18 years ago, and the costs have quadrupled in real terms to more than £11 billion a year, making it one of the largest items of Government spending. We will introduce a medical assessment for DLA from 2013, which will be applied to new and existing claimants. For people with disabilities, that will be a simpler process than the complex forms that they have to fill out at present. That way, we can continue to afford paying this important benefit to those with the greatest needs, while significantly improving incentives to work for others.
Spending on housing benefit has risen from £14 billion 10 years ago to £21 billion today. That is close to a 50% increase over and above inflation. The costs are completely out of control. We now spend more on housing benefit than we do on the police and on universities combined. Among these enormous numbers for total spending, there are some equally enormous individual claims. Today there are some families receiving £104,000 a year in housing benefit. The cost of that single award is equivalent to the total income tax and national insurance paid by 16 working people on median incomes. It is clear that the system of housing benefit is in dire need of reform.
We will introduce that reform by resetting and restricting local housing allowances; uprating deductions; reducing certain awards; re-adjusting support for mortgage interest payments; and limiting social tenants’ entitlement to appropriately sized homes. Lastly, we will for the first time introduce maximum limits on housing benefit, from £280 a week for a one-bedroom property to £400 a week for a four-bedroom property or larger. Our package today will reduce the costs of housing benefit by £1.8 billion a year by the end of the Parliament—or by just 7% of the total budget—but it will improve incentives to work. At the same time, we will target more resources at those who need them most by increasing the budget for discretionary housing payments to deal with hardship cases by £40 million, and from now we will cover the cost of an additional room for those claimants with a disability who need a carer.
Taken together, all those measures to control the costs of welfare will save the country £11 billion by 2014-15. Governments in the past have said that they were going to get to grips with welfare and to reward work. We are delivering. My right hon. Friend the Secretary of State for Work and Pensions will bring forward proposals to further reform the benefits system as a tool to support work and encourage aspiration in time for the autumn spending review.
But as I said right at the start of this speech, this Budget is not just about paying for the bills of the past; it is also about planning for the future. It is my deeply held belief that a genuine and long-lasting economic recovery must have its foundations in the private sector. That is where the jobs will come from, and we will do absolutely everything to support their creation. We argued that imposing a jobs tax was the last thing that Britain needed in a recovery, and the businesses of the country agreed with us, so we will adopt a different approach. We will make it cheaper for companies to employ people. From April 2011, the threshold at which employers start to pay national insurance will rise by £21 a week above indexation. The cost of hiring people on incomes lower than £20,000 will be less than it is today; and in one move we will have lifted 650,000 employees out of this tax altogether.
But if we are to have a sustained, job-creating recovery, we need more than that. We need to see growth not just in one corner of our country, nor in just one sector, for we live in a world where the competition for business is growing ever more intense. I want a sign to go up over the British economy that says “Open for business”, and this is how I propose to do it. Corporation tax rates are compared around the world, and low rates act as adverts for the countries that introduce them. Our current rate of 28p is looking less and less competitive, so we will do something about it. Next year we will cut corporation tax by 1%, to 27p in the pound, the year after we will cut it again by 1%, and again the year after, and again the year after that—four annual reductions in the rate of corporation tax that will take it down to just 24%. That will give us the lowest rate of any major Western economy, one of the lowest rates in the G20 and the lowest rate that this country has ever known.
At the same time, we will agree with businesses a long-term approach to the taxation of foreign profits, the treatment of intellectual property and the proposals from James Dyson on research and development. We will also reduce the small companies tax rate. The previous Government were planning to increase that tax rate next year to 22%, at the very time when we should be encouraging small businesses to grow. Instead, we will cut the rate to 20%, which will benefit some 850,000 companies. And because small businesses are struggling to obtain credit at the moment, I will extend the enterprise finance guarantee scheme, which supports small and medium-sized businesses’ access to lending. Those changes will benefit at least 2,000 small businesses.
My right hon. Friend the Secretary of State for Business, Innovation and Skills will come forward in the summer with further proposals on expanding the availability of credit, to ensure that the economic recovery is properly financed. Also, there are many small businesses in the tourism industry today. To help them, I am reinstating the favourable tax rules for furnished holiday lettings, which our predecessors had planned to repeal. I can also announce that there will be measures to cancel certain backdated business rates bills, including for many businesses in ports.
In the current climate, with the deficit the size that it is, all those reductions in tax must be more than paid for by other changes to business taxation, so we will not go ahead with the poorly targeted tax relief for the video games industry. There will be a small reduction in the rates for capital allowances, which will remain broadly in line with economic depreciation. For the majority of plant and machinery assets, the rate of the allowance will fall from 20% to 18%, while the allowance for longer-lived assets will fall from 10% to 8%. In other words, businesses will still receive full tax relief on their qualifying expenditure, but over a longer time frame.
I have also decided to reduce the annual investment allowance to £25,000 a year, to ensure that support is focused on investment by smaller firms. Over 95% of businesses will continue to have all their qualifying plant and machinery expenditure fully covered by this relief. Manufacturing as a whole will pay less tax. I have listened to the argument that changing those crucial allowances during the early stages of the economic recovery could be disruptive, so I will delay the reductions in capital and investment allowances to April 2012. That will give businesses the extra early advantage of the tax cuts, which will start to come in from next year.
Our reforms today will also mean a greater contribution from the banking sector—one that far outweighs any benefit that it will receive from the lower tax rates that I have just announced. In putting the nation’s finances in order, we must remember that this was a crisis that started in the banking sector. The failures of the banks imposed a huge cost on the rest of society, so I believe that it is fair and right that in future banks should make a more appropriate contribution, reflecting the many risks that they generate. Such an approach has already been recommended by the International Monetary Fund. We are exploring the costs and benefits of a financial activities tax on profits and remuneration, and we will work with international partners to secure agreement, but today the British Government take the initiative in this global debate about the appropriate risks and rewards in international banking.
From January 2011, we will introduce a bank levy. It will apply to the balance sheets of UK banks and building societies, and to the UK operations of banks from abroad. There will be deductions for tier 1 capital and insured retail deposits, and a lower rate for longer maturity funding. Smaller banks with liabilities below a certain level will not be liable for the levy. Once fully in place, we expect the levy to generate over £2 billion of annual revenues.
There are those who have argued whether we should wait until every country in the G20 introduces a bank levy. I believe that is not reasonable or fair. Indeed, I can tell the House that the French and Germans have joined the UK today in committing to introduce a bank balance sheet levy. In a joint statement, our three Governments have pledged to ensure our banks make a fair contribution to reflect the risks they pose.
The message I hear from those in the business community is unequivocal: they want certainty and stability from Government so that they can start the long process of rebuilding their businesses. Today, I am offering them just that—a five-year plan to reform the corporation tax system, with lower rates, simpler rules and greater certainty. It provides the most fundamental and far-reaching reform of our corporate tax regime in generations. It offers a stable and consistent platform for a private sector recovery. It is a balanced package, which will send a clear signal that Britain is open for business. It will help companies invest, attract foreign investment and boost growth. Above all, it will help create jobs. By increasing the amount of business investment by an additional £13 billion between now and 2016, these reforms will help rebalance the economy away from household debt and Government consumption.
We will also take forward our plans to create a green investment bank, bringing forward private investment in clean energy and green technologies; and we will also need investment in our digital infrastructure. But the previous Government’s landline duty is an archaic way of achieving this, hitting 30 million households who happen to have a fixed telephone line. I am happy to be able to abolish this new duty before it is even introduced. Instead, we will support private broadband investment, including to rural areas, in part with funding from the digital switchover underspend within the television licence fee.
Over the past decade, the British economy has become deeply unbalanced, and nowhere are those disparities as marked as between the different regions of Britain. Between 1998 and 2008, for every private sector job generated in the north and the midlands, 10 were created in London and the south. We need a new approach—one that empowers local leadership, generates local economic growth and promotes job creation in all parts of the country, including Wales and Scotland. We will publish a White Paper on how we intend to deal with these issues later in the summer, followed by a consultation paper on rebalancing the economy of Northern Ireland.
As a step towards rebalancing our economy, we are today announcing the support for those regions more dependent on the public sector. First, even when money is so short, we will commit to the following important regional transport projects: the upgrade of the Tyne and Wear metro; the extension of the Manchester Metrolink; the redevelopment of Birmingham New Street station; and improvements to the rail lines to Sheffield and between Liverpool and Leeds.
Secondly, we will create a large regional growth fund to provide finance for regional capital projects over the next two years. We will announce the details shortly, but priority will be given to projects that have the greatest impact on improving innovation and creating jobs.
Thirdly, we will shortly announce a new tax scheme to help create new businesses in those regions where the private sector is not nearly strong enough. For the next three years, anyone who sets up a new business outside London, the south-east and the eastern region will be exempt from up to £5,000 of employer national insurance payments for each of the first 10 employees hired. We aim to have the scheme up and running by September, but any qualifying new business set up from today will also receive help. The Treasury estimates that some 400,000 new businesses will benefit, ensuring all parts of our country contribute to a more balanced and sustainable economic future.
Let me turn now to some further decisions we have made on taxation. I am someone who believes in the virtues of lower taxation, but the only sustainable route to lower taxes is by first achieving sound public finances. The sovereign debt crisis means we need to the reduce the deficit even more quickly in order to protect our economy. The Office for Budget Responsibility has revealed the size of the structural deficit to be even larger than we feared—£12 billion larger next year.
As a result, this Budget announces a further fiscal tightening of £40 billion a year by the end of this Parliament, including welfare and spending measures, over and above the previous Government’s plans. To achieve that additional tightening while maintaining the right “four-to-one” balance between spending and taxation means that I have to announce further tax rises today.
On 4 January next year, the main rate of VAT will rise from 17.5% to 20%. [Interruption.] The years of debt and spending make this unavoidable. This single tax—[Interruption.]
The years of debt and spending made this unavoidable. This single tax measure will by the end of this Parliament generate over £13 billion a year of extra revenues. That is £13 billion that we do not have to find from extra spending cuts or income tax rises. I can also give this House a commitment that we will keep everyday essentials such as food and children’s clothing, as well as other zero-rated items like newspapers and printed books, exempt from VAT over the course of this Parliament. In line with the increase in the main rate of VAT, the higher rate of insurance premium will also rise from 17.5% to 20%, while the standard rate will increase from 5% to 6%.
Let me turn to my decisions on duties. The March Budget included substantial increases in those, and I can tell the House that my Budget includes no new increases in duties on alcohol, tobacco or fuel. We will report back in the autumn on the scope for targeting alcohol duty at the products most associated with binge drinking and under-age consumption. We will explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty, and consult on major changes. This will help us to reduce our carbon emissions. We are examining the impact of sharp fluctuations in the price of oil on the public finances to see if pump prices can be stabilised, and we will also look at whether a rebate for remote rural areas could work.
I have one final announcement on duties. We have decided to reverse the previous Government’s plans to increase the duty on cider by 10% above inflation and the reduction will come into effect at the end of this month—just in time to celebrate England’s progress to the quarter finals, or else to drown our sorrows.
That brings me to council tax. At times like this when money is short, we think all parts of government should work hard to keep costs down, and we want to give councils every incentive to do just that. So we will offer a deal to local authorities in England: if they can keep their cost increases low, then we will help them to freeze council tax for one year from next April. That will mean that the average family will be some £35 better off next year, and every year thereafter. It will be one less rising bill for families to worry about, and it will drive value for money throughout all levels of government.
One of the most chaotic areas of tax that the new Government inherited from their predecessor is the capital gains tax regime. Some of the richest people in this country have been able to pay less tax than the people who clean for them. That is not fair, and it stems from the avoidance activity that has exploited the wider gap between the rate of capital gains tax and the top rates of income tax. Those practices are costing other taxpayers more than £1 billion every year.
It is therefore right, as set out in the coalition agreement, that capital gains tax should increase in order to help create a fairer tax system. I have listened carefully to everyone’s views and considered all the options. My concern has been to balance the competing demands of fairness, simplicity and competitiveness—and I believe my decision gets that balance right. Low and middle-income savers who pay income tax at the basic rate make up over half of all capital gains taxpayers. They will continue to pay tax on their capital gains at 18%. From midnight, taxpayers on higher rates will pay 28% on their capital gains. I have also decided that the annual exempt amount for capital gains tax will remain at £10,100 this year, and will continue to rise with inflation in future years.
I am acutely aware of how important it is to protect the incentives to succeed in business and to innovate, so to promote enterprise, the 10% capital gains tax rate for entrepreneurs, which currently applies to the first £2 million of qualifying gains made over a lifetime, will be extended to the first £5 million of lifetime gains. I asked the Treasury to examine what would have happened if we had increased the rate much further beyond 28%, and its dynamic analysis showed that that would have resulted in smaller total revenues. I also considered in great detail the options presented to me for introducing tapers or indexation allowances, and concluded that the complexity and administration involved would have been self-defeating.
The changes that I have made mean that the capital gains of the majority of taxpayers are protected; that we have a top rate that is in line with those of our international competitors; that we keep the system simple and easy for any taxpayer to understand; and that we reduce the incentives to convert income to capital gains. It is revealing that the great majority of the almost £1 billion of extra receipts that we expect to see as a result of this change will come from additional income tax payments. I believe that that is the right way in which to reform the taxation of capital gains.
Let me say something about the previous Government’s policy to reduce pension tax relief for people on high incomes, due to come in next year. Many businesses are alarmed at the complexity that it will introduce. I have listened to those concerns; however, I must also protect the £3.5 billion of revenues that the policy was set to raise from high-income people. I will therefore work with industry on alternative ways of raising the same amount of revenue, potentially by reducing the annual allowance.
Let me now turn to income tax. A responsible society is one that rewards the efforts of those who choose to work. The income tax system—in particular, the abolition of the 10% rate of income tax—has meant that many people on lower incomes face higher average tax rates. I believe that it is important to lift people out of the income tax system and allow them to keep more of their hard-earned money. It is especially important to make progress in this Budget, in which we are asking so much of so many, and this demonstrates that the coalition Government put fairness first.
In the current system, everyone under the age of 65 is eligible for a tax-free personal allowance of £6,475. That means that many thousands of people have their income taken away from them in tax, only to have to apply to get it back in benefits. That does not reward work. So today I can announce that we will increase the personal allowance by £1,000 in April. People will be able to earn £7,475 before they have to start paying income tax, 23 million people who are basic-rate taxpayers will each gain by up to £170 a year, and 880,000 of the lowest-income taxpayers will be taken out of tax altogether. Higher-rate taxpayers will not benefit from the change, and the higher-rate income tax threshold will have to remain frozen until 2013-14. Our long-term objective remains to increase the personal allowance to £10,000, as set out in the coalition agreement, and we will take real steps towards achieving that objective during the rest of this Parliament.
I do not disguise from the House that the combined impact of the tax and benefit changes that we make today are tough for people. That is unavoidable, given the scale of the debts that our country faces and the catastrophe that would ensue if we failed to deal with them. My priority in putting together this Budget has been to make sure that the measures are fair: that all sections of society contribute, but that the richest pay more than the poorest, not just in terms of cash but as a proportion of income as well. That is far from straightforward when the deficit is this high, and when the burden of reduction must rightly fall on Government spending.
Too often, when countries undertake major consolidations of this kind, it is the poorest—those who had least to do with the cause of the economic misfortunes—who are hit hardest. Perhaps that is a mistake that our country has made in the past. This coalition Government will be different. We are a progressive alliance governing in the national interest, and that requires us to make two final decisions.
First, we will provide lasting help for pensioners. The earnings link was broken by the last Conservative Government, and was never restored through 13 years of a Labour Government. That meant that each year more and more pensioners were drawn into the means test, which punished those who had done the right thing and saved for their retirement. I can announce today that from April next year we will re-link the basic state pension to earnings. Now pensioners can save with confidence. They will also be protected by our new triple lock, which will guarantee each and every year a rise in the basic state pension in line with earnings or prices or a 2.5% increase, whichever is the greater. There will be no more 75p increases in the basic state pension. With this coalition Government, pensioners will have the income to live with dignity in retirement.
Secondly, we will provide additional support for families in poverty. They are among the most vulnerable people in our society, and they need our help. I have decided to increase the child element of the child tax credit by £150 above indexation next year. That is a £2 billion a year commitment to low-income families, and we make it even now, in these difficult times. I can tell the House that the policies in this Budget, taken together, will not increase measured child poverty over the next two years. Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top. It is a progressive Budget.
Today we take decisive action to deal with the debts that we inherited, and confront the greatest economic risk facing our country. We have been tough, but we have also been fair. We have set the course for a balanced budget and falling national debt by the end of this Parliament. We have insisted that four pounds of every five needed to reduce our deficit will be found from Government spending. We have protected capital investment from additional cuts, and have got to grips with the soaring costs of welfare. We have provided the foundations for economic recovery in all parts of our nation, and have given our country some of the most competitive business taxes in the world. We have taken almost a million people out of income tax and half a million people out of national insurance, and we have done all that without increasing child poverty.
Sadly, in this unavoidable Budget we have had to increase taxes. We have had to pay the bills of past irresponsibility. We have had to relearn the virtue of financial prudence. But in doing so, we have ensured that the burden is fairly shared. Today we have paid the debts of a failed past and laid the foundations for a more prosperous future. The richest paying the most and the vulnerable protected: that is our approach. Prosperity for all: that is our goal.
I commend this Budget to the House.
I now call on the Chancellor of the Exchequer to move the motion entitled “Capital Gains Tax (Rates)”. It is on that motion that the debate will take place today and on succeeding days. The questions on the remaining motions will be put at the end of the Budget debate on Monday 28 June.
Budget Resolutions and Economic Situation
Motion made, and Question proposed,
That provision may be made in relation to the rates at which capital gains tax is charged.—(Mr George Osborne.)
The Chancellor of the Exchequer has delivered his Budget. It is his first Budget, but we have seen it all before. This is a Tory Budget that will throw people out of work, will hold back economic growth—[Interruption.] Read the book! This Budget will hold back economic growth, and will harm vital public services. Yes, it is the Chancellor’s first Budget, but it is the same old Tories, hitting hardest at those who can least afford it and breaking their promises. This is true to form for the Tories, but it includes things that the Liberal Democrats have always fought against. Surely they cannot vote for this.
The Chancellor says his top priority is to cut the deficit. In order to get the deficit down, we need to keep economic growth up and we need to keep unemployment down. Today’s Budget—[Interruption.] Read the book! Today’s Budget is bad for growth, and that will make it harder to cut the deficit.
The new Office for Budget Responsibility has said in its report today that because of this Budget, growth next year will be lower than it would have been under our policies to support the economy through difficult times. It has revised growth for next year down from 2.6% to 2.3% because of the harm that the Chancellor’s Budget does. He said he was going to tell it straight, but the Chancellor has not told it straight today on jobs. Today’s Budget is bad for jobs and that, too, will make it harder to cut the deficit. The OBR forecasts on page 84 of its report that the price of the plans he has set out today in his Budget is tens of thousands of people out of work. [Interruption.] I say to hon. Members, look at the OBR report last week and compare it, on the International Labour Organisation unemployment and claimant count, with the forecast as a result of this Budget: tens of thousands more people out of work, and unemployment higher next year and every year of this Parliament. For people affected, this is a high price to pay, and it is equivalent in scale to putting every working man and woman in the city of Coventry out of work; that is the scale of the changes on jobs. And it is counter-productive. Private sector jobs will not spontaneously emerge as we see fewer people employed in public services. This Budget will hit private sector jobs as well as public sector jobs.
The reality is we do not get borrowing down by pulling the plug on support for businesses. We do not get borrowing down by throwing people out of work and on to the dole. [Interruption.] Look at the forecasts! We do not get borrowing down by stifling economic growth. This reckless Budget’s short-sighted approach will jeopardise the recovery and make the deficit worse, and when we do that, we end up with more tax rises further down the track, and it is unfair.
It is unfair on young people who need help to get work and get a decent start in life. The Government have scrapped the future jobs fund before it has even been formally evaluated, but every young person helped into work shows its value. It is unfair on the regions, whose manufacturing industries will suffer. They have cancelled the loan to Sheffield Forgemasters; they have snatched away the chance of new jobs. It is unfair on families: cuts to the value of child benefit; cuts to the disability living allowance; cuts to help for the jobless; ending the health in pregnancy grant; cutting the Sure Start maternity grant; ending free swimming; and cutting back free school meals. It is also unfair to older people, who will have to pay higher VAT and will have less money to spend in their local shops.
The Chancellor tells us that his plans are fair: that the rich will pay most. That is not true. As the Prime Minister himself said of VAT:
“it’s very regressive, it hits the poorest the hardest. It does, I absolutely promise you”,
and as the hon. Member for Bermondsey and Old Southwark (Simon Hughes) rightly pointed out last week, VAT “penalises the poor”.
It is unfair when cuts in public spending hit those people and those areas where public services and benefits matter most. The impact of the Chancellor’s changes to benefits and tax will be greatest in the poorest areas. We agree that borrowing must be brought down, but look at whom he has chosen to bear the brunt of cutting the deficit. The area most affected by his austerity policy, where people will see the biggest fall in average incomes, is Merseyside; the area least affected by his austerity policy—least affected by the fall in income—will be Cheshire. Yes, that includes his own constituency. This is not a fair Budget; it will entrench unfairness for the future.
And the VAT rise makes this a Budget of broken promises. Before the election the Prime Minister said he had no plans to put up VAT, and now, in his first Budget, he puts up VAT. During the election campaign the Liberal Democrats attacked what they called the Tory secret VAT bombshell. Little did we know that the Lib Dems had their own secret bombshell to drop on us: that they would vote for it.
The Tories present this Budget but they try to evade responsibility for it. They try to justify their broken promises, saying that things have changed—that things are worse than they realised—but what is this new information? The OBR forecasts are better than we predicted at the time of the March Budget: less borrowing than expected, and lower unemployment than expected, because of our actions.
The Government like to cite new information from abroad: the problems of Greece. Greece is in a completely different position from us: it is still in recession; it does not control its interest rates; and its debt is over 115% of its GDP. Greece is no alibi for this Tory Budget.
Nor should they pray in aid the story of Canada’s Budget cuts. Canada’s deficit reduction was taking place as Canada’s economy was boosted by strong growth in its neighbouring economy and main export market, the United States. Our export market is mainly the EU and growth there is sluggish. That is why President Obama wrote to his fellow G20 leaders this week urging them to turn away from the rush to austerity. Yes, deficits must be reduced, but we must not risk undermining the fragile global recovery. This is a Budget based on rewritten history and false excuses.
They say there is no alternative, but the truth is this is what they want. This Budget is not driven by economics; it is driven by ideology—their commitment to a smaller state. The Chancellor claims he has no alternative, but the OBR last week clearly stated that our plans would have more than halved the deficit over four years. No, this austerity Budget is their choice, and right now it is exactly the wrong choice.
This reckless Tory Budget would not be possible without the Lib Dems. The Lib Dems denounced early cuts; now they are backing them. They denounced VAT increases; now they are voting for them. How could they support everything they fought against? How could they let down everyone who voted for them? How could they let the Tories so exploit them? Do they not see that they are just a fig leaf? The Liberal Democrat Chief Secretary is just the Chancellor’s fig leaf. The Deputy Prime Minister is just the Prime Minister’s fig leaf. The Lib Dems’ leaders have sacrificed everything they ever stood for to ride in ministerial cars and to ride on the coat tails of the Tory Government. Twenty-two Liberal Democrat ministerial jobs have been bought at the cost of tens of thousands of other people’s. The Liberal Democrats used to stand up for people’s jobs, but now they only stand up for their own.
Look at the Business Secretary, the right hon. Member for Twickenham (Vince Cable). The House has noticed his remarkable transformation in the past few weeks from national treasure to Treasury poodle. They have no mandate for this Budget; this Budget has no legitimacy. Even if the Lib Dems will not speak up for jobs, we will. Even if they will not fight for fairness, we will, and even if they will not protest against Tory broken promises, we will.
We will support measures that are fair and that will help the economy. We will support the increase in capital gains tax. As the Chancellor said, it will help to stop people avoiding income tax by getting payment in capital. Such avoidance of tax is even more objectionable when we need to cut borrowing. We welcome the retention of the 50p tax rate. The Labour party was the first to call for a levy on the banks and the Government are going ahead with it. We will support that move, although I note that the banks will get a corporation tax cut to compensate them. We will support the increase in personal allowance, but the public, who will be hit by a rise in VAT, will feel short-changed.
In the face of a global economic crisis, this has been a difficult time for businesses and families, not just here but around the world. What this country needed was a Budget to support economic growth, to protect jobs and to cut the deficit fairly, but what we have got is a reckless Budget that pulls the rug out from under the economy. Predictably, the Tories do not care and are not listening. The Lib Dems are wringing their hands, and well they might, but that is not good enough. They should think about their constituents who will suffer if this Budget goes ahead. The Lib Dems should think again, but whatever they do, we will vote against it.
On a point of order, Mr Deputy Speaker. The Chancellor of the Exchequer said to us earlier that this country would hear the facts about his Budget straight from him at the Dispatch Box, but this morning his freeze of the civil list moneys was announced in The Guardian, his announcements on capital spending plans were in The Guardian and his proposals on national insurance, child tax credit and the VAT rise being delayed were all in The Guardian. Also, the precise figures about the changes to income tax—rising by £1,000 to £7,475—were in every single media outlet in this country. That is an abuse of the privilege of this House. Will Mr Speaker, or you on his behalf, refer this issue of the abuse of the privilege of the House to the Select Committee on Standards and Privileges?
It falls to me to respond just as everybody quite reasonably goes off for a bite to eat. I commiserate with the right hon. and learned Member for Camberwell and Peckham (Ms Harman) about having to respond to the Budget without a chance to absorb it, although I must say that that showed in some of the things she said. She made the best of a very weak hand, but a couple of points must be borne in mind. I shall say this as best I can without partisanship.
First, all three parties were committed at the last election to sharp cuts in spending. According to the Institute for Fiscal Studies, Labour was planning about £45 billion-worth of cuts, which, because of ring-fencing, would have had to fall on only four main areas: education, defence, transport and housing. To give people an idea of the scale, defence spending is only about £40 billion, so massive adjustments would have had to be made by Labour, but that did not seem to feature in anything the right hon. and learned Lady said.
A second point that needs to be made is that we went into the recession carrying a huge structural deficit. Again, the right hon. and learned Lady did not acknowledge that at all. That deficit developed as a result of over-ambitious spending over many years by the previous Government, particularly by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). It simply had to be tackled; it could not have been left unaddressed. It really is not correct to attribute most of the tightening we need now to the mistakes of banks, the global recession or, as she has suggested today, to coalition ideology. The overwhelming majority of people who have looked at this have concluded that we must take early action to curb the huge, burgeoning deficit.
Does my hon. Friend agree that it was a disgraceful performance by the acting leader of the Labour party to accept no responsibility for the disgraceful state of the public accounts, and to dare to say that we wanted to cut when Labour was going to have to cut?
In my new job, I am doing my best to avoid putting things in such trenchant terms, but I feel that not enough has been accepted by the Labour party about the scale of the mismanagement on the economy—requiring us to do something about it now.
This was an astonishing and phenomenal Budget—a tour de force. It really was a further addition to the early economic radicalism of the coalition Government. We have already had announcements about a complete overhaul of financial regulation and an innovative body, the Office for Budget Responsibility, has been created. We have also had announcements about vigorous action being taken on the deficit as well as major proposals for tax and benefit reform. The first of these measures is needed, among other things, to change the culture. The politics of plenty have to give way to the politics of thrift in Whitehall. That, above all, is why it is right for the Government to make the £6 billion-worth of cuts.
On the second of the measures that I have just mentioned, we must have tax reform and simplification if we are to have any chance of improving Britain’s long-run growth rate, which has been imperilled by immense complexity in the tax system.
As I recall, all three parties talked about having no plans to increase VAT, and it would not have surprised me a scrap, had the positions been reversed, if we had had an increase in VAT. How would Labour have filled the £45 billion deficit? We have not heard a word on that. That brings me to a point that I had decided, on the grounds of non-partisanship, not to make, but that I now think needs to be made. It was irresponsible and damaging to British democracy not to have had a spending review on which to judge the decisions to be taken. In my current job, if I were to find the coalition Government as evasive as that, I would do everything in my power to call them to account and to make sure that they told us the facts.
I congratulate the hon. Gentleman on his election as Chair of the Treasury Committee. Does he accept that the rise in VAT that the Chancellor announced today will have a huge impact on small companies in the construction industry in my constituency that are looking for business building extensions to houses and so on? They will have to pass the rise on to those individuals, so the rise will slow down growth in that sector and will cause further job losses.
I thank my hon. Friend for reminding me about that, as I had completely forgotten it. The whole House has heard the point he made.
The central judgment in the Budget is about the scale and speed of the fiscal adjustment. Whatever the Chancellor does, there are risks. If he shows lack of resolve on the deficit, the Greek experience beckons, as markets lose confidence in our ability to service our debts. The Chancellor was right to emphasise sovereign debt risk in his speech. That is not a fanciful risk, but a clear and present danger for Britain and he was right to flag it up. If we show too much zeal, too early, on the deficit, some people fear that the Japanese experience awaits us—being caught in a heavily indebted deflationary trap.
I voted for the hon. Gentleman to hold his new position and even told his opponent that I had done so, but I am deeply concerned that today he is making the same mistake as the Chancellor. He said that the greatest problem facing economies is sovereign debt, when in fact analysis shows that it is bank indebtedness. Greece has a sovereign debt problem, but other countries of Europe have a problem with bank debt. That is the problem, so we are looking at the wrong target.
I agree that both are extremely important. I do not think I said that the greatest threat is necessarily sovereign debt, although Hansard will show whether I did. I said that I agreed with the Chancellor that it was an extremely grave risk. That is supported by the overwhelming majority of commentators—the International Monetary Fund, the OECD and a large number of independent commentators.
From the remarks made by the Leader of the Opposition, I presume that she is more fearful of the recovery being snuffed out by further tightening than of the risk of a downgrade in the bond markets. I shall not form an instant judgment now. I shall want my Committee to take a look at the situation and report to the House. None the less I noted a couple of relevant points. With the benefit of hindsight—looking historically—most fiscal retrenchments in this country have erred on the side of too little, too late, rather than too much, too soon.
My other general comment is that although the Japanese parallel is well worth examining, it should be borne in mind that the Japanese banking system was in a shocking state even by comparison with ours, and it has remained in grave difficulties. The revival of our banking system is crucial if we are to have sustained recovery. In some degree, that answers the point made by the hon. Member for Linlithgow and East Falkirk (Michael Connarty), and agrees with it.
Whether the Chancellor’s judgment turns out to be right or wrong, there are a couple of points on which I should like to hear more from him over the coming days and weeks. First, although he must be resolute in his judgment his policy framework could, and I think should, signal that if the facts change, he will change his mind—he hinted at that in his speech. The global economic situation is fluid and fragile, so if we were to find ourselves in another global downturn, possibly triggered by global fiscal contraction, we need to know that he would deploy whatever tools were required to avoid deflation. There must be some risk of that. It is not just a matter of Governments around the world, and particularly in Europe, beginning to address their deficits after their bail-outs. The banking system, too, will remain under strain. Banks will be subjected to a levy and will be required to secure major increases in capital and liquid assets, both of which will reduce lending. On top of that, there is the risk that household saving might sharply increase at the expense of consumption.
However, looking at things from an international perspective, I am heartened by the global growth forecasts of the IMF, which suggest that global growth for the next two years will be running in excess of 4%. I have not yet had a chance to see what the Office for Budget Responsibility has written in, but I suspect it will probably be in line, which would appear to buttress the Chancellor’s judgment that the cuts are sustainable.
My second question to the Chancellor relates to the first: what is the overall macro-economic framework for the Budget judgment? I should like more information about that. In previous squeezes on fiscal policy, it has been reasonable to argue that tight policy has created room for a compensating looser monetary policy through short-term interest rates. This time, however, interest rates are already very low, so the only offset comes in long-term bond rates. Interestingly, the OBR has already published a second estimate for gross debt interest, which takes account of the tighter fiscal policy that has just been announced. On its forecast, the figures show a reduction in central Government gross debt interest of £7 billion over the planning period, so there is a long-term bond yield dividend to be had from the tighter fiscal policy.
In any case, the Chancellor may have spelt out his macro-economic framework in more detail in the Red Book. None of us has yet had a chance to read it, although some people may be taking that opportunity while I am speaking. It would be worth hearing more about the policy framework, because it must leave the Chancellor with enough room to alter course if circumstances change, otherwise credibility could collapse in the face of unforeseen events. The one thing I can predict is that there will be quite a few of those.
Whatever else people conclude about the Budget, it is fair to say that it shows extraordinary political courage by the Chancellor and by the coalition Government. There will be rumblings in the undergrowth in both coalition parties. The vested interest groups will cause enormous trouble, just as they would have done if a Labour Government had been implementing their cuts. It will take sustained resolution by the Prime Minister, his Deputy and the Chancellor to stick to their course. The relationship between No. 10 and No. 11 will be absolutely crucial in the months ahead.
I have concentrated on the deficit and the macro-economic framework, but the Budget will be judged on more than just accountancy. There are a number of other important issues. Does the Budget pave the way for providing better economic performance in the long run? Does it adequately protect the poorest and the most vulnerable in our society? I hope the Treasury Committee will look at that issue. Does it take enough account of both regional and structural imbalances in the economy? What role will Britain play in addressing the large global imbalances that still remain? Those are some of the questions that I very much hope my colleagues on the Treasury Committee will agree should be looked at in the months and years ahead.
I look forward to the formation of the Committee, the first-ever Treasury Committee that will benefit from a democratic mandate. Our task now is to get on with the job. I am open to suggestions from both sides of the House about what exactly we should look at; indeed I am already being inundated with proposals and suggestions, so we shall need to prioritise. Of course, I shall await the views of my Committee colleagues, but it would surprise no one—certainly not me—if we concluded that the central fiscal judgment of the Budget, and both the structure and early output of the new Office for Budget Responsibility, should be high on our agenda.
Today, let us spare a thought for the Liberal Democrats. In April, the great cause célèbre—the only amendment they fought for in Labour’s Budget—was deferring the rise in the rate of duty on cider until June. Today, they achieved that ambition; duty was reduced from 10% to just 2%. In April, Liberal Democrat spokespeople loudly claimed to have stopped the wicked Labour Government from raising a few million pounds from west country cider farmers. Today, they sit, quisling apologists, for a Budget containing the most savage cuts and devastating tax increases in a generation.
On 8 April, the Deputy Prime Minister accused the Conservatives of wanting to raise VAT to plug a black hole in their financial plans. He boasted:
“We will not have to raise VAT to deliver to our promises. The Conservatives will. Let me repeat that: our plans do not require a rise in VAT”.
No wonder that, when the Prime Minister was asked during the election campaign for his favourite political joke, he replied in just two words: “Nick Clegg.” The Liberal Democrats have now delivered the tax bombshell for their Conservative masters, precisely targeted at the poor, who spend a far greater proportion of their income on VAT-able items.
I should be very happy to look at the pages of the Red Book in due course, but if the hon. Gentleman wants to challenge the fact, which I have just stated, that the poor spend a greater proportion of their incomes on VATable items, I am sure that he will find not only that he is wrong, but that he is out of sync with other Liberal Democrats—his leader, in fact, and his deputy leader—who have said exactly the same as I have. No wonder that the Liberal leader had to write to his MPs today to insist that he had not sold out on his party’s promise to protect those who are on average incomes.
I simply refer those hon. Members to “Liberal Democrat Voice”, published on 8 April, in which the Liberal leader said:
“So if you’re on an ordinary income, you have a choice. If you want your taxes to rise: vote Labour or Conservative. If you want your taxes to fall: choose the Liberal Democrats.”
The smugness is breathtaking, but nowhere near as breathtaking as the G-forces exerted by the speed of the U-turn that he has performed. His talk of progressive cuts certainly did not go down well in Sheffield, Hallam, where the axing of the Labour Government’s £80 million loan to Sheffield Forgemasters has denied his constituency of the manufacturing future and new jobs that local people so badly wanted and that he once said that he believed in.
As the Social Liberal Forum reminded the Deputy Prime Minister in an open letter last week:
“The Liberal Democrats did not sign up to the Conservative formula of cutting £4 for every £1 raised in additional revenue and it would be impossible to pursue such a policy without adversely hurting the most vulnerable in society. With this in mind, it seems incomprehensible that we could be contemplating a rise in VAT at this stage. As the Liberal Democrats pointed out before the election, a VAT rise to 20% would cost every person in the country an average of £389, disproportionately hurting the least well-off who would be least able to afford it.”
That is Liberal Democrats talking. Frankly, we expect the Conservative party to attack the poorest in society. It was rather refreshing to be told a week last Thursday, by the Under-Secretary of State for Communities and Local Government, the hon. Member for Bromley and Chislehurst (Robert Neill), that
“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 450.]
At least he got it right.
It is unfortunate that the Deputy Prime Minister is not listening to the comments about Sheffield Forgemasters, and I assume that he was not listening to the Prime Minister’s remarks yesterday, when he made disparaging comments about the shareholders of Sheffield Forgemasters and the financial engineering associated with the deal, which has been through the most robust critique by the Treasury. Does my hon. Friend agree that, when the Deputy Prime Minister returns to Sheffield, it would be appropriate for him to apologise on behalf of the Prime Minister for those comments?
I entirely endorse my hon. Friend’s remarks. The only thing that I find more smug than the comments that have been made was the fact that, during the entirety of oral questions to the Deputy Prime Minister, he refused to answer any of the questions that he would have found difficult to answer. One wonders why they are called oral questions to the Deputy Prime Minister if he is not going to bother to answer them.
How does my hon. Friend feel that the Budget will impact on the poorest of his constituents in Brent? The impact will be felt by the poorest people across the country, but does he agree that, with this Budget, we have finally seen the Liberal Democrats for what they are: the real wolves in sheep’s clothing?
My hon. Friend is absolutely right. It is very clear that the Liberal Democrats vary not just what they say from doorstep to doorstep, but what they say before the election from what they do after the election, and many of us have bitter experience of that.
Today, it was interesting to hear the Chancellor say that council taxes will be frozen. I thought to myself, “Yes, I’ve heard that mantra before.” My hon. Friend prompts me. That is exactly what the Liberal Democrats promised in the run-up to the 2006 local elections in Brent. Strangely, after that local election, they went into a coalition with the Conservatives, who had promised not just a freeze on council tax but a reduction in council tax. When they got into power, what did they do? They raised council tax for three years in a row.
Moreover, before the election, the Minister of State, Department for Education, the hon. Member for Brent Central (Sarah Teather), was photographed with the elderly—I have a copy of it here—and appeared on a leaflet that said, “Free Personal Care for the elderly say Lib Dems”, but when they got into office on Brent council, they raised the personal care charges from £5 an hour to £16.50 an hour.
When the Chancellor talked today about how the Government would freeze council tax, I thought, “Yes, I know how they will manage to do that.” All the charges that councils make people, such as elderly residents in Brent, pay will be bumped up. The increase will be imposed not on council tax, but on those who have the very least ability to pay—the most vulnerable people in our community.
Last week, I was invited to the Brent Teachers Association meeting to debate the future of education in the borough with the Minister of State, Department for Education, the hon. Member for Brent Central. As she had promised in her election literature an extra £2.5 billion towards education and smaller class sizes, but subsequently approved a £1.88 million cut to the borough’s education area-based grant, I was looking forward to that debate. However, I understand that, half an hour before the start of it, her office phoned to indicate that she was indisposed and could not attend. If I had been in her position, I would have been indisposed and unable to attend, too. To cut one’s education department in the borough, having promised such a vast increase in the education spending, is typical of how the Liberal Democrats have proceeded around the country, and we now see that what they do in national government is absolutely no different. The disillusion of those who believed the Liberal Democrat promises before the election can be only further deepened by the Budget statement that they have heard today.
I thank the hon. Gentleman for rethinking and giving way. I am listening to what he is saying with great care, but I wonder whether he is going to tell us—I am yet to hear about this from any Labour politician—where he would like any of the £44 billion of cuts that the Labour Government decided were required to fall.
The hon. Lady has been a Member for a number of years. She will remember the answer that she and her colleagues gave when they sat on the Opposition Benches and Labour Members asked them exactly that sort of question: “You’re in government. It is you who provide the answers and we who ask the questions.”
People were told, “Vote blue, go green.” Vote blue, go green? Go green with frustration? Go green with fury? Where was that—did I miss it? Was there anything in the Budget about going green? I heard a mention of an investigation into whether there should be a per-passenger or per-plane duty, but that hardly constitutes vote blue, go green. There are many things that a really progressive Government could be doing to improve the way in which the environment is treated in this country.
The hon. Gentleman is absolutely right that there are a great many such things—fairness in transmission charges to the grid, for example, and access to the fossil fuel levy—so perhaps he will explain why, over 13 years, his party did not do them either.
I am happy to give an answer to the hon. Gentleman. We introduced the first legislation on climate change anywhere in the world. We put in place carbon budgets and feed-in tariffs. We ensured that we set a reduction target for 2050 of not just 50% but at least 80%, with interim budgets that can be examined every year, so that Parliament can hold the Government to account. The Labour Government achieved substantial things on the environment, but I agree with the hon. Gentleman that we did not do enough. I often spoke from the Government Benches to ask my own Ministers to go further. In addition, the system of renewables obligation certificates is a good deal more generous in Scotland than in England. However, does the Budget address the environment? Not one whit; we heard only a mention of an investigation into duty for planes rather than passengers.
If the hon. Gentleman reads page 57 of the Red Book, he will see that it states:
“Legislation will be in the Finance Bill introduced in the autumn for an enhanced capital allowance for zero-carbon goods vehicles.”
If that is not a green element, I do not know what is.
The hon. Lady is new to the House and might not have had the opportunity to read earlier Red Books. The previous Government were also doing quite a bit on zero-carbon vehicles.
The Budget is a dreadful missed opportunity. It should have ensured that we can resolve the problems with our public finances and pull the country through the recession. It should have achieved that in a staged and phased way. The Government tried to paint a dichotomy between those who appreciated that this had to be done—that this was the inevitable Budget—and, as they put it, those on the other side who said, “No, no. Hold back.” However, it was never like that. Labour Members said that this must be done, but more progressively and slowly. We said that we must not jeopardise the recovery now by taking a macho posture that goes too far, that chokes off recovery and that will ultimately be self-defeating.
I am about to conclude my remarks.
If the Opposition’s policies had been followed, we could have pulled the country through the recession and reduced the structural deficit to half its present level, as has been shown by today’s predictions and forecasts. However, the Government have decided to go for machismo over prudence—they will pay the price for it.
The Labour party’s synthetic anger, and the rather pompous and patronising show that we have just seen, are perhaps a reflection of Labour Members’ inability to accept their share of responsibility for the mess that the country is in. The party is in total denial. It is leaderless and rudderless, and it has not even had the courtesy to apologise to the British people for what it did. Perhaps Labour Members are also reflecting on the things that they could have done over 13 years but never got round to, such as restoring the earnings link for pensions, introducing a bank levy and raising the tax threshold. I do not think that Labour Members will find those on these Benches receptive to a party that has shown no leadership, no responsibility and no ideas, and that does not know where it is going.
We should be grateful that my right hon. Friend the Chancellor has set out a Budget that has ideally balanced the need to deliver tough control over our finances with a fair approach that, as the Red Book shows, will mean that in tax terms 80% of people will be better off under the Budget, while the richest 20% bear the greatest share of the burden. That is a proper expression of a progressive Budget.
The right hon. Gentleman talks about balance and fairness. Will he comment on the balance between £11 billion of welfare cuts and less than £2 billion from the bankers, which is offset by the decrease in corporation tax? Will he also comment on the fairness and balance of setting an average of £35 per household from council tax against taking an extra £12 billion in VAT, which will hit the poor hardest?
I am sorry but that intervention also shows no recognition of the fact that we have to find the money from somewhere. Our approach to that gives the poorest the most and makes the richest pay the biggest contribution. I cannot think of anything more progressive than that, and the more the hon. Gentleman and others consider the Budget, the more they will recognise that it stands up to robust analysis.
I had the honour of being my party’s Treasury spokesman between 1995 and 2000. During the 1997 election, the Liberal Democrat manifesto included an aspiration to raise the threshold at which people started to pay income tax to £10,000. That was only an aspiration because, try as we might, we were unable to find the resources at that time to pay for it. However, when the Labour Government were elected in 1997, the first thing that they did was to introduce the most generous capital gains tax relief that the richest people in this country had ever enjoyed—Mrs Thatcher never contemplated it! However, closing such tax loopholes has enabled us to start to deliver the increase in the tax threshold so that people will not have to pay tax and then apply for benefit, as the Chancellor said. I for one am absolutely delighted to support a Budget that fulfils a commitment set out in an aspiration on which I fought the 1997 election.
The hon. Member for Brent North (Barry Gardiner) suggests that Liberal Democrats should be ashamed of the Budget, but far from it. There is much in the Budget of which to be proud, and I make it clear to right hon. and hon. Friends in the Conservative party that it is not a Conservative Budget or a Liberal Democrat Budget, but a coalition Budget. I would argue that it draws on the best on both parties. Those parties command the support of the majority of the British people, and the Budget’s approach will deliver benefits to the majority of the British people. I said in the election campaign, when I became aware of the seriousness of the financial situation facing the country, that the position would be much better after the election if cuts that had to be made were implemented by more than one party, as they would be forced to engage with each other and find a balance that would be more acceptable than measures adopted by one party running for a sectional interest that did not have the same strength of appeal. I honestly believe that the coalition has found a dynamic that has delivered something that is greater than the sum of its parts: a Budget that is genuinely progressive.
Does my right hon. Friend agree that another part of this package is fundamental? The discussion about the cuts and savings in public expenditure will take place with the public, the trade unions, business, communities and local government, so that decisions are not only informed by the prejudices of civil servants and Ministers but are made as a result of the widest consultation with the British public to make sure that although, yes, they may be tough, they will be absolutely fair.
I am grateful to my hon. Friend. Opposition Members and the wider audience looking at the Budget should examine it in detail and recognise the extent to which it is based on a much broader consensus and approach to consultation, while being radical across the piece and balanced. That is not easy to achieve, and I am prepared to admit that I had my doubts about whether the Chancellor of the Exchequer would be able to achieve it. I am pleasantly surprised by the extent to which he has been able to do so.
Indeed, there is little in the Budget to which I can fundamentally take exception. It is absolutely true that an increase in VAT is a painful decision—there is no question about that. It is difficult to understand how the Opposition could balance their books without any such tax increases. Although our proposals in the self-contained Liberal Democrat budget did not require an increase in VAT, we always said that if the financial situation required it, we would not rule it out. We never did rule it out, so those attacks that suggest that somehow this is a betrayal are not true. There was careful and guarded explanation of that position.
I am grateful, because I have not had time to look at the Red Book, only at one or two selected items. The health budget overall is protected. As the Chair of the Select Committee on International Development, I am delighted that the coalition is committed not only to protecting the aid and development budget but, over the coalition period, to delivering our promise of 0.7% of our gross domestic product in overseas aid spending.
Even in these difficult times, we can protect key areas, and the Chancellor demonstrated his recognition of the vulnerability of education and his desire to make sure that it received a degree of protection. I have been involved in working up a policy on the future of Royal Mail and the Post Office. I do not know how many times most hon. Members have debated the closure of post offices and problems in the Royal Mail. We all recognise that what we have at the moment is not fit for purpose, and has to be radically reformed and changed. I can honestly say that the Liberal Democrats have made a big contribution to producing a proposal that brings capital into Royal Mail, will help to support the post office network, and will enable Royal Mail employees to take a share in the business in which they are engaged in a way that makes it a much more co-operative venture. That is something that we have brought to the coalition, and I am delighted that it has been accepted.