House of Commons
Wednesday 21 March 2012
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Minister for the Cabinet Office was asked—
8. If he will undertake an impact assessment on the effect of changes in resource for the civil service on delivery of Government policy. (100944)
Our aim is to maintain the superb quality of our civil service while reducing its quantity. Under this Government the civil service headcount has come down from 487,000 to 435,000, which is smaller than it has been at any time since the second world war. Of course, this reduction helps to reduce the deficit, but it is also a natural consequence of our intention to reduce bureaucracy, improve public services and promote the big society by shifting power to people on the front line.
A recent National Audit Office report on cost reduction in central Government suggests that the staffing departures revealed an unplanned and haphazard redundancy drive that has paid off 18,000 civil servants since 2010, at a cost of £600 million, to save just £400 million. One of the report’s conclusions is:
“Few departmental systems can link costs to outputs and impacts, making it difficult to evaluate the effect of cost changes”.
Does the Minister agree, and what will his Department do about it?
The right hon. Gentleman has a distinguished career, which includes at one time being Parliamentary Private Secretary to Lord Kinnock, so presumably he has some experience of figures that go completely wonky, and the ones he is presenting give a very wonky picture. What the NAO report actually revealed is that the cost to the Departments was £600 million, the payback to the taxpayer was over 10 to 16 months and the total savings in this spending review period alone, in net present value, will be between £750 million and £1.4 billion. There is a massive saving there, which he would see if he read the whole report.
Recent analysis by the Office for National Statistics revealed that half of all central Government Departments, including the Minister’s, have actually increased staff numbers in the past six months. How does that fit with the Government’s pledge to increase localism? Is that not more central bureaucracy being created?
The hon. Lady will be aware that, as I mentioned in my first answer, there has been a massive reduction in the headcount of the civil service as a whole. Of course there have been particular cases in which particular people needed to be hired, but the broad effort we have been making has brought down the deficit and increased dramatically the efficiency of the civil service.
May I remind my right hon. Friend of the findings of the Public Administration Committee report, “Change in Government”, published last autumn, which identified the reduction in resources as just one of the many changes the Government are trying to achieve in the civil service? We await the plan for civil service reform with great interest, because our main conclusion was that the Government need a plan in order to effect this change.
My hon. Friend, the Chairman of the Public Administration Committee, is absolutely right. My right hon. Friend the Minister for the Cabinet Office and Paymaster General and I have had meetings with the Prime Minister, the head of the civil service and the Cabinet Secretary, and under the aegis of those two very senior officials the review to which my hon. Friend refers is now being carried forward. There will be a strategy—much beloved of the Committee—that will emerge from that review, and once it is available Ministers will consider it and produce a plan for further changes in the civil service.
I am afraid that some wildly inaccurate reports have been floating around, but it is certainly true that the review that the Cabinet Secretary and the head of the civil service are leading on, which I mentioned in my previous answer, is looking right across the board to try to work out what a modern civil service ought to look like, bearing in mind all the technology and other advantages we currently have, in order to deliver innovation, change and the delivery of policy in the most effective and efficient way possible.
The Minister has announced the closure of the Central Office of Information, which provides politically independent public information from professional civil servants, and he will instead locate the service in various Departments, with the consequential inherent risk that the Government information service might become politicised. We would of course support any sensible measure to deliver a more economic service, but is not the current flood of leaks, on an industrial scale, in relation to today’s Budget a portent of the public information service’s politicisation, which he is opening the door to?
In a word, no. The changes that are being made in the structure and character of the information service are being made in order to have a modern service that can actually do the job properly. The hon. Gentleman ought to pause before talking about politicisation of the civil service, as under the previous Government efforts were made on an unparalleled scale to politicise the service’s activities. By contrast, this Government in all our information have been extraordinarily transparent, providing data on an unparalleled scale and operating a much more open Government than he and his colleagues ever dreamed of doing.
But that is all flim-flam, frankly. The leaking of Budget information on that scale is without precedent, and it is in clear breach, Mr Speaker, of your strict admonition that such statements should take place first in the House and not in the media. There is no way that professional civil servants in the COI would have undertaken such leaking, so does the Minister agree that there should be a Cabinet Office inquiry to identify the leakers? If it was civil servants, they are clearly in breach of their code of conduct, but, if it was Ministers, they are playing fast and loose with our democracy.
First, if the hon. Gentleman recalls his time as the Parliamentary Private Secretary to the previous Prime Minister, he will be aware that he was serving a past master at giving foretastes of Budgets. Secondly, I am surprised that the hon. Gentleman feels he knows what is or is not a leak, as he has not seen the Budget yet, and nor has the House.
Policy Advice (Outsourcing)
The head of the civil service has set up a number of themed groups to explore various aspects of civil service reform. One is exploring whether outsourcing policy making could deliver more creative and innovative results, while ensuring accountability and value for money, and I met permanent secretaries recently to discuss that and other issues.
The Cabinet Office spent almost £120,000 in one day in August last year on consultancy, and McKinsey & Company is reported to have earned almost £14 million from Government health policy since the election. Outsourcing policy advice is costly and can lead to conflicts of interest, so will Conservative Ministers stick to their pledge in their manifesto to reduce the amount of consultancy?
Not only will we, but we have. We have more than halved—I stress, more than halved—the cost of consultancy to the taxpayer. Under the previous Government, such money was spent incontinently, and the result was bad value for money and the serious undermining of the self-esteem of professional civil servants, who like being asked to do difficult things and are very good at doing them.
As the new Cabinet Secretary said the other day, the civil service has in the past had a monopoly on policy advice, and he and others feel that it is something worth questioning. I am sorry that it is only the Opposition who seem to have closed minds on the issue.
Voluntary and Community Sector
We want to help the voluntary and community sector to become more resilient by developing three pillars of funding: traditional giving, income from the state including more opportunities to deliver public service and a new pillar, the emerging market of social investment.
Many local voluntary organisations were set up to complement statutory services, as Nottingham Community and Voluntary Service reminded me when I met its representatives last week. If the predominant funding source for the voluntary sector is now to be public sector contracts, will not thousands of valuable voluntary groups throughout the country be left high and dry, showing once again this Government’s utter contempt for the big society that they purport to champion?
I think the hon. Lady missed my point. We are developing three pillars of funding, with the encouragement of high levels of giving, including a very generous tax incentive introduced by the Chancellor in the previous Budget; a new source of funding, social investment; and the launch of the world’s first social investment bank within a few weeks. But, yes, we want to do more with the sector to help us deliver public services, so, yes, we will be opening up new opportunities for charities and social enterprises to help us do just that.
No. The hon. Gentleman asks his supplementary question now, although it would have been helpful if there had been advance notification of the grouping to my office, which there was not. Very regrettable. The Minister must do better in the future, I am afraid.
A survey commissioned by Charity Bank has revealed that more than 20% of charities have suffered from the cancellation of contracts with businesses and Government bodies in the past year. Does the Minister agree that the Government’s refusal to recognise the needs and benefits of charities and voluntary organisations in policy formulation is preventing such organisations from getting vital funding to which they are entitled?
First, Mr Speaker, I apologise to you formally for that oversight by my office.
The hon. Gentleman makes an important point. Any commissioner in the public sector needs to engage with stakeholders in communities before commissioning services—not least in the voluntary and community sector, whose stakeholders tend to have, on the whole, a much better understanding of the needs of the people we are trying to help.
Five months ago, the Prime Minister told me here that he would look at the funding gap arising from changes to legal aid funding for advice services such as the citizens advice bureaux in Wiltshire. Does the Minister consider that he has yet found lasting funding arrangements to sustain that voluntary sector service in future years?
We know that the charity advice sector is under a lot of pressure; that is why we found the money for a £20 million fund to provide immediate support for the most vulnerable organisations and why we are undertaking a serious review of the longer-term issues facing the sector. We will be announcing the findings of that review later in the spring, so the hon. Gentleman may not have to wait very long.
Will the Minister join me in congratulating the work of bodies such as Voluntary Action Leicestershire, which are advising the voluntary and community sector so well in Leicestershire, including my constituency of Loughborough, on how to find alternative funding models and how to do things differently given the changed funding environment?
I am certainly happy to do that. Such organisations play an essential role in providing support for front-line organisations. That is why we have found £30 million of funding to support organisations as they improve those services for the front line through the transforming local infrastructure fund.
Voluntary Sector Funding
Most voluntary sector organisations receive no public funding at all, but those that do cannot be immune from the need to reduce public spending. That is why we are taking active steps to help the most vulnerable organisations, to encourage more giving and social investment, and to create new opportunities to deliver more public services.
Given that the most recent report by the National Council for Voluntary Organisations shows that, according to the Government’s own figures, charities are facing cuts of £1.2 billion in public money per year, does the Minister agree that the Government need to do more to support the voluntary sector in constituencies such as mine, Feltham and Heston, as we turn around what the NCVO has described as a “toxic mix of circumstances” affecting our charities?
As I have said, almost 80% of charities receive no money from the state, but we have made it clear that those that do cannot be immune from cuts. The Labour leader himself has made it clear that he could not have protected them from cuts at all. We should remind ourselves that the cuts are necessary because of the actions of the last Labour Government. This Government are taking action to protect the most vulnerable organisations, create new sources of funding and open up new opportunities for charities and social enterprises to deliver public services. All they hear from the Labour party are empty words.
Voluntary and Community Sector
Our agenda is to give community groups and other voluntary sector organisations a much wider role in fulfilling the demands and needs of the public than they have had in the past. That is why, in considering each of our public service reforms, we have paid particular attention to the question of how the voluntary and community sector can work through them and help them.
Research by the NCVO has shown that Government Departments plan to cut a further £444 million of funding from the voluntary and community sector. Does the Minister agree that that is evidence of the complete disregard of his own Government for that sector?
Absolutely not. The hon. Lady should look carefully at what we have done in respect of funding of advice services, to which the Parliamentary Secretary, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd), referred a moment or two ago. In 2010-11, the funding stood at rather less than £200 million, but in 2011-12 it went up and it has almost maintained the 2011-12 levels—still above those of 2010-11—for 2012-13. The Government are investing in the voluntary and community sector, not disinvesting in it.
Some examples of bureaucracy are being faced by many in the community and voluntary sectors. What are the Government doing to try to ensure that those sectors face no undue levels of bureaucracy in delivering their services?
The hon. Gentleman is absolutely right—there are major bureaucratic obstacles and regulatory hurdles. My noble Friend Lord Hodgson has been looking specifically at those, and my team and I have been looking at them as part of the red tape challenge. We are going through every single regulation that affects the voluntary sector, the community sector and social enterprises to see what we can do to ameliorate or remove those obstacles, because we are determined to build the big society.
I am grateful, Mr Speaker.
A year ago, the Prime Minister and I launched a package of radical measures to increase opportunities for small and medium-sized enterprises to supply to Government. One year on, central Government’s direct spend with SMEs is on track to more than double to nearly 14% since we took office.
I am delighted to tell my right hon. Friend that we make this information much more public and transparent than it has ever been before. The Contracts Finder website contains much more information about tenders, contracts and successful bids than has ever been the case, but we have more distance to go, and we will do so.
I am delighted to say that nine of the biggest suppliers to Government have already agreed that they will advertise on Contracts Finder their contracts for sub-contract as well, and that will increase accessibility. In addition, we are taking steps to ensure that payments get made quickly not only to prime contractors but to sub-contractors further down the supply chain. [Interruption.]
11. The Government say that they are committed to ensuring that 25% of all Government contracts will be awarded to SMEs, but official figures and the experience of SMEs in my constituency show that the situation is getting worse. When are the Government going to get their act together on this? (100947)
I fear that the hon. Lady wrote her question before hearing my answer. We cannot make a commitment; it would be illegal to do that. We have an aspiration to move to 25%. The Government formed by the party of which the hon. Lady is a member did not even bother to measure how much of this was happening. In the past year, we have more than doubled the amount of spend that goes directly to SMEs, but there is further to go and we will go that distance.
Last week, Mark Taylor, the co-chair of the “new suppliers to Government” panel which is advising the Minister on SMEs, resigned, saying that Government contracts to SMEs were “drying up”, that things were “going backwards”, and that SMEs were
“finding it more difficult to do business with Government”,
and accusing the Government of “recounting” their figures. Given that the Minister has admitted that the Government are nowhere near their promised 25% target, will he explain why the proportion of procurement spend going to SMEs is falling at the Department of Energy and Climate Change, the Department for Culture, Media and Sport, the Department for Business, Innovation and Skills, the Department of Health, the Department for Education, the Department for Transport, Her Majesty’s Revenue and Customs, the Department for Environment, Food and Rural Affairs, the Department for International Development, and the Treasury?
I say to the hon. Gentleman that if Mr Mark Taylor had come to any meetings of the SME panel over the past six months, he would have been more up to speed with the considerable progress that is being made. The previous Government, for whom the hon. Gentleman was an adviser, cared so little about this matter that they did not even measure what was being done. We have, I repeat, more than doubled the amount that is spent with SMEs over the past year. That amount will continue to grow.
My responsibilities as Minister for the Cabinet Office are public sector efficiency and reform, civil service issues, the industrial relations strategy in the public sector, Government transparency, civil contingencies, civil society and cyber-security.
Three providers are delivering more than 600 places across Lancashire this year. Those providers are Catch22, The Challenge Network and Fylde Coast YMCA. I strongly encourage young people and their parents in Rossendale and Darwen to find out more about the NCS through its Facebook page or the Cabinet Office’s NCS website.
T2. What progress has been made by the commission into the West Lothian question? Many Opposition Members, and I am sure many Government Members, do not want to see a two-tier system of hon. Members in Westminster. What progress has the Minister made on this matter? Will he assure Members that we will be allowed to make a contribution to the commission? (100953)
Those plans were approved in 2008, when the current Leader of the Opposition was Minister for the Cabinet Office. It is therefore surprising that the shadow Minister for the Cabinet Office chose recently to mount an unprovoked attack on the decision made by his party leader.
T3. Part of my constituency had a bad experience with the Big Lottery Fund, which awarded it £1 million, but then sat on the money for the best part of two years. Will the Minister give better policy direction to that body so that it does not award funding and then sit on it for two years? (100954)
T5. Yesterday, Britain showed itself at its best. The Olympics offer us a chance to repeat such a show to the world. Does my right hon. Friend agree that it is disgraceful that strike action has been threatened during such a wonderful opportunity? (100956)
It was distressing that the leader of the Unite trade union made that intemperate threat. I hope that the Leader of the Opposition will take an early opportunity to condemn these bully-boy paymasters, who are threatening, when the eyes of the world are on Britain, to bring the country to a standstill.
We are strongly in favour of using open source software wherever possible. We have established that that can cut the cost of providing digital services massively, while producing better results. On a recent visit to silicon valley, I and a number of colleagues found businesses that were capable of cutting those costs on a massive scale.
A study by the Association of Chief Executives of Voluntary Organisations has found that applications by charities for emergency help were highest in the north-east, because the 20 poorest areas suffered 40 times as much reduction in their funding as the 20 richest. A year ago the Minister of State, Cabinet Office, the right hon. Member for West Dorset (Mr Letwin), said that the voluntary sector would
“find that there is access to a large amount of revenue”.—[Official Report, 20 October 2010; Vol. 516, c. 936.]
Has he disappeared because he no longer believes that?
The Prime Minister was asked—
Small business is concerned that Britain suffers from a sicknote culture. Does the Prime Minister agree that an example should be set from the very top, and that those who throw sickies and then swan off to a football match in a Rolls-Royce are setting a very bad example indeed?
My hon. Friend makes an important point. We do have a problem of a sicknote culture, and I have to report that the problem can sometimes go to the very top. The Leader of the Opposition was meant to be addressing a health rally, called a sickie, and three hours later was at a Hull football match. As well as his knowing the miracle cure, I think there is an important question—what was it that first attracted him to the multi-millionaire owner of the Hull football club?
Following the Prime Minister’s recent trip to Washington, we now know that the timetable for the withdrawal of British and other international combat forces in Afghanistan will be reviewed at the NATO summit in Chicago in May. He has previously set out a timetable that would see combat operations for British troops cease by the end of 2014. Given the recent statements by the US Defence Secretary and the French President about an accelerated timetable for their troops, can the Prime Minister confirm the British Government’s position going into that summit?
First, let me take this opportunity on behalf of the whole House once again to pay tribute to the magnificent work that our armed forces do in Afghanistan. We had another reminder yesterday of the very high price that we have paid.
On the programme of withdrawal, what I have said absolutely stands, which is that we will not be in a combat role in Afghanistan after 2014, nor will we have anything like the number of troops that we have now. We will be performing a training task, particularly helping with the officer training academy. Between now and 2014, it is important that we have a sensible profile for the reduction in troop numbers, which should be largely based on the conditions in the three parts of Helmand province that we are still responsible for and the transition that takes place.
What I discussed with President Obama in America was that in 2013, if there are opportunities to change the nature of the mission and be more in a support rather than in a direct combat role, that is something that I think everyone will want to see. We can make further progress on that issue at the Chicago summit and make announcements later in the year about that.
I thank the Prime Minister for that answer, and I know he will keep the House informed of any change in the British position, and indeed of the precise timetable and any evolution of it.
I am sure the Prime Minister will agree that in the wake of the tragic killing of Afghan civilians last week, which we all abhor, we must carry on with our mission. President Karzai has recommended that international troops should be confined to their main bases. Notwithstanding the tragedy of the incident that occurred, does the Prime Minister agree that while international troops are there, they must be able to perform their role of protecting the Afghan population? Can he tell us what discussions he has had with President Karzai and his representatives about the impact that any change in that role will have on security in Helmand, were that to happen?
Obviously our teams are in permanent contact about Afghanistan, and I speak to President Karzai regularly. Obviously what happened in Afghanistan, with the dreadful shootings that the rogue American soldier carried out, was a dreadful event, which must be properly prosecuted and dealt with for what it was: a mass murder. I know that President Obama takes that view very strongly.
In terms of making sure that we work with the Afghans, as I have said, the key is ensuring that we transition in the three parts of Helmand for which we are responsible, that we hand over to Afghan troops, and that they are in the lead as soon as they are capable of fulfilling that task. I do not have any concerns at the moment about the role of British troops—they are able to carry out the tasks that they are allotted. We are making good progress in the three parts of Helmand. We will be in permanent touch with the Afghans about that transition, but transition is a process and, as the Chancellor will explain in a moment or two, we should try to make the most of the transition that will take place.
I know that the Prime Minister agrees with me that dialogue with President Karzai and his representatives on the issue is very important, particularly in the light of the comments that were made. A few days ago, the Taliban decided to suspend preliminary talks with the United States. Will the Prime Minister give the House his assessment of the significance of that? Does he agree that we owe it to our troops serving in Afghanistan to be much more urgently focused on the task of securing a lasting political settlement? How do the British Government plan to play their role in getting the political process restarted?
I thank the right hon. Gentleman for that question. It is vital that we get this right. Since we took office—to be fair to the previous Government, they took this view as well—the British position has always been that we need a political settlement to ensure the best possible outcome for the people of Afghanistan. Britain has been pushing for political reconciliation and reintegration, and I had very productive talks with President Obama last week because the American view is now the same; they want to support that political process. Of course, the Taliban said what they said last week. I would make this point: we are committed to handing over to the Afghan Government, the Afghan military and the Afghan police—and the numbers of Afghan military and police are on track—at the end of 2014. We believe that that can happen even without a political settlement, with a satisfactory outcome for the United Kingdom, but clearly it would be better for everyone concerned if it was accompanied by a political settlement. The work for that, including setting up a Taliban political office in Qatar, is progressing well, and I believe that it is in everyone’s interest that we keep pushing that agenda. However, the Taliban should be in no doubt: there are opportunities for a political settlement if they give up violence, renounce al-Qaeda and want to play a part in the future politics of Afghanistan, but if they do not take those steps, we will continue to defeat them on the battlefield every time they raise their head.
Q2. I know that the Prime Minister will agree that the Association of Air Ambulances is a fantastic charity, which enjoys support across the House. However, a typical air ambulance branch needs to raise about £5 million a year, yet can claim gift aid often on only about 5% of that. Will he support my efforts to make it easier for charities to get the gift aid that they are due? (100963)
First, I join my hon. Friend in paying tribute to the air ambulance service, which does an amazing job in responding to emergencies, and saves many, many lives. We are providing £3 billion a year in tax reliefs for charities, of which gift aid makes up around £1 billion. We are increasing the amount on which charities are allowed to claim gift aid without the need for a declaration. That takes it up to £5,000, and I think that that will be a significant help to great charities such as the one my hon. Friend mentioned.
When the disability Minister came to Wales last week, she said that it was for others to consider whether Remploy’s budgets should be devolved to Wales. I think, when she said “others”, she meant you, Prime Minister. The Welsh Government have already said that they are committed to supporting the Remploy workers in Wales. Will the Prime Minister therefore devolve the Remploy budgets for the Welsh factories for the next three years to ensure that all the factories that can have a future do have a future?
I will look carefully at the right hon. Lady’s proposal, because I know it is put forward in a constructive spirit. However, whether the decision is reserved or devolved, it does not mean that we do not have to take difficult decisions. The fact is that we asked the chief executive of Disability Rights UK to look at the issue, and the outcome she proposed is supported by Mencap, Mind, Disability Wales, Sense for Deafblind People and the Centre for Mental Health. The point is this: Government funding allows for half a billion pounds over five years for Remploy, but even that is not enough to keep those factories open, because although access to work awards are around £2,900 per disabled person, the cost of each job in Remploy is around £25,000 per person. Therefore, if the aim of policy is to use the money that we have to support disabled people into work, the right hon. Lady will understand why the review came to the decision that it did.
3. The last few weeks have seen the start of the £350 million construction of Jaguar Land Rover’s new engine plant in my constituency. Does my right hon. Friend agree that that is a sign of growing confidence and belief in British manufacturing, which is in stark contrast to the destruction wrought on it by the last Labour Government? (100964)
My hon. Friend makes an important point. The Jaguar Land Rover news is excellent news for the west midlands and for British manufacturing and British car making. The good news is that what is happening in the car industry is not confined to Jaguar Land Rover: Nissan, Honda and Toyota are all expanding across our country. That is very good news for British manufacturing.
On the bus to the Commons today I foolishly revealed to a fellow passenger that I was a Member of Parliament. After some light-hearted and customary abuse, our conversation turned to life, the universe and commuting. Can the Prime Minister tell me and the man on the Peckham omnibus this: if that journey cost me 90p under Ken, how much did the same journey cost me today under Boris?
My hon. Friend makes an important point. I note that Ken Livingstone has said that if he is elected Mayor of London, he will fully pay his taxes. It is not for me to hand out political advice, but my advice would be to pay them before the campaign gets going.
5. Does the Prime Minister recognise that the introduction of regional pay would set hospital against hospital, and school against school, as the Secretary of State for Business, Innovation and Skills has helpfully pointed out, and yet it would almost certainly push up the overall cost of public sector pay? Can the Prime Minister give us a guarantee or a promise today that introducing regional pay will bring down the overall bill? (100966)
The last Government introduced local pay into the Court Service. The idea of local pay for some public services is not an alien concept, but a perfectly sensible thing to look at. Labour Front Benchers suggested in the debate on benefits that we look at local levels of benefits, so surely the hon. Gentleman should be in favour rather than against.
14. I am sure the Prime Minister will join me in praising the work of the search and rescue helicopter service around our country, but does he share my concern that the loss of the Portland search and rescue helicopter in 2017 will threaten the lives of my constituents and damage the integrity of the search and rescue service on the south coast? (100975)
I totally agree with my hon. Friend that a reliable search and rescue service is vital. We have looked at keeping the Sea King helicopters, which is one of the things he suggested, but they would not be able to provide a service as good or as capable as a modern fleet of helicopters. That is why we are planning the changes. We believe that it should provide faster flying times and a more reliable service.
Following last year’s riots, the Prime Minister came to the House and said that
“we will help you repair the damage, get your businesses back up and running and support your communities.”—[Official Report, 11 August 2011; Vol. 531, c. 1053.]
Last week, a report by the Metropolitan police revealed that of the claims made by the uninsured under the Riot (Damages) Act 1886, only about half had been settled since last August. Does the Prime Minister agree that this is simply not good enough?
I agree. There have been problems under the Riot (Damages) Act, which is specifically why we also introduced a number of extra funds run by the Department for Communities and Local Government. Those funds have paid out faster. It is right, in a way, to have the Riot (Damages) Act, although it is quite out of date. However, it takes time to make the payments, and I will certainly do what I can to chase them up.
We are eight months on from the riots. The Deputy Prime Minister hosted a reception—[Interruption.] Government Members should listen to this very important issue about the riots. At a reception last week organised by the Deputy Prime Minister, he and I met Amrit Khurmy, the owner of Ealing Green supermarket, which was razed to the ground during the violence on 8 August. She is still waiting to receive any compensation. Does the Prime Minister agree that, eight months on, that is just not right? Does he further agree that ultimately it is the Government’s responsibility to ensure that she gets the compensation that she deserves?
I agree with the right hon. Gentleman, and I will look into that specific case. As I said, one reason I introduced funds alongside the Riot (Damages) Act was to get that money out to local authorities faster. If he likes, I will put in the Library of the House of Commons a set of information about what those funds did and where we have got to with that Act. I will also look into the individual case that he mentioned.
We are talking about people who have not been helped by the money provided to local authorities and cannot get help. Three things need to happen to make good on this. First, as matter of urgency, there needs to be proper information on the payments made under the Riot (Damages) Act—[Interruption.] Government Members say, “There is information”. There is information from the Metropolitan police, but the reality is that the information available about what is happening around the country is very patchy. So first we need proper information. Secondly, I ask the Prime Minister to nominate a Home Office Minister with the job of ensuring that these claims are paid. Thirdly, will he promise to return to the House with a clear indication of when 100% of legitimate claims will be properly settled?
I am certainly happy to return to the House, as I said, putting an answer in the House of Commons Library about all this information. On the individual case that the right hon. Gentleman mentioned, I understand that it was a multiple claim because it was a shop with a number of flats above it, but I accept that eight months is too long. So we will make progress on that case. The Minister for Policing and Criminal Justice is taking the lead on this matter, but I have also held follow-up meetings myself with DCLG and the Home Office to ensure that the money is paid out.
Q15. The Prime Minister might be aware that the St Dunstan’s charity, which provides support for injured servicemen, has recently changed its name to Blind Veterans UK. To raise awareness of this name change, will he join me in visiting its new residential centre in Llandudno to see at first hand the wonderful work it does in supporting our veterans? (100976)
I always enjoy my visits to Llandudno, and perhaps I will be able to schedule one before long. I would like to put on the record my thanks for the tireless and highly professional way in which the charity assists service personnel who have tragically lost their sight. My hon. Friend pays it a great compliment and does his duty by explaining the change in its name, so that people know what it is and can give it money. As a country and a Government, we have a huge debt to pay to former service personnel. They have done extraordinary things on behalf of their country, and we need to look after them through their lives. My right hon. Friend the Chancellor will make some announcements about that in his Budget.
Q6. The Prime Minister said last year that under his Government unemployment would fall year on year, but here we are with unemployment at a 17-year high. In my constituency, 55.4 people are chasing every job vacancy. The regional growth fund has supported only four businesses. Why should the 515 workers in Rio Tinto Alcan, the disabled workers at Remploy and many others set to lose their jobs believe a single word that he or the Chancellor say? (100967)
First, on the specific case of the Rio Tinto plant, I know how important that is. We are working with Northumbria county council and the company to do what we can to help get those people work, although I understand that Rio Tinto is still in negotiations with a potential purchaser of that plant. What I would say to the hon. Gentleman about employment and unemployment is this. Clearly we need more jobs in our economy, but since the election we have had more than 600,000 new jobs in the private sector. The level of employment in the country is up by around 250,000 and there are fewer people on out-of-work benefits now than there were at the time of the election. In terms of what is happening in the north-east, we should also celebrate the good news—the fact that Nissan is creating 2,000 jobs; the fact that Hitachi is building a new plant in County Durham; the fact that Newcastle airport is expanding; the fact that Greggs is putting more money into the north-east. We should be talking up the north-east instead of talking it down.
The running aground of a cargo vessel on a small island in the Minch showed the need for the emergency coastguard tug that was recently withdrawn from service. Will the Prime Minister please look into this as a matter of urgency, with a view to getting a replacement tug in place before a worse incident happens?
I know this issue is being looked into at the moment, so I am happy to write to the hon. Gentleman and give him the details. He represents island communities that can be extremely cut off, particularly during the winter months. He needs to know that those services are there, and I will write to him about that.
First, let me pay tribute to the work the hon. Gentleman does in this area. Early intervention is absolutely central to what this Government are looking to achieve. That is how we are going to improve the life chances of the least well-off in our country, and genuinely lift young people and children out of poverty. We will base funding decisions on what comes out of the first two years, but as he will know, the early intervention grant, which is a crucial piece of Government funding and policy, is going to rise next year.
May I thank the Prime Minister and the leaders of all parties in the Chamber for their continuing support for early intervention? Early intervention not only helps babies, children and young people to develop the social and emotional capability to make the best of themselves, but saves the country billions of pounds in the long run. Will the Prime Minister and the Chancellor take this as the first representation not for today’s Budget, but for next year’s Budget? Will he consider theming next year’s Budget around early intervention, bringing forward proposals for tax changes to stimulate the social finance market, which we heard about in earlier questions, and move 1% only of departmental budgets from late intervention to early intervention?
In terms of Budget submissions, that was definitely an example of early intervention. I praise the hon. Gentleman for the work that he has done. As he knows, we will be setting up the early intervention foundation, which will be funded to make the arguments that he has put very effectively, whichever side of the Chamber he has been sitting on, for very many years. I will certainly discuss this issue with my right hon. Friend the Chancellor. What we are trying to do is look at all the mechanisms we have, whether it is backing nursery education, introducing a pupil premium, making sure the early intervention grant is going up or actually putting the money in early to try to change people’s life chances before it is too late.
Q8. Is the Prime Minister aware that Harlow has the highest business growth in the whole of the United Kingdom, thanks to a Conservative council that is open for business and a Conservative-led Government who have invested in an enterprise zone, increased apprentices and cut taxes? Will the Prime Minister come to Harlow so we can show Britain how to lead the economic recovery? (100969)
Although I am in danger of being accused of watching too much television, I think we could summarise my hon. Friend’s question by saying, “The only way is Essex”. I know he speaks up for his county; what I would say is that I congratulate Harlow on its fantastic achievement. The Government want to play their part, not least with the enterprise zone in west Essex, which covers Harlow and which we hope will create 5,000 new jobs.
Q9. In North Tyneside more than 7,000 hard-working families depend on working tax credits to make ends meet, yet fewer than 200 people have to pay top-rate tax. Which of those groups does the Prime Minister think needs the most support in the Chancellor’s Budget? (100970)
What I can tell the hon. Lady is that we increased the child tax credit by £255 last year, which was the biggest increase in its history, and that it will go up by another £135 this year. In terms of the very richest in our country, let me reassure her that, after this Budget, they will be paying more in tax.
Does the Prime Minister agree that one of the best ways of helping families on low and medium incomes is to build more affordable housing throughout the country? Given that Labour’s legacy in London was to have 350,000 families on the waiting list, will he assure us that there will be more affordable housing in London and across the country?
We do want to get our housing markets started again, including for affordable housing. That is why, with the higher right-to-buy discounts, that money is going to go back into building affordable homes. At the same time, we are doing more to kick-start those places that have planning permission but cannot get under way because of problems with bank and other finance. That is why we are putting extra money into those schemes, to make sure that that building takes place this year or next year.
The Information Commissioner has confirmed that some of the information used by the Consulting Association to blacklist trade unionists could only have come from the police or the Security Service. When 3,000 people, mostly celebrities, had their telephones hacked, the Government set up an inquiry under Leveson. When 3,200 trade unionists have been blacklisted, and many have lost their livelihoods, the Home Secretary simply suggests that they go to the Independent Police Complaints Commission. Why is there one route to justice for celebrities, and another for working people?
There is one law that has to cover everybody in this land, and if there is any accusation of wrongdoing, that is something that the police, who are completely independent of the Government, can investigate. That is what should happen. I say that on the hon. Gentleman’s behalf, but he could do something on everyone else’s behalf. He runs the Right to Work campaign, which is stopping young people getting work experience places. If he cares about opportunities for young people, he will give up that left-wing organisation.
Q11. My county of Herefordshire has below-average household income, but public funding for schools and health care in Herefordshire has been among the lowest in the country for a long time. Does my right hon. Friend share my view that that is unfair, and will he personally support measures to change the funding formulas, to get a fair deal for my county and for other similarly affected rural areas? (100972)
My hon. Friend will know that we are looking at the funding formula for schools. We want to try to make it simpler, so that people can see what the criteria are and why their area receives the money that it does. At the same time, we are introducing the pupil premium, which will mean that parts of the country such as his, where there are quite high levels of deprivation in parts, will get specific funding for those children who are on free school meals. That should help the funding of those schools that need the money the most.
Will the Prime Minister do the honourable thing and publish the risk register, including the action that is needed to mitigate the risks that the Health and Social Care Bill still poses to patients?
What I would say is that, as far as I can see, we have actually voted in this House of Commons twice on the same issue—thank you, Mr Speaker—and on both occasions, there was a significant majority in favour of the Government’s position. I would also add that the last Government had many, many opportunities to publish risk registers, and they did not do it.
Q12. For 10 years or more, leading Conservatives such as Lord Saatchi and Lord Tebbit have argued for working people and pensioners on low incomes to be taken out of income tax altogether. Does my right hon. Friend agree that this is a thoroughly Conservative idea whose time has well and truly arrived? (100973)
Q13. The Prime Minister may recall that at the time of the strategic defence and security review, he described it as a mistake and an error to use the short take-off vertical landing variant of the Joint Strike Fighter. As the Ministry of Defence is about to perform a U-turn on the decision to rescind the original decision, does he now accept and understand that the real mistake and error has been a defence review that has been inadequate and is fast unravelling? (100974)
The real mistake and error was inheriting a £38 billion black hole in the defence budget. To pay tribute to my right hon. Friend, what he wants as Defence Secretary is to be the first—in a generation, frankly—to announce a balanced and funded budget for defence, for this year and for many years to come. That is what we are discussing. We will look at all the evidence and all the costings. As the hon. Gentleman will know, costings change in defence, but I make this pledge: if costs and facts change, we—unlike previous Governments—will not just plough on regardless and make the wrong decisions for political reasons.
Ways and Means
Before I call the Chancellor of the Exchequer, it is convenient to remind hon. Members that copies of the Budget resolutions will be available in the Vote Office at the end of the Chancellor’s speech. It may also be appropriate to remind hon. Members that it is not the norm to intervene on the Chancellor of the Exchequer or the Leader of the Opposition, as was stated last year.
This Budget rewards work. Britain is going to earn its way in the world. There is no other road to recovery. This Budget supports working families and helps those looking for work. It unashamedly backs business, and it is on the side of aspiration—of those who want to do better for themselves and for their families.
This Budget reaffirms our unwavering commitment to deal with Britain’s record debts, but because we have already taken difficult decisions this can also be a reforming Budget that seeks to repair the disastrous model of economic growth that created those debts—a model that saw manufacturing almost halved as a share of our national economy, while the national debt doubled.
This is how Britain will earn its way in the world: with far-reaching tax reform, with a simpler tax system where ordinary taxpayers understand what they are being asked to pay; with a tax system that is more competitive for business than any other major economy in the world; with a tax system where millions of the lowest paid are lifted out of tax altogether, while the tax revenues we get from the wealthiest increase.
Reforming tax is only part of the story. We will earn our way in the world by saying to all business, large and small, “We will provide you with modern infrastructure, new growth-friendly planning rules and employment laws and the kinds of schools, universities and colleges our future work force need. In return, you, British business, will have the self-confidence to invest, expand, hire, innovate and be the best.” We earn our way in the world if we stop being afraid to identify Britain’s strengths and reinforce them instead, backing industries such as aerospace, energy, pharmaceuticals, creative media and science—a deliberate strategy to create a more balanced national economy where financial services are strong, but are not the only string to our bow.
Stability comes first, and the report from the Office for Budget Responsibility reminds us today of the risks to stability. Despite the welcome action by the European Central Bank, the impact of the sovereign debt crisis on the European economy has been significant. Italy, the Netherlands, Belgium and others are now in recession, and Germany’s economy shrank in the last quarter. In today’s report, the OBR is sharply revising down its forecast for euro area growth this year by 0.8% to minus 0.3%. Its forecast for world economic growth is also revised down over the next two years, by 0.2% and 0.3% respectively.
Of course, Britain is not immune from those developments in our largest export markets, and the OBR says today that
“the situation in the euro area remains a major risk to our forecast”.
Another risk that it identifies is a
“further spike in oil prices”,
and there is no doubt that the high oil price, driven both by real demand and the Iranian situation, is of great concern across the world. It means that the OBR’s overall assessment of the outlook for, and risks to, the British economy is “broadly unchanged” since last November’s report.
Despite those head winds, there are some more positive signs. The OBR expects the British economy
“to avoid a technical recession with positive growth in the first quarter”
of this year. The British economy has, in its words,
“carried a little more momentum into the new year than previously anticipated”.
Indeed, the Office for Budget Responsibility is slightly revising up its growth forecasts for the UK this year to 0.8%. It then forecasts 2% next year—[Interruption.]
The OBR forecasts 2% next year, 2.7% in 2014, and 3% in both 2015 and 2016. Its forecast unemployment rate is the same as it was last autumn. It expects it to peak this year at 8.7%, before falling each year to 6.3% by the end of the forecast period, but it has revised down its estimate of the claimant count, which it now expects to be around 100,000 lower in each of the next four years than it previously forecast, peaking at 1.67 million this year, rather than the 1.8 million it forecast in November. It forecasts 1 million more jobs in the economy over five years.
Inflation is expected to fall throughout the period, from 2.8% this year to 1.9% next year, and then 2% by the end of the forecast period. I am today writing to the Governor of the Bank of England to reaffirm the consumer prices index inflation target of 2%. The Government’s credible and responsible fiscal policy allows the independent central Bank to pursue an activist monetary policy consistent with targeting low inflation. I confirm that the asset purchase facility will remain in place for the coming year.
Employment is growing, and inflation is coming down; so too is the deficit. When this Government came to office, the budget deficit stood at over 11%. The state was borrowing one in four of every single pound it spent. Today, I can report that the deficit is falling and is forecast to reach 7.6% next year. The share of national income taken by the state will have fallen from almost 48% when we took office to 43% next year. We must stick to the course, so there will be no deficit-funded giveaways today, but because we have taken difficult decisions we do not need to tighten further. Over the five-year period, this is a fiscally neutral Budget. This is achieved through a modest reduction in both taxation and spending.
Let me turn to those fiscal forecasts. The whole House will be pleased to know that these have improved a little from the forecasts that I presented in November. Borrowing this year is set to come in at £126 billion—£1 billion lower than I forecast in the autumn, and over £30 billion a year lower than its peak in the year before we came to office. Borrowing will then fall to £120 billion next year, if one excludes the transfer of Royal Mail pension assets. It will fall to £98 billion in 2013-14, then £75 billion, and then £52 billion, reaching £21 billion by 2016-17. So, in total, borrowing is £11 billion less than I last forecast, in the autumn, and this will be used to pay down debt.
In my first Budget, I set the Government the fiscal mandate of achieving a cyclically adjusted current balance by the end of the five-year horizon, and the OBR confirmed today that we are on course to achieve that mandate and to have eliminated the structural current deficit by 2016-17. It also confirmed that we are on course to reach our target for debt to be falling as a percentage of national income by the end of the Parliament in 2015-16. Public sector net debt is now set to peak at 76.3% in 2014-15, almost 2% lower than previously forecast, before falling the following year. With a balanced structural current budget and falling debt, our deficit reduction plan is on course, and we will not waiver from it. To do so would risk a sudden loss of confidence and a sharp rise in interest rates, and we will not risk that. Instead, we reinforce today our commitment to fiscal responsibility, not just this year, but in the years ahead.
The transfer of the £28 billion of assets from the Royal Mail pension fund to the Exchequer will free it from its crippling pension debts, ensure the pensions of hard-working staff are paid and help to bring in new, private sector investment. Some would have been tempted to spend the windfall. I do not propose to spend it; instead, I have used it to pay off debt.
We will also maintain our control on welfare spending. The passing of the Welfare Reform Act two weeks ago was an historic moment, and I pay tribute to my right hon. Friend the Work and Pensions Secretary, and to all my coalition colleagues for supporting him against determined opposition from those who defend unlimited welfare. But even with the Act, the welfare budget is set to rise to consume one third of all public spending. If nothing is done to curb welfare bills further, the full weight of the spending restraint will fall on departmental budgets. The next spending review will have to confront this, so I am today publishing analysis that shows that if in the next spending review we maintain the same rate of reductions in departmental spending as we have in this review, we would need to make savings in welfare of £10 billion by 2016.
We will also address the rising costs of an ageing population and the burden this places on future generations. We will publish a White Paper on social care. I have also said we would consider proposals to manage future increases in the state pension age, beyond the increases already announced. I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity. Details of how this will operate will be published alongside the OBR’s long-term fiscal sustainability report this summer.
One area where Government spending is expected to be lower than planned is, as the Prime Minister just indicated, Afghanistan. We were reminded again yesterday of the sacrifice so many of our servicemen and women have made. As the Prime Minister made clear with the US President last week, UK forces will cease combat operations by the end of 2014. As a consequence, I can tell the House that the cost of operations—which are funded by the Government’s special reserve and are entirely separate from the Defence budget—is expected to be a total of £2.4 billion lower than planned over the remainder of the Parliament. Let me be clear today: the full cost of operations will continue to be met from the reserve, and our brave armed forces will get the equipment they need to complete the job.
But I can ensure that some of the benefit of the lower cost is felt by those who fight so hard and give so much for our nation’s security. We will fund an extra £100 million of improvements in the accommodation of our armed forces and their families. I will also double the families’ welfare grant, which is used to provide additional support to families left behind when people deploy. We have already doubled the operational allowance. Today, I am doubling the rate of council tax: the thousands serving our country in operations overseas will receive 100% relief on an average council tax bill.
Our commitment to reduce the deficit is keeping interest rates low. In this Budget, we take measures to ensure that the benefits of those low market interest rates are felt across the economy. They are certainly benefiting the taxpayer. Thanks to the reduction in the deficit and our low interest rates, this Government are saving a total of £36 billion in debt interest payments compared with their predecessor. This year is the 400th anniversary of the creation of the Treasury Board and the modern Treasury. There have been times recently when the Treasury has been borrowing money more cheaply than at any previous time in that 400-year history—few countries in Europe could say that at the moment. That reflects the confidence that investors have in Britain’s ability to pay its way.
I now want to test whether we can extend these benefits further into the future and diversify our portfolio. The longest gilt we currently offer to the market is 50 years. The Debt Management Office will consult on the case for issuing gilts with maturities longer than 50 years and the case for a “perpetual” gilt with no fixed redemption date— something that Britain last felt able to do six decades ago. We are also taking the opportunity to rebuild Britain’s reserves, which had fallen to historically low levels. I can confirm that our gold holdings have risen in value to £11 billion. Sadly, that does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, which would now be worth six times that, at over £13 billion.
Working families are already being helped by historic low mortgage rates. The NewBuy scheme that we introduced last week uses the Government’s balance sheet to help those who cannot afford the larger deposits that some mortgage companies are now demanding. It comes alongside a new, reinvigorated right to buy, and to ensure that there are new homes to buy we are today expanding the get Britain building fund that provides up-front finance to construction firms.
We are also passing on our low interest rates to small businesses, through the national loan guarantee scheme, which started operation yesterday. Barclays, Lloyds, RBS, Santander and the new business bank, Aldermore, are all involved, and £20 billion of guarantees, in total, will be available. In the autumn statement, I also allocated £1 billion to invest in funds that lend directly to the mid-cap business that are the backbone of our economy. This is an alternative source of finance to the banks. The response has exceeded our expectations; 24 funds have submitted proposals. I am today shortlisting seven of them and, such has been the quality of the bids, I have also decided to increase the size of the finance partnership by 20%. I am also today expanding the enterprise finance guarantee.
Stability and credibility, the low interest rates they bring, and passing those low rates to families and businesses are necessary for growth, but alone they are not sufficient. As a nation, we have to make a choice. This country became seduced by large deficits and the illusion of cheap finance. Do we watch as the Brazils, Chinas and Indias of this world power ahead of us in the global economy or do we have the national resolve to say, “No, we will not be left behind. We want to be out in front”? That is this Government’s resolve.
Under this Government, Britain has moved into the top 10 of the most competitive places in the world in which to do business—but we have to do more, and here is how. First, on exports, over the last decade our share of world exports shrank as Germany’s grew. We sold more to Ireland than we did to Brazil, Russia, India and China put together. That was the road to Britain’s economic irrelevance, and we want to double our nation’s exports to £1 trillion this decade. So we are expanding UK Export Finance and setting out new plans to help smaller firms in new markets. Exports abroad must be accompanied by investment at home. Britain has a reputation as a remarkably open and welcoming place for investment. We must never allow protectionist rhetoric to creep into our political system.
Instead, we are actively seeking investment from overseas pension and sovereign wealth funds, and working to develop London as a new offshore market for the Chinese currency. We also want investment from British pension funds in British infrastructure, and we are now working with a dozen of the large pension schemes specifically on that. We are the first British Government to set out in a national infrastructure plan the projects we are going to prioritise in the coming decade: the roads, railways, clean energy and water, and broadband networks that we all need and that we have identified.
I believe that this country must confront the lack of airport capacity in the south-east of England. We cannot cut ourselves off from the fastest growing cities in the world, and my right hon. Friend the Transport Secretary will set out Government thinking later this summer. We want to look at the opportunities for increasing the role of private investment in the road network, learning lessons from the water industry. I confirm today that Network Rail will extend the northern hub, adding to the electrification of the trans-Pennine rail route by upgrading the Hope Valley line between Manchester and Sheffield and improving the Manchester to Preston and Blackpool and the Manchester to Bradford lines. For years transport investment in the north of England was neglected. Not under this Government.
We are working with our great cities to devolve decision-making powers and we are striking a ground-breaking deal this week with Manchester to support £1.2 billion in growth-enhancing infrastructure in that city. We will support £150 million of tax increment financing to help local authorities to promote development, and we will provide an extra £270 million to the Growing Places fund. In all this we are working with local areas to support their ideas for growing the private sector in parts of the country where the state has taken a larger and larger share of the economy.
The Mayor of London is a very effective champion for the city he runs so well. We will work with him on plans this summer to go on investing in London transport, lengthening commuter trains, extending the underground and exploring new river crossings in east London. So from the allocation made to the Mayor through the Growing Places fund, he will be creating a new £70 million development fund to attract new business and new jobs. The Mayor has persuaded me of the opportunities that the new Royal Docks enterprise zone offers our largest city if we offer enhanced capital allowances there, so we will.
Twenty-four enterprise zones are now going ahead across England. Chinese investment is pouring into the zone in Liverpool. The Marches zone in the west midlands is already expanding. I want other parts of the United Kingdom to benefit from these policies. My right hon. Friend the Chief Secretary can confirm today that we will offer enhanced capital allowances for businesses starting up in the new Scottish enterprise areas in Dundee, Irvine and Nigg, and there will be a new Welsh enterprise zone in Deeside, and we look forward to the first enterprise zone in Northern Ireland.
I want to see investment in our world-leading energy sector, including renewables. We have launched the Green investment bank, which will be open for business next month. We have introduced a carbon price floor into our tax system to encourage investment and we have set the rate today. Combined heat and power plants will not be liable to carbon price support rates on fuels used for heat.
Renewable energy will play a crucial part in Britain’s energy mix, but I will always be alert to the costs that we are asking families and businesses to bear. Environmentally sustainable has to be fiscally sustainable as well. The carbon reduction commitment was established by the previous Government. It is cumbersome and bureaucratic and imposes unnecessary costs on business, so we will seek major savings in the administrative cost of the commitment for business. If those cannot be found, I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax.
Gas is cheap, has much less carbon than coal and will be the largest single source of electricity in the coming years, so my right hon. Friend the Energy Secretary will set out our new gas generation strategy in the autumn to secure investment. I want to ensure that we extract the greatest possible amount of oil and gas from our reserves in the North sea. We are today introducing a major package of tax changes to achieve this. We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach. We are also introducing new allowances, including a £3 billion new field allowance for large and deep fields to open up West of Shetland, the last area of the basin left to be developed—a huge boost for investment in the North sea.
We should not be shy about identifying our successful industries and reinforcing them. Around one fifth of the world’s top 100 medicines originate from UK research, so we are backing our life sciences sector by creating the Francis Crick institute at St Pancras and cutting taxes on patents to make this one of the most attractive places in the world to invent new medicines. We have protected the science budget. Now we are committing £100 million of support, alongside the private sector, for investment in major new university research facilities. With the world’s second largest aerospace industry, we will also establish a UK centre for aerodynamics to open next year, which will encourage innovation in aircraft design and commercialise new ideas.
Today we set Britain this industrial ambition—that we turn Britain into Europe’s technology centre. We will start with digital content. The film tax credit, protected in our spending review, helped to generate over £1 billion of film production investment in the UK last year alone. Today I am announcing our intention to introduce similar schemes for the video games, animation and high-end TV production industries. Not only will this help to stop premium British TV programmes like “Birdsong” being made abroad, but it will attract top international investors like Disney and HBO to make more of their premium shows in the UK. It will support our brilliant video games and animation industries too, because it is the determined policy of this Government that we keep Wallace and Gromit exactly where they are.
To be Europe’s technology centre we need to have the best technology infrastructure. Two years ago Britain had some of the slowest broadband speeds in Europe. Today our plans will deliver some of the fastest, with 90% of the population having access to superfast broadband, and improved mobile phone coverage for rural areas and along key roads across the UK. But we should not be complacent by saying it is enough to be the best in Europe when countries such as Korea and Singapore do even better, so today we are funding ultra-fast broadband and wi-fi in 10 of the UK’s largest cities—Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London. My hon. Friend the Member for Brighton, Kemptown (Simon Kirby) asked me to help small cities too, no doubt with his own city in mind. I agree; £50 million will be available for smaller cities too. The fastest digital speeds in the world available in our cities, with the most connected countryside in Europe and the most creative digital content anywhere—that is what a modern industrial policy looks like.
My right hon. Friend the Business Secretary and I have asked Michael Heseltine to review by the autumn how Government spending Departments and other public bodies can work better with the private sector on economic development. From Liverpool to Canary Wharf, Michael knows how it is done. Of course, these projects succeeded because they were not killed off by the planning system. No one can earn their future if they cannot get planning permission. Global businesses have diverted specific investments that would have created hundreds of jobs in some of the most deprived communities in Britain to countries such as Germany and the Netherlands, because they cannot get planning permission here. That is unacceptable.
Next week my right hon. Friend the Communities Secretary and the Minister of State, Department for Communities and Local Government, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), the Minister with responsibility for planning, will publish the results of our overhaul of planning regulation. We are replacing 1,000 pages of guidance with just 50 pages. We are introducing a presumption in favour of sustainable development, while protecting our most precious environments. The new policy comes into effect when the national planning policy framework is published next Tuesday. This is the biggest reduction in business red tape ever undertaken.
As a country, we also want to make the most of the Olympic and Paralympic games. Some of the biggest events will be on a Sunday. When millions of visitors come to Britain to see them, we do not want to hang up a “Closed for Business” sign, so we will introduce legislation limited to relaxing the Sunday trading laws for eight Sundays only, starting on 22 July.
Earning our way in the world means giving young people the skills to compete. In time, the school reforms being introduced by my right hon. Friend the Education Secretary will do more to improve the long-term economic performance of our country than any Budget measure ever will. But we have got to help the young adults who have already been let down by the schools system. We are offering a record number of apprenticeships and our youth contract comes into force next month. I can tell the House that we are also exploring the idea of enterprise loans. Young people get a loan to go to university or college; now we want to help them get a loan to start their own business.
We are also looking to see whether we can make public sector pay more responsive to local pay rates. As we have just heard, that is something the last Government introduced in the Courts Service. London weighting already exists across the public sector. Indeed, the Opposition have proposed the interesting idea of regional benefit rates. So we should see what we can do to make our public services more responsive and help our private sector to grow and create jobs in all parts of the country. We have asked the independent pay review bodies to look at this issue. Today we are publishing the evidence the Treasury is submitting to them, and some Departments will have the option of moving to more local pay for those civil servants whose pay freezes end this year.
New infrastructure and investment and ambitious reforms of planning, education and welfare to help businesses create jobs will all help Britain to earn its way in the world, but we also need a tax system that supports work. Two hundred years ago Adam Smith set out the four principles of good taxation, and they remain good principles today: taxes should be simple, predictable, support work and be fair. The rich should pay the most and the poor the least. The tax system this Government inherited from our predecessor has drifted far from these principles. We have already addressed some of the problem. We have established an Office of Tax Simplification to drive out complexity. Companies are moving to Britain, not away. We stopped the jobs tax. We have taken 1 million low-paid people out of tax altogether. But now we need further reform. We need to give Britain a modern tax system fit for the modern world.
The first goal is a far simpler tax system that businesses can easily navigate and where ordinary taxpayers understand what they are being asked to pay, so we will radically change the administration of tax for our smallest firms. Last year I asked the Office of Tax Simplification for recommendations. It has proposed that we tax small firms on the basis of the cash that passes through their businesses, rather than asking them to spend a huge amount of time doing calculations designed for big businesses. I agree, so we will consult on this new cash basis for calculating tax for firms with a turnover of up to £77,000, double what the Office of Tax Simplification proposed. This will make filling in tax returns dramatically simpler for up to 3 million firms.
We are also pressing forward with our ambition to integrate the operation of income tax and national insurance, which I announced at last year’s Budget, so that we do not ask businesses to run two different payroll tax administrations. A detailed consultation on how we will do this will be published next month.
We will also address some of the loopholes and anomalies in our VAT system. For example, at present soft drinks and sports drinks are charged VAT, but sports nutrition drinks are not. Hot takeaway food on the high streets has been charged VAT for more than 20 years, but some new hot takeaway products in supermarkets are not. Some companies are using the VAT rules that exempt the rental of land to avoid the tax that their competitors are paying. We are publishing our plans today to remove loopholes and anomalies, but we will keep the broad exemptions on food, children’s clothes, printed books and newspapers.
We should also simplify the age-related allowances, which the Office of Tax Simplification recently highlighted as a particularly complicated feature of the tax system. The National Audit Office points out that many pensioners do not understand them. These allowances require around 150,000 pensioners to fill in self-assessment forms, and as we have real increases in the personal allowances, their value is already being eroded.
So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6 April 2013, and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance. This will protect the existing level of allowance pensioners have while introducing a new single personal allowance for all. It is a major simplification, it saves money, and no pensioner will lose in cash terms.
Under this Government, pensioners next month will receive the largest ever cash increase in the basic state pension of £5.30 a week. Now we want to simplify the basic state pension and its interaction with the second state pension. I pay tribute to the work my hon. Friend the Pensions Minister has done on this. Such is the complexity of this means-tested system that only someone like our Pensions Minister can work out exactly what someone is entitled to and what they need to save, so I can confirm that we will introduce a new single-tier pension for future pensioners, set above the means test. This is currently estimated at around £140. It will be based on contributions and will cost no more than the current system in any year. We will bring forward further details later this spring. It will be a single, generous, basic state pension for those who have worked hard and saved hard all their lives, and a further major simplification of our tax and benefit system.
In the information age people should know what taxes they are paying and what their money is being spent on. My hon. Friend the Member for Ipswich (Ben Gummer) recently proposed to this House that we send taxpayers an annual statement showing them just that. I think this is an excellent idea and intend to put it into practice. HMRC contacts roughly half of taxpayers each year. From 2014, these 20 million taxpayers will at the same time receive a new personal tax statement. This will tell people how much income tax and national insurance they have paid, their average tax rates and how this contributes to public spending—in other words, how much, proportionately, of their tax bill goes to fund the healthcare, education, or welfare bills and how much is spent on servicing interest payments on the national debt. People will know what they are paying and what they are paying it for. A tax system that is simple and transparent: that is our first goal.
Our second goal is a tax system that is more competitive for business than any other major economy in the world. Our predecessors wanted to increase taxes on small businesses. Instead, we have cut the tax rate on small companies to 20%. Our predecessors wanted to increase national insurance on jobs, and we have cut it. Our new controlled foreign company rules will be legislated for in the coming Finance Bill and will stop global firms leaving Britain, as they were, and encourage them to start coming here.
This Government also support research and development here in Britain instead of abroad. We have already increased the generosity of the R and D tax credit for smaller firms. I confirm that from next year we will also introduce an above-the-line R and D tax credit that business organisations such as the Engineering Employers Federation, the Institute of Directors and the CBI have campaigned hard for. We will help new start-up businesses to recruit and retain talent by more than doubling the enterprise management incentive scheme grant limit to £250,000 and easing the rules so that academics in our universities can turn great ideas into great companies. The Treasury will review for this autumn what more we can do to encourage employee ownership.
All these tax reductions will help to win business for Britain, but the headline rate of corporation tax remains the most visible sign of how competitive our country is. We have already cut the rate from 28% to 26%. This April it is due to fall again to 25%. I can tell the House today that we will have a further cut of 1%, to be implemented right away.
From next month, Britain will have a corporation tax rate of just 24%, and we will continue with the two further cuts planned next year and the year after, so that by 2014 Britain will have a 22% rate of corporation tax. That is the biggest sustained reduction in business tax rates for a generation—a headline rate that is not just lower than our competitors, but dramatically lower: 18% lower than the US, 16% lower than Japan, 12% below France and 8% below Germany. That is an advertisement for investment and jobs in Britain, and it is a rate that puts our country within sight of a 20% rate of business tax that would align basic rate income tax, the small companies rate and the corporation tax rate.
I am also increasing the rate of the bank levy to 0.105% from next January, so that the additional corporation tax cuts do not benefit the banks, and so that our levy will in addition raise the £2.5 billion a year that we said it would.
That brings me to the main duties. Let me start with alcohol duty. The Government will shortly be publishing their alcohol strategy to address the growing problem of alcohol abuse, and the many billions of pounds it costs our NHS and criminal justice system, but today I have no further changes to make to the duty rates set out by my predecessor.
Turning to tobacco duty, smoking remains the biggest cause of preventable illness and premature death in the UK. There is clear evidence that increasing the cost of tobacco encourages smokers to quit and discourages young people from taking it up. So duty on all tobacco products will rise by 5% above inflation. That is 37p on a packet of cigarettes, and this will take effect at 6pm tonight.
One area where I am today making substantial changes is gambling duties. The VAT treatment of gaming machines is being repeatedly challenged by operators in the courts, so I will introduce a new machine games duty, with a standard rate of 20%, and a lower rate for low stakes and prize machines of 5%, of net takings. The current duty regime for remote gambling introduced by the last Government was levied on a “place of supply” basis. This allowed overseas operators largely to avoid it, and much of the industry has, as a result, moved offshore. Ninety per cent of online gambling consumed by our citizens is now supplied from outside the UK, and the remaining UK operations are under pressure to leave. This is clearly not fair—and not a sensible way to support jobs in Britain. So we intend to introduce a tax regime based on the place of consumption—where the customer is based, not the company—and, from this April, we will also introduce double taxation relief for remote gambling. These changes will create a more level playing field, and protect jobs here.
I turn now to fuel and vehicle excise duties. High oil prices have put real pressure on household budgets and on businesses. That is why we took action in last year’s Budget to cut fuel duty so that it is 6p lower than our predecessors planned. We have also scrapped the last Government’s fuel duty escalator of annual above-inflation rises, regardless of the oil price, and we are today confirming the fair fuel stabiliser. Above-inflation rises will return only if the oil price falls below £45 on a sustained basis—currently equivalent to about $75. These measures mean that this Government have eased the burden on motorists by £4.5 billion at a time when money is very short. I do not propose to make any further changes to the fuel duty plans already set out.
I am increasing vehicle excise duty by inflation only. To encourage fuel efficient fleets, we will extend the 100% first-year capital allowance for low-emission business cars, reduce the CO2 threshold for the main capital allowance rates and increase the percentage list price of company cars subject to tax. I can also announce that I am again freezing vehicle excise duty for road hauliers.
I now turn to personal and property taxation. My goal is a tax system where the lowest paid are lifted out of tax altogether, while the tax revenues that we get from the richest increase. Most wealthy people pay their taxes, and without them we could not begin to afford the public services upon which this country depends, but under the last Government it was the boast of some high earners that, with the help of their accountants, they were paying less in tax than their cleaners.
I regard tax evasion and, indeed, aggressive tax avoidance as morally repugnant. We have increased both the resources and the number of staff working on evasion and avoidance at HMRC. Taken together, the anti-avoidance measures in this year’s Finance Bill will increase tax revenue over the next five years by around £1 billion, and protect a further £10 billion that could have been lost. This week we have signed a further agreement with the Swiss to stop UK residents evading tax.
We have done all these things, but today we do even more. On coming to office, I asked Graham Aaronson QC to establish whether a general anti-avoidance rule could work in the UK tax system. He recommended that such a rule would improve our ability to tackle tax avoidance without damaging the competitiveness of the UK as a place to do business. We agree, so we will introduce one. We will consult on the details of the new rule and legislate for it in next year’s Finance Bill.
A major source of abuse, and one that rouses the anger of many of our citizens, is the way in which some people avoid the stamp duty that the rest of the population pays, including by using companies to buy expensive residential property. I have given plenty of public warnings that this abuse should stop, and now we are taking action. I am increasing the stamp duty land tax charge applied to residential properties over £2 million that are bought into a corporate envelope. The charge will be 15%, and it will take effect today.
We will also consult on the introduction of a large annual charge on those £2 million residential properties that are already contained in corporate envelopes, and, to ensure that wealthy non-residents are also caught by these changes, we will be introducing capital gains tax on residential property held in overseas envelopes. We are also announcing legislation today to close down the subsales relief rules as a route of avoidance.
Let me make this absolutely clear to people. If you buy a property in Britain that is used for residential purposes, we will expect stamp duty to be paid. This is the clear intention of Parliament, and I will not hesitate to move swiftly, without notice and retrospectively if inappropriate ways around these new rules are found. People have been warned. It is fair when money is tight, and so many families could do with help, that those buying the most expensive homes contribute more. From midnight tonight, we will introduce a new stamp duty land tax rate of 7% on properties worth more than £2 million.
I also intend to deal with the unlimited use of income tax reliefs. Let us be clear: most rich people pay a lot of tax. It is also right that we have tax reliefs that promote investment, support charitable giving and reflect genuine business loss. But it cannot be right that some people make unlimited use of these reliefs year after year. Everyone in this country, and particularly those with the highest incomes, should contribute a fair share to the Exchequer. Some reliefs, such as the enterprise investment scheme and pensions relief, are already capped, and I do not intend to make any significant changes to pensions relief in this Budget. But, to make sure that those on the highest income contribute a fair share, I am introducing a new cap on those reliefs that are currently uncapped.
From next year, anyone seeking to claim more than £50,000 of these reliefs in any one year will have a cap set at 25% of their income. We have capped benefits. Now it is right to cap tax reliefs too.
That brings me to the rates of income tax and the additional rate of 50p. This tax rate is the highest in the G20; it is higher not just than the tax rate of America, but also of major European countries like France, Italy and Germany. It is widely acknowledged by business organisations and international observers as harming the British economy. Like the previous Chancellor who introduced it, I have always said that it was temporary. But I also said, three years ago, that I would not be prepared to reduce it while we were asking the whole public sector to accept a pay freeze, and I will stick to those pledges.
A 50p tax rate, with all the damage it does to Britain’s competitiveness, can only be justified if it raises significant sums of money. In last year’s Budget, I asked Her Majesty’s Revenue and Customs to look at the evidence, and especially to look at the self-assessment tax receipts that have come in since this January. I am publishing its report today. What it reveals is that the 50p tax rate has caused massive distortions.
HMRC finds that an astonishing £16 billion of income was deliberately shifted into the previous tax year, at a cost to the taxpayer of £1 billion—something that the previous Government’s figures made no allowance for whatsoever. Self-assessment receipts this year are below forecast by some £3.6 billion, while other tax receipts have held up. The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.
Of course, the previous Government initially proposed a rate of 45p and then increased that to 50p. Let me tell the House what HMRC says about the difference between 50p and 45p. Its figures—
I am coming on to the OBR, don’t you worry.
The HMRC figures tell the story. The direct cost is only £100 million a year. Indeed, HMRC calculates that the loss of other tax revenues may even cancel that out. In other words, it raises at most a fraction of what we were told, and may raise nothing at all. So from April next year, the top rate of tax will be 45p. No Chancellor can justify a tax rate—[Interruption.]
No Chancellor can justify a tax rate that damages our economy and raises next to nothing—it is as simple as that. Thanks to the other new taxes on the rich that I have announced today, we will be getting five times more money each and every year from the wealthiest in our society. So the richest pay more—[Interruption.].
The richest pay more, the economy benefits and Britain is competitive again.
The shadow Chancellor and quite a few Labour Members have said that the HMRC report is not enough and that the Office for Budget Responsibility should pass judgment. It has, because these days the direct costing that the Treasury applies to every Budget measure is independently assessed and certified by the OBR. Unlike the previous Government, it also assesses the cash flow consequences of forestalling.
When it comes to the £100 million direct permanent costs of this measure, the OBR says this:
“we believe that this is a reasonable and central estimate”.
It also assesses as reasonable the estimate that the new taxes that I have introduced on the rich today directly raise five times that amount. That is half a billion pounds that we can now use to help people on lower and middle incomes keep more of their earnings.
In the spending review, we took the difficult decision to remove child benefit from families with a higher rate taxpayer. I said then that I simply could not justify asking those earning £15,000 or £30,000 a year to go on paying child benefit to those earning £80,000 or £100,000, and I stand by that principle. All sections of society must make a contribution to dealing with the deficit. Without this measure, we would not get the job done. But I said that I wanted to do this in a way that is fair and that does not involve setting up some new means-tested tax credit system for millions of families; and I said I would set out exactly how this measure would be implemented in this Budget.
We want to avoid a cliff edge that means that people lose all their child benefit when they earn just a pound more. So I can today confirm that, instead of withdrawing child benefit all at once when people earn more than the higher rate threshold, the benefit will only be withdrawn when someone in the household has an income of more than £50,000, and the withdrawal will be gradual—1% of child benefit for every extra £100 earned over £50,000, so there is no cliff edge and only those with an income of more than £60,000 lose all their child benefit.
This means that an extra 750,000 families will keep some or all of their child benefit, and 90% of all families will remain eligible for child benefit. We can afford to implement the child benefit policy in this way because instead of extending the full benefit of this Budget’s increase in the personal allowance to all higher rate taxpayers, as we did last year, we will pass on a quarter of the benefit to higher rate taxpayers and spend the rest on helping families with children towards the bottom of the higher rate band, as I have explained.
That brings me on to the personal allowance and the central goal of this Budget, which is to support working families. This coalition Government believe that the best way to support working people on the lowest incomes is to take them out of tax altogether, and the best way of getting money directly into the pockets of working families on middle incomes is to increase the amount of their earnings that they can keep before they pay tax.
That is why this Government have set themselves the goal of raising the personal tax-free allowance to £10,000, and we have promised real increases every year to reach that. In my last two Budgets, we made great strides forward. Last year, the personal allowance rose by £1,000; in two weeks’ time, it will go up by another £630 to £8,105. Together, these increases have taken over a million low-paid people out of tax altogether.
Today, I want to go much further and much faster. I am announcing the largest ever increase in the personal allowance—that is, the amount that people can earn tax free. From next April, that amount will increase by £1,100. Every working person on low or middle incomes will benefit. People will be able to earn up to £9,205 before they have to pay any tax. Millions of working people will be £220 better off every year; that is £170 better off after inflation. Because higher rate earners will also benefit, 24 million people earning less than £100,000 a year will gain from this measure. We are in touching distance of the goal of a £10,000 personal allowance that we all share.
I can tell the country that as a result of our Budgets, people working full time on the minimum wage will have seen their income tax bill cut in half. This coalition Government will have taken 2 million of the lowest paid people in our country out of tax altogether.
In the middle of this Parliament, in difficult economic times, this coalition Government have not settled for a do-nothing Budget. We have not ducked the difficult choices; we have taken them head on—a competitive top rate of tax; more revenues from those best able to pay; fewer reliefs; a tax cut for working people; support for families; and low-income earners taken out of tax altogether. Alongside it, we have one of the lowest rates of business tax in the world; a simpler tax code; and a country where its citizens know the taxes they are paying and what they are paying them for. We have achieved all this and kept to our deficit plan.
Let us be resolved. No people will strive as the British will strive. No country will adapt as the British will adapt. No country will value those who work as we will value those who work. Together, the British people will share in the effort and share the rewards. This country borrowed its way into trouble; now we are going to earn our way out. I commend the Budget to the House. [Interruption.]
Order. [Interruption.] Order. [Interruption.] I think we have had enough. Thank you, Mr Baron; you may get a new job at this rate.
Under Standing Order No. 51, the first motion, entitled “Provisional Collection of Taxes”, must be decided without debate. I call on the Chancellor of the Exchequer to move it formally.
PROVISIONAL COLLECTION OF TAXES
Motion made, and Question put forthwith (Standing Order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Tobacco products duty (rates) (Motion No. 40);
(b) Alcoholic liquor duties (rates) (Motion No. 41);
(c) Amusement machine licence duty (rates) (Motion No. 47);
(d) Landfill sites in Scotland (Motion No. 58);
(e) Stamp duty land tax (prevention of avoidance: subsales etc) (Motion No. 65);
(f) Stamp duty land tax (rates: residential property where consideration exceeds £2m) (Motion No. 66).
(g) Stamp duty land tax (higher rate for certain acquisitions by companies etc) (Motion No. 67)—(Mr George Osborne.)
Question agreed to.
I now call on the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate on Monday 26 March.
Budget Resolutions and Economic Situation
Amendment of the Law
Motion made, and Question 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.—(Mr George Osborne.)
After today’s Budget, millions will be paying more while millionaires pay less. A year ago, the Chancellor said in his Budget speech that
“now would not be the right time to remove”
the 50p tax rate
“when we are asking others in our society”—[Interruption.]
Is the Chancellor saying that he did not say it? He said that
“now would not be the right time to remove”
the 50p tax rate
“when we are asking others in our society on much lower incomes to make sacrifices”.—[Official Report, 23 March 2011; Vol. 525, c. 957.]
That is exactly what he has done. With tax credits cut, child benefit taken away, and fuel duty rising, what has he chosen to make a priority? For Britain’s millionaires, a massive income tax cut each and every year. The fairness test for this Budget was whether the Chancellor used every penny he could to help middle-income families who are squeezed. He has failed that test. Anyone who listened to him will be asking the same question: what planet are he and the Prime Minister living on? There are 1 million young people out of work and 50 businesses going bust every day, and there is a cost of living crisis for families. They promised change, but things have got worse, not better.
What did the Chancellor promise us in last year’s Budget? He said that he would
“put fuel into the tank of the British economy.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
He promised growth of 2.5% in 2012, but today he comes to the House and tells us that it will be just 0.8%: growth down last year, growth down this year, and growth down next year. Every time he comes to the House, he offers a different excuse, but the reality is that his plan has failed. Last year, he told us that unemployment would peak in 2011, and what has he delivered? We are into 2012, and unemployment is rising month upon month upon month. His plan has failed. He promised us last year that the deficit would be gone by the end of the Parliament, but today he admits that he is borrowing over £150 billion more than he said he would. His plan has failed.
In the face of failure, what does the Chancellor offer? Not a change in economic strategy, not a guarantee of jobs for the young unemployed, not targeting every penny he can at working families. We know that for the Chancellor the driving ambition of this Budget was to deliver a tax cut for people earning over £150,000 a year. There are 30 million taxpayers in this country; this policy will do absolutely nothing for 29,700,000 of them. How can the priority for our country be an income tax cut for the richest 1% at a time when the squeezed middle are facing rising petrol prices, higher energy bills, and cuts in tax credits and child benefit?
Let us think of what the Chancellor could have done with the money. He could have reversed his cuts to tax credits. He could have done something for pensioners; in fact, I think there is a tax rise for pensioners hidden in the detail of this Budget. He could have done more to undo the damage to child benefit, but he claims he cannot afford it. Let me tell him this: every time in future he tries to justify an unfair decision by saying that times are tough, we will remind him that he is the man who chose to spend hundreds of millions of pounds on those who need it least. Wrong choices, wrong priorities, wrong values; out of touch, same old Tories.
Let me come to his claims on stamp duty. There are 300,000 people benefiting each and every year from his top rate tax cut, and there are 4,000 houses sold each year for more than £2 million. So 99% of those who gain from his millionaires’ tax cut will be totally unaffected by the rise in stamp duty and will get a massive windfall from this Chancellor. He did not tell us what this meant in pounds and pence—[Interruption.] Oh, the Prime Minister thinks that the Chancellor did say how much each person is getting as a result of the top rate tax cut. He did not, and I am going to tell him the figure. There are 14,000 people earning over £1 million in Britain. The Chancellor’s decision today means that each of them will get a tax cut—not of £1,000, not of £5,000, not of £10,000, but of over £40,000—[Interruption.]
That tax cut is not just for this year but for every year. What happens to families who earn in one year half what the Chancellor has so casually given away to the richest in the last hour—families on £20,000 a year, perhaps those of a nurse or a lorry driver? Even after the personal allowance change, they are not going to be better off; they are going to be worse off. Putting aside the VAT rise and all the other tax rises that have happened, from this April alone they will be a further £253 a year worse off. All he is doing for ordinary families is giving with one hand and taking far more away with the other. This is a millionaire’s Budget that squeezes the middle. Wrong choices, wrong priorities, wrong values, out of touch—same old Tories.
Under the Chancellor’s tax cut, a banker earning £5 million will get an extra £240,000 a year. Let us call it what it really is: the Government’s very own bankers’ bonus. Presumably, he wants us to believe that the £240,000 tax cut is necessary to make the bankers work harder. It is one rule for them and another rule for everyone else. This April, the Chancellor will be telling a family working for 16 hours on the minimum wage that, if they do not work more hours, they will lose nearly £4,000 in tax credits. That tells people everything they need to know about the values of the Chancellor and the Prime Minister: the poor will work harder only if they are made poorer; the rich will work harder only if they are made richer. Wrong choices, wrong values, wrong priorities—same old Tories.
While everybody else is squeezed, what is the Chancellor’s priority? It is a massive tax cut for those on his Christmas card list. The Chancellor talked a lot about tax transparency. Let us have some—[Interruption.]
Order. Mr Shelbrooke—[Interruption.] Order. Mr Shelbrooke, I have looked at you twice and I do not want to continue to do so. We need a bit of silence from you. If not, you might be better off leaving the Chamber. I think that we understand each other.
The Prime Minister is the man who said that
“sunlight is the best disinfectant”.
Here is the challenge. Just nod if you are going to benefit from the income tax cut or shake your head if you are not. Come on. Come on. Come on. Come on, we have plenty of time. [Interruption.]
Order. Members on both sides of the House will come to order. The Leader of the Opposition will be heard with the same courtesy that was given to the Chancellor. I do not want to have to rule further, because I will have to get firmer. It is only right that the country hears what the Opposition have to say. [Interruption.] I do not need any examples from hon. Members.
What about the hapless accomplice, the Deputy Prime Minister? Only the Liberal Democrats could be dumb enough to think that a George Osborne Budget is a Robin Hood Budget. Calamity Clegg strikes again! A few months ago, the Deputy Prime Minister said of the 50p tax rate, with no ifs and no buts:
“I do not believe that the priority…is to give a tax cut to a tiny, tiny number of people who are much, much better off than anybody else.”
The party that once followed Lloyd George is now reduced to following George Osborne. The party that delivered the people’s Budget of 1909 is supporting the millionaire’s Budget of 2012. The Liberal Democrats should be ashamed. For all the talk and all the briefings, the Deputy Prime Minister has done what he has done on every big issue, from tuition fees to the betrayal on the NHS—he has rolled over and said, “Yes, Prime Minister.”
The truth is that for ordinary families, it is hurting, but it is not working. We know why that is. This Government have been cutting too far and too fast. What did the Chancellor say last August about America’s more balanced deficit reduction plan? He said:
“Those who spent the whole of the past year telling us to follow the American example…need to answer this simple question: why has the US economy grown more slowly than the UK economy”?—[Official Report, 11 August 2011; Vol. 531, c. 1108.]
The numbers are in. The Chancellor is plain wrong. The US economy grew by 1.7% last year—twice the rate of ours. The Government have run out of excuses. It is their mistakes and the failure of their plan that are damaging our future.
Today we have heard about more schemes from the Chancellor, but why should we believe him? Every scheme that he has put forward so far has failed. What was the big idea of his first Budget? The national insurance holiday. We did not hear much about the national insurance holiday today, and it is no wonder. He told us in his June 2010 Budget that it would help 400,000 firms. He has missed his target by 97%. The Chancellor’s plan has failed. What was the centrepiece of last year’s Budget? It is easy to forget now, but it was called the “Budget for growth”. This scheme is my favourite. It is called the business growth fund. Six regional offices have been opened and how many businesses are benefiting? Six. [Laughter.] It is true. One business for each office. The Chancellor’s plan has failed. We needed a plan for growth that would work. We needed a guarantee on youth jobs. We needed a British investment bank to help small business. On growth, jobs and how we pay our way in the world, this Chancellor has failed.
On the film tax relief proposal, it is great to support great British success stories such as “Downton Abbey”.
Indeed, and Wallace and Gromit. It is important to support “Downton Abbey”, the tale of a group of out-of-touch millionaires who act like they were born to rule, but turn out not to be very good at it. It sounds familiar, does it not? We all know that it is a costume drama; the Cabinet think it is a fly-on-the-wall documentary.
This Budget will be remembered for the Chancellor’s failure on growth and jobs, and for the top rate tax cut. That is not just a bad policy or a misjudgment. It destroys the claims that the Prime Minister made about who he was and what he believed. He said personally in the aims and values document that he sent to every Conservative party member:
“The right test for our policies is how they help the most disadvantaged in society, not the rich.”
The document was called “Built to Last”. That was his test. It is a test that this Budget fails spectacularly. This is the death knell of his project and of his compassionate conservatism. He and the Chancellor have shown their true colours. They promised change, but they have failed on growth, on jobs, on borrowing and on fairness. It is unfair, out of touch, and for the few, not the many—an unfair Budget built on economic failure; an unfair Budget from the same old Tories.
I am also available for injury time, if anybody wants to chip in. After the generals, it always falls to me to be the first of the foot soldiers.
The first point that I want to make is about the overall Budget judgment. The issue that overshadows all the others to which the Chancellor referred is that Britain is living beyond its means. We are borrowing £1 for every £4 we spend. That is why the last Chancellor of the Exchequer was right, in his final Budget two years ago, to set out a tough deficit reduction plan, even if his neighbour argued about it all the way. It is also why the current Chancellor was absolutely right today to stick to a clear plan for deficit reduction. Although it is not popular with most Members to say this, I also deeply respect the Liberals for helping to make that plan a cornerstone of coalition policy, despite all the flak they take.
Some have argued that the economy needs a further fiscal boost on top of the deficit that we are already running. It is worth bearing it in mind that the last Chancellor injected a £20 billion boost in 2009, but that sum pales into insignificance compared with the £100 billion of quantitative easing over the past 12 months or the £300 billion of quantitative easing since the crisis began. Even though quantitative easing and fiscal policy are not directly comparable, it is clear that monetary policy has played a huge role in managing the recession.
The biggest influence on overall macro-economic policy at the moment, therefore, is probably the Bank of England. It is becoming more powerful than ever before, which is why the Treasury Committee will look closely at how much of the latest round of quantitative easing is finding its way into final demand. It is also why strong accountability of the Bank to Parliament is essential. The Treasury Committee is united in the view that the proposals currently in the Financial Services Bill are simply not enough, and we will press on behalf of Parliament for significant improvements on Report.
At the time of the last general election, the national debt stood at £760 billion. It has now risen to more than £1 trillion for the first time in history and is on track to rise to about £1.5 trillion. What does the Chairman of the Treasury Committee think the impact on interest rates will be by the end of this Parliament?
I think I will ask the Bank of England that question when it comes to see the Committee, but I agree that the issue needs to be taken into consideration.
One measure that was announced yesterday, about which I might just have time to say a few words now that I have some injury time, was credit easing. Yesterday’s announcement on the loan guarantee scheme responded to many constituents’ complaints that they simply cannot get the money they need to run or start up small businesses. We all have constituents in that position, and the scheme will offer some welcome relief. How much relief? I think it will offer only a little, and there is a risk of the banks pocketing most of the money. The Treasury Committee, the Public Accounts Committee— I do not know whether its Chair is in her place—and the National Audit Office all need to play a role in ensuring that the banks do not run off with the money, and that value for money is secured.
None the less, I still think the scheme may turn out to be valuable, for several reasons. First, by announcing it the Chancellor has raised the salience of an important issue and put pressure on the banks not to dismiss requests for loans without examining them properly. Furthermore, it seems to me that the Treasury’s own pessimistic briefing yesterday that the money will go only to existing borrowers is almost certainly mistaken. There is very likely to be some more lending, because banks will benefit from the stronger financial position of firms to which they have lent. Those loans, in turn, will be less risky for the banks, so they should have some more headroom for new lending without altering their risk profile.
I absolutely agree. My hon. Friend serves with me on the Treasury Committee, and we have published quite a detailed report on competition in retail banking that has won the support of Vickers and of the Joint Committee on the Draft Financial Services Bill, chaired by my right hon. Friend the Member for Hitchin and somewhere. [Interruption.] Harpenden, is it? My right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley)? Anyway, wherever it is, it is somewhere in Hertfordshire.
The loan guarantee scheme was at least announced. I have to tell the Chancellor, who is in his place, that several colleagues on both sides of the House have complained to me about the leaks and briefings in the days prior to the Budget. All I will say at this point is that the Treasury Committee will look at the matter.
The Committee will also publish a preliminary report on the Budget in time for the consideration of the Finance Bill. The timetable proposed by the Government is very tight, but we will do our best. In particular, we will scrutinise what the Chancellor has described—correctly, by the look of things—as a tax-reforming Budget. We will examine whether the main tax measures live up to what it is claimed they will achieve. We will assess them against a number of principles that the Committee believes should guide tax reform, which we set out in a report 14 months ago, “Principles of tax policy”.
I am most grateful. I hope that when the Committee does its review, it will consider the fact that for an ordinary family with two children, the losses coming this April will amount to £530 and the compensation that the Chancellor boasted of giving will amount to only £220.
We will seek evidence on that point and on all the main measures, and we will publish it as quickly as we can. I thank the right hon. Lady for making that point.
The principles that we set out in our paper a little over a year ago were more or less endorsed by the Chancellor today. They were: does a measure make the tax system more simple, predictable—the Chancellor used that word—stable, fair and coherent, and does it unlock higher economic growth? As last year, we will ask the major accountancy bodies—the chartered accountants, the certified accountants and the Chartered Institute of Taxation—to score each major measure against those principles. We hope the Committee can thereby assist the House in gauging progress towards a simpler, fairer tax system. That is what all our constituents want.
We will also ask those bodies to scrutinise some of the measures that have been announced today—the cap on tax reliefs and its workability; the yield from the 45p rate; the general anti-avoidance provision, about which a number of us have concerns; and the reference to retrospection in the tax system that is associated with that provision, which many have held could damage the yield in the long run. We will also take a look at the Leader of the Opposition’s point that this was a Budget for millionaires, at the expense of the squeezed middle.
A number of colleagues have asked the Committee also to examine measures that were introduced in previous Budgets, to see what the effect of them has been. Have they had the effect of raising more revenue and generating more efficiency than was outlined for them when they were introduced? We have not made up our mind about which measures to examine in that respect, but I suspect that in a few years’ time the cut in the top rate of tax announced today will be a prime candidate. We will be able to judge whether Mr Laffer really was out and about.
Will the hon. Gentleman give way?
I thank the hon. Gentleman. In looking at the tax system, will he consider how the constructive engagement between the oil and gas industry in the North sea and the Treasury has led to a change of heart, some certainty on decommissioning and added incentives to encourage further investment and more revenue for the Treasury?
We were a bit concerned about that. The Chancellor announced in either his first or second Budget that he would not alter the framework for the North sea tax regime, and then in his following Budget announced significant changes. That does not do wonders for tax certainty, of course. We need to keep an eye on exactly that sort of thing. We need to move steadily and remorselessly towards a simpler, fairer, clearer, more certain and more reliable tax system. That is what will unlock the huge potential for investment in the private sector; medium-sized and large firms are often sitting on cash piles and have very strong balance sheets.
I am sorry—I have lost my way.
I will do my best to assist the hon. Gentleman and get back into the groove.
The tax changes that have been announced today should play a crucial role in encouraging economic activity. However, that is only part of what is required to transform the growth potential of the economy. We also need a much wider supply side agenda to be implemented. We need labour market reform. The Chancellor has announced his intentions on planning, and we need simpler regulation. He combined the planning and the regulation points in his speech today.
The decision to tell taxpayers in each statement that they receive how their money is spent and how much tax they pay as individuals is a huge step forward. My hon. Friend the Member for Ipswich (Ben Gummer), who is no longer in his place, has been pressing for that for a few years. I argued for it 25 years ago when I was at the Treasury.
Britain is in the early stages of recovery from the biggest boom and bust cycle since the war. The UK has had to absorb the biggest bank failure—RBS—that, as far as I know, the world has ever seen. We are now having to absorb a crisis among our closest trading partners, generated by fundamental flaws in the design of the eurozone. The times are uncertain and confidence is at a premium. Whatever one’s view of the overall Budget judgment, most people agree that confidence is bolstered when Governments do what they say they will do. In the Budget, the Chancellor has done just that.
There has been much trumpeting and advance spinning of the Budget in recent days, so almost every announcement this afternoon came as no surprise. There are also hidden messages in the Budget: those who are poor and whose income is being squeezed are being asked to work longer; but for those in the top income bracket, the message is, “Let us ease your pain. We’ve reduced your corporation tax bills, lowered your banker’s bonus tax, now let’s cut your income tax rate.”
My hon. Friend has cleverly noted that hidden message, to which, I am sure, the Chancellor was keen to avoid drawing attention. However, pensioners are not as daft as he thinks, and I think that they will soon reckon that they are paying for the millionaires’ tax bonus announced today.
There has also been complete radio silence on other matters: women, for example, or children. By any rational definition, the Budget has not only ducked the hard issues, but entrenched the division in our society.
As even the Chancellor would admit, the economy was very different. [Interruption.] We had job growth and we were taking people out of poverty—that was the difference, which the hon. Gentleman seems to have completely failed to realise.
The Chancellor must by now be all too aware of the criticism levelled at his efforts in the past two years. Women were left paying more than 72% of the net cost of the changes in taxes, benefits and tax credits in his June 2010 Budget, and the subsequent comprehensive spending review ushered in yet more of a burden on women and families. Of the £18.3 billion raised through net direct tax, pay and pension changes up to now, £13.2 billion is coming from women. For children, the position is even worse. If we are to reach the target set in the Child Poverty Act 2010, the Government need to reduce the number of children in poverty by 120,000 per annum.
In a minute. The Institute for Fiscal Studies has told the Government that their current policies will see poverty increasing by 100,000 people a year. What does it say about a country when it allows tax cuts for the richest but at the same time allows more of its children’s lives to be stunted? I will be interested to hear what the hon. Gentleman has to say about that.
The hon. Lady raises the issue about women, which is clearly important. That is why it is disappointing that at the end of the 13 years of the Labour Government, 28% more women were unemployed than at the beginning. Does she accept that, of the 2 million poorly paid people who will be lifted out of income tax, a huge proportion—[Interruption.]
I am grateful, Mr Deputy Speaker. The hon. Gentleman should remember that under this Government, unemployment among women is at its highest for more than 23 years. The Chancellor did not make one mention of what he will do about that scandal.
The Lib Dem part of the Government has made great play of the increase in personal allowances, but more than 70% of that benefits higher and middle earners and fails to benefit those at the lowest levels, who already do not pay income tax. I point out to the hon. Member for Cambridge (Dr Huppert) that, funnily enough, the majority of them are women.
While middle earners stand to gain £379 when the threshold reaches £10,000, low earners on housing benefit and council tax benefit will gain only a paltry £57, as the rest will be tapered away. Overturning the perverse reductions in tax credits, which increased child care costs and penalised those trying to work on the lowest income scales, would have helped those in need the most. As my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) said, pensioners will also bear the burden as the years go on.
It is estimated that the reduction in tax credits on child care from 80% to 70% has pushed tens of thousands of parents out of the labour market, with 44,000 fewer families claiming support in December 2011 than in April that year. We have a Chancellor who thinks that it should be no problem for a cleaner to increase their hours from 16 to 24 hours a week to claim tax credits. Frankly, that is the reaction of someone living in a parallel universe, who fails to listen to those who have to attempt the challenge at a time when overtime and extra hours are almost impossible in most low earning jobs. As the Union of Shop, Distributive and Allied Workers reported yesterday, two thirds of those already receiving tax credits who are about to lose them next month already live in poverty: 200,000 couples with children face losing £3,870 per annum and an extra 80,000 children will be pushed into poverty by this one measure. It is immoral, unfair and unjust. I wait to see if anyone on the Government Benches can mount any argument to support such an outrageous measure, given that it completely fails their own core test of making work pay in every case. Even at this late stage, I hope that the Government will see sense and postpone the measure until universal credit is in place. If we are all in it together, why was there no mention of that today? It is a scandal of the Budget.
As the Scottish TUC pointed out in its Budget submission, it is now indisputable that Government policy is hitting wages much harder than profits. Indeed, as I pointed out at last week’s Business, Innovation and Skills questions, UK companies are now sitting on the highest ratio of cash reserves of any major western economy. That is not only unfair, but bad economics. We need more of those profits to be converted into real investment, and we need a much greater rise in consumption if we are ever to achieve the necessary higher growth.
The Government’s austerity plan has led to lower tax receipts and further downward revisions of growth, which is exactly the opposite of what we need. The Business Secretary has asked for a report on how to release company cash reserves. I welcome that, but I detect a complete lack of focus or priority in tackling the issue, just as I do in efforts to achieve a coherent industrial policy. Where is the Budget to create jobs? Where is the analysis to explain why, in the past year, female unemployment in Scotland and across the UK has increased by more than 17% , but male employment has increased by only l%? Where is the analysis on the increasing move into involuntary part-time working? Where is the analysis and policy on how to shift jobs into the industrial and manufacturing sectors, and to retrain those who have lost their jobs to enable them once more to hold down secure employment? Answer is there none.
The fact that we now have the highest female unemployment in 23 years was ignored in today’s Budget speech. That is not going to go away, and I fear that the consequences have been heavily underestimated by the Government, economists and our media. Far more women work in the public sector, and increasingly, men enter and compete for traditionally female-dominated work in the private sector. We are told that three quarters of public sector reductions are still to come, with the inevitable contraction of the work force, but there is absolutely no planning on how to create new jobs for the many women who will seek work.
Announcements on infrastructure are welcome, but construction jobs are entirely male dominated. Only about 1% of electricians are female, for example, and we have the lowest proportion of female engineering professionals of any EU nation, at less than 9%. The Government need to use procurement in such a way that will encourage and increase the numbers of women. There is an example for them to follow—the Olympic Delivery Authority has got more than 1,000 women into work in construction jobs—and I want to ensure that that good practice is followed throughout every major Government procurement programme to come.
I agree with the hon. Lady that we need more women in work, and to look after women and take them out of tax, which is what the Government are doing. Nevertheless, she mentions jobs. In her constituency in the last Parliament, unemployment increased by 44%; in this Parliament it has hardly changed. Does she agree that the previous Labour Government’s policies caused massive damage to this country?
The hon. Gentleman distorts the employment figures in my constituency and my city, where jobs were growing before this Government started to suppress demand and consumption and to take away huge amounts in benefit. I do not want women out of tax; I want them to get better-paid jobs so that they are in a position to pay tax. That is the fundamental problem, and taking people out of tax is an acceptance of it. Far too many people work in jobs that are too low-paid, but we are not doing anything about it.
As the Joseph Rowntree Foundation and others have repeatedly pointed out, we have a high level of under-employment in this country—4 million to 6 million people are in that category. The Scottish TUC has calculated that more than 0.5 million people, or more than 17%, are either unemployed or under-employed. Tax and benefit changes do nothing to change that long-term lack of demand for jobs.
The Government had the opportunity today to move away from their failed policy of austerity and to focus on stimulus for growth and jobs. They have failed, but the consequences will stay with this country and the communities we represent for many years to come. I am sure that point will depress many hon. Members, and it should depress all hon. Members on both sides of the House.
I fully support the Government’s aim. We need to earn our way out of the fiscal crisis, the massive over-borrowing and the large deficits. I also fully support their aim to get more money from taxing the rich, and we need a tax break for everybody else. We need a stimulus to demand and growth in this country and it is welcome that, given the difficult figures before the Chancellor today and the situation he inherited, he has managed to find a way of cutting tax for most people. That will be welcome relief from the relentless pressures on private budgets that hon. Members and their constituents have been experiencing as we try to climb out of the crisis.
It would be helpful to remind the House of the general shape of the five-year programme to try to get the deficit down. We want to get to a position in which we are adding less to the new borrowing. It is not that we are paying off the debt or dealing with the nation’s mortgage and credit card; we are just not flexing them quite as much as before. The Government have said that, over the five-year period of the planned coalition Government, they wish to increase current public spending by £90 billion and tax revenues by £174 billion a year by the fifth year of the programme, compared with the last Labour year. The House can see that, on most normal ways of looking at the situation, the plan is for the heavy lifting of getting the deficit down to be done by a very large increase in tax revenues.
Those tax revenues best roll in if the economy grows reasonably rapidly. The more quickly the economy grows, the easier and less hurtful it is to get money out of people; the less the economy grows, the more the choices become difficult.