Debate resumed (Order, 24 March).
Question again proposed,
(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation,
(b) for refunding an amount of tax,
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
It is a great pleasure to resume the debate on the Budget.
Since 1997, year on year, families have waited for that dreaded envelope: the council tax bill. Every year under Labour, it grew, eventually doubling in size, but this year something is different. As the bill hits the doormat, families and pensioners throughout England will find that it has not gone through the roof. It will save families up to £72 on a band D home, because the coalition Government are on the side of ordinary working people. I commend those councils—every single one of them—that have taken up the Government’s offer to give their residents a much-needed break, but I am very disappointed that the Opposition have opposed the measure.
In the Commons, the shadow Local Government Minister, the hon. Member for Derby North (Chris Williamson), called the measure a “gimmick”. His Lords counterpart last week also opposed it, alleging that the
“freeze builds up financial trouble for the future.”
Surely that cannot be the Labour party’s position, because it is not what Labour councils are saying on the ground.
I have a selection of quotations, and I will read out just three that will help. Sandwell’s local authority states:
“The council is very aware of the difficult times local people face, and we don’t want to add to their misery”.
On the freeze, it states:
“It would be barmy not to do so.”
Manchester city council, a local authority that we have heard a lot of recently, states:
“We recognise it has been a very difficult year for some people, and as the UK comes out of recession it is critical we offer all the support we can to Manchester residents… it is great news…that this year we will freeze council tax”.
Bolsover council states that
“we have taken this step to freeze our share of the Council Tax because we do not feel it is fair that these are passed onto you”.
I do not recall the right hon. Gentleman freezing the council tax during his time in government, but let us hear from him.
I am sure the right hon. Gentleman will recall, because he has followed local government matters, that the London borough of Greenwich, the authority in the area I am proud to represent, has frozen its council tax for six of the past 10 years—under a Labour Government for five of those six years. Has he forgotten that? Is he not aware of what councils were doing long before he took up his current position?
I suppose if a council sits on £130 million of reserves, that is an easy thing to do, but let him recall Hammersmith and Fulham, which, after years of considerable increases, managed not only to freeze the council tax but to cut it in each successive year.
I regret that the Labour party says one thing in the Chamber and another thing to the voters. I am proud to say that we are able to set aside—
In a moment.
I am proud to say that we are able to set aside £3 billion to support councils with a freeze on spending, and that is despite the mess that the Labour Government made of our nation’s finances. It sounds as though some on the Opposition Benches would like to wash away the past few years and drown out their bitter legacy: record national debt; unsustainable public spending; and a crushing burden on ordinary families.
The Opposition do not like to admit that their Labour Government planned spending cuts of £44 billion by 2015. Labour’s cuts were to be front-loaded cuts, with £14 billion of cuts falling this April, and Labour’s spending plans would have made bigger cuts to housing, regeneration and local government.
On Saturday, the Leader of the Opposition should have told the crowds the extent of Labour’s cuts. That would have been much more convincing, as hon. Friends have said, than comparing himself to Martin Luther King or, more bizarrely, to Emily Pankhurst.
In a moment. I am sure that my hon. Friend would like to hear this point.
Perhaps that omission prompted the right hon. and learned Member for Camberwell and Peckham (Ms Harman) to say today on “The Daily Politics” that a Labour Government would have employed fewer people in the public sector. I have obtained a transcript of the interview, and the interviewer said:
“Some of the people on that march, some of those people listening to Ed Miliband, would have lost their jobs under a Labour Government. Yes or no?”
The right hon. and learned Lady was wise enough not to give a yes or no answer, and said:
“Well, I think that basically we would see, err yes, fewer people employed in the public sector.”
[Hon. Members: “Ah!”] Yes. I think “err yes” neatly covers the point.
Certainly not to Martin Luther King.
Let us be clear: Communities and Local Government was the unprotected Department under Labour’s plans. Unprotected Departments would have received a larger average real-terms cut over four years under Labour than they are under the coalition’s deficit reduction plans over the spending period.
Thanks to the £18 billion of savings from our welfare reform programme and the £3 billion of savings from lower debt interest, the coalition is cutting £2 billion less from departmental budgets than the Labour party would have. Labour would have cut local government more, and, without the support for a council tax freeze, the end result would have been soaring council tax.
Will the Secretary of State consider monitoring what happens to charges where local authorities have imposed the council tax freeze? We have had a council tax freeze in Scotland for four years now, and a 90-year-old constituent of mine has just received a charge for garden aid. It was nil under a Labour council, it became £75 and it is now £200, so she is not that impressed by the council tax freeze.
That is great news on the council tax—fantastic. Will my right hon. Friend confirm that, every year of this Parliament, total spending goes up in cash terms, so, if the public sector can control costs and inflation, the situation need not be nearly as bad as the Opposition say?
My right hon. Friend, as always in these matters, is absolutely correct. There is sometimes a fallacy, which the Opposition assume, that a pound cut in grant means a pound cut in services, but there are clearly better ways of doing such things.
Last June’s emergency Budget started a rescue mission. It preserved the UK’s triple A rating and helped to keep interest rates stable. This Budget shows that we are moving from rescue to far-reaching reform. It is a Budget for a strong and stable economy, marking our progress towards eliminating the structural deficit. It is a Budget for growth, rebalancing the economy away from over-reliance on the public sector towards long-term, sustainable growth based on export and investments. This is a Budget for fairness, lightening the burden on some 23 million taxpayers by lifting the personal income tax allowance.
In the past, there may have been an impression that the people in Whitehall who were responsible for the economy sat in the Treasury or in the Department for Business. Today, every part of Government has a role to play in helping to keep business thriving. I am proud of my Department’s reputation as one of the most deregulating Departments in Whitehall. The Communities Department is central to economic activity, and were it not for the cost of sign writers and stationery, I would rename it the Department for Communities, Growth and Local Government. Over the course of the past 10 months, we have cut the red tape on councils; called time on the Audit Commission’s clipboard inspectors; unravelled Labour’s home information packs; scuppered Labour’s ports tax; scrapped the Whitehall density targets for housing, which encouraged garden grabbing and a glut of flats; and binned the planning rules that encouraged councils to hike up parking charges in town centres. Today, we are going further still to create the conditions for growth.
The Secretary of State talked about rebalancing the economy. One of the most shocking statistics that the Chancellor quoted in his address was that in the west midlands, during a time of growth, we saw a 3% decline in private sector jobs growth. In areas such as the black country, it is absolutely essential that we deregulate and find as many opportunities as possible to drive entrepreneurship, small business and economic growth.
My hon. Friend makes a very reasonable point. Part of the problem is that we are now having to rebalance the economy.
Last week’s Budget was driven by an absolute certainty held by Conservative Members—that Governments can print money but only businesses can make money. We do not succeed as an economy by giving bean counters the whip hand over wealth creators. Governments need to listen to entrepreneurs about how to unlock growth.
I do not want to be terribly unpleasant about the regional development agencies, but perhaps I should on just this one occasion. They were fantastic at passing public grants from one part of the public sector to another, but very poor at creating private sector jobs and sustainable growth. After a decade of regional development agencies—my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) gave figures for the midlands—the public sector still accounts for more than a quarter of jobs in the north-east, compared with less than a fifth in the south-east of England, and the number of private sector jobs grew half as fast in the north-east as the national average between 2003 and 2008.
The Secretary of State said that we should have fewer bean counters and more wealth creators. Would not a few bean counters not have come amiss under the previous Government, who spent £135,000 on luxury Parisian sofas for the Department, partly under the stewardship of the right hon. Member for Don Valley (Caroline Flint)?
Is not the key difference that instead of quangos such as the RDAs running amok across the country doing nothing, we will see enterprise zones and pro-business, pro-growth planning policies that will get the country going again properly?
My hon. Friend is absolutely correct—so much so that I am delighted to tell him that I will refer to that in a few moments.
The regional bureaucratic approach is not only costly but does not do the job it is supposed to do. Instead, we want to see business men and business women playing a leading role in the debate about their local economy, helping all parts of the country to live up to their full economic potential.
More than 90% of people in England now live in areas with local enterprise partnerships. These partnerships are a new approach to economic development, putting local councils, local communities and local business in the driving seat. The partnerships established so far have already set out plans that are high on ambition and low on bureaucracy—plans to attract investment, boost tourism and strengthen transport links. Local enterprise partnerships are going for growth, not handing out grants. The 21 new enterprise zones are an opportunity for leading partnerships to take their work to a new level. In exchange, we will let them keep all business rate growth in their zones for at least 25 years.
Businesses in the enterprise zones will benefit from a discount of up to 100% on rates and access to superfast broadband. We will work closely with local partners to make sure that the zones do not simply displace jobs and business. For example, the Boots campus in Nottingham will be a centre for science and medical research and innovation, the Manchester airport zone will be ideally placed to make the most of the local science and engineering expertise and international transport links, and Liverpool Waters will keep up the momentum of economic growth in that resurgent English city.
It is not just enterprise zones that are being helped: the Budget extends the doubling of small business rate relief for a second year. This will help small firms and small shops across the country, given that business rates are the third biggest outgoing for firms after staff and rents.
It is very important to understand that the enterprise zones will be allotted on the basis of innovation and ideas, not on the basis of Buggins’ turn. Having seen some of the industry leaders in the Coventry area, I am confident that their innovation and skills will make them a high priority in obtaining these zones; after all, Coventry and Warwickshire is one of the leading local enterprise partnerships in the country.
The right hon. Gentleman will know that several new towns still have areas of land that are, in essence, controlled by Government. Would he be willing to put some of those land holdings into the pot if local enterprise partnerships come up with schemes to promote growth in their areas?
The right hon. Gentleman mentioned three cities having local enterprise zones, but he did not mention Bristol, although that was one of the 12 listed in the Budget. It is somewhat surprising that the Secretary of State for Business, Innovation and Skills was in Bristol on Friday but did not, as far as I am aware, tell us where the local enterprise zone is going to be. Can the right hon. Gentleman enlighten me?
There is confusion in the north-east because what the Chancellor said in his speech about enterprise zones—that there will be one in Tyneside—was not the same as what the Budget documents said: namely, there will be one in the north-east. There is an enterprise zone on Teesside, but the geography of the other one in the north-east is not clear. Does the Secretary of State have any insight on that?
There is one in Teesside and an additional one within the northern area. In truth, it is up to the local enterprise partnerships to put the thing together. [Interruption.] The hon. Lady wants to control everything from here, but I have to say that she was not very successful in doing so. What is wrong with an approach in which rather than us down here in Whitehall telling the people of the north-east what to do, the people of the north-east tell us how they will do things?
We are taking measures to help get the house building industry firing on all cylinders. Every new home supports four jobs in house building and two more in related industries. The availability of new homes helps people move around the country for work. Getting the housing industry moving again is key to restoring growth. Under the new Government, house building starts are up 23% and construction orders for new private housing are up 50% compared with Labour’s last year. But we need to go much further. There are about 200,000 granted planning permissions out there in the country, but the homes are not being built.
The answer is not targets; it is addressing the root causes. First, there is a tight mortgage market, so we will introduce a new form of support that will help first-time buyers get a foot on the ladder: a 20% equity loan, co-funded by Government and developers. That will put ownership within the grasp of 10,000 first-time buyers. We will reform the stamp duty land tax rules on bulk purchases of new homes to boost equity investment. We will help to reduce the sector’s reliance on mortgage funding.
Secondly, there is the problem that elements of the planning system are holding up the building of new homes. Let us go back to the 200,000 granted planning permissions. It is fair for councils to agree a contribution to the area where developers are planning to build to ensure that the development is sustainable, perhaps by providing a new park or playground, or by paying for road widening. However, what looked like a reasonable request three or four years ago may no longer look quite so reasonable if it stops necessary development happening altogether. If those commitments make it simply too expensive to build, we need to be realistic. Councils should not compromise on the essentials to make a development acceptable to the local area, but unrealistic agreements negotiated in the boom times should be reviewed to help new developments move forward quickly.
I am grateful that the Secretary of State mentioned Liverpool, but what is happening with Liverpool Waters is nothing to do with his Government. I read a statement that said, “Pickles was always happy and obedient, and would often roll over and have his tummy tickled.” Although the statement was about the dog called Pickles who found the World cup in 1966, does it not describe exactly what he did when negotiating his Department’s budget?
One of the big issues in many former mining constituencies is that a large proportion of people live in their own homes, but there is no work in the area any more. People do not want to make the decision to move to a place where there is work, but where they cannot afford the price of homes. How does the Secretary of State propose to get round that vicious circle, in which many people in my constituency and in the constituencies of many Opposition Members are stuck?
Has the Secretary of State had discussions with the Department for Work and Pensions on the reforms to housing benefit, under which it will become impossible for someone who is under-occupying their house to get full housing benefit for that house? He talks about building new homes, but what proportion of them will be one-bedroom homes, because a large number of people who will be looking for property under the new housing benefit rules will be looking for such homes?
The hon. Lady will be aware that we have abolished the density targets, which led to a glut of flats. We will ensure that the market decides a reasonable mix. That seems to be a more sensible and reasonable way of going about the process.
For too long, the planning system has been a source of friction between councils, communities and businesses.
In a moment. The purpose of the planning system is to ensure that the country benefits from the right kind of development—not to frustrate and delay, and generate endless paperwork. The Budget therefore confirms fundamental changes. By the end of the year, we aim to condense the morass of unwieldy national planning policies into one concise, easy-to-use document.
At the heart of our approach to planning is a presumption in favour of sustainable development. We need a system that consistently and predictably says yes to the right kinds of development. We will consult on plans to streamline the information required to support planning applications. We will introduce a planning guarantee so that no planning application will spend more than 12 months with decision makers, when a timely appeal is made. We will consult on proposals to bring empty commercial buildings back into use as residential properties. Let us cut the red tape and make it easier to turn run-down old eyesores into much-needed new housing. At the same time, we will maintain protection for the environment, including by safeguarding the green belt, which was under threat from Labour’s regional plans.
Will my right hon. Friend confirm that the third and sixth paragraphs of chapter 4 of the coalition’s programme for Government on communities and local government will form part of the planning legislation? I believe that they will, but I would like that to be put on the record.
I ask the Secretary of State to look at paragraph 2.12 of “The Plan for Growth”, which states that where an authority does not have a development plan or where such a plan is not up to date, there will be a presumption that an application “will be accepted”. That sentence does not mention sustainability, but just that such applications will be accepted. Does that mean that where there is an up-to-date plan, a developer will have less chance of getting an application through than in an authority without a current local development framework that is still operating on a unitary development plan? In other words, will there be a two-tier and differential planning system in this country, which we have never had before?
The local plan will have to reflect the presumption as well. It will be reflected in the national planning framework, which in turn will be reflected in the local plan. If a plan is ambiguous or out of date, that presumption will take effect, but there might be an existing plan that conforms to the presumption in favour of sustainable development. Members will now understand why planning is such fun.
Our planning reforms, like the new roles for local councils and entrepreneurs, are there to drive growth, just like the council tax freeze for hard-working families. They show that localism and economic growth go hand in hand. Those who think that the key to getting Britain growing again is for Whitehall to seize control should learn the lesson of history, which is that it repeats itself because no one was listening the first time round.
Let us compare two years, 1924 and 2009. There are many parallels. In 1924, Lenin is dead and Stalin is planning to take absolute power; John Logie Baird is demonstrating a prototype of his latest invention, the televisor; in New York, theatre audiences are getting their first sight of a dance called the Charlton—[Hon. Members: “Charleston!”] Charleston. I do beg your pardon. Also, house building in the UK reaches an all-time low.
In 2009, pleasingly, Lenin is still dead and the Soviet Union is no more; multi-channel TV is available in most homes; and “Strictly Come Dancing” becomes almost compulsory viewing. What is Labour’s contribution to this wave of nostalgia for the roaring twenties? A dance revival such as bringing back the Black Bottom? Introducing a flapper to speak from the Dispatch Box? No, a record fall in the number of new builds. The Labour party rails against the system and the machine, ups its target and achieves absolutely nothing. That is what central control brought us—growth constraint, innovations stifled and an economy needlessly held back. This is a positive Budget, a Budget for stability, balanced growth and above all fairness, and I commend it to the House.
I begin by saying that the violence of a handful of anarchists and attention seekers at the weekend was an absolute disgrace, and I hope that prosecutions will follow. However, I have to add that none of their yobbish and illegal behaviour could detract from the biggest demonstration of British feeling for eight years. People wanted to tell the Government that their cuts are going too far and too fast, and that their lack of plans for jobs and growth just make the pain worse.
I will shortly, but I want to make a little progress.
What the Secretary of State’s rhetoric today has revealed is that the Government have no plans for jobs or growth and no plans for the future. If he wants to talk about the economy that they inherited, let me tell him a thing or two about the legacy that we left. They inherited an economy in which growth had returned, inflation was low, unemployment was falling and borrowing was lower than forecast. I am proud to say that Labour increased funding for local authorities, built or refurbished 4,000 schools and 100 new hospitals and left the nation’s public housing stock in better shape than it had been in during our lifetime. If the Secretary of State got out of his office a little more often, he would see that Britain’s major towns and cities had been substantially regenerated.
Even when the worst recession in our lifetime was visited upon our country, bringing half the banks in the UK and Europe to their knees, we still had fewer repossessions, fewer business collapses and a lower rise in unemployment than during the Tory recession of the 1990s. Today we have an economy that is not growing at all and in which inflation is up to 4.4%, unemployment is at a 17-year high and borrowing will be higher this year, next year and in every year for the next five.
We were part of a global crisis that affected countries around Europe and the world, but it is interesting that before the international crisis hit, we had the second lowest debt of any G7 country. We had brought overall public sector net borrowing down, and the now Prime Minister and Chancellor committed themselves to Labour’s spending plans. In 13 years, we created 1.1 million enterprises, and in the past two years, which included our last year in government, the World Bank ranked the UK fourth in the world and first among European countries for the ease of doing business.
I am particularly glad that my right hon. Friend has reminded that lot over there on the Tory Benches that they fully supported Labour’s spending plans up until the end of 2008 and promised to spend the additional benefits of growth on the economy, which they never seem to remember. That lot on the Liberal Democrat Benches, when they were sitting over here on the Opposition Benches, urged even greater levels of spending, so we are not going to take any hypocrisy from them.
In addition, will my right hon. Friend remind that lot over there of one further piece of history? In 1924, George Lansbury—
If my hon. Friend was going to point out that when we go into recession we have to ensure that we do not go into a depression, that is exactly what the Labour Government did. Things may look rosy from the leather seats of the Secretary of State’s new Government Jag, but for ordinary people, the Government’s plans are hurting but they are not working.
For goodness’ sake. I have always put on record my pride in what the Labour Government did to ensure that this country recovered from 18 years of Tory rule. Whatever my disagreements with them, I will never take that away from any of our leaders of the past 13 years.
This Budget has offered more of the same. The Government claimed that it was a Budget for growth, but we got nothing of the sort. Only a few weeks ago, the Chancellor told us that it would be an “unashamedly pro-growth Budget”, as though economic growth was something that he would normally be embarrassed about. What the Government should really be embarrassed about is that as a direct result of their policies, the Office for Budget Responsibility has downgraded its growth forecast not once but twice. Now we know that growth was down last year and will be down this year and next year. The only things that are growing at the moment are the prices in the shops and the number of people out of work.
I think we are doing quite well in by-elections, but I do not take the public for granted, and I know that they believe the deficit should be tackled. That is quite right, and I absolutely agree. However, as every day goes past and people see the choices that the Government are making, they say that they are going too far and too fast. That was expressed on Saturday, and it will be expressed on 5 May.
Does the right hon. Lady share the opinion of her esteemed colleague, the very sensible right hon. Member for Salford and Eccles (Hazel Blears), who recently said that Labour could be much more
“explicit about where we had plans to cut…The public…are worried that we haven’t been as clear as we ought to be.”
I have already given way to the hon. Gentleman, so I am going to make some progress.
I turn to some of the measures announced in the Government’s plan for growth. I think we would all agree that the planning system shapes the places where people live and gives character to our communities. It helps us to protect our natural and historic environment, and it should ensure that everyone has access to green space and unspoiled countryside. It is crucial for growth, because it supports economic development, helps to create jobs and contributes to our prosperity as a nation. I have never shied away from the fact that we as a country need to build more homes, and that our planning system has to support that. When the Government were elected, they promised bold, radical reform of the planning system that would speed it up, reduce bureaucracy and support growth. Let us look at what has happened.
Following the Government’s chaotic and botched reforms to the planning system, there has been a dramatic fall in the number of planning permissions for new homes, which are now at a near-record low. The figure for the third quarter of 2010 was the second lowest seen in the past 19 quarters, and in the last quarter of 2010, new planning permissions were down 22% on the previous year. It is no good the Government blaming the previous one, because things have got worse and not better since they came to power. The biggest drop of all came just after the last general election. In the first quarter of 2010, before the election, more than 40,000 planning permissions were granted to developers for new homes, but by the third quarter, after the election, that had fallen to just 30,000.
The Chancellor sought to address that last week, but I am afraid that in doing so, he sounded the death knell of localism. I offer my condolences to the Communities and Local Government Secretary for the demise of localism, because after months of the Government pledging power to the people—neighbourhood plans, communities in the driving seat and so on—the Chancellor blew localism out of the water in a single sentence. He said that
“from today, we will expect all bodies involved in planning…to prioritise growth and jobs, and we will introduce a new presumption in favour of sustainable development, so that the default answer to development is yes.”—[Official Report, 23 March 2011; Vol. 525, c. 956.]
I cannot recall cheers from Government Members when that was said. While the Secretary of State trumpets devolving power to local people and promises to give them a real say in the development of their area, the Chancellor wants to make it easier for developers to bypass the planning system altogether. They cannot both be right, which reinforces the confusion that has paralysed the planning system in the past 10 months.
Did the right hon. Lady support regional spatial strategies, which imposed on my constituents a brand-new town on green belt that was not supported by any democratically elected person? Does she prefer that to the Government policy that she describes?
I am afraid that if the Chancellor gets his way, nobody will be consulted.
No community can thrive if the system is biased against change. Every community must look to create new homes, workplaces and jobs. A planning system that is devoid of obligations to provide for the future and that just protects the present is destined to fail, but a fair and open planning system that involves local people, and that leads to better decision making and greater consensus on development, is important. Although the Government promise to give local people more of a say, their policies do exactly the opposite. Ten months in, their record on planning is one of incompetence and broken promises. Government Members who represent our green and pleasant land must be in mourning, for although existing controls on green belt will be retained, the Chancellor made it very clear that the Government
“will remove the nationally imposed targets on the use of previously developed land.”—[Official Report, 23 March 2011; Vol. 525, c. 956.]
Forgive me for putting that in plain English. More developers will be given a yes, but as there will be no obligation to develop brownfield sites, by definition, more greenfields will be developed. I do not hear any cheers from Government Members for that one.
We can add to the chaos in the planning system the fact that plans for more than 200,000 new homes have been dropped. Under Labour, more than 2 million more homes were built in England, including 500,000 affordable homes; 1.5 million social homes were brought up to a decent standard; 700,000 new kitchens, 525,000 new bathrooms and more than 1 million new central heating systems were installed; 1 million more families were able to buy their own homes; help was provided to more than 130,000 first-time buyers through shared-ownership schemes or equity loans; and even in the teeth of the recession, the previous Government were building 55,000 new affordable homes, which is more than this Government will build in any of the next four years.
They still had people living in them. The hon. Gentleman should come to the constituencies of Labour Members to see the investment in social homes, and the partnerships that were developed with the private sector to ensure that we had social homes alongside private developments. The previous Government were putting an end to the division whereby social homes were in one part of the community and private homes were built in another. That is the Labour way, and I am very proud of it.
The story the right hon. Lady tells is not one that I recognise in my constituency, which had the worst quality council housing in the whole country. Seventy per cent. of our housing was not up to the decent homes standard, and it has taken a Conservative-led coalition Government to deliver the £21 million to bring them up to standard over the next four years.
People throughout the country benefited from the decent homes programme and other housing initiatives that helped them to get on to the property ladder and to ensure that they had choices. In the first six months of 2010, before the election, the number of new homes built went up by more than 20%, but in the last six months of 2010, after the election, the number of new homes started fell by nearly 20%. If the Secretary of State wants that debate, I am always happy to have it with him—or with any of his colleagues.
The country wants to know what the Secretary of State and his Government will do to help to build the homes for which communities up and down the country are crying out. Whatever he pretends, the reality is that the Budget brings very little good news. It promises help for first-time buyers. The Opposition welcome the Government’s U-turn—their decision to bring back Labour’s homebuy scheme, which they insist on calling “Firstbuy”—but less than a year ago, the Minister for Housing and Local Government described that policy as an “expensive flop”. That was not what thousands of first-time buyers thought about it or what the housing industry made of it. The Home Builders Federation said that it
“was judged a major success by the industry”.
Only a matter of months later, with his customary humility, the Minister has been forced to admit that he called it wrong. We have wasted 10 months in which we could have ensured that people had a better opportunity to own their own homes. He has done too little, too late, and the measure does not go far enough, because while more than 3 million hopeful first-time buyers try to get a foot on the property ladder, the measure helps only 10,000 of them.
No one is convinced that the new homes bonus is the panacea to the housing crisis that the Government believe it to be, least of all the 21 Tory council leaders from the south-east who wrote to them earlier this year warning that they were not convinced that the plan provides enough of an incentive to communities for them to welcome development. The Budget was crying out for measures to support housing, but they did not happen. All it comes up with is the idea of allowing commercial properties to be turned into homes without requiring planning permission. When the Government get around to establishing exactly which sort of commercial properties will be allowed to turn into residential properties and under what conditions, we will look at their proposals carefully, but if the Secretary of State really believes that the answer to the country’s housing crisis is turning some empty offices into luxury penthouses, or asking people to live in disused out-of-town business parks or derelict industrial estates, he had better think again.
The biggest disappointment is the failure to address the deeper problems of housing supply and the lack of available mortgages. In their submission on the Budget, the Home Builders Federation is absolutely clear that mortgage availability
“is the biggest immediate constraint on demand and house building.”
Figures from the Council of Mortgage Lenders published as recently as 18 March show that mortgage lending has stalled. It says that lending is
“weaker than a year ago”
and that the housing market is “stuck in a rut”, but on that, the Budget is silent.
Before we move on from housing, let us remind ourselves of another matter on which the Government have not lived up to their promises. Just a few weeks ago, the Minister for Housing and Local Government told the Zero Carbon Hub annual conference:
“The commitment to Zero Carbon remains in place—there’s no ambiguity about that”,
but when reading the small print of the Budget, we discover that that is just another broken promise, because from 2016, new homes will no longer have to source all their energy from carbon-neutral sources, which goes back on a commitment that the Conservatives made in opposition and repeated in government. Those standards were about not only protecting our environment, but driving innovation and creating new jobs in the green economy. The Government’s failure on that undermines not only their green credentials, but the ability of our economy to compete for new jobs, new investment and new industries.
Let me deal with the underlying economic nonsense at the heart of Government policy. They hope that the UK economy will be saved by an export-led recovery, which I call Osborne’s see-saw, because the Chancellor views the public and private sectors as opposite ends of a see-saw. He thinks that the harder, deeper and faster he cuts the public sector, the sooner the private sector grows to fill the space and suck up the unemployment. One does not have to be an economist to know that there is no reason why cutting home helps, police officers and council cleaners will lead to the UK selling more electrical equipment, cars or IT services abroad. However, I do know that if we cut public investment in roads, regeneration and house building, and shred the school building programme, the private sector takes a huge hit. The construction industry nose-dives and hundreds of thousands of skilled workers and those who manufacture and supply to them lose their jobs.
Has the right hon. Lady noticed the International Monetary Fund’s recent figures showing that Britain is running interest rates 3% lower than those in countries with similar deficits to us? Is that not a fundamental result of our programme for the deficit?
I notice that the economies of the USA, France and Germany grew in the last quarter of 2010, but that of Britain shrank by 0.6%, and that the German and US economies are forecast to grow more strongly.
This is the first ever Budget for growth to downgrade its own growth forecast, yet the Government’s answer is not to continue Labour’s plan to manage the deficit reduction, but to go faster and further and hammer public spending harder. Then they blame everyone but themselves when growth forecasts fall and when Government borrowing rises. Hundreds of thousands of people tried to tell the Government on Saturday that it is hurting but not working, and they are just not listening. For this Government, giving a tax cut to the banks was more important than supporting the construction industry, keeping people in work or building new homes.
The Budget shows above all else how out of touch the Government are. With more people out of work, inflation rising and people facing the biggest squeeze on their living standards in a generation, we hear the Secretary of State make much of this year’s council tax freeze, which every Labour council has implemented, despite receiving much steeper cuts than Tory and Liberal Democrat councils in far wealthier parts of the country. However, with the Deputy Prime Minister busily coming up with a thousand and one new taxes and the Business Secretary desperately trying to resurrect the idea of his mansions tax, it remains to be seen whether the Secretary of State will be able to say the same next year.
A council tax freeze helps only so much. It is a £72 saving versus a VAT increase that will cost a family £450 extra this year, and it is coming at a time when families are losing tax credits and facing a freeze in their child benefit, when pensioners are seeing winter fuel payments cut, and when the Government’s cuts are undermining our recovery and costing people their livelihoods. They give with one hand but take with many more from the communities that we represent.
The right hon. Lady will be aware that the Darling plan commits her party to £14 billion of cuts, beginning in a few weeks, which is only £2 billion less than the Government are committed to. Will she tell us where those cuts would fall under her party’s Government?
It is amazing how Conservative MPs are picky about which part of our budget they want to suggest would go different ways. On the one hand, the hon. Gentleman claims that the difference between our budget and theirs is £2 billion, and on the other hand, the Chancellor boasted in the previous Budget that there was a £40 billion difference between our plan to halve the deficit over four years and his plan to eliminate it entirely. They cannot have it both ways. We need a Budget for growth, and a few facts tell us all we need to know.
Government Members have mentioned export-led recovery. Only last week, in the Budget debate, the right hon. Member for Wokingham (Mr Redwood) warned the Front-Bench team that such an export-led recovery will peter out very soon and for the next two years, as credit contracts in China, India and Brazil, among other countries. However, does my right hon. Friend agree that at the heart of the Budget and the growth strategy lies the privatisation of the Royal Mail, the privatisation of the NHS and the attempted privatisation of the forests?
They have already U-turned on the forests; let us see how much they respond to the elections in a month when the people of this country will make it loud and clear what they think of the past 10 months. The sad thing is that we have had to wait 10 months for a so-called plan for growth. In those 10 months, we have seen unemployment and borrowing rise and growth fall. That does not bode well for anybody in the country, be they those with families, those in the public or private sectors, those with a business trying to grow or those trying to start up a business.
Does my right hon. Friend not agree that what we need in order to promote growth is demand in the economy? However, with public spending being cut and people losing their jobs, which will cut private spending, where will the demand come from to fuel private sector growth?
My hon. Friend makes a very good point. I could not make it better myself.
The fact is that this is not a Budget for growth. We have the highest unemployment rate in nearly two decades, with nearly 1 million young people out of work and inflation spiralling out of control. Even Moody’s credit rating agency, which all of us have heard so much about from Government Members, are warning that our triple A credit rating could be at risk. What is the price of this failure? It will be another £43.4 billion in borrowing. Yet all the Government can come up with is more of the same: the same old excuses; the same failed policies; and the same old stories from the same old Tories.
No number of excuses can hide the fact that the Government have cut too far and too fast, hitting jobs and growth, and putting our recovery at risk. However, there is an alternative. We could get our country’s finances back on track by halving the deficit in four years; we could give families and businesses real help by scrapping the VAT increase on fuel; we could repeat last year’s tax on bankers’ bonuses, and invest the money in building 25,000 new homes and getting 90,000 young people into work; and we could boost the regional growth fund by £200 million.
With the Government’s first major elections just weeks away, this Budget sets out a very clear choice: between Labour, which will do everything it can to protect jobs and the services people rely on, and this Tory-led Government imposing cuts with barely disguised relish; between Labour, which knows that there are difficult decisions to be made, but will make them in a way that is fair and open, and the broken promises and underhand tactics of the Tories and the Liberal Democrats; between Labour, which will support people into work and get our economy back on track, and a Government who are taking a reckless gamble with the economy that is hurting but not working. In one month’s time, people up and down the country will have their chance to send the Government a very clear message—and their voices will be heard.
Order. I remind Members that speeches are limited to six minutes, although I might look to reduce that to four. A huge number of Members wish to speak, and there is a lot of pressure today and tomorrow, so we might have to reduce the limit to four minutes.
I draw the House’s attention to my entry in the register.
I warmly welcome the Budget and my right hon. Friend the Chancellor’s broad judgment of the economy. I particularly commend him for sticking to the plans he had outlined earlier, so that—painful though it may be, and mindful, as we must be, of the difficulties—we can deal properly and speedily with the appalling state of the economy bequeathed to the Government by their thoroughly irresponsible predecessors. Measures are now firmly in place to repair the economy, to ameliorate the gross waste of public money, to pay down the deficit and to put in place the architecture for a growing and expanding enterprise economy, with all the opportunities for jobs, increased competitiveness, substantial improvement in the effectiveness of essential and greatly valued public services and support for wealth creation.
Clearly major challenges and difficulties lie ahead, but the Chancellor has set out a clear vision for growth, with the aim of creating in the United Kingdom the world-class businesses of the future, of all sizes and in all activities, and consolidating a way ahead for all our industries and commerce. I was taken today with a letter in the press from some of Britain’s most successful business men that said that the steps taken
“will be a massive boost for start-ups, and will help entrepreneurs to secure finance to get their ideas off the ground.”
That is just so. It is exactly what is required.
Of course, I welcome the announcement on apprenticeships, but as I have made consistently clear to Ministers on many occasions, all the good will in the world cannot replace the over-bureaucratic burden currently in place that often makes it difficult to take on apprentices. If these targets are to be achieved, the process must be made a great deal easier. These are matters with which the Department concerned must deal with great vigour. The opportunities to expand the skills of our young work force are real and vital, and I hear from businesses on all sides their desire to get on with this matter in a speedier manner. To this end, I strongly urge my right hon. Friend to pay careful attention to the views of Professor Alison Wolf, who has developed some very good ideas on these matters, and the excellent work done by my right hon. Friend Lord Baker of Dorking.
I welcome the steps taken on deregulation, and I was pleased to see that the Government’s earlier work has been built on in the Budget in a number of areas. However, those steps are nowhere near good enough yet, and progress across Whitehall is extremely patchy. For my part, I believe that greater authority and impetus should be given to the war on unnecessary, debilitating and grinding red tape, which holds back so many of our businesses and infuriates so many of our best people, who have great ambitions that they cannot fulfil because of the burden that the state places on enterprise.
No, I am very sorry; I am afraid that I cannot.
I call on the Chancellor and the Prime Minister to bring back Lord Young, who understands such matters well, knows the grislier ways of Whitehall and is ideally qualified to lead a tough, cross-departmental effort to enforce the measures needed to reduce onerous administrative burdens, particularly on our small and medium-sized businesses. I know that many Ministers are aware of the importance of doing that, but from the Back Benches making progress often feels like wading through very deep mud. The sometimes apparent weakness of the civil service, judicial activism, thickets of regulation, and an infantilised and often financially illiterate press can all make it impossible to progress. The Government need to make a big effort to move on the issue.
On taxation I need say only this. A more competitive, simpler and more stable tax system will be better for everyone, rich and poor alike. Such a system would also go a long way towards restoring our badly lost international competitiveness, to which the last Government did such terrible damage.
Finally, let me briefly say a word about banks and the language of relentless negativity that is doing great harm to the City of London, which is one of the greatest assets that this country has. That language—particularly of the Opposition, but also of much of the press—is self-defeating, illiterate and often infantile. It needs to stop, and the debate needs to grow up. Many new jobs in banks headquartered in London are now being located overseas. That is very bad news. The Chancellor has averted a fiscal calamity. I am optimistic about the future of this country, but we face a long, hard slog.
Let me start by saying that I did not recognise the Secretary of State’s position. In my county of Northumberland, we have just cut £44 million, with more to be cut next year and hundreds of people sacked throughout the United Kingdom, and we have cut services—or, if we have not cut them, we have charged people for them. Unfortunately, he never mentioned that, so I thought that I would put that one to right.
Let me talk about the enterprise zones. We have seen them in the north-east, where we had them last time, under Thatcher—they were called “Thatcher zones”. Although they were partially successful, they were not all successful. I would say that, at a good guess, most of them stood empty. They were not filled by anyone—in fact, anyone who went around the north Tyneside and Newcastle area today would find that a lot of the buildings are still empty.
Of course that is right, and that is part of my point. I would like the zones to be targeted in unemployment blackspots, which we have in the north-east. Unfortunately for Blyth Valley and Wansbeck—my hon. Friend the Member for Wansbeck (Ian Lavery) is not here—those zones did not come into our areas. If they are going to be in Tyneside, we have to get the people from our area into Tyneside, but the only transport we have is buses and people’s private cars—we have a rail link, but we do not have a train on it. If we target those blackspots, the enterprise zones might see some success.
Let me turn quickly to what I have heard since this Government came to power about how the last Government are to blame for the mess we are in. We hear all the time—we have heard it this evening—about the bankers’ mess, and that is indeed what I would call it: the bankers’ mess. The one thing that we never hear from the Government Benches is any criticism of the banks and the crisis that the bankers put us in. This country was going on wheels until 2008, when the bankers created the crisis. Government Members are not blaming the last Labour Government for the crisis in America, the crisis in Greece, the crisis in Spain, the crisis in Portugal or the crisis in Ireland. They are not blaming the Labour Government for all that—or would they in fact want to blame them for it?
I will tell the House why Government Members are not blaming the bankers: because since the Prime Minister was selected as a candidate for the leadership of the Tory party, the City has put £42 million into the Tory coffers to fight elections. That is why we do not hear anything from the Government side about the banks. That is why the banks and the bonuses are allowed to flourish, because the Tories are in the pay of the bankers. Make no mistake about it: that is a fact. The fact is that the Conservatives are in their pockets, and the banks are in their pockets.
No, I am not going to give way; I do not have time.
What happens when the Conservatives are in the pockets of the banks? Where does the bill for the bankers’ crisis fall? Yes, you’ve got it: it falls on the working people of this country. We are seeing that now, with sackings all over the place and wages cut.
I thank the hon. Gentleman for giving way. Does he recognise the fact that 1 million people in this country are employed by those banks in one way or another, in financial services, accounting for 3.5% of employed people in total? Is he blaming all those individuals?
I am blaming the bankers for the way they invested their money in the crisis that they caused. They caused it—they knew what they were doing, and they will all say that. They all came to the Treasury Committee and apologised, if the hon. Lady remembers.
As I was saying, the bill for all this falls squarely on the working people of this country, with the sackings that we have seen and the wage cuts. Wages are 2.2% below the average. That is what they are: they are not above. In fact, we had to take a pay cut ourselves last week. We all did it, and most of them on the Government Benches are in the pay of somebody—some board or some consultancy—so they will be all right when they get a pay increase from them.
What else is being cut? Pensions are being cut. Look at the furore. I am sure that hon. Members have had letters from servicemen, policemen, teachers and local government workers about their pensions. The Government are murdering their pensions, and what are they doing about it? Absolutely nothing. The Government are going to sink them with their pensions—[Interruption.] Never mind looking at my lot: your lot are in power. They are in charge, and they have to deliver the pensions that those people are entitled to have.
We can go even further, because we can look at those who are in their pockets—the pockets of Government Members—who also evade tax. There is £16 billion out there in evaded tax, with people running off to the Cayman islands, or some island where they can put their money under a sack and hide it. That is what is happening today. What are the Government doing about it? Absolutely nothing. They will tax the people of this country, but they will not tax those who run away to another country to put their money in a sack. That is what they will do, and they always have.
Then there is the argument that there was no money. That’s funny—we had £7 billion to give to Ireland when Ireland went under. Why, we saw the Chancellor jumping up at that Dispatch Box and saying, “Not a problem, Ireland. We’ve got plenty of money—there’s £7 billion,” yet we kept being told that there was no money. Now what have we got? We have got this Libya crisis. Not a problem for Britain. Tomahawk missile? Not a problem, even when one Tomahawk missile costs £900,000, and we are firing them left, right and centre. That is another expense for the British people. Ministers are not saying anything about that at the Dispatch Box, but I am waiting for it, and it may come.
The business of the Government is not the government of business. The growth that this country needs, which will provide jobs and higher living standards for all our citizens, is generated by businesses, not by the Government. This Budget takes a modest step towards setting enterprise free in this country. I welcome these measures, but I also wish to sound a note of caution.
I want to talk first about the fiscal squeeze and the way in which inflation is squeezing Britain’s businesses. The Chancellor of the Exchequer is rightly lionised for being the deficit reducer of the western world. Contrary to what the Opposition might think, we do have the biggest peacetime borrowing requirement in the history of this country, and national debt was doubled under the Labour Government. It is also the case that £120 million a day is being spent on debt interest, which is more than we are spending on schools, the armed forces, criminal justice and police. Those are the facts.
The Chancellor’s rules are clearly correct, and he is setting about implementing them with real purpose and due ruthlessness to eliminate the structural deficit in five years, and thereafter to ensure that debt as a share of national income falls. The Chancellor’s excellent fiscal policy is in safe hands but, sadly, monetary policy is not. The good work done by the Budget will be threatened by monetary policy. We all know that the Bank of England has let inflation out of the box. It has lost control of inflation. Consumer prices index inflation is now 4.4%, and retail prices index inflation, which many people feel is a truer measure of the cost of living, is now 5.5%. Too many letters have been sent to the Chancellor by the Governor of the Bank of England explaining why, yet again, he and the Monetary Policy Committee have missed the inflation target.
Our higher-than-expected inflation has had the following consequences. Our debt interest payments are £4.6 billion higher than forecast in November for the simple reason that inflation has fed through to gilts, one third of which are index linked. We have also seen increases in the spending totals for social security and public sector pensions. This has led to an overshoot in the public sector borrowing figure, not for this year but for next year, of £4 billion. For 2012, there will be an overshoot of between £10 billion and £12 billion on the borrowing numbers that we forecast last autumn.
Higher inflation has another pernicious consequence. It will make cuts in public spending deeper, assuming that the Chancellor sticks to his cash totals, which I have every confidence he will. The Office for Budget Responsibility has forecast that average earnings will not grow faster than inflation until 2013, but the real worry in the OBR report is that inflation will not be tamed, and that the Bank of England does not tighten monetary policy in such a way as to get inflation under control. The report sets out a very gloomy scenario. It is that, in 2012-13, inflation could be stubbornly trading at around 4%. In those circumstances, real earnings would need to tick up. They will tick up, and there will be upward pressure at that stage for the Bank to jack up interest rates. According to the OBR’s gloomy scenario, it could be as bad as having a 6% base rate by 2013. That would result in the mother of all squeezes—much worse than the one we are already contemplating. That is why I suggest that, when we look at the macro-economy, we pay more attention to what the Monetary Policy Committee is doing. It is the duty of this House to scrutinise exactly how the committee is ensuring that monetary policy works together with, and supports, fiscal policy. At the moment, it is not doing so.
Because of the pressure on living standards, I am particularly pleased that the Chancellor has decided to lighten the burden on ordinary hard-working families. Taking 1p a litre off fuel duty, abolishing the escalator and introducing a fair fuel stabiliser are at least a nod towards helping household finances and giving some stability to the cost of fuel for each household. By 2012-13, the allowances for income tax will rise so that the average cash gain will be in the region of £326 a year for every working household. Those measures will take 106,000 people out of tax in the east of England, and they will benefit more than 2 million in the region. There is also the council tax freeze, which will be worth about £72 for a band D property.
We seem to have made a sensible start on unleashing the forces of enterprise in this country, but it is my contention that we need to keep a watch on inflation. We need more deregulation, and quickly, and we will also need deeper tax cuts when the economy can afford them.
Last week’s Budget was delivered by a Chancellor who was quite frankly in denial about the impact of his Budget last year. He used to accuse the former Chancellor of the Exchequer and Prime Minister, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), of being in a bunker, but the current Chancellor has not only gone into the bunker but has had it sound-proofed and cut off the phone lines. He is not listening to what is going on in the economy at all.
In my speech in last year’s Budget debate, I cited the example of Japan and the problems that the Japanese economy has had over the past 10 to 15 years. Of course our hearts go out to the people of Japan after what has happened to them over the past few weeks, but it is interesting to see how their economy has behaved over the past 10 to 15 years. We have seen a series of growth figures that just bump along the bottom. There has been no significant stimulus in the economy there, and this country is in real danger of following Japan’s example.
It is clear that the Chancellor has not taken into account the impact of last year’s Budget on confidence in the economy, on the housing market and on the jobs situation in constituencies such as mine. He has gone on to build on the problems that he has already created in the UK economy.
I will not.
In the Budget, we have seen that growth estimates have gone down for last year, this year and next year. Borrowing is up by £43.4 billion, and debt interest will be £17.6 billion higher. According to the Chancellor’s forecast, unemployment will go up by up to 200,000 every single year until 2015. That is a significant price for people to have to pay for what I believe are the sado-monetarist views of this Chancellor.
We have seen a massive squeeze on living standards right across the board. The hon. Member for Bury St Edmunds (Mr Ruffley) rightly spoke of the impact of inflation on the economy. People see it every time they go to their local supermarket as the costs of the core products that they buy rise significantly. There is an impact on the cost of food, as well as significant rises in the cost of fuel. It is interesting that the Chancellor’s much-heralded policy for cutting fuel costs was destroyed within two days of the Budget, when I saw a gentleman arguing with the staff in my local Sainsbury’s filling station. He said, “Hasn’t the price of petrol gone down?” and they said, “Yes, it went down on Budget day, but we put it back up again the day after.” That policy was blown out of the water as soon as it was announced, and, anyway, the Chancellor had already put a 3p a litre rise in the price of petrol into the system through the VAT increase.
It was interesting to listen to the Chancellor’s speech. It contained a complicated segment at the beginning on tax thresholds, which he went through very quickly. That was because it contained all the clawbacks relating to the changes in tax thresholds, following the debate on the consumer prices index and the retail prices index and the announcements of all the cash that he was giving out—actually, he did not give out that much cash; he gave out a bit. All the cash that went out had already been clawed back in the measures announced at the start of his speech. The impact of his decisions in last year’s Budget was that the average family with a child would be paying about £450 a year more in VAT anyway, so he had already wiped out any goodies to be given away in this year’s Budget by the approach he took last year.
There has been much debate about youth unemployment. The corporation tax cut from the Chancellor is one way of proceeding for a Budget strategy, but I believe he could have done something far more radical: instead of giving away that corporation tax cut, he could have spent the cash on a massive programme of employment, training and support for young people in the economy. He could have made that choice and, as I say, invested the money in training and skills for young people.
The Red Book is useful for looking at the Government’s overall strategy. The table on page 12 is headed “International consensus on fiscal consolidation”. It shows that we are up there as consolidators-in-chief with France, Turkey, Canada and Spain. There is, however, a significant outlier on this table—it is the United States. The table suggests that the US is going to move its fiscal consolidation position significantly next year, but I have my doubts. Let me explain what I think is going on.
I believe that the US is looking more carefully at where its economy is and is planning significant investment to lift its people out of recession. Obama’s programme on public spending and expenditure right across the board shows that he is not pursuing a strategy of significant fiscal consolidation, and I doubt whether he will next year either. He is trying to ensure that his economy recovers throughout this period of downturn and that it does not go into significant levels of depression.
Finally, the enterprise zones are positive, but infrastructure investment has to be put in place alongside them; otherwise, they will not work and local economies will be blighted. This is a Chancellor who has got it generally wrong in the Budget. He needs to change his strategy and adopt a plan B very—
I draw the House’s attention to my entry in the Register of Members’ Financial Interests.
I start by welcoming the increase in income tax thresholds. It is important that 1.1 million people, including a number of part-time workers, are being taken out of tax altogether. That will make a great deal of difference to them. In addition, up to 25 million people are likely to receive a rebate, which will, of course, be some help in these difficult circumstances. I would also like to welcome the many measures to help small and medium-sized enterprises, through incentives to invest and innovate, reduction in taxation and, most importantly, cuts in regulations that have been such a burden on our small and medium-sized firms.
We are where we are, and there is no doubt that it is growth in the private sector that is going to take us out of this situation. We are already seeing growth in manufacturing and growth in exports. That has to be where the growth comes from, rather than in the public sector. In his Budget speech, the Chancellor identified our current planning system as a chronic obstacle to economic growth in Britain. I would like to make a few comments on some of the proposals for planning.
First, on making it easier to convert commercial premises to residential ones, I am pleased this is going out to consultation as I can see some instances where it would be beneficial and others where it would be detrimental. The overriding question for me is how this fits in with localism, local decision making and indeed the proposed neighbourhood plans.
Developing an office block left empty for many years owing to a lack of demand for such facilities because of new ways of working sounds like a good idea, but let us suppose that that office block overlooks Poole harbour. It could be right for a second home, so what conditions could be placed on it to make sure local that housing needs were met and that there was an affordable component? My own district shopping centre has suffered from estate agent creep, takeaway café creep and, of course, charity shops, so I hope its viability will be secured through a neighbourhood plan, but will this proposal present another threat? I welcome residential accommodation above shops, but there is often a conflict with noise and other side-effects from the retail use, which would need to be considered.
Although more flexibility about the level of control over change of use is generally to be welcomed, I am wary about any top-down national measures that would impede local people from shaping their local or town centres. Councils and local residents need to decide when and where the relaxing of rules would be advantageous. The new presumption is in favour of sustainable development so that the default answer is yes. Again, my worry is how this will fit with localism and the proposed neighbourhood plans. What is sustainable development? Presumably, it will be defined in the national policy framework. Housing amidst shops is sustainable in one sense, but not in others—the viability of a local shopping centre, for example.
Having fought long and hard against centralised targets, the south-west regional spatial strategy and the last Government’s plans that would have destroyed valuable green belt within my constituency and that were not supported by any locally elected person, I welcome the commitment to protect the green belt. Naturally, I welcome the removal of nationally imposed targets, but with this presumption, can valuable green spaces, which are not green belt, be protected within a neighbourhood plan? It is particularly important in an urban setting to protect those green lungs and to be mindful of densities. High density works in some settings, but not in others. Will this new presumption be a trump card over local plans?
The infrastructure must be there. We need the right balance with housing. My local council seems to be pursuing its core strategy and trying to put the plan in place, but is still working to the housing targets set by the last Government.
I shall comment briefly on something that affects housing in my constituency. I represent an area with a great deal of valuable heath land, of which I am very proud. Natural England, however, has a policy that no development can take place within 400 metres of the valuable heath land. That is right for a large development, but when it comes down to infilling in an already built-up area, sometimes with dual carriageway between the housing and the heath land, I feel that it is too restrictive and should be looked at again. I do not want to jeopardise our valuable heath land, but I am sure that this policy, as it stands at the moment, is too restrictive.
It is important to achieve growth. There has to be some scope for speeding up the planning process, for empowering our councils to prioritise employment and housing opportunities and for giving them the tools to do so. That seems to me to make sense because we should have local decision making—on how we work, how we live and how we play.
It is well documented that the west midlands has been one of the worst hit regions during the recession. That is one reason why I raised the issue of enterprise zones in an earlier intervention. Those zones would certainly affect Coventry in a major way.
There is widespread concern in the west midlands about these cuts, but it is important to remember how this started. Some of us were here when the economic crisis blew up. It blew up in America. I realise that Government Members are probably in denial about this, but the fact remains that it started with Lehman Brothers in America. As Members who have followed these events will recall, there are still some charges against them. A Senate investigation took place into why Lehman Brothers collapsed. Some believe that the American Treasury could have done a lot more to help Lehman Brothers out. Be that as it may, it did not happen. We should all remember how this started.
People might have short memories, but the situation became so bad that even a Republican President and tax cutter like George W. Bush ended up pumping billions of dollars into the economy in the last month of his presidency. He realised the seriousness of the situation. It is not true to suggest for a moment that the Labour Government created this problem. It was an international problem, and that has been demonstrated.
It is equally important to say that we were never in the same position as Greece or Portugal—or Ireland, for that matter. We kept our triple A credit rating, although people tend to forget that. If we cast our minds back, we will remember that we had to restructure the banks. Anyone who watched the collapse of Northern Rock night after night on the television would know that there could have been a major run on the banks. The previous Government acted decisively and quickly. The last Prime Minister flew out to America in an attempt to secure international agreement on how to control the banks. The widespread absence of such agreement was one of the major problems. The Prime Minister tried to secure it in Europe as well. To say that we created the present problem is to deny the truth, in my view at least.
As I have said, we had at least 14 years in which to repay our debt—unlike Greece, and unlike other European countries such as Ireland. If we can underwrite Ireland’s debt, or help Ireland and promise to help one or two other countries, that suggests to me that our country has not been as badly off financially or economically as the Government parties have tried to make out. There certainly were economic problems, as I have demonstrated, but not to the extent that the Government’s solution suggests. We said that we would probably halve the deficit over about four years, but the present Government want to eradicate it, and I cannot think of any United Kingdom Government in recent history who have eradicated a deficit. Governments have tried, but they have not been able to do it.
We should bear in mind that when Labour came to power in 1997, 50p in every pound of taxpayers’ money was used to pay off debt. People also tend to forget that, after consultation with industry and the trade unions, we introduced the car scrappage scheme, which brought the motor car industry out of the doldrums. That was a long, hard-fought battle. We would certainly have reduced the deficit over those four years.
Coventry has benefited from significant redevelopment and regeneration, and the public sector has been crucial to that process. What concerns us now is the possibility that the Government’s cuts in the public sector will cause it to return to the days of the late 1970s and 1980s. Members may recall that, during the 1970s and the 1980s in particular, the motor car industry in Coventry and manufacturing in the west midlands were almost annihilated. The Government talk of balancing the economy. The last Conservative Government were balancing the economy at the time, but they were balancing it in favour of the service sector. The present Government criticise the excessive emphasis placed on that sector, but the Conservatives started it.
Rising unemployment is also a growing worry. The latest figures from the House of Commons Library reveal that there are nearly 10,000 unemployed jobseekers in Coventry, and the position is likely to worsen in future years. Coventry is famous for car manufacture, but public sector workers are driving much of the local economy under the present Government.
As some Members will recall, one of the Government’s first actions, last June or thereabouts, was to abolish the British Educational Communications and Technology Agency and the Qualifications and Curriculum Development Agency. They also abolished Advantage West Midlands, which was one of the most successful regional development agencies in the country and had created hundreds of thousands of jobs throughout the midlands. It created Ansty technological park, of which the Government are now very proud. What a strange coincidence. When we created a business park at the university of Warwick at the same time, we were told that we had no business to be in the area, but later the Government tried to take the credit.
I will end my speech now, because I know that others wish to speak. There is a time limit anyway.
Last year’s emergency Budget and the comprehensive spending review laid the foundations for rescuing our economy and restoring our public finances to balance. Now reform is needed to steer our country to prosperity, and at the heart of the reforms that are necessary is the knowledge that less interference and regulation from central Government is the natural precursor of growth and efficiency. It is essential that we make it as easy as possible for our firms to succeed, expand, and employ more people, and it is imperative that we send a clear message that this coalition Government are on the side of innovators and entrepreneurs.
I am fortunate to represent Chester, which is a successful, popular and thriving constituency. However, like most places, we could do better. I am in the enviable position of watching companies queue up to move in and invest, but our problem is that we have nowhere for them to move into. For years after the millennium, we had a planning moratorium that was designed to discourage investment in Chester and Cheshire and direct it towards Merseyside or Greater Manchester instead. I have no problem with encouraging investment in our metropolitan city centres—indeed, I welcome it—but that must be done by making them more attractive to investors, rather than simply stopping investment in other areas and hoping it will spontaneously start up elsewhere. The two-pronged approach announced by the Chancellor on Wednesday will help to solve both problems.
First, enterprise zones will create areas that are more attractive to investors, developers and those who wish to start up companies. I am delighted to note that Liverpool Waters has been selected on Merseyside. That will create jobs and investment, which will help people in the whole sub-region, including my own city of Chester. Unlike many Members over the past few days, I am not going to call for an enterprise zone in my own constituency, but I wholeheartedly support Cheshire West and Chester council’s proposal for one in neighbouring Ellesmere Port. A manufacturing-based enterprise zone there would complement the existing manufacturing industry—including Vauxhall and Shell—and because workers no longer live next door to the factories in which they work, it would create jobs for people in Chester as well.
Secondly, Chester will benefit from the relaxation of planning regulations. Planning is rightly considered to be a sensitive issue in Chester. Ours is a small historic city with a heritage and archaeology that make new development in the city centre very difficult. We are also tightly surrounded by green belt. All Members will be aware of the difficulties caused by proposed green belt development. However, that does not mean that we should have a planning system that places even more hurdles in the way of investors, developers and wealth creators. Reforms involving streamlining, fast-tracking, removing bureaucracy and time-limiting are long overdue, and they will have one simple consequence: they will facilitate growth.
I also welcome the Chancellor’s announcement that the Government will consult on the potential benefits of merging income tax and national insurance. It does not make sense that people’s earnings are subject to two separate taxes that are deducted directly from income. Let us not sit here and pretend that there is one pot of money that goes towards paying the state pension or unemployment benefits, and a completely different pot for general Government expenditure. Income tax and national insurance are contributors to the same kitty. Of course we must take great care to ensure that there is no unfair impact on those of state pension age whose earnings are not currently subject to national insurance deductions, but if the system can be simplified, it should be simplified.
Those of us who have run businesses are all too aware of the burden that the current system places on business owners, especially owners of small businesses that do not have the advantage of large payroll departments. It was obvious from the cheers on the Government side of the House on Wednesday that many of my colleagues had had such experiences, but as we cheered, the blank looks on the Opposition Benches told a different story. It dawned on me that many Opposition Members had very little idea of the difficulties involved in running a small business. They seemed unaware of the impact of this unnecessary complication on businesses up and down the country.
We should be doing all that we can to reduce the burden of bureaucracy on businesses and to help them to invest their time, energy and money in growth, ingenuity and development. That is what this proposal will help to deliver. If we want to stimulate our economy and help business and private enterprise to grow, we need to cut costs, cut regulations and cut bureaucracy.
Last week the Chancellor said:
“We want the words:
‘made in Britain, created in Britain, designed in Britain, invented in Britain’ to drive our nation forward.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
Only a simplification of regulations will allow such an overhaul of our economy, and I believe the measures outlined in the Budget are the first steps towards achieving that goal.
While the cuts in public services have been directly caused by the disastrous economic legacy of the last Government, these cuts in bureaucracy, waste and red tape are entirely our own, and will provide the foundations needed to help our economy to grow for decades to come.
It is a pleasure to follow the hon. Member for City of Chester (Stephen Mosley).
I want to start by welcoming three aspects of the Budget. The first of them is the confirmation on page 54 of the Red Book of the announcement made the day before the Budget that the Government intend to fund a new system of savings accounts for children in care. The previous system was lost when the child trust fund was abolished last year. I have been campaigning with Barnardo’s and Action for Children for a new system to improve the prospects of those leaving care, and I am grateful to the Financial Secretary, who is in his place, for the constructive approach he has taken and welcome the Government’s announcement.
Secondly, I welcome the decisions to put on hold this year’s increase in air passenger duty and not to move to a per plane tax. High levels of APD are having an impact on regional airports such as Manchester airport in my constituency, including by putting off airlines from making connecting flights to regional airports. A per plane tax would be even worse, of course. I therefore welcome the consultation the Government have begun, and I encourage Treasury Ministers to look very closely at the regional variations proposal made by regional airports.
Thirdly, I welcome the announcement that Manchester’s airport city is to be one of the new enterprise zones. Politicians, and certainly Opposition Members, hold various and different opinions about enterprise zones, but I welcome the prospect of the rate reliefs that will be available and the superfast broadband. More particularly, having zone status will give airport city the energy to turn the ambitious plans that have been drawn up into reality. Airport city could certainly produce jobs—perhaps as many as 15,000 in total—when all the plans are worked out.
There are two issues on which I seek reassurance, however, and if there is not time to address them in the winding-up speech I would appreciate a letter following the debate. First, it is essential that the zone is shaped and led by its key local partners: Manchester airport, the city council and the University Hospital of South Manchester. Manchester’s international airport will clearly be an attraction for international investors, and the hospital also has an ambitious plan, known as medi-park, which would attract global players in the life sciences industry. These organisations must be allowed to define the zone for themselves, and to get on and make progress. We must hold the Secretary of State to his statement earlier that this will be bottom-up, not top-down. We need a reassurance that that will indeed be the case in practice.
Turning to the second reassurance I seek, airport city is one of the bids being considered for regional growth funding, and it is crucial that funding is made available and that we begin to put the infrastructure in place that will make the zone possible. A particular feature of the Manchester bid is the idea that public money should not simply be spent but be recycled and reinvested as the market develops and progress is made. I hope that that aspect of the Manchester bid model will find favour with Ministers.
The ultimate question about airport city is whether it will benefit the people in my constituency and the surrounding communities who still face severe hardship and disadvantage, and whether they will get the support, training and opportunities they will need to be able to connect to the jobs that will be created. I give an assurance that we at local level will do everything we can to make this a reality, but, frankly, there is little in the Budget that offers us encouragement. The growth estimates are down and the estimates for unemployment and social security spending are up, yet the message from the Chancellor is, “No change. Carry on as normal. Carry on with the cuts.” We have no prospect of new investment in social housing, and even with almost 1 million young people now out of work and on the dole he is not prepared to invest in a proper, quality jobs programme for young people such as the future jobs fund, of which I am very proud, and under which 8,000 young people in Greater Manchester found work in the last year alone, including hundreds from my constituency.
Let me give one example. It concerns the STARS—student tourist ambassador recruit—project run by Manchester airport. Out of 40 young people, 32 now have permanent employment as a result of their going through the future jobs fund, but we have no prospect of that now. All we have is the pale imitation that is on offer: the work experience scheme that will last a maximum of two months. Most worryingly of all, even now, on the eve of a catastrophic loss of jobs and public services, the Chancellor is not prepared to revisit the public spending decisions.
In the days that follow any Budget, we are treated to a mass of statistics, trends and distributional detail, but in the few seconds remaining to me I want to take Members on a journey to a small street in Benchill at the heart of my constituency, so that they can learn what the Budget and this Government’s policies mean for communities such as those I represent. Benchill is a community that knows real poverty through experience, but through previous investment in schools, community infrastructure and housing the trend has been reversed. I recently met the mother of a 14-year-old boy who was destined to be on a programme that would have given him work experience leading to an apprenticeship, but that has now gone because of the cuts. I also met a man who has worked for 25 years in the youth service in Manchester, and who was given his redundancy notice last Friday, and a young woman who works at the local Sure Start centre, and whose job goes in September.
That is the reality of what is happening. The Conservatives think that when the economic prospects improve, all communities will benefit, but that is not true. Particular communities need particular help, and I urge a rethink on the Budget in that respect.
The measures our coalition Government have taken in the Budget make something of a silk purse out of the sow’s ear left by the previous Government, and I was very reassured by the letter published in today’s The Daily Telegraph today from venture capitalists about the fact that these measures will be very attractive to business start-ups. Some 99.9% of enterprises in this country are small and medium sized, 60% of private sector employment comes from that sector, and there are 500,000 new start-ups each year. In my constituency, there are many small businesses, some focused on motor sport or high technology, and they are exactly the sorts of businesses this coalition Government are determined to support. I welcome the many measures we took in the Budget to try to encourage the development of such new businesses.
I recently had a meeting with my Northamptonshire business club, at which business people told me that the single biggest problem they face is funding. Bank finance is still not being made available to them at prices they can afford. The figures show that between 2009 and 2010 small businesses with a debit account turnover of less than £1 million per year suffered a 19% drop in total lending made available by banks. The problem is not just the lack of availability of funding, however; it is also the terms, such as the time scales, which have been much shorter—sometimes just a year—and very difficult to achieve for small businesses. The arrangement fees have been much higher too, and the margins have increased by an average of 60 basis points. Funding for small and medium-sized enterprises has therefore been extremely difficult, and remains so in spite of the excellent Project Merlin agreement this Government put together, which I thoroughly welcome.
I want to make the following suggestion to Ministers. United Kingdom Financial Investments Ltd, which holds the taxpayers’ investment in the banks, should look at the shares we own and consider whether it might restructure some of the shareholdings in Northern Rock, Bradford & Bingley, RBS and Lloyds HBOS with a view to creating new banks out of the bank shares. In other words, it should consider restructuring some of those shareholdings to create, at a stroke, new competition in the high street and particularly in the SME lending area. While we remain significant shareholders in those banks, I believe there is a huge opportunity to improve funding availability and banking competition.
The Treasury Committee recently took evidence that showed that up to 90% of SME finance comes from just five banks in the UK. It is absolutely true that conservative lending is the way forward, and banks will not be able to afford to make loans at such cheap rates as in the past, but there is plenty of evidence to suggest that these enormously concentrated market shares are creating enormous pressure for SMEs. Indeed, Mervyn King told the Treasury Committee that
“we should try to encourage new entrants into the banking system because they will not have the same problems of legacy balance sheet difficulties.”
He also said:
“We have to make sure there are other sources to which those SMEs can turn for finance.”
This Government have been incredibly generous and creative in their support for SMEs, and I urge Ministers to consider this idea, because it is only through revitalising our private enterprise in an SME-led recovery that we will put our economy back on track.
I am pleased to have the opportunity to contribute to this year’s Budget debates. Last Wednesday, the Chancellor of the Exchequer had a choice to make. He could have corrected the judgment he made last summer in the light of December’s stall in growth and the huge instability in the oil market, but he made a different choice: he chose to continue with his £81 billion of public spending cuts. Notwithstanding the remarks made by the hon. Member for South Northamptonshire (Andrea Leadsom), I fear that the Government’s supply side measures will not produce a revolution in entrepreneurialism. The evidence for that is the Chancellor’s own growth forecasts. The forecasts for the early years have been reduced by far more than those for the later years have been increased, and that is because everything is dwarfed by the massive fiscal retrenchment. The cuts are deeply unfair and they are a strategic blunder.
I wish to focus for a moment on the cuts to the poorest families: the cuts to the social fund. At the beginning of March, the Department for Work and Pensions announced an immediate end to crisis loans for cookers and beds. Why? Before the election, the hon. Member for Thornbury and Yate (Steve Webb), who is now a Minister of State at the Department for Work and Pensions, said:
“People who apply for crisis loans are desperate and have nowhere else to turn…The Government has got to practice what it preaches to the banks and make more cash available through these loans to help families through hard times.”
Now he prioritises sticking to the Budget and says:
“We need to ensure that crisis loan support is correctly targeted at those who need it most”.
Does he honestly believe that bedding is not essential? Does he think that mothers of disabled and incontinent children do not need beds and bedding? Can Government Members imagine how a mattress smells after six months’ use by an incontinent child?
The hon. Lady says yes, so she obviously thinks it is satisfactory for poor children to live in that way—a way that I am sure she would never allow her own children to live.
Do Government Members think that children in poor families should have only cold food—even in winter? Would they like to say to their small child on a cold afternoon in November, “Oh you can’t have baked beans on toast. You’ve got to have a cheese sandwich”? No wonder DWP Ministers are not having an outing on the Treasury Bench during these Budget debates. Clearly they do not want to face the criticism they know they would get from Labour Members.
In answer to questions, the DWP has told me that last year crisis loans for cookers and bedding totalled some £27 million. Where are people supposed to turn instead? Are they supposed to turn to the voluntary sector? I recently met families in my constituency, all with disabled children, who had benefited from that excellent voluntary sector organisation the Family Fund. Last year, the Family Fund helped 55,000 families with items such as cookers and bedding and its total budget was £35 million. Are the Government going to increase the grant to the Family Fund by £27 million to make up for the cuts to the crisis loans? Last year, the Family Fund included a picture of the right hon. Member for Witney (Mr Cameron) in its annual report—I wonder whether it will do that next year too. I am sorry that the hon. Member for Colchester (Bob Russell) is the only Liberal Democrat Member here to be reminded that the Minister responsible for this is the hon. Member for Thornbury and Yate.
The problem that this country faces is not that it is bankrupt; the problem this country faces is that it has a Government who are morally bankrupt. This is hurting, but is it working? Taking the four years from 2010 to 2014 together, the independent Office for Budget Responsibility forecasts that growth will be down, unemployment will be up, the social security budget will be up and net public sector borrowing will be up by a massive £40 billion. Already this looks like a catastrophic error of judgment and a strategic blunder. There is an alternative: a sensible path to fiscal consolidation as set out by my right hon. Friend the Member for Edinburgh South West (Mr Darling), which was about bringing down the debt, promoting growth and keeping people in work. There is an alternative, and on Saturday 300,000 people came to London to demonstrate in favour of it.
Before I dive into my speech, I just want to provide clarity on a matter that has caused considerable trouble for Labour Members. In last Thursday’s Budget debate, the shadow Chancellor rightly referred to Members getting confused between debt and the deficit, but one of the worst offenders is the hon. Member for Streatham (Mr Umunna). Given his extremely confident exterior, his no doubt lengthy experience of working in the City and his position on the Treasury Committee, one would not expect him to be so easily confused about basic economic terms, but he has talked about “paying down the deficit”. For his benefit, let me explain: you can pay off or pay down debt, but you cannot pay down a deficit. The deficit is the gap between income and expenditure, and therefore the level of borrowing required. This is not just pedantic semantics, because it really matters when the Labour party confuses debt and the deficit. It makes a policy of halving the deficit over the course of this Parliament appear reasonable, but it is in fact a policy that involves continuing with massive levels of borrowing well beyond 2015, and saddling our children and grandchildren with even more debt. That is why a structural deficit is something that we need to eliminate and why two political parties have come together to achieve this goal by the end of this Parliament. I am very pleased that this Budget keeps us on track to do this.
Having got that off my chest, may I say that I am delighted to speak in this Budget debate and I am delighted at the announcements made last week by my right hon. Friend the Member for Tatton (Mr Osborne)? My constituency stretches from the border with Tatton in mid-Cheshire all the way to Runcorn and Merseyside. As I have mentioned before, I am the only Government Member with a constituency on the Mersey estuary, so I am very pleased to welcome this Budget, which does more for Merseyside than any of Labour’s 13 Budgets between 1997 and 2010. The plans for enterprise zones in both Merseyside and Greater Manchester are great news for my constituents, who commute to both cities in large numbers. Along with the reduction in corporation tax and increased relief for small businesses, the zones will bring investment, help boost growth and create jobs.
I am also thrilled about the decision to invest £100 million in science capital development, with a substantial share going to the Daresbury science and innovation campus, in my constituency. That investment provides a sharp contrast with the Labour years, when funding was taken away from Daresbury and the north, to be put into alternative centres in the south-east. Many Members may be growing tired of my constant references to this world-class facility, but I will continue to support it in any way I can, and I welcome the creation of thousands of high-tech local jobs.
The timing of that investment also happens to be rather helpful for me. Just two days before the Budget, Rob Polhill, the Labour leader of Halton borough council attacked me in the local paper, asking:
“What new money has he actually won for Halton since he became the MP?”
Councillor Polhill has been very quiet since the Budget. But to be fair to him, he is not the only Labour politician struggling to respond to the Budget. The Leader of the Opposition’s Budget response last week was the most astonishing performance I have ever seen in this Chamber. He talked for 15 minutes but said nothing. Labour lack any credibility on the economy. Despite their leader ordering Front Benchers not to make any unfunded spending commitments in February, they went on to make £12 billion of spending commitments in just four weeks. The Labour Party has not changed: it is still suffering from spending diarrhoea—or, to use the correct medical Latin, “Balls-itis”.
I could list every welcome measure in the Budget, but I would run out of time. So let me focus on three areas that will help to reduce the burden on families. The 1p cut in fuel duty and the scrapping of Labour’s fuel escalator is very welcome. Many constituents have got in touch to express their concerns about rising prices, and I know that the cost of running a car falls particularly heavily on those with children. I have three young children and “Mum’s Taxis” takes them to football, cricket, rugby, jujitsu and parties. When we bought our Vauxhall Zafira five years ago, it cost £30 to fill the tank and it is now nearly £60. I congratulate the Government on the action they have taken; if Labour were still in power, people would be paying 6p a litre more in fuel duty. Labour is the party that punishes the motorist at every opportunity.
I welcome the help for home owners and the help on to the property ladder for first-time buyers. The Firstbuy programme of equity loans is an excellent initiative. When I knock on doors in my constituency, I regularly hear people’s worries that their children or grandchildren will never get to own their own home and will have no choice but to move away from Cheshire, so I am proud to support a Government who are taking practical steps to encourage more house building and to help people on to the property ladder. Finally, I congratulate the Government on raising the personal tax free allowance again. That is a big help for many people and has now taken more than a million of the lowest earners out of paying income tax altogether.
I shall finish by giving my full support to this excellent Budget, which boosts growth, helps families and is exceptionally good news for my constituency.
It probably comes as no surprise that I was deeply disappointed by the announcements in last week’s Budget. The Chancellor was strong on rhetoric but short on action that will deliver a sustainable economy, quality jobs, and a fairer society. Despite the Budget’s being hailed as a Budget for growth, the OBR growth forecasts were revised down for last year, this year and next year and although the OBR has revised medium-term growth prospects slightly upwards, it is entirely unclear why less growth now should somehow automatically lead to higher growth later.
The OBR concluded that the effects of the Budget’s so-called growth measures—the cut in corporation tax, the relaxation of planning laws and the creation of 1980s-style enterprise zones—would be minimal and unlikely to raise the trend growth rate of the UK economy. We already know from evaluations of similar and comparable enterprise zones, not just in this country but in Europe, that there has been a zero net increase in growth. There tends to be a relocation effect, but that is about it. I am glad that many of our colleagues have had positive experiences, but the overall evaluation shows quite the opposite.
Once again, the Government are ignoring evidence and pushing ahead with ideologically driven policy. Not only is the Chancellor ignoring evidence, but he is failing to listen to the British people. The Chancellor made little reference to public spending plans—his Budget stuck rigidly to the public spending plans set out in last October’s spending review. It was as though he thought if he did not mention the cuts, nobody would notice them. Well, the people have noticed and in addition to sending clear messages to the Government in the recent by-elections, mine included, on Saturday more than 250,000 people also voiced their objections to these disastrous cuts to vital services—the police, social care, education, and our NHS.
Despite what the Government say, such cuts are affecting our NHS. One of my constituents, Peter Thornborrow, was diagnosed with cataracts last year. He is a 50-year-old precision engineer and he has had his cataracts operation refused. Cuts are going on and are affecting his ability to work. That is obviously not what we need. My surgeries are full of the tragic consequences of the Government’s policies as services are cut or rationed.
In addition to the human tragedy resulting from the disastrous cuts to public spending, the spending plans will also continue to crimp UK economic performance. The irony is that the deficit will increase as a result of what the Government are doing, but they say the cuts are needed to reduce the deficit. The Government are now expected to increase the amount of borrowing—the amount of debt—by an additional £45 billion over the coming years. Last week, as we have already heard, the credit ratings agency, Moody’s, warned that slower growth combined with
“weaker-than-expected fiscal consolidation”
could put the UK’s triple A credit rating at risk. In other words, the Chancellor might be stumbling into exactly the situation he says he is trying to avoid.
Alongside the downgrading of growth and the cuts in services and jobs, prices have and will continue to rise faster than expected and wages slower, dampening the recovery even further and adding to the deficit, not to mention the spectre appearing to home owners of an increase in their mortgage interest rates. The rise in inflation to 4.4% announced last week—that is the consumer prices index, which is much higher than the EU average of 2.8%—and the revised upward projections, coupled with average earnings going down, mean that the squeeze in living standards is set to intensify this year and next.
Most alarmingly, forecasts for unemployment have been revised up and it is now expected to reach more than 8% this year. In my constituency, we have seen unemployment nearly double over the past few years, with one in five young people affected. That is simply unacceptable—we cannot have another generation of young people consigned to the scrap heap as we saw in the 1980s and 1990s. I was a community worker in the 1980s and I can remember how the young people I worked with felt abandoned and written off. The Chancellor is proposing more work experience opportunities for our young people, but will that help young people like those with whom I used to work? I remember one young woman whom I took to job interviews for work experience and she rocked backwards and forwards in her first interview. It was tragic and it took five interviews before an employer was willing to take her on and months of hand-holding before she increased her confidence and self-esteem so that she could go on to secure permanent employment.
On the surface, the proposals to increase work placements and apprenticeships seem positive but those must be high-quality programmes that cater for young people’s range of needs, including the needs of people like the young woman I have spoken about. However, the most important way to reduce unemployment, including youth unemployment, is to get the economy going again.
The Chancellor has claimed that the Budget is fair. I do not know what definition or test of fairness he is using, but the Institute for Fiscal Studies analysis shows it is not fair. I think that most people will consider that the Budget means, for example, that disproportionately more young women and young people will lose their jobs and that pensioners will be affected.
Let me start by saying how welcome the Chancellor’s measures to remove red tape are. By freeing up small businesses and start-ups from the burden of excessive regulation, we will encourage a new generation of entrepreneurs and create for them the conditions in which they can thrive and kick-start our economy again. So often, it is young, creative and dynamic people who are penalised for their endeavours by becoming entangled in too much red tape. I am really pleased that the Government are taking steps to put their trust in these people and I am sure that we will soon reap the rewards.
It must be said too—I know many of my hon. Friends agree—that this is hardly the easiest time to produce a Budget to cheer us all up. With the problems in the middle east, tragic events in Japan and worrying developments again in Portugal, producing such a balanced, fiscally neutral Budget, which none the less contains a number of positive moves, is a feat in itself.
Lest we forget—as I note many on the Opposition Benches are still wont to do—we are still in the big old mess inherited from the previous Labour Government. It was a faintly depressing experience to listen to the Leader of the Opposition as he moaned on in response to the Budget statement, constantly barracking us for taking difficult decisions and suggesting that we enjoy imposing hardship on communities across the country. That is just childish politics that does nothing to further the public debate.
It is quite scandalous that Opposition Members now absent themselves from any responsibility for the spectacular mess the Government have inherited. They desperately avoid the fact that we faced the same banking crisis as every other country, but, separately, we were left with the largest deficit in the G7. It is because of the Labour party that Britain is spending £120 million a day just on servicing the interest on Labour’s debt.
The Chancellor has shown that we remain firmly committed to turning the country around. His decision to double the first cut in corporation tax is a huge step forward and comes on top of measures to help smaller businesses, such as extending the business rate relief for another year. Those proposals, plus the 50,000 extra apprenticeships that will bring the total funded by Government to 250,000 over the next four years, demonstrate a Budget with a vision for growth. The 1p cut in petrol duty, on top of the cancellation of Labour’s extra 5p tax on fuel that was in the pipeline, is also a welcome relief for hard-strapped motorists and businesses. The reduced freight costs should also help to bear down on inflation, but shame on those petrol stations that are not passing on the cuts.
The introduction of the new enterprise zones only further confirms the Government’s intention to make it as easy as possible to start up and grow new businesses, but I must throw my hat into the ring and stand up for my patch on this issue. London is to have one enterprise zone in the royal docks area and the Mayor has announced that he is going for another two—one in Croydon and one in Tottenham. My question, as the Member of Parliament for Ealing Central and Acton, is, what about west London? With the focus on the Olympics in east London, other parts of London have missed out on regeneration programmes and I hope that City Hall will soon start to look west once again.
Moving to a smaller, but significant, aspect of the Budget, I welcome the removal of the requirement on charities to document gift aid for donations of £10 or less. That will be of considerable assistance to churches, along with all charities, around the country. Those beautiful buildings are maintained without support from the Government or the Church Commissioners, often by small bands of dedicated people within their parishes. The move could mean, even for smaller churches, a positive gain to cash flow of £1,000 or more. In many cases, it will make all the difference between keeping them open or having to shut them. This measure is clearly a big shot in the arm for the big society. Allied with the Chancellor’s promise to cut the inheritance tax rate by 10% for those who leave 10% of their estates to charity, which could benefit charities by as much as £300 million, it firmly underlines the Government’s commitment to supporting volunteering, philanthropy and social action.
In conclusion, I support the Budget proposals at a time when the whole country is still struggling to emerge from Labour’s recession. The measures are not individually huge, but put together they provide good reasons to be a little more cheerful during these difficult days. After all, the Government have also taken decisive action to lift more than 1 million people out of paying tax altogether and have restored some sanity to prices at the petrol pumps up and down the country—and let us not forget their initiative to freeze council tax across the country. The measures in the Chancellor’s Budget point the way towards a far stronger economy—a rebalanced economy with a successful private sector powering ahead. We should not forget that without a thriving private sector, we can never afford efficient and sustainable public services.
Across Britain, our low-carbon firms, our green groups and millions of concerned citizens had high hopes for this Budget. They have heard the Prime Minister say that this will be the greenest Government ever—an ambition that was restated in the Chancellor’s Budget statement—so they might therefore have expected this to be a Budget for green growth and green jobs and a boost for green firms, but those hopes have been cruelly dashed by Ministers as it was not a Budget for green growth, green jobs or green firms. There have been so many promises, but so little action.
I want to address three important areas, the first of which is the reduction of household emissions. Ministers have announced the green deal for householders and tenants to make their homes energy efficient, but a closer look at the scheme shows that it is at serious risk of being bungled and botched. A battalion of accredited energy assessors and installers will be needed, but where will they come from and what are the incentives for home owners and tenants? How will consumers be protected from cowboys and what happens if the cost of energy efficiency measures is not met by the savings? Who will pick up the bill? The Government claim that up to 14 million households will benefit by 2020, so every one of the people living in those homes has the right to demand answers.
What about the Government’s ambition to make all new homes zero-carbon? In an article in The Guardian on 6 December 2010, the Minister for Housing, whom I am sorry to see has left his place, wrote,
“very soon I’ll be setting out our progress towards achieving a zero carbon approach”.
At the zero carbon hub annual conference on 1 February—just under two months ago—the Minister for Housing said:
“The commitment to Zero Carbon remains in place—there’s no ambiguity about that”.
There is no ambiguity because buried on page 117 of the Government document, “The Plan for Growth”, contrary to what we have heard from the Secretary of State for Energy and Climate Change, who should perhaps look more closely at those elements of the Budget that affect his Department, Ministers have killed that commitment stone dead. The WWF described the announcement as
“years of work and ambition swept away.”
The second area that I want to discuss is the green investment bank, which Department of Energy and Climate Change Ministers have heralded in every speech and utterance. The Energy Secretary has staked his political reputation on it and green businesses up and down the country are crying out for it, so where is it? That the green investment bank will not be able to borrow its own capital until 2015—four long years away—and only then if the Government’s debt target is met, makes me wonder when a bank is not a bank and when it is merely a fund run by officials. Surely, a bank has staff, a board and a headquarters building. I have been asking Ministers about the set-up of this so-called bank for a while, but we are still waiting for the answers.
The fund that has been announced will total £3 billion, but Ernst and Young calculates that Britain needs £450 billion between now and 2025 for low-carbon investment. Ministers claim that up to £1 billion will come from selling Britain’s third share in URENCO, the uranium enrichment company. Perhaps Ministers can tell us what the URENCO share price is today compared with a year or two ago? If it can be done in 2015, why can it not be done this year? Do Ministers really believe that we can take our time? I keep hearing time and again from green companies that the window of opportunity is closing and that green business needs stability, but all they get from the Budget is uncertainty.
Thirdly, what does the Budget do to boost green research and development? No one should seriously doubt that without research and development into low and no-carbon technologies there will be no green revolution in Britain and Britain’s good green ideas will be developed abroad. Research into biofuels such as algae biofuels, which can be developed on arid land and could considerably reduce aviation emissions, has been cut, not boosted, by the Government. They have cut funding to the Carbon Trust and support for geothermal, tidal and other renewables has also been slashed. They have taken an axe to the very research and development that would yield the new green products and jobs for the future—how unlike other countries, which have increased their support for those infant technologies.
Britain can be proud of its environmental and renewables firms, including companies such as Eco Environments on Merseyside. We can also be proud of our leadership in low-carbon firms such as our video games development industry, which is the third largest in the world. In 2010, UK sales of video games totalled £1.53 billion. Those are the kinds of low-carbon sectors that deserve our support, but this Budget is unambitious: it does not deliver for low-carbon enterprise, it does not deliver green jobs and it does not deliver growth. Judged by deeds, not words, this Government fail every test. Ministers talk green, but is not the simple truth that this Budget sets Britain’s environmental progress back years?
It is a privilege to speak in this Budget debate. First, I should like to touch on some of the comments that have been made so far, especially the opening comments of the Secretary of State for Communities and Local Government, who stated categorically that English council tax payers were enjoying a council tax freeze. Unfortunately, that is not the position in Wales where the Labour-Plaid Cymru Assembly Government have decided not to ask the local authorities in Wales to play a part in the sacrifices being asked of the population of Wales, and as a result people in constituencies such as mine are facing council tax increases this year.
It has been said that the council tax saving is nothing compared with the cost to individuals of the increase in VAT. I was in a public meeting in Penrhyn bay in my constituency on Friday night where a large proportion of the population are pensioners. Often, pensioners’ biggest expenditure will be on food, heating and council tax, and there has been no effect on their food budget from the VAT rise because food is zero-rated. In the same way, there has been no increase in the cost of heating, because VAT on household fuel is remaining at 5%. But, under a council that is operated in Wales by the Labour party, we have had an increase in council tax, and it is fair to make that point.
We hear a lot from the Assembly Government about the fact that Wales is treated very badly by the coalition Government in Westminster. That is not the case. In a fiscally neutral Budget, the consequentials through the Barnett formula for the Welsh Assembly was £65 million. Over the weekend I took part in a number of television and radio programmes. Not once did I hear a single member of the Labour party or Plaid Cymru say a word of thanks for the fact that Wales is benefiting to the tune of £65 million as a result of the changes announced in the Budget.
The main feature of the Budget is that it is a Budget for growth. The proof of the pudding is in the attitude of small businesses to the Budget. I was delighted—elated even—on Friday morning to go into my office and receive an e-mail from a business in my constituency in the town of Llanrwst. That business man had been communicating with me regularly since Christmas, asking, “When will this Government show their commitment to small businesses?” He wrote to me on Friday morning, stating that he now felt confident that the Government would stick to their promises to support enterprise. As a result of the Budget, he had undertaken to invest £160,000 in his business and to give his staff a pay increase for the first time in three years, because he felt confident enough to make such a decision.
In a constituency such as mine, where 70% of employment is in the public sector—a statistic that would have embarrassed the East German Government in 1989—and there remains such dependence on the public sector, it is imperative that we get the private sector moving. In a Welsh context, the private sector means small businesses. I welcome the fact that we are reducing the corporation tax rate in the Budget. I also welcome the fact that the small companies corporation tax is going down from 21% to 20%, but in my constituency the vast majority of small businesses are owned and operated by sole traders and in partnerships. The fact that we are increasing the personal allowances makes a real difference to such businesses. It means that they can retain and reinvest more of their profits.
I am delighted with the announcements made in the Budget, but we can go further. By that I mean that we need to look at the burden of regulation on small businesses. For example, the Food Standards Agency is looking to increase dramatically the costs on small abattoirs throughout the United Kingdom in relation to food hygiene rules. It is moving towards full cost recovery from abattoirs. That sounds technical, but in a Welsh context that means an increase in cost to small abattoirs in the region of £4.3 million at a time when they are struggling to survive. These regulations cost money for small businesses. Although the fact that we are getting to grips with regulation is welcome, we must go further and faster. I see no reason why profitable businesses in my constituency should be under threat as a result of regulations and the cost of regulation.
We want small businesses to grow in constituencies such as mine. By “small” I mean micro-businesses. One of the issues that we still need to deal with is VAT. I notice from the Red Book that we are increasing the threshold for registration from £70,000 to £73,000, and again, I am delighted that that change is happening, but we need to get to grips with the fact that VAT can be such a throttle on the growth of small businesses. Small start-up businesses reach a turnover threshold of about £68,000 or £70,000, and then those business people have to ask themselves, “Do I grow and, as a result, probably see my profits reduced, or do I decide to stay put?”
When one goes into Llandudno in my constituency and sees cafés and bed-and-breakfast businesses closed for winter, that is not because those people are lazy. They work extremely hard, but because of the VAT threshold, they make a conscious decision to close their businesses over winter, not to grow their businesses. Surely any tax threshold which has that impact on entrepreneurship and on the need to grow must be changed.
I am pleased to be called to speak in the debate on the Budget resolutions. In January, the Chancellor was fiercely critical of what he called the forces of stagnation holding back economic recovery. With last week’s Budget, which fails the test of growth, strips demand from our economy, and hardwires unfairness and higher living costs into our society, he has joined those forces. Rather than being a Budget for growth, it is a Budget that now depends on growth.
If the OBR’s growth forecast proves overly optimistic, and the resulting lower tax receipts further impede the Government’s ability to encourage growth, what will drive the economy? Before the Budget statement, the OBR was expecting total receipts to exceed non-investment spending by 0.3% of national income by 2015-16. It now expects instead a deficit of 0.2% of national income by then. On Thursday afternoon, the Institute for Fiscal Studies at its post-Budget seminar gave its verdict on the Chancellor’s failure—his spending cuts will now be even more dramatic than planned in last June’s emergency Budget because of surging inflation, cutting 1% deeper over the next four years.
The Chancellor says that only his programme of fiscal consolidation and no other can save the economy from collapse. He talks of the need for confidence in the markets. Emulating Lady Thatcher and Lord Lawson, he tells us that there can be no alternative. But on Thursday morning, the ratings agency Moody’s said that a combination of slower growth and lower than forecast tax receipts could endanger the UK’s triple A credit rating.
This Budget sees growth downgraded for last year, for this year, and for next year, with the price of the Chancellor’s failure on growth being £43.4 billion in extra borrowing, higher debt interest payments to the tune of £17.6 billion between 2010 and 2016, and higher benefit costs of £12.6 billion by the end of this Parliament. The Chancellor’s headline measures, such as the 1p cut in fuel duty, were described by the OBR last week as having at best a minimal effect on the stagnant level of growth that his policies are set to deliver.
Given the appalling UK trade deficit recorded in the last quarter, it becomes even clearer what an error the Chancellor committed in slashing investment and capital allowances inherited from the previous Government. Although the Budget contains some small-scale measures such as on the research and development tax credit for small and medium-sized business, and on the enterprise investment scheme, they are no substitute for a comprehensive strategy on supply-side reform.
Many credible voices, both national and international, have warned the Government that taking £81 billion out of public spending, as they propose, is cutting too far and too fast. Higher unemployment, a slump in consumer confidence and lower growth are the likely results. As Paul Krugman, the Nobel prize-winning economist said in The New York Times last week, after the Budget the downgrading of the economic forecast plus the upgrading of the deficit forecast is evidence that
“slashing spending in the face of high unemployment is a mistake”.
Whereas we should have had a Budget for jobs to reverse soaring youth unemployment now approaching 1 million, we instead had a Budget which directly increases unemployment in each of the next two years by 130,000, and will increase the International Labour Organisation measure of unemployment by 0.5%. The IFS, in its green budget last month, found that Labour’s plan to halve the deficit by 2015 would have restored the public finances to sustainable levels. There is an alternative to the Chancellor’s raid on the winter fuel payments of pensioners from next winter, when the bonuses of the bankers who exacerbated the economic crisis have been left so feebly undertaxed.
Most feeble of all was how the self-proclaimed greenest Government ever completely failed to fulfil the green economy’s potential to generate growth. As the UN environment programme’s report “Towards a Green Economy” concluded recently, green investment
“will result in the long run in faster economic growth.”
On the green investment bank, there will be no independent borrowing powers until 2015 at the earliest, and again that is dependent on growth not being further downgraded and the national debt falling. There are no green ISAs or green bonds underpinned by the Government to promote small investor participation in the renewables sector.
The Chancellor said that his Budget would put fuel in the tank of the economy, but instead he has put the engine into reverse. He has fired up the Quattro and is taking Britain back all the way to the 1980s. There is inadequate help for the construction sector and no plan for jobs for young people. Our country deserves better than this reckless, deflationary gamble, which is hurting but not working. This is the no-growth Budget from the out-of-touch Chancellor.
Until the Labour party acknowledges the problems it left the country and its financial mismanagement, it will never be taken seriously by the British people. The stark reality is that the previous Government took Britain to the brink of bankruptcy—just one more move and we would have been in the same boat as Ireland, Greece and Portugal.
Not everything in the Budget meets with my approval. There are things in it that I wish were not, and things not in it that I wish were. However, it is a Budget of hope, and it is pragmatic after Labour’s years of hopelessness. Among the good things is the fact that I am blessed in Colchester with the most incompetent Conservative party in the east of England, which is matched in incompetence only by the local Labour party. Although I welcome the Budget, it will come as no surprise to Members on the Government Benches to hear that, having spent 40 years opposing the Conservatives, I have not changed my spots. The Budget is more Aldi than Waitrose.
Some Members have referred to their constituencies, and I believe that on occasions such as these we need to remind people that national Budgets have local consequences. They affect local pride and civic leadership. In that respect, I want to state with great honour that last Wednesday Colchester borough council voted to apply for city status, a civic honour granted by Her Majesty the Queen under the royal prerogative. The qualifying guidelines for making such an application state:
“Any local authority… which considers that its area deserves to be granted the rare honour of city status on this very special occasion is welcome to enter the competition… The places to be honoured for the Diamond Jubilee should be vibrant, welcoming communities with interesting histories and distinct identities.”
On that basis, Colchester ticks every box. It is Britain’s oldest recorded town and the first capital of Roman Britain. It is the home of the university of Essex, the most international university in the country, and of which Mr Speaker is a graduate. As a super garrison town, it is also the home of 16 Air Assault Brigade, which is currently serving in Afghanistan. An additional reason why I hope Colchester will become the UK’s newest city is the fact that this is being driven from the ground upwards by an organisation called Destination Colchester, which is bringing together organisations, local businesses and the people of the town. This is the big society in operation.
Among the aspects of the Budget that I am unhappy about are those relating to planning. I urge the Government to look again at the VAT on old buildings, because although converting old buildings to housing is welcome, the 20% VAT levy is a penalty. I hope that they will look at that again. Colleagues will recall that I intervened on the Secretary of State for Communities and Local Government earlier to mention chapter 4 of the coalition programme for government, which relates to communities and local government. The third point states:
“In the longer term, we will radically reform the planning system to give neighbourhoods far more ability to determine the shape of the places in which their inhabitants live, based on the principles set out in the Conservative Party publication Open Source Planning.”
The sixth point states:
“We will… create a new designation—similar to SSSIs—to protect green areas of particular importance to local communities.”
I am delighted that the Secretary of State has agreed to visit Colchester to see the fields of west Mile End, which developers want to put under a housing estate of 2,200 dwellings, against all the wishes of the local community.
I will conclude on beer duty, which was an opportunity lost by our Government. I hope that they will look again at the issue, because our towns and cities are troubled by binge drinkers, and one way to address that would be to put up the beer levy by 10p a pint or thereabouts in the supermarkets and the mega-pubs and to reduce it by 10p a pint in our community pubs, traditional pubs and village pubs. In that way, our local communities—the localism aspect of the licensing industry—would receive the boost. At the moment, the supermarkets and the mega-pubs are able to outdo the local, community pubs, and we all know that the consequence is drunkenness in town centres, so I urge the Government to look again to see whether we can have a lower beer levy for our community pubs.
This Budget trumpets much about growth, and indeed accompanying it we have a whole White Paper, “The Plan for Growth”, which claims to set the seal on those aims so loudly trumpeted. In truth, however, the Budget contains very little that, in the real world, stimulates economic activity or, in a time of deficits or depression, shows any sign of moving the economy forward so that the Government can tackle the deficit other than by just cutting everything they can lay their hands on.
That is a conundrum. Unless all those measures are a cynical put-on, the Government obviously believe that they are setting out a path for growth. They have, as a default position on the economy, chosen a particular path that they believe will, if followed, lead to growth. In technical terms, that assumption is called the Ricardian equivalence: the assumption that Government borrowing is essentially deferred taxation; and that, even in a depressed economy, it is important to send out a signal that the Government will not borrow, so that people discount what they had set aside to cope with what they saw as deferred taxation and, instead, invest and spend, thereby miraculously bringing about growth, deficit reduction and so on. In reality—and in previous depressions—the opposite is usually the public’s reaction, but we will pass that by.
Then, the public, once they are cured of the unhealthy habit of holding money back to deal with perceived deferred taxation, must also have regulations and other matters stripped away if they are to invest and spend. Hence it is necessary to pull apart regulations, collapse planning impediments and so on.
This Budget sets out that false premise admirably, although some of the zeal with which it is being pursued is, to say the least, a little alarming, especially as I imagine the Government still believe that growth should be low-carbon growth in order for them to be, as the Prime Minister has stated “the greenest Government ever”.
The removal of most housing targets and the new announcement of the removal of any prescribed level of house building on brownfield sites, which I am sure is bad news for the hon. Member for Colchester (Bob Russell) and the fields near his constituency, both follow from the philosophy of pulling down regulation so that the private sector can supposedly rush in to invest where the public sector has withdrawn. That must come as a shock, however, to anyone who believed for example that being the greenest Government ever implied some view about the merits of arbitrarily concreting over at a random cost to the environment and to carbon emissions targets.
Two other planning and investment decisions in the Budget must come as a similar shock. The green investment bank has been downgraded to a “fund” for the foreseeable future, so even the merits of the private sector investing in the bank have been eschewed in favour of its functioning as a bank only, as the Budget papers state,
“once the target for debt to be falling as a percentage of GDP has been met.”
In other words, “After all these good people have rushed in and invested to replace the loss of public sector funds, then we might consider some public sector-based funding, even if it is with private money, at a point when the prime need will have passed anyway.”
Not the most significant measure, but perhaps the most shocking—indeed, the measure in the smallest print—is the decision to remove the target to require homes to be built on a zero-carbon basis by 2016, as the Government say:
“To ensure that it remains viable to build new houses”.
Not green, not worried about quality or longevity—anything goes so long as the theory of Ricardian equivalence is upheld. The Government are also apparently holding discussions with industry to see how the principle of the green deal can be extended to new homes. The code for sustainable buildings has been taken out and shot, and B&Q is now going to come in and put the roof on our houses once they are built. Even if that supposition were to be taken just a little seriously, then the signal that has already been loudly given out that spending is to be cut savagely and that the fear of deferred taxation is no more should have started to bear fruit. However, it has not, and that, among other things, is why the Government have had to downgrade their growth forecast so significantly. Consumer and business confidence has collapsed and stays at a very low point. Unemployment is rising, house prices are uncertain or falling, and we had negative growth in the fourth quarter of last year.
Let me give a palimpsest. In my constituency, virtually all the day centre schemes for the elderly are to close in mid-April because the money has been cut. According to Ricardian equivalence, that is a signal to get these old people on their feet and investing in their own facilities—perhaps a private entrepreneur could come in and invest in a gap in the market—but of course that is not going to happen. Jobs are being lost, old people are staying indoors instead of going out and about, and ill-health among elderly people is likely to increase. In short, it hurts but it certainly will not work. No amount of flannel to disguise what an empty set of propositions this Budget, this plan for growth and this massacre of planning and sensible regulation consists of will pass muster. It really is time for plan B, or at least to start reading rather more sensible economists.
I rise to speak in support of my right hon. Friend the Chancellor’s historic and pivotal Budget. Today we have heard Conservative Members give examples of what a difficult hand the Chancellor has been dealt in producing a Budget. We have heard about the £120 million a day—£840 million a week—that the Government have to pay in interest. We have heard that interest has, in effect, become one of the biggest Government Departments. That is why it is so important to point out the difference between the deficit and the overall debt. In setting out the path that he did, my right hon. Friend still has to live with the fact that debt will be rising in every year of this Parliament until the last one. That means that the debt interest bill is still growing, despite the tighter economic conditions that he has imposed.
I think I am probably somewhat different from other Members of this House in that I did not aspire to come here when I was a student. Indeed, I managed to survive the first 40 years of my life without it ever crossing my mind that I should stand for Parliament. Shortly after Tony Blair’s second election victory in 2001, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) gave another historic Budget in which he departed from Conservative spending plans for the first time. At the same time, that Government were beginning to evaluate whether the conditions might be right to enter the euro. Those two horrors were the impetus for me to seek election to this place. I vowed, as a mother, that I wanted to ensure that my children did not grow up in a country that was facing bankruptcy, and yet I failed to get here soon enough to stop the rot. I am therefore very grateful to the Chancellor for having finally set out a path that will enable my children—and one day, I hope, grandchildren—to enjoy opportunities of the kind that I enjoyed when I left university.
Enough of me; I think I should talk about the Budget. I welcome the Budget’s focus on growth and the private sector. When the right hon. Member for Morley and Outwood (Ed Balls) was an adviser to the previous Prime Minister, he set out something called a neo-endogenous growth strategy. Again, I realised quite early on that the problem with such a strategy is that before long the marginal impact of increased Government spending decreases, and one runs out of money. We therefore need to focus on private sector growth, which is why this Budget is so pivotal. A lower tax rate for businesses will bring in higher tax returns.
My hon. Friend makes a powerful point about the importance of lowering taxation on businesses to provide growth. Does she agree that the Chancellor was immediately vindicated the next morning, when Sir Martin Sorrell was on the “Today” programme explaining that WPP, the world’s largest advertising agency, would consider relocating to the UK as a direct result of the Budget?
Those sentiments were echoed by businesses in my constituency, where entrepreneurs welcomed and cheered the measures set out in the Budget. I also received a communication from a non-dom in west Worcestershire—I did not think we had one, but we do. He is so pleased with the clarity of the Budget that he is going to bring lots of money in on a remittance basis to invest in businesses in the UK.
I have a couple of questions for those on the Front Bench. I do not think that we can enjoy sustained economic growth until we resolve the problems with our banks. I agree with the hon. Member for Telford (David Wright), who said that Japan suffered from slow growth for many decades because it did not do anything about its banking sector. The sooner we get rid of the state’s ownership of so much of the banking sector, the better it will be for the health of the economy.
Given that the Financial Secretary is on the Front Bench, I will take this opportunity to read a passage from the Budget speech:
“from April, we are going to impose a moratorium exempting all businesses employing fewer than 10 people, and all genuine start-ups, from new domestic regulation for the next three years.”—[Official Report, 23 March 2011; Vol. 525, c. 956.]
I ask the Financial Secretary to raise this point with the Financial Services Authority, which we know is the regulator of many small, independent financial advisers. I suggest that he take this opportunity to suggest that small IFAs employing fewer than 10 people might be exempt from the increased regulation in the retail distribution review.
In conclusion, I believe that this Budget will be seen as historically pivotal, because it will create real jobs, real growth and real prosperity. Such real prosperity can come only from investment in business and from exports. There will be exogenous growth—the exogenous growth of the private sector. I look forward to supporting the Budget in the Lobby tomorrow.
This could be a Budget for growth—reduced growth. A few weeks ago, the Chancellor blamed the snow. Now we have the old chestnut, “When in doubt, blame the planners.” There is the idea that everything that is wrong with this country is down to our planning system. I accept that some proposals in “The Plan for Growth” may be helpful. Speeding up the consideration of planning applications is generally beneficial. However, I have four areas of doubt in which I want to urge caution.
First, developers want certainty. Consistently tinkering with the planning system leads to uncertainty and is likely to discourage development. Secondly, good developers want good quality development. If they are concerned that on the site next door to them, tin sheds could go up unrestricted, they will be less likely to put their money into good quality development. The Royal Town Planning Institute has cautioned against a return to tin-shack Britain. Thirdly, not only might more houses be built on greenfield sites; if restrictions are not properly applied to applications, out-of-town superstores might rear their heads again, which would go against the policy of the previous Conservative Government of a “town and district centre first” policy for retail development. Finally, we have had enterprise zones before, and last time each job cost an average of £26,000 of public money. There is concern, which the Secretary of State for Communities and Local Government referred to, about jobs simply being transferred to enterprise zones from other areas. He said that that would be controlled, but it is difficult to see how. It is even more difficult to see how we can control the problem of development that would have been undertaken elsewhere going to an enterprise zone instead, at a cost to public funds.
There is a real housing problem in this country. We can welcome the Firstbuy housing programme that the Government have introduced, although it looks very much like HomeBuy Direct, which they have just abolished, by another name. The real concern is the chronic shortage of housing in this country. We hear that from people in our surgeries such as young couples who cannot buy their first home, people who need social housing and are on the waiting list and people in overcrowded accommodation.
What the Government have done in the Budget has to be considered alongside a 50% cut in money for new social homes in the next four years, and alongside the catastrophic fall in the number of planning applications for new homes that are being approved. There is concern that as individuals’ economic circumstances improve in three or four years, as they probably will, when they feel more confident about buying a new home and mortgage availability improves, the houses will not be there to buy because they will have been stopped in the planning system.
We can argue about the abolition of the regional spatial strategies, but it leaves a vacuum behind and there is no evidence at all that the new homes bonus will generate housing development. If it does not, we could be left with a spike in house prices in four or five years’ time, which again will price young people out of buying their first home and force more people back on to the social housing waiting list. That is a real concern, and I do not think the Government are beginning to address it.
When people in my constituency look at the Budget, they will be concerned that it does nothing to address the fact that their real wages are falling or that their benefits and pensions are not going up as fast as inflation. They will also be concerned that the Government have done nothing in the Budget to cushion people from the attack on front-line services caused by the cuts to local government spending.
Local government is taking a much bigger hit than Government Departments, and cities in the north, such as Sheffield, are being hit harder than places in the south, such as Dorset. The front-loading of the cuts is having a real impact. The Secretary of State for Communities and Local Government has said before, “It’s all right, because cities like Sheffield are managing better”. That is not true, despite the fact that the Deputy Prime Minister has said that it is all okay because Sheffield city council is cutting only 200 jobs. Its own website shows that 731 jobs are to go. As it has a high level of outsourcing, many hundred more jobs in the private, third and voluntary sectors will also be cut.
Voluntary sector organisations such as the south-east Sheffield citizens advice bureau are facing 15% cuts to their budgets this year, nearly twice the level of the cut in the council’s funding. That is completely contrary to what the coalition Government said should happen. There are unspecified cuts in the council’s budget, such as £1.3 million for library services. The council is not saying which libraries will close, which books will not be bought or which libraries will have their hours reduced. It is achieving its proposals only by reducing balances to what the chief executive has said is a low level at a time of considerable risk.
Sheffield council is facing up to exactly the same problems as other northern cities are facing. Unfortunately, it is choosing to delay its cuts until after the local elections, when either that deferral of the cuts will help win the election, as it hopes, or more likely the problem will be passed on to a new, Labour council. It is hiding the reality of the cuts from the people of Sheffield. In reality, Sheffield council is facing the same funding reductions as councils in similar cities, and will therefore face the same cuts to front-line services and the same loss of jobs, not merely in the public sector but in the private and voluntary sectors. The Budget will do absolutely nothing to address the situation.
As a nation, we borrow almost £150 billion a year. That is £12.5 billion a month, £410 million a day or an incredible £4,745 every second. By the time I sit down, we will have borrowed another £1.7 million. That is the economic reality that we face, and the reason why balancing the books and business growth are so vital to our country. As an entrepreneur and business man I feel that I have some knowledge of what will damage and what will encourage growth in business, and I am delighted to say that the plans set out in the Budget are most certainly of the latter variety.
I ask Members to imagine, if they will, that we are a group of men and women who are considering setting up or expanding a business. Times are tough, but there are now a number of incentives that can help us make up our mind. One of our earliest decisions is where to site our business. In the early stages, we want to make our capital and that of our investors go as far as possible, so we settle on an enterprise zone, where we get up to a 100% discount on business rates, new, superfast broadband and, as a manufacturing firm, access to enhanced capital allowances, giving us relief on investment in plant and machinery.
At the beginning, like many businesses, our budgets are tight and banks are unwilling to lend, so we look to angel investors for support. The enterprise investment scheme offers tax relief to those investors, and thanks to the Budget the income tax relief on an investment has been increased from 20% to 30%, and the amount that an individual can invest in our business has been increased by 400%. Those changes will make investing in our business, which is an obviously excellent proposition, even more attractive.
My hon. Friend is absolutely right, and I shall come to the effect of corporation tax in a moment.
As a result of the measures in the Budget that I described, our business has raised early stage finance and begun an expansion programme. As a small company, our R and D tax credit will increase from 175% to 200% this April, and to 225% this time next year. That will allow us to invest in products for the future, helping us to carve out a real niche in the market and to sell our products to the rest of the world. That is crucial. In the real world, that helped me and my business, as we evolved YouGov and invested in its future.
Often the smallest things such as changes in regulation, red tape, and complicated tax and health and safety rules greatly affect businesses.
My hon. Friend is absolutely right. That is exactly what the Budget would do for our imaginary business. Three hundred and fifty million pounds’ worth of regulation will be scrapped, the dual discrimination rules in the Equality Act 2010 will be ended, Lord Young’s recommendations on health and safety will be enacted, and new business regulations for the smallest business will be stopped. That is a great starter for 10 from the Chancellor.
As my hon. Friend the Member for South Derbyshire (Heather Wheeler) rightly pointed out, our corporation tax has been reduced by 2% this year, and by 2014 we will be paying the lowest corporation tax in the G7—16% lower than in the US. Many say that that is just a tax cut to line the pockets of business owners, but I disagree. Business owners know that every extra £1 paid in corporation tax is £1 less to reinvest in their business to support growth and job creation, which the Labour party seems never to have understood.
Lowering corporation tax is vital in attracting new, overseas business to the UK. Corporation taxes are not the sole attractor, but they and tax certainty are important in attracting overseas investment. The fact that chief executive officers, such as that of WPP, have announced that their companies are coming back to the UK is testament to that, and today’s letter in The Daily Telegraph from the leading private equity houses reiterates the point.
Let us go back to our little business, which is growing, employing more people, and making more and selling more to the world. However, the cost of fuel is hurting us, and we watch our costs and those of our suppliers increase with transport costs. Luckily, the Government are listening. They feel our pain, and decide to deal with the high petrol price. Under the previous Government, our fuel duty would have shot up by 6p in three days’ time. After all, by the end of their 13 years in power, 75% of the cost of fuel was taxation.
For the employees of our company, the 45p per mile allowance is another huge milestone. The allowance has been 40p for so long that most young people in work cannot remember it ever increasing. That amount was out of step with economic reality. This increase not only makes sense, but is vital for those in business who use their own vehicles, and is particularly helpful to the self-employed. It also, by the way, helps voluntary organisations such as Voluntary Action Stratford-on-Avon, whose volunteer drivers provide such an excellent service.
I return to our little business. What happens if we are successful, and if through our hard work and entrepreneurship it grows, and another business wants to buy us, or we want to float our company? Thanks to the Budget, our capital gains tax relief for entrepreneurs has been doubled to £10 million, increasing the reward for our hard work and investment, and encouraging more individuals to invest in their own business. As you can see, Mr Deputy Speaker, our hypothetical company, like millions of real-world start-ups, will have been aided by the announcements in this Budget. It is a Budget for growth, and through it many start-ups and small firms will get a fighting chance to be a great success. I commend the Budget.
I want to declare an interest. From 2004 to 2010, I worked for a regulator—the bogeyman of Conservative Members. I worked for Ofcom. Working in that area, I was very aware of the dangers and limitations of regulation. However, I am also influenced by my time spent in the private sector in countries that have little or no regulation. It would make for an interesting reality show-type experiment to take Conservative Members who decry all regulation and place them in an entirely unregulated environment to see how they would fare without established property law, civil protection, guaranteed quality standards, working rights, planning control or health and safety.
But enough fantasy. I want to focus on why we need better regulation and the role of regulation in growth. All Governments promise to reduce regulation. I am quite sure that every Byzantine emperor came to power on a platform of less regulation. When Labour was elected in 1997, one of the first things we did was set up the Better Regulation Task Force, and later the Regulatory Enforcement and Sanctions Act 2008 put in place a requirement to remove unnecessary regulation. However, regulation often has unforeseen consequences or is interpreted in bureaucratic and inflexible ways. The solution is not to call for a war on all regulation, but to examine existing regulation imaginatively and to ensure that more public servants have experience of business.
Having worked for a UK regulator with European regulators, I know that we often translate into English law and then interpret European directives in ways that are much less flexible and more burdensome than those in other countries. I welcome evidence-based proposals, therefore, to reduce and/or improve regulation. The improvements to clinical trial regulations proposed in the Budget should lead to better regulation, which is good for business and innovation. However, the sleight of hand by which the Government have delayed green building regulations will actually add to the uncertainty in the building industry and reduce our energy efficiency.
We should not forget that the financial crisis would have been even worse had Labour heeded Tory calls for more deregulation of the City. As the shadow Chancellor has said, we should have been tougher with the City, but the Conservative party was certainly not calling for more regulation in that case. Since coming to power, the Department for Business, Innovation and Skills—the self-styled department for growth—has introduce 26 new regulations in six months, of which several will impose a burden and substantial costs on businesses.
The Government’s repeated calls for reduced regulation are yet another example of their rhetoric exceeding their reach. We know that the Government are recklessly cutting too far and too fast, but they are also entirely failing in leadership. Labour believed that the Government had a duty not to pick technology winners, but to deliver the coherent business, academic and political environment in which the best can win.
Recently I visited a small but growing, innovative high-tech manufacturing company, Kromek, which is developing colour X-rays for security applications. It is based in NETPark—the North East Technology Park—in County Durham, a business park supported by the RDA and the local authority. However, the company is finding it hard to get the talent that it needs, because of the Tory Government’s visa policies—an example of new regulation preventing growth. As the north-east chamber of commerce recently said:
“Since the Government came to power, business have seen the reversal of plans to recycle Carbon Reduction Commitment revenues; the Feed-In Tariff capped; and a delay to the expected start date of the Renewable Heat Incentive. These changes are delaying investment in low carbon technology.”
That regulatory uncertainty means jobs being lost in new industries, including in the north-east. As NESTA—the National Endowment for Science, Technology and the Arts—said when discussing regulation:
“Removing barriers to innovation is important, but on its own it is not enough. Innovation happens in an ecosystem and Government has a role to play in constructing that environment.”
To conclude, rebalancing and growing our economy requires vision, leadership, regulatory imagination, coherent policies and targeted investment. This Government are offering up a few regulatory sacrificial lambs to distract from the vacuum at the heart of their strategy for growth.
I am grateful to follow the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), who was trying to make some positive comments about regulation, as was the hon. Member for Sheffield South East (Mr Betts), who spoke previously. Unfortunately, however, what we have heard from the majority of Opposition Members is this line about how we are cutting too far, too fast. It would really help their presentation to the country, including my electorate—or at least their presentation to us—if they said which cuts they would be prepared to tolerate, because to my electors their position just sounds bogus and false. The Opposition have lost the argument about how we got into this problem, but it would be really useful in the argument about how far we cut to know their position. I can say from my attendance in the Chamber that they have opposed every one of the Government’s proposed cuts. We would therefore love to hear one or two suggestions from the Opposition about where they would be by now.
Like most Members, I suppose, I spent the weekend trying to find out what constituents really feel about this Budget, on the political proviso that we should be careful on the first day, and then see how it sinks in on the following days. We are now five days in, and if I can sum up the general view by quoting one of my electors, he said of the Chancellor—in true Lancashire fashion, of course—that he did not think that the lad had done too badly, given the poor hand that he had been dealt. I have found that to be pretty much the general impression.
As for growth, my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) is absolutely right. Indeed, the north and western Lancashire chamber of commerce has said:
“Overall there is a lot in this Budget for Business,”
and specifically mentioned the corporation tax reduction and cuts in fuel duty. From the workings-out that I have seen, the Federation of Small Businesses gives the Chancellor eight and a half out of 10, welcoming the measures on fuel duty, the fair fuel stabiliser, apprenticeships, deregulation, enterprise zones and small business rate relief, and the doubling of entrepreneurs’ relief and the increase in the R and D tax credit for SMEs.
In the few minutes remaining, I want to pick up on something that my hon. Friend the Economic Secretary said last week when she talked about regional imbalances. Anyone who goes to the Fleetwood end of my constituency and asks people there what their view is of economic policy over the last 13 years, would simply be told that Fleetwood had been forgotten—a port now without a ferry service; a train line without a train on it. Yet behind all that—to return to the point made by the hon. Member for Newcastle upon Tyne Central—all that small businesses talk about are the regulations that prevent them from taking on more people. I have food processors in my constituency that export all over the world, but they are trapped by regulation. They want to take on more apprentices, and they hope that something will come from the measures in the Budget.
The interesting thing about Labour policy on the regional imbalance over the last 18 years is this. The Office for National Statistics uses a measurement called gross value added, which measures the contribution to the economy of each individual producer, industry and sector. It showed that there was decline in the north every year for the past 13 years as growth in London and the south-east increased. Lancashire’s rate of decline was twice that of the whole of the north over the past 13 years. The figures are consistent for every single year.
What has gone wrong? My right hon. Friend the Secretary of State for Communities and Local Government has suggested that the regional development agencies were not working, and I support that view. I sat on the board of the London Development Agency for four years. I have to be careful what I say, because I see my hon. Friend the Member for Ealing Central and Acton (Angie Bray) in the Chamber, and she was instrumental in getting me on to that board as the lone Conservative. But why did London need such an agency in the first place? It had all the bureaucracy and office-led systems of any other development agency. It also claimed that every person employed across the whole of London was employed as a result of its actions. I could never quite make that connection, because I thought that perhaps the City of London Corporation and the development in the docklands might also have had something to do with people coming to London.
There is a general view in my part of the world that people in London think that the north-west begins and ends with Greater Manchester and Merseyside. I am therefore not surprised that each of those areas is to have one of the new enterprise zones, but I hope that Ministers are listening and will perhaps decide that there will be room for one of the 21 zones announced in the Budget in part of Lancashire.
During my four years on the board of the London Development Agency, I learned that, while it is possible to spend money on all kinds training schemes, as the Opposition have proposed, infrastructure is the key. This Government have made a commitment to major transport improvements. I also hope that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) will look into the proposal in the Liberal manifesto for regional stock exchanges. Given the problems with banks and investment, they might encourage greater investment by local people in local businesses. The Chancellor should look into that. A great practical step forward would be the announcement of a Lancashire-wide stock exchange based in Lancaster.
It is always a pleasure to follow the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw), and I will try to respond to his challenges.
The Budget statement treads water while this reckless Government cut too fast and too deep. While the Deputy Prime Minister confides that there will be nothing for him to disagree with the Prime Minister about in future television debates, the nation suffers. Indeed, the nation is bracing itself for worse to come. I was proud to join more than 250,000 honest Britons on the march for the alternative on Saturday. That was the big society in action, rising up to say no thank you to the Government, and I am happy to spell out what the alternative is. Strangely, it is the very alternative that the British people voted for last May. Let us be clear: no individual party won the 2010 election. The British people essentially said, “A plague on all your houses.” One thing is certain, however: they roundly rejected the Conservative argument that there was a need to clear the deficit in double-quick time over four years. That argument was well put by the Tory party and the Tory media, but the British people gave it a resounding no. Instead, more people voted for candidates who argued that the deficit needed to be reduced more carefully and more slowly.
As someone who has run an organisation employing more than 250 people, I well know the difference between making cuts of, say, 8% and 16%. Chief constables said that they could manage a cut of up to 12%, but that anything greater would harm front-line services. The front-loading of cuts in public expenditure will also make the situation far worse. There are many of us in the Chamber who have run real organisations in the real world, and we know that savings can be more intelligently and better made when they are properly planned and actioned over time. There is a massive difference between the quantum of the service reductions being recklessly driven forward by this Government and the approach that Labour has argued for.
Alongside cuts in spending and tax increases, there is a need for growth to address the deficit. The Government’s plan for growth is this vacuous document, and in its four-point plan, it is silent on how to stimulate the biggest driver for growth—demand. That is not surprising as the actions of this Government have been to machete demand. With consumer confidence in free-fall, unemployment rising exponentially and inflation fuelled by a VAT hike, living standards are being eroded and the economy is contracting. All this is before the cuts in public expenditure hit next month and we see record job losses in the public sector and the lowering of demand for goods and services in the private sector. It is not, I am afraid, a pretty picture.
The alternative is to go much more slowly and much more carefully so that things can be managed out there in the real world. [Interruption.] I am sorry that Conservative Members just do not understand the difference between double and half. They simply do not understand it, but perhaps that will get through to them over time.
I am not giving way, as other Members want to speak.
Let me welcome the decision to defer the fuel duty rise in line with what Labour called for. It is disappointing, however, that the rise in VAT on fuel means that even allowing for a 1p reduction, people still have to pay 2p more a litre.
There is potential merit in the incentives for further charitable giving, but these are limited in their scope. I hope that the Government will examine carefully the proposals brought forward, with strong cross-party support, in my recent ten-minute rule Bill. It is designed to ensure that charities taking over the delivery of services from the NHS—for hospice care, for example—are treated in the same way as the NHS in respect of the application of VAT to non-business supplies.
The Budget’s proposals to increase support for technical innovation and research and development are movements in the right direction, as are the faltering steps forward for the green investment bank. However, I am disappointed not to see greater emphasis placed on ensuring that future investment in energy infrastructure will be carried out and supplied by UK-based companies. Such an approach would support the sort of renaissance that is needed in steel-based manufacturing supply chains.
I am further concerned about the introduction of the carbon floor pricing. It is not only steel manufacturers such as Tata in my Scunthorpe county constituency that are sceptical, but organisations like Greenpeace, which said:
“The carbon floor price will put up bills, deliver a windfall profit for existing nuclear power stations and yet it won’t drive investment into clean energy and improved efficiency. It’s not so much a green tax as a stealth tax and it’s exactly the kind of measure that gives green levies a bad name.”
The proposals on planning law are confusing when set alongside the direction outlined in the Localism Bill. At first glance, these are Janus-like policies, pointing in two directions. As the hon. Member for Mid Dorset and North Poole (Annette Brooke) pointed out, they present mixed messages to an already confused world.
Finally, there is nothing in this Budget to support getting young people into work and much to create greater worklessness. The investment in apprenticeships is to be welcomed, but the key issue around apprentices is not student demand—there is plenty of student demand out there—but employer supply. As the Federation of Small Businesses says, small businesses
“are willing to take on apprenticeships given the right incentives.”
This remains sadly unclear. There was also disappointment that the Government had chosen not to extend the graduate internship scheme.
To conclude, this is a Budget that disappoints rather than inspires. It leaves the UK economy charging pell-mell in the wrong direction. It is a helter-skelter ride of falling demand, rising joblessness and falling living standards. I hope the Government will listen to the people, take stock and pause—before it is too late.
I thank all Members for the speeches that they have made this evening. We have heard a bit of knockabout and a few partisan comments, and of course that is all good fun in the Chamber, but I want to shed some light on the issue. I want to draw attention to the writings of one Hamish McRae, the economics correspondent of The Independent—a newspaper which, if truth be told, has not always expressed a favourable opinion of Conservative Members.
From about 2005 onwards, Hamish McRae’s weekly columns highlighted the fact that the then Chancellor was quoting his famous golden economic rules less frequently, until he eventually stopped referring to them, in much the same way as he stopped using the word “prudence”. In later years, Mr McRae pointed out that the Chancellor had continued to borrow money even when tax receipts were fairly plentiful. Despite Tony Blair’s best efforts to stress economic credibility and use the term “prudence” from the beginning of the last decade, the Labour Government abandoned Conservative spending plans and resorted to type, which meant spending money. Labour Members cannot help it: in the end, they always think that they can cure society’s ills and promote social mobility by throwing money at a problem.
The present Government have produced a pro-growth and pro-aspiration Budget. First and most important, it outlines a strategy for growth, a strategy for reducing the national debt, and a strategy for continuing to restore confidence in our once broken economy. We must never shy away from supporting businesses by offering competitive levels of taxation, and we in the House of Commons must send out the message that the country is once again open for business.
Over the last decade, many high-profile companies have left the UK to escape our complicated tax system and our higher than average rate of corporation tax. Given the increased mobility of capital and people, Britain must be an attractive place in which to work and live. We must be a beacon for investment from around the world and the jobs that it will bring. With this Budget, we can once again start to attract the kind of investment that the country needs. Britain must be able to compete to attract the brightest and the best, and enterprise zones, lower corporation tax and other measures outlined in the Budget will achieve that.
I am proud to be able to speak about what I feel is the most important part of the Budget, the part that deals with enterprise zones. I know that the black country has already been allocated an enterprise zone, and I am delighted that the Chancellor has made that decision. I have in mind Wolverhampton and my constituency of Wolverhampton South West when I say that I hope and believe that the reintroduction of enterprise zones will offer the black country an opportunity to rebalance the regional economy and provide the building blocks for future prosperity in areas that have missed out on capital spending projects over the last decade. I grew up in the shadow of Merry Hill. I remember the original site, and I saw with my own eyes the power of ambition and aspiration being tangibly enhanced as the buildings rose up in a sea of regeneration.
The recovery must be led by the private sector, and the Budget outlines how we will be able to achieve that. The growth of small businesses employing a handful of people will be central to our future economic prosperity. They are the engines of our economy, employing 60% of the private sector work force and contributing half the United Kingdom’s annual turnover. Lower taxation, planning simplification and less bureaucracy will provide an ideal cocktail of measures to kick-start local economies and encourage the growth of that vital sector.
Let me end by briefly discussing another of Labour’s legacies. Labour created an environment in which young people feel unable or unwilling to take the first steps in creating their own businesses. On Friday I visited a number of sixth-form politics and economics students. When they were asked whether they wanted to set up their own businesses, none of them said that they did. I was struck by their reaction, which suggested that future generations would not be inspired to go out into the world of business. Indeed, that supports the finding of commissioned research that 50% of young people do not feel that they are encouraged at school to be entrepreneurial. Changing that culture is vital to our economic future. Children in our education system need to be challenged and encouraged to take employment into their own hands. We need to invest in and develop talented young people, supporting them in the first steps on the difficult journey towards creating their own businesses and ultimately becoming successful.
Perhaps more pernicious is the Opposition’s determination to play politics and present the most draconian picture of the responsibility measures taken by the Government. Indeed, the Leader of the Opposition compared the demonstration on Saturday to the struggle for civil rights and the suffragettes. In 2009-2010 Government spending was £669 billion; by 2014-15 it will be £647 billion, a few percentage points leaner. Even more tellingly, in 1999-2000 it was £343 billion, and had it followed inflation, it would have been £438 billion by 2009-2010. In fact, expenditure increased by over 50% in real terms during the current decade. Labour just cannot help itself: it will always be in its DNA to spend other people’s money. Thank goodness we on this side of the House are implementing measures to return the country to good economic governance and responsible spending.
The Government have had to face up to two challenges in this Budget. The first was to do with growth, on which the news presented to the Chancellor as he drew up his Budget was not good. The UK economy shrank by 0.6% in the last quarter and the Office for Budget Responsibility was forced to revise downwards its growth forecast for the next two years. Unemployment is more than 2.5 million, a 17-year high, and is rising rapidly, and again the OBR has had to raise its forecast. The Chancellor must know in his heart of hearts that it is simply not possible to reduce the deficit while the economy is shrinking, tax revenues are falling and the number of unemployed people is rising.
I am afraid I do not have time, as I want others to be able to speak.
Instead of listening to the mounting evidence that the plan is not working and preparing a fiscal plan B, the Chancellor is not for turning. He has stuck to his plan of cutting too far and too fast, and instead of a plan for growth that would create jobs, he has gone back to the failed Thatcherite ideology of the ’80s—that by simply removing regulations and lowering taxes, the private sector will rush in and save the day.
I welcome the announcement of a local enterprise zone for Bristol, of course—this Government have so little to offer us that we have to grab what we are given—but how long will it be before we see the benefits of such a move, and how will we ensure that this does not simply displace investment from other areas that need it just as much? The Work Foundation says that up to four fifths of the jobs created by enterprise zones in the 1980s were merely shifted from other areas. It also says the cost of creating such jobs was in today’s money £26,000 per person. We should compare that with the £6,500 cost per job created under the future jobs fund, which, as I recall, not very long ago the Conservatives were decrying as a waste of public money.
With the regional development agency axed, where is the strategic overview for the wider city region of Bristol to come from? Where are the sources of match funding? Where is the focus on, or funding for, our infrastructure needs? On infrastructure, may I once again make a plea for an integrated transport authority for the Bristol area, as that is badly needed? On housing, I agree with the National Housing Federation, whose representative said:
“Removing regional spatial strategies, without putting anything in their place, was a short-term mistake”.
The NHF has estimated that local authorities have already scrapped plans for more than 200,000 homes as a result of that, and that there may be no new social homes built until 2015. In Bristol alone, 9,600 planned homes were scrapped by the city council. Shelter says that only 39% of housing need is met in Bristol. Last year, about 10,500 people were on the waiting list for social housing, and with transfers included, the number was as high as 15,000, but only a few thousand people a year are being rehoused. There is a clear need for a strategic level of planning to ensure that local need is met.
The Government now promise a presumption in favour of sustainable development in the planning system, but neither that nor the promised national planning framework were set down in the Localism Bill, and that presumption would appear to be at odds with the Localism Bill itself, which gives nimby power to small sections of a community to block developments in a local area. It is therefore unclear whether or not local people have been given more say over planning decisions in their area.
I welcome the Budget’s proposal to speed up major planning decisions. Developers in Bristol have in the past complained to me that it takes a long time—years sometimes—to get approval for their big projects and that it is simply not financially viable to hang on in there and wait. I accept that the planning authorities do need a rocket put under them, but that must not lead to decisions being railroaded through without local people being given a proper say.
The second challenge the Chancellor faced in his Budget was to deliver help for ordinary people, and again he comprehensively failed. The economic crisis began in the financial sector, but ordinary working families are paying the highest price for it. The cost of living is now rising by over 5% per year on the retail price index measure. That is in no small part due to the Government’s decision to raise VAT. Meanwhile, average wages grow at just 2.3%.
At the same time, cuts to services are also affecting the quality of life of ordinary people. Councils are grappling with cuts to their formula grant of 28% over four years. The Communities Secretary said that councils should be able to find efficiency savings rather than make front-line cuts, and the Deputy Prime Minister said that
“they shouldn’t immediately start issuing redundancy notices for savings that they can phase in over four years”,
but the Local Government Association believes councils will make 140,000 redundancies next year across the UK, and the Liberal Democrat-controlled Bristol city council is making 340 people redundant next year alone, and it is reported that 600 jobs are now under review. The Communities Secretary told councillors last year:
“You are now in charge of something like £38 billion every year, no strings attached.”
He also said that they were back
“in charge of the decisions which matter”,
but in fact the only decision that councillors are now empowered to make is the decision to slash services on which local people rely.
The Chancellor could have chosen to implement a real strategy for growth by keeping people in work, building homes and infrastructure, and investing in businesses and industry. Instead he is cutting too far, too fast, and his Government have removed the strategic mechanisms for delivering the investment we think is needed. Even staying within his fiscal plans he could have chosen to put a greater share of the tax burden on the banks by reintroducing the bankers bonus tax. That money could have been used to create jobs and homes, as we suggested. He could have chosen to smooth the cuts to local authority budgets and protect the most vulnerable groups from sudden front-line reductions, rather than front-loading the cuts. The Chancellor is not listening. I predict that in time he will wish that he had.
I welcome this Budget as the first step in a much overdue reform of our economy and our tax system. It is not a sustainable position to expect the private sector, at 50% of the economy, to support itself and the other 50%, which is the public sector. The rebalancing of our economy is not a nice optional extra or a Government whim: it is absolutely essential to our country’s current and future economic survival in an increasingly competitive world. It will be by promoting enterprise that we grow our way out of the disastrous position left behind by the last Labour Government and their debt-fuelled economic model, which has been proven to be totally unsustainable. They borrowed even in the boom years of 1997 to 2004, when the national debt rose by an eye-watering £74.9 billion.
I welcome the announcement of the extra 1% cut in corporation tax to 26% this year, making it the lowest corporation tax rate in the G7, which is accompanied by commitments to reduce corporation tax further in future years. That positive move will let international businesses know that Britain is truly open for business. In addition, there are many signposts that if someone is prepared to take risks to generate wealth and pay taxes, the rewards will be worth while. The doubling of the size of the entrepreneur’s relief, for instance, ensures that if someone creates wealth and employment, they will not be overly punished by the taxman when they exit their business.
Other measures taken in this Budget are a welcome start on the road to regulatory reform and will be of encouragement to employers in my constituency and across the country, especially those with fewer than 10 employees—90% of the businesses in this country fall into that category. The announcements on incentives for charitable giving and the rise in personal allowances should be welcomed and supported by Members on both sides of the House.
I also welcome the announcement that the 50p tax rate is to be reviewed by Her Majesty’s Revenue and Customs, and the revenue raised from the new rate calculated. I have written at length about the damage the measure has done to our economy. Hon. Members will recall that when Nigel Lawson cut the top rate of tax from 60p to 40p in 1988, the tax take rose and the top earners actually paid a larger share of it. When the Treasury recently decided to set the rate of capital gains tax at 28%, it stated that studies it had conducted concluded that this was the rate that maximised the tax take. If that is correct and the optimum rate for unearned income is about 28%, it is very unlikely that the optimum top rate of income tax should be nearly double that level. I look forward to the report in due course.
On a personal basis, on behalf of North West Leicestershire, I very much welcome the news that the per plane tax plan is to be dropped. East Midlands airport is in my constituency and the jobs dependent on both the airport and air distribution are a significant part of my district’s economy and employment base. There is nothing more international than air transport and if we had acted alone with the per plane tax, those jobs would have been threatened. Cuts in fuel duty are also particularly welcome for North West Leicestershire, as one in three of our private sector jobs are either in distribution or distribution-related.
I believe the Budget will act as a signpost that the Government will take action to reform our taxation system and our economy. Labour left our economy in a totally unsustainable state—imbalanced in so many ways, whether that meant the proportion of the economy made up by the public sector, our decline in manufacturing or our reliance, or over-reliance, on financial services and housing bubbles. There is no doubt that Labour’s economic model was and still is unsustainable. The attitude of the Opposition to the record deficit they bequeathed the coalition Government is both startling and opportunistic. In opposing all the coalition Government’s saving reductions but still claiming to be in favour of deficit reduction, they are failing to act in their duty of being a credible Opposition on this topic.
This is a good Budget for growth, a good Budget for jobs and a good Budget for North West Leicestershire, and I support it enthusiastically.
A very interesting thing happened in my city in 2009. For the first time since the 1960s, the number of affordable rented homes built exceeded the number of private homes—55% of all new build was affordable rented homes, subsidised by public spending. That subsidy helped the private builders who otherwise would have had to shut up shop for a while—as many have had to do—and meant that some at least could stay in work, and that gave work to the skilled work force who would otherwise be sitting at home watching daytime television because there was no work. When those people are at work they are contributing to our economy and paying taxes—[Interruption.] I do not know why that is so funny for people who want to reduce the deficit, because if people are paying taxes in, that is far better than their simply taking benefits out.
That was a good thing. It showed the weakness of the private sector, however, that it was affordable rented homes that had to be built in the numbers to keep some people in work. I look out from my constituency office at a regeneration scheme that has stalled because the private sector is not leaping in to build new homes and to bring offices or any other kind of business into the area. I look out on land. There is no shortage of land, but there is a shortage of investment to make all this development happen. We ought to invest in housing and build a real shared equity scheme, rather than providing a meagre amount of money that will be available for only one year, as we learn if we read the detail. The scheme is not sustainable: for one year there will be £250 million.
Shared equity has certainly helped to keep the house market going in my city—it is very important—but it needs subsidy. What is wrong is the constant juxtaposition of the private and public sector as though they are at war. In fact, the two are constantly interrelated.
No, I will not.
The private and public sectors are constantly interrelated, because public sector stimulus has kept the economy going since the recession began.
History has been rewritten, and I find it deeply perplexing and upsetting that the Liberals have been prepared to be complicit in that. I am not surprised that the hon. Member for Colchester (Bob Russell) took us along the byways of Colchester becoming a city, because it was a diversionary tactic. He did not want to talk about his party’s real economic policy. It reminded me of when I was working from home—suddenly, cleaning the kitchen became quite attractive because I could not settle down to do the work that required a bit more effort. That is what is happening with a party that went into the election telling people that it would be downright dangerous to cut public spending too quickly. That is not just some sort of Labour notion, as the Conservatives seem to think. It was the policy of two of the parties that went into the election and that, together, won a majority of public support. It is not true that the public supported the financial disaster that the Conservatives are now wishing on us.
I said in a previous finance debate that the proof would be in the outcomes and that if the Conservative party was right and economic growth was driven by their policies, I would concede that, but so far we are seeing nothing of the sort. Our position would not be too far, too fast—
My hon. Friend the Member for Edinburgh East (Sheila Gilmore) was making her point so well, and I commend her analysis of this Budget, as well as those of my hon. Friend the Member for Coventry South (Mr Cunningham), my right hon. Friend the Member for Wythenshawe and Sale East (Paul Goggins) and my hon. Friends the Members for Liverpool, Wavertree (Luciana Berger), for Newcastle upon Tyne Central (Chi Onwurah) and for Telford (David Wright), among others. They all made the point that it is a no-growth Budget that is hurting many people and that certainly will not help our economy in the years ahead.
We do not have to look far to see the cracks emerging. Setting aside the scepticism that some might have had about the Office for Budget Responsibility, a cursory flick through its detailed analysis shows that the Budget has had a dilatory effect on our economy. The first line of chapter 3 on page 31 of its report cites a squeeze on household disposable incomes in the coming months weakening consumer spending growth. The OBR states on the same page that
“we have revised down our central forecast for economic growth in 2011 from 2.1 per cent to 1.7 per cent.”,
as my hon. Friend the Member for Southampton, Test (Dr Whitehead) has pointed out. Page 53 of the report says that real household incomes will “fall further in 2011”, and page 54 states:
“We have revised down our forecast for consumption growth…from 1.3 per cent to 0.6 per cent”.
Page 62 tells us that the medium-term forecast for exports needs to be revised downwards and page 72 states:
“We expect unemployment to rise over the next few quarters,”
with unemployment 80,000 higher in 2012. On page 75, the OBR downgrades forecasts for average earnings and output growth and on page 76 it tells us that aggregate wages and salaries will be
“around 1 per cent lower by 2015-16 than expected”—
and on and on it goes.
Economic growth matters, but that simple fact is lost on the Chancellor. I asked the Library about the cost to the Exchequer of that infamous quarter 4 reduction in economic growth in the last few months of 2010 when the economy shrank by 0.6%. It estimated that that reduction has caused a £3 billion reduction in Treasury revenues—£3 billion that might have been anticipated in revenue if performance in quarter 4 had been anything like that in quarter 3. That significant sum would have been enough to offset the need for the freeze in child benefit or the cuts in capital allowances for business investment that the Chancellor announced.
There is a symmetrical irony in that the OBR says, on page 125 of the report, that an
“increase in the claimant count”
will lead to “higher benefit payments” in 2012-13. As my hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Glasgow North East (Mr Bain) have pointed out, the OBR has forecast an increase in social security costs of
“approximately £3 billion per year from 2012-13 onwards”.
When economic growth is driven down and unemployment is increased, those costs and the deficit are both going to be increased, as the eminent economist Paul Krugman has pointed out this week. This obsession with deficit reduction to the exclusion of all else—this fetishism—is a very narrow view of the world and ignores the impact that the Government’s belligerent strategy is having on the real economy.
The other document that was published with the Budget, “The Plan for Growth”, has also failed to convince anyone that the Government understand the importance of the real economy. The OBR’s reaction to the policy measures, when it had totted up all the Chancellor’s announcements, was that
“we do not believe there is strong enough evidence to raise our trend growth assumption”.
That is its response to the measures in the growth plan. As my hon. Friend the Member for Scunthorpe (Nic Dakin) so eloquently put it, the Government have taken a machete to growth—that is exactly what has happened. Their growth plan is riddled with confusion, fudge and contradictions.
Enterprise zones sound interesting at face value, but when they were tried in the 1980s they took jobs from surrounding areas. My hon. Friends the Members for Blyth Valley (Mr Campbell) and for Oldham East and Saddleworth (Debbie Abrahams) tried to be as optimistic as they could when looking at those enterprise zones, but we have seen that the Government give with one hand and take away so much more with the other. Any improvements to capital allowances on the margins are taken away by a factor of 10, with the cuts in capital allowances of £5 billion announced for the next five years.
There are in the growth plan allusions to weakening employee rights, as though that is the avenue we have to go down to boost growth. There is an allusion to clarity on the national minimum wage. We will have to see where that goes. There is opposition to improvements in maternity and paternity rights—typical Tory fare. There are some interesting vignettes on legal reforms that the Government want to make. For example, injured parties will have to deduct their legal costs from their compensation, instead of those costs falling on the negligent party. The Government want fewer food safety inspections at takeaways, as some hon. Members mentioned this evening.
There are references to abolishing money-laundering regulations and reducing corporate accounting, but hold the front page! Many people may not have got as far as page 121, where the Government say—this is absolutely serious—that they will review the Outer Space Act 1986. Presumably they will give us a clue what planet they are living on. One assumes it is planet Redwood, but who knows?
As we can see from the discussion that we have had today, the cuts have been significant and they are having an effect on the real economy. We can see that the unprecedented reductions in local government expenditure will harm local economies. My hon. Friend the Member for Sheffield South East (Mr Betts) mentioned that 737 jobs are being lost in Sheffield alone. The Government are facing both ways when it comes to local government reform. The set of proposals in the Localism Bill is hardly deregulatory, with 142 order-making powers. The Government are facing both ways on business rates. They promise local freedoms to councillors, but when businesses object, they say, “We will have national certainty when it comes to business rates.”
There is a looming crisis in residential housing and property finance. On planning policy, as my hon. Friend the Member for Sheffield South East said, so much for localism, when the Government’s clear expectation is
“that the default answer to development is ‘yes’”.
We will see how far localism goes in each of the constituencies of those on the Government Benches.
My hon. Friend the Member for Bristol East (Kerry McCarthy) pointed out that although the planning process needs to be speeded up, the supposed guarantee of a 12-month closure, including the appeal, is incongruent with the 35% cut in the planning inspectorate’s budget—35%. We will see whether the Government can live up to that guarantee. They are abolishing the Infrastructure Planning Commission, but they will have to recreate a major infrastructure planning unit within the planning inspectorate. They say they will get rid of top-down guidance, but the growth plan refers to five new national guidelines.
It must be recognised that there are significant problems with the Budget, one of which is the risk of a lost generation of young people. Youth unemployment is up 30,000 in the first quarter of this year to just under 1 million claimants between the ages of 16 and 24, the highest since comparable records began in 1992. We know that in the 1980s—the Secretary of State for Communities and Local Government has joined us as a shibboleth for that era—the Government neglected the risk of unemployment. We know the story.
Now, again, a younger generation is forgotten by the Government. Young people are losing their education maintenance allowances, their tuition fees are being trebled to £9,000 per year if they go to university, and opportunities to get into work or on to the career ladder will be rare. There is insufficient emphasis in the Budget on work experience and apprenticeships. The Government should have repeated the bank bonus levy that we implemented last year to raise resources to target job creation, but no; instead, they have scrapped the guarantee of apprenticeship places for 16 to 18-year-olds—a massive backward step.
What hope do young people have of getting on the housing ladder with the rather puny Firstbuy scheme, which Shelter says will help less than 1% of first-time buyers? As my hon. Friend the Member for Sheffield South East mentioned, there is a 50% cut in the new social homes construction budget. On top of that there are cuts to housing benefit. Even on pensions, young people are penalised should they dare to want to save for the long term. The Government assume that they can get away with pulling the rug from under young people, perhaps because they do not vote, but the mood is changing across the country. There is a profound sense of unfairness in cutting young people adrift. It is foolish economics to consign a generation to poorer prospects and less prosperity than their parents enjoyed. The Budget’s adverse impact on young people will penalise and alienate those in their teens and 20s. It is a catastrophe in the making, and the Chancellor will rue the day he neglected the younger generation.
We knew that the Labour party was in denial about the deficit and the difficult decisions that the country has had to take as a consequence of its legacy, but every one of the 16 speeches we heard from Opposition Members today reiterated that same denial. They claim that 250,000 people were out at the weekend to find an alternative, but there is clearly no alternative from those on the Opposition Benches. In speech after speech, Labour Members denied the reality of the economic situation they left the country. They have forgotten that when they were in Government the manufacturing sector halved in size while financial engineering replaced real engineering, and that our share of world trade fell as we failed to take advantage of growth in the global economy. The gap between the north and the south grew on their watch, and under their stewardship red tape, whether regulation or the length of the tax code, ballooned, acting as a dead weight on business. Their legacy to this country is an economy that needs reform if we are to have stable and sustainable growth, if every part of this nation is to prosper and if we are to compete with the best in the world. That is the agenda of reform that we set out in the Budget last week.
We want the UK to become the best place in Europe to start, finance and grow a business, but in the past decade alone countries such as Germany, Denmark and Finland have overtaken us in international rankings for competitiveness. In our plan for growth we have therefore taken action to abolish £350 million-worth of specific regulations, to implement in full Lord Young’s recommendations on health and safety laws and to impose a moratorium, exempting businesses employing fewer than 10 people and all genuine start-ups from new domestic regulations for the next 10 years. These measures were welcomed by my hon. Friends the Members for Aberconwy (Guto Bebb), for Mid Dorset and North Poole (Annette Brooke) and for City of Chester (Stephen Mosley). No longer will British business be tied down by wasteful red tape.
We are going to tackle what every Government have identified as a chronic obstacle to economic growth in Britain but have never done anything about: the planning system. Councils are spending 13% more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third. Yes, communities should have a greater say in planning, but as a result of the Budget we will expect all bodies involved in planning to put jobs and growth first, and we will introduce a new presumption in favour of sustainable development so that the default answer to development is yes.
We will protect the greenbelt, but we will also remove the nationally imposed targets on the use of previously developed land. We will streamline the planning process. I welcome the support from the hon. Member for Bristol East (Kerry McCarthy), who wants to stop applications being bogged down for years, which I think will free up the economy. I am pleased that there is at least one measure in the Budget that Labour Front Benchers will support. No longer will cumbersome planning rules and bad regulation stand in the way of job creation up and down this country.
There has been a lot of talk about enterprise zones. The hon. Member for Nottingham East (Chris Leslie) was dismissive of them, so I think that he should speak to his friends the hon. Members for Blyth Valley (Mr Campbell), for Telford (David Wright) and for Coventry South (Mr Cunningham), who all want to see enterprise zones in their constituencies because they want to see the benefit that will flow as a result. We have already announced four new enterprise zones: Mersey Waters in Liverpool; the Royal docks in Newham; Manchester city airport, which was welcomed by the right hon. Member for Wythenshawe and Sale East (Paul Goggins); and the Boots campus in Nottingham. There are 17 more to follow. The only Member who did not call for an enterprise zone in his constituency was my hon. Friend the Member for Colchester (Bob Russell), who went one further and called for Colchester to become a city. I do not know whether city status will offer the same benefit as enterprise zones, but I wish him well in that bid.
There was some discussion among Opposition Members about the problems of youth unemployment. We know that under the previous Government youth unemployment increased. Let me remind the House what the Chancellor announced in the Budget last week: 80,000 additional work experience placements and a doubling of the number of university technology colleges from 12 to 24. He announced 50,000 additional apprenticeships, taking the number introduced by this Government to 250,000 in total, compared with the plans left us by the previous Government.
We also need to make sure that we have a competitive tax system. Britain used to have the third lowest corporate tax rate in Europe; now we have the sixth highest. At the same time, our tax code has become so complex that it has overtaken India’s to become the longest in the world. As my hon. Friends the Members for Mid Sussex (Nicholas Soames) and for Wolverhampton South West (Paul Uppal) said, we have to address that issue.
Our taxes should be efficient and support growth, be fair and predictable, simple to understand and easy to comply with. That is why from April the corporation tax rate will be reduced not just by 1 percentage point as we announced last June, but by 2 percentage points, and by 1 percentage point for each of the next three years, taking our rate down to 23%—16 percentage points lower than in America, 11 lower than in France and 7 lower than in Germany, giving us the lowest corporation tax rate in the G7.
A competitive tax system is not just about lower rates, however; it is also about the way in which we make tax policy and cut the cost of compliance. That is why last July we set up the Office of Tax Simplification to give advice on how to reduce the complexity of the tax system; and that is why we are going to reduce no fewer than 43 complex reliefs, from Black Beer to Angostura Bitters and late-night taxis to luncheon vouchers. We are ridding the tax system of unnecessary legislation and taking out 100 pages from our tax code, which is a good step towards creating a simpler tax system and reducing the cost of compliance for small businesses.
We need to go further, however. For decades, we have operated separate systems for income tax and for national insurance, with two completely different systems of administration and two different periods and bases of charge. That imposes unnecessary costs on our country’s employers, and that is why this Government will consult on merging the operation of national insurance and income tax to create a simpler, more competitive and more stable tax system that is an asset to our economy.
Several hon. Friends talked about the importance of small businesses having access to finance, and we should not ignore the problems that businesses face in that regard. Small businesses in particular have been innocent victims of the credit crunch. They have seen the flow of affordable credit dry up, their overdrafts squeezed and lending conditions deteriorate. That is why we have agreed with the nation’s banks a 15% increase in the availability of credit to small businesses.
But that is not the end of the story. As my hon. Friends the Members for Stratford-on-Avon (Nadhim Zahawi) and for South Northamptonshire (Andrea Leadsom) said, we need tax incentives to encourage entrepreneurial activity, and that is why it was good to see Sir Ronald Cohen and a number of venture capitalists and business angels praise the measures we announced in the Budget last week to double the size of entrepreneurs relief to £10 million and to increase income tax relief to 30%. That is how we will provide finance to the nation’s small businesses in order to help them to grow and create the jobs that we will need in the future; and that will help Britain to become the best place in Europe to start, grow and finance a business.
The issue is not just about financing start-ups and smaller businesses. We are pleased that the banks have agreed to increase the size of business growth funds to £2.5 billion, and to provide more equity investments for small and medium-sized businesses that want to grow and become the best in the world.
This Government are looking to right the wrongs of the past. We are going to reverse the trend of the past decade, a decade that saw manufacturing shrink, businesses tied down by red tape imposed by the previous Labour Government, the south grow faster than the north and growth balanced precariously on a mountain of debt. We will not repeat the mistakes of the previous Labour Government. We want to see growth built on firm foundations, with reforms that make our country more competitive and more business-friendly, with an economy exploiting new opportunities in the manufacturing, life sciences, digital and creative industries.
That is why the Budget has been greeted with acclaim throughout the country by business organisations that recognise the measures we have taken. That is why the strategy that my right hon. Friend the Chancellor set out, of tackling the deficit, has been supported by the OECD, the International Monetary Fund, the European Union, the CBI, the Institute of Directors, the Bank of England and 35 business leaders who wrote in support of our plans at the time of the spending review last year. Who can the Opposition claim in support of their plans? The Guardian. Is it not typical that, when this country needs far-reaching economic reform, the only answer that the Labour party has is a policy, which it knows is illegal, to cut the VAT rate on petrol?
We have set out measures to ensure that we tackle the mistakes of the past, that build a more dynamic, prosperous and sustainable economy that this country—
The debate stood adjourned (Standing Order No. 9(3)).
Ordered, That the debate be resumed tomorrow.