House of Commons
Wednesday 20 March 2013
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Minister for the Cabinet Office was asked—
Public Services (Digitisation)
1. What estimate he has made of the potential savings to the public purse from the digitisation of public services; and if he will make a statement. 
2. What estimate he has made of the potential savings to the public purse from the digitisation of public services; and if he will make a statement. 
By introducing new digital services and redesigning old ones, we expect to save the taxpayer and service users around £1.2 billion by 2015, and at least £1.7 billion a year thereafter. Of course, that is not just about saving money; it is also about the opportunity to change totally the way the public engage with the Government and radically improve that experience.
What services does the Minister see being digitised in the near future, when does he think that will happen, and how will we get people who do not have experience of computers using those new services?
We are reviewing more than 600 central Government transactions. My hon. Friend will be aware that seven Departments are responsible for around 90% of those. Those Departments have committed to redesigning three significant series each, all the details of which are in their departmental digital strategies. This is a live process, and the Student Loans Company went live in October. He is entirely right to remind us that no one should be excluded from the process, which is why the Government remain committed to an assisted digital service.
The latest figures for Medway show that nearly 90% of people there have accessed the internet. What support are the Government providing to allow more people to access public services through the internet?
We are making it easier to access broadband and have supported, and continue to work closely with, valuable networks such as Go ON UK and UK online centres, because my hon. Friend is right that there is still a big opportunity to help more people, small businesses and charities to access the benefits of the internet.
As I am sure the Minister knows, 11 million people in this country have never used the internet, and at the moment his Department is spending no money on digital inclusion. Is its real way of saving money on public services to make them completely inaccessible to those who need them?
No. As I said, we are clear that no one must be excluded from this process. That is why significant assisted digital provision is still in place, and we will shortly make available details of how that will work. There are digital inclusion projects across Government and we are actively reviewing, with partners such as Go ON UK, what more we can do.
I look forward to reading the real figures on fullfact.org, which had to correct the Minister’s overblown assertions last time. The Opposition know that ICT can make government more accessible and save money, but the Government have abandoned the universal broadband pledge and failed on digital inclusion, so 75% of over-75s and a third of people with disabilities are still not online. In those circumstances, is digital by default not simply digital exclusion by diktat?
I will take no lectures from the Labour party on wasting money on ICT, because the processes we inherited in that regard were absolutely scandalous. I repeat what I said: we see a big opportunity in digital by default. It is a chance to transform the way people engage with the Government. We can see significant savings, which I do not think have been overstated at all. As I said, we have an active commitment to assisted digital, the details of which will come shortly, and to continued activity to support digital inclusion.
Public Service Delivery (Innovative Design)
3. What steps he is taking to utilise innovative design to increase the effectiveness and quality of public service delivery. 
The Government are implementing an ambitious programme of public sector reform. From welfare to education, we are changing the way services are delivered to the public. We are opening up policy making, ensuring that policy is made with implementation in mind. To improve the quality of public services, we are backing new delivery models, such as public service mutuals, and redesigning services to be digital by default.
Is the Minister aware that too many people still think that good design means a beautiful table or chair or a new piece of architecture, such as the Shard? There is a whole body of expert design capacity in this country that could help design services, particularly public services. Will he, his Department and the Government wake up to the fact that good design, as shown in a new publication from the Design Commission, could help recovery in this country?
I agree with everything that the hon. Gentleman says except his assumption that we are not already doing this. I know he is a member of the Design Commission, which produced that excellent publication; it is in fact very complimentary about a number of initiatives that the Government have taken, including the creation of the Government Digital Service, which is committed to ensuring that as we reform the delivery of public services, they are designed around the needs of the user rather than, as has far too often been the case, designed to suit the convenience of the Government.
Given that all public services are going to be under financial pressure for the next few years, is my right hon. Friend happy that enough sharing of best practice is taking place to find new, innovative ways to do more with less?
No, I am not happy that we are yet doing enough, but we are doing more. We are establishing a series of What Works organisations that will exist to share best practice and experiences. We have also set up the commissioning academy, an unexpected by-product of which is that it brings together public service deliverers from all over the public sector who network and share experience, which is already proving extremely beneficial.
On the subject of innovative public service design, the Minister abolished the Central Office of Information and sacked hundreds of staff while simultaneously increasing the number of spin merchants in his Department and others. Meanwhile, he put the Government Information Service out to tender, with contracts valuing £520 million, millions of which then went to a company which he himself had chaired in the past, although I accept that he took no part in letting that contract. There are many ways of describing this chain of events. Does he agree that intelligent design is not one of them?
We did dismantle the Central Office of Information, which was overloaded with 750 people who were not doing enough useful work. We cut down massively on the previous Government’s gross overspend on marketing and advertising, which was throwing money out of the back of a lorry wholly ineffectually. We therefore needed a lot fewer people in the Government communication service. Our own press and media operation in the Cabinet Office is smaller than what we inherited from the previous Government despite the fact that it has to service the Deputy Prime Minister as well as other Ministers and the Prime Minister.
4. What recent steps he has taken to address barriers to small and medium-sized enterprises participating in Government procurement. 
5. How he plans to ensure that small and medium-sized enterprises secure a larger proportion of Government contracts. 
8. What progress he has made on engaging small businesses in public procurement. 
It is this Government’s policy to dismantle the barriers facing small companies to ensure that they can compete for contracts on a level playing field and that they can better grow. Direct spend with small and medium-sized companies across Government has steadily increased since 2010 as a result of the steps we have taken, and we have required all Departments to put in place plans to ensure that their spend with SMEs continues to increase.
Does the Minister think that it is acceptable for large multinational companies to receive millions of pounds in Government grants while avoiding paying a single penny in corporation tax? If not, what changes will she make to procurement legislation to ensure that we stop this bad practice and instead increase opportunities for small and medium-sized enterprises?
I think that the hon. Gentleman will find that much of what he seeks is covered in debates later today. We have recently announced measures to ensure that the companies we deal with as a Government pay their fair share of tax, and rightly so.
I would like more businesses in Brighton to have contracts with the Government. Will the Minister make data available on a constituency level regarding which businesses do business with the Government?
Since the general election Government have become much more transparent about the business they do, and all contracts over £10,000 are now published online at Contracts Finder. My hon. Friend will also find pipelines covering infrastructure and Government construction that will help him with a lot of data. Although we cannot yet release these data specifically at constituency level, I am very keen to make them available, and I look forward to working with him to make that a reality.
The Minister has done a lot of excellent work on fair payment, but how do we make it easier for our smallest businesses, and our smallest service businesses, to win Government contracts?
Central Government policy is to pay undisputed invoices within five days and to pass 30-day payment terms down the supply chain as a condition of contract. That has earned this Government the title of fair payment champion, which is very important. We encourage small and medium-sized enterprises to use the mystery shopper service to “shop” poor practice where they find it. My hon. Friend will also know that we have streamlined the procurement process, removed bureaucracy and increased transparency. We are challenging the traditional ways of buying and are ready to be held to account for that.
Does the Minister agree that if a company fails to deliver on a contract, it should be put on a list and not allowed to bid for any future contracts?
As I noted in my previous answer, we believe in accountability and in being able to “shop” those examples where that occurs. We take action on every such example and I am confident that that will cover what the right hon. Gentleman seeks.
Does my hon. Friend agree that the sheer cost inflicted on smaller businesses trying to bid for public contracts is prohibitive? What are the Government doing to reduce the cost of bidding for public contracts? Unless we reduce the cost, they simply will not bid.
My hon. Friend is absolutely right. We have streamlined the procurement process by introducing faster and simpler procedures. We have removed bureaucracies such as pre-qualification questionnaires for contracts below the European Union threshold. We are also continually finding ways to help SMEs and others to navigate their way across Government. We look forward to continuing to work with my hon. Friend’s Committee to do more of that.
What progress is the Government making with the SME sector’s representative bodies in addressing barriers?
I will answer that by quoting evidence submitted to the Public Administration Committee by the Market Research Society, which said that it
“applauds the activity of the Crown’s Representative for SMEs…and the ‘Mystery Shopper Scheme’ enabling SMEs to report examples of good and bad practice”.
Those are ways in which we are holding our own systems to account. We want to do more and it is vital to get SME representatives around the table to do so. I shall be doing more work on that this afternoon.
6. What his policy is on the use of teleworking and working from home in Government Departments; and if he will make a statement. 
In order to deliver services that meet the needs of the public, the civil service—just like comparable private sector employers—needs a flexible and dynamic workforce. We recognise that remote and home working can bring significant benefits, such as increased productivity, business resilience, work-life balance and well-being. Business units in every Department will need to make such decisions according to business need.
Does the Minister recognise that young working mothers are the principal beneficiaries of teleworking, and will she do more to keep this pool of talent in the civil service?
My hon. Friend makes an excellent point. This Government are doing plenty to help that group and we made child care announcements yesterday and today. The benefits of flexible working can also be seen on a much broader level: research recently suggested that British businesses could save £34 billion by taking on such an approach.
Women's Voluntary Organisations
7. What recent assessment he has made of the adequacy of Government funding for women’s voluntary organisations. 
The Government recognise the tough conditions that all voluntary organisations face at present while we open up new opportunities for them. With limited resources we are helping the sector build its resilience and ability to take up those opportunities, including more than £107 million-worth of transition funding, some of which has been accessed by women’s organisations such as Birmingham and Solihull Women’s Aid.
What discussions has the Minister had with Ministry of Justice colleagues to ensure that the excellent work done by women’s organisations to meet the specialist needs of women offenders will be protected in a payment-by-results system?
I share the hon. Lady’s concern that, for example, the upcoming commissioning process for reform of probation and rehabilitation services is sensitive and sympathetic to, and makes full opportunity of, the voluntary sector, including the many organisations that do incredibly valuable work with women offenders. We are working very closely with the Ministry of Justice to make sure that happens.
Local authorities across the country have been determining what they will do with Government grants. Does my hon. Friend agree that it is disgraceful that local authorities have been cutting grants to voluntary organisations that provide services to the weak and vulnerable?
I should inform my hon. Friend and fellow Harrow MP that I had a meeting with Harrow charities recently to discuss the response to cuts in their grants from Harrow council. I pointed out the contrast with neighbouring Conservative-led Hillingdon council, which, having managed its public finances excellently over many years, is continuing to invest in front-line charities, rather than cut the grants to them.
9. What steps his Department is taking to encourage growth in the social market in the UK. 
We are cutting red tape for charities and investing to encourage social action. We are recognised as a world leader in developing the social investment market. We are opening up opportunities for the social sector to help us deliver better public services.
Does the Minister agree that the Cinnamon Network community franchising model is proving an excellent stimulus that is enabling the big society to flourish? Will he commend the work of Simon Redmill and Salisbury city church, who are using a grant from the Cinnamon Network to launch a job club in Salisbury next Monday?
It will not surprise my hon. Friend that I totally agree with him. I am delighted that through the social action fund we have invested more than £1 million to help the Cinnamon Network and Tearfund support church-led community projects around the country. Through him, I congratulate Salisbury city church and wish it every success.
Does the Minister agree with the Federation of Small Businesses and the Forum of Private Business that the three problems for small businesses are the set-up costs for tendering, the difficulty of getting on to lists, and the fact that they do not get their payments in time, which means that they have great problems with cash flow?
I recognise that there are all kinds of challenges for small organisations and, in particular, for small voluntary groups and charities in competing for public service contracts. We are opening up many more opportunities for them than there were under the previous Administration. We are working actively through things like the commissioning academy and new master classes around the country to tool up small organisations so that they can compete more effectively for such contracts.
11. What steps his Department is taking to reduce the level of late payment by public sector contractors to small and medium-sized enterprises. 
As I have noted, Government policy is to pay undisputed invoices within five days and to pass 30-day payment terms down supply chains. The Crown representative team in the Cabinet Office is encouraging prime contractors to do that more quickly on a voluntary basis. We have tasked Departments to manage their contracts to ensure that prime contractors pay sub-contractors within 30 days.
I am glad that the Government are now taking seriously late payments to small and medium-sized enterprises, after I received such a dismal response on the issue in 2011. When are the Government going to ensure that public sector contractors have the need to pay SMEs in their supply chain promptly in their contracts?
I congratulate the hon. Lady on the award that she has won in connection with her work on this matter. My previous answer covered what the Government are doing. We are extremely keen to see good practice pushed throughout the supply chain. We are ensuring that more business goes to SMEs, which is good for growth. All told, that is a good thing and something of which the Government can be proud.
T1. If he will make a statement on his departmental responsibilities. 
My responsibilities are the public sector Efficiency and Reform Group, civil service issues, the industrial relations strategy in the public sector, Government transparency, civil contingencies, civil society and cyber-security.
I thank the Paymaster General for his answer. When I talk to voluntary organisations across Leicester, many of those that took part in the future jobs fund tell me that it had a positive impact. Today, we have seen unemployment across Leicester rise again. The chief executive of the National Council for Voluntary Organisations recently called the Work programme
“a slow motion car crash”.
When are we going to have a scheme to get our young people back to work that truly harnesses the expertise of the voluntary sector?
It would have been nice to hear the hon. Gentleman celebrating the rise in employment and the fact that since the election 1.25 million new jobs have been created in the private sector. It would be very good if he and his colleagues would occasionally support that.
T2. Will my right hon. Friend assure me that the residents of Redditch will not suffer too much today from the strike action by the Public and Commercial Services Union? 
I am happy to be able to tell my hon. Friend that the latest numbers suggest that fewer than 95,000 civil servants went on strike today. The leadership of the PCS, who are not serving their hard-working members at all well, claimed this morning that 250,000 civil servants were on strike. That was simply untrue—it is fewer than 95,000.
On 5 March, Sir George Cox published his independent review into “Overcoming Short-termism within British Business”. The report concluded, among other things, that Cabinet Office-led procurement in the public sector is failing, with long-term strategic issues for the UK Government not a part of Government procurement thinking. When does the Minister plan to put that right?
We inherited a position that was exactly as the hon. Gentleman describes from the Government of whom he was a member. We have already improved matters significantly by publishing forward pipelines in a number of sectors so that British suppliers can tool up to bid effectively. We have cut procurement times and costs dramatically so that it is easier and cheaper for businesses to bid and win that business. It is a very great pity that his Government did not get on and do some of that themselves.
T3. Can my right hon. Friend confirm that the big society awards help highlight the important work of community groups, just as the 2012 award did for the Street Angels initiative, which helps make night life safer in Macclesfield and in hundreds of towns and cities across the country? 
I can certainly confirm that the big society awards are there to throw a spotlight on and celebrate outstanding community-led initiatives, such as the Street Angels initiative that has done such good work in Macclesfield and has now spread to more than 70 towns across the UK. I encourage colleagues on both sides of the House to think about nominating community initiatives to the big society awards through the No. 10 website.
Can the Minister explain why his Government have failed to bring forward robust proposals for a statutory register of lobbyists given that the public want one, the lobbying industry wants one and the Government promised one?
An announcement will be made shortly, but it is worth pointing out that the hon. Gentleman’s party was in power for 13 years and did the square root of nothing on this.
T5. What services have been affected by the PCS strike today? Does my right hon. Friend agree that responsibility for the strike lies exclusively with the PCS leadership? 
That is exactly right. I can confirm that there has been minimal impact on public services and that the public will have been inconvenienced to a very small extent by today’s strike. The borders at the airports and ports have been properly manned, queues have been minimal and I am delighted to say that at Birmingham airport alone, there have been significant seizures of illegal drugs to the benefit of protecting the public.
T4. Today’s shambolic, reactionary Budget will put the Labour party another step closer to government. Now that we have a fixed-term Parliament, will the Minister lay out a proper timetable for Opposition access to the civil service so that we can clear the mess up? 
I am afraid that I did not hear a single word that the hon. Gentleman said—[Interruption.]
Order. In the remaining couple of minutes, let us have a courteous audience for Mr Halfon.
T6. Does my right hon. Friend agree that local trade unions are very much part of the big society? Does he support the vital work of USDAW, which is fighting for fair pay and conditions for Tesco workers whose jobs are under threat following the announcement of the closure of the Tesco depot in Harlow? 
Of course, responsible trade unionism has a proper role to play in Britain’s big society. What we object to is the irresponsible leadership of unions such as Unite, Labour’s biggest donor, which is taking strike action today in support of the wholly unrepresentative PCS leadership, whose sway with its members has fallen to the extent that the turnout in the strike today has been the lowest at any time since the election.
T7. It has been reported that half of charities are planning to cut their work force or expenditure in the next 12 months. What real steps will the Minister take to help those charities to carry out the valuable work that they do throughout our country? 
The hon. Lady will know that, to give one example, my right hon. Friend the Justice Secretary is proposing to open up the whole of rehabilitation services so that particularly charitable and voluntary organisations and social enterprises will be able to bid on a payment-by-results basis to win that business. We have created a growing social investment market, supported by big society capital, which will enable those groups to get for the first time access to capital to fund those projects.
The Prime Minister was asked—
Q1. If he will list his official engagements for Wednesday 20 March. 
This morning I had meetings with ministerial colleagues, and others. In addition to my duties in this House, I shall have further such meetings later today.
Does the Prime Minister agree that today we need a blue collar Conservative Budget which cuts taxes for people who work hard, do the right thing and want to get on; which stops spending billions of pounds that we do not have on overseas aid; and in which we source the cheapest energy for people, helping them with their costs of living, rather than sourcing the greenest energy?
First, I thank my hon. Friend for giving me the opportunity to remind people that even before this Budget, in two weeks’ time there will be a tax cut for 24 million people in our country as we raise the amount of money someone can earn before they pay tax. We will have taken more than 2 million people out of tax altogether; we have frozen council tax; we have cancelled fuel duty increase after fuel duty increase; and we are legislating to put customers on the lowest electricity tariff. I can also tell my hon. Friend that we are not going to carry on with the proposal made by the previous Energy Secretary, which was to put £179 on everybody’s bill. We have decided to scrap that.
I want to ask the Prime Minister about the situation in Cyprus. Will he update the House on what is being done to protect British nationals, including our armed forces, who have deposits in Cypriot banks?
The Leader of the Opposition raises an extremely important issue at a very sensitive and difficult time for the Republic of Cyprus. First, we have absolutely guaranteed that anyone who is in Cyprus because they have been sent there by the British Government, and the armed forces, Ministry of Defence or the Foreign Office, will not lose out in any way in terms of their earnings or their savings. That is the first thing to say. We have also made sure that money will be available, which is why a plane with money was sent to Cyprus last night.
In terms of British citizens in Cyprus, of whom there are many thousands, of course we cannot insure them against any losses in Cypriot bank accounts, but we can make sure that they get safely the pensions and benefits to which they are entitled. We have frozen those payments for the time being until the situation becomes clear, but everyone should know that they will get those payments.
On Monday, the City Minister said that the UK Government have
“intelligence about what went on”—[Official Report, 18 March 2013; Vol. 560, c. 620.]
in discussions among eurozone members who negotiated the plan. Will the Prime Minister tell us what the Government knew in advance, and what eurozone members said about that plan?
First, as we are not in the euro, we do not join the discussions about eurozone bail-outs. That is important, and it is worth noting that because of the deal I did in Brussels, getting us out of the bail-out fund, we will not be contributing to what would otherwise, under the previous Government’s plans be perhaps up to £1 billion. Obviously what we are doing is waiting to see the action that the Cypriot Government and the Eurogroup agree, and ensuring that we do everything to help British citizens in the weeks ahead.
The point I make to the Prime Minister is that this is a matter not just for the eurozone but for other European economies, because it goes to trust in the banking system. I think it should have been obvious to everyone that a sudden levy imposed on ordinary savers would undermine basic trust and confidence in banks. Will the Prime Minister send a clear message from the Dispatch Box that any negotiated bail-out that is subsequently agreed with the Government of Cyprus needs to rebuild trust in the banking system and not undermine it further?
We have made our views very clear to the Cypriot Government. In our view, when there are deposit protection schemes—as we have in this country; as all of Europe put in place after the crash of Lehman Brothers—those deposit protection schemes should be respected. That is the whole point; that is why they are there for small savers.
The civil service union has chosen today to go on strike, but the country does not seem to have ground to a halt. Does the Prime Minister agree that that probably indicates that there is a bit more room to save in terms of public sector spending, so that we can clear up Labour’s debts and get this country back on track?
My hon. Friend raises an important point. It is important to recognise that we should do everything we can to save and find efficiencies in public spending in order to help hard-working families and keep their tax bills down. That is exactly what this Government will continue to do.
Q2. On 9 January, the Prime Minister told me there would be no hospital reorganisations unless they had the support of the local GP commissioners, proper public engagement and an evidence base. Will he now admit that not one of those tests is met in the case of Lewisham hospital, where he proposes to close down half the services and sell off two thirds of the land to bail out a neighbouring failing trust? Can anyone trust this Prime Minister on the NHS ever again? 
It is worth remembering who set up the PFI deal that has meant that this action has had to be taken. The apology over what is happening at the South London Healthcare trust should come from the Labour party, because it was responsible for creating this situation. As the right hon. Lady knows, £1 million a week is being lost from front-line care. No change is not an option, but the Health Secretary’s plans have ensured that Lewisham will retain an A and E with senior medical emergency cover.
Today, the FTSE index is just under 6,500; in 2008, it was just under 3,500. Does my right hon. Friend agree that the real investors in this economy agree with the coalition Government’s economic policy, contrary to the policies delivered by the Labour party?
My hon. Friend makes a good point. It is a difficult and hard road that we are travelling to turn this economy round after the huge mess made by Labour, but when we look at the facts—just this morning, we have seen that an extra 131,000 are in work—we see the changes necessary to start the rebuilding of our economy.
Last weekend, the Foreign Secretary said that there was a strong case for lifting or amending the arms embargo on Syria in the months ahead. Given that no decision was taken at the EU Council, does it remain the Prime Minister’s intention to seek a relaxation of the EU arms embargo?
First of all, let us look at what we have already achieved in terms of amending the arms embargo. We asked specifically for it to be changed so that we could give technical support to the opposition. We have achieved that, but the French President and I discussed at the European Council looking for further changes to the arms embargo, which will be discussed by Foreign Affairs Ministers this weekend. The reason for that is twofold. First, that the arms embargo still applies pretty much equally to this hateful regime and to the opposition, who we now recognise as legitimate representatives of the Syrian people, sends a peculiar message. Secondly, the French President and I are concerned that we should not be restricted for months and months ahead when we do not know exactly what could happen in Syria—there are very worrying reports of the use of chemical weapons.
I thank the Prime Minister for that answer. Obviously, everybody is appalled by the actions of the Assad regime, but the Prime Minister will know that there is not only a lack of unity among Syrian opposition groups, but the known presence on the ground in Syria of al-Nusra, the al-Qaeda backed terrorist organisation. Does he therefore understand the widespread concern that remains about the idea of seeking to supply weapons to the rebels?
The Leader of the Opposition puts the point absolutely rightly. There is widespread concern about the nature of the opposition. The argument we must engage in is this: are we more likely to help the good elements of the opposition by standing back, or are we more likely to help by getting in there and shaping and giving that technical assistance, so that we can play a part in building up the Syrian opposition, so that they are a legitimate and credible alternative to this hateful regime?
It is worth recalling—we should all recall it—the fact that current policies are not working for the people of Syria. Seventy thousand people are dead and this hateful regime is still in place.
The Prime Minister is absolutely right that the current situation is terrible; we just must not make it worse with the actions that we take. The spokesman for the UN Secretary-General has said that the introduction of more weapons into Syria is “counterproductive” and will not lead to a solution. Special Representative Brahimi recently called for a renewed diplomatic initiative to bring the warring parties to the negotiating table. Will the Prime Minister set out what steps the UK Government, specifically, are taking to support the UN in advancing that initiative?
We are taking specific steps to help the UN with this vital initiative. Trying to achieve a diplomatic solution, with transition at the top of the regime, is worth while. That is why we have had detailed talks with the Russian Foreign and Defence Ministers in the past week. I would just make one other point about the arms embargo. Sitting in the European Council chamber, I felt that there was a slight similarity between some of the arguments being made about not putting more weapons into Syria and the discussions we had on Bosnia, with the appalling events that followed. In my view, it is better to be engaged and working with the Syrian opposition and trying to bring this conflict to an end.
Q15. Traveller numbers on the coastal railway line running through my constituency are growing fast. Given its importance to local tourism in Dawlish and Teignmouth, can the Prime Minister assure me that urgent investment plans are in hand to repair recent flood damage and to create a long-term sustainable future for this railway line? 
I can give my hon. Friend that assurance. I know that the Transport Secretary will shortly be visiting her constituency. Investment is going into the whole of the line that serves her constituency, including major investment that will shortly be completed at Reading station, which will help capacity all down the line.
Q3. The Prime Minister will be aware of the growing disquiet across the UK regarding his Government’s welfare reform proposals—great disquiet, because the proposals are deeply unfair and will, I predict, lead to administrative chaos. Does the Prime Minister agree with me that, in terms of his legacy, welfare reform will be his poll tax? 
I do not agree with the hon. Lady at all. I find that there is strong support for the housing benefit cap, so that we no longer fund homes in the capital of our country by up to £100,000 a year. There is strong support for the welfare cap, and, indeed, there is strong support for universal credit, which will make sure that in every case people are better off in work and better off when they choose to work extra hours. That is what we want: a welfare system that supports enterprise, work and aspiration.
Q14. Is the Prime Minister aware that seven people have died on Norfolk’s roads in the past week? Furthermore, eight have died on the A47 in the past 10 weeks. Does he share my concern about this tragic loss of life? Is he aware of the campaign being run by me and other hon. Members, such as my hon. Friend the Member for Broadland (Mr Simpson), to improve the A47? Norfolk people understand the current budgetary constraints; they simply want a fairer share of resources. 
I am grateful to my hon. Friend for bringing me up to date with this important campaign that he and others are leading in Norfolk. We have a much better record on road safety than we have had in recent years, but we should never be complacent and should continue to work on it. Money has been made available for road schemes in Norfolk, the A11 chief among them. I can see from the Minister of State, Department for Transport, the right hon. Member for Chelmsford (Mr Burns) nodding vigorously behind my hon. Friend that there may be more to come.
Q4. Does the Prime Minister agree with Lord Heseltine that people are suffering under the recession, and that it would be the wrong politics at this time to remove the 50p top rate of tax? Will he now cancel next month’s tax cut for millionaires? 
The point I make to the hon. Lady is that after the start of the financial year the top rate of tax will be higher than in any year when Labour was in office, and I am sure that that is something with which Michael Heseltine would fully agree.
Today is the 20th anniversary of the Warrington bombing. The Prime Minister will recall that more than 20 people were killed and injured, among them a 12-year-old boy, Tim Parry. Will he join me in congratulating Tim’s parents, Wendy and Colin, on how they have worked tirelessly for peace over the past two decades, and particularly on the establishment of the Foundation for Peace, which brings help to victims of conflict around the world?
I certainly join my hon. Friend in praising that family for the incredible bravery they have shown. When someone suffers such a tragedy, it must be so much easier to try and put it behind them and forget about it, but to go on and campaign for peace and to bring together the people of Warrington as they have done shows enormous character and fortitude. They have the backing of the whole country.
Q5. Has the Prime Minister had time to consider the remarks of the leader of his MEPs in the European Parliament, who said of the decision to cut the 50p rate that it was“one of the biggest mistakes that we’ve made so far in this parliament”and “disastrous to do so in a recession”.Is Mr Callanan right or wrong? 
When the hon. Gentleman’s party put the top rate of tax up, millionaires paid £7 billion less in taxation. We are having a lower tax rate that will raise more revenue. That makes pretty good sense.
Just a few weeks back, my right hon. Friend became the first serving British Prime Minister to visit Amritsar in Punjab. As a British Sikh, may I say how warmly his visit was received? More importantly, will he congratulate Her Majesty’s Government on the pioneering work they have done in searching the Sikh turban at European airports? It shows that we can have a proactive relationship with Europe, rather than a reactive one.
I thank my hon. Friend for all the work he does in this area and for how he consistently raises issues about the British Sikh community, the immense contribution it makes to our country and the respect that we should show it. I also thank him for accompanying me on that trip to the Golden Temple—something that I will never forget. It gives me the opportunity to say, on behalf of the House, how much British Sikhs give to Britain and how much we thank them for it.
Q6. My constituent Jordan Kingston found himself homeless aged just 17. He was offered social housing and is now studying for his A-levels, determined to improve his situation through education. From his £56 weekly benefit, he will lose £14 in the bedroom tax and £3 in council tax, leaving just £11 per week to live on after utilities. Based on the Prime Minister’s experience of hardship, what advice does he have for Jordan? 
First, the Government are investing in social housing, and the hon. Lady will hear more about that in a moment. Secondly, when housing benefit costs £23 billion a year, we simply have to reform it. There is a basic issue of fairness: why should someone living in private rented accommodation not receive a spare room subsidy and someone in social housing should? There is a basic issue of fairness, and that is why it should be put right.
Unlike the hon. Member for Shipley (Philip Davies), I am proud of our coalition for sticking to the 0.7% aid target—[Interruption.]
Order. The hon. Lady’s question must be heard. People should not jeer before they have heard it.
Thank you, Mr Speaker.
We set an example to the world, and later on this month, the Prime Minister goes to Bali to co-chair the high-level panel to discuss the next set of millennium development goals. Will he use his leadership to press for a stand-alone goal on gender equality and women’s empowerment?
I will look very carefully at what the hon. Lady says about the importance of gender equality in terms of the new millennium development goals. The point I would make to anyone who raises the issue about our aid commitment is that I do not think we should break our promises to the poorest people in the world. Our key aim ought to be to eradicate the extreme poverty that people sometimes still face, living on less than $1.25 a day. That is what we are talking about, and I think that we should be proud of the fact that we are keeping our promises.
Q7. As a money-saving tip on Budget day, and in line with what the Education Secretary wants for teachers, could the Prime Minister put his Chancellor and the Cabinet on performance-related pay? How much does he think it would save? 
It is this Chancellor who has seen the deficit come down by a third since he became Chancellor and has seen the creation of over a million private sector jobs. He is getting the country out of the hole that we were left in by Labour.
Will the Prime Minister welcome the successful launch in Bedford last week of the country’s first local enterprise fund? People who care about Bedford have raised £400,000 to invest in businesses in Bedford, encouraging enterprise and securing employment? Does he agree that in this respect, as in so many others, where Bedford leads, the rest of the country should follow?
I am sure my hon. Friend is right about Bedford’s leadership in all things. He makes an important point, which is that we need to see more small businesses start and more enterprise. We have seen in Britain over the last three years the fastest rate of new business creation in our history, but we need to see more of it to keep the private sector going.
Q8. Rising unemployment remains an issue in my Stockton North constituency. Is unemployment and recession, which grind hard-working families and the most vulnerable into the ground, a price worth paying for next month’s obscene tax cut for millionaires? 
If the hon. Gentleman looks at the figures today, he will see that there are 131,000 more people in work over the last quarter. We have seen 600,000 more people employed compared with a year ago. That is what is actually happening in terms of employment. I have to say, when we look at the mess we were left by Labour, being given advice on economics on Budget day from Labour is like asking Enron for accountancy advice.
In less than a fortnight’s time, this Government will have taken 3,168 of my constituents out of paying income tax altogether. Does that not show that this Conservative-led Government are on the side of hard-working, low-paid people?
My hon. Friend makes an important point, which is that we have consistently lifted the personal tax allowance—the amount of money that people earn before they start paying tax—starting at around £6,000 and now rising all the time, so that over 2 million people have already been taken out of tax altogether. If he is sitting comfortably for the next half an hour, he may hear some further news.
Q9. Does the Prime Minister agree with his hon. Friend the Member for Hexham (Guy Opperman) that his Government’s focus should be on looking after people who are struggling to pay their mortgages, rather than protecting those in £2 million houses? 
We should be helping people who are paying their mortgages, and that is why it is so vital that we stick to our plans. We have low interest rates in this country because we have a plan to get the deficit down. That is absolutely key. The other point I would make to the hon. Lady is that if we look at the funding for lending scheme from the Bank of England, it has now successfully reduced mortgage rates and also made sure that people who do not have access to a large deposit are able to look at buying a house. We are making progress, but there is a lot more to do.
Q10. This month we have had the wonderful news that Jaguar Land Rover is going to create a further 700 jobs in South Staffordshire, bringing its total investment to over £500 million. Last year we saw the creation of 70,000 manufacturing jobs in the UK. Does my right hon. Friend not think that this is a stark contrast to the 1.7 million manufacturing jobs destroyed under the last Labour Government? 
My hon. Friend makes an important point. Jaguar Land Rover has been a massive success story for our country, and I would praise all of those who have invested money in that business, all those who work in it and all the apprentices who are being trained in it. It is part of a recovery of our automotive sector, which has, for the first time in 30 years, seen a surplus in the number of cars that we export overseas, and it is part of a picture where Nissan, Toyota, Honda and other automotive businesses in the sector are doing well, and we support them.
The Prime Minister will be aware that this week marks the bicentenary of the birth of Dr David Livingstone—born in Blantyre in my constituency, buried in Westminster abbey—which was marked by a service attended by President Joyce Banda last night in the abbey. He will know that one of Livingstone’s proudest achievements was the drive to abolish slavery in east Africa. Given the bicentenary, does the Prime Minister agree that it is now time for his Government to take the lead to end the scandal of the 2.5 million people in modern-day slavery or prostitution as a result of people trafficking?
The hon. Gentleman makes an important point, and he gives me the opportunity to praise President Banda for what she is doing to lift people out of poverty in Malawi, and to thank her for visiting Britain and Scotland this week. The hon. Gentleman makes an important point about slavery, because there is still modern-day slavery and we still need to take action to combat it at European level, at national level and at local level with the police. This Government will continue to take that action.
Q11. Whatever further changes the Chancellor announces today, the payslips of ordinary working people will show a tax cut next month as a result of the personal allowance rise that the Liberal Democrats called for. It represents the largest single income tax change in this Parliament. What does this say about the priorities of my right hon. Friend the Prime Minister’s coalition Government? 
This is an important priority that we have taken action on in Budget after Budget, even in difficult times, saying to people, “We are on your side. We want to cut your tax bills.” In just two weeks’ time there will be a tax cut of over £200 for 24 million people in our country—each and every taxpayer. At the same time, we are lifting over 2 million people out of tax—they will not pay any income tax at all. This is real progress and it is on the side of the people who work hard and want to get on.
Q12. What is the Prime Minister planning to spend his millionaire’s tax cut on? 
When the top rate of tax was put up, millionaires paid £7 billion less. That is the sort of incompetence and inefficiency that the hon. Lady left the sofa of GMTV to support. [Interruption.]
Order. When a question is asked, Members should not shout their heads off when the Prime Minister is giving an answer.
Given that SAS Sergeant Danny Nightingale has had his conviction quashed following the quashing of his military prison sentence last year, does the Prime Minister agree that it would be totally against the public interest, and against the interests of the SAS Regiment, for Sergeant Nightingale to have to face a fresh trial when others are benefiting from the weapons amnesty that was rightly introduced by the Secretary of State for Defence as a result of the Nightingale case?
My hon. Friend raises an important point. Let me say how strongly I support all those who serve in our special forces. As Prime Minister, I have the privilege of meeting many of those brave people and seeing that they are some of the finest and most courageous people in our country. I do not, however, want to get into any trouble with my right hon. and learned Friend the Attorney-General, so I will leave the issues of the courts to the courts.
Q13. The money that the Government have set aside to help people who are hit by the bedroom tax will not cover a fraction of the really hard cases, such as that of my paralysed constituent who receives round-the-clock care from his wife. There is an acute housing shortage in York, and they have nowhere to move to. So will the Prime Minister do one more U-turn on the bedroom tax, and scrap it altogether? 
First, let me remind the hon. Gentleman that only the Labour party could call a welfare reform a tax. It shows how little they understand how tax and benefits work. We are making available a discretionary fund that is there for the hard cases, but we are also recognising that there is a basic issue of cost—about £23 billion is spent on housing benefit every year—and a basic issue of fairness, not just between the private sector and the social sector but in recognising that there are 1.8 million people on housing waiting lists who would love to have a bedroom.
Is my right hon. Friend aware that the Business Location Index has just cited Milton Keynes as the best place in the country to do business and that, with more than 2,000 business start-ups in the past year, it is Milton Keynes that is rebuilding our economy?
I was aware of that statistic, because my hon. Friend helpfully reminded me of it when we were in Milton Keynes together recently, talking about what a fantastic location for business it is, about how it is encouraging business start-ups and about how it is leading to a growth in employment in the region.
Given that the Chancellor has joined Twitter this morning, will the Prime Minister remind him and the House what too many tweets make?
I have made a number of remarks about Twitter over the years, most of which I have had to withdraw because I am now tweeting, too. I look forward to the first tweet after the Budget this afternoon. What is clear is that the hon. Gentleman could tweet even now that we are cutting taxes in two weeks’ time for 24 million working people, taking 2 million people out of tax. Tweeting that would certainly not cause any dangers for the hon. Gentleman.
Recently, the shadow Home Secretary admitted that when the Labour party was in government it got its immigration policy wrong. Does the Prime Minister agree with me that across the breakfast table, she should persuade her husband to make a similar admission on Labour’s economic policy.
I think my hon. Friend makes a very good point. We inherited a complete shambles in immigration—a system completely out of control. We have sort of had apologies for that; what we have not had is any sort of apology for the borrowing, the spending and the debt—the mess that the Labour party left us.
It has been estimated that for the cost of just one nuclear reactor, 7 million households could be lifted out of fuel poverty through energy efficiency and conservation. Hinkley is expected to come with an eye-watering £14 billion price tag and a strike price of getting on for double the current price of electricity. If that does not make nuclear unaffordable, can the Prime Minister tell us what would?
I am afraid that I just do not agree with the hon. Lady. Our fleet of nuclear power stations is coming to the end of its life, and I think it is important that we work hard to replace some of that capacity. That is what Hinkley is about; that is why I think my right hon. Friend the Secretary of State for Energy and Climate Change was absolutely right to give it the go-ahead. It will be an important provider of carbon-free electricity in the years ahead.
Ways and Means
Before I call the Chancellor of the Exchequer, it is convenient to remind hon. Members that copies of the Budget resolutions will be available in the Vote Office at the end of the Chancellor’s speech. It may also be appropriate to remind hon. Members that it is the norm not to intervene on the Chancellor of the Exchequer or the Leader of the Opposition.
This is a Budget for people who aspire to work hard and get on. It is a Budget for people who realise there are no easy answers to problems built up over many years—just the painstaking work of putting right what went so badly wrong. And together with the British people, we are, slowly but surely, fixing our country’s economic problems. We have now cut the deficit not by a quarter, but by a third. We have helped business create not a million new jobs, but one and a quarter million new jobs. We have kept interest rates at record lows.
Despite the progress we have made, there is much more to do. Today, I am going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them. It is taking longer than anyone hoped, but we must hold to the right track. By setting free the aspirations of this nation, we will get there.
Our economic plan combines monetary activism with fiscal responsibility and supply-side reform, and today we go further on all three components of that plan: monetary, fiscal and supply-side reform. We also understand something else more fundamental. Our nation is in a global race, competing alongside new centres of enterprise around the world for investment and jobs that can move anywhere. What was the response of those who came before us? It was to expand the state in a way that we could not afford; to drive businesses overseas with taxes that became more and more uncompetitive; to let schools fail; to deplete our skills base; to let a bloated welfare system pick up the human casualties and assume that an uncontrolled banking boom would pick up the bill. To win in the global race, we are doing the exact opposite. We are building a modern, reformed state that we can afford. We are bringing businesses to our shores with competitive taxes. We are fixing the banks. We are improving our schools, our skills—[Interruption.]
Order. Obviously the country is waiting to hear the Chancellor. I certainly want to hear the Chancellor, and I am sure that most people in the Chamber also want to hear the Chancellor. Please let us hear the Chancellor.
For years people have felt that the whole system is tilted against those who did the right thing: who worked, who saved, who aspired. Those are the very people whom we must support if Britain is to have a prosperous future. This is a Budget for those who aspire to own their own home, who aspire to get their first job or to start their own business. It is a Budget for those who want to save for their retirement and provide for their children. It is a Budget for our aspiration nation.
The forecast from the independent Office for Budget Responsibility today reminds us of the economic challenge at home and abroad, but it also—[Interruption.]
Order. Let us start as we mean to go on. The shadow Chancellor may not have been the Chancellor, but he should observe the courtesies, and should know better. [Interruption.] We want no advice from the Government, and they should know better than to display it. I do not wish to see it. That is not a good position to put us in. Let us continue, and let this not become the circus of the day.
Since the autumn statement, the OBR has again revised down its forecast for global economic growth, and has sharply revised down its forecast for world trade. Growth in the United States and Japan was flat in the last quarter, while the eurozone shrank by 0.6%. That was the largest fall since the height of the financial crisis. The problems in Cyprus this week are further evidence that the crisis is not over, and the situation remains very worrying. I can confirm that, as the Prime Minister said, people sent to Cyprus to serve our country, in our military or Government, will be protected in full from any tax on their deposits.
The OBR today sharply revised down its future growth forecast for the eurozone, and expects it to remain in recession throughout this year. In its words, “the underlying situation” in the eurozone “remains very fragile”. I will be straight with the country: another bout of economic storms in the eurozone would hit Britain’s economic fortunes hard. Forty per cent. of all we export, we export to the eurozone. There is a huge effort across the Government to grow Britain’s trade with the fast-growing parts of the world, and exports to Brazil, India and China are up by almost two thirds. United Kingdom firms now export more goods to non-European Union countries than to EU countries. This is the first time that that has happened in over two decades. However, we are still very exposed to what happens on the continent. Indeed, last year domestic demand was actually stronger than forecast, but it is the weakness of net trade that helps to account for much of the weakness in GDP. As the OBR makes clear,
“the unexpectedly poor performance of exports is more than sufficient on its own to explain the shortfall”.
GDP for last year has turned out to be a little higher than the OBR forecast in December, but this year its output forecast is reduced to 0.6% growth. Despite the recession in the eurozone, the OBR’s central forecast today is that we will avoid a second quarter of negative growth here in the UK. While it is less than we would like, our growth this year and next year is forecast by the International Monetary Fund to be higher than that of France and Germany. That is a reminder of the fact that all western nations live in very challenging economic times.
The OBR expects the recovery to pick up to 1.8% in 2014, 2.3% in 2015, 2.7% in 2016, and 2.8% in 2017. Crucially, jobs are being created. Indeed, in the words of the OBR, the picture on employment
“continues to surprise on the upside”
in this forecast.
When we started the unavoidable task of reducing the size of the public sector work force, some in the House expressed doubts that the private sector would be able to make up the difference. I am glad to report to the House that their lack of confidence in British businesses has been misplaced. It is a tribute to the energy and enterprise of British companies that for every one job lost in the public sector in the last year, six jobs have been created in the private sector; the employment rate has been growing faster than in the US and three times as fast as in Germany. So, despite the weaker GDP, at this Budget the OBR has now revised up further its forecasts for employment. Compared with this time last year, the OBR now expects 600,000 more jobs in 2013, and there will be 60,000 fewer people claiming unemployment benefit. We have seen more people in work than ever before, including a record number of women; there are a quarter of a million fewer workless households than two years ago; and the unemployment rate is lower than it was when we came to office.
The deficit continues to come down. Three years ago, the Government were borrowing £1 for every £4 they spent—that was completely reckless and unsustainable. We have taken many tough decisions to bring that deficit down, and we will continue to do so. The deficit has fallen from 11.2% of GDP in 2009-10 to a forecast of 7.4% this year—that is a fall of a third. It will then fall further to 6.8% next year, 5.9% in 2014-15, 5% in 2015-16 and 3.4% the following year, reaching 2.2% by 2017-18. Those numbers all exclude the transfer of the Royal Mail pension fund to the Government, which reduces the deficit still further for this year alone. It is sometimes asserted in this House that borrowing has gone up under this Government—[Interruption.] As we have just seen again. The facts show the opposite to be true. The previous Government borrowed—[Interruption.]
Order. We cannot have one side being told without the other. It is not a competition of who can shout the loudest. Let us hear the Chancellor. If you don’t want to hear your own Chancellor, I am sure your constituents would understand if you were to leave the Chamber. I suggest that nobody wants to leave the Chamber, so let us continue to hear the Chancellor of the Exchequer.
As I was saying, the facts show the opposite to be true. The previous Government borrowed £159 billion in their last year in office and this year this Government are forecast to borrow £114 billion. So that is not more borrowing—it is £45 billion a year less borrowing. Borrowing then falls from £108 billion next year, and falls again to £97 billion in 2014-15 and to £87 billion in the last year of this Parliament, before falling again to £61 billion and £42 billion in the following two years. To ensure complete transparency, the OBR publishes the numbers without the asset purchase facility cash transfers. They show that on that measure, too, borrowing is just forecast to fall.
We committed at the start of this Parliament to a fiscal mandate that said we would aim to balance the cyclically adjusted current budget over the following rolling five years. I can confirm that the OBR says we are on course to meet our fiscal mandate—and meet it one year early. However, the likelihood of meeting the supplementary debt target has deteriorated. Public sector net debt is forecast to be 75.9% of GDP this year, 79.2% next year, 82.6% the year after, 85.1% in 2015-16 and 85.6% in the year after, before falling to 84.8% in 2017-18.
In response, there are those who would want to cut much more than we are planning to and chase the debt target. I said in December that I thought that with the current weak economic conditions across Europe that would be a mistake. We have got a plan to cut our structural deficit. Our country’s credibility comes from delivering that plan, not altering it with every forecast—and that is why interest rates remain so low. Our judgment has since been supported by the International Monetary Fund, the OECD and the Governor of the Bank of England, and I do not propose to change that judgment three months later.
I have also had representations at this Budget for measures that would add £33 billion a year extra to borrowing on top of the figures I have announced. That is from people who seem to think that the way to borrow less is to borrow more. They would return us to the double-digit deficits of the last Government and give us far and away one of the highest deficits in the western world. That would pose a huge risk to the stability of the British economy, threaten a sharp rise in interest rates and leave the burden of debts to our children and our grandchildren. I will not take that gamble with the future of this country, especially when those representations came from the very same people whose previous gamble with our economy led to the mess that we are clearing up in the first place.
The spending reductions that we promised have been more than delivered. Welfare reforms have been legislated for and are taking place, and here is a clear sign of progress: the proportion of national income spent by the state has fallen from 47.4% three years ago to 43.6% today; and it is on course to reach 40.5% at the end of the period. We have set out the deficit plan, and we are delivering that plan. Taken together, the measures that I will announce today are fiscally neutral overall. Ask the British people and they will tell you: our problem as a country is not that we are taxed too little, but that the Government spend too much. I agree with them. So the tax cuts in this Budget are not borrowed; they are paid for. That is our way, and it is the only responsible way to lower taxes.
It is the central plank of our economic plan that a tough and credible fiscal policy creates the space for an active monetary policy. Recovering from the financial crisis has exposed the shortcomings of conventional monetary tools. We in Britain have had to innovate and develop new tools; so have other countries. I confirm today that the asset purchase facility will remain in place for the coming year. We are now actively considering with the Bank of England whether there are potential extensions to the successful funding for lending scheme that will boost lending still further. We are also setting out our plans for lending from our new business bank, but I want to make sure that an active monetary policy plays a full role in supporting the economy, so I am today setting out an updated remit for the Monetary Policy Committee. Alongside it, we are publishing a review of the monetary policy framework.
This Budget confirms the primacy of price stability and the inflation target in Britain’s monetary policy framework. The updated remit reaffirms the inflation target as 2% as measured by the 12-month increase in the consumer prices index. The target will apply at all times, but as we have seen over the last five years, low and stable inflation is a necessary but not sufficient condition for prosperity. The new remit explicitly tasks the MPC with setting out clearly the trade-offs that it has made in deciding how long it will be before inflation returns to target. To ensure a fuller communication between the Bank and the Treasury, I am changing the timing of the open letter system, so that when inflation is above target the Governor will write to me on the day the minutes of the next MPC meeting are published to allow for a more substantive exchange of views.
The new remit also recognises that the Monetary Policy Committee may need to use unconventional monetary instruments to support the economy while keeping inflation stable, and it makes it clear that the committee may wish to issue explicit forward guidance, including using intermediate thresholds in order to influence expectations on the future path of interest rates. For example, that is what the US Federal Reserve has now done, making a commitment to keep interest rates low while unemployment is high, provided that inflation is not expected to rise too much. This can help the economy because it gives families planning their futures, and businesses wondering whether to invest, more confidence that interest rates will stay lower for longer. So I am asking the Monetary Policy Committee to provide an assessment of how intermediate thresholds might work in Britain, and to give that assessment in its August 2013 inflation report. That report will be the first issued under the governorship of Mark Carney. Whether intermediate thresholds are used will be an operational matter for the independent MPC. I can confirm that Mervyn King and Mark Carney have both seen the new remit and they have both agreed to it.
Active monetary policy can only operate freely when securely anchored by credible fiscal policy. That is the next component of our economic plan. We have instituted new public spending controls in government. When money is short, we make no excuses for the rigorous financial management we have run across Whitehall. Let me be clear with the House: that is one of the reasons why we have got forecast borrowing falling in this year and next. The traditional splurge of cash by Departments at the end of the financial year, just to get the money spent, has to be curtailed. And thanks to the tough financial control of my right hon. Friend the Chief Secretary, Government Departments are forecast to underspend their budgets by more than £11 billion this year. If you want to bring borrowing down, you have to control spending, and that is what we have done.
Now we want to ensure Departments have budgets that are more closely aligned to what they actually spend. So both next year and the year after, we will reduce resource departmental expenditure limits by the equivalent to a 1% reduction for most Departments. The schools and health budgets will remain protected, because our promise to our NHS is a promise we will keep. Local government and police allocations for 2013-14 have already been set out and will not be affected. We will also deliver in this coming year on this nation’s long-standing commitment to the world’s poorest to spend 0.7% of our national income on international development. We should all take pride, as I do, in this historic achievement for our country. As previously, the Department for International Development budget will be adjusted to ensure we do not spend more than 0.7%.
Departmental budgets have yet to be set for the year 2015-16, which starts before the end of this Parliament. This will be done in the spending round that will be set out on 26 June. I said last autumn that we would require around £10 billion of savings from that spending round. I confirm today that we will instead be seeking £11.5 billion of current savings. We have got to go on making difficult decisions so that Britain can live within its means. And because we make those decisions, we can get our deficit down and focus on our nation’s economic priorities.
Total managed expenditure for 2015-16 will be set at £745 billion. How the savings will be achieved will be a matter for the spending round, but existing protections apply. We are also taking steps to help all Departments to achieve the savings required. Together, my right hon. Friends the Chief Secretary and the Minister for the Cabinet Office have indentified that a further £5 billion of savings in efficiency and cutting the cost of administration can be made. This will go a huge way towards delivering the spending round in a way that saves money but protects services.
So too will action on pay. The Government will extend the restraint on public sector pay for a further year by limiting increases to an average of up to 1% in 2015-16. This will apply to the civil service and work forces with pay review bodies. Local government and devolved Administration budgets will be adjusted accordingly in the spending round. We will also seek substantial savings from what is called progression pay. These are the annual increases in the pay of some parts of the public sector. I think they are difficult to justify when others in the public sector, and millions more in the private sector, have seen pay frozen or even cut. I know that is tough, but it is fair. In difficult times with the inevitable trade-off between paying people more and saving jobs, we should put jobs first.
Today is also the 10th anniversary of the start of the Iraq war. The awarding of a posthumous Victoria Cross to Lance Corporal James Ashworth this week reminds us of the courage and sacrifice that all who serve in our armed forces are still making to defend our country. We will exempt our military from changes to progression pay. We are also accepting in full from 1 May this year the armed forces pay review body's recommended increase in the so-called X factor payment made to military personnel to recognise the particular sacrifices they make. And I can also announce that further awards from the LIBOR banking fines have gone to good military causes, with money for Combat Stress to help veterans with mental health issues and funds for Christmas boxes for all our troops on operations this year and next. Those who have paid fines in our financial sector because they demonstrated the very worst of values are paying to support those in our armed forces who demonstrate the very best of British values.
Ultimately as a country we will not be able to spend more on the services we all value, from our NHS to our armed forces, or invest in our infrastructure, unless we go on tackling the growth of spending on welfare budgets. The public spending framework introduced by the previous Government divided Government spending into two halves: fixed departmental budgets and what is called annually managed expenditure—except in practice it was annually unmanaged expenditure—and it includes almost the entire welfare budget as well as items like debt interest and payments to the EU. I can tell the House that according to the OBR forecast today, the European budget deal secured by my right hon. Friend the Prime Minister has saved Britain a total of £3.5 billion. We will now introduce a new limit on a significant proportion of annually managed expenditure. It will be set out in a way that allows the automatic stabilisers to operate, but it will bring real control to areas of public spending that had been out of control. We will set out more detail on how this new spending limit will work at the spending round in June. All decisions, on welfare, pay and Departments are tough, and they affect many people. But if we did not take them, what is a difficult situation for them and for the whole country would be very much worse.
Active monetary policy and a responsible fiscal policy are two components of our economic plan. We also need supply-side reform, to throw the full weight of our efforts behind the entrepreneurial forces in our society. Our fundamental overhaul of the planning laws are now helping homes to be built and businesses to expand. Our reform of schools, universities and apprenticeships is probably the single most important long-term economic policy we are pursuing. Our support for European free trade agreements with India, Japan and the US is a priority of our foreign policy. And we are building the most competitive tax system in the world. But now we need to do more.
First, we can provide the economy with the infrastructure it needs. We are already supporting the largest programme of investment in our railways since Victorian times, and spending more on new roads than in a generation. We are giving Britain the fastest broadband and mobile telephony in Europe. And the Treasury is now writing guarantees to major projects from supporting the regeneration of the old Battersea power station site to building the new power stations of tomorrow. We have switched billions of pounds from current to capital spending since the spending review to mitigate the sharp decline set in train by the last Government. But on existing plans, capital spending is still due to fall back in 2015-16, and I do not think that is sensible. So by using our extra savings from Government Departments, we will boost our infrastructure plans by £3 billion a year from 2015-16. That is £15 billion of extra capital spending over the next decade, because by investing in the economic arteries of this country, we will get growth flowing to every part of it. And public investment will now be higher on average as a percentage of our national income under our plans than it was in the whole period of the last Government.
In June, we will set out long-term spending plans for that long-term capital budget. And we will use the expertise of Paul Deighton, the man who delivered the Olympics and who now serves in the Treasury, to improve the capacity of Whitehall to deliver big projects and make greater use of independent advice.
The second thing we can do to support enterprise is to give our great regional cities and other local areas much greater control over their economic destiny and to back sectors that are a global success. Businesses have created more jobs in areas such as the west midlands in the first three years of this Government than they did in the first 10 years of the Labour Government. Private sector employment has been growing more quickly in the north-east, the north-west and Yorkshire than across the whole country.
But we can do much more, so I accept Michael Heseltine’s excellent idea of a single competitive pot of funding for local enterprise. I also fully endorse the report of Doug Richard to make the most of our apprenticeships. We have the second largest aerospace industry in the world. For the first time in 40 years, we manufacture for export more cars than we import, and our agritech business is at the global cutting edge. We are backing international successes like those with £1.6 billion of long-term funding for the industrial strategy that my right hon. Friend the Business Secretary launched this week.
Today we build on our new tax reliefs coming in this year for the creative industries such as high-end television and animation with new support for our world-class visual effects sector. To help small firms, we will increase fivefold the value of Government procurement budgets spent through the small business research initiative. We will fund the proposal to make growth vouchers available to small firms seeking advice on how to expand. We are putting new controls on what regulators can charge and giving the Pensions Regulator a new requirement to have regard to the growth prospects of employers.
A vital sector for our economy, and a cost of doing business for everyone, is energy. Creating a low-carbon economy should be done in a way that creates jobs, rather than costing them. The granting of planning permission yesterday at Hinkley Point was a major step forward for new nuclear. Today, with the help of my hon. Friend the Energy Minister, we are also announcing our intention to take two major carbon capture and storage projects to the next stage of development. We will support the manufacture of ultra-low emissions vehicles in Britain with new tax incentives. The hon. Member for Stoke-on-Trent Central (Tristram Hunt) has argued passionately, and on this occasion in a non-partisan way, about the damage that energy costs are doing to his city’s famous ceramics industry. He has persuaded me, so from next year we will exempt the industrial processes for that industry and some others from the climate change levy.
In the spending round, we will provide support for energy-intensive industries beyond 2015. For the North sea, we will this year sign contracts for future decommissioning relief, the expectation of which is already increasing investment there. But I also want Britain to tap into new sources of low-cost energy such as shale gas, so I am introducing a generous new tax regime, including a shale gas field allowance, to promote early investment. By the summer, new planning guidance will be available alongside specific proposals to allow local communities to benefit. Shale gas is part of the future, and we will make it happen.
We can help companies grow and succeed by building infrastructure, backing local enterprise and supporting successful sectors, but nothing beats having the most competitive business tax system of any major economy in the world. That is what this Government set out to achieve. That is what we are delivering. The accountants KPMG does a survey of investors that ranks the most competitive tax regimes in the world. Three years ago we were near the bottom of that table; now we are at the top. But in this global race we cannot stand still, so today we step up the pace. Our seed enterprise investment scheme offers generous incentives to investors in start-ups. My hon. Friend the Member for Braintree (Mr Newmark) and David Young have done a great job helping to promote it across the country. They have asked me to extend the capital gains tax holiday, and I will.
Employee ownership helps create an enterprise culture, so we are making our new employee shareholder status more generous, with national insurance contributions and income tax relief, and we are introducing capital gains tax relief for sales of businesses to their employees. Companies that look after their employees and help them return to work after periods of sickness will also get new help through the tax system, and we will double to £10,000 the size of the loans that employers can offer tax free to pay for items such as season tickets for commuters. That is a great idea from my hon. Friend the Member for Witham (Priti Patel) and I am happy to put it into practice. My hon. Friend the Member for Enfield North (Nick de Bois) and others have put forward proposals to help investment in social enterprises, and I have listened. We will introduce a new tax relief to encourage private investment in these social enterprises.
Research and development is absolutely central to Britain’s economic future, so today I am increasing the rate of the above-the-line R and D credit to 10%. Along with our new 10% corporation tax rate on profits from patents coming in next month, that will help make us one of the most internationally attractive places to innovate.
I also want Britain to be the place where people raise money and invest. Financial services are about much more than banking. In places such as Edinburgh and London we have a world-beating asset management industry, but they are losing business to other places in Europe. We act now with a package of measures to reverse that decline, and we will abolish the schedule 19 tax, which is payable only by UK-domiciled funds.
Many medium-sized firms and start-ups use the alternative investment market to raise funds to help them grow. Many observers of the British tax system complain that it has long been biased towards debt financing over equity investment, so today I am abolishing altogether stamp duty on shares traded on growth markets such as AIM. In parts of Europe they are introducing a financial transaction tax; here in Britain we are getting rid of one. From April next year, that will directly benefit hundreds of medium-sized UK firms, lowering their cost of capital and supporting jobs and growth across the UK.
We also set out to compete with the world in our headline rate of corporation tax. In Germany, the corporate tax rate is 29%; in France it is 33%; in the United States it is 40%. Here in Britain we have cut corporation tax from the 28% we inherited to 21% next year. But I want to go further. Today I want us to send a message to anyone who wants to invest and create jobs here that Britain is open for business, so in April 2015 we will reduce the main rate of corporation tax by another 1%. Britain will have a 20% rate of corporation tax, the lowest business tax of any major economy in the world. That is a tax cut for jobs and growth. We will have achieved in one Parliament, and in these difficult times, the largest reduction in the burden of corporation tax in our nation’s history, and with it we will achieve major simplification of our business tax system. By merging the small company and main rates at 20p, we will abolish the complex marginal relief calculations between them and give Britain a single rate of corporation tax for the first time since 1973. As with previous reductions in the corporate tax rate, I do not intend to pass the benefit on to the banking sector, so I will offset the reduction by increasing the bank levy rate next year to 0.142%.
Britain is moving to low and competitive taxes, but we should insist that people and business pay those taxes, rather than aggressively avoiding or evading them. That is the right way to succeed in the global race. Under Labour, we had the worst of both worlds: uncompetitive tax rates that were not paid. When the 50p rate was introduced, tax revenues fell by billions of pounds as the wealthy paid less. That is the wrong way round. Under this Government, the tax rates are more competitive and the wealthy pay more tax. That is the right way round. Here is an inconvenient truth for the Opposition: in every year of this Parliament the rich will pay a greater proportion of income tax revenues than in any one of the 13 years of the previous Labour Government. During those 13 years, too many people were allowed to get away with aggressive tax avoidance and abuse. They boasted that they were paying less tax then their cleaners, and Labour Members lauded them for it. We have stopped that, and that is what I call fair.
Today I am unveiling one of the largest ever packages of tax avoidance and evasion measures presented at a Budget. The details are set out in the Red Book. They include agreements with the Isle of Man, Guernsey and Jersey to bring in over £1 billion in unpaid taxes and new rules to stop the abuse of partnership rules, corporate tax losses and offshore employment intermediaries. That is another £2 billion. This year we are giving Britain its first ever general anti-abuse rule, and we will name and shame the promoters of tax avoidance schemes. My message to those who make a living advising other people how to aggressively avoid their taxes is this: this Government will not let you get away with it. This year we are leading international action on tax avoidance through our presidency of the G8 and with the OECD and the G20. We want the global rules governing the taxation of multinational firms to be updated from the 1920s, when they were first written, and made relevant to the global internet economy of the 21st century. This is the right and fair thing to do.
A tax system where people and businesses pay what is expected of them is part of the glue that holds our society together. So too is the expectation that those who work hard, who play by the rules, who save for their future and try to be independent of the state are not undermined but supported. So to the working parents struggling with the costs of child care, and the mother wondering whether it makes financial sense to get a job, we offer this: tax-free child care. The plans were set out yesterday: new tax-free child care vouchers for working families, with 20% off the first £6,000 of your child care costs for each child, and increased child care support for those low-income working families on universal credit.
For those who aspire to put aside money for their retirement, we offer this: a simple, flat-rate pension accessible to everyone and worth £144 a week. Any one pound you save will be a pound you can keep. We are bringing forward the introduction of the new single-tier pension to 2016. It will help the low-paid, the self-employed, and millions of women most of all. Of course, if there is no longer the old state second pension, there is no longer anything to contract out of. For employers, that means paying the same employer national insurance as those without defined-benefit schemes. Private sector employers can adjust their pension benefits to accommodate the extra cost; public sector employers will have to absorb the burden, as is always the case with tax changes. Any spending review in the next Parliament will of course take the £3.3 billion cost into account.
As we have already made clear, public sector employees, and the relatively small number of private sector employees in defined benefit schemes, will from 2016 pay more national insurance then they do today. They will pay the same rate of national insurance as the rest of the working population, and in return they will get a larger state pension than before. For example, someone who is 40 years old when the single-tier pension is introduced, and who has always been contracted out, will pay an extra £6,000 in national insurance over the rest of their working life—and in return get an extra £24,000 in state pension over the course of their retirement. That is a fair deal, and it is a progressive pension reform. We have also made it clear before that the extra £1.6 billion raised in employee national insurance will not be kept by the Treasury.
There is another group of savers I want to talk about today. I am proud to have been part of a Government who have helped to compensate the policyholders of Equitable Life, who have suffered a great injustice. But we have not extended help to those who bought their with-profits annuity before 1992. Now we can. I would like to acknowledge the work of my hon. Friend the Member for Harrow East (Bob Blackman) on behalf of these people. We will make ex gratia payments of £5,000 to those elderly policyholders, and we will make an extra £5,000 available to those on the lowest incomes who are on pension credit. We are not doing this because we are legally obliged to; we are doing it because, quite simply, it is the right thing to do.
Helping with aspiration also means helping those who want to keep their home instead of having to sell it to pay for the costs of social care. That is what our new cap will deliver, as Andrew Dilnot recommended. It will also come in in 2016. It will be set to protect savings above £72,000, and we will raise the threshold for the means test on residential care from just over £23,000 to £118,000 that year too. For decades, politicians have talked of doing something for savers and those who have to sell their homes to pay for care, and yet nothing has been done—until this week.
I want to do much more, for unless we fire up the aspirations of the British people—light the fires of ambition within our nation—we are going to be out-smarted, out-competed and out-performed by others in the world who are prepared to work harder for success than we are. So this Budget makes a new offer to our aspiration nation—and what symbolises that more than the desire to own your own home? Today I can announce Help to Buy. The deposits demanded for a mortgage these days have put home ownership beyond the great majority who cannot turn to their parents for a contribution. That is not just a blow to the most human of aspirations: it is a setback for social mobility, and it has been hard on the construction industry too. This Budget proposes to put that right—and put it right in a dramatic way.
Help to Buy has two components. First, we are going to commit £3.5 billion of capital spending over the next three years to shared equity loans. From the beginning of next month, we will offer an equity loan worth up to 20% of the value of a new build home to anyone looking to move up the housing ladder. You put down a 5% deposit from your savings, and the Government will loan you a further 20%. The loan is interest free for the first five years. It is repaid when the home is sold. Previous help was available only to those who were first-time buyers and who had family incomes below £60,000. Now help is available to all buyers of newly built homes on all incomes: available to anyone looking to get on or move up the housing ladder. The only constraint will be that the home cannot be worth more than £600,000—but this covers well over 90% of all homes. It is a great deal for homebuyers; it is a great support to home builders; and because it is a financial transaction, with the taxpayer making an investment and getting a return, it will not hit our deficit.
The second part of Help to Buy is even bolder and has not been seen before in this country. We are going to help families who want a mortgage for any home they are buying, old or new, but who cannot begin to afford the kind of deposits being demanded today. We will offer a new mortgage guarantee. This will be available to lenders to help them to provide more mortgages to people who cannot afford a big deposit. These guaranteed mortgages will be available to all homeowners, subject to the usual checks on responsible lending. Using the Government’s balance sheet to back these higher loan-to-value mortgages will dramatically increase their availability. We have worked with some of the biggest mortgage lenders to get this right; and we are offering guarantees sufficient to support £130 billion of mortgages. It will be available from the start of 2014 and run for three years. A future Government would need the agreement of the Bank of England’s Financial Policy Committee if they wanted to extend it.
Help to Buy is a dramatic intervention to get our housing market moving. For newly built housing, Government will put up a fifth of the cost; and for anyone who can afford a mortgage but cannot afford a big deposit, our mortgage guarantee will help them to buy their own home. That is a good use of this Government’s fiscal credibility.
In the Budget Book we also set out more plans for housing—plans to build 15,000 more affordable homes; plans to increase fivefold the funds available for building for rent; and plans to extend the right to buy so that more tenants can buy their own home.
People also have the aspiration to keep more of what they earn. That is a difficult aspiration for any Chancellor to help with when economic times are tough and money is short, but we are doing the hard work to reduce current spending. We have set out a tough package to raise money from tax avoiders. That means that with this Budget we can stick to the path of deficit reduction, increase capital spending, and still find ways to help families.
Let me turn to duties. We inherited a fuel duty escalator from the previous Government that would have seen above-inflation increases in every year of this Parliament. We abolished the escalator and we have now frozen fuel duty for two years. This has not been easy. The Government have forgone £6 billion in revenues to date, but oil prices have risen again, family budgets are squeezed, and I hear those who want me to do more to help them get by. My hon. Friend the Member for Harlow (Robert Halfon) has again spoken up for his hard-working constituents. He has been joined by many other hon. Friends, like the hon. Member for Argyll and Bute (Mr Reid). We have all listened to the people we represent. Today I am cancelling this September’s fuel duty increase altogether. Petrol will now be 13p per litre cheaper than if we had not acted over these last two years to freeze fuel duty. For a Vauxhall Astra or a Ford Focus, that is £7 less every time you fill up.
There is another duty escalator that we also inherited from the previous Government—the annual 2% above inflation increase in alcohol. We are looking at plans to stop the biggest discounts of cheap alcohol at retailers, but responsible drinkers in our pubs should not pay the price for the problems caused by others. The sad fact is that we have lost 10,000 pubs in the UK over the past decade. Many hon. Members, such as my hon. Friend the Member for Bristol North West (Charlotte Leslie), have raised their concerns with me, and my hon. Friend the Member for Burton (Andrew Griffiths) in particular has been a committed champion of the famous brewing industry that employs many of his constituents.
I intend to maintain the planned rise for all alcohol duties, with the exception of beer. We will now scrap the beer duty escalator altogether, and instead of the 3p rise in beer duty tax planned for this year by the previous Government I am cancelling it altogether.
That is the freeze people have been campaigning for, but I am going to go one step further and cut beer duty by 1p. We are taking a penny off the pint. The cut will take effect this Sunday night and I expect it to be passed on in full to customers. All other duties will remain as previously announced.
Of course, freezing petrol duty and cutting beer duty will not transform the finances of any family, but it helps a little to have some bills that are not going up. [Interruption.]
Order. May I say to Back Benchers and to a couple of Members in particular that the panto season is not for another nine months, and if there are auditions could they take place outside the Chamber?
It helps a lot to be able to keep more of the money you earn before you pay tax on it. The Government support people who work hard and want to get on.
When we came to office the personal income tax allowance stood at under £6,500. In two weeks’ time, the allowance will reach £9,440, with the largest cash increase in its history. Twenty-four million taxpayers will see their income tax bill cut by an extra £200. More than 2 million of the lowest paid will be taken out of tax altogether.
In this Budget, the Government reconfirm their commitment to raising the personal allowance to £10,000, In fact, we go one better. We said we would raise the personal allowance to £10,000 by the end of the Parliament. Today I can confirm that we will get there next year. From 2014, there will be no income tax at all on the first £10,000 of your salary—£10,000 of tax-free earning. That is £700 less in tax for working families than when this Government came to office. Almost 3 million of the lowest paid will pay no income tax at all. It is a historic achievement for this Government and for hard-working families across the country.
I am aware that the concept of a 10p tax rate has caused problems for Labour Members. First, they introduced it before deciding that introducing it was a mistake and that it ought to be abolished. Then they decided that abolishing it was a mistake and that they ought to introduce it again. To put them out of their misery, we are going to turn their 10p band into a 0p band, so they do not have to worry about it any more. Every person who is paying at the 10p rate that Labour doubled will now pay no income tax at all.
There is one final tax change that I want to tell the House about. It is about jobs. In the end, aspiration is about living in a country where people can get jobs and fulfil their dreams. The ending of contracting out that I talked about generates extra employee national insurance revenues for the Exchequer. I want to put those revenues to good use. I want to support jobs and the small businesses that create them, and I want to do it with a reforming tax cut. In fact, it is the largest tax cut in this Budget.
The cost of employing people is a burden on small firms. It is a real barrier to taking an extra person on. To help create jobs and back small businesses in this country, I am today creating the employment allowance. The employment allowance will work by taking the first £2,000 off the employer national insurance bill of every company. It is a tax off jobs. It is worth up to £2,000 to every business in the country. It will mean that 450,000 small businesses—one third of all employers in the country—will pay no jobs tax at all.
For the person who has set up their own business and is thinking about taking on their first employee, a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax. Ninety-eight per cent. of the benefit of this employment allowance will go to small and medium-sized enterprises. It will become available in April next year, once the legislation has passed. We will also make it available to charities and community sports clubs. The previous Government’s answer to Britain’s economic problems was to propose a tax on jobs. We stopped that and today this Government are taking tax off jobs.
A new employment allowance that helps small firms, a 20% rate of corporation tax and a £10,000 personal allowance are major achievements delivered by this Government in difficult times.
We understand that the way to restore our economic prosperity is to energise the aspirations of the British people. If you want to own your own home, if you want help with your child care bills, if you want to start your own business or give someone a job, if you want to save for your retirement and leave your home to your children, and if you want to work hard and get on, we are on your side. This is a Budget that does not duck our nation’s problems; it confronts them head on. It is a Budget for an aspiration nation. It is a Budget that wants to be prosperous, solvent and free, and I commend it to the House. [Interruption.]
Order. If Members want to debate the Budget, we had better make some progress.
Provisional Collection of Taxes
Motion made, and Question put forthwith (Standing Order No. 51(2)),
That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:—
(a) Alcoholic liquor duties (rates) (Motion No. 50.)
(b) Tobacco products duty (rates) (Motion No. 51.)—(Mr George Osborne.)
Question agreed to.
Let’s all have a drink.
Only if you’re buying.
I now call upon the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on this motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate next week.
Budget Resolutions and Economic Situation
Amendment of the Law
Motion made, and Question proposed,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.—(Mr George Osborne.)
This is the Chancellor’s fourth Budget, but one thing unites them all: every Budget, when he comes to this House, things are worse, not better, for this country. Compared to last year’s Budget, growth last year is down, growth this year is down, growth next year is down and growth in 2015 is down. And all he offers is more of the same: higher borrowing, lower growth and more—[Interruption.]
Order. I expected the Chancellor to be heard and I expect the Leader of the Opposition to be given the same courtesy.
Government Members do not think that growth matters, but people in this country do.
All the Chancellor offers is more of the same. It is a more-of-the-same Budget from a downgraded Chancellor. Britain deserves better than this.
The Chancellor almost need not have bothered coming to the House, because the whole Budget, including the market-sensitive fiscal forecasts, was in the Standard before he rose to his feet.
Order. I cannot understand an Opposition who do not want to hear their own leader. [Interruption.] Order. Just as when the Opposition did not want to hear the Chancellor, the one thing that I can guarantee is that people in this country want to hear what the right hon. Gentleman has to say.
To be fair to the Chancellor of the Exchequer, I am sure that he did not intend the whole of the Budget to be in the Standard before he rose to his feet. I hope that he will investigate and report back to the House.
What did the Prime Minister declare late last year? He said
“the good news will keep coming.”—[Official Report, 24 October 2012; Vol. 551, c. 917.]
What did the Chancellor tell us today? Under this Government, the bad news just does not stop. Back in June 2010, he promised in his Budget a “steady and sustained” recovery. He was wrong. We have had the slowest recovery for 100 years. Last year, he said in the Budget that there would be no double-dip recession. He was wrong; there was. He told us a year ago that growth would be 2%. He was wrong; now he says that it will be just 0.6%. He told us that next year, growth will be 2.7%. Wrong again; it will be just 1.8%.
“Wait for tomorrow,” the Chancellor says, “and I will be vindicated.” But with this Chancellor, tomorrow never comes. He is the wrong man in the wrong place at the worst possible time for the country. It is a downgraded Budget from a downgraded Chancellor. He has secured one upgrade this year: travelling first class on a second-class ticket from Crewe to London. [Interruption.]
Order. I do not want to keep repeating myself. I expect, and the public expect, to hear the Leader of the Opposition. Government Members must also listen to the Leader of the Opposition.
The only time when the country has felt all in it together is when the Chancellor was booed by 80,000 people at the Paralympic games. I have some advice for the Chancellor: stay away from the cup final, even if Chelsea get there.
Who is paying the price for the Chancellor’s failure? Britain’s families. In his first Budget, he predicted that living standards would rise over the Parliament, but wages are flat, prices are rising and Britain’s families are squeezed. What the Chancellor did not tell us is that the Office for Budget Responsibility has already confirmed that the British people will be worse off in 2015 than they were in 2010. It’s official: you’re worse off under the Tories. Worse off, year after year after year.
Was there not an extraordinary omission from the Chancellor’s speech? There was no mention of the triple A rating. The Prime Minister called it the “mark of trust” and told us that it had been “secured”. The Chancellor said that it would be a humiliation for Britain to be downgraded. So he is not just a downgraded Chancellor, but a humiliated Chancellor too.
What about borrowing? The Chancellor made the extraordinary claim in his Budget speech that he was “on course”. Even he cannot believe this nonsense. Debt will be higher in every year of this Parliament than he forecast at the last Budget. He is going to borrow £200 billion more than he planned.
What did the Chancellor say in his June 2010 Budget? He set two very clear benchmarks:
“we are on track to have debt falling and a balanced structural current budget by”
2014-15.—[Official Report, 22 June 2010; Vol. 512, c. 168.] He called that “our four-year plan”. This was the deal that he offered the British people. These were the terms: four years of pain, tax rises—[Interruption.] The Prime Minister says from a sedentary position, “Borrow more.” He is borrowing more. He just needs to look down the Bench, because his own Business Secretary said that they are borrowing more. I would keep quiet if I was him.
These were the terms: four years of pain, tax rises and spending cuts, and the public finances would be sorted. So today, the Chancellor should have been telling us, “Just one more year of sacrifice. In 12 months the good times will roll. Job done. Mission accomplished. Election plan under way.” But three years on, what does he say? Exactly what he said three years ago. We still need four more years of pain, tax rises and spending cuts. In other words, after all the misery, all the harsh medicine and all the suffering by the British people—three years, no progress, deal broken, same old Tories. And all the Chancellor offers is more of the same.
It is as if the Government really do believe their own propaganda that the failure is nothing to do with them. We have heard all the excuses: the snow, the royal wedding, the jubilee, the eurozone. Now, they are turning on each other. The Prime Minister said last weekend:
“Let the message go out from this hall and this party: we are here to fight.”
They are certainly doing that. The Business Secretary has turned on the Chancellor, the Home Secretary has turned on the Prime Minister and the Education Secretary has turned on her. The whole country can see what is going on: the blame game has begun in the Cabinet.
The truth is that the Chancellor is lashed to the mast. Not because of his judgment, but because of pride; not because of the facts, but because of ideology. Why does he stay in his job? Not because the country wants him, not because his party wants him, but because he is the Prime Minister’s last line of defence. The Bullingdon boys really are both in it together. They do not understand that we need a recovery made by the many, not just a few at the top.
It is a year now since the omnishambles Budget. We have had U-turns on charities, churches, caravans and, yes, on pasties. But what is the one policy that the Government are absolutely committed to? The top rate tax cut. John the banker—remember him?—has had a tough year earning £1 million. What does he get? He gets a tax cut of £42,500 next year—double the average wage. His colleague—let us call him George—has done a little better and brings home £5 million a year. What does he get as a tax cut? I know that the Prime Minister does not like to hear what he agreed to. He gets a tax cut of nearly £250,000.
At the same time, everyone else is paying the price. The Chancellor is giving with one hand and taking far more away with the other. Hard-working families are hit by the strivers tax. Pensioners are hit by the granny tax. Disabled people are hit by the bedroom tax. Millions pay more so that millionaires can pay less.
The Chancellor mentioned child care in his speech. He wants a round of applause for cutting £7 billion in help for families in this Parliament and offering £700 million of help in the next. What are the families who are waiting for that child care help told? They have to wait more than two years for the help to arrive, but the richest in society need to wait only two weeks for the millionaires’ tax cut to kick in. That is David Cameron’s Britain.
Of course, the Prime Minister still refuses to tell us, despite repeated questions, whether he is getting the 50p tax cut. He is getting embarrassed now, we can see. He has had a year to think about it and he must have done the maths. Even he should have worked it out by now, so come on. Nod your head if you are getting the 50p tax rate—[Interruption.]
Order. The House must come to order. Let us hear the Leader of the Opposition.
I am not getting the 50p tax rate; I am asking whether the Prime Minister is. He should answer—after all, he is the person who said that sunlight is the best disinfectant. Let transparency win the day.
Let us try something else. What about the rest of the Cabinet? Are they getting the 50p rate? Okay, hands up if you’re not getting the 50p tax cut. Come on—[Interruption.]
Order. We are all right; as some hon. Members want to take a cup of tea, we might be a little more silent.
I was just asking those in the Cabinet to put their hands up if they are not getting the 50p tax cut. They do not like it, do they? At last, the Cabinet are united with a simple message: “Thanks, George.” He is cutting taxes for them while raising them for everyone else.
The Chancellor announced some measures today that he said would boost growth, just like he does every year—and every year, they fail. I could mention the national loan guarantee scheme that he trumpeted last year—
Order. Mr Mosley, I think your voice might be better saved for Chester FC this weekend. As they are top of the league, I think you would be better off cheering them on.
The Chancellor trumpeted the loan guarantee scheme, then he abolished it just four months later. There was the funding for lending scheme, which he said would transform the prospects for small businesses, and the Work programme, which is worse than doing nothing.
Today, the Chancellor talked a lot about housing. When the Prime Minister launched his so-called housing strategy in 2011, in his own understated way he labelled it
“a radical and unashamedly ambitious strategy”.
He said it would give the housing industry a “shot in the arm” and help 100,000 people to buy their own homes. Eighteen months later, how many families have been helped? Not 100,000. Not even 10,000. Just 1,500 out of the promised 100,000. That is 98,500 broken promises. For all the launches, strategies and plans, housing completions are now at their lowest level since the 1920s and 130,000 jobs have been lost in construction. It is a failing economic plan from a failing Chancellor.
The Chancellor has failed the tests of the British people—growth, living standards and hope—but he has not just failed their tests. He has failed his own as well. All he has to offer is this more-of-the-same Budget. Today, the Chancellor joined Twitter. He could have got it all into 140 characters: “Growth down. Borrowing up. Families hit. And millionaires laughing all the way to the bank. #downgradedChancellor.”
More of the same is not the answer to the problems of the last three years. More of the same is the answer of a downgraded Chancellor in a downgraded Government. Britain deserves better than this.
Several hon. Members
Order. I remind hon. Members that there is a 10-minute limit on speeches.
Before I start my speech I shall give colleagues an opportunity to get to their lunches. The slot while they are shuffling out seems always to fall to me.
There is a lot more to digest in this Budget than many—not least those people sitting in the Chamber this afternoon and around the country—thought there would be. The Treasury Committee will have a great deal to consider, particularly the changes to the inflation remit, the employment allowance and the policies on housing and corporation tax.
For many years, and certainly since 2008, Britain has been living beyond its means and the Chancellor’s most immediate priority has been and should have been to sort that out. An equally important task has been to find ways to improve the long-run performance of the economy and supply-side reform.
Ultimately, politicians can do little more than create the conditions that release the energy of others. The future of the economy will depend on the millions of people in small businesses in our constituencies and on our releasing their energies.
Does my hon. Friend agree that this is a cost of living Budget, freezing fuel duty, cutting beer taxes, helping people with child care costs and raising the threshold for lower earners?
Yes. My hon. Friend did not mention fuel duty, which rather surprised me—[Interruption.] Oh, he did? I am terribly sorry, I thought he missed it out. I shall discuss energy in a moment, if I get a chance.
Let me say a few more words about the macro decisions before I move on to the supply side.
When I was leader of the opposition on Cambridgeshire county council we had an approach of presenting an alternative budget so that it could be scrutinised by the scrutiny committees and select committees. That approach is carried on by Councillor Kilian Bourke, the current leader. Does the hon. Gentleman agree that it would be helpful if there were an alternative Budget for him and his Committee to consider in order to check whether it all added up?
If anybody wants to produce one, we will certainly take a look at it.
The Chancellor has not fundamentally altered the macro-economic stance in this Budget. The big shift in direction of Britain’s fiscal policy in response to the crisis came not from this Chancellor but from his predecessor. More than two thirds of the fiscal adjustment announced by the Chancellor in the 2010 Budget had already been signalled by the right hon. Member for Edinburgh South West (Mr Darling). In 2010, the OBR estimated that the economy would grow about 4% more than it has and the key question for the Chancellor has been how much policy should be altered to take account of that—what he should announce this afternoon and what adjustments he should make in response.
It is important to be clear that policy has already been altered a great deal, something that seems to be lost in the brouhaha in this place. Both the Government and the Bank of England have implemented massive policy changes to stimulate the economy. Fiscal policy has been loosened a great deal. The so-called automatic stabilisers—the falls in tax receipts and rises in public expenditure that come with lower growth—have been allowed to kick in. No one knows their full value, but I note that the Institute for Fiscal Studies used to think that they were worth about £100 billion and said yesterday that they were worth £140 billion. No one knows the full effects of QE—quantitative easing—either, but we know that since 2010 £175 billion of QE has been pumped in, bringing the total to £375 billion in all.
Both QE and automatic stabilisers are delivering colossal extra sums to the economy—they are massive policy changes—and the Chancellor has exercised great flexibility in response to the downturn. He does not always seem happy to acknowledge the fact that there has been that huge adjustment, so I thought I would put the points myself after his speech.
I want to say a few words about growth and the supply side, but before I do I want to refer to the greatest single blight on the prospects for the economy, which is the eurozone. Eurozone demand has remained very weak, as the Chancellor pointed out. There could not be a more vivid illustration of the eurozone’s capacity for self-harm than its chronic mishandling of the Cypriot financial crisis over the past few days. What on earth possessed policy makers to play with fire by doing the very things most likely to trigger a run on the banks? I just do not know, but it beggars belief. We cannot influence policy in the eurozone directly, but we can—and should—speak truth to incompetence. That is in Britain’s interest, as well as that of the eurozone, and I urge the Government to do that and ignore what will undoubtedly be bleatings from the Foreign Office asking them to desist.
On the supply side we cannot, of course, do much about the eurozone, but we can do something to improve the micro-economy. For nearly three years, the Treasury Committee has been calling for more coherent and tougher supply-side reforms. The Chancellor has had such an agenda for at least 18 months, but implementing it in a consistent way is proving difficult. The Chancellor has done what he can on tax reform and simplification—a big ask given the lack of fiscal room—and I pay tribute to him today because he has managed a substantial cut in corporation tax and its simplification in one go. That is both simplification and reduction, despite the lack of fiscal room.
I will give way one last time.
Does my hon. Friend agree that that simplification makes it much easier for the Chancellor to generate tax and ensure that people pay it so that we do not get the fiddling about at the margins that we saw in the past under the previous Government’s policies?
I will not add any comments because I do not get any more injury time after a couple of interventions, but I agree with my hon. Friend.
Reforms are going ahead in the labour market, and quite big reforms are being pushed through on the planning side. That is controversial but, I think, necessary. However, I have been arguing for some time that we must concentrate on those areas where policy is pulling in conflicting directions. The agenda might be right, but the execution is not always right:
“There has to be a drive to make the UK competitive in motorcars and engineering...we are saddled by a high cost of energy”
compared with our counterparts in Europe, and certainly in Asia. UK environmental policies are causing “dangerous distortions” to energy prices. Those are not my words but those of Tata Steel’s head of European business operations.
According to Government figures, energy prices for the average business consumer have more than doubled since 2004. Those figures also show that in 2011, almost one fifth of a medium-sized business user’s bills were due to climate change policies. Britain is going it alone with many of those policies, for example by introducing a carbon floor. That unilateralism is rendering parts of our manufacturing industry increasingly uncompetitive, and we are exporting jobs in manufacturing right now.
The Chancellor is well aware of that and has announced an important tax allowance to support the development of indigenous shale deposits. That will certainly help to level the playing field. We really need, however—this is difficult for the Government, not least a coalition Government—to address the contradiction caused by the current high subsidies to renewables. Those subsidies are so high that today the Chancellor has been forced to introduce subsidies for shale gas, just to get it going. As the American experience has shown, shale gas can be highly competitive given a balanced renewables policy. American natural gas prices have dropped by more than two thirds since 2008, which must be a reason—perhaps a major reason—why US manufacturing is doing much better than in recent years.
I also have reservations about aspects of the infrastructure policy. I strongly welcome the extra money being put in, but I wonder whether we are right to put what will amount to at least £34 billion into HS2—which, at best, is carrying a doubtful economic return—but not building much-needed extra capacity for a London airport. We must get to the point where airport capacity in London can be allowed to grow.
I will conclude by discussing briefly the other big obstacle to growth: the dysfunctionality of the banking sector. Again, that is something we can control—unlike the eurozone—although it is difficult for the Government to get to grips with. Britain’s economic recovery will depend to a large extent on a return to growth in the small business sector, and I strongly welcome the crucial measures announced today by the Chancellor to help the small business sector, but the plain fact remains that small and medium-sized businesses in our constituencies cannot get the funding they need from the banks. Banks lack the confidence to lend to them, and businesses lack the confidence to borrow from banks on the terms offered. The SME sector cannot fully recover until the partly state-owned banks return to more normal lending behaviour, and until we introduce greater competition into an over-concentrated market.
The Banking Commission, which I chair, has heard a good deal of evidence in recent months to suggest that until more of the impairments on bank balance sheets are cleaned up—in other words, until those balance sheets are in much better order—banks simply will not return to normal lending. Without that normal lending, SMEs will not recover. How to address that issue during this crisis has been one of the abiding concerns for policy makers, and a matter that the Banking Commission has considered carefully over the past few months. We have given a great deal of thought to the issue, and will be making some proposals in May.
I began by talking about SMEs, and I will end my contribution with that thought. When small businesses have the confidence to borrow and invest, and when banks have the financial strength and competitive need to do so, that is when our economy will recover and that recovery will take root.
It is a great pleasure to follow the Chair of the Treasury Committee.
There must have been at least some Government Members who, however much they wanted to cheer publicly, were wondering privately why no progress has been made in the past three years, and why so much of the promise, as set out by the coalition Government, has failed to achieve what they thought it was going to achieve. I have no doubt that three years ago the Chancellor, the Prime Minister and other members of the Cabinet believed that the measures they were planning were going to work. If we are to understand why we have made no progress, despite the fall in the living standards of an average family of £1,200 a year and the loss of public services, we must look not only at the statistics, but understand why things have gone so badly wrong.
Does my right hon. Friend agree that the Chancellor is becoming the Baldrick of British politics? He thinks he has got a cunning plan, but everybody else can see that it is doomed to failure.
There were certainly points in the Chancellor’s speech when he seemed to be living in a completely different world from the one in which I am living. For example, he made a throwaway remark that reforms to the planning system mean that houses are being built, yet there were fewer housing starts last year than at any time over the past few years. It is nonsense to claim something that is patently untrue, which brings me to my central point about the danger in politics and government of believing one’s own rhetoric.
Will my right hon. Friend give way?
No, because I need to make some progress. In 2010 when the Conservative and Liberal Democrats got together, they agreed on a political strategy that was to blame everything on the previous Labour Government—it was to be their profligacy, their debt and their fault. Never mind that all parties had agreed on Labour’s spending plans right up to the banking crisis; never mind that the banking crisis was global and not national; and never mind that, although the failure of the banks owed a lot to failures in regulation, the Conservative party had consistently called for less regulation. Those facts were not going to get in the way of a clear political strategy of blaming it all on Labour. The political strategy has had some effect—the polls, which people such as Lord Ashcroft tell us are the only glimmer of hope the Conservatives have, tell us that—but the disastrous mistake for Britain is that the Government believe their own rhetoric. They believe that, because the strategy seems to be effective politically, it means it is true and that they should act as though it is true. That is what lies behind the disaster facing the British people.
Will my right hon. Friend give way?
No—I would like to make progress.
If the rhetoric were true, the policies pursued by the Government would have worked. If it had been true that all that needed to be done was to get the deficit down as quickly as possible because the problems were simply a matter of overspending, the strategy would have worked. The strategy did not work, because the analysis of what was wrong was fundamentally flawed.
In the first year of the Government, the rhetoric of doom and gloom shattered business and consumer confidence before the first tax increase or the first cut began to bite. It was so important to the Government politically to tell everybody how bad things were going to be that people behaved accordingly. The VAT increase and the cuts then began to bite in the real world. The pessimism deliberately spread by the Government for political reasons began to bite and have an effect—a real reduction in demand.
The House has great respect for the right hon. Gentleman, but he must remember the situation Europe was in on the date the coalition was formed, the crisis in Greece, and the fears that we would not be in a good position. Some of us have always made it clear that a combination of the outgoing Government, the banks and the international financial situation was the cause of the crisis and warned against it for many years.
I am tempted merely to say, “I rest my case.” Throughout the 2010 election campaign, the right hon. Gentleman and all members of the Liberal Democrats said how disastrous it would be to adopt the policies that they later supported. He makes precisely my point. He adopted a position that was absolutely factually wrong and damaging to the country for the political convenience and advantage of the Liberal Democrats—he sanctioned with his own words what happened later.
The Government’s strategy on cutting too far and too fast was bad enough—it shattered confidence and took demand out of the economy—but it was compounded by catastrophic failures in policy. Because the Government convinced themselves that the only thing that needed to be done was cutting the deficit fast, they abandoned many of the tools available to them to stimulate growth. It was interesting today to hear of a single pot for cities to bid for from the Government who, within two months of coming to office, abolished the regional development agencies and the whole development infrastructure. They recognise, three years later, that that was a disastrous mistake, as Lord Heseltine has told them, but at the time, they did not believe that getting rid of those strategies mattered.
The Government also created massive uncertainty in the wider economy. The truth is that there is no absolute shortage of money that could be used to rebuild the British economy. The cash balances of giant companies are huge, but they will not invest, because there is so little business confidence in Britain as a place for investment.
The responsibility for that goes much wider than the Government, because Conservative and Liberal Democrat Back Benchers have spent three years creating uncertainty about wind power, nuclear power, HS2 and the future of airports policy. For everywhere that business might look to invest in this country, Conservative and Liberal Democrat MPs have, for the narrowest of marginal constituency political interests, conspired to create the maximum business uncertainty. It is therefore unfair to blame all the uncertainty on the Chancellor’s misguided policies. Much of it comes from a misunderstanding by Conservatives and Liberal Democrats of what needs to be done—long-term investment and long-term certainty in Government policy to create investment.
For example, such uncertainty is why investment in renewable energy—the Chancellor mentioned green investment—halved between 2009 and 2011. That is a conscious, clear effect of chaos in Government policy and the narrow interests of Conservatives and Liberal Democrat Back Benchers. For all those reasons, unnecessary damage has been done to investment in our economy.
Will the right hon. Gentleman give way?
I will not give way because my speech is time limited—I would give way if I had more time.
The Chancellor did not mention a number of things in his speech. For example, he did not mention the march of the makers. Whatever happened to that and our desire to build up an advanced manufacturing industry to lead the way in exports? Perhaps the march of the makers was in an early draft of the Budget speech, but last month’s worst industrial output figures for 20 years probably put paid to the idea of mentioning it today.
There are areas of success—the Government have wisely continued the Labour Government’s policies for the motor industry and reaped the rewards for the country as a whole—but, in too many areas, there has been no coherent policy. In my part of the country, the leisure boat industry, including well known global companies such as Sunseeker and Oyster Yachts and many smaller manufacturers, is a small but world-leading industry. To foster such an industry, we need coherence in Government policy, but what do we find? We find that the banks are not lending coherently as they once did to businesses in the luxury yacht and leisure boat industry; that it is hard for dealers to get finance to trade up and down in the second-hand vessels that need to be sold; and that the Home Office makes it impossible for wealthy buyers from Russia, China or elsewhere to get into the country to see the boats on sale at our boat shows. There is a complete lack of interest in vast parts of the Government in successful strategies to promote successful parts of the economy.
My final point is to agree broadly with the Chancellor on one point. He said that
“unless we fire up the aspirations of the British people…we are going to be out-smarted, out-competed and out-performed by others in the world who are prepared to work harder for success than we are.”
I agree with him in this sense: a country in a disastrous economic position such as ours will recover only if there is a shared patriotic commitment to rebuilding our country, and a shared case in which everybody in the country feels that they have a stake and a role, and that they will benefit from success. That is why the millionaires’ tax cut and other divisive policies that have been pursued against the poorest in our country are so damaging. Those policies are not only socially unfair and morally reprehensible, but because they divide our country and make it clear that there is no common cause and nothing to be gained from pulling together, they undermine the effort needed to build a one nation economy that genuinely works for all people in this country.
That is the problem once again. The political rhetoric cannot be faulted, but the policies needed are entirely missing.
It is perhaps not surprising that as a former Chief Whip, albeit one of relatively short duration, I rise to support the Budget set out by the Chancellor of the Exchequer, but that is what I do.
It is a considerable tribute to the strength of the Government’s purpose that the measures the Chancellor has announced today will be enacted. The Budget takes place against an extraordinarily difficult background. I cannot remember, in 26 years on and off in this House, a more difficult set of circumstances in which a Chancellor has had to craft the Budget, nor such a heavy volume of advice across all media, much of which has been contradictory. The article in last Saturday’s Financial Times by Terry Leahy, which set out the case for the morality of low taxation, is well worth reading and sets out an argument that we do not hear often enough in this House. The article was blessed with a cartoon that showed the Chancellor in a trench surrounded by mud, blood and barbed wire, and wearing a tin hit. He may well feel, after the past few days, that that is not a bad summation of where he stands.
Does the right hon. Gentleman really think that that is a good image with which to portray his Chancellor, since the squaddies were in the trenches and the first world war generals kept sending them out to be killed? Surely that is not an image that the right hon. Gentleman wants to portray.
That was not my image, but the image in the Financial Times. Nor was it of a general, but of a soldier serving in the trenches.
Hemmed in as the Chancellor is, he steers between the Scylla of debt that must be paid down and the Charybdis of growth that must be fought for and secured. I believe that today he has made the right decision in the long-term interests of the country, and I want to focus on those two key issues in my brief remarks.
In terms of the Charybdis of growth, I think he has picked up on the excellent work done by Lord Heseltine, particularly in its reference to Birmingham, and on what we can do in local economies to ensure that growth is boosted.
Today, the Chancellor announced an extra £3 billion of annual public sector investment, but in the 2010 spending review public sector investment was cut by £9 billion a year. Does the right hon. Gentleman agree that in hindsight the Business Secretary was right and that those drastic, immediate cuts were a mistake?
I do not agree at all, and I will come on to address the substantial part of what the Business Secretary said in a moment.
I was talking about the importance of engendering growth in the economy through local activity, and mentioned specifically the work that Lord Heseltine has done in respect of Birmingham. He underlined the importance of the local enterprise partnership and the importance of stimulating growth in an area that remains at the heart of this country’s industrial base. I am reminded that it was only three years ago that I visited the Jaguar factory just outside my constituency in Castle Bromwich. At that stage, two of the three production lines were lying idle and employees were unable to continue to secure work. Now, just three years later, all three production lines are in operation. We see a company that is storming ahead and cannot produce enough cars to satisfy market demand. Last year, it exported more than £10 billion-worth of cars made in Britain and paid in to the Exchequer more than £1 billion of taxation. That real transformation offers hope at a very difficult time in the area of the country I represent. The announcement that we will have a single pot of central money to support local initiatives is enormously important, as is the emphasis that Lord Heseltine places on more effective governance to address the fragmentation and lack of coherence of the business voice, which he has been loud in commenting on.
On the stimulation of growth nationally, today we have heard the Chancellor announce the excellent news about cutting taxes on jobs. I can think of few measures that could be more effective. Prioritising the changes that make growth easier, cutting business taxes—not easy, and not the popular thing to do—and facing down the vested interests that the Chancellor has to wrestle with every day, are all important measures if we are to ensure that growth is supported nationally. Making life easier for entrepreneurs and businessmen is not the route to easy popularity, but it is the route to long-term economic success and growth.
The way the Government have sought, with single-minded emphasis, to boost trade with the BRICs—Brazil, Russia, India and China—and the other countries with growing economies has had a significant effect. I wonder whether my right hon. and hon. Friends on the Treasury Bench think that all the lessons from around the world on how to boost growth and entrepreneurialism have been learned. Encouraging entrepreneurship, improving links between schools and business, and making sure that all the lessons from these emerging markets are learned are all very important. For example, I wonder whether there is more to learn from Singapore, Sweden, Finland and the Netherlands, which consistently top the global competitiveness report issued by the World Economic Forum. I wonder whether the lessons from New Zealand, Denmark and Canada, which are consistently identified as the best countries in which to do business, have been learned, or whether there is more that we can learn from the Nordic and Asian economies that have been so successful in harnessing information and communications technology for economic growth. The Chancellor deserves great credit for the brave steps he has taken today to secure growth.
The Scylla of debt has hung around our neck, and hangs around the economy’s neck, for the reasons that are well known across the House. Anyone who doubts its scale and the anxiety it causes, as my hon. Friend the Member for Chichester (Mr Tyrie) set out, needs only to look at the absurd proposition, coming out of the crisis in Cyprus, that one can confiscate arbitrarily people’s deposits. That underlines the extraordinary difficulties that overweening levels of debt, which we and other countries face, cause.
It is irksome to repeat so regularly the irresponsibility of the previous Government in the levels of debt they left and the measures they took during the good times, but that needs to be repeated so that people understand the sheer scale of what happened. I remember studying the papers on the National Security Council when we were conducting the defence review, and noting that there was, allegedly, from the previous Government a £38 billion black hole in their accounts. I was unable to believe that that was possible and sent back the papers on the assumption that there was a decimal point in the wrong place. But no, it was confirmed on the Monday morning that there was indeed, under the previous Labour Government, a £38 billion black hole in the defence budget. We should never allow them to forget the appalling difficulties that their stewardship of the economy and their legacy have left for the coalition to clean up.
Will my right hon. Friend give way?
I am afraid that I will be out of time, if my hon. Friend will forgive me.
It is difficult to confront the welfare budget, as the Government have done. We still spend £23 billion on housing benefit. In looking at the welfare budget, which I urge my right hon. and hon. Friends to continue to do, they should of course be guided always by the principles of fairness and decency. It is enormously difficult to cut the welfare budget. People blithely say that we can cut £1 billion off the welfare budget, as that is just 0.5% of that budget. However, cutting £1 billion would take £1,000 off 1 million people, or £100 off 10 million people. That underlines the scale and the difficulty, and the essential need to tackle welfare budget commitments, curtail expectations, and determine the sort of welfare system we will have as a society in the next 30 or 50 years and that we can afford. It is essential that our reforms do that.
In conclusion, I wish to praise the Government and the Chancellor’s courage and wisdom in continuing the international development budget and ensuring that next year we meet our historic pledge of spending 0.7% of GDP on development. Of course, the special protection for this budget is justified only by the results it achieves and the effect it has, and we should never forget that this hard-earned taxpayers’ money has to be justified. Every pound we take off the taxpayer must deliver 100p of value on the ground. This is a huge investment in our country’s future prosperity and security and in the prosperity and security of our children and grandchildren, which is why the Government are absolutely right to stand by the commitment, ensuring that the coalition delivers on that historic pledge.
I have spent much of the past eight years of my life trying to work out the most effective use of public money and the most effective way of doing something about the colossal discrepancies in opportunity and wealth that scar our world and that our generations, for the first time ever, have a real chance to address. That is why I am pleased that the Government are standing by our commitment, that every day they continue to underline the effectiveness of development and that they are maintaining the implicit bargain with the public to spend the money well. I hope to hear far more from Ministers about why the development budget matters to our country. I want to hear all of them making that case, so that the sceptics outside can hear why it is important for our country’s economic and political future.
In a spirit of agreement, I endorse the final comments from the right hon. Member for Sutton Coldfield (Mr Mitchell) about the preservation of our aid budget, which has support across the House, and about how every pound of taxpayers’ money should be spent efficiently and effectively to deliver for our constituents. I fear, however, that that might be where the agreement ends.
The Budget was not only disappointing but unsurprising, given that, as my right hon. Friend the Member for Doncaster North (Edward Miliband) said, it was leaked to the newspapers in unprecedented detail. I want to concentrate, however, on three issues key to my constituency and, I believe, the future of our country and families and households throughout the land: child care, lending for business, and housing.
First, the Government—the same Government who removed child benefits from those earning more than £50,000 a year, reduced tax credits and watered down child care by increasing children-to-carers ratios—are offering a giveaway: £1,200 per child, per year off child care costs, but that is two and a half years away. It is jam tomorrow for parents up and down the country who have been feeling the pain for months and years.
My hon. Friend is making the valid point that the Prime Minister has just taken child benefit from parents who are already struggling to pay massive child care costs and who now learn that the Government will not be softening the blow until their children are in school. Does she not think we ought to be doing much more now?
I completely agree with my hon. Friend. It is tough being a parent, especially in the early years up to age five, so although any support is welcome—all parties have to welcome any support, however inadequate, for children—this is not the sort of thing Labour should be promising at the next election. It is vital that we get cross-party agreement about the importance of families and of parents getting into work.
There is still no promise on the supply of quality child care, however. Supply is a key issue. The Under-Secretary of State for Education, the hon. Member for Crewe and Nantwich (Mr Timpson), who has responsibility for children, has been tinkering, finger in the wind, hoping for more child minders but not more child care in child care settings. There are important and detailed questions that I hope Ministers will consider and that I will follow up for a proper response. Will the child care tax break only apply to Ofsted-regulated child care? If so, how does that chime with the children’s Minister’s desire for lighter-touch, or no-touch, regulation by that very important body? Does the £2,000 national insurance break for small businesses also apply to anyone employing child care directly, as well as the promised tax break? We could see a double subsidy for the higher income earner, who can afford to employ a child carer in their home, and much less help for those at the lower end of the scale.
When only one parent is working, much more difficult issues arise. Low-income parents have higher marginal costs. I think of two women I met at a recent roundtable I organised in one of my child care centres: one was a chef who, because of her working hours, found it much harder to access the sort of child care that would get the subsidy the Government have waved in front of us today; and the other was herself a child carer working for a private nursery on £15,000 a year who could not afford to pay for child care herself and whose employer, shockingly, would not allow her to work part-time. How will those women be helped by what the Government have offered today? We need more detail and to ensure that we make this work for working parents. In a spirit of co-operation, I want it to work—I am not just carping—but I do not see how the proposals will work as planned.
I turn now to lending for businesses. I am proud to represent Shoreditch. It is a borough of thriving small businesses, but there are issues with lending. Merlin’s magic wand has not delivered loans from local banks. The reduction in loan interest has not helped businesses, which tell me that one of their big worries is banks removing overdrafts at a moment’s notice. I want to see—I am disappointed that the Budget did not touch on this—better support for peer-to-peer lending to help interesting nascent businesses.
Does my hon. Friend agree that, given the failure of the funding for lending scheme to get money into small businesses via the main clearing banks, which appear to be using it to reinforce their capital position, the Government should consider using the scheme to help other sources of financing for small businesses?
My hon. Friend, who does good work on the Business, Innovation and Skills Committee, speaks clearly on this issue. It is vital that we do what he suggests. The funding for lending scheme has effectively been supporting more buy-to-let landlords, which was not really what it was intended for, while businesses in Shoreditch—businesses visited regularly by the occupants of No. 10 and No. 11 Downing street—are losing out.
It is interesting that the Labour Front-Bench team, even in opposition, are encouraging local government to consider investing in one of the peer-to-peer lending vehicles, Funding Circle, representing an important part of the difference in ethos between the Government and the Opposition. We want local money invested in local business and creating local jobs—a break from the distant lenders that have no connection to the business models and economies to which they lend. We cannot say that the banks have stood up well to the test. They have let the side down. They overextended themselves with risky lending and brought the world financial system to the brink of collapse, and the rest of us, including local businesses in my area, have been paying the price.
One way to cut the banks out is to have better approaches to peer-to-peer lending. The Government have said that they will channel £100 million to small businesses through alternative mainstream, but we do not have the detail. The key issue about peer-to-peer lending is that, although it is for profit, there is no necessary prior relationship between borrower and lender. The lender, who buys into the model and will believe in the business, can choose the loan recipients, but there is no protection from the Financial Services Compensation Scheme and no full regulation.
The first peer-to-peer lending company, Zopa, was founded in February 2005, but we now have others: RateSetter, the Funding Circle, ThinCats and MarketInvoice. Between them, they expect to provide about £200 million this year alone in funding to businesses with innovative models that are struggling to get money from the banks, which, if they are not familiar with a business model, think it a risk and do not lend, resulting in a vicious circle of not being able to fund a business.
Despite the low level of regulation, there is a good case for peer-to-peer lending organisations receiving more support even as they are. Zopa says that bad debts account for just 0.84% of the £200 million it has loaned over the last seven years, compared with 3% to 5% for traditional banks, so I think the banks are missing a trick and the Government most certainly are. The average increase in employment after a Funding Circle loan was 25%. If we give businesses the tools to get on and build their businesses, we see jobs created. The Chancellor talks the talk on this issue, but he could have done more to help the industry. The problem is that the industry is barely regulated and lenders have to absorb the losses. Where was the discussion today—or even a hint—that the Government might be looking at better regulation? Where were the changes to taxation, for example, to offset losses through bad debtors against tax, which would encourage more people to lend through such models?
My party is strongly supportive of peer-to-peer lending, as it can help small businesses such as those in Shoreditch and Hackney to obtain access to funding that would otherwise not be available—something on which the Government have failed to date. In the current climate there is a lack of access to funding—often to very small pots of funding. Indeed, the owner of Lock 7 cycle shop in Hackney—the first cycle café to open in the country—took out a personal loan to get her business started. She did that because it was quicker and easier than trying to put her innovative business model—a café that sells coffee and fixes bikes—to the banks. Actually, it is not that innovative—I give her credit for being the first, but it is hardly a risky business, given that both sides of the business are likely to do well—but the banks would have been slow, had they even coughed up. To take the chance, she took another route. The Government need to be fleeter of foot if they really mean what they say about supporting businesses.
Finally, I must touch on housing. There is much of promise in what the Chancellor said, but I suspect there will be a lot in the detail, which we have yet to see. The interest-free loan is for all buyers, not just first-time buyers, so it could be a licence to print rent for potential buy-to-let landlords and others looking to invest in second homes. From what the Chancellor said, it is not clear whether this will apply only to first homes.
Does my hon. Friend share my concern that the measures announced by the Government today tilt the financial incentives more towards new build than improving the existing housing stock? Home improvements attract the full rate of VAT; new build does not. One of the imperatives in her area, like mine, is to incentivise the improvement of existing housing.
My hon. Friend makes a good point.
We do not have full details about the exact implications of the measure for overseas owners—albeit perhaps those with a tax footprint in the UK—or whether they can benefit from an interest-free loan. There are many questions about the measure, which I simply pose at this point, because it does not seem to do anything in particular to target those in greatest need. We see nothing for the growing number of private renters who struggle to pay high rents in areas such as mine, who will effectively be paying the mortgages that many borrowers may take out under this proposal.
We have a promise of more housing supply, but in my area we have seen many properties sold over a weekend to investors from Hong Kong or Dubai. They might be good landlords in that they are not cowboys, but they are after the rental yield, so we see a high turnover of population. These are not local homes for local people. We have also had the announcement of an increase in the right to buy discount, to £100,000. My area has been ravaged because people have, obviously understandably, taken the opportunity to buy their homes, yet within a few years they are inherited by people paying high rents or purchased by those who could have purchased other properties, thereby reducing our valuable—and so far not replaced—affordable housing stock.
This is the same Government who want all new affordable housing to be let at 80% of local private rents, which in my area and many others will put it out of the reach of ordinary working people. We see a Government wanting to cleanse areas such as Shoreditch and Hackney, along with other high-price areas, of people on lower incomes and also provide more housing, but for those at the higher end of the scale. Overall, we see muddle. This is also the same Government who have a Department—the Department for Communities and Local Government—that wanted offices in Shoreditch converted into fancy loft apartments, not homes for local people, instead of the kind of business space that is so often visited by the occupants of No. 10 and No. 11. We will lose business but not get the homes we need. The Chancellor has woefully failed to tackle the housing crisis in this country.
It is important first to understand what the Government strategy is, because there have been a number of misleading interpretations of it. Some have said that the reason the economy did not grow last year and is still growing very slowly is that there have been massive public spending cuts that have reduced national output. There is a helpful table on page 53 of the Office for Budget Responsibility report which shows that growth was indeed only 0.2% in real terms last year. However, it shows that the Government sector made a positive contribution of 0.6%, which is far more than overall growth, and that growth was reduced by disappointment in private sector housing investment, changes in stocks in private sector companies, reflecting an absence of confidence, and a poor performance on trade. A similar position is reported in forecasts for the current year, in which it is assumed that the Government sector will still make a positive real contribution to a rather low rate of growth, while it is hoped that the private sector will not have as disappointing a performance this year as it did last year.
The strategy was never about massive cuts in public spending overall; it was about modest growth in public spending. The idea was to get the deficit down through some very large tax rises. Unfortunately, as the latest documents reveal, the 50p and the other income tax changes were especially damaging to revenue. A loss of more than £7 billion has been recorded by those on the Front Bench. The overall figures imply that it was probably even more than that. In the most recent year, tax revenues from income tax overall are down on the previous year, not up. The strategy has not miscarried because it cut too much or because the Government overspent compared with what was planned—they have done a rather better job this year of controlling spending. Rather, the strategy miscarried because the big increase in tax revenue that had been forecast did not come through. That was partly because tax rates were set that did not work, such as the high rate of income tax. Also, the capital gains tax rate is too high, so we will get less in capital gains tax receipts this year than in the previous year. The reason is also partly that growth in the economy was very disappointing.
Does my right hon. Friend agree that it is important to have capital gains tax rates that are lower and more competitive, particularly for business assets?
I entirely agree. There would be much more activity if people could free some of those assets by taking profits and moving them on to people who could use them better and build on land, for example. I hope my right hon. Friend the Chancellor will think about that in due course, because it would make him revenue and help to grow the economy.
Nor has there been any lacking in flexibility by my right hon. Friend the Chancellor in applying his strategy. He has been flexible over the deficit; indeed, we see in the latest figures that he plans to borrow £48 billion more in 2013-14, £60 billion more in 2014-15 and £67 billion more in the following year than in the original plans. He has reflected the fact that the economy has not performed well in the way that the independent forecasters assumed and the fact that tax revenues had a big wobble because of wrong rates and low growth, and he is allowing the state to borrow more to try to pick up the slack. I therefore welcome the fact that in this Budget he is concentrating on things that he can do to promote growth in the areas that subtracted from our growth in the most recent year.
The Chancellor is right to look at ways of trying to promote more housing activity. Many of us represent constituents who would love the opportunity to buy their first flat or house. They have been priced out of the market by the boom and now they are kept out of the market by an inadequate supply of mortgage finance and tough conditions. We need to be careful, because we do not want to fuel another housing bubble, but we also need to recognise that the banking system is not delivering finance for many of our constituents at the moment, and there are people who could borrow prudently and sensibly to buy their first home. I do not want to live in a society where people have to be in their late 30s before they can own their first home. I think we need to do better than that.
My right hon. Friend says that we do not want to fuel another housing boom, but is it not the case that in this country, unlike the US, the boom was largely in prices and, to a degree, transactions? There was never a boom in supply. What we may see today are measures aimed at boosting the supply of new housing.
My hon. Friend is absolutely right. These measures are targeted with that in mind. We need to study their details, but they are clearly well intentioned and I wish them every success. I am sure that we shall look carefully at them in Committee and on the Floor of the House when they come before us in physical form.
The next area in which we need to help is promoting more industry and commerce to deal with the net trade deficit. I am glad that that Chancellor has recognised in his speech that one of the big drawbacks to doing business in Britain now is expensive energy pricing. This is something that we share with the European continent, compared with the American continent. The United States of America is playing a blinder with its very cheap gas and much cheaper energy generally. I welcome the idea that certain businesses and industries will be taken out of the climate change levy altogether.
I do not expect the right hon. Gentleman to agree with me, but I must point out that experts ranging from Ofgem and BP to the International Energy Agency and the CBI have all pointed out that investment in shale gas in the UK will not result in lower energy prices. Why cannot he therefore agree that it makes no sense to go all out for shale gas through tax breaks in the Budget, and that the money would be much better spent on renewables, which would get emissions and fuel bills down?
I am delighted that the hon. Lady has made her own case. She is the cause of the problem. She is pricing people out of the market. She is destroying jobs. She is the reason that people cannot heat their homes at a sensible price. She is the deliberate architect of dear and scarce energy, and now she presumes to lecture us and to say that if we generate more energy, it will be dearer and not cheaper. I suggest that she consult her constituents to find out how angry they are about the cost of heating their homes and their inability to get jobs in industry. She might also like to consult a reputable economist to find out what happens to prices when we produce more of something. I think she will discover that the price normally falls.
Will the right hon. Gentleman give way?
I am sorry; I have no more injury time left, and I have more to say. I am sure the Government will be delighted about that.
The Government need to look at the problem of electricity generation. I would like them to go to our partners in the European Union and say that there is no way in which we can close down all our coal-powered stations and still produce enough sensibly priced power in the near future, and that we need a stay of execution and longer transitional arrangements. I believe that the Germans are going to generate a lot more electricity from coal, and they seem to have found a way around the European regulations. I would urge my right hon. and hon. Friends on the Front Bench to do the same, because we need to keep our homes warm, keep the machinery of industry turning and keep the lights on in the offices and shops of this country. We are pricing ourselves out of our ability to do that. We are also running the risk of not having enough electricity, full stop, because of the delays and the problems that the previous Government had in coming up with an energy policy, and because of the present Government’s problems in trying to get an energy policy through, given all the European Union restrictions and complications that are placed in their way.
The most important thing that the Chancellor will need to do in the weeks ahead, in addition to the Budget, is ensure that the banks can now create sensible amounts of credit to power the recovery. This is not just about mortgages for homes, important though they are; it is also about loans for bigger items such as cars and domestic appliances. People need to be able to renew their stock of capital, or get their first capital items when setting up a new home, using finance that is available and affordable.
Above all, this is about ensuring that much better finance is available for stock, work in progress and capital equipment in our small and medium-sized enterprises. The banks say that there is no demand for loans from the SMEs—or, at least, no demand that they are not meeting. We all know that our constituents do not think that that is the case, and we have seen many cases that imply the opposite. Let us be charitable to the banks, however. I know that most of my colleagues here are not, but I wish to be, because I think that banking is an important source of export earnings and income. Many good people work in banks, and we need to support them as well. We need to understand that the banks are now charging so much and imposing such tough terms on loans—they are doing so because they are under a regulatory cosh to lend less and hold more capital, relative to the amount of their lending—that people are simply not bothering to ask their bank manager for a loan because they assume that none will be available. Also, businesses sometimes do not foresee increases in demand ahead and, wrongly, lack the confidence to go out and borrow money.
Of course it is not easy for the United Kingdom Government to rebuild confidence when we are part of the European Union and live close to the continent of Europe, and when we can see the spectacular crash that the EU is designing, thanks to the way in which it is mishandling its single currency and common banking arrangements. I can scarcely believe that we are meeting today against a background of part of the European Union having its banks closed for days on end and unable to carry out transactions to give the business life in Cyprus an air of normality or allow the people in Cyprus to withdraw their hard-earned money.
This is happening within the European Union because it has got its system of bank management wrong and it cannot decide who should pick up the bill when there is a crisis in one part of the eurozone. The Germans say that it is not their problem and they are not going to lend more money. They think that Cyprus ought to be taught a lesson. Cyprus says that it is under EU and eurozone control and that it built a big banking sector that now needs recapitalising. It requires money on a scale well beyond the ability of the Cyprus people to pay, so we have an impasse.
I shall give the House a flavour of the numbers involved. We have heard from a Minister in a recent statement that the proposed bank deposit tax represents 33% of Cypriot national output and income. In UK terms, that would be like saying that we had to impose a one-off levy of £500 billion on people’s bank accounts to put the position right. [Laughter.] Everyone here is laughing nervously. I do not think that many of us would be up for voting that kind of thing through, and I am not surprised that the Cypriot MPs did not vote their measure through.
We are now seeing a desperate idiocy in part of the European Union. Germany thinks that it can ring-fence the situation, and I hope it can, but if we are not careful, it will spread. That would undermine confidence in banking deposits in other parts of the eurozone and drive them deeper into recession. It would do more damage to our export market and, yes, there could even be a little collateral damage to our much better funded banks because of their relationships with EU banks. We need to be in there saying, “For goodness’ sake, sort it out and come up with a fair way of recapitalising those banks, so that the Cypriot people can to return to a normal economic life.” Meanwhile, our Government are right to say that we need to export more and more outside the European Union. With all this going on, and with a forecast of a deep and long recession on the continent, there will be no relief from the European markets through our exports.
Our banking resolution, which is making progress, needs to be speeded up. I urge the Chancellor of the Exchequer to revisit the issue of RBS. I do not believe that RBS is a natural unified bank. It is far too big, and it has far too many businesses in it. We should split it up, sell it on and make it more competitive. We need more competitive banks on the British high street that are capable of financing our recovery. We are trying to build the private sector-led recovery with weak, broken banks in the state sector and not enough banks outside in the private sector. We are also trying to do it under European regulation, which does enormous damage to banking and energy costs, and therefore to industry. Britain is partly free of that regulation, but please, Government, make it freer and get on with the task of creating the jobs and the growth that the British people rightly expect.
It is a pleasure to follow the right hon. Member for Wokingham (Mr Redwood). He has become something of a regular fixture on the first day of the Budget debates during the years I have been in the House. I shall start by agreeing with him about the importance of certain exemptions from the climate change levy. I have the honour of representing a steel area in Rotherham. Steel is one of this country’s strategic industries, and the Chancellor’s announcement today will be very welcome in my constituency. It will help to secure the industry for the future, and I hope that it will also help to secure extra investment from Tata Steel.
Will the announcement not also help important ceramics industries such as Naylor Industries in Barnsley, and Hepworth’s?
It will indeed. This is a result of strong cross-party campaigning by Members including my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) and me.
I also welcome the Chancellor’s decision to axe the beer duty escalator. I pay particular tribute to the Economic Secretary to the Treasury for his hand in that. In fact, the escalator was introduced in 2008 for a four-year term. It should have ended last year, but instead of ending it, the Chancellor extended it. I am glad that he has seen sense and realised that we have hit the revenue maximisation point at which the tax rate had gone up, but the tax take had started to go down. I welcome that: it will be a boost for the brewing industry, which is a great British industry, and it will be a boost for the pubs, too.
I would like to thank the right hon. Gentleman and all the other members of the parliamentary save the pub group for their support in this campaign. I would also like to echo what was said about the Economic Secretary being a Minister who listened—I warmly thank him for that. Does the right hon. Gentleman agree that this shows that the Government are listening and realised that the beer duty escalator was damaging investment and growth opportunities? Hopefully, we will see growth coming back to the brewing sector, which will have a knock-on effect for pubs.
That was exactly the case that I, the hon. Gentleman and others were making—that the escalator was damaging investment, damaging jobs, damaging pubs, damaging the British brewing industry and that it had even started to damage tax revenues. This afternoon’s decision is therefore sensible and welcome.
The right hon. Member for Wokingham made an important point in the middle of his speech, when he said that the problem of tax revenues was at the heart of the Chancellor’s fiscal problem. The right hon. Gentleman acknowledged that it was partly about growth. It certainly is, and I would argue that he underestimates the extent to which it is about growth. The big gap in the Chancellor’s record to date—and, to an extent, the Budget announcements today—remains that we have a growth crisis without having a growth plan.
When the Chancellor first took office nearly three years ago, unemployment was falling, the economy was recovering and we had had growth of 1.9% in the final year of the last Labour Government. That is the baseline from which the Chancellor has now given us four Budgets, four fiscal reports, four economic forecasts—with each one worse than the last. Since his first Budget plan in June 2010, debt is up, borrowing is up, we have lost our triple A credit rating, the economy has flatlined and we have had the first double-dip recession for 40 years.
Five years after the recklessness of bankers brought the global financial system close to collapse and drove a worldwide downturn and three years after this Chancellor took control, our UK gross domestic product is still 3% lower than it was at the start of that global crisis. So, our economy is smaller, weaker, making less, earning less and contributing less in revenues to the public finances. Other major countries such as Germany or the US have made up the ground they lost during that global financial crisis—we have failed.
Does my right hon. Friend agree with me that it is entirely perverse for the Department for Communities and Local Government to suggest that offices should become homes and thereby not provide space for businesses to grow, which would help to boost the economy in the way we agree is needed?
I have to say to my hon. Friend that there is sometimes a case for changing the historical land use, but that is a decision that very much needs to be taken locally. It will certainly not work if it is dictated by the Department for Communities and Local Government.
To deal with a deficit, which is what we face—whether it be for a country or a family—we must control spending, as the Chancellor said, but if we cut income at the same time, that makes it much harder to close that gap. That is why growth is so vital to a proper balanced plan for the country’s finances. That is why the Chancellor is now further from his fiscal targets than he was before the Budget.
The Prime Minister has tried to claim that the depressed growth has nothing to do with the Government. The independent Office for Budget Responsibility, he told us, is
“absolutely clear that the deficit reduction plan is not responsible; in fact, quite the opposite.”
Next day, a letter from the chairman of the OBR indeed confirmed the opposite, saying
“for the avoidance of doubt”
that the OBR operates
“the widely held assumption that tax increases and spending cuts reduce economic growth.”
In other words, the Chancellor has cut too far, too fast, killed the recovery and choked off growth.
There is good reason to believe that the OBR has underestimated and is underestimating the impact of fiscal policy on growth—the fiscal multipliers. Its estimates to date have been based on the International Monetary Fund figures, which estimate a 0.5% fiscal multiplier, 0.3% for changes in personal taxation and 1% for infrastructure and capital spending. The IMF has recently changed its estimates—up from 0.5% to a range between 0.9% and 1.7%. In other words, the impact of fiscal policy, the potential of the fiscal multiplier and of Government action and Government investment might be much greater than we have been led to believe.
At a time when consumer and business confidence is rock bottom and companies and households are cutting back and not spending, the Government must be ready to do more. They must be ready to invest alongside the private sector and they must, yes, be ready to borrow to help the country through tough times. Borrowing is bad when the repayments are not affordable or if it is done to cover day-to-day spending or indeed a shortfall between income and expenditure. That is why the Government’s planned borrowing bill has been ballooning, but borrowing can be good. It is good if it is for investment to improve infrastructure or the productive capacity of the economy or if it is to create jobs, revive growth and generate the tax revenue that is so sorely lacking.
Companies would borrow to take advantage of an opportunity to increase their earnings and profitability. Companies would never say, “We can borrow to invest only if we can cover the cost entirely by cutting the cost of our operations.” Households would do the same thing if, for example, borrowing to buy a car meant that it was possible to take up better-paid work, or if taking out a mortgage was cheaper than paying a private rent. In those circumstances, households would be daft not to borrow.
Given that this Government are planning to borrow £120 billion a year for each of three years, or £10 billion a month, how much extra does the right hon. Gentleman think it would be a good idea to add to that amount?
There is an interesting example of a proposal, which I have backed, to allow local government to borrow more by removing the cap from the newly localised housing revenue account. We have heard about families borrowing prudently, but local government does borrow prudently, as its average level of debt is less than 5%. The Chancellor told us that the national Government’s net debt is 75%. We are talking about £7 billion, loosening the cap, and 15,000 new council homes—not just for this year, as the Chancellor has announced, but every year for the next five years. That is the sort of borrowing we could do to invest, to promote jobs, to promote growth and to bring in tax revenues, helping to deal with the deficit in a proper and balanced way.
If we want to move the dial on GDP growth when the economy is weak, it is Government investment—not simply private sector investment—that is needed. When the economy is weak, we need more public investment; yes, it will increase debt, but it will also increase output and growth. Even the Chancellor recognised, when he delivered his first Budget, that the last Tory Government had cut capital investment too far, yet the Office for Budget Responsibility has shown that for the first three years of this Parliament, capital spending fell year on year—it is now £12.8 billion lower than Labour planned. Even the £3.5 billion of extra investment that the Chancellor has announced today will not be for this year or next year, but in three years’ time—too little, too late.
I would argue that, after three years of economic policy failure, the balance of economic advantage lies decisively in Government borrowing to invest and build. Borrowing for those purposes can be good borrowing. There is a difference: not all borrowing is bad borrowing. Interest rates on public debt are at an historic low, so now is exactly the right time for government, both national and local, to borrow for that investment. An open advocacy of the means, not just the ends, is overdue.
The Chancellor has confirmed in his Budget that his economic plan is failing, but he has also confirmed that he is sticking to that plan. We need a change. We need a change of policy, we need a change of Chancellor, and yes, we need a change of Government.
Liberal Democrats will look back on our record in government and on every Budget that the coalition Government have delivered, and will judge them according to our values and our principles. We will judge them according to whether we have, together, built a stronger economy and a fairer society that enables everyone to get on in life.
The Chancellor has recognised that building a stronger economy in today’s turbulent world conditions is an extraordinarily difficult thing to do. The Office for Budget Responsibility has said that our export markets have been suppressed, and that that alone accounts for suppressed rates of growth. It is right for us to recognise the extraordinary achievements of businesses in our economy in producing 1.25 million extra private sector jobs since the first quarter of 2010. However, it is also right for the Government to give businesses a helping hand to enable them to go that one step further.
The Liberal Democrats are delighted by the announcement in the Budget of a £2,000 employers’ national insurance credit which will enable every business to take on new employees. A business could take on four adults on the national minimum wage and see absolutely no increase in its employment costs. As a result of this measure, 450,000 small businesses will make no national insurance contributions whatsoever. That will provide a further boost for the recruitment of apprentices, in respect of which the Government already have an extraordinarily good record.
The Government need to do more to get growth in our economy going. Liberal Democrats both inside and outside Government have called for that growth to come from extra capital spending, which is why I am pleased that the Budget contains a further switch to finance more of it. It is worth noting that over the decade since the Government came to office, our capital expenditure will be higher than it was throughout the 13 years of the last Labour Government. However, most capital expenditure does not come from Government; it comes from the private sector and, in particular, from housing. For some time, many of us have been calling for a boost to be given to house building, especially the building of affordable homes, so that young people can get their foot on the housing ladder for the first time.
The Government announced two housing initiatives today. Under the Help to Buy scheme, which will start in just two weeks’ time, they will put a fifth of the equity in a new home on the table for those who can put down 5% themselves. There is also our mortgage guarantee to free up the mortgage market. There are planning permissions for various sites in all our constituencies, but, as we know, they have been frozen for some time. House builders have received the message that they have been waiting for, which will enable them to make a start on those sites, to give people new homes, and to provide new jobs throughout the land. However, growth needs to come from other sectors as well.
Has my hon. Friend seen a report about green growth which was published last year by the Confederation of British Industry? It said:
“The business response is definitive and emphatic: green is not just complementary to growth, but is a vital driver of it.”
The CBI said that green business could
“roughly halve the UK’s trade deficit”
by 2014-15. It also said:
“With a smarter approach, green business could add £20 billion to the UK economy by 2014-15. This is an opportunity we cannot afford to miss.”
I know that Liberal Democrat Ministers are pressing for such action. Will my hon. Friend encourage them to go further, and try to persuade the Chancellor of the business benefits of green growth?
I entirely agree with my hon. Friend. There is, perhaps, a tension in the coalition Government between the Chancellor and the Department for Energy and Climate Change, and, if we are honest, within the Department itself, when it comes to whether sustainable growth from green technologies is desirable. I emphatically believe that it is desirable, and I want investment in wind farms in particular to go ahead. We said at the time of the 2010 general election that we wanted to rebalance the economy, and green growth is certainly one of the things that we had in mind.
What I have in mind particularly at the moment, however, is a major industry in which Britain is a world leader, especially in the south-west of England, and its centre is in Bristol. I refer to the aerospace industry. The Government are working on industrial strategies for 11 critical sectors of the economy, so I was delighted when the Deputy Prime Minister came to Bristol on Monday and announced a £2.1 billion investment in an aerospace technology institute. I would say that the best place for that is, indeed, in Bristol.
We also need to introduce reforms to help local economic growth in all our city regions. I am pleased that the Government have accepted 81 of Lord Heseltine’s recommendations, and especially pleased that they have accepted the recommendation of a single growth fund bringing together investment in skills, housing and transport. The Liberal Democrats have long believed that our economy needs to be rebalanced, away from London and the south-east, and centred on city regions such as Leeds and Bristol.
The hon. Gentleman has said that he welcomes a single pot. Is that not exactly what the regional development agencies had, including the south-west RDA? They had a single pot with no strings attached from the centre, and decisions on the spending of that pot were made in the regions, for the regions. Was it not a mistake to abolish the RDAs and then to wait three years before reintroducing that important flexible funding arrangement?
The right hon. Gentleman is one of the most thoughtful Members of the Opposition, but on this occasion I must respectfully disagree with him. My experience in Bristol suggests that no one misses the south-west regional development agency, but everyone in the greater Bristol area recognises the extraordinarily good work done by the West of England local enterprise partnership. [Interruption.] I hear a chorus of agreement from my west midlands colleagues, including my hon. Friend the Member for Solihull (Lorely Burt). It seems that the experience is the same in that area.
We want to rebalance the economy, away from the south-east and to our city regions, and also—as was pointed out by my hon. Friend the Member for Cambridge (Dr Huppert)—to decarbonise the economy. I want to raise an issue that has not been the subject of much comment, but which I know is tucked away among the Budget details. I think that we should consider how we can provide further incentives for the setting up of social enterprises around the country in order to produce sustainable micro-growth in all our communities, and devise innovative ways of bringing people into business on a not-for-profit basis. That would contribute to a fairer society as well, but the biggest contribution to a fairer society that any Government can make is putting more money into people’s own pockets and purses, so that they can decide for themselves how to spend the money for which they have worked so hard.
At the last general election, all my Liberal Democrat colleagues stood on the basis of their No. 1 priority: the delivery of £10,000 of tax-free pay by whatever Government we were to become a part. That promise will have been delivered in full by April 2014. During his speech today, the Leader of the Opposition urged people to put their hands up in favour of a different tax measure, but 24 million people around the country will be able to put their hands up and say, “I am receiving a tax cut because of this coalition Government, and, in particular, because of the Liberal Democrat participation in that coalition Government.”
Since we came to office, the personal allowance has risen by £3,525. That is an increase of more than 50% in the amount of money that people can take home without income tax being deducted from it. A total of 2.7 million people will have been taken out of tax altogether, and £700 of extra income will land in the pockets and purses of 24.5 million workers up and down the country. That is an extraordinary achievement on the part of the coalition Government, and I am very proud of the role that my own party has played in developing a tax change that is a landmark in the history of our country.
A young person working on the minimum wage has already been lifted out of the income tax net altogether. Members should contrast that with the lamentable record of the Labour party, which introduced the 10p tax rate and then abolished it in order to fund a tax cut for people who were earning much more. Despite what Labour Members say now, Labour’s record in office was one of cutting taxes for the wealthy and raising them for the poorest. The coalition is doing the reverse of that.
We are also delivering further help for families up and down the country who are trying to balance their budgets. Many of my colleagues, particularly those representing rural seats—the Chancellor referred to my hon. Friend the Member for Argyll and Bute (Mr Reid) earlier—will welcome the fact that a fuel duty increase planned by the previous Government has been cancelled, yet again. I say, speaking for myself, that we cannot go on doing this indefinitely; I would prefer us to be much more radical and to scrap fuel duty altogether. It is an extremely blunt instrument of taxation that is long past its sell-by date, and a more economically sensible system of road-user pricing in the long term should replace it.
In pubs and clubs up and down the country, including the Prince of Wales in Gloucester road in my constituency, people will be raising a glass to the Chancellor tonight for the cancellation of another duty escalator—that on beer. I pay tribute to my hon. Friend the Member for Leeds North West (Greg Mulholland), who has badgered me and everyone else involved in this area for the past two and a half years to try to do something to get rid of it.
People will indeed be raising a glass to this Government for this. Does my hon. Friend agree that we now need to hear from the large pub-owning companies? They need to say clearly today that they will pass on the 1p reduction to their licensees, who can then pass it on to their customers.
My hon. Friend makes a vital point. We all know that when the global oil price fluctuates all over the place we do not necessarily see a cut in the price at the pump. I would expect every major beer company to pass on this reduction in full to its customers.
The other significant help that the coalition Government have announced this week for families up and down the country is the increase in our assistance with child care costs—£1,200 per child, to be delivered by 2015. However, our entire structure of taxes works only if people actually pay what we in this place decide should be assessed, so I am delighted that this Government have announced another huge package of anti-avoidance measures. Let us not forget that in 2013 we will see the country’s first general anti-abuse rule. So this is the second largest set of anti-avoidance measures that any Government have introduced—the largest was also introduced by this Government, back in 2011. This Government have done more to tackle egregious tax avoidance and evasion than any of our predecessors, but it is also worth mentioning that tax avoidance is a problem abroad.
Some of us will have been startled yesterday to see 500 masked Osbornes outside Parliament promoting the Enough Food for Everyone IF campaign. We should be proud that this coalition Government are delivering the 40-year-old promise of having 0.7% of our income go to the less-developed parts of the world. I am pleased that some of that increased aid budget is going on a tax capability-building unit, thus making developing countries able to stand on their two feet by collecting their own tax revenues and royalties.
This Budget, over time, will be remembered for that promise of delivering £10,000 of tax-free pay. We have cut the taxes on people in work. We have cut the tax that is a barrier for people entering work. We have given a boost for housing. We have given help with the costs of raising a family. We are indeed building a stronger economy and a fairer society, where everyone is able to get on in life.
I am grateful to be called so early in the debate.
I start by welcoming some of the measures in the Budget. Although there has been a 1% reduction in departmental spending, as a result of the top-slicing, the way in which the Barnett formula works means that Northern Ireland will actually benefit over the two years by about £59 million of additional spending. I do not think the Chancellor meant that to happen; I do not think it was deliberate. Of course it helps to replace some of the 40% reduction in capital spending announced at the very beginning of the Budget period when the Government took over.
Also, I welcome Northern Ireland’s exemption from the carbon price floor and put on the record how much work the Chief Secretary to the Treasury did on that. We took the point to him, saying that this measure was going to devastate all the electricity producers in Northern Ireland and leave them uncompetitive. We said that it was going to add to the costs of generating electricity in Northern Ireland—£20 million this year, rising to £45 million—which would have affected household bills by about 15% and made us dependent on producers in the Irish Republic. The one thing I want to say is that when a case is made to the Government, they do respond. It would have been churlish of me not to acknowledge that in the House today.
Some other measures will have a positive impact on Northern Ireland: the change in the threshold for income tax will benefit 7,000 families; the employment tax exemption will benefit 25,000 small businesses in Northern Ireland; and fuel duty not going up in September will benefit motorists.
What effect will that have on motorists in Northern Ireland? This is particularly relevant, given that Northern Ireland’s petrol and diesel prices are the highest in the UK and higher than most in the European Union.
For an average haulier, this will mean an annual saving of about £750 per vehicle and for the average motorist it will mean a £25 saving per year. Again, that is a good thing for the hard-pressed motorist.
The Chancellor made much of the monetary measures that he has introduced, especially the funding for lending scheme. Unfortunately, given the state of the banking industry in Northern Ireland and the fact that most of the banks there are not even part of the scheme, this is likely to have very little impact. However, positive impacts are being felt, and it would be right to start by acknowledging that. It is easy in opposition to criticise when we do not have to make the decisions. We can be the armchair economists who see everything that is wrong, what should be done and what one would do if one were sitting on the other side. However, there are some issues that the Chancellor has got wrong.
First, we have a Budget that he has said is fiscally neutral. That comes at a time when the economy needs some form of stimulus. He has admitted in his speech that it is not coming from consumer spending, because consumers do not have the money to spend or the necessary confidence. It is not coming from business spending, because businesses are trying to contract their loans and deleverage during the recession. It is not coming from exports, because our deficit is actually increasing. The only source of that stimulus therefore has to be what the Government can do in a practical and sustainable way.
Does the hon. Gentleman agree that there is an ever-increasing need to stimulate our economy, particularly in Northern Ireland? Our unemployment figures came out today and they are the highest in the past 15 years, with the level at about 23%. Wearing his other hat, as well as his hat in here, does he have any thoughts as to how the local economy should be stimulated?
I thank the hon. Lady for her intervention, which leads me to a point that I wanted to make. We have a Budget that, as the Chancellor has admitted—in fact, boasted—is fiscally neutral. Although it contains good things—I have highlighted some of the impacts of the decisions—it moves the existing money around and does not mean an increase in the total level of demand. If that is not coming from exports, from consumers or from industry, because of a lack of confidence, it has to come as a result of properly targeted Government initiatives.
Although I sit on the Opposition Benches, I do not have a vested interest in Government failure and a failure of economic policy, and nor does my party. I want the Government’s policy to succeed, as it means more jobs for people in Northern Ireland and a better standard of living for them. It means that we can balance our economy. However, it is not a policy that is designed for success; it simply tries to continue the fiscal position that the Government are in at the moment. Indeed, if we look at all the targets that the Chancellor has set himself, we see that he wanted to increase confidence in the economy, yet we have seen low demand from consumers, and firms have not taken up loans—the right hon. Member for Wokingham (Mr Redwood) mentioned that—either because they cannot get money from the banks or do not believe that there is any point in investing at the moment. Firms are running down their stock levels, because they see no prospect of additional sales in future.
The Chancellor also set himself the objective of keeping Britain’s credit rating, but that is slipping because the people who make the assessments are looking at the state of the British economy and asking when we are going to get out of the downward spiral of debt. If there is no growth, we cannot pay off the debt.
I do not have any additional time, but as I have not yet accepted an intervention from a Government Member, I give way to the hon. Lady.
I am grateful to the hon. Gentleman. Does he accept that the ratings agency said that if we did not stick to our fiscal deficit plans, it would downgrade us still further, so the reduction in the triple A rating is an incentive to do more to cut our deficit, not less?
Indeed. I am glad that the hon. Lady has raised the matter, because I want to come on to that.
The Chancellor set himself the objective of reducing debt, yet the Red Book shows—this is since the autumn forecast in 2012, so a period of six months—that by 2015, or the end of this Parliament, Government debt will increase from 80% to 85% of gross domestic product. The hon. Member for Chichester (Mr Tyrie) gave us the reason for that: the automatic stabilisers are kicking in. We are spending the money on benefits, or paying people to be on the dole, instead of spending it—this is the point I want to come on to—on the things that would stimulate growth, increase the capacity of the economy and enable us to pay our way out of our debt, while at the same time giving people the dignity of having a job and making a positive contribution to the economy.
That is why I think the Chancellor has got this wrong. There has never been a better time for him to borrow. The 10-year price of bonds is down 2%, and it is now cheaper to borrow than it has ever been. Borrowing for those things that will stimulate growth and increase infrastructure in the economy can be very useful.
Does the hon. Gentleman accept that the issue, as he has said, is the ratio of debt to GDP? There are two ways of confronting it: reducing debt or increasing GDP. If we had growth, that ratio would go down, but growth has been completely ignored.
The hon. Gentleman is quite right. One reason why debt has increased as a percentage of GDP is that GDP has fallen while spending has had to go up to pay for a policy that has failed anyway.
If the Government wish to borrow, what kinds of things should they do? I shall give just two examples of infrastructure projects in Northern Ireland on which tens of millions of pounds have been spent, but which have already begun to have an impact on the economy. First, there has been investment in the broadband infrastructure as a result of the Chancellor’s initiatives in previous Budgets. Project Kelvin and broadband infrastructure around Belfast and Londonderry have helped us to grow the financial services industry in Northern Ireland, which employs nearly 30,000 people, and it has helped us to grow the film industry there too. Both industries need connectivity to north America, and there is faster connectivity to north America from Northern Ireland than there is from the west coast of north America to the east coast. That has stimulated a range of other investments, and it makes sense when it comes to infrastructure investment.
In our tourism industry, we spent nearly £100 million on two signature projects— the Titanic signature project and the Causeway project—which were supposed to generate over half a million visitors in one year. In the first six months, they nearly doubled that estimate, in business for hotels in Northern Ireland and business for restaurants, taxi drivers and so on. The hon. Member for Swansea West (Geraint Davies) made the point that there is good borrowing and bad borrowing. Bad borrowing is paying to keep people at home on the dole; good borrowing is paying to have infrastructure development, which helps to increase the capacity of the economy. I think the Chancellor has missed a trick. Instead of having a financially neutral Budget, he ought to look to the future and ask what we can do and how we can raise money to spend on projects that, in the long run, will generate more tax and jobs, give us growth, and bring down the deficit.
While I welcome the things that I mentioned at the outset, and I acknowledge the way in which the Chancellor and the Treasury have responded to some of the points that we have made from Northern Ireland, for the country as a whole there are things that could have been done that have not been done, which we will live to regret and which will probably result in the Chancellor standing at the Dispatch Box next year saying, “I forecast this, and unfortunately I’m downgrading those forecasts again.”
May I give the Government two sets of thanks? First, may I give them unreserved of thanks for the fact that I do not have to discuss VAT on caravans this year? More seriously, may I give them unreserved thanks for the action on Equitable Life pensioners which, while a little overdue, is morally right and exactly the proper thing to do?
With respect to the Government’s economic strategy, a number of Members have pointed out the difficult circumstances surrounding the Budget from various points of view. The Government clearly have a difficult deal to handle regarding the inheritance from the previous Government. Obviously, there is the borrowing, but it is not just that. The structural deficit passed on by the previous Government was much bigger than anyone understood at the time, and that is just economists’ technospeak for a society that has too much welfare dependency throughout, including even the middle classes, and too much inefficient—costly and expensive—delivery of public services, which are properly needed but badly delivered.
The second part, which is extremely important and has been alluded to slightly by a few Members who have spoken so far, is the international backdrop with which the Government have to deal. We are in a circumstance where world growth is probably about 6%, but that divides sharply into two sectors. The far east, the BRICs—Brazil, Russia, India, China—Vietnam, Indonesia, and so on, have growth rates approaching 10% or thereabouts. In the developed world, of which we are obviously a part, the growth rate on average is nearer to 1%. So we are in a 1% world, and the reason for that is pretty straightforward: it is the dramatic change in competitiveness between ourselves and the far east and other developing countries. That does not mean that it is inescapable, but it means that competitiveness has to be at the centre of the strategy that we undertake—competitiveness, pure and simple. Everything else, all the other macro-economic tricks, frankly do not work.
In that respect I am addressing the comments of the hon. Member for East Antrim (Sammy Wilson). If I may say so—and I do not mean to be rude—he talked very much like a classical Labour Member. He talked about stimulus, and about this being a balanced Budget. It is about £100-odd billion off being a balanced Budget. There is a vast amount of deficit finance in there. But my point is that, if we look at the historic examples of countries that have been knocked off the historic growth rates—3% or 4%—down to something lower and at what has been done with them, there are clear examples of success and failure. Let me tell him, just for a second, about the biggest failure in modern times, which was Japan some 20 years or so ago, which went from a 4% growth rate, pretty much for all the post-war years, to a 1% growth rate after a financial crisis not unlike our own. What did it try? It tried Keynesian expansion. It now has pretty much the biggest public debts in the world, with an annual deficit of 10% of GDP in recent years. Did it work? No, it did not. It also tried monetary activism. I hope that those on the Treasury Bench listen to this, because it had effectively zero interest rates for a decade. Did it work? No, it did not. It also went in for infrastructure spending—the fashionable item this week—on a grand scale. It spent 40% of its Government budget on infrastructure investment, more than was spent to build the entire Panama canal—in one year. Did it work? No, it did not. I am afraid that those macro-economic polices that people love because the arithmetic seems to work are a dangerous allure. We must focus first and last on competitiveness, because without that we will not be able to earn our way in the world.
My right hon. Friend is saying something that should be blindingly obvious. When a Government borrow some money and spend it, once it is spent it is gone. It does not create economic growth. Once they have spent that money, it might have a little bit of effect in the economy, but then it is over. What we need to generate is what the right hon. Member for Morley and Outwood (Ed Balls) used to call endogenous growth, because that is what comes from within the economy itself instead of being stimulated by Government spending.
My hon. Friend is right. I shall not give him the response to the endogenous growth of the right hon. Member for Morley and Outwood (Ed Balls) that Michael Heseltine gave at one party conference, which my hon. Friend might remember, but—
“It’s not Brown.”
The simple truth is that this is a blinding glimpse of the obvious in many respects. But this is not impossible to put right. Other countries managed to get back to a 3% growth rate, or thereabouts, so it can be done.
The right hon. Gentleman seems to be saying that anyone who talks about putting money into the infrastructure and the economy is a Keynesian. Would he not accept that the monetarist argument is that the supply side of the economy is very important, and to stimulate the supply side of the economy often the Government need to spend money on capital injections to increase the capacity of the economy to produce more goods? It is not a Keynesian view, it is a monetarist view, with which I would have thought he identified.
I will come back to the detail in a minute, but the point I am making—it is a serious point—is that we can do what Keynes said and pay someone to dig a hole and then pay someone else to fill it in, and that creates employment. So long as we avoid that and talk about the real value, we are on the same side. I will come back to the real value issue in a moment.
The problem with actions to promote competitiveness is that they are not always politically popular. Very often, they are politically unpopular, and I will elaborate on that in a second. The other element about growth—everyone in the Chamber today agrees that growth is necessary—is that it is also important to the deficit reduction policy. In effect, if 1% is taken off the growth rate, the OBR’s rule of thumb says that within a year or so that adds £10 billion to the deficit every year thereafter—not once, but every year thereafter. So growth is fundamental to the central fiscal policy as well. While we are talking about growth, we have had much talk about double and triple-dip recessions, but judging by the employment numbers, we have not had real recessions; we have had bouncing around zero to 1% growth, and that will show up when the numbers are corrected, as will be done in a few years.
There are six key elements to ensuring the economy’s competitiveness, and they are all pretty straightforward. I agree with what the Government are doing on some of them, but on others I think that they should go further. The first is straightforward: the Chancellor is absolutely right not to hesitate or flinch in the deficit reduction programme. That is absolutely essential. Canada, Germany and Sweden, which are all successful examples—Japan is not—managed their deficit reduction unflinchingly, and in all of them it delivered 3% plus rates of growth within a few years. Indeed, Canada had the fastest growing economy in the G8 when it carried through. The simple fact is that, even with the deficit reduction programme, we will be £600 billion more indebted at the end of this Parliament than we were at the beginning, and that is a devil of a burden for any country to carry. Clearly we cannot hesitate on deficit reduction.
The second key element is the one on which I and my right hon. Friends on the Treasury Bench might have a difference of view. One of the critical drivers of competitiveness is tax policy. I wholeheartedly welcome the actions announced today on corporation tax and national insurance, although I would like them to go further. The simple truth is that expensive, complex and high levels of tax returns are very damaging to a country’s economic competitiveness. We should be looking hard at the tax categories that are most responsive to lower rates. We have heard today, even from the Labour Benches, about a couple of measures—on beer, I think—that will deliver more money for the Exchequer, not less, so even Labour Members recognise dynamic tax strategy. We certainly want to see lower national insurance contributions for employers. I would like to see the employment allowance scheme that we put together extended considerably. Capital gains tax must come down. At 28%, we are collecting much less money than we would if it was somewhere between 15% and 20%. There is a series of other taxes, including corporation tax, on which action could be taken. Again, the examples to look to are Canada, Sweden and Germany.
The third key element, which we did not hear much about from the Chancellor today—perhaps we have not heard much because we are yet to go through the detail of the Budget—is deregulation. The most successful recovery in Europe in the past decade was Germany’s. The Germans took it upon themselves to dramatically deregulate their employment market for small companies. That is key, because small companies are the biggest employment creator in the economy, bar none. The Germans effectively removed employment law for companies with fewer than 10 employees and created mini-jobs and other mechanisms to reduce the bureaucracy and legislation surrounding employment. That is massively important. It is one very effective way of creating new employment, and it is something we should undertake as dramatically as we can.
Another item that was raised earlier—the hon. Member for East Antrim raised it with respect to Northern Ireland alone—was the question of carbon tax and carbon floors. In the next month or so, the changes that are being introduced will give us a disadvantage of £10 a tonne, and not against China or India, but against Germany, Holland and France. We will see a transfer of heavy industry from this country to Europe. There will now be an exemption for ceramics, but frankly there are many other businesses—they employ about 600,000 people—in the energy-intensive industries. We need to address that. The previous Government were very happy to deliver golden rules of one sort or another. I would like to suggest a rule for us on environmental and energy policy: we should not introduce any environmental policy that is not matched by our European colleagues. That would ensure that we do not do ourselves huge harm.
Let me move on to infrastructure. The hon. Member for East Antrim made a perfectly sensible point about broadband, and I agree with him. What I do not want to see is massive expenditure for its own sake in the expectation or hope that that will simply generate employment by itself. The Japanese experiment demonstrates that that does not work. What we want to see is de-bottlenecking of our railways and road systems and underpinning of things such as broadband. The Government can make some good claims in that area, but we need to do more. That is what will fundamentally allow growth to take off in Britain and get us back to the 3% level of growth.
The last item I want to speak about is bank reform. A number of colleagues, including my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Chichester (Mr Tyrie), who chairs the Treasury Committee, have talked about bank reform. Bluntly, we have been too slow—[Interruption.] I am out of time—
I am very grateful to follow the right hon. Member for Haltemprice and Howden (Mr Davis). I agree with part of what he said about competitiveness, and I will come back to that.
On today’s announcements, I think that most Labour Members would want to welcome the changes made to national insurance contributions, in particular, and the help for employers. Changes to personal allowances are valuable for the poorest in our society. Clearly, the scrapping of the fuel duty escalator and lower beer prices will help considerably.
Beyond that, I want to concentrate my remarks on rebalancing the economy, which the hon. Member for Bristol West (Stephen Williams) talked about. I felt that the Chancellor should have emphasised that, but we heard very little about it. As we saw in the figures published last week by the Office for National Statistics, a fifth of our economic output is attributable to London. One could draw from that the conclusion that Londoners are twice as productive as people in other regions of the country. The hon. Gentleman, in talking about his region, wanted to emphasise that London and the south-east are getting a bigger share of the pie than they should be. I want to challenge that basic assumption.
Underlying much of the Chancellor’s analysis—certainly my constituents would want to communicate this—is the question of whose London we are talking about. Should we be entirely preoccupied with those in the City of London, with an elite arriving from Russia, China or the middle east, or with the very many Londoners who did not see sufficient for them in the Budget that he described? The north-east and east of London, as a sub-region, is ranked 113th in terms of economic activity, and there are only 139 sub-regions across Britain. Of the 20 constituencies with the highest number of unemployed people, seven are in London. Of the 20 constituencies with the worst child poverty, nine are in London. This is not a London that feels as though it is benefiting considerably from economic growth; it is a London that is really struggling. We needed to hear from the Chancellor a whole series of announcements that could meet the challenges of unemployment and child poverty, and a London that does not feel as though it is working for Londoners.
The Chancellor could, then, have had more to say about infrastructure here in this city. He could have announced that the Government would bring forward a hybrid Bill on Crossrail 2, which will benefit hugely the transport infrastructure of London—and it will be in need of such benefit after High Speed 2 is complete and we have extra people in London’s transport system, which is creaking from the point of view of someone who is on the tube in the peak hours early in the morning or going home late at night. All we have heard about so far from the Mayor and the Chancellor is a small extension to the Northern line, when in fact we needed to hear something big and major. We hear hon. Members pooh-pooh the need for greater investment in infrastructure; HS2 was that, but we heard nothing more from the Chancellor today.
We heard a huge boast about how planning changes are generating growth in house building, but house building has fallen to a level unseen in this country since the 1920s, and that was during the depression. The situation is absolutely dire. Some 59% of Londoners are renting—the highest proportion since before the second world war. There was a settlement in London whereby people could rent, get a council property and be part of the social housing fabric of this country, or own, but that has gone backwards—59% of people are renting.
Although I will look at the detail of the housing policy announced by the Chancellor, I am concerned that the proportion of people renting will increase as a result of buy-to-lets. Like my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier), I want to see the detail to see whether the measures will extend to those who want to buy homes in order to rent them out. I do not think that that will ease the situation.
What we needed to hear was a Government commitment to house building, which would be a far more responsive approach to local government in particular. Local governments in London have between them committed £1.6 billion to house building in London. It is not sufficient, but that is their commitment. Islington hopes to complete its target of about 1,600 homes by 2014, and Southwark wants to complete, I think, 1,000 homes by 2020. As my hon. Friend has said, a small change to how the Treasury allows local authorities to borrow against their assets, with changes to the Treasury’s prudential rules, would allow for a huge expansion in local government house building. London local governments estimate that 54,000 new homes could be built over this next period, which is a significant amount that would go some way to meeting the needs of those currently in temporary housing.
A statement on infrastructure and Crossrail 2 and a big announcement on house building, not just house-purchasing—particularly for those who want to buy to let—would have been acceptable.
I am also hugely disappointed that the Chancellor did not once mention youth unemployment, which is having a devastating effect on every single region, town, village and major city throughout the country. He said nothing about it. The Work programme is not working and the Youth Contract is shaping up to look like the old youth training scheme. We need real growth for our young people, but we have heard nothing about it from the Chancellor. He boasted about 55,000 extra apprenticeships in London, but 40,000 of those apprentices are over-35, which is an indication of how much trouble we are in.
We needed to hear more about what a balanced economy looks like. Margaret Thatcher made a deal in the 1980s. [Hon. Members: “Hear, hear!”] Government Members are applauding, but what was that deal? It was to base our economy on two sectors, namely the financial sector—look where that has led us—and the service economy, which is largely retail. Retail alone is not sufficient for our young people and we should have learned more about what a balanced economy looks like.
Does my right hon. Friend agree that he is describing precisely the inequality that must be tackled before young people in this country really get a chance?
Absolutely. To have a Budget that places no value on our young people is extraordinary at this time. It is a Budget that is content that the growth in apprenticeships has come largely from retail and administration. The growth in apprenticeships has seen just 210 of the higher-level apprenticeships that we need, but 30,000 level 2 apprenticeships. A Budget that does not acknowledge that is deeply problematic.
It is only by having something to say on infrastructure, house building and construction that we can begin to get back to the balanced economy that this country has so dearly lost and that is necessary if we are to get back to growth.
Let me end on the importance of local government. We did not hear enough in the Budget about local government. We know from the pre-Budget report that there are further cuts to come in local government. We know that adult social services will be under immense strain over the coming months, as council leaders have to make difficult decisions. We know that things such as child protection will be under immense strain as councils make those decisions. It is wrong for the Government to cut 8% of their own spending, but to expect some London authorities to cut 33% from their budgets.
We needed to hear a Budget with investment in local government, something on infrastructure, something on housing and something for young people, but we did not.
The economic strategy adopted by the Chancellor is the right one. On the one hand, we must deal with the massive deficit left by the Labour Government. On the other, we must kick-start the economy. With a budget deficit of £120 billion that is mounting by the day, it would be utterly reckless to borrow more. That is the road to ruin and we must avoid it at all costs.
I am optimistic about the future. I am optimistic that with sound economic policies, we can get our country back on its feet. Only British businesses have the power to lift our country out of the economic legacy left by the previous Government. I chose to come into politics from the world of business. Anyone with experience in business will say that it is tough and that it is really hard work. That work is made tougher by unnecessary regulations and the bizarre tax on jobs that is called employers’ national insurance. I therefore welcome the measures in the Budget that will tackle regulation and reduce the burden of tax.
I want our nation to be back on top. I want it to be on top of the world competitiveness tables, on top of the productivity tables and on top of the world trade tables, but at the bottom of the world taxation tables.
The hon. Gentleman mentioned being at the top of the productivity tables. Does he accept that as an extra 1 million people are in jobs and we are producing no more, productivity has gone down? That is a complete disaster.
Opposition Members have a real cheek in raising cheap points like that. This Government are doing everything they can to dig this country out of a hole of Labour’s creating. Labour Members should remember that and should be ashamed of such comments.
My hope for our nation is that we will feel proud and self-confident; that it will be a nation where enterprise, employment and economic growth are highly valued. Why? Because that is the only way to afford the well-funded public services and caring society that we all want. It is the only way to have a decent health service that takes care of us. It is the only way to fund a world-class education system that is open to everyone. It is the only way to pay for strong defence through our armed services. It is the only way to generate wealth to help others. Above all, it is the only way to secure social mobility.
I come from a pretty tough background, as do many people. It was not easy growing up in a single-parent household in social housing as a mixed-race kid in the 1960s and 1970s. But I was one of the fortunate few. I was born in Britain at a time when it was possible to make it in a lifetime. I want the opportunities that I enjoyed to be available to every single British citizen. It seems to me that it has become even more difficult for people to forge their way in life. My heart is with the least well-off in our society and with all those people, especially our young people, who want to make something of their lives. That is why we must back British enterprise. We must give British businesses the support they desperately need. We must help them to regain their confidence and competitiveness, because this country needs a thriving, dynamic and competitive business environment. In a competitive business environment, there will be failures, there will be successes, but, above all, there will be opportunities for everyone to work hard and to achieve the type of life that they would wish to achieve.
I made my way by working hard at school and eventually starting a business. I remember being exhausted in the early hours of the morning, filling in Government forms and tax returns, and the stress of trying to meet the payroll—yes, and sometimes failing—and the agonising over whether to take on new employees. I can remember the fear of never being quite sure whether the businesses would make it. It is the same today for millions of small business owners around the country.
I was one of the fortunate ones; the risks and the hard work paid off. For many, they do not. It seems to me that our political elite are nervous about talking about success. There is a tendency to view wealth creation as somehow distasteful or a bit dirty. We love it when young people set up businesses, but we become suspicious if our businesses become too successful.
My message today is this: get over it. Backing British businesses is not only the way to escape our dire economic situation but the way of securing social mobility. We must trade our way to a balanced budget and we must trade our way to a trade surplus. Business is the engine of our economy; it generates the jobs, the livelihoods and, yes, the taxes that make for a good society. Only by embracing enterprise with every ounce of our being can we secure economic growth.
Economic growth can come from nowhere else. Governments cannot do it, but our tradesman, entrepreneurs, business owners and hard-working employees can. They are the lifeblood of our economy and it should be obvious to us all that enterprise is the only route to success. In business, people must get results. If they do not, they are out of business. That is the harsh reality that businesses face every single day and it is about time that our political class adopted those real-world principles. We must learn to like business—to love business—and to take a more business-like approach in government. We must learn to love the process of wealth creation. Government must make life easier for businesses to invest and hire new staff.
I agree with the hon. Gentleman that investment in business is a good thing and that growth in business is a good thing. Would he like to comment on the efficacies of the Government’s efforts so far to increase lending to, and other forms of financing for, business?
I think the Government have been doing an incredibly tough job in incredibly difficult economic circumstances. The funding for lending scheme should work in time, but the deficit and the troubles we have today have all been caused by the Opposition. I will give way to anybody on the Labour Benches who will stand up and apologise to Britain for putting us in this huge hole. I am happy to give way to anybody—will they apologise?
I believe that it is the primary responsibility and duty of Government to create the environment in which enterprise can flourish, and that means unashamedly celebrating business success. Next time we hear of a British company making huge profits, I want to hear the House cheer. Even now I can feel a little shudder from Opposition Members. The reality is that, under Labour, the little guy stays little and the little guy cannot grow. In Labour’s time in office, it bred in this country a culture of state dependency, a trap not just for the least well-off but for the middle classes.
Labour politicians should be ashamed of themselves and the Labour leadership should be ashamed of itself for digging this hole. This is why I am a Conservative. This is why I believe the Conservative way is the best way forward for this country. We want, and I want, enterprise to bloom and succeed so that opportunities are available for everyone in our society.
Turning to the Budget, I welcome the reduction in corporation tax; it makes Britain a more impressive and attractive place in which to invest. I welcome the increase in the tax-free threshold that will allow lower earners to keep more of their money and encourage people off the benefits that Labour created and into meaningful work. I also welcome the capital gains tax relief that will encourage further investment in business and create more jobs. Above all, I welcome the reduction in employers’ national insurance for smaller businesses that are taking on new employees. The direction of travel is good, and we will look forward to digesting the details and examining the implementation in months to come.
In conclusion, I want to see our nation self-confident and at ease with itself, and my vision is of a Britain where people can succeed through hard work. Whether someone is first, third or 300th generation British, I want them to know that the Government are on their side. Business is the engine of the economy and social mobility, and a path to a better life. It gives people the chance to better themselves and forge a better future for their families.
The Conservative party agreed to putting a married tax allowance in its manifesto and in the Budget, and the Democratic Unionist party wrote to request that as well? Does the hon. Gentleman feel some concern and disappointment that the Conservative party, and the Chancellor, have failed to deliver on the married tax allowance that they said they would introduce?
The coalition Government and the Conservative Chancellor are doing the best they can to make life better for families in Britain, and the deficit reduction and other measures we have heard about today work towards that goal. I wholeheartedly support the Conservative part of the coalition in delivering those good things for Britain.
Business gives people the chance to better themselves and forge a better future for their families. A competitive job market cannot discriminate on the basis of gender or skin colour. I believe we have a moral, social and economic duty to embrace wealth creation. If we can learn to love wealth creation, I believe that Britain, once again, has a bright future as a world-leading nation.
I apologise to the House for having to leave the Chamber for a short time earlier.
I welcome one or two of the things in the Budget statement—the changes to national insurance are very sensible, and the reiteration of the general anti-avoidance rule will be important in time. The announcement of flexible inflation targeting for the Bank of England could be significant in how the economy is managed in the future.
First, however, I would like to talk about tax. The Government are right to try to take as many people on low and modest wages out of tax as possible, and the savings so far of £326 a year for basic rate taxpayers, whose personal allowance rose last year from £6,475 to £8,105, makes sense. However, if we are “all in it together”, a saving of £326 makes rather less sense when we are persevering with a tax cut for millionaires who might consider a £326 saving no more than a decent lunch.
It is welcome that the Government are taking people at the bottom out of tax, but we should look at what they are doing to those in the middle, who have seen tax relief before the 40% band kicks in fall from £37,400 in 2010 to £34,370 last year. Therefore, for every £326 saved at the bottom on the 20p rate, people have had to shell out an extra £560 at the 40p rate. I welcomed the announcement that the basic rate tax threshold will increase to £9,440 and then £10,000, but the Chancellor has pulled the same trick with that as he did previously because relief for the 40p band will shrink again to £32,010, as announced last year. Importantly, that means that in the three years before today’s announcement, the Government have increased the number of taxpayers paying 40% tax from 10% to 13% of all taxpayers—a whopping 670,000 extra people. In the past 25 years—this is instructive—the number has doubled. Some 2.1 million extra people pay tax at 40%. The rate used to be for the rich, but the people paying it are not rich or wealthier.
It is not as if the economy has come out of the austerity period—the UK teeters on the brink of a triple-dip recession. People feel poorer because they are poorer. Last year, the Office for Budget Responsibility changed its forecast by reducing household disposable income every year from 2013 onwards. It has done the same for this year’s Budget. People are poorer for many reasons. In the 2010 Budget, child benefit was frozen, and later removed entirely for many people, costing families £2.5 billion a year. Households are and feel poorer because their wages have been frozen or capped while inflation has been higher than forecast. For pensioner households, notwithstanding the much vaunted triple lock, the pensions calculation has gone from the retail prices index to the consumer prices index.
What do the Chancellor’s previous decisions mean? The 1% benefit cap hits 1 million households in Scotland to the tune of, on average, around £165 a year; the tax credit changes hit 110,000 families in Scotland to the tune of around £700 a year; and the child benefit changes hit 91,000 families to the tune of, on average, around £1,400 a year.
I should explain that lesson in recent history. Last year’s Red Book told us that the Government’s discretionary fiscal consolidation—tax rises and cuts—would rise to £155 billion a year every year from 2016-17 onwards. I checked the Red Book today to find out the scale of the increase in the discretionary consolidation—tax rises and cuts—only to find that there is no 2017-18. Indeed, the Government have taken out 2016-17. They are hiding the future. The one thing we know from this year’s Red Book is that the Government continue to be determined to change the ratio of cuts to tax rises to 4:1.
We therefore know precisely where the Government’s priorities lie, and it is not with people, jobs or growth, as we have seen with the announcement of another £11.5 billion of cuts, the detail of which we will get in June. That tells us—the Chancellor is the only one who does not see this—that plan A has failed. He has failed according to his own metrics. The net borrowing requirement, which was meant to be £126 billion last year, falling to £92 billion for 2012-13, has been increased to £121 billion. The national debt—this should worry everybody—was due to peak at 92.7% of gross domestic product, or £1.36 trillion, in 2014-15 on the treaty calculation. It is now expected to peak at more than 100% of GDP—100.8% of GDP—on the treaty calculation by 2016-17. That means a national debt of £1.58 trillion. The Chancellor has therefore failed by his own measures.
On the fiscal rules that the structural current deficit should be in balance in the final year of a five-year rolling programme, and that debt should fall as a share of GDP, the objectives were highly dependent on GDP growth, which, as we have noticed in previous Budgets, is massively dependent, according to the OBR, on incredible, unbelievable, unmet and unmeetable rates of business investment. In 2010, the Government suggested that business investment had to grow by between 8.1% and 10.9%. By the time we got to the OBR’s fiscal outlook the next year, growth in business investment had turned negative. So it went on year after year. The Chancellor is at it again today, forecasting future business investment rates of 6.4% to 10.2% from 2013 onwards. These will not be met either, and the Chancellor will be back at the Dispatch Box making more excuses for why the failure is not his fault.
The biggest disappointment is that although the Government announced a modest stimulus of £3 billion a year in capital investment, it will not be immediate. The crisis is with us here and now. This is a delayed reaction Budget—it does not kick in until 2015-16—and implies a fiscal stimulus in capital expenditure terms of less than 0.25% of GDP. The benefits of that, if there are any, will almost certainly be offset by the other cuts, the details of which we will get in June.
We have an immediate crisis of huge proportions: the national debt is forecast to reach 100% of GDP; all the other metrics have failed; and the much-vaunted triple A rating has gone—that was not mentioned today. The Government’s response is a 0.25% of GDP capital expenditure stimulus, most of which will be gobbled up by cuts made elsewhere. That is a timid, weak and inadequate response. What should have been a bold demand to go for growth instead locks us into austerity. To be frank, it risks a decade of austerity and a decade of stagnant growth to go along with the Government’s failure to invest when it was necessary, and when they could, to get the growth in the economy that we all want.
Several hon. Members
Order. To accommodate as many Members as we can up until 7 pm—just to remind you, there are no wind-ups, so we will go right up to the wire—the time limit is now eight minutes.
It is a pleasure to follow the hon. Member for Dundee East (Stewart Hosie). I do not agree with his overall analysis, but he deployed statistics in a careful, if selective, way. I disagree with the fundamental direction of travel that he indicated for the Government; he falls into the trap of allowing immediate difficulties to deflect the Government from the long-term commitment to maintaining financial control and dealing with fiscal consolidation.
It is against that background that I want to commend the Budget statement by my right hon. Friend the Chancellor, in particular for the commitment he expressed to fiscal consolidation and to maintaining control of public expenditure. The Chancellor set out the position clearly and frankly. It is refreshing to have such frank Budgets, particularly in comparison with the first 10 years of the previous Government, when we found out about undesirable developments later on by consulting the Red Book. I urge the Government to maintain a tight control of public expenditure.
Of all the statistics presented today, the most important is the trajectory of debt consolidation and dealing with the financial deficit—one to which I do not think the hon. Member for Dundee East alluded. Although he chose to refer to the national debt, he did not refer to the fiscal deficit, which is an important determinant of the national debt. As the Chancellor rightly said, the deficit has been falling. It has fallen by a quarter, and has now fallen by a third. The trajectory set out by the Chancellor was encouraging: falling by 6.8% next year, 5.9% in 2014-15, and down to 2.2% by 2017. Cyclically adjusted, as I understand from the Red Book, that would amount to 0.6% in 2017, and that is very important.
The Leader of the Opposition gave a disappointing performance and missed an opportunity to set out his plans for the future. He was very keen to draw attention to the downgrade by Moody’s. The hon. Member for Dundee East said that that had not been mentioned—I am mentioning it now. The downgrade took place, and people can make of the ratings agency what they want, but it would be instructive to refer to what was actually said by Moody’s at the time and the reasons it gave for the downgrade, particularly the weakness in the eurozone. On the long-term trajectory, Moody’s stated:
“The stable outlook on the UK’s Aa1 sovereign rating reflects Moody's expectation that a combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK’s debt trajectory. Moreover, although the UK’s economy has considerable risk exposure through trade and financial linkages to a potential escalation in the euro area sovereign debt crisis, its contagion risk is mitigated by the flexibility afforded by the UK’s independent monetary policy framework and sterling’s global reserve currency status.”
On the last point about our ability to set an independent monetary framework, therein lies another tale, as far as the Leader of the Opposition is concerned. The Opposition say that they are not committed to joining the euro at the moment, but I have not heard them rule out joining it at any stage. I believe that the benefit of an independent monetary framework is a permanent, not just a temporary one, as has been proved over the last decade.
Does my hon. Friend think that there will long be a euro to join?
I was one of those who joined the crusade led by my right hon. Friend the Member for Richmond (Yorks) (Mr Hague), now Foreign Secretary, against the euro. Some of the comments made at the time about that crusade, which has been of lasting benefit to this country, have come back to haunt those who made them.
The Leader of the Opposition missed the chance today to set out his plans in detail. He said that the Government had been downgraded and he referred to borrowing, but he did not say how much more borrowing he would undertake, how it would be spent, how it would affect the economy, what effect it would have on our international credit rating or how those who take business and monetary decisions would view this country. We need to hear much more detail from the Opposition. We heard a lot about the millionaires’ tax cut. I do not think that Opposition Members are going to get much more mileage out of that. We all remember that the 50p tax rate was put in place in the last five minutes of the previous Labour Government.
The Opposition’s rhetoric runs the risk of creating an anti-business and anti-success environment and of deterring investors from investing here and earning rewards. That contrasts with the policies we heard from the Government today. I commend their priority in giving help to business, particularly in reducing the rate of corporation tax, which I think is an achievement and will give us a good rate compared to our competitors. I also applaud the employment allowance, which is an imaginative proposal that will help many people and small businesses. Of course, I also applaud the help being given to hard-working families through the tax-free child care, the fuel duty freeze and the beer duty cuts, which will be of particular interest to many of my constituents who have lobbied me from the real ale society. I also welcome the Government’s plans to help more people to buy their own homes. I agree with the priorities the Government have set, with the funds available, within this tight fiscal framework and given the desire not to make unfunded tax cuts. They have struck the right balance in first helping business and hard-pressed families with the pressures they face.
For future reference—this is not intended as a criticism now—I would urge the Government to consider the position of, and to give some assistance to, savers, as the Conservative party committed to doing in a previous manifesto. The savings environment is not the best for small savers, particularly older people looking to supplement their pensions with interest on their savings. They have been hard hit by a combination of the interest rates offered by the financial institutions and the effect of inflation. We need to look carefully at its effect and what more can be done to help savers.
Over the past week or so, we have heard a lot about the effects of the savings levy on Cyprus, but I understand from a calculation that the House of Commons Library made for me that a basic rate taxpayer saver, having obtained the best possible current easy access account, with the forecast rate inflation in the country, at the end of four years will have seen their savings lose in value the equivalent of the 6.75% levy on Cyprus savers. That is the hidden effect of inflation on savings. We know that inflation has been rising and that savers cannot obtain high rates of interest from any of our financial institutions. Very few if any will beat the rate of inflation, and certainly not if one is a basic rate taxpayer.
I urge my right hon. Friends to look carefully at that issue and, in particular, at helping savers with individual savings accounts by giving more flexibility to ISAs. That could be done by increasing the limit for cash ISAs—this point has been made in many circles—up to the same as that for stocks and shares ISAs, to give people the opportunity to save £10,000 tax-free in cash, and also by giving people the opportunity to convert stocks and shares ISAs into cash ISAs. People cannot currently do that—although they can do it the other way around—yet it is something that some in retirement or approaching it may wish to do. ISAs are the most democratic form of saving, if I can put it that way. If future help is to be made available, I would urge the Government to ensure that it goes to our savers.
I applaud the choices we are making for today’s purposes in the Budget. It is right to help hard-pressed families and businesses for the future. This is a business-friendly Government who are taking the decisions to lay the foundations for successful businesses in this country in difficult economic circumstances.
It was in June 2010 that the Chancellor presented his emergency Budget. He said then that the measures he was announcing had
“set the course for a balanced budget and falling national debt by the end of this Parliament.”—[Official Report, 22 June 2010; Vol. 512, c. 180.]
However, today our economy is flatlining. We have a cost-of-living crisis, borrowing is increasing and we have lost our triple A credit rating. Since the last spending review the economy has grown by just 0.7%, rather than the 5.3% that was forecast, and last year the country went through a double-dip recession. Instead of the books being balanced by 2015, as the Chancellor promised, national debt as a percentage of GDP is not predicted to fall again until 2017-18. The whole country can see that, when judged by actions not words, this Government have failed every test they have set themselves. It is people up and down the country who are paying the price for their failure—families hit by the mummy tax; part-time workers who have lost tax credits; the 250,000 people in this country who have had to access emergency food aid or visit a food bank last year so that they did not go hungry; and the 200,000 more children who will be pushed into poverty as a result of this Government’s assault on support for families.
Today was a chance to change course—a chance to put right the mistakes of the past 33 months and correct a failing economic strategy. Instead, all we got was more of the same from a Chancellor and a Prime Minister who, despite all the evidence, refuse to accept that their plan simply is not working. In 17 days, millionaires will get a tax cut, so why do my constituents have to wait more than 900 days for help with child care?
It has emerged today that £38.5 million of shares have been given to nine top executives by Barclays bank. Does not that underline the point my hon. Friend is making about how millionaires seem to be faring much better under this Government than people on low pay or middle incomes?
It is incredibly insensitive that that announcement was made today. People up and down this country will rightly be shocked by it. In a moment I will reference the fact that we are seeing the gap between the richest and the poorest in our society widen. The Government should be doing everything to ensure it is closed.
I acknowledge and welcome the extra money we have heard about today for infrastructure projects, but I note that the majority of it will not be delivered until 2015-16, while work on many of the projects is not expected to begin for years. We must not forget that the Chancellor has spent £12 billion less on infrastructure over the past three years than under the plans he inherited. What is needed is a plan to get our economy growing and to create more jobs across the country right now. The fact that we have a chronic shortage of jobs was reinforced to me last week when I held a jobs fair in my constituency, which was attended by 66 companies. They ranged from local businesses such as the Liverpool Dental Spa and Davey’s Chemists to big global companies such as Nutricia Danone. On the day, more than 500 different job and apprenticeship opportunities were on offer.
My jobs fair last Friday was a great event, with more than 2,000 people coming through the door. That far exceeded my expectations; we had printed only 1,000 welcome packs. Despite what the Chancellor would have us believe, I did not meet anyone whom he would describe as a shirker. That point was also made in a letter to the Liverpool Echo this week from Bernie Hunt of Kensington Fields, a section of which I want to share with the House. Bernie said:
“What a surprise I had on March 15. I called in at the Wavertree Jobs Fair…half expecting to have the car park to myself as Mr Cameron’s Welfare State dependents were supposed to be too busy watching daytime TV recovering from the dole fuelled bender from the night before. What I actually found was those desperate for the chance of a job, or even training for a job, packing the place to the rafters.”
The fantastic turnout reinforced the fact that people who are out of work are not shirkers, but the real problem is that there are not enough jobs. Even if we filled every one of those 500 job and apprenticeship opportunities available at the jobs fair, three quarters of those who attended would still have missed out.
We have learned today that 2.52 million people are still out of work, with youth unemployment at almost 1 million again. There are still more than five people chasing every job vacancy, and even those who can find work still have to accept lower living standards.
I hope that my hon. Friend will also comment at some point on apprenticeships and on the fact that part of the reason for the shortage of jobs in her constituency, and the mismatch of Government spin, is the rebadging of existing jobs as new apprenticeships. Does she not think that the Government should come clean about that?
I have spoken on a number of occasions on the issue of youth apprenticeships, particularly those for people under the age of 19. We have seen a decrease in the number of such apprenticeships. As my hon. Friend says, there is also the issue of the rebadging of different types of jobs. The House will have heard many a representation from the Labour Benches about the Government’s consistent claim to have created 1 million jobs in the private sector, but we know that many of those jobs are simply public sector jobs that have been rebadged.
There has also been a shift in the kind of jobs available. The number of people working in full-time jobs fell in the last quarter. It is now down 378,000 since the beginning of the 2008 recession, while the number of people in part-time work has risen by 572,000 in that period. Since the general election, people have taken an average £1,200 pay cut because jobs are so hard to come by.
If jobs are so hard to come by, why does the hon. Lady think that the Office for Budget Responsibility is predicting that 600,000 more jobs will be created next year, and why have we seen 1 million more private sector jobs since the election?
I thank the hon. Gentleman for his intervention, but I refer him to the comments that I have just made about the rebadging of public sector jobs. Many fact checks have been done to determine what those jobs actually are, as the intervention from my hon. Friend the Member for Wirral South (Alison McGovern) highlighted. Many of them are now apprenticeships. We also know that many of the assessments by the OBR have had to be downgraded because its estimates have often been too optimistic.
It is in the context of this maelstrom of frozen wages, rising prices and reduced opportunity that the Government are making some of the most draconian cuts to our public services and welfare, despite the fact that the OBR has said that those cuts are reducing growth in our economy. The cumulative impact of the cuts has been to widen the gap between the richest and the poorest, and to ask the most vulnerable and disadvantaged in our society to pick up the bill for the Chancellor’s mismanagement of the economy.
Today should not have been about more of the same; it should have been about changing course. If this had been a Labour Budget, we would have acted to boost confidence, create jobs and support struggling businesses. We need to bring forward long-term infrastructure investment in schools and transport, and we need to use the money raised from the 4G mobile spectrum auction to build thousands of affordable homes—getting builders back to work, creating the homes we need and strengthening our economy for the future. Alongside that, we would have cut VAT temporarily, including to 5% on home repairs, maintenance and improvement, which would have helped the energy efficiency side of our economy. The result would have been a plan for a steadier and more balanced pace of deficit reduction with measures that support our economy and create jobs now.
Government Members say that we cannot do that because it would mean more borrowing. They neglect to mention that it is their policies that are already leading to much higher borrowing. The Government and this Chancellor are already borrowing £212 billion more than they said they would to plug the holes in our public finances caused by a flatlining economy and a higher unemployment bill. The Government argument seems to be, “We will not borrow to grow the economy, but we will borrow to shrink it”. Instead, the real question is not whether we should borrow or not, but what we are borrowing for. Are we going to continue to borrow to pay the cost of the Tory Government’s economic failure and to keep people at home out of work or are we going to act to support those small businesses that want to invest in new equipment, to kick-start house building, to support research and development and investment in low-carbon energy and high-tech manufacturing with a proper plan to get people into work? In other words, we need a real plan for jobs and growth, which would be fairer, more successful in getting the deficit down and make Britain better off for the future.
On a point of order, Mr Speaker. It says on page 93 of the Red Book:
“The Government will…publish the Business Bank’s first business strategy”
this coming Friday, on 22 March. Given that you, Mr Speaker, have been very clear that important announcements should be made first to this House, and given that it is my understanding that the Secretary of State for Business, Innovation and Skills will open tomorrow’s Budget debate, can you give me any guidance about the powers you have either for the publication to be brought forward to tomorrow to allow hon. Members to question the Secretary of State when he is at the Dispatch Box during the debate or to provide for an oral statement to be made to the House on Friday morning? Mr Speaker, how can we question the Government on this important topic?
I am grateful to the hon. Gentleman for his point of order. I do not have formal powers in this regard and have only just had notice of what the hon. Gentleman sought to raise. What I would say to him is as follows: first, the Secretary of State will have heard—or will soon hear—of the point of order, and it is perfectly open to him to adjust his plans accordingly if he judges it appropriate to do so. Secondly, my sense is that this is a matter that can reasonably be expected to be raised in the debate, and the versatility, not to mention the indefatigability, of the hon. Gentleman as a parliamentarian, suggests to me that he himself is likely to do so. As to whether a statement or a publication intended for Friday will be brought forward, I cannot say, but Ministers will have heard what the hon. Gentleman has said, and I will keep an eye on the matter.
I am very pleased to catch your eye in this debate, Mr Speaker, and I ask you and the House to forgive me for breaking the usual convention in that I beg leave to leave the Chamber immediately after this speech because I have to chair a Committee upstairs. I would normally stay to listen to the following speaker.
I commend my right hon. Friend the Chancellor for his Budget, particularly for getting the macro-economic situation right. I would like to quote again from the Library note cited by my hon. Friend the Member for Hertsmere (Mr Clappison), who is no longer in his place. He quoted figures showing that the deficit is already down by a third and that net borrowing as a percentage of GDP is set to fall to 5% in 2015-16 and 2.2% in 2017-18. Those figures are taken from the Red Book. What is absolutely staggering is the fact that the last Labour Government inherited a figure from us of just 0.7% in 1997, which rose to a whopping 11.2%—this is contained in the Library note—in 2009-10. If there were ever any doubt about the fact that the last Labour Government—under the stewardship of the shadow Chancellor—were at the root of all our present economic problems, those figures would prove it to be the case. In absolute terms, our borrowing rose from £5.8 million a year to £158.9 million in the last year for which Labour was in office.
I believe that, surprisingly, the current employment situation shines a bright light on our economy. It was interesting to hear the Chancellor say this afternoon that the private sector was creating six jobs for every job lost in the public sector. We have already created more than 1 million jobs in the private sector in the two years since the last general election. It was also useful and, indeed, heartening to hear the Chancellor estimate that 600,000 jobs would be created in the next year alone. We are creating more jobs than France, the Netherlands, Japan and the United States, and we are outstripped only by Germany in this respect.
It is welcome that there are additional jobs in the private sector, and we commend that, but has the hon. Gentleman any idea how many jobs have been lost in the private sector?