House of Commons
Friday 23 March 2012
The House met at half-past Nine o’clock
[Mr Speaker in the Chair]
Ways and Means
Budget Resolutions and Economic Situation
Amendment of the Law
Debate resumed (Order, 22 March).
Question again proposed,
(1) That it is expedient to amend the law with respect to the National Debt and the
public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect
to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation,
(b) for refunding an amount of tax,
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
It is a great pleasure to be able to resume the debate on the Budget today. This is the coalition Government’s third Budget. It is a Budget that helps Britain to earn its way in the world, rewards working families, backs business, and sticks to our course of clearing up the economic mess that the previous Government left us. This Budget, like the last two, cannot be divorced from the urgent need to deal with Labour’s debts. Let us remember the crisis that we inherited less than two years ago. The state was borrowing one in every four pounds it spent and spending £120 million a day on debt interest alone. The country was taken to the brink of bankruptcy by a profligate Labour Government, leaving our people with the biggest deficit in the developed world.
This Budget marks another step on the road to a strong and stable economy, and that is why we are sticking to our deficit reduction plan, winning credibility in the markets and keeping interest rates low.
Many people who see that the hon. Gentleman’s party’s strategy is to borrow in the middle of a debt crisis will wonder why he is asking that question. I presume it is because he thinks that borrowing is not high enough.
This Government ultimately have a laser focus on making Britain the best place in the world to start, finance and grow a business.
On the subject of Labour waste and profligacy, is my right hon. Friend aware that the Institute for Fiscal Studies says that had Labour been re-elected, it would have borrowed an extra £200 billion, which would have had a huge impact on interest rates, in particular, and, given the debt legacy in households, a calamitous impact on the economy generally?
I will not give way; I am still replying to an intervention. The worst thing that Britain could do right now is to listen to the siren voices of the Opposition. They are very good at criticising, but they have absolutely no credible alternative, and that is probably the key message that will come across to the public who are watching this debate.
From easing access to credit and bringing down the cost of borrowing for small businesses, to cutting corporation tax and reforming the planning system, the measures set out in this Budget will help to get growth back into our economy. They will also help to rebalance the economy by supporting our companies—wealth creators shifting UK plc from a spend-and-borrow path under the previous Government to a make-and-sell future under this one.
If the hon. Gentleman reads the whole OBR report, he will realise that Britain is an economy that operates in a global marketplace. Of course, his solution to the challenges faced in that global marketplace is to go and join all the countries that are facing problems, not to tackle our own economic crisis that his party left us. I assume that most, if not all the interventions that I get from Labour Members will be cherry-picked statistics that offer no alternative solutions to the challenges facing Britain.
I am not about to cherry-pick a statistic, but let me give the Secretary of State some facts. I appreciate that she was not here at the time, but when the Labour Government came into power in 1997, the servicing of the debt that was left behind amounted to more than was being spent on transport and defence combined. That was a major task to be handled by the incoming Labour Government, so everything was not rosy in the garden.
The previous Conservative Government handed over a golden economic legacy. It was the Labour party that handed over a Britain loaded up with debt, costing us £120 million a day in debt interest, and that left unemployment higher than when it came to office, like every single Labour Government we have ever had. I will take no lectures from the party opposite on economic management, and neither will the British people.
On the question of investment from overseas, is my right hon. Friend aware that some Labour shadow Cabinet Ministers have said that they would reverse the corporation tax cut, which was cited by GlaxoSmithKline yesterday when it announced 1,000 new jobs in this country?
Ultimately, Labour Members seem to know nothing about how business runs. It may be that none of them has ever worked in business. Keeping our corporation tax rate low is critical in re-establishing our economic credibility and our tax competitiveness. Those are fundamental building blocks in getting the investment that we are seeing. I wholeheartedly welcome the steps that the Chancellor has taken.
As my right hon. Friend the Prime Minister has said, the infrastructure deficit that we inherited is just as serious as the budget deficit for our future productivity and the country’s ability to be successful. Infrastructure matters because it makes possible our journeys to work, delivers light when we flick on the switch and provides the connections that have created the communications revolution. Whether it is the congestion on our roads, our ageing power stations or the slow speed of our broadband connections, we face massive challenges to ensure that we have the infrastructure that we need to put Britain at the head of the competitiveness curve, not just in the next four to five years, but in the next four to five decades.
My remarks will focus on transport, because the Budget sends a clear message about how crucial the Government and I believe our transport infrastructure is to our economic future. That reflects what business is telling us. The CBI states:
“There are large amounts of business capital waiting to be unlocked if the Government achieves a step-change on transport”.
The Institute of Directors says that it is
“essential to provide more and better transport infrastructure in order to sustain the UK’s competitiveness.”
The British Chambers of Commerce rightly states:
“Infrastructure is the lifeblood of British business.”
I could not agree more. The last Government delivered the biggest boom and the biggest bust. As we chart our way back to economic recovery, what companies and firms up and down the country rightly want to see is a Government taking action.
I find the Secretary of State’s emphasis on infrastructure appealing, because infrastructure is needed. Unfortunately, the Office for Budget Responsibility has put the majority of growth for the foreseeable future down to personal consumption. Last Budget, it said that 12.5% of growth would come from private consumption. It now says that the figure is 37.5%. That is the very growth that the Government have now condemned.
I am not sure that the hon. Gentleman’s intervention made much sense. I agree that infrastructure is critical. The key part of the OBR report, which he ought to focus on, states that we are on course to meet our fiscal mandate and to get our public finances back in order. I am sure that he welcomes the OBR’s assessment that we will see the net creation of 1 million jobs in this country over the coming year.
To explain further the point made by my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), if the Secretary of State turns to table D.1 in the Red Book, which shows the detailed summary of the OBR’s central forecast, and looks along the line for “Fixed investment” by “General government”, she will see that it falls in 2011, falls in 2012 and falls in 2013. That is the point that my hon. Friend was making. The right hon. Lady clearly has not looked at the Red Book.
This Government are investing more money in capital spend than was planned by the previous Government. If the hon. Lady is complaining about those numbers, she would be complaining even more if we had the misfortune of having her party in office. This Government are investing in infrastructure and putting unprecedented levels of investment into the railways, as I am sure she is well aware, even though she prefers to score a political point.
The Government are rightly taking action to make it easier for people and businesses to go about their daily business. We are cutting commuting times and speeding up journeys; getting people and products moving faster and more reliably; and ensuring that Britain is plugged into the global marketplace. Of course, the easy choice, faced with Labour’s debt and deficit, would have been to cut capital spending and major infrastructure projects. We are not doing that. Instead, we have taken a deliberate decision to invest in our transport infrastructure, from relatively small interventions that make a big difference such as hard-shoulder running on motorways, to huge projects such as Thameslink and Crossrail.
I am delighted that we have a London Mayor who is committed, alongside the Government, to driving forward projects such as Crossrail, which are vital to our capital’s future prosperity. It is vital that we continue to have a Mayor who is passionate and successful in campaigning on London’s behalf at the heart of the Government; a Mayor who refuses, unlike his opponent, to make empty spending promises based on imaginary pots of money; and a Mayor who will be the best possible advocate for London’s economic success when he welcomes the Olympic tourists and athletes in the summer.
I am extremely grateful to the Secretary of State for giving way after that party political broadcast to re-endorse the London Mayor. Turning to a point of substance, may I ask her what her policy is on airport expansion in the south-east? The Government were keen to show a bit of leg in that regard, but have ruled out a third runway at Heathrow.
The hon. Gentleman will be delighted to know that I will come on to that matter shortly. After all, this is a speech on infrastructure. I hope that when the Opposition spokesman responds, he will take the time to set out some kind of alternative plan. That would be of real interest to us all.
Five months into this job, I could reel off a long list of the transport investments that we are making. We are electrifying the trans-Pennine railway and the Great Western line from London to Cardiff, far surpassing the 39 miles of electrification that happened under the previous Government. That would not even stretch from Cardiff to Swansea, let alone from London to Cardiff. We are upgrading the Tyne and Wear metro. There are 45 local authority major schemes to improve connectivity across the country. We are finally progressing with the first parts of the northern hub project, which is so important to many Members.
I could continue, Mr Speaker, but we are investing in so many projects that you would probably call me out of order for speaking for too long. Therefore, let me summarise. The spending review set out more than £30 billion of investment for road, rail and local transport projects across the country. On our roads, we are investing billions to unlock extra capacity and ease congestion. We have set up the £560 million local sustainable transport fund, which gives local communities more power to design and deliver local transport systems. We have put in place the Growing Places fund to kick-start infrastructure projects.
We have given the green light to High Speed 2, a national high-speed rail network that will radically improve the connections between our great cities and, by doing so, help to create jobs and generate growth and prosperity. That sits alongside our unprecedented investment in the existing railway network, from new stations and rolling stock to line electrification, which will help to decarbonise the industry. That amounts to the biggest modernisation programme since Victorian times.
Hand in hand with additional resources for our railways goes the reform of our railways. The rail Command Paper sets out our vision for an efficient, effective and value-for-money rail industry. Our reforms will put the customer first and allow us to end the era of inflation-busting regulated fares increases once the vital savings are made.
Building on all those investments, the Chancellor announced further measures on Wednesday to improve our country’s transport links. He announced a £323 million package that includes a range of projects. There is an extra £150 million contribution towards the Growing Places fund, which will facilitate the economic growth, jobs and house building that our country needs so badly. There is £15 million for cycle safety in London, which will enable the innovative redesign of some of the capital’s most dangerous junctions for cyclists. There is £11 million more for low-carbon buses, which is part of the £101 million bus investment package that the Under-Secretary of State for Transport, my hon. Friend the Member for Lewes (Norman Baker) is announcing today.
In addition, the Chancellor has announced that the rail industry will benefit from £130 million of funding from Network Rail to improve rail connectivity in the north of England by giving the go-ahead to further parts of the northern hub project. That will include increasing line speed and capacity on the Sheffield to Manchester Hope Valley line, and reducing journey times on the Manchester to Bradford via Rochdale and Halifax line and the Manchester to Preston via Bolton line. We are linking up the great counties of Yorkshire and Lancashire in the way that they have always wanted to be linked. That all adds up to passengers enjoying better connections, faster services and more seats.
Our national road network is also a key part of our national infrastructure. The strategic road network carries two thirds of all the freight on Britain’s roads, and it is vital for all types of business from mail order retailers to industrial parks and shopping centres. We have already announced, in last year’s growth review, £1 billion of additional investment in the nation’s strategic roads, on top of the £2.3 billion planned investment in major improvements announced in the spending review. However, as the Budget makes clear, we want to go further and examine the opportunities for more private investment in the road network in future. We want to consider where we can learn lessons from other industries, and we want to build on the proposals in Alan Cook’s report on the Highways Agency.
The hon. Gentleman will be aware of the work on how we can improve the A14, for example, and some of the options being considered could include tolling. If he is interested in finding out more about how the Government are approaching the issue, he can meet up with people who are involved in the A14 challenge. That programme of improvements will deliver for the community in that region in a way that his party’s Government failed to in 13 years.
The hon. Gentleman is looking at the sky and shaking his head, but I have a very, very long list of investments that the Government are making, whereas the Labour party delivered precious little. The biggest irony, of course, is that we ended up with all this debt, but what did it get spent on? Not the things that would have made a real difference to Britain—not roads, not trains. Labour frittered it away and wasted it on an unprecedented scale.
This Government understand that Britain is not just an island nation but a trading nation, so our ports must be world-class global gateways. That is why we are backing major container port developments such as Liverpool, Bathside Bay, Felixstowe South, London Gateway, Teesport and the port of Bristol. It is also why we want to see a successful and sustainable future for that other crucial global gateway, our aviation industry.
We should remember that our country and our capital are right up there with the very best when it comes to international connections. Only China and the USA have aviation networks more extensive than ours. We are directly connected to 356 international destinations, and no European country can match our connections to the world’s great commercial centres. There are more than 9,000 flights every year to New York, 3,000 to Hong Kong, 2,500 to Singapore—I could go on. To each of those important destinations and many others, Britain is the world leader.
Nevertheless, if we are to maintain that status, we have to take on the tough challenges facing the industry, whether it is improving the passenger experience or enhancing capacity and connectivity, while tackling the industry’s impact on climate change and the local environment. We are determined to look at those difficult issues. As the Budget makes clear, we will set out our thinking on aviation capacity and a sustainable aviation framework this summer. We are determined to ensure that we retain our aviation competitiveness and hub status in the decades to come.
An economy built on success requires investment in infrastructure that is built to last. That is why we need to invest in, reform and modernise our transport networks to make them the very best that they can be at not just national but local level. This Budget helps to lay those foundations for Britain’s future economic success.
We will not follow the Labour party’s advice to spend more, borrow more and put our economic credibility at risk. We will hold our course to cut Labour’s deficit, rebalance our economy and forge a path to sustainable growth. We will make the investment decisions needed to ensure that our economy is well placed to compete in the decades ahead. Tackling today’s challenges and investing in tomorrow’s future—that is what this Budget is about and what this Government are about, and we will build a country that we can be proud of again.
I begin by passing on the apologies of my hon. Friend the Member for Garston and Halewood (Maria Eagle), the shadow Secretary of State for Transport, for not being present today. It turns out that Ministers were on to something when they refused the offer to speak at the TUC’s railway event earlier this week. Conservative Members often seem to think that our brothers and sisters in the trade unions must be contagious, but on this occasion there is no getting around it—I am afraid they made my hon. Friend ill.
It therefore falls to me to point out what the Secretary of State already knows—that over the past 48 hours, the Chancellor’s Budget has unravelled at astonishing speed. We now know that it will inflict pain on the millions, so that millionaires can be spared. On the subject of transport, the Secretary of State has shown that she and the Chancellor are wedded to a platform of pain today and more pain in the future, with woefully little to return to the country the jobs and growth that we so desperately need.
We must not be unfair, for action has been taken to ease transport costs in at least one area. Fares on cable-based transportation systems carrying fewer than 10 people will now be subject to 5% VAT. That is unalloyed good news, and I am sure Government Members will think it is a clear sign of a Chancellor with his finger on the pulse of the lives of hard-working families up and down the country. If people travel to work by cable car, they are laughing, but if they are among the millions of motorists and train passengers squeezed as never before, facing the prospect of whole new charges in future, they are definitely not laughing.
I am not aware of any, but my hon. Friend might make proposals as a result of that excellent tax cut.
Yes, there are tough choices to be made, and the Opposition have set out the choices that we would have made. Of the £9 billion of cuts and efficiencies being made by the Department for Transport, we have accepted more than £6 billion.
I am sure that businesses will now see a great opportunity to set up offices at the top of Mickle fell as a result of this great tax cut.
Ministers are making decisions that will make our economy more fragile and that expose where their true priorities lie.
I will be happy to, within the constraints of time, but I want to try to keep to the same time as the Secretary of State took. If you will allow me to go slightly over that time, Mr Speaker, I can do so.
We have not opposed £3.36 billion being taken from the Highways Agency’s budget, out of the total reduction of £3.86 billion. We have not opposed £1.73 billion being taken from the Transport for London budget, which represents the full reduction. [Interruption.] The Secretary of State looks surprised. If she had paid a little more attention to what we have been saying over the past several months, she might not have had to ask the question now.
We have not opposed £794 million of the road maintenance budget out of total reductions of £1.23 billion or £528 million of cuts from the Network Rail passenger budget out of total reductions of £1.29 billion. We have not opposed the efficiencies that are being made to the Crossrail budget, or the £231 million from the local authority major transport teams out of a total reduction of £731 million. The Secretary of State asked for the list and has got it. I hope she is happy.
I am glad the Secretary of State asks me that. I would expect a little more humility from the Government given that on their own plans they are set to borrow £150 billion more. We strongly believe that the cuts we do not accept represent a false economy that will act as a drag on the nation’s growth and stop us returning to the prosperity that this country desperately needs.
The Government’s priorities are not with the family who are struggling to make ends meet, with the small business that wants to create more jobs or with the employee who wants to be able to afford to turn up to work in the morning.
I am not going to give way at the moment because the Secretary of State has taken up the hon. Gentleman’s time.
On all those counts, Wednesday’s Budget was a great disappointment. I will give the Secretary of State one thing: at least she is consistent. When we dig beneath her unrealistic claims that everything will be peachy, we see that she is not gearing up to deliver jam tomorrow after the pain today. Instead, with the Budget the Government set out this week, motorists, train passengers and bus users will be squeezed today, tomorrow and for years into the future. The effect will be a decade-long drag on jobs and growth, with the prospect of drivers and commuters being priced out of getting to work, or left stranded at a bus stop wondering why the service has been axed.
The Chancellor offered nothing to hard-pressed motorists this week. In fact, he has made things worse. He has raised the prospect of finding new ways to make things harder in future. Even from the comfort of No. 11 Downing street, the Chancellor cannot have failed to hear the growing calls for some relief on fuel taxation. If he refused to listen, it was the Secretary of State’s job to prise open his ears and tell him just how hard it is for Britain’s motorists. In the Budget negotiations, however, she secured diddly squat—[Interruption.] Instead, faced with rising and record petrol prices, she set her face against calls for relief in fuel tax, including the call for a temporary—[Interruption.]
I remind the hon. Gentleman that this April petrol duty will be a full 10p lower than it would have been under the previous Government’s plans. That will save the average family £144 and be a massive benefit—a far greater benefit than if Labour had remained in office.
That shows just how out of touch the hon. Gentleman and Government Members are. I would like to see him go to the forecourt in his constituency, or any forecourt around the country, and say, “Let’s welcome the further rise in fuel taxation that you’re getting this week. What a great job the Government are doing in keeping fuel prices down!”
Families in Britain, worried by energy bills, clobbered by spiralling rail fares and made poorer by cuts to tax credits, are, thanks to this Secretary of State’s inaction, once again being squeezed even harder at the fuel pump. There is pain today and pain tomorrow. The ultimate victims are jobs and growth, and the nation’s return to prosperity. What is the Chancellor offering motorists in return for their growing fuel bills? He is offering only vague promises, which might well turn out to be yet another ratchet with precious little reward.
The National Audit Office has warned the Government that they are creating a vicious cycle of deteriorating roads and higher long-term costs. A plague of potholes is making our road network less safe for all users, less green and more congested. The road network is a brake on, and not an agent of, jobs and growth. There is no movement on the cuts already set for local roads—that is good news on potholes but bad news for everyone else—but what about our trunk roads, which the Secretary of State mentioned? We need long-term strategic investment in the road network, and we also need to look at how we lever in that investment, but Britain’s drivers and cyclists will have little confidence after seeing Ministers tying themselves in knots in recent days.
Before the Prime Minister’s speech on infrastructure on Monday, those pesky anonymous briefers, who seem to be everywhere in this Government—good luck in trying to catch them, Mr Speaker—said that tolling would be considered only for brand new roads. However, in the speech, “new roads” became “new capacity”. We now know for certain that charging is being considered when improvements take place on existing roads because the Budget document confirms it. We are told that the shortlist of options include “widening some sections” of the A14,
“rationalising access to the route, and improving the route of the southern bypass for Huntingdon.”
In other words, the A14 will be not a new road, but the existing one with added tolling.
Britain’s motorists, already squeezed to breaking point, demand plain speaking from the Government, so I will give the Secretary of State another opportunity. Will she tell us what will constitute a capacity improvement on an existing road that could lead to tolling? Will that include an extra lane, a contra flow, a new slip road, a roundabout or a bollard? Motorists deserve to know what the Government have in mind.
As the A14 runs through my constituency and is rather a long way from Barrow, may I point out to the hon. Gentleman that adding extra capacity, even if it is tolled, will help all those who go on the free bit of the road, because they will be able to get home faster? That is why the proposal is supported locally, even if there is opportunistic opposition from Labour.
The hon. Gentleman seems to have more information about how the scheme will work than either me or the Secretary of State, who does not seem to know how exactly motorists will be clobbered with tolls.
Who, if anyone, will police tolls? Will contracts stipulate that tolls must be removed when improvements have been paid for? How will we avoid people being driven off the motorways and dual carriageways and back into the communities and road networks that the toll roads were built to relieve?
In addition to the fear of massively increased tolling, there could be a further, lasting sting in the tail for motorists from this Budget. Buried on page 70 of the Red Book are plans for what can be described only as a new stealth tax hike on motorists. The Government say they will consider reforming—by which they clearly mean “increasing”—vehicle excise duty. Ministers need to come clean on how much extra they plan to squeeze out of motorists through that new stealth tax increase. They also need to say what it will mean for motorists who behave responsibly and opt for fuel-efficient vehicles.
On a less testing note on the subject of sustainable road travel, let me say that the Opposition welcome the £15 million the Chancellor has found to help to make London’s roads safer for cyclists. The spate of injuries and deaths in the capital has been truly appalling, and the Opposition fully support the campaign, led by The Times, for significant change. As the Secretary of State will know, however, the Budget contained only this one-off grant for London—the fact that there is an upcoming mayoral election is a complete coincidence, I am sure. Labour has committed to reserving a portion of the roads budget to dedicated cycle facilities on roads across the country, not just in the capital. Will she make a similar commitment?
If transport on the ground is up in the air with the uncertainties created by the Government, transport in the air, aviation, remains at serious risk of being grounded—if Members follow me. On aviation capacity, the Government still do not know—and we still do not know after the Secretary of State’s speech—whether she is taking off or landing.
Well, you know. [Laughter.] I am here all week.
The Chancellor told us on Wednesday that the country must confront the lack of airport capacity in the south-east. He is right, but his words would carry more weight had the Government not spent the past two years dithering and delaying on producing any sort of aviation strategy. What did we actually get this week? We got not one but two further delays. First, the Chancellor announced that the strategy that the Department for Transport’s business plan told us to expect in March will now appear late this summer; and now the Secretary of State seems to have put back the date even further to this winter or next spring—more dithering, more delay, while competitor hubs in continental Europe get on with providing new capacity that could transform their economies.
I will not give way any more because I am running on and I want to give other Members time to speak.
The Government came to power with just one policy on aviation capacity—to abandon the Heathrow third runway. Since the election, the Government have come up with no practical thinking on alternatives. Instead, they seem to have outsourced their aviation strategy down the river to a Mayor who is more interested in trying to grab attention than in finding a plan that will work. That is no way to treat a vital economic driver that is critical to the country’s future growth.
As the Secretary of State is well aware, the plans for an airport in the Thames estuary are being met with a barrage of opposition from the area, including from her own party’s MPs and councillors. She would be even clearer on that if, like my hon. Friend the shadow Secretary of State, she had been to north Kent and talked to local people in the areas affected. The idea of building a new airport from scratch in the Thames estuary is a huge distraction from the real need for airport capacity here and now. It is obvious why so many people, but apparently not the Secretary of State, see an estuary airport as a complete non-starter—there is the impact on local communities, the destruction of internationally important habitats, the safety threat from explosive-laden wrecks, a liquefied petroleum gas terminal and a huge offshore wind farm.
Does my hon. Friend agree that the reason the Government have not yet come out explicitly on these issues is that they do not want to damage Boris’s chances in the mayoral election and undermine his fantasy island proposal? The reality is that this proposal is completely opposed by whole sectors not just in Kent but north of the River Thames, including in my constituency.
My hon. Friend makes a good point. Frankly, Britain deserves better.
The overwhelming majority of the aviation industry agrees that Heathrow would struggle to continue in its current form alongside an estuary airport, placing at least 140,000 jobs in west London and the M4 corridor under threat. I hope, then, that when the Secretary of State finally publishes her thinking, she will choose a sensible course based on providing additional capacity at existing airports, not a strategy based on a pie-in-the-sky estuary airport.
I will not at this stage, if the hon. Gentleman does not mind.
My hon. Friend the shadow Secretary of State is still waiting for a response to her letter offering cross-party talks on tackling capacity at existing airports. Perhaps the Secretary of State could pop her reply in a “get well soon” card and send it over with a nice bunch of grapes. I am running out of suggestions to make her agree to this proposal, which seems eminently sensible to Opposition Members. The aviation industry, businesses and passengers need certainty to guarantee investment, and we are offering to help her achieve that.
On the railways, we strongly welcome a number of the investment decisions made in the Budget, particularly the Secretary of State’s support for the vital northern hub project. I pay tribute to the hard work put in by colleagues on both sides of the House from across the north of England on ensuring that support for the hub transferred from the last Government to this one. We need clarity, however. In the Budget, the Chancellor announced £130 million of support for a £500 million project, but we need details of what remains to be funded.
Although that infrastructure investment, when it arrives, will be welcome, the Secretary of State knows that with no help on Wednesday for rail passengers struggling with fares that for some have already risen by up to 11% this year, there was nothing to reassure commuters that the next two years of RPI-plus-three increases will not be going ahead, and nothing to change the franchises about to be awarded by her Department that will allow for 15 years of fares increasing by up to 8% every year. All over the country, families are finding themselves paying more for their journey to work than for their rent or their mortgage. They will not welcome this inaction on fares. These sky-high increases price people out of jobs, stunt growth and discourage sustainable travel choices.
Britain’s bus users, too, who are already being hit by reduced services and rising fares, will have noticed that they warranted no mention at all in the Budget, and there was only a passing reference in the Secretary of State’s speech today to a paper to be produced later today. From next month, bus operators are being hit by a 20% cut in the bus service operators grant. In my constituency, like those of many hon. Members, that is threatening to lead to more services being taken off the road and a hike in fares for those who remain.
Buses are the backbone of our transport network and essential to ensuring that many people—especially young people—can access jobs and training. Labour is calling on bus companies to set up a free travel scheme for 16 to 18-year-olds in return for the financial support they receive. Let us compare that to the approach by Ministers, who seem content to wash their hands of the entire sector. When they could be helping tackle youth unemployment, they risk making a bad situation even worse.
At the end of his statement on Wednesday, the Chancellor boasted that he had
“not settled for a do-nothing Budget.”—[Official Report, 21 March 2012; Vol. 542, c. 807.]
But to motorists, businesses, and the millions who rely on public transport across the country, that is exactly what he has done. On rail fares, he has done nothing; on the crisis facing our buses, nothing; on aviation capacity, nothing; and on fuel costs, well, he has done something—he has made them even higher. In defending the Budget, the Secretary of State and her Ministers need to explain whether they do not understand or simply are not bothered about the damage they are doing to family budgets and the impact it is having on Britain’s ability to get moving again.
Like all Members, I am frequently visited by members of my community asking for many things that the Government can do to help their businesses or special interest groups. I have recently taken to asking them what they would do if they were Chancellor of the Exchequer for the day. I ask them to come up with three ideas, and invariably they come up with a whole load of ideas, and after a few minutes I have to say to them, “I’m terribly sorry, but you’re Chancellor for the day, not Father Christmas.” Once they have been told, people realise that when our back is against the wall, it is vital that any budget has to be balanced. Anybody who knows how to run a business knows that they simply cannot carry on borrowing to stimulate that business. Cuts have to happen, and it is important that we all share the burden of those cuts. Labour is keen to ask those on this side of the House how we will be affected by them and what our interest in them is.
That is a slightly wider point, but the fact is that when someone has run out of credit on their credit card, they can use the debt that they already have, but they cannot increase it.
Many of us on this side of the House have a vested interest in the cuts. I declare an interest, in that I shall be £2,450 a year worse off as a result of child tax credit cuts, but the other side of the coin has to involve stimulating economic growth. The problem is that the Chancellor does not have a volume knob on the economy that he can easily turn up. He has to use a number of different measures. There is no simpler way to generate quick economic growth than to import investment from overseas, but to do that we need to demonstrate that we are open for business and competitive. We need a tax regime that attracts inward investment. That is why I see the combination of the accelerated fall in corporation tax to 22% by April 2014 and the cut in the top rate of income tax to 45p as crucial to the opportunity that we offer to international companies and entrepreneurs looking to set up their businesses in the UK.
I cannot overstate the importance of that international competitiveness. Brintons carpets in my constituency has recently been reviewing its operations. It is absolutely committed to Kidderminster, but it has received overtures from the Portuguese Government, who are offering free loans and grants for it to move its carpet looms to Portugal to increase manufacturing there. This is a real threat to UK manufacturing and to my constituency, but that threat is significantly diminished when the corporation tax differential is increased to 7 percentage points. The top rate of income tax in Portugal is 46.5%. In other words, Brintons would have a 33% higher corporation tax bill by moving to Portugal. The managing director of Brintons assured me last night that this was absolutely a pro-business Budget.
Those two tax measures represent an important step towards achieving the relatively quick fix of attracting inward investment, and making it harder to justify leaving the country, but it is incredibly important that we support this with home-grown prosperity that will provide opportunities for local entrepreneurs. The Government have already introduced measures to help small and medium-sized enterprises, as well as announcing the business enterprise zones.
I must confess to being disappointed that my constituency was not granted such a zone, but it is a credit to the local enterprise partnership and Wyre Forest district council that the South Kidderminster business park continues to be a reality. We have just had a planning application submitted for a new development of 27 hectares of mixed use, including a 4 hectare employment development, retail, hotels, a restaurant and a café, care and crèche facilities, a railway halt for the Severn valley heritage railway, and up to 250 new homes. That planning application demonstrates a strong commitment to my constituency by a far-sighted investor, and follows on from two significant investments in local businesses— £36 million in Brintons carpets and £15 million in Sealine yachts—and precedes a further planning application to create a 250-room conference facility at the West Midlands Safari Park that will be the premier facility in the county. In addition, a brand new Premier Inn hotel is opening today in Kidderminster.
I am not trying to pretend that everything is entirely rosy, but it is important to balance negative news with all the positives, and there is a lot of positive news about. It is also worth remembering that unemployment, although too high in Wyre Forest, has remained flat since 2010, having doubled in the years between 2005 and 2010. A strong local will to make a difference is incredibly important and, if I may, I will use this opportunity to plug my jobs fair, which is being held in Kidderminster next Thursday. It will try to match those who are looking for jobs with businesses that are hoping to expand.
The key point, however, is that an enthusiasm to do well locally and to run with initiatives—from something as simple as a jobs fair to something as strategic as significant local investment—has to be balanced by support from the top. That can be illustrated by the fact that the recently announced Kidderminster college tie-up with Birmingham Metropolitan college to provide high-tech courses in the video, animation and gaming arena will benefit hugely from the announcement yesterday of tax reliefs in that industry. I should declare an interest as I am a governor of Kidderminster college. Cutting red tape for micro-businesses, giving research and development credits above the line, introducing measures to make the UK a centre for technology for Europe, and other measures will help to create opportunities for a whole raft of small businesses to start up and develop.
Mr Speaker, you will note that I am an enthusiast for this Budget. I am absolutely convinced of its pro-business credentials and I broadly welcome them, but I have one or two points that I would like to raise. I am pleased to see the Secretary of State for Transport in her place. The High Speed 2 project will certainly bring benefits to Birmingham, the main city of the west midlands and the second city of this country. I urge the Secretary of State to look into the possibility of building a new regional hub airport in Birmingham to reinforce the important link that HS2 will provide between Birmingham and London. A hub airport would certainly be of huge benefit to the economy of the west midlands, and indeed of the midlands as a whole.
I also want to sound a note of caution about the regionalisation of pay scales. I completely agree with the logic that the private sector will be unable to compete with the public sector on pay when the public sector pays as much as 18% more for equivalent jobs in the regions.
The areas in which public sector pay tends to be higher than that in the private sector also have extremely high unemployment. I am therefore puzzled by the idea that high public sector pay is preventing job vacancies from being filled, or that there are any such vacancies as a result of this so-called problem. That does not appear to be the case, given that there are so many people chasing each job.
Not all of it. Small businesses do not set their pay on a national basis. It makes complete sense that public sector pay should be treated likewise, and in the broadest sense I welcome the freeze on regional public sector pay awards, but I have one caveat. Moving public sector jobs around the country—especially in Government Departments such as vehicle licensing, which went to Swansea—brings cash to a local economy. That cash can provide economic activity and liquidity that supports jobs in the local private sector that might otherwise struggle. While the public sector regional pay adjustment is going on, I urge the Government to take careful note of what is going on locally, to ensure that the proper efforts to reduce the crowding-out of the private sector by the public sector do not unwittingly starve the private sector of much-needed local liquidity.
I also worry about the rising cost of fuel for our constituents. This is a huge burden on families and although the increase in tax-free allowances is welcome, the rising cost of fuel is an issue for rural and semi-rural constituencies such as mine. I welcome the help that the Government have given—we are 10p better off than we would otherwise have been—but there are two further issues to consider. The first is that fuel companies charge consumers what they can get away with locally. Prices in Kidderminster are around 5p dearer than they are in the constituency of my hon. Friend the Member for Bromsgrove (Sajid Javid), for example. On writing to the chief executives of Tesco, Sainsbury and Texaco, I was told that prices were set locally. When I contacted the local managers, they told me that the prices were set regionally. Whatever the method of price setting, the fuel companies are ripping off my constituents in Wyre Forest and I want them to stop.
When we compare the price of oil to pre-tax profits over the years, we see that the oil companies are simply not passing on extra profits to consumers. Indeed, they are making extra profits from consumers. Of course duty and VAT are part of the price of oil, as is the dollar-sterling exchange rate, but the underlying commodity price at the pump is the key component, and any means by which the Government could persuade the oil companies to pass on their profits to consumers would be gratefully received.
I am most grateful to you for calling me to speak in the Budget debate, Mr Speaker. I do not propose to retread old ground, and I shall confine my remarks to how the Budget will affect my constituents. The backdrop to my observations is the fact that unemployment has gone up by 12% since May 2010, according to the claimant count figures from the Office for National Statistics. The latest figures show that 1,811 people in my constituency were unemployed in February 2012. Those same statistics show that unemployment has risen for 15 of the past 21 months, and job losses have included 150 highly skilled jobs at Tetrapak.
A major supermarket is opening in Cefn Mawr in my constituency next Monday, and I welcome that. I welcome the fact that about 100 new jobs will be created, although most will be part time. What I do not welcome is the news that 11 people were chasing every single one of those job vacancies. That is the sort of economic climate people in my home area are facing. It is why it is living in cloud cuckoo land to think that our 41 local Remploy staff will wander straight out of the factory that the Government want to shut into a land of milk, honey and stable new jobs. That is deeply wrong, unjust and immoral, and if the Tory-Lib Dem double act in Westminster will not do anything to put it right, it is vital that they play ball and devolve it to a Labour Government in Wales who will.
What people in my home area know all too well is that we need more of the wealth that private sector jobs create. There is a strong work ethic in our area, which runs deep in our twin industrial and agricultural heritage. We do not expect something for nothing, and these strong cohesive communities are very cross—rightly so—when anyone says we do. This is why we are so concerned about unemployment, and why we know that however many courses people take, however much work experience they get and however many boxes are ticked, what really matters is how many real jobs are out there—jobs that create prosperity and purchasing power, jobs that are for personal fulfilment and challenge, jobs to promote well-being and cohesion in our communities.
Yes, purchasing power is vital in all this. What did construction companies think when the Government swooped up the VAT rates? Let us remember the VAT tax bombshell—I mean the real one that happened on 4 January 2011. The builders and tradesmen in small and medium-sized enterprises certainly remember it because it had a major effect on their businesses.
The Minister spoke about people with business experience, so I will provide her with an example. Mike Learmond, regional organiser for the North Wales and Chester Federation of Small Businesses, put it like this at the time:
“Small firms will be hit hard by the rise in VAT, as unlike big businesses they can’t absorb the increase. Thus small firms will have to pass the full cost on to customers, reduce stock levels or find cost savings elsewhere—potentially costing jobs and undermining the Government’s private sector led recovery.”
Well, 1,811 people in my constituency know exactly what he meant by that.
In a Westminster Hall debate on micro-businesses in January this year, I was most interested when a Conservative Member with clear expertise in this area, the hon. Member for Newton Abbot (Anne Marie Morris), made this very thoughtful point about VAT:
“We have on a number of occasions talked about the possibility of reducing rates for restoration and repair of houses, bringing the rate down to 5% rather than the full 20%. It seems to me that, given the pressure on the Government to increase the available housing stock, now is the time to look at that again.”—[Official Report, 25 January 2012; Vol. 539, c. 137WH.]
I agree with her totally and am heartened that my own party has pledged itself to a one-year VAT cut to 5% on home improvements, repairs and maintenance to help home owners and small businesses. In the interests of small and medium-sized businesses, enterprise and support for the work ethic, I am bitterly disappointed that the Chancellor has not used the opportunity of the Budget to do that, as he could have done.
On purchasing power, I am at a loss to understand quite how this Government’s apparent embrace of regional pay, which means pay cuts to my constituents and the people of Wales more widely, is supposed to create an environment in which private sector businesses will flourish. There is also, of course, a deeply moral issue. If a policeman or woman in my constituency is serving the public—whether it be in my constituency or elsewhere, as when they travelled down to London in vans to support the Met police during last summer’s riots—it is right that those servants of the public be paid the same rates. [Interruption.] I wonder whether there will be a real intervention. Perhaps not. In many ways, there will be rightful anger and disappointment at the missed opportunities of this Budget.
I had assumed that the hon. Lady would resume her seat if she had accepted my intervention. She might want to consider the fact that London police officers already receive London weighting, as do other public officials. I remind her, too, that it was her Government who introduced regionalised pay for the Court Service; the last Labour Government started it.
It is a great pity that the hon. Lady has been so interested in following the Conservative party’s crib sheet that she has not read about what happened. The circumstances were very different with the court system, and 50 local rates were reduced to five—it was totally different and it standardised the pay far more. [Interruption.] Oh dear, I fear that the hon. Lady will have to wait a little longer to be promoted to a Parliamentary Private Secretary.
As I was saying, I believe that there will be rightful anger and disappointment at the missed opportunities of this Budget. About 14,000 millionaires—we saw some of them on the Front Bench the other day; it looks as though the servants are on duty today—will be rubbing their hands with glee at the £40,000 tax cuts they are receiving, while small and medium-sized entrepreneurs, teachers, nurses, police, families and pensioners are collectively faced with a £3 billion stealth tax, and are adversely affected. The 1,811 unemployed people in Clwyd South will rightly feel let down this week by a Tory Government, aided and abetted by those spectacularly useless Orange Book Lib Dems. Let us hope that, even at this late hour, this Government will put working families and those who want to work ahead of their ultra-rich cronies.
I believe that this is a courageous Budget. It is innovative and ingenious, notable for the steady stewardship of the Chancellor of the Exchequer. We need to take a strategic overview. The recession from which we have emerged is a deleveraging recession, a paying down debt rather than a destocking recession, so some of the normal policy prescriptions on fiscal and monetary policy have proved useless in the face of that. That makes the imperatives of long-term reform of the public services, particularly education and welfare, tax cuts and supply-side reforms, including the reduction in taxes and the regulatory burden, even more important.
My hon. Friend is making a strong point about deregulation. I would point to paragraph 2.238 of the Red Book, which shows that the Government are committed to scrapping or improving 84% of health and safety regulation. Does my hon. Friend agree that this is the right approach—focusing on what is most risky as opposed to applying all sorts of regulations that are no longer necessary, valid or helpful?
My hon. Friend makes a very good point, which explains why this Budget has had consensus support and been viewed from a positive perspective by business organisations across the country.
We should be talking a paradigm that involves tax and spending, not just tax. There has been too much focus in the last few months on cutting or increasing taxes, when we should be talking about expenditure. Are we really asking the public to believe that a net 6.8% reduction in public expenditure over the comprehensive spending review period is enough to rebalance the economy when we saw a 53% real-terms growth in public expenditure between 2000 and 2010? We were spending £450 billion just 10 years ago on public services, and we are now spending £702 billion. Are we getting value for money for our constituents and our taxpayers?
Of course, Conservative Members will not let the electorate forget the disastrous and poisonous economic legacy left to us by the Labour party—to the extent that we have to pay £120 million a day in debt interest and are £47.6 billion a year in debt this year. As I said earlier to my right hon. Friend the Transport Secretary, had Labour remained in office, they would have had to borrow another £200 billion. They left us a structural debt in a period of economic growth. They left us a situation in which individual net borrowing doubled in just six years, while we have massive sectoral imbalances and a systemic dependency on debt. That was Labour’s legacy.
Labour Members still have no economic credibility; if they were a party with a cogent and coherent narrative on the economy, they would pledge to reinstate the 50p tax rate and reverse the policy on freezing age-related allowances. They do neither because they are opportunistic and they know that if they were elected to government, they would need the money.
My hon. Friend is absolutely right. The Labour party will not make progress with the electorate until it does two things: apologise for the debt millstone they left to our children and grandchildren, and develop a policy that is not written on the back of a fag packet.
I welcome the cut in corporation tax, which gives us the fourth lowest such tax rate in the G20. I welcome the reduction in the top rate of income tax from 50p to 45p, too, as the 50p rate was damaging competitiveness and not collecting the sums it should have collected, and was an impediment to entrepreneurial activity and business growth in our country.
Let us nail the myth about taking poorer working people out of tax. It is a Conservative policy, enunciated by Lord Forsyth in the tax commission in 2005, and restated by Lords Saatchi and Tebbit. It is a Conservative policy to boost people’s incomes because we trust them to spend their money wisely.
I also support the policy on age-related allowances. There is consensus on the issue of generational fairness—even the hon. Member for Pontypridd (Owen Smith) will agree with me about that—and this Government have a very good record on provision for pensioners, including the largest ever cash rise in the basic state pension from April this year, the uprating of the pension credit guarantee, and the help with fuel bills for poorer pensioners. We have a much better story to tell on that than the last Labour Government had, with their ridiculous and insulting 75p pension rise in 2000.
Does the hon. Gentleman agree, however, that the 4.7 million pensioners who will be impacted by the age-related allowances policy will not be pleased to learn that the House of Commons Library note on the Budget concludes that they will be between £80 and £280 worse off in real terms as a result of its provisions?
The independent Institute for Fiscal Studies disagrees profoundly with the hon. Gentleman, and believes that the proposals are both morally and financially right and progressive. The hon. Gentleman will therefore have to try again later.
I support the planning regime reforms and the liberalisation of the national planning policy framework. I was delighted to hear about the regional policy and the expansion of airports in the south-east as well. We are currently losing our competitive advantage to Schiphol, Frankfurt and Charles de Gaulle. I am delighted, too, that the Chancellor resisted the temptation to limit further tax relief on higher-rate pension contributions. That would have been an attack on thrift and prudence. We in Cambridgeshire are very pleased with the news about the A14 and the Get Britain Building and Growing Places funding. Moreover, I have been campaigning for quite some time for residential estate investment trusts for social housing, and the previous Government did nothing about that in 13 years.
It would be wrong to say that I am happy with every measure in the Budget. There were some missed opportunities and missed steps. Fuel duty is an issue that will return—as it would do for any Chancellor and Government. I understand why changes were not made this time, but my constituents’ petrol bills are hurting, and using a car is a necessity, not a luxury. Air passenger duty must be looked at again, too. It has increased 360% in the last seven years. Because of the major impact on transportation and tourism, I hope that the Chancellor will revisit that issue. I should declare an interest: Thomas Cook has a headquarters in my constituency.
The House will know that I had very serious concerns about the child benefit policy, but the Chancellor has listened and taken them on board. We have addressed the cliff-edge issue, although there is still the anomaly of the two earners as opposed to the one earner; we should regard that as a work in progress. My constituents are also asking why our European Union contribution has increased between the pre-Budget report and this Budget. It may be a function of reduced co-payment of funds for EU projects. If we are all in this together, however, that should include the European Union, so we must look at that issue.
I was very disappointed that, once again, the Budget did not contain a policy to recognise marriage in the tax system. For probably as little as £800 million—less than a third of the £3 billion we spent on taking people out of lower rate tax, in order to appease, as it were, our Liberal Democrat friends—we could have given a tax break to married couples with children under 3. I am sorry that that did not happen.
Things will be tough over the next few years. Restoring economic health after the 13 years of the last Labour Government—years of waste, profligacy and creating a client state—was never going to be easy. Once again, the job of getting the finances of this country straight and of building a great Britain and a strong economy falls to a Conservative Government, and I believe that this Chancellor has proved he is up to the task.
It is always a pleasure to follow the hon. Member for Peterborough (Mr Jackson), who has a particular perspective on things.
I want to focus on two themes: jobs and justice. The overall state of the economy is as follows: the Budget deficit is £121 billion; interest rates are 0.5%; and the Bank of England has undertaken £325 billion in quantitative easing. Yet the economy is in a depressed state, with GDP below its peak and its potential. The worst consequence of that is that 2.67 million people are unemployed, including 1,000 young people in my constituency.
What are the Government doing to tackle that? Given the fiscal squeeze on households, it is clear that what is needed is an increase in business investment and exports, but that is not what we are getting. According to the Office for Budget Responsibility forecasts, the increase in business investment has been pushed back from 2012 to 2013, and the unemployment peak has also been pushed back. In the north-east, the chamber of commerce says that investment is particularly weak. Shockingly, it has been negative since 2008, and the figure currently stands at minus 6.3. That means that, in contrast to what the hon. Member for Peterborough said, the capital stock is shrinking.
Why is investment so low, given that The Daily Telegraph tells us that corporate balance sheets are “brimming with cash” and the Bank of England reports that dividends are at record levels? It is because there is a lack of confidence. Have the Government done anything to strengthen business confidence? What little growth that is forecast will be fuelled by consumer borrowing. Although Government Members inveigh against household indebtedness, over the forecast period, that is predicted to rise from £1.5 trillion to £2 trillion.
The hon. Lady is an expert in Treasury and economic matters, so I was surprised that she stressed that confidence was so important, because does she truly think that the Labour alternative policy of borrowing more money would give businesses more confidence to invest?
The fact of the matter is that Ministers have overshot on their borrowing. Their borrowing is £147 billion higher than they were planning a year ago, and the credit rating agencies have put a watch on our creditworthiness. Government Members should not be quite so confident about where their Ministers are taking the British economy.
Turning to growth in the enterprise sector, there is to be a measly £25 million for aerodynamics and another measly £25 million for science, which is crucial to modernising our manufacturing. Under the last Labour Government, science spending rose by £1 billion; a £25-million investment will not get us anywhere.
Let us discuss what the Government are doing on corporation tax. They have trumpeted a cut in the main rate, but the reductions in the allowances mean that the net support to industry overall is £200 million. No wonder investment at home is so flat. Government Members claim that GlaxoSmithKline took its investment decisions in response to the Budget, but that is patently ridiculous. GSK has been planning its investments for the past two years, in response to the patent box changes announced by the previous Government before the general election. Everything this Government have done this time has been swamped by the cuts to capital allowances that they made in their first Budget, which took £1.5 billion from the private sector.
My hon. Friend is absolutely right. Government Members are completely unrealistic about what business needs and simply do not understand that what is needed is a co-operative approach between the public and the private sectors, and long-term investment. The North East Chamber of Commerce told us that its checklist for the Budget was an increase in capital allowances and the industrial buildings allowance; a reduction in employer national insurance contributions for young people; and more support for apprenticeships. None of that appeared in the Budget this week. The Government simply have no strategy for jobs or growth.
We have heard a lot from Government Members about the benefits of cutting the 50p rate, but even the Chancellor of the Exchequer does not have the gall to put cutting the top rate of tax into the “enterprise and growth” section of his Budget. The distribution effects of this Budget are shocking. It is grotesque to give a millionaire an extra £40,000 while cutting the tax credits of those on the minimum wage who work 16 hours a week by £4,000. That is a complete disgrace. As the Leader of the Opposition pointed out on Wednesday afternoon, 300,000 people will benefit from the cut in the 50p rate, by an average of £10,000, whereas only 4,000 people will pay the higher stamp duty on properties worth more than £25 million. The Chancellor’s estimate that the loss in revenue from cutting the 50p rate is £100 million is risible. It is absurd to suggest that £2.9 billion more tax will be collected because of behavioural changes—that would be an unprecedented impact on people’s behaviour.
Before I leave the issue of tax avoidance, I wish to discuss the great contribution to the Budget made by the Liberal Democrats. They seem pleased with securing a crackdown on tax avoidance in return for succumbing to the Tory desire for a cut in the 50p rate. In fact, the Institute for Fiscal Studies says this morning that there is less action on tackling tax avoidance in this Budget than there has been in previous years.
I am sorry, but I will not give way, as I have used up my intervention time.
If the Liberal Democrats look at the measures in the Red Book to combat tax avoidance, they will see that six of them will be legislated for in the 2013 Finance Bill instead of the 2012 Finance Bill. If they look at table 2.1 in the Red Book, they will see that the forestalling of the additional rate reduction and the cap on unlimited tax reliefs—that is the new phraseology for the tycoon tax—adds up to £2.4 billion this year. In other words, this coalition Government have given their wealthy friends one last chance to avoid tax, and that avoidance will be worth £2.4 billion. That is equivalent to all the cuts imposed in the June 2010 Budget on lone parents, on working parents and on the disabled.
I am conscious of the fact that our speeches are limited to seven minutes. I have so much to say in the Budget debate but, first, I shall just answer something that the hon. Member for Bishop Auckland (Helen Goodman) said. One moment she was talking about the importance, in her experience, of confidence in business and among those who do business, and I perfectly understand that, but the next moment she was pouring scorn on attempts to reduce the taxation for those people. I must ask her something, which she does not need to answer now but perhaps she will consider: what gives people confidence? They need lower interest rates, which they have got because of the prudent things that this coalition Government have done to reduce debt; they need stability and the possibility of obtaining funds for investment, and the Government have done such a lot on that; and, above all, they need to know that if they work hard to set up a business, with all the hassle and aggravation that mortgaging their house and creating jobs involves, and they are successful, they will keep the majority of what they earn. We must not forget that that is what growth is about and what confidence is about. We cannot therefore pour scorn on reducing this top rate of tax, which does not work, as has been empirically proven in the figures that have come out. People in business do all this grafting and striving to do what they do, and nothing knocks their confidence more than the fear that the majority—more than 50%, if employers’ national insurance is included—of what they earn will be taken away.
I am interested in the hon. Gentleman’s description of setting up a business. When my husband set up a business, he took a salary cut. I do not believe that what motivates people is just what they are going to earn and how much money they are going to put in their back pocket; it is about being confident that they can sell whatever it is they are selling and that there is a long-term market for what they are doing. The cuts in domestic consumption are what is killing business confidence in this country.
I thank the hon. Lady for those comments. I remind her that I said that the rate of taxation was one of a package of things that gives confidence. I have started and owned a business, and I did not draw a salary for two or three years as a result. I drove minicabs and ran a market stall at weekends in order to pay my way, so I know what it is like, as I have experience in that field. I do not feel it is appropriate to take lectures from people who perhaps have not done that themselves. I am talking not about the hon. Lady, but about many other people who have mentioned these things.
Should we not base our approach on evidence? Given that the evidence, supported by the Office for Budget Responsibility, shows that there are behavioural effects that lose revenue, does this not show why the Labour party got us into such a mess? That party ignores and is positively disdainful of the impact of taxes on people’s behaviour.
I absolutely agree with my hon. Friend. I hear a lot from people from all parts of the spectrum in my constituency, as other hon. Members do in theirs. In my judgment, people are very realistic, because they realise that the mess we got into was caused by chronic overspending and a budget that was completely out of control under the previous Administration. I believe that the polling on who got us into this mess is consistent on that point. So it is clear that no matter which party people are going to vote for in the future, they do not want this to happen again; they do not want overspending to take place and they do not believe that spending more money and borrowing more money is the solution to this country’s economic problems. This is the first time in my adult life, from reading the papers and taking part in politics, that I can recall this important lesson having got into the public’s consciousness. That is sensible, because people can relate to it in their own household earnings and the budgets that they make for themselves.
Let me move on to the growth area of the Budget. The focus is on economic growth and infrastructure and that is important because the future growth of this country is the most significant thing that the Budget is about. Rather than talking about—
Proceedings interrupted (Standing Order No. 11(4)).
With permission, Mr. Speaker, I would like to make a statement on the new cross-Government alcohol strategy. Most people have no problem with alcohol. They enjoy a drink and it is one of life’s pleasures, but we all know there is a significant minority in this country who drink dangerously and who cause disproportionate harm. Almost 1 million violent crimes and 1.2 million hospital admissions each year are alcohol-related. Just under half of all violent crime is connected to alcohol, and drunken brawls and disorder have made many town centres no-go areas for law-abiding citizens.
The effects of such dangerous drinking on crime, communities, children and families are clear, but it need not be like this. Alcohol can be consumed responsibly, a drink can be enjoyable, not dangerous, and a thriving night-time economy can be built on the basis of a sensible drinking culture. In Durham, a Best Bar None accreditation scheme promotes responsible pub management. Licensed premises must meet minimum standards, for example on the skills and knowledge of their bar staff, to gain approval. They are encouraged not to serve beer to drunks and to build a good relationship with the police and local agencies. After three years, licensees reported a 75% increase in trade, a 50% increase in city centre footfall and an 87% reduction in violent crime. Experiences like that show that city centres can become more attractive places to visit at night if they allow sensible drinking rather than a licensing free-for-all.
Such schemes should be encouraged, but any progress will for ever be overshadowed unless we stop the flow of cheap alcohol. In some shops and supermarkets, drinks are now so heavily discounted that it is possible to buy a can of lager for as little as 20p or a two-litre bottle of cider for just £1.69. That means that many people now drink excessively at home and that many pre-load before they go out. Two thirds of 17 to 30-year-olds recently arrested in one city said they had pre-loaded before going out, and pre-loaders are estimated to be two-and-a-half times more likely to be involved in violence than other drinkers. So we need to deal with the dangerous drinkers, crack down on the irresponsible businesses and stem the tide of cheap alcohol. That means providing punishment and treatment for those who have shown that they cannot drink sensibly, tightening our licensing laws and cracking down on those who sell alcohol to children or drunks. It also means, for the first time, putting a sensible price on alcohol.
Those who have a particular problem with alcohol need specialist help to change their behaviour, so we will provide better treatment for dependent drinkers. We will develop alcohol interventions in prisons and will make alcohol treatment requirements imposed by the courts more effective. Dangerous drinkers who are convicted of alcohol-related crimes will have their unqualified right to drink removed through piloted sobriety schemes. These schemes will involve breathalysers and specialist electronic tags to monitor offenders’ alcohol levels and ensure they remain sober. From April, pilots using conditional cautions will launch in five areas—Westminster, St Helens, Hull, Plymouth and Cardiff. Further pilots will be launched shortly to tackle more serious offenders using community orders. We will legislate to support the roll-out of these schemes nationwide should they prove successful.
As well as tackling irresponsible drinkers, we must also help local areas to tackle irresponsible businesses by giving them greater powers over licensing. The Government’s reforms to policing, health and the criminal justice system will help to put power in the hands of local people, but we also want to give local areas specific powers to deal with alcohol-related problems. New powers in the Police Reform and Social Responsibility Act 2011 will come into force on 25 April. They include powers to make it easier for local agencies to refuse, revoke or impose conditions on a licence and to close down premises that sell alcohol to children or contribute to crime and disorder. They will double to £20,000 the maximum fine for persistently selling alcohol to children, and anyone with an interest will be able to object to new licensing applications no matter where they live. Later this year, new early morning alcohol restriction orders will give local areas the power to stop alcohol sales late at night if they are causing problems by restricting opening and closing hours, and we will introduce powers for local areas to control the density of licensed premises. We will also bring in powers to allow local areas to place a new late-night levy on businesses that sell alcohol late into the night so that businesses that benefit from late-night drinking will contribute towards the cost of late-night policing.
The alcohol industry also has an important role to play. This strategy promises to support and free up businesses that are acting responsibly. Most British pubs promote a good drinking environment and are the safest and friendliest places to have a drink, so we will build on the existing responsibility deal to drive greater industry action to prevent alcohol misuse. For example, 35 leading drinks companies are today launching a pledge to give consumers a wider choice of lower-strength products and smaller servings with the aim of taking 1 billion units of alcohol out of the market by 2015.
Individual, local and industry actions are all important to deal with problem drinkers and problem pubs, but dealing with problem pricing can be done only by central Government. We know that the availability of cheap alcohol helps to fuel binge drinking. Strong evidence from a number of studies conducted in the UK, Europe, America, Canada, New Zealand and elsewhere shows that alcohol consumption is closely linked to the price of alcohol. Those studies also showed that increasing the price of the very cheapest alcohol does the most to reduce heavy drinking. There is also evidence that young people are particularly sensitive to changes in price. Increasing alcohol prices lowers their alcohol consumption. That is why we have already taken action to tackle the availability of cheap alcohol. We have stopped high-strength white ciders from qualifying for lower rates of duty, we have introduced a new higher rate of duty for high-strength beers and we have brought in a new lower rate for lower-strength beers.
Those significant steps forward will help better to match prices to alcoholic strength, but the problem is now so acute that we need to go further. We will therefore introduce a minimum unit price for alcohol. This will ensure for the first time that alcohol can be sold only at a sensible and responsible price, stopping the deep discounting and bargain basement sales that drive binge drinking. We will consult over the coming months on the level of the minimum unit price and will seek to introduce legislation as soon as possible. We do not now intend to go ahead with the proposed ban on the sale of alcohol below the cost of duty and VAT. Most drinks will not be affected by minimum unit pricing, but the cheap vodka, super-strength cider and special brew lagers will go up in price. The dangerous drinks will become more expensive but the price of a normal pint in the local pub will not increase by a single penny. We will also consult on introducing a ban on multi-buy promotions in shops, such as “buy one, get one free” deals that push people to buy more alcohol than they want. We do not intend to apply this ban to pubs, bars and restaurants, which, as I have already said, offer a more controlled drinking environment. We want to encourage these premises to survive and thrive.
This strategy is targeted explicitly at dangerous drinkers, problem pubs, irresponsible shops and harmful drinks. Those who enjoy a quiet drink or two have nothing to fear from our proposals. The local pub has nothing to fear and the responsible off-licence has nothing to fear. We will help to tackle problem drinkers, we will help local areas to deal with local licensing problems, we will encourage the alcohol industry to act responsibly and we will put a stop to the easy availability of cheap booze that has blighted Britain for too long. This is a comprehensive strategy to take back our town centres from the drunken thugs and restore them to the law-abiding majority. I commend this statement to the House.
This announcement about the alcohol strategy is extremely important, but the way in which it has been done is a complete shambles. It has been rushed out on a Friday morning when many of our colleagues have engagements in their constituencies and without notifying the Select Committee on Home Affairs. So, despite the many pieces of work the Committee has done on this issue, its members do not have the chance to be here in Parliament to scrutinise the strategy.
Why are we debating it today rather than on Monday, as was previously planned? It cannot be to ensure that Parliament hears the details first, because we have had the chance to read them in the Daily Mail, The Guardian and The Daily Telegraph, and all the other newspapers that were given the details yesterday. I even have the press pack, complete with questions and answers, which was given to the media yesterday and not to the House. It includes considerable additional information that has not been given to the House as part of the Home Secretary’s statement today. Nor can the reason be for Parliament to debate the statement, when only two hours’ notice has been given of a statement on a Friday. I take this opportunity, Mr Speaker, to apologise to the students I was due to meet in Pontefract at lunch time and have had to let down. Many of our colleagues will be in the same position.
The only reason we are sitting on Friday is so that the Budget debate could take place today rather than next week, Parliament could finish 10 days early and the Prime Minister would not have to answer Prime Minister’s questions next week. There is no precedent for handling a long-awaited consultation document in this way, on a Friday morning, with no notice. Over the past 10 years, there have been only three Government statements on a Friday: on the Iraq war, on swine flu and on Libya—all of them involving serious issues around national emergencies. What is the national emergency today?
What is the national emergency that prompted a decision to be made late yesterday afternoon to brief an important and serious strategy to the newspapers which meant that a decision was made this morning to interrupt the debate and make an oral statement? The only emergency is that the Prime Minister and the Chancellor have gone wobbly over the coverage of their Budget. Their Budget has gone wrong because pensioners are furious about the granny tax, middle earners are shocked to discover they will be paying the higher rate and everyone else is furious that the Government are bringing in a £10,000 tax break for the highest earners in the country, including, we discover, half the Cabinet. This is not about a 40p minimum price; it is about their failings on the 40p tax. The Home Secretary is being used as a human shield for the Chancellor and the Prime Minister, and she should have said no.
The issue is extremely serious. The Home Secretary is right: 1 million violent crimes each year are linked to alcohol. Nearly 9,000 people die each year as a result of alcohol abuse. Many people—indeed, most people—drink moderately and responsibly, and we enjoy it. The Home Secretary is right to say that responsible drinkers should not be penalised, but we cannot stand by and ignore the serious problem of dangerous alcohol abuse. Many policies have been tried already, including linking duty to strength and giving the police stronger powers to clamp down on alcohol-related antisocial behaviour, but she is right: they have not solved the problem.
The Home Secretary is also right to say that more now needs to be done. Many of her policies are sensible and we will support them. I agree that this is the right time to try minimum pricing. There are serious questions that she should answer—and the House should have the opportunity to debate—about how we ensure that supermarkets do not simply get a huge windfall, and what safeguards there should be for pubs. I agree, too, that we should explore the issue of sobriety orders, but these are serious questions that the House should have the chance to debate, to make sure they are not used wrongly for domestic violence cases and do not tackle the seriousness of the abuse.
I agree too that licensing is important. I hope the Home Secretary will now support our proposals to put public health in the terms for licensing decisions. More needs to be done on prevention, which had little mention in the statement—little wonder perhaps, when alcohol education is being watered down in schools. These are all extremely serious issues and we should have the opportunity to debate them properly in Parliament; but we do not have the opportunity for many MPs to ask questions today and to intervene and discuss the issues with the Home Secretary.
Will the Home Secretary tell us when the decision was taken to make the statement today? Will she agree to come back to the House and properly debate the strategy, giving the Home Affairs Committee and others the proper chance to ask questions? Does she agree that she is wrong to treat something so serious in such a cavalier fashion in the announcements made to the House? Does she agree that the Government are wrong to use a serious alcohol strategy as a cover for their chaotic confusion over their dreadful Budget? Will she treat the issue with the seriousness it deserves? We will give it proper support, if she will do so for the future.
That was the usual response from the right hon. Lady—bluster and political point scoring. One thing was missing. After the disaster of Labour’s Licensing Act 2003, after election text messages saying, “Couldn’t give a XXXX for closing time,” and after all that drink-fuelled violence and disorder, there was not even a hint of apology from the right hon. Lady.
I suggest that the right hon. Lady speaks to the previous Home Secretary, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), who said that he regrets not doing more during his time in office to tackle the problems caused by binge drinking. It is a shame that she cannot bring herself to be as frank about her party’s record in office.
It was difficult to decipher the right hon. Lady’s questions about the actual statement on alcohol strategy. I think she raised two points. She asked about ensuring that the minimum unit price did not lead to a cash windfall for supermarkets. I do not believe it will, because the supermarket industry is highly competitive; it has small margins on its goods and I expect money made through higher alcohol prices to be passed on through lower prices for other goods. When the cost of living is an issue, I should have thought that the right hon. Lady would welcome that.
The right hon. Lady asked about health bodies. They will of course be in a position to contribute to local licensing decisions; indeed, the new public health and wellbeing bodies will be able to participate, alongside the police and local authorities, in setting strategies to deal with alcohol in their local area. The right hon. Lady now takes an interest in health bodies having a role, although sadly she and her party opposed the Bill that enabled them to be set up.
I recognise that the right hon. Member for Leicester East (Keith Vaz), the Chairman of the Home Affairs Committee, is not in the Chamber, but last year he said:
“May I welcome the Government’s proposals for a minimum price for alcohol? They are of course in keeping with the recommendations that the Home Affairs Committee made last year.”—[Official Report, 24 January 2011; Vol. 522, c. 3.]
In 2008, the Home Affairs Committee talked about the cheap availability of alcohol, recommending that
“the Government establish as soon as possible a legal basis for banning the use of loss-leading by supermarkets and setting a minimum price for the sale of alcohol.”
What I think I deciphered from the right hon. Lady’s bluster is that the Opposition actually support the idea of an alcohol strategy and what the Government are doing. If I am correct, I welcome that.
I think the whole House welcomes what the Home Secretary is trying to achieve with the policy, and we certainly wish it every success. Could she comment on how we can tackle a possible increase in the black market—the smuggling of cheap booze from abroad? We do not want the reinstatement of the booze cruise to France.
My hon. Friend raises an important point. There are still issues about alcohol and other goods, such as cigarettes, being imported in ways that avoid paying tax to the Government. Much of that involves organised crime groups. One of the things the Government are doing is creating the new National Crime Agency, which will strengthen our ability to deal with organised crime, and the specific border police command will strengthen our border security to enable us to fight those problems even better than we are able to do today.
Clearly, the Home Secretary has been sent to the House today in a shameful attempt to divert attention from the disastrous Budget, but can she tell me why if somebody is prepared to spend £60 a night in sunny Stratford, they will be diverted from spending an extra pound in the supermarket to load up before they go out?
Does the hon. Lady want an answer to her question or not? By setting a minimum unit price, we are tackling the cheap alcohol that is sold and the bulk discount sales of alcohol, which mean that people pre-load at home. They are often drunk when they leave home. They go to their town centres and sadly, they create the drunkenness, the brawls, the fighting in the streets, the mayhem that mean several things. It means that the police have to spend money and deal with those issues. It means that accident and emergency departments in our hospitals are having to deal with people in drunkenness; every year, 1.2 million admissions to accident and emergency units are alcohol-fuelled. It also means that many law-abiding citizens just do not feel able to go into their town centres at night, particularly on Fridays and Saturdays, and I think it is time we did something about it, and that is what this Government are doing.
I welcome this consultation as an opportunity to tighten up on irresponsible sales. Does the Secretary of State agree with landlords such as Juliet Watchman of The Bell Inn in Shepton Mallet, who makes the point that if she behaved as local supermarkets did and sold lager for 34 pence per pint and cider at 48 pence per pint—pocket-money prices—or sold to those who are already heavily under the influence of alcohol, she would have her licence revoked by the local authority, and that this is a massive opportunity for landlords, the police and hospitals to contribute to the consultation?
I thank my hon. Friend. I commend the landlady of The Bell Inn in Shepton Mallet for taking that responsible approach to the issue of alcohol. We certainly look forward to receiving responses to the consultation from people such as her constituent and others. There are responsible landlords out there who are running pubs in difficult circumstances. We know; we have all seen many pubs in communities closing. We want to ensure that those who drink responsibly and those who deal responsibly with their clients, as many landlords and landladies do, are able to carry on doing so, and that we hit that end of the market that is being fuelled by this very cheap alcohol, often sold by supermarkets.
I went to talk to young people in the youth club in Spennymoor about exactly this issue. I believe that price does influence young people’s behaviour. What I do not understand is why the Government are having a consultation on this issue but did not have a consultation on the granny tax.
I very much welcome the contents of the statement, especially as it will spell the end of the dreadful legacy of the Labour party’s so-called café culture of licensing, which has blighted town centres up and down the country and done so much harm to people’s health. I particularly welcome the licensing changes. Could the Secretary of State inform the House a bit more about how the licensing changes could also be applied to supermarkets?
I thank my hon. Friend for that question. She is absolutely right. We were promised, under Labour’s Licensing Act, a European-style café culture. Nothing could be further from the truth in many of our town centres on a Friday and a Saturday night, and law-abiding citizens are suffering as a result. We are looking at ensuring—in some of the legislation that we have already passed, such as the Police Reform and Social Responsibility Act 2011, we are ensuring it—that it is easier for local authorities to clamp down on those outlets that are selling alcohol particularly to children. The fine has been increased. We are also making it easier to revoke licences where people are persistently caught selling alcohol to children.
A minimum price for alcohol is something that I have campaigned on, and I am delighted that, on this issue at least, the Government are listening to the health professionals, who warn that we are losing nearly £3 billion a year on alcohol-related disease. Without pre-judging the outcome of the consultation, will the Home Secretary acknowledge that the university of Sheffield suggests that a unit price of 50p is more effective? Why has her strategy not included the really important issue of alcohol advertising?
I welcome the support that the hon. Lady is giving to the thrust of the alcohol strategy. We have based the assumptions that are in the strategy on a minimum unit price of 40p. I am aware that there are those out there who say that it should be higher. We will be consulting, and obviously we will look at the results of that consultation when we make a final decision on the unit price.
I warmly welcome the statement by my right hon. Friend. She has talked about the changes in licensing laws made by the previous Government, which incidentally I think were well reported in the press before they were reported to this House. Can she perhaps expand on the impact that those licensing changes had on the binge-drinking culture?
I thank my hon. Friend for that. He is absolutely right. We were promised that the legislation would suddenly open an era in which people would sit casually in the streets, drinking responsibly. In fact, what we saw was an enormously increased burden on the police, who had to deal with the late-night and early-hours licences that were allowed as a result of Labour’s Licensing Act—that is why the police welcome the steps that we are taking today—and of course that just helped to fuel that binge-drinking culture which has caused so many problems in our town centres and high streets.
I apologise; the hon. Member for Brighton, Pavilion (Caroline Lucas) previously mentioned advertising. In fact, we are looking at the issue of advertising and display of alcohol as part of the responsibility deal.
I agree that it is a very important statement that we have before us today, but it is a shame that it has been snuck out as a diversionary tactic on a Friday. As the Home Secretary failed to answer the question asked by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), can she now tell us when exactly she was instructed to make today's statement?
I strongly support my right hon. Friend’s statement. It is important to make the point that a Conservative-led Government should be about not just laissez-faire liberalism but social responsibility and civic duty. How will my right hon. Friend ensure—if necessary, by sanction—that local authorities properly use the power that she gives them, given that they have not chosen to be very prescriptive in their powers under the Licensing Act 2003?
We obviously had a lot of consultation with local authorities when we were putting through the changes in the Police Reform and Social Responsibility Act 2011, and we saw that they welcomed what we were doing, which will give them more freedom to be able to exercise powers. One problem was that in some areas the Licensing Act was drawn quite rigidly, in terms of what authorities were able to do and how they were able to interpret it. They will welcome the extra freedom that we are giving them, particularly the late-night levy which, as I said in my statement, will defray the costs of late-night policing.
The Home Secretary’s statement repeats an awful lot of things that have already happened, which illustrates that it has been cobbled together—announcing new powers from an Act that this Parliament has already passed. Further powers such as heavier fines for those serving under-age people, which I think is very valuable, will work only if they are properly enforced. How does the Home Secretary square that with her reductions in policing budgets?
It ill behoves an Opposition Member, given the extra burden that the police felt as a result of the Licensing Act 2003, to stand up and refer to policing. The hon. Lady talked about the strategy being only about what has already been passed. No, it is not. Of course, we have brought together a number of issues, some of which we have already legislated for, such as changing local authorities’ powers in relation to the 2003 Act, and some of which we have not yet introduced, such as minimum unit pricing. Also, we have included more action with industry and on public health, dealing with health issues related to the harm that can be caused by excessive drinking. This is the first time that the Government have produced a cross-Government strategy across the board, addressing every way in which this Government can deal with the problems of alcohol which, sadly, we see in too many people in this country.
Pubs in West Suffolk and across the country are not only economically important but often vital hubs of the local community. Can my right hon. Friend tell me a bit more about what impact this statement will have on pubs, where so much, in many cases mostly, responsible drinking happens?
I am grateful to my hon. Friend for making the point that pubs play a very important role in our communities. Pubs have nothing to fear from the minimum unit price that is being introduced today. That will not have an impact on them. I hope that we will see more people feeling able to go to pubs, particularly those in town centres which until now people have often felt unable to visit because of the brawling that they see in the streets. However, we will be looking very carefully in a number of areas to ensure that what we are doing is very clearly focused on those outlets that are bulk-discounting cheap alcohol, which enables people to get drunk before they go out, not affecting the pubs.
A billion units a year.
Order. I apologise for interrupting the Home Secretary. I am a little concerned about the hon. Member for Rhondda (Chris Bryant), who I fear is suffering from compulsive chuntering disorder. I know that he will now calm himself, and we look forward to hearing from him eloquently and possibly at length on other occasions.
Thank you, Mr Speaker. As I was saying to the hon. Member for North Tyneside (Mrs Glindon), we have already been working with the industry to ensure that changes can take place. My right hon. Friend the Secretary of State for Health has done a lot of work on that. It will lead to 1 billion units of alcohol being taken out by 2015, and 35 companies have signed up to that deal.
This is an important issue for Bournemouth. We have a vibrant and popular town centre as part of the local economy, but it has suffered because of the previous Government and their reckless Licensing Act, which has been very costly to the town centre. The residents are concerned that there are simply too many pubs and clubs there. Will my right hon. Friend expand on her comments on density and powers that might be given to local authorities?
My hon. Friend is absolutely right. Sadly, many towns and cities across the country have felt the impact of Labour’s Licensing Act in the same way as Bournemouth. We will enable local authorities to take into account the density of licensed premises in a town centre when they are determining applications. One of the problems in Maidenhead in my constituency was that application after application was given permission. Many residents felt that things started to go wrong through that. All too often, the sort of bars to which problem drinkers went were in our town centres.
As a former chair of the all-party group on alcohol misuse, I think that I was the first Member to table an early-day motion raising the problem of cheap alcohol and its impact on our society. However, the Home Secretary has not mentioned the more than 6,000 babies every year who are born damaged by alcohol consumed by their mothers during pregnancy. In America, every drink canister and bottle has a label warning pregnant women about drinking. Will the Home Secretary take that into account in her consultation?
We do indeed. The hon. Gentleman will find that we refer in the alcohol strategy to the issue of pregnant women drinking and the impact on the foetus and therefore on the babies when they are born. The drinks industry—for example, Diageo—has taken several initiatives on research and other aspects of the problem. The hon. Gentleman and I do not often agree on issues, but I am very happy to agree with him on the importance of the matter that he raised.
In the town of Deal that I represent, residents are beset in the early hours of the morning by drunks returning home and smashing up property and fights breaking out. The district council says that there is nothing it can do because of the rules brought in by Labour’s 24-hour drinking culture. In changing the rules, will the Home Secretary give real power and discretion to the district councils?
My hon. Friend is right. We are changing the law on the powers of the licensing authorities, and I am sure that Deal and other towns and cities will find very helpful the early morning restriction orders, which will be introduced later this year and will enable local authorities to restrict licensed premises’ ability to open between midnight and 6 am.
Does the Health Secretary agree with the policy?
Police in Camborne in my constituency have recently dusted off the Inebriates Act 1898, which contains a comprehensive package of measures to deal with habitual drunks. As well as the new measures that the Home Secretary has introduced today, will she ensure that the police are making proper use of existing powers?
My hon. Friend makes a fair point. We want to ensure that existing powers that should be used, particularly on dealing with premises that continue to sell alcohol to people who are drunk, are exercised. However, I am sure that responsible landlords will welcome the statement. Indeed, the chief executive of Greene King said today that he strongly believes that the Government’s intention to introduce a minimum unit price for alcohol is an important step.
This is undoubtedly a problem, but it is disappointing that the Home Secretary makes some of our town and city centres at weekends sound like the wild west. Alcohol is a health issue, and the figures clearly show that. Earlier this week, figures published on liver disease were extremely worrying. The Home Secretary says that there is a consultation, yet she is determined to introduce a minimum price, even if the results of the consultation go against that. Pricing is only one tool in the box that needs to be considered. Young people may laugh at the Home Secretary’s comment this morning that they are particularly sensitive to changes in price—many are not.
The hon. Gentleman makes a valid point about the health aspect. There has been a 25% increase in liver disease between 2001 and 2009. As he said, figures on that came out earlier this week. That is why the document is a comprehensive strategy. It deals with alcohol pricing, health, relationship with the industry and the powers for licensing authorities. It is a cross-Government strategy, which brings all those issues together, to deal with what I hope Members of all parties recognise as a problem that has not been tackled for too long.
Many nurses, doctors and other hospital staff will welcome the moves to improve zero tolerance towards drunks being abusive. However, will my right hon. Friend be careful that she is not, with the multi-buy option, harming families that budget carefully during the week when they purchase alcohol?
My hon. Friend is right to say that we need to implement the strategy so that it has the impact that we want on the cheap alcohol and bulk discounts that lead to the sort of behaviours that I described earlier. When we consult about dealing with bulk discounts, I am sure that the very point that she makes will be raised. Obviously, we will consider that carefully.
I point out to the Home Secretary that part of the success of the Durham Best Bar None scheme was effective policing, which is now being put at risk because of cuts to Durham constabulary’s budget. We all want responsible pricing of alcohol, and there is much that I welcome in the statement. However, the right hon. Lady has not explained why it was necessary to interrupt the Budget debate today to make the statement. Many of us are here to speak for our constituencies and outline how the Budget has had a negative impact on them. I have a specific question. A real problem in Durham is special promotions by pubs aimed at students and young people. Will they be able to continue?
The hon. Lady made several points. I fully recognise the role that the Durham police played in the work that is being done there. It was a collective operation through licensees, the police and others. I am very pleased that Chief Constable Jon Stoddart of Durham, who is the ACPO lead on the matter, has said that he greatly supports the policy. He said that he welcomed any new approach
“that will help reduce the availability of cheap alcohol… and reduce pressure on the police.”
That is exactly what the strategy will do.
The people of Cleethorpes will broadly support the announcement. However, there will be concerns that, once again, the law-abiding majority are being penalised. Will the Home Secretary assure me that the police will use existing and new powers to the maximum, and that courts will ensure a robust approach?
I thank the Home Secretary for the positive remarks that have been made this morning about Durham constabulary and about the Best Bar None scheme. I recently spent some time with Durham constabulary on a Friday night, targeting under-age drinking, and I personally poured out 11 litres of cheap vodka that was taken from 13 and 14-year-olds, having been purchased by older young people and by parents, not necessarily from off-licences, but from supermarkets. This is an extremely serious issue, but I am disappointed by the way the statement has been rushed out this morning. If it was so important, why was it not brought out properly in the Budget on Wednesday?
This would never have been brought out in the Budget because this is a cross-Government strategy which deals with a variety of issues that are not matters for the Budget. The hon. Lady is right to say what an important issue this is. That is why the Government have been working across Departments to produce for the first time a comprehensive strategy which, I hope—it is the intention—will deal with the sort of problem that she has rightly raised and recognised.
Budget Resolutions and Economic Situation
This has been like the show, “Who Wants To Be A Millionaire?”—a question is asked, there is an advert break, and everybody is waiting for the answer. My quiz show might be called, “Who used to want to be a millionaire but now is a Member of Parliament?” I shall endeavour to continue after the commercial break in the spirit in which I started, by asking hon. Members to consider what growth in the economy means.
As a Johnny-come-lately to professional politics and prior to that having been in business for 30 years in various ways, successfully and, I have to say, unsuccessfully, it seems to me that growth often means something different to politicians, people who work in think-tanks, journalists and people who work in public affairs. For economists it is easy to consider growth as a statistic—0.5%, 0.8% or negative growth, on which Opposition Members and Government Members take different views.
For me, growth is a collective decision by individuals, whether they are business owners, people who want to start a business, or the management of a large company. In a capitalist society—there is a general consensus that the profit motive is what drives private enterprise—business people must make the decision to start or expand their business. Growth in the economy is the collection of such decisions. It is Government’s role and the role of this Budget to facilitate that.
Now. Unfortunately that was not the case with the situation we inherited, with a huge deficit and the economy plummeting. Opposition Members should remember what I said—that growth is not a statistic. If we are to get growth, it requires a collective series of decisions by people to expand their businesses and start other businesses.
The predecessors of the current Opposition believed in a different type of economy. They believed in a socialist economy. They believed that Governments, by nationalising businesses or taking investment decisions themselves, could make a fundamental decision, people would do things because they were told to do so by Government and the result would be a growing economy. Society has taken the decision—and this is the general consensus among nearly everyone in the House—that growth will come from private enterprise.
If growth comes from private enterprise, we must accept that that comes from people accepting all the aggravation, mortgaging their houses, setting up businesses, employing people and taking very little money out during much of the growth period of the business. What makes them want to do that is the fact that they want to get rich themselves. I am fine with that. If they pay their taxes—I am certainly against tax avoidance and all the legal and illegal schemes to do that—and if they employ people who pay their taxes, it is right that they should keep the majority of what they earn. I hope that when criticising the reduction from 50% to 45%, hon. Members on both sides of the House will bear that in mind. I believe that that ambition is the core of growth in this country and I commend the Chancellor for progress in this respect.
We have heard quite a lot already about the economic situation. The context for the Budget is one of economic stagnation. The growth forecast produced last year for this year was for growth of 2.5% in 2012. The OBR’s estimate now of growth in 2012 is just 0.8%. The growth forecast for 2013 is also 0.8%. That is close to stagnation.
Unemployment is rising, the cost of living is rising, and it is particularly worrying that business investment appears to be collapsing. The OBR forecasts that business investment this year will drop 7%, from an estimate of 7.7% to 0.7%. That is connected with the OBR’s forecast for such meagre growth as there is to be, according to its estimate. A much larger share of this growth—three times larger—is to come from private consumption rather than from export-led growth. We have a demand crisis in the economy. I worry that the Chancellor is putting all his eggs in one basket, rather like Japan did in the 1990s, gambling everything on low interest rates as a way to stimulate the economy.
The hon. Gentleman talks about a demand crisis, but does he accept that some of the responsibility for that comes from the policies of the previous Government, which so substantially over-leveraged not just the Government, but the entire economy?
There is no doubt, and the hon. Gentleman is right to say, that not everything in the garden was rosy by 2010. That does not take away from the current Government their responsibility to stimulate the economy. On any metric, growth of 0.8% this year and next year is only very limited growth. On current estimates we will not return to 2007 GPD levels till 2013. That slump will be the longest since the 19th century—six years to get back to a previous level of GDP. That is indeed a slump, and this is a stagnation Budget.
As usual, my hon. Friend hits on the apposite point. Corporates do have an enormous cash pile, and we have to ask, why are they not investing? It is because they do not think there is anyone to buy their products; it is as simple as that.
Of course, no one is suggesting that this issue is all about one side, because it is not all about stimulating demand at the expense of cutting the deficit, but my and the Opposition’s view is that the Government have got the balance wrong. Confidence will not be restored if there is no growth in the economy.
I appreciate the hon. Gentleman giving way, but does he not agree that, actually, it is hard to say which comes first? He says that confidence comes from growth, but I say that growth comes from confidence. I think he has got it the wrong way around.
I thank the hon. Gentleman for his intervention, which will be the last one I take, given the time constraints. The lessons of history are that, unless we can make people feel that they have money in their pockets to spend and to stimulate growth and the economy, the chances are—the Japanese example is a perfect illustration of this—that we are unlikely to recover to pre-trend levels.
At this time of stagnation and austerity, what is the Government’s priority? Is it growth, jobs and helping the hard-pressed squeezed middle? No, it is a tax cut for millionaires. Some 14,000 millionaires will get a tax cut of £40,000 per year. The 300,000 payers of the 50%—[Interruption.]
Order. Hon. Gentlemen will not shout across the Chamber. The point being made is a matter for debate, and that is what is happening now. They can intervene if the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) wants to give way.
Thank you, Madam Deputy Speaker. Hon. Gentlemen on the Conservative Benches are becoming rather vexed, and one does not have to wonder why, given the message that they are sending out to the electorate with this tax cut, which will cost more than £3 billion at a time, as the Government emphasise, of austerity.
The hon. Member for Watford (Richard Harrington) suggests that empirical evidence shows that the 50p tax does not raise any money, but there is no empirical evidence in the document presented by the Government. There is a series of estimates, based on a view of behavioural change, itself based on a view of human behaviour, which one would have thought would have at least been challenged by the financial crisis and all that it brought.
This Government are taking a gamble that the £3 billion that they would have had in the bank—in their coffers—will be almost cancelled out by millionaires from Monte Carlo and Caribbean boltholes rushing back to show their patriotism to this country by paying a slightly lower rate of tax. Those are not my words, but the words of the Business Secretary in a previous incarnation. This tax cut for millionaires is the wrong priority for this country at this time.
We have a crisis of employment—a crisis of youth unemployment, with 1 million in the UK and one in four in Scotland now unemployed. What we need are measures to get young people back into work, but how long are they meant to wait, to take the argument of Government Members? A national insurance holiday for small and medium-sized enterprises—that is what we need. A bank bonus tax to create 150,000 jobs for young people—that is what we need. A temporary VAT cut to stimulate the economy and help out hard-pressed motorists—that is what we need. And a VAT cut for home repairs and maintenance to stimulate that important sector of the economy—that is what we need.
Then we have the granny tax. Under the guise of simplification the Government have brought in a stealth tax on more than 4 million pensioners. Some 700,000 people turning 65 years old will lose more than £300 per year—[Interruption.] Someone shouts, “No one will pay more,” and there is a debate to be had about sharing burdens.
I am afraid that I have no more time to do so.
There is a debate to be had about sharing burdens across the generations, but to begin it with a stealth tax described as a “simplification” is surely not the way to encourage a healthy, long-term debate about that kind of distribution.
I finish on this point: wrong priorities, wrong values, wrong Government.
I welcome in particular the Budget’s emphasis on business and enterprise, because we have to be clear that there are no short cuts out of the financial mess left by the previous Government. We need new businesses to set up, and existing businesses to expand and export more products, in order to create the jobs of the future.
The hon. Member for Clwyd South (Susan Elan Jones) said that there are no jobs for public sector people to go to, and that those who have been in the public sector cannot get jobs in the private sector, but we need those public sector employees to set up their own businesses, because I see a lot of talent in the public sector workers whom I meet in Cornwall. Many have experience of managing large projects, managing large teams of people, planning ahead and dealing with the public. They have many of the skills that they need to set up their own business and to create jobs for other people if they only had the confidence to do so.
I should also like to discuss the importance of supporting young people in setting up in business. I remember talking about 10 years ago to a businessman who said, “There is never a better time to start to run your own business than when you are young, when you have just left university. You should never put it off and think, ‘Well I will start up my own business later in life’; you should get on with it early.” It is therefore particularly important that we encourage enterprise at schools and get schools to engage in the various existing entrepreneurship schemes.
The announcement in the Budget to develop the idea of enterprise loans was particularly welcome, as it builds on the good work that the Government have already started with the enterprise allowances to help small businesses to set up.
Before the Budget I visited a large manufacturer in my constituency, or as large as they come in my constituency, called Teagle Machinery, based just outside Redruth. It is a fantastic success story in Cornwall: more than half of everything it produces is exported; the number of its employees has more than doubled over the past 10 years; it is winning orders in markets from Japan through to eastern Europe; and it is even now attempting to break into the market in Russia. It is an extraordinary success story, almost like Cornwall’s answer to JCB and proof that this country can still do traditional, high-quality manufacturing and engineering, and that we can be world beaters in that sector.
There are several measures in the Budget that companies such as Teagle in my constituency will welcome. There is the reduction in corporation tax, which my hon. Friend the Member for Wyre Forest (Mark Garnier) touched on. It is important that we have a business-friendly tax system here and encourage businesses that want to invest in Europe to choose the UK, and the reduction to 24% and the further planned reductions to 22% by 2014 will be incredibly welcome.
The planned national loan guarantee scheme will be a major support for smaller businesses. We all have many businesses coming to us saying that they have difficulty accessing finance at the moment, and that scheme will bring into the market £20 billion of funding that will be affordable for small businesses and give lenders the safeguards they need to make the money available. That, too, is going to be incredibly welcome.
I particularly welcome also the efforts being made to increase export finance and the funding available for it, because Teagle specifically raised that issue with me. It gets some support from UK Trade and Investment to take part in trade fairs, but it would like to do more, and this country is quite successful with exports at the moment. In the past year, our exports to India have risen by 30% and to China by 15%, and our overall exports during the past couple of years have risen by 30%. We have to build on that, because it is through exports, manufacturing and creating wealth that we will get our economy back on its feet.
The Secretary of State for Transport touched on many transport issues, and the Government’s decision to maintain investment in infrastructure is especially welcome. In my area, in particular, there is a new link between Camborne and Redruth, which will unlock the potential of derelict mining land and create 6,000 new jobs over the next 20 years, half of them in the next five years. Projects like that will also help to get our businesses back on their feet and moving forward again.
A speech about Cornwall would be incomplete if it did not touch on fuel tax. I have argued consistently, and continue to do so, that fuel tax can be a regressive tax and that it hits peripheral areas particularly hard because their products have to be transported much further. What the Government have done so far on that is particularly welcome. We must remember, as my hon. Friend the Member for Dover (Charlie Elphicke) pointed out, that fuel tax is currently 10p lower than it would have been under the Labour party’s plans, which is very welcome. I am particularly encouraged to see what has been done to take forward the idea of a fuel price stabiliser and the pilots that have continued to be rolled out in rural areas with the rural rebate, which is particularly important to areas like Cornwall.
Finally, I want to talk a little about the tax thresholds, because the increase in the threshold to £9,200 a year is a major boost to areas such as Cornwall where a large number of people are on low incomes. It will take more than 20,000 people in Cornwall out of tax altogether and 24 million people across the country will benefit. There has been some discussion about the genesis of the proposal and which party came up with the idea first. My hon. Friend the Member for Peterborough (Mr Jackson) touched on that, but I can vouch for the fact that in 2004, when I was working on policy ideas in the Conservative party, it was in fact Lord Saatchi who strongly pushed the idea of having a £10,000 threshold and taking people out of tax altogether. It is a Conservative proposal and always has been, and I am delighted that our Liberal Democrat colleagues have come around to our way of thinking.
This is a landmark Budget, because it has redefined the meaning of complacency. The Budget speech, in essence, was nothing more than a review of the previous week’s press, rather than a strategy for growth, although we did learn one thing: the Conservative party is a one-region party, not a one-nation party. The Lib Dems—I notice none of them is here at the moment—have followed such a crooked path since the general election that I am surprised they can now lie straight in bed.
Transport is a very important issue in Sedgefield. In the south-east corner of the constituency, Durham Tees Valley airport is doing its best to continue to serve the Tees valley, even though it has faced difficult times recently. I am pleased that the Minister responsible for aviation has agreed to meet MPs from the area to discuss the airport’s future, and I will be pleased to hear the Government’s plans for expanding runway capacity in the south-east, which would greatly help regional airports.
The Hitachi train building facility is due to start construction in my constituency at the back end of this year or the beginning of next year, and I hope that one day in years to come it will compare with Nissan for the number of private sector jobs it creates. I would like to record once again my thanks to the people of Newton Aycliffe, Sedgefield and the north-east who campaigned to ensure that this Government went ahead with the Labour Government’s plans for investing in new rolling stock to guarantee the Hitachi investment.
Beside the concerns about the future of the airport, the other great concern is the state of public transport in County Durham, especially local bus services. The lack of a credible bus service in the area, which has been restricted because of the cuts in central Government grant, is counter-productive. The local Jobcentre Plus has informed me that it knows that poor transport in the area is making it difficult for people to get to work, and it is such a problem that it is thinking about buying bicycles so that people can make the journey to work. At present, nine jobseekers in Sedgefield are chasing every vacancy, and there are fewer public sector workers in Sedgefield than in the Prime Minister’s constituency.
Although the north-east has the highest proportion of public sector workers of any region in England—just under 26%—private sector jobs increased in the north-east between 2003 and 2008 by 9.2%, while public sector employment grew by 4.1%. In other words, private sector employment in the region was accelerating faster than public sector employment was before the international financial crisis. Therefore, public sector jobs were not crowding out private sector jobs.
As in other parts of the country, in the north-east 40% of households with dual incomes include someone who works in the public sector. The loss of significant public sector jobs and a public sector pay freeze can only exacerbate the loss of spending power in the region if those factors are joined by the localisation of public sector pay. I believe that the move in the direction of localised public sector pay is driven by ideology, rather than economic facts. It belies the fact that we can have national pay bargaining and still have flexibility within pay structures without hitting regions such as the north-east.
Concern about the localisation of public sector pay is not restricted to people in the public sector and trade unionists. The chairman of the Leighton Group, a technology company in the north-east, Mr Paul Callaghan, has warned:
“I’m very concerned about the negative impact on the North East economy of regional pay rates. Clearly we do not have regional pricing on gas, electricity, petrol and most other goods, so freezing of regional public sector pay must reduce demand for local goods and services, further dampening an already depressed economy. I have seen no credible research to show that this move will have anything but a negative impact on both the region’s private and public sector.”
As I have said, I think that it is ideologically driven. The facts of the matter have been thought through, so my hon. Friend is quite right.
The previous Government turned their back on the wholesale devolution of pay determination at local level in 2003. A Treasury guidance note published in the autumn of 2003 stated:
“At the extreme, local pay in theory could mean devolved pay...to local bodies. In practice, extremely devolved arrangements are not desirable. There are risks of workers being treated differently for no good reason. There could be dangers of leapfrogging and parts of the public sector competing against each other for the best staff.”
It will end up increasing the division between the north and the south in this country. If the Government go forward with this proposal, I believe that it will prove the point that the Conservative party is no longer a one-nation party, but a one-region party.
I believe that the proposal would mean that poorer regions would be starved of talent. Social mobility would be restricted because of too much variance in pay rates, especially between the north and the south. There are many myths about local pay determination. For example, last year’s autumn statement said:
“While private sector pay is set in accordance with local labour markets, public sector pay is usually set on a national basis.”
The fact is that most large, multi-site private sector companies have national pay structures, among them retailers, banks and telecom companies. The Government give the impression that private sector pay is set by myriad individual-level decisions based on specific local labour market variations. In reality, large, multi-site, private sector companies operate with up to four or five bands or zones within a national framework.
The Government have put across the idea that there is significant regional pay variation outside the south-east and London, but there is much more similarity than difference. In practice, most retailers and banks that operate zonal-type pay systems have national pay structures outside the south-east and London without having to set different rates for sites in Durham, Doncaster or Daventry.
There is a myth that local labour market and cost-of-living factors have displaced skill-level qualifications in setting pay in the private sector. Even in small private sector organisations, skills and qualifications will be key factors, and there is plenty of evidence, according to Incomes Data Services, that international engineering companies with regional bases are using international salary data on skills and qualifications rather than local data for recruitment purposes. Human resources professionals in the private sector who work for companies with multiple sites around the country would say that national pay structures are important because they provide simplicity, avoid the costs of duplication, allow better payroll control, create consistency, and avoid poaching and leapfrogging.
Another myth states that geography is a key factor for determining pay, yet in fact the industrial sector is the key determinant. In the car industry, with different companies working in different locations such as Sunderland, east London, the west midlands, Merseyside, Oxford, Derbyshire, north Wales and Swindon, there is a great deal of similarity in pay levels. These manufacturers benchmark pay against each other and other successful manufacturing companies. Geographical pay differentiation within the UK is not a major factor for them, although global pay differentials can be a factor. Localisation of public sector pay will also open the way to greater cost in the public sector, as local management will need to expand to handle negotiations and to collate and analyse local labour market data. There could be more challenges over equal pay.
Complex localised pay systems are rare because of the resources involved. Official earnings data show that there is very little difference in earnings outside London and the south-east. There are two labour markets in the UK: the south-east and London, and the rest of the country. Even zonal pay systems, which may cross regional boundaries, usually equate to the boundaries that I have mentioned and extend no further.
I do not believe that public sector jobs are squeezing out the private sector. Unemployment is highest in the north-east, with nine jobseekers chasing every vacancy. Thousands of jobs have been lost in the public sector, so why is not the private sector growing in the way anticipated? It is because there is a lack of growth and demand in the local economy. The Government’s plans for excessive localisation of public sector pay are misguided and ideologically driven, and they should not be implemented.
It is a great pleasure to follow the hon. Member for Sedgefield (Phil Wilson), who already outshines his predecessor in his integrity and sincerity, if not in his fame.
I apologise, Madam Deputy Speaker, to you and the House for the fact that unfortunately, owing to a constituency commitment, I will not be able to be here for the closing speeches. That is a great shame, because we have had a very stimulating debate across both sides of the House, with the opening speeches by my right hon. Friend the Secretary of State for Transport and by the shadow Minister, the hon. Member for Barrow and Furness (John Woodcock). The hon. Gentleman is standing in for the shadow Secretary of State, the hon. Member for Garston and Halewood (Maria Eagle), who became sick at a TUC conference. I think that this is the first time that a Labour Front Bencher has issued a health warning on their union paymasters. Let us hope that those health warnings will continue.
I will be going back to the great towns of Bedford and Kempston, whose people know that these are tough times but wanted to have a Budget that rewarded work, and the Chancellor of the Exchequer has delivered precisely that. The single most valuable part of this Budget for the people of my constituency is the raising of the personal allowance by over £1,000 so that the first £9,000 of a person’s income will not be liable for tax. That is a fantastic encouragement for people who are finding that their budgets are very tight.
Members on both sides of the House have expressed concerns about fuel duty, and I echo those concerns, because the duty does have a significant impact on personal budgets and on business. I would have liked the Government to do more, but I understand that they were unable to do so. I draw my hon. Friend the Economic Secretary’s attention to the campaign by my local newspaper, the Times and Citizen, which echoes what my hon. Friend the Member for Wyre Forest (Mark Garnier) said about how petrol prices can vary significantly between different regions. The Times and Citizen found that in Bedford and Kempston, our fuel prices were 4p to 5p per litre higher than in other areas. If we cannot do anything about fuel duty, will my hon. Friend consider ways in which the Government can ensure that we do not face monopolistic positions on fuel duty in very localised situations? The Times and Citizen’s campaign has shown that the people of Bedford and Kempston care very much about that, and it can, in itself, have as much impact as a cut in fuel duty overall.
I should like to spend a couple of minutes on the deficit crisis, inter-generational debt and competitiveness. On the deficit crisis, it is excellent that the Government are looking for fiscal neutrality, but that is different from considering the overall level of public expenditure and public debt. Public expenditure is still going up, in cash terms and in real terms, and tax receipts are going up—from 35.8% of GDP in 2010-11 to 36.4% of GDP in 2014-15. We continue to be a high-public-spending, high-tax economy. I hope that the Government and the Chancellor will look at ways in which the overall balance can be brought down so that resources can be moved from the Government sector to the more productive private sector.
May I also urge caution on Ministers in the use of quantitative easing? Quantitative easing is a policy to overcome a credit-driven recession. It should not be a policy to support excessive public expenditure or the long-term erosion of the value of savings. It is pertinent to look at the “Debt and reserves management report 2011-12”, which shows that the Bank of England’s asset purchase facility holds more than 18% of Government gilts. That holding has, at some point, to be unwound, which will have inflationary consequences.
No, I am not calling for an increase in interest rates. I am calling for the Government to be clear, which I think they are, about the use of the quantitative easing policy. The results of that policy will, in a few years, have to be unwound. The level of their own gilts that the Government hold will have to be reduced. When that happens, interest rates will go up. We need to caution the Government to be aware, in setting the level of public expenditure, of what that level will mean. People will need an increase in pay owing to the increase in the Government’s cost of borrowing. Foreign holdings have also increased, and are now at 31%. We now have the highest spread between five-year and 30-year gilts in terms of the risk premium. All those points should caution us about our deficit.
Those facts come on the back of a significant level of debt in our economy. Opposition Members fail to realise that ours is the most indebted major economy in the world. That is the legacy of the previous Government and the previous Chancellor. Those who were here yesterday would have seen the shadow Chancellor give an uncharacteristically short speech. He sat down and people were surprised, because there was more that he could have said. However, I think that his speech could have been shorter. It could have gone thus: “I am sorry. I am really sorry. I am sorry for my hubris in thinking that I could end boom and bust. I know now that that was achievable only by leveraging up the entire British economy and dumping the debts on our children and grandchildren.” That is the speech that the shadow Chancellor could have given yesterday. He could then have sat down, because that sums up what he left us to sort out.
The shadow Chancellor did not give that speech yesterday, so perhaps I can give him some advice. The next time he goes to a school, instead of looking for a photo opportunity of him playing football, he could go up to one of the schoolchildren and say, “Hey, I’m sorry. I’m sorry that I shackled your potential with the debts that my monumentally short-sighted economic strategy created.” That is the truth of what he left behind.
Does the hon. Gentleman accept that that is rather a caricature of what happened during the global financial crisis? It was a global crisis. Surely the financial sector, and the banks in particular, have to take some responsibility for the debt that we face.
As always, I have a lot in common with the hon. Gentleman, but that is not the point. The point is that the damage was already being done in our national economy. It was the strategy of the previous Government not to be content with leveraging up their own debt; they required the leveraging up of household debt and corporate debt, as well as financial sector debt and Government debt. Debt was the answer in the period when they came up with the statement that they had ended boom and bust. That debt has to be paid for. It is two years since the Labour Government left office and there is not enough time to pay for the 10 years of the growth of debt in our economy. It will take a significant amount of time for us to de-leverage the economy in every sector. This Budget is part of that process.
That is a good question, which the hon. Gentleman should address to the Chancellor. I was not in Parliament at that time and I am not sure that that is what I would have said.
Much has been said about the granny tax. The one thing that grandparents want is what is best for their grandchildren. They understand that in tough times—this is because many of them have been through tough times—they have to give something to ensure that we will be stronger in future. That is what this Budget will deliver, and it is part of getting our economy balanced and back on the right track.
I think the hon. Gentleman is referring to unsecured personal debt rather than overall levels of personal and household debt. There is much for the Government to do, such as examining excessive rises in credit card terms and penalties for people who have to take on unsecured debt, and I believe they intend to do it.
We need to do more about our deficit, and I suggest again that one thing we can do for the sake of general fairness is consider creating a future fund that takes the pension obligations of our public sector workers and puts them into a fully funded scheme. It would take 20 to 25 years to accomplish that, but Australia, New Zealand, France and Norway are doing it, and it would show that this generation in Parliament understands its responsibility to the next generation of Britons. If we added that to our fiscal responsibility, we would be doing the next generation a great favour.
Investment in transport is absolutely essential for the future of our economy, which means that we need support for transport now and for future projects. I regret that no support was announced in the Budget statement for the maintenance of bus services, which are often important in getting people to work. Rising bus fares are a great burden, and in many cases essential bus services are simply being stopped. Nor was there any short-term relief from ever-rising train fares. I regret the absence of any measures in those areas, which are so vital to people today.
There were some encouraging statements about future transport investment. In the short time that I have available, I want to ask some questions about the meaning behind some of those headline statements. They are encouraging, but a lot lies behind them.
I first wish to refer to rail. I very much welcome the increased commitment to rail electrification. I listened carefully to what was said about Wales, and we would like to know exactly when rail electrification will come to Swansea, which was not very clear. I also welcome the commitment to more electrification across the north of England, and particularly the statement that part of the northern hub had now been agreed to.
Will the Government give a firm commitment to investing half a billion pounds in the northern hub, which is a major scheme to improve rail services right across the north, including places such as Liverpool, Manchester, Leeds, Sheffield and Newcastle. That £0.5 billion investment would produce a £4 billion boost to northern economies. We are still being told that the value-for-money studies are continuing, to assess whether the whole scheme can be made available. I remind the Minister that the Government are quite rightly investing £15 billion in Crossrail and £5 billion in Thameslink, yet the proposed £0.5 billion for rail right across the north is subject to scrutiny that has not yet come to a conclusion. I should like to hear a firm commitment to the northern hub today.
Major questions have been raised about the disparities in transport investment in different parts of the country. The passenger transport executive found figures showing that three times as much per head was invested in transport in London and the south-east as in the rest of the country. The Institute for Public Policy Research North, examining the implications for transport investment of the autumn statement, in which welcome new investment was announced, found that £2,700 per head was being invested in London and only £5 a head in the north-east. I accept that our capital city needs continuing major investment in transport, but given the needs of the country as a whole it cannot be right to have such wide disparities.
Will the Economic Secretary consider publishing the impact of spending decisions on transport across the country and in the different regions? All parts of the country need investment, but it is simply not right for the interests of the country overall that we continue to have an overheated south-east, while other parts are without essential transport investment.
The Budget contained announcements on road investment. More investment in roads—appropriate roads—is required. We are told that there will be a feasibility study on bringing private investment into our road system, but we need to know a great deal more about what that actually means. We are told that there will not be charges for existing roads, but would the widening of existing roads lead to charges? Is the policy not road charging through the back door, without the safeguards that were considered in the past when road charging as a national policy was under national discussion?
In previous discussions on road charging, it was always assumed—and indeed stated—that if road charges were levied, there would be a compensatory reduction in road taxation paid by the motorists, but it appears that under the Government’s new plans, that reduction in taxation will go to the private sector investors as an incentive to them, and will not accrue to the motorist. This is a major issue. It has been suggested that bringing more private sector investment into roads by leasing or selling our road system would be similar to privatisation of the water utilities—that is what the Prime Minister stated. If it is, it could well lead to a great hike in charges. However, the leasing or selling could be more akin to the Railtrack situation, when maintenance in infrastructure was severely reduced, with tragic consequences.
I thank my hon. Friend for his comment—he makes an very important point and underlines the importance of looking at the policy in great detail. We are told that there will be a feasibility study, but we do not know exactly when that will take place, what it will include, or what kind of consultation there will be. Asking the private sector to own, run and lease our road system is a major step, and detailed scrutiny of exactly what it means for the future as well as the present is essential.
I am pleased that the Government have made statements on their renewed commitment to aviation. If we are to succeed as a country, it is vital that we maintain a successful hub airport. We cannot continue to lose out to our European rivals. It is essential that we build on the hub and do not allow it to decay. Investment in our regional airports is also important. They are important to local areas, but many of them are suffering economically because of the general economic situation. If the Government are interested in aviation for the future, they must look at our regional airports as well as maintaining that essential hub airport.
Hon. Members have been told in the past that there would be a Government aviation strategy that we could debate and consider. That is mentioned in the statement, but the situation is exceedingly vague. I ask the Minister please to tell us this: when will the Government publish their sustainable framework on aviation so that those very important issues can be considered and debated?
In the short time available to me today, I have raised a number of important issues that need proper consideration. I hope the Select Committee on Transport will look at those matters in detail. The whole House will want to know exactly what those headline statements mean. Investment in transport infrastructure is essential for the economic future of the country, but that means the whole country. I hope the Government are committed to doing just that.
In my speech, I should like to give overall support to the general thrust and direction of my right hon. Friend the Chancellor’s Budget. In extremely difficult circumstances, he has produced a package that I believe will stand the test of time. Budgets too often unravel in a matter of days. Before I continue, I must apologise to the House and the Minister for not being able to be here for the winding-up speeches, but I have constituency appointments that I must honour.
This is the third day of the debate, and many of the points that are made will have been made many times over, so I should like, in the main, to look at the proposals from my constituency perspective.
Order. A lot of Members have apologised for not being present to hear the Minister. That is the convention of the House. I sincerely hope that the Minister will be here, however, because it does not look like any other Members will.
The local economy of my constituency is generally a low-paid one, with an average annual salary hovering around the £20,000 mark, so it would be wrong to say that I have been overwhelmed with demands for a reduction in the 50p tax rate. To be perfectly honest, no one has canvassed me on that, and that includes two millionaires—but that is an aside. We recognise the desirability of expanding an entrepreneurial economy, however, and on balance I think it is the right decision.
Most of my constituents are far more concerned about the cost of living—most notably petrol and energy costs—so as an officer of the all-party group on fair fuel for motorists and hauliers, I am disappointed that our recent efforts to persuade the Chancellor to postpone the next scheduled increase in petrol duty have not borne fruit. I acknowledge that much has been done on this since the election, but household budgets are being severely squeezed by the cost of motoring. Lincolnshire is a predominantly rural county with limited public transport, so people have little choice but to use their own cars. The FairFuelUK campaign has done much work to highlight this, and the recent report it commissioned from the Centre for Economics and Business Research provided considerable and compelling evidence of the benefits of lowering the burden not just to individuals but to the economy. Our campaign will continue.
Before raising another couple of concerns, I want to welcome the increase in the personal allowance to £9,205. This is a major step towards achieving the £10,000 target and has been warmly welcomed in my constituency, which, as I said, is a low-wage area. I also welcome the moves to lighten the burden regarding child benefit. It is a step in the right direction. It is not entirely what I had hoped for, but, again, I recognise the pressures on the Chancellor. It was interesting to note, in the debate a day or two ago, the suggestion made by my hon. Friend the Member for Gainsborough (Mr Leigh) about a possible way forward.
It is notable that when the reporter from the local Grimsby Telegraph contacted me just after the Budget speech, their first question was not about the 50p tax rate or the impact on pensioners. Instead, it was, “What’s in it for regeneration?” Northern Lincolnshire urgently needs improvements to its infrastructure and public realm, and the Government have recognised the area’s bright future with an additional allocation of £6 million to the pan-Humber and Greater Lincolnshire enterprise partnerships.
I particularly welcome the forthcoming publication of the national planning policy framework speeding up the procedure for major applications, and note that the Red Book makes specific mention of the Able marine energy park in my constituency, which has been plagued by delay after delay from wildlife directives and a less than positive approach from some Government agencies. The specific commitment in the Red Book to change the culture of statutory bodies is therefore much needed. I also welcome the commitment to changing use class orders and the associated permitted development rights that will make it easier to change the use of buildings.
Enterprise loans are also a welcome development, particularly those aimed at young people. I was recently involved in the small business all-party group’s inquiry into entrepreneurship. It was notable that every witness pointed out the need to encourage the entrepreneurship in our young people that the economy so urgently needs. It is also notable that the Federation of Small Businesses is broadly supportive of the Budget proposals. As we all know, to a great extent it is small businesses that will be the engine of growth.
I want to comment briefly on the Opposition’s response to the Budget. Despite their playground attitude of pointing and calling us “the same old Tories”, it is notable that it was those same old Tories who have guided the country through most of its difficult periods. We also provided the opportunities for working-class people to buy their council homes. We have provided the economic conditions for some of the most notable periods of growth throughout our history. The Labour party’s renewed class warfare just does not wash, especially with people like me who come from a working-class background. The fact is that all people, whatever their station in life, benefit from a growing economy, and I believe that this Budget will do a great deal to bring that about.
The Budget was an opportunity to give hope to those who have seen their household budgets squeezed and their livelihoods destroyed by the Government’s economic policies. On Wednesday, however, we saw the Government’s priorities. They were to help the few, not the many; to help the millionaires, not the millions. The Government chose ideology, not fairness. The impact of the Tory-led Government’s austerity measures is plain to see: with rising prices, squeezed living standards and soaring unemployment, this is a return to the Thatcher years of the 1980s.
In Preston, unemployment has risen month by month. In February 2012, 3,733 people were claiming jobseeker’s allowance, which is double the figure under the Labour Government. We have seen an increase of 439 from February 2011—a 13% increase in a year—and an increase of 169 since January 2012, which represents a 5% increase in just one month. The most striking figure is the increase in long-term youth unemployment, and I fear that that will be the hallmark of this Government. Long-term youth unemployment in Preston has tripled in the last year.
This problem is not unique to my constituency; it is endemic across the country. Young people and families are the victims of the Government’s reckless austerity measures, which I fear will lead to a lost generation of young people. I ask the Minister and other Government Members how it can be fair that 14,000 people earning £1 million or more are getting a tax cut of over £40,000 a year when a family with children earning just £20,000 will lose £253 a year from this April. That is on top of the VAT rise, which is costing families an average of £450 per year. The Government’s priorities are clear: tax cuts for the few while others wallow in the mess created by the Government. To repeat a comment picked up on by the hon. Member for Cleethorpes (Martin Vickers): these are the same old Tories.
This Budget is a tax raid on pensioners. In Preston, there are 5,894 people aged between 60 and 64. A large proportion of them will be the victims of the Chancellor’s decision to freeze personal allowance for pensioners, with those turning 65 next year set to lose up to £322. There are currently 16,622 pensioners in Preston, and a considerable percentage of them will have to pay this granny tax, along with 480,000 other income tax paying pensioners in the north-west of England. The economy in the north-west is already suffering.
The Budget also does nothing to help manufacturing. The Prime Minister and the Chancellor have made it clear that they envisage the rebalancing of our economy through manufacturing. For Preston and Lancashire, manufacturing is not only our heritage but our future. As a Lancashire MP, I am proud of the work that BAE Systems and the BAE work force have done over the generations. As we know, however, BAE has lost the contest for preferred partner with the Indian Government owing to the lack of activism on the part of this Government. In January, it was announced that French defence firm Dassault would be the Indian Government’s preferred partner for the building of their fighter jets, instead of BAE Systems with its Typhoon. In the White Paper “National Security Through Technology”, the Government have made it clear that they will no longer give British companies preferred status. If the British Government will not give that preferred status, why should the Indian Government give it to companies such as BAE? It beggars belief that the Government do not support British industry, but the Budget illustrates that fact.
The Budget shows no plans to support the nuclear industry. I hope the Government will look again at providing support to ensure that the Westinghouse AP1000 nuclear reactor is secured at Wylfa in Anglesey. This project would not only generate jobs in Anglesey, but create a Westinghouse service-based business with more than 200 jobs located in central Lancashire. This should have been the Budget for jobs and growth. Instead, it was a battle of pure politics between the coalition partners, with the winners being the millionaires and the victims the ordinary hard-working people. If this Government were to have any credibility on jobs and growth, they should have used the Budget to support companies such as BAE Systems and Westinghouse at the Springfields plant near my constituency.
The Budget included announcements on transport. Preston is a major hub for Lancashire, connecting Lancashire to Scotland, London, Liverpool and Manchester. I welcome the fact that the Government are looking to add to the trans-Pennine rail route by upgrading and electrifying the Manchester to Preston line. Why, however, are the HS2 plans so timid? The Transport Secretary and her team should not be so timid in pushing forward HS2, which would provide greater capacity and reduce journey times between major cities. Instead of legislating for the first phase of the new high-speed line from London to Birmingham, taking forward HS2 as one project, beginning construction in the north as well as the south, would have been the answer to solving the nation’s rail problems—instead of just looking after the south.
Labour Members remember the famous phrase, “We’re all in this together.” With youth unemployment at record highs and pensioners having had their money snatched by the Chancellor, there is nothing to excuse the callous and scandalous closure of the Remploy factory in Preston and others across the country. Where were the measures in this Budget to help the disabled? The systematic attacks on disabled people—whether it be through the removal of benefits or the closure of the Remploy factories—show that this Government have no shame about victimising the most vulnerable in our society.
This Budget provided a chance for a stimulus to jobs and growth in our country, and a chance to show the British people that the Government were on the side of ordinary hard-working families. Yet again, the country has been let down. This Budget will be celebrated by the few, but it will hurt the many.
It is a great pleasure to serve under your enlightened chairmanship of this debate, Mr Deputy Speaker.
The debate has focused much on the immediate challenges and some specific measures, but I want to focus on the big picture. This Budget has seen a tax cut for 24 million working people and a wide range of measures to help Britain earn its way in the world. After all, this Budget was part of a series of Budgets to tackle the challenge of how to turn this country around after years of economic mismanagement. Some of that requires difficult and controversial decisions to be taken, but the fruits of these labours are not in the next day’s headlines, but in preparing our country for the world we live in.
My generation does not have the certainties of an economic world in which our main competitors were in the west—indeed, in the north-west of the globe and centred around the north Atlantic. We must compete against the growing tigers of the east and the growing and rapidly developing economies of the south, yet our economy was left unprepared for that. We all know that the fiscal situation was dire. Action has been taken over the past two years to deal with our debts, but we also need to ensure that we can earn our way in the world.
Understanding the international context might be helped by a few facts and figures, showing that we cannot any longer rely simply on trading with the old world to earn our living. Over the latest period, demand for UK exports by the European Union has been falling. Compared with January last year, the value of our trade with the EU is down £300 million, while exports to France fell by 14% and by 3.5% to Ireland. Those falls were more than offset by increases in exports to the rest of the world, however. Exports to the rest of the world are up 16% since January last year. Trade with China is up 30%, and trade to India is up 15%. There have also been rises in respect of economies with which we do not have much of a history of trade; our trade with South Korea, for instance, is up 145%. Our trade with our Commonwealth partner, South Africa, is up 57%, too. It is clear that our international trade patterns are changing rapidly, and we can no longer simply rely on Europe and north America to pull us through.
I compliment UKTI on the turnaround it is undergoing under Lord Green, the exceptional new trade Minister, who has vast experience and extensive contacts across the world. I commend the work he is doing both in the Department for Business, Innovation and Skills and with the Foreign Office, which is putting resources into the effort to increase our trade with the rest of the world, which has languished for so long.
I shall focus now on certain measures that I believe should be taken. Some of them might be controversial in the short term, but in the long term they will all prove to be beneficial and will change views. We must better inform people about the taxes they pay and the effects of those taxes. We also need a simpler and more attractive tax regime, to ensure that people want to create jobs in our country and international companies want to expand here.
We also need an active industrial policy. That is considered a controversial proposal by some of my party colleagues, but my argument is that the Government already put their imprint on the different sectors of the economy. Our financial services regulations are different from our pharmaceutical regulations, for instance. Also, Government decisions on where to put the roads that Opposition Members are happy to welcome has an impact on the rates of development in different parts of our country, and the development of High Speed 2 will, we hope, reduce the north-south divide. The Government have a sector-by-sector stamp, therefore, so we should use the power of Government where it can be a positive force, rather than simply say, “Government must get out of the way.”
The last Labour Government produced a defence industrial strategy, drafted by Lord Drayson, which included a development strategy for the industry. The current “National Security through Technology” paper says British companies should not necessarily be given priority in defence procurement, however. What does the hon. Gentleman think about that?
Lord Drayson was an unusually good Labour Minister—I would favourably compare him with almost all the others. The defence strategy does, indeed, recognise the need to take into account the interests of our defence industries. That is an important part of the strategy, but not necessarily always the decisive factor.
Returning to the issue of tax, the Government should give a receipt to taxpayers. My hon. Friend the Member for Ipswich (Ben Gummer)—another great Suffolk man—has pioneered that approach. We as individuals would not spend much money without asking for a receipt in return. For most people, their tax bill is the biggest item of expenditure, so such a receipt would be very important. It would also educate the public on the impact of their taxes.
We also need to know the impact of our taxes for policy making. It is extraordinary that the Labour party ignores the behavioural impact of high taxes. It is hardly surprising that it managed to mess up the public finances so comprehensively if it denies, as the shadow Chancellor does, the impact of high taxes on incentives and the amount of future tax money the Exchequer receives.
Secondly, we need a simple and attractive tax system, especially on corporation tax. All taxes are, eventually, paid by individuals, but it is companies that make so many decisions about where to locate jobs. So although a high corporation tax still falls on individuals, it puts companies off expanding or coming to Britain. By having an attractive corporation tax rate, we can attract companies to this country. Ultimately, the corporation tax would still be paid by UK residents, whether it was paid indirectly involving the companies or in any other way the tax is raised.
I cannot give way, as I have only a minute left. This denial of the impact of the 45p rate is surprising, given that the Labour party is not pledged to implement the old rate again.
The third point I shall make is the importance of an industrial policy. Whether we like it or not, the Government have a stamp in this area, so I am very supportive of the following: the announcement on help for our creative industries, which was warmly welcomed, as Britain’s creative industries are the biggest in the world; the enterprise zones; the research and development tax credits; the moves on transport infrastructure, which has been talked about many times, where the start date for the work on the A11 has been announced and brought forward, and there is to be more road infrastructure, paid for both by the taxpayer and through innovative other means; and more for university research facilities. Let us contrast all that with what was called a “backwater”—the previous Government’s business Department. It all shows that the results of this Budget will be growth in the future, business confidence and a great deal of support in the months and years to come.
I am extremely grateful to you for calling me to speak on this auspicious day, a Friday sitting, to discuss the Budget, Mr Deputy Speaker. I am also grateful to follow the right hon. Gentleman—[Interruption.] Sorry, the hon. Member for West Suffolk (Matthew Hancock)—
It is only a matter of time.
It is only a matter of time, as the Whip says, so there is a top tip.
The reason I am pleased to follow the hon. Member for West Suffolk is that he promised to talk about some of the long-term reforms required in the economy. If we are to talk about the Budget, we need to talk not only about the long term, but about the capacity in the economy right now, and that is where I will briefly focus my remarks.
Labour Members have examined the Budget in detail and we see a wasted opportunity. We required a Budget for jobs and for growth in the short term that would lead to our prosperity in the long term. Instead, we got a Budget that has fought over the spoils. Two years into this Tory-led Government, we can see the effect that the coalition Government are having on our economic policy. Various Ministers and, indeed, Back Benchers, are fighting over, and leaking in the press, the measures in the Budget. They are fighting not over the scale of the fiscal challenge we face, but over what measures could be assigned to each individual party. It is almost as though, having slashed and burned, they are fighting over who wants to win the spoils for having scorched the earth.
The OBR has said:
“We have made no…material adjustments to the economy forecast as a result Budget 2012 policy announcements.”
The independent OBR accepts that growth will not be changed by this Budget. We all remember last year’s so-called “Budget for growth”, but we have still yet to see a strategy for getting growth in the economy, as the numbers clearly show: over this coming period, borrowing is to be more than £150 billion more than the Government announced just a year ago; the deficit reduction plan has gone from four years to seven; and the Government are trying conveniently to lay by the wayside promises that unemployment numbers would decrease in each and every year of this Parliament. What about the lie that the private sector will pick up where the public sector is being slashed away? We are being given a full body of evidence to prove that that is untrue. It is clear that in both policy and ideology the Government are struggling to get growth going because they are ignoring the lessons of history, particularly the lesson that when the public sector is cut back too far and too fast, fiscal policy has a deflationary effect on the economy. There is a real problem, but unfortunately we have been trapped in a paradigm by this coalition Administration which they cannot get out of.
What are we seeing? A number of tiny interventions, programmes and schemes. Let me go through some of the most eye-catching ones. I was on the Public Bill Committee that considered the legislation introducing the national insurance holiday regime, but only 3.3% of the businesses that the Government said would be helped have been helped under that scheme, so it clearly is not working. We have a much better plan to recycle that money to make sure there is a proper cut in national insurance across the country. Credit easing has yet to help a single business. The business growth fund has six regional offices, with 50 jobs having been created, but there have been just six investments in businesses to get business moving. The export enterprise finance guarantee has helped just six exporters since it was introduced.
In the absence of a clear ideology to get growth growing in our economy what we see are hundreds of tiny measures, none of which is actually giving confidence to business to invest. Roosevelt talked about the alphabet laws when he came to power and about the scale of the challenge that he faced in the States in the 1930s. What we have from this Government is alphabet soup: a series of initiatives, all with long and good-sounding titles, but no actual significant movement in the economy to get growth going. What we are left with are just words, and now they take money out of the pockets of those who are most likely to spend and instead choose to put it in the pockets of millionaires and of people who are already very good at avoiding paying tax in the first place—people who are likely to save it, spend it abroad or spend it in areas that are not going to stimulate the economy. Even those people are calling for action in the economy to get growth growing and not necessarily to reward themselves when growth is not there currently.
Let us consider the situation in the US, where its leader has explicitly talked about the dangers of the austerity narrative and has specifically said that to cut too far, too fast would be detrimental to the US economy over time. And what do we see there? Unemployment falling month by month and significant growth in the economy, just as, funnily enough, there was in this country in this Government’s first few months because they inherited that from the previous Government. Most crucially, capacity in the US economy is being protected. Look at its auto business: many Republicans said it should be let go to the wall but the Democrats stepped up and said, “We will protect it.” Why? Because if capacity is protected in the economy, the ability to keep growth going is retained throughout. We have seen a big turnaround there.
When we go into periods of recession or depression, businesses try to hold on to their ability to manufacture or to keep going for as long as possible—perhaps for six, 12 or 18 months—without laying people off. After a while, however, when it is clear that no lifebelt is coming from the Government, businesses start to lay people off, so a 2,000-employee business becomes a 1,500-employee business. That means that when the growth comes back, it is much harder to manufacture to the previous level. That is the legacy that the Government will leave us to pick up the pieces of—an economy with much less capacity to manufacture and grow to meet the long-term challenges we face. For all the talk of clearing up or picking up the pieces from the global financial crisis and the reforms that are required, we must remember that if our economy does not survive this period, we will not have the foundations for growth in the future.
It is a pleasure to follow the hon. Member for Luton South (Gavin Shuker); we have heard each other speak many times over the past few weeks.
When I was asked what I wanted to see in the Budget, my general response was “Not a lot.” The key thing is to keep a steady course and not scare the horses with a sharp change of direction, and that, as we can see from the Red Book, is the Chancellor’s main strategy. In the current financial year, the deficit is still about £126 billion, so there is no real scope for the Chancellor to take major expensive action. Looking forward to next year, we still see a deficit of about £90 billion, with public spending of £683 billion, which is nearly £2 billion a day. The most significant Budget measure for the coming financial year is the corporation tax cut, which is highly welcome. It is worth just under £400 million, which is about four hours’ worth of public spending. There has not been scope, and there is no scope, for major changes in that situation.
What most investors want from the British tax regime is stability and predictability. That is the strategy the Government set out at the start of this Parliament, and I am glad they have stuck to it, and that when we hit the start of the new financial year in a couple of weeks’ time, there will be no major changes for everyone to understand over the next fortnight. Most of what will apply was well signalled and we all knew about it months ago. There has been detailed consultation on many of the major measures; others are to do with anti-avoidance, which clearly we cannot consult on, but they are more than welcome.
As the debate today was opened by the Secretary of State for Transport, it would be rude not to touch on a few transport issues. Like other Members, I welcome the investment in transport infrastructure. One thing that has not had much attention in this debate is the decision to set up the transport innovation centre. I am sure the Government will recognise the overwhelming case for it to be based in Derby, where we have Rolls-Royce, Toyota and Bombardier. I can think of nowhere else in the country where transport plays a greater role in the economy and where there are more people with the skills to make the centre work effectively.
In all the Government’s recent announcements about the electrification of rail lines, it is a pity that they missed out the east midlands main line. It serves a large part of the country and a number of deprived areas. We suffer from a much slower train service than the east coast or the west coast, which must have an effect on economic activity. In fact, to get to London for 9.30 this morning, it was quicker for me to catch a train to Tamworth and change to the west coast main line than to stay on the east midlands line. There is an overwhelming economic case for electrifying the line and I hope that that will be brought forward.
As my hon. Friend the Member for Cleethorpes (Martin Vickers) said, after three days of Budget debates most of the good points have been made. Obviously, I warmly welcome the increase in personal tax allowance for the lowest paid; it will affect 23 million people, which is a strong signal of where we think our values should be. Of all the money the Chancellor has at his disposal, the £3.3 billion annual cost when that measure takes effect shows where his focus and priorities lie.
I welcome the measures announced previously to try to get more finance to small and medium-sized businesses—the loan guarantee and credit-easing schemes. We hope the banks will take them on so that businesses around the country have access to the finance they need to grow and create jobs.
I shall spend the last few minutes of my speech talking about the importance of tax simplification, which was front and centre in the Budget. I especially commend the valuable work of the Office of Tax Simplification on this Budget and the previous one. I only hope that the Government, having seen the value of the work of the OTS, will commission it to do something more ambitious and look at how we can radically reform business taxation and corporation tax to make them simpler and to make the country even more attractive to investors.
The OTS recently produced a report on the taxation of the smallest businesses. I welcome the fact that the Chancellor went further than it recommended, in effect allowing businesses with turnover of up to £77,000 not to prepare detailed accounts, but just to pay tax on their cash surplus each year. If that coincides with VAT thresholds, businesses will know that if their turnover is less than about £77,000 they will not have to prepare detailed accounts for tax purposes or deal with VAT. That is a powerful message to send to the smallest businesses. I look forward to the consultation to see how that measure can be made to work. However, there is just one issue I want to raise. We all want the guy who is making a nice living for himself—perhaps a successful plumber—to be able to grow his business, and to take on someone to train. The risk is that if he does so, and takes his turnover beyond £77,000, he will suddenly be clobbered by having to register for VAT and going through the accounts process. We need to think about how we transition successful people who take on extra staff, which would tackle unemployment, and bring down the compliance level for them, but that is not to take away from what is a welcome measure.
A slightly less welcome review from the Office of Tax Simplification was the review on taxation of pensioners, which is where the Budget measure that has been most controversial—the changes to the personal allowances for people over a certain age—may have originated. Those of us that have argued for tax simplification have had to accept that whatever we try to change there will be some winners, who will be very grateful but probably very quiet, and some losers, who will be somewhat less grateful and no doubt quite a lot louder. Understandably, that is what has happened. When there is no fiscal room, there is no way of easing the burden on those that lose in the short term or of trying to spread that pain, although the increase in the state pension tackles some of that. But the change is a year away and there is scope to have a look at it.
I welcome the Budget. It sticks to the course that we need and takes our finances in the right direction, heading back towards stability. I think it will be a successful Budget for growth in this country.
It is a pleasure to follow the hon. Member for Amber Valley (Nigel Mills), not least because he aptly demonstrated the huge complacency that exists on the coalition Benches about the need for economic growth. However, I am sorry that the Secretary of State is not in her place, because I am extremely worried about her, on two counts. The first is that she seems to be inhabiting a fantasy land where we are actually experiencing economic growth, and the second is that she seems completely unaware of the fact that we have had a global economic crisis in the past few years, so we need a growth plan to recover from it.
I would have liked to contribute something to the debate about transport, but alas I cannot, because I am afraid the Budget delivered absolutely nothing to meet the transport needs of my constituents. There was no support at all for buses, despite the fact that our bus network is in crisis. I know from my constituents that despite the fact that we have precious few jobs in the area, with 10 people chasing every job vacancy, people are losing jobs because they cannot get buses to work. Care workers—